With changes in the general economy have come changes in the self-storage finance world. Self-storage lenders, like those for all commercial real estate, apply more stringent underwriting standards when evaluating the potential of a construction, permanent or other self-storage loans. Even the refinancing process has become more challenging for self-storage owners, who must weigh their options and exit strategies. Some negotiate with lenders in an attempt to salvage underperforming self-storage properties. Tax issues are also a significant concern for self-storage owners. Cost segregation and 1031 exchange are possibilities to be explored. Financial and operating performance is reported quarterly by the self-storage real estate investment trusts (REITs): Public Storage Inc., U-Store-It Trust, Sovran Self Storage and Extra Space Storage.
The Art of the Cap Rate
Economics is sometimes called the “dismal science” because it can present bad news about money and the economy. In the economics of self-storage, the calculation of an overall capitalization rate, or “cap rate,” might be called an abysmal science because there is much ...More
What Does This Mean for Self-Storage?
The End of an Era By Michael L. McCune No, not all of the Beatles are dead. But the handwriting is on the wall for the era of low interest rates. You may be asking, “What are the signs of impeding rise in the cost of borrowed money?” First, the Federal Reserve has raised ...More
Merchant Accounts 101
Business owners know they need to accept credit cards. But often, the things they don’t know about merchant accounts can cost them money on every transaction. Typically, they sign up with their bank or the high-pressure salesperson who magically appears as their business is ...More
Legalities and Benefits of Cost Segregation
As we close the books on another fiscal year, self-storage owners should be looking for ways to keep more of their money. If you are depreciating your facility over 39 years, you may be sitting on a financial windfall through the use of cost segregation. While the window ...More
Understanding Cap Rates
"Capitalization rate,” or “cap rate,” is one of the most misunderstood terms in the self-storage business. I always feel a bit uncomfortable bringing up the subject of cap rates when discussing the sale of a property with its owner. I don’t know ...More
Whose Cap Rate Is It?
Buyers and sellers of investment real estate are always looking for ways to measure their most recent acquisition or sale. Some buyers will use an industry rent multiplier to see if their property is in the range of 5.5 to 7.5 times gross collected rents. Some will compute ...More
Choosing and Working With Your Lender
Few partnerships are more important to business owners than those with their lending institutions and the lenders who represent them. When the partnership is working well, it’s the proverbial win-win for both. When it’s not, it’s a painful pairing. So how does the astute ...More
In The Shadow Of $
“Business? It’s quite simple. It’s other people’s money.”—ALEXANDRE DUMAS THE YOUNGER “Money is the seed of money, and the first guinea is sometimes more difficult to acquire than the second million.”—JEAN JACQUES ROUSSEAU We like to believe we have appreciation for the ...More
Loan Types And Lending Options
Just as there are many types of self-storage facilities, there is a diversity of financing options available in the capital markets. Some self-storage owners seek floating rate financing, while others prefer fixed-rate loans. Some ownerdevelopers want construction financing ...More
The Self-Storage Joint Venture
Recent stock market meltdowns have caused investors many sleepless nights. Overnight, they find an earthquake in their IRA account. Years of saving for retirement are wiped out without warning. Yet the self-storage investment remains virtually undisturbed by perturbations ...More