Crisis Management: Preparing Your Self-Storage Facility for a Potential Disaster

By Paulina Pineda

Nearly three months after an earthquake hit, Napa Self Storage in Napa, Calif., was still recovering from severe damage to three of its buildings, which forced the operator to restrict tenant access to some units. The Aug. 24 earthquake led city inspectors to yellow-tag two buildings and red-tag another. According to media reports, the 6.0-magnitude quake was the strongest in the region in 25 years.

In 2014, there have been several fires, floods and other natural disasters that have caused thousands of dollars in damage to self-storage facilities around the world. While owners can’t prevent these events, they can prepare themselves and their management team on the steps to take when something unexpected happens.

I recently asked operators for their advice on handling a crisis, including how to communicate and assist their tenants, interact with members of the media, and ensure adequate insurance coverage. They also shared their tips on how to create an effective disaster plan.

A Property in Crisis

Although it’s been several months since the Northern California earthquake, Napa Self Storage is still reeling from its effects. The property’s two yellow-tagged buildings suffered moderate damage and will need to be evaluated and stabilized. Both are still in use by existing tenants, but the operator can’t rent units to new customers. Building 900, the newest and largest on the property, is a two-story structure housing 230 units. It suffered the most damage. No one can enter the building, as it’s in danger of collapse.

“We had engineers come down, and it was so bad that some of [them] didn’t even want to touch the project or go inside,” says Miranda Evans, spokeswoman with RMB Management Co., the property-management firm that co-owns the facility. “Everybody says it needs to come down.”

Since the building can’t be saved, RMB has refocused its efforts on retrieving tenants’ property from inside.

RMB consulted various engineering teams on the most effective way to salvage the items. One firm said it would use scaffolding on the outside of the building to access the second-story units while dismantling the building piece by piece, but that could cause the second floor to collapse onto the first. Bids for the project carried an almost $300,000 price tag, Evans says.

Another firm devised a plan to shore up the building by installing braces along the exterior walls. This would allow engineers to install scaffolding on the interior of the first floor and bolster the second. The team would then be able to enter the building and recover items from the first-floor units, Evans explains.

The plan requires the approval of the adjacent property owner, who hasn’t responded to RMB’s request. Though possibly less expensive than the first plan, it would cost about $40,000 to brace the outside of the building, another $40,000 to support the inside, then another $75,000 for the demolition. Even if the plan is approved, the company will still need to find funding.

Construction costs aside, RMB was concerned about when and how to notify tenants. “It looked bad, but we didn’t know it would have to be demolished,” Evans says. “At that point, what do we tell tenants?” The company sent written communication weeks after the earthquake, and the delay upset customers. Rumors were rampant that RMB planned to demolish the building with everyone’s belongings inside.

“That was never our intention,” Evan says. “At this point, we would’ve done it a bit different, maybe notified them earlier that there was no access to the building. [But there was] nothing we could’ve done to make everybody happy.”

Many tenants believe RMB should be responsible for the damage. Some are threatening to sue because they perceive they’re being locked out of their units, Evan says. “We understand the tenants are in a bad situation. We’re in a bad situation, too. A lot of the tenants don’t understand that we’re trying to come up with a solution.”

Action Plan

To avoid a situation such as the one faced by RMB, facility operators should have a disaster plan in place. Pacific Highway Storage in San Diego recently participated in the state’s Great Shakeout Earthquake Drill to assess how the facility would handle an earthquake, says Kris Fetter, the administration-rental associate at the property. The drill helped her discover they were “woefully unprepared.” “It was a wakeup call,” she says.

In response, the facility has implemented a crisis-action plan. In case of an emergency, Fetter will notify tenants immediately. “Storage is like any other customer-service-related business,” she says. “You have to be sensitive to the customers’ needs in a time of crisis.”

Nick Lackner, founder and general manager at City Center Self Storage in Pittsburgh, says his facility is prepared for a natural disaster, even though it’s never experienced one. His advice to other operators is to imagine the worst-case scenario and devise a plan around it. Look at catastrophes that have affected other facilities and determine how you would handle something similar.

An operator’s No. 1 priority during a calamity is to make sure employees and customers are safe and provide medical attention if needed, Lackner says. From there, work backward. Managers should contact their district manager, management company or facility owner, secure the property, document everything, take pictures and pull video surveillance if necessary.

Now that City Center Self Storage is out of the start-up phase, one of its main priorities is reducing risks, Lackner says. Having adequate insurance coverage as well as requiring tenants to carry some form of tenant insurance is the best route, he adds.

Media Inquiries

When a catastrophe occurs, media crews will seek people for interviews. A self-storage operator in the middle of a crisis might find himself woefully unprepared to respond when staring at a microphone and video camera. As such, it’s advisable to have procedures for how managers should respond to media inquiries.

First, designate a spokesperson to represent the property and speak with media outlets. Having a single point person ensures your response to the event is consistent. If the manager needs to defer inquiries to ownership, a district manager or the management company, provide around-the-clock contact information. If the manager will act as the spokesperson, create written guidelines on what information should and shouldn’t be shared with reporters.

Of course, a verbal or written “no comment” statement can be issued in any situation, or you can simply downplay an event. “If it’s negative, try and find a way to make it a non-story,” Lackner says. “You only have so much control over that; but if someone calls, you want to make it as uninteresting as possible.”

Insurance Considerations

Once the dust settles, operators are charged with the clean-up, literally and figuratively. In addition to addressing tenant concerns and handling reporters, they must determine how to get the property back up and running. This is one area where an owner’s insurance policies come into play.

Although Napa Self Storage has property insurance, it didn’t have an earthquake-insurance policy. The insurance company denied RMB’s loss-of-income claim because it attributed property damage and loss of income to the earthquake, Evans says. “Even if we had earthquake insurance, it wouldn’t have covered everything.”

However, not having any insurance at all can be even more disastrous. Keith McConnell, vice president of business development, and Chris Nelson, the underwriting supervisor for new business, for MiniCo Insurance Agency LLC, a provider of specialty-insurance programs for self-storage businesses in Canada and the United States, agree insurance is a crucial part of crisis management and disaster planning. A self-storage owner should have general liability, property and workers’ compensation insurance in addition to several other policies that are unique to the storage industry.

One special coverage is customer goods legal liability, which provides coverage against loss or damage to a tenants’ personal property. Another is sale and disposal liability, which covers claims against the facility in case of a lockout, sale, removal or disposal of a tenants’ property. This policy includes defense against allegations, Nelson says.

Self-storage owners should also require or provide some type of tenant insurance to their customers, McConnell advises. Facilities whose customers are insured are much less likely to face demands or requests for compensation, he says. Many of the bigger self-storage chains now require some form of tenant insurance, and the trend is moving in that direction for mom-and-pop operations as well, McConnell says.

The Bottom Line

In the event of a disaster, secure the premises and do whatever you can to prevent further damage. Then contact your insurance agent and provide the following information:

Frequently review your insurance policy to ensure your facility has adequate coverage, especially if any buildings or new services have been added to the existing site, Nelson says. “You don’t want to wait until a claim occurs to find out that there was no coverage for something.”

Paulina Pineda is a senior journalism major at Arizona State University (ASU) in Phoenix. Her emphasis is print journalism with minors in “Spanish for the Professions” and history. She recently interned as a daily wire correspondent in the Washington, D.C., bureau of ASU’s Cronkite News Service and hopes to find her way back to the nation’s capital after graduation. To reach her, e-mail [email protected].