Being Tough Enough for Russia: Local Self-Storage Operators Face a Multitude of Lacks and Challenges

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Due to the historic nature of Russia and the fluctuating market of the last 20 years, many building owners are too nervous to make a “long-term” decision, as market economics and inflation can be difficult to predict and understand. Obviously, signing such a short-term lease agreement is incredibly risky, and a few self-storage operators have been forced to shut down when owners reclaimed their properties for their own use.

Lack of Funding

The second biggest problem for self-storage development in Russia is a lack of financing. There are extremely high interest rates, between 12 percent and 20 percent. There are also tough lending rules, even to the point of a bank specifying how the borrower can invest the loan, whether it be in a property purchase, building, mezzanine investment, etc. Each individual payment has to be approved by the bank.

A Samosklad retail areaEven with two freehold properties on our balance sheet, Samosklad has been unable to secure financing in Moscow. At this stage, we’ve been equity-financed by our shareholders. Many institutional and private investors have shown interest in purchasing a stake in our business model, which has a strong cash flow and has never failed in any market.

Customer Base and Facility Operation

The self-storage customer base follows that of the European market, with roughly 15 percent business customers and 85 percent individual customers. Russians love to store and hate to throw away their beloved goods. Due to the problems described above—and frequent property-renovation delays—individual renters stay for an average of six months. At Samosklad, 95 percent of our business customers have been with us for three years.

Marketing primarily takes the form of context advertising through the major Internet portals, although operators with visible buildings spend less.

Facility administration is time-consuming due to the sheer volume of documentation involved with operating a retail business in Russia. Samosklad employs one extra accountant per each facility, for example.

As of September, there are approximately 10 self-storage operators in Moscow, all ranging in quality. Some conform to local regulations for fire prevention, taxes, etc., but many do not. As the market grows, we’re likely to see consolidation, with the large, well-financed operators coming to the forefront.

Christopher Bond is the director of Samosklad Self Storage. The company opened its first facility in 2011 and currently operates three facilities in Moscow. Samosklad plans to open 20 to 25 facilities by 2018. For more information, visit www.samosklad.ru .

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