Hurricane Harvey affected 13 million people last summer in Kentucky, Louisiana, Mississippi, Tennessee and Texas. Some 6.3 million people were evacuated in Florida before Hurricane Irma hit landfall. And more than 213,000 acres and 5,700 structures were destroyed by California’s wave of wildfires in December. These are just a fraction of the scary statistics emerging from last year’s natural disasters in the United States. Floods, hurricanes, tornadoes, severe storms and wildfires took the lives of nearly 400 people. Many have come with a price tag of $1 billion or more, according to the National Oceanic and Atmospheric Administration.
U.S. citizens weren’t the only victims. An earthquake in Mexico City killed more than 200 people; a mudslide in Mocoa, Colombia, took the lives of at least 300 citizens and injured 200 more; and 41 million people were affected by severe flooding in South Asia. By all accounts, it was one of the deadliest and costliest years for natural disasters in modern history.
The self-storage industry took its share of hits, with operators closing facilities in the wake of catastrophes and sustaining property damage in the aftermath. While it’s too soon to predict how they’ll be affected financially and operationally in the long wrong, the industry as a whole has learned several valuable lessons.
Casualties and Cleanup
At the time of this writing in late December, fire crews were still battling a blaze in Southern California that had already consumed 272,000 acres. It was just one of multiple fires that burned across the state last year, making 2017 one of the most destructive wildfire seasons on record. In October, the “wine country” wildfires in Northern California threatened several self-storage properties, including three managed by StoragePRO Inc. in Santa Rosa.
“Sunday evening, we went to sleep knowing about pending ‘Diablo’ winds and awoke to hurricane-force winds in the middle of the night. By 5 a.m., the news hit the airwaves of the path of destruction,” says Steve Mirabito, president of StoragePRO, which oversees more than 70 storage properties throughout the West.
The fire had crossed U.S. Route 101 and was headed directly toward a trio of storage properties in proximity: Public Storage, Security Public Storage and StoragePRO. “By 5:15 a.m. I had incorrectly concluded we were doomed and anticipated full and total destruction. The property is over 30 years, with wood-frame construction,” Mirabito says.
Fortunately, the StoragePRO and Public Storage sites were left unscathed. “The fire burned up to and stopped on our property line,” Mirabito says. However, several nearby structures, including the Security Public Storage facility just down the street, suffered extensive damage. “It appeared flames and heat caused contents inside the storage units or possible combustible on storage containers to ignite and be the source of ignition,” Mirabito says.
Several Public Storage facilities in Houston weren’t as lucky when Hurricane Harvey blew into Texas last summer. The real estate investment trust (REIT) was forced to temporarily close 116 locations during the onslaught. Although the majority were open within a few weeks of the storm, seven sites were severely impacted, which the REIT plans to raze and rebuild. Public Storage also closed 125 properties in Florida for a short time after Hurricane Irma. It expects to incur $10 million in capital expenditures to complete the repairs.
REITs CubeSmart, Extra Space Storage Inc. and Life Storage Inc. also closed sites before and after Harvey and Irma. “This year’s hurricanes impacted about 145 Life Storage locations in some manner. Even in areas not ultimately impacted, all stores undertook precautionary measures,” says Darren Laratonda, vice president of store operations for Life Storage. “We were fortunate only seven of our stores suffered significant damage, primarily due to related flooding.”
Extra Space temporarily closed 30 stores in Houston and 219 in Florida, Georgia and South Carolina during the hurricane season. “Various stores received damage, and some units needed to be taken offline; but we didn’t need to keep any full stores closed for extended periods of time,” says Jeffrey Norman, the REIT’s vice president of investor relations and corporate communications.
Extra Space also dealt with fallout from Hurricane Maria in Puerto Rico, closing eight facilities it manages on the Caribbean island. As of December, seven of the properties were operational using generator power, and one was open for existing customers, but not accepting new tenants.
Cleanup has been especially difficult for storage operators in areas hit by hurricanes and flooding. In addition to unit doors and roofs being torn away, they and their tenants had to deal with the removal of damaged goods. “The garbage disposal was a nightmare as flooded items had to be mucked out and piled up in mountains at curbside,” says Ginny Sutton, executive director of the Texas Self Storage Association (TSSA).
While some Texas facilities along the coast were destroyed, others in Houston were able to recover once the flood waters abated. “The coastal area has been extremely slow to recover, partly because of a lack of labor to rebuild,” Sutton says. Martial law was instituted in some areas and, initially, curfews were enforced in places such as Port Aransas, a city on Mustang Island on the Texas coast, which prolonged the recovery process, Sutton adds.
In times of crisis, one thing that can act as a balm is information. Everyone—from tenants to staff—should be made aware of how a storage business is responding to the crisis. This might include preparing or closing a property, evacuating the area or simply hunkering down until the danger passes.
“We begin preparing for storms as soon as there’s a high probability of impact to any of our markets, typically when a watch is issued,” says Philip Wilfong, regional vice president for Life Storage. “We implement our ‘Severe Weather-Hurricane Preparedness Plan’ in areas where impact is imminent, sometimes several days before any strike.”
Before, during and after an event, communication and teamwork are the fastest ways to get a facility functioning again, says Grace Anderson, director of marketing for Absolute Storage Management, which oversees 88 facilities. This includes conversing across all departments. “Accounting needs to know of any deposit delays, marketing needs to know about website updates to make, and off-site operations can assist with updating customers, vendors and other team members of property status,” Anderson says.
In addition, it’s vital to communicate with tenants about how the property has been affected by the event and when they can access their belongings. Sometimes, however, reaching customers can be problematic following a crisis in which there were evacuations. “The biggest challenge with flooding is notifying tenants, many of whom were displaced because of flooded homes,” Sutton says.
Having multiple communication channels can be beneficial in these situations. This is when technology can be a true asset, as you can notify customers through your website, social media, e-mail and even texts. During the wine-country fires, StoragePRO set up a hotline with a recorded update.
“We also implemented text and e-mail updates to our customers regarding store closures and what we knew about the condition of each property, including several located out of the primary evacuation areas,” Mirabito says. “We had customers calling and crying as they had nothing and were relieved to get a text from StoragePRO reporting no damage to the buildings or their property.”
While it might seem like a good idea to keep bad news under wraps, being open about the situation is a better policy. “Be honest with property staff about expectations, with tenants about damages, access, closings, and anything else that comes up,” Anderson says. “If applicable, be honest with owners about damages and needs. People respond better to hard situations when handled with integrity and honesty.”
When it comes to conversing with tenants—some of whom may have just lost everything—operators also need to be gentle. “Quite frankly, we acted both as a storage counselor and crises counselor allowing some of the customers to express their emotions,” says Mirabito, adding that the wine country fires were a uniquely different situation. “Many of our tenants were victims of fires destroying their homes and were in evacuation mode.”
Following a crisis, many operators are rightly concerned about risk management, including their legal obligations to their tenants. Beyond notifying customers about the situation and providing regular updates, operators should also attempt to mitigate further damage to their property. Of course, if the facility is deemed unsafe, measures should be taken to prevent access.
Once the site is declared accessible, tenants should be permitted, under supervision, to collect their items. “A certain part of the responsibility falls on the tenant to reclaim property as soon as practicable so it can be salvaged, cleaned and repaired, if they choose to do so. But the self-storage operator isn’t responsible for those costs,” says Scott Zucker, a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta.
Tenants who either refuse to cooperate or are unable to remove property leave the operator with no choice but to take action. “The operator, eventually, will have the right to remove the property,” Zucker says. “A tenant, even in this situation, can’t choose to do nothing and force a landlord to suffer potential further damages to his property and lose future rental income.”
Storage operators and their tenants need to work together under these stressful circumstances to make the best of a bad situation, Zucker advises. “Sometimes it takes a while to sort things out after a natural disaster. But there’s also a time that action must be taken to avoid further damage. The operator has the right, after notice, to take the steps necessary to save his business,” he adds.
Another critical factor to recovery is working with your insurance company to resolve any claims. The key to a smooth process is to keep your insurance partner informed and document everything. “Operators should complete requested reports and take pictures of the damage that has occurred on the premises,” says Mario J. Macaluso, senior vice president for SBOA Tenant Insurance, which provides a tenant-insurance program created by and for self-storage owners.
In addition, business owners and their customers should consider their insurance needs long before a catastrophe strikes. “Tenants and operators should take an interest in knowing what is covered and not covered on their insurance policies,” Macaluso says. “If it is necessary, they may need to supplement with additional insurance to bridge the gap.”
There’s no doubt we’ll continue to grapple with these kinds of events in the years to come as climate change shapes our world. The best course of action when facing a catastrophe is to be prepared. “Have an emergency evacuation plan, have a contingency plan and how you plan to react as some type of an emergency will affect one’s property,” Mirabito says.
All StoragePRO sites have an emergency-evacuation handbook that identifies potential risks, precautions and what do to in the event of an emergency. Each property also has an emergency food bag containing three days of sustenance and survival supplies. “We require earthquake training for all employees each year along with other safety training on a monthly basis,” Mirabito notes.
Operators seeking crisis-response information can find information online from the American Red Cross or National Safety Council. Many state self-storage associations also provide resources. During last year’s hurricanes, the Florida Self Storage Association (FSSA) and the TSSA informed operators about disaster preparation, evacuations and what to do after the storm through their websites and by e-mail.
“We also sent an e-newsletter to our nonmember list with some important Web links and let them know resources were available if they were interested in reaching out to us,” says Courtney Long, membership and meetings manager for the FSSA.
Being prepared before something happens can make a huge difference for staff, the storage property and tenants. “Create policies and procedures beforehand, and practice and think about how you’ll respond to an event before it happens,” Norman says. “In the moment, it’s hard to react smoothly, and make decisions on the spot. With some planning, you can already have processes in place to address such incidents.”