If you’re thinking about selling your self-storage business, of course you’re concerned about sale price. Thankfully, there are steps you can take before going on the market to help maximize asset value. Following are three of them.

Tom de Jong, Senior Vice President of Investing

February 22, 2024

5 Min Read

Selling a self-storage facility is a significant undertaking. To ensure you extract the most value at closing, the process requires careful consideration and strategic planning.

Before you begin, evaluate your reasons for selling. Factors such as market conditions, financial goals, changes in personal circumstances or a desire to invest in other ventures can influence this decision. Assess the potential benefits and drawbacks to ensure a sale aligns with your long-term objectives. If you’re certain it’s the right time to let go of your asset, following are three essential steps to optimize the sale.

Enhance Value

Determining the right price for your self-storage facility is crucial for attracting potential buyers. Your broker can conduct a comprehensive market analysis to assess comparable sales, the facility's financial performance and current market trends. Striking a balance between a setting a competitive price and achieving maximum value is key to generating interest and ensuring a satisfactory sale.

Underwriting the value of a self-storage facility involves a thorough review of several key reports in addition to ascertaining the physical condition of the property. Buyers generally evaluate assets based on current, in-place rents and market-adjusted expenses; so, the most relevant reports are:

  • Unit mix with number of units, sizes, location and current asking rents

  • Occupancy history for 12 to 36 months

  • Daily management summary, generally for the current and prior year

  • Current rent-roll

  • Income statements for the prior year, plus year-to-date at a minimum (many buyers request three years)

Cleaning up your financial statements helps expedite underwriting. Removing seller discretionary expenses such as personal auto, family cell-phone bills and others not directly related to the business helps a buyer understand the facility’s actual costs. Rectifying past-due rent through lien sales is also beneficial.

That said, enhancing income will move the needle more than any minor adjustments to expenses. The most effective strategy is to increase rental rates. Most self-storage software platforms have tools for comparing your rents to those in your local market. (If you don’t have access to this data, contact an industry broker for competitive rental-rate reports.) Other ways to boost income include increasing retail sales, adding vehicle storage in open lots, installing portable-storage units, offering a tenant-insurance or tenant-protection program, and charging admin and late fees.

Beyond the financial aspects, keep your self-storage facility clean, well-lit and in good working order. First impressions do matter when it comes time for a buyer to tour the site.

Work With a Broker

Before making the decision to sell, engage a self-storage broker to prepare an opinion of market value. An experienced agent can create a detailed sales model, provide a price range, and make recommendations on how to increase value at sale. They bring a wealth of expertise, contacts and knowledge to the table. Brokers understand industry dynamics, market trends, demand patterns and property valuations. This allows them to accurately assess your facility, ensuring you set a competitive and attractive price that appeals to potential buyers.

One of the key advantages of working with a broker is their ability to effectively market a property for sale. They have access to vast networks and channels specific to self-storage real estate, and they can leverage these resources to reach a wider audience, including prospective buyers who may not be easily accessible through traditional marketing efforts.

Partnering with an experienced and reputable broker in the sale of your facility can unlock substantial value. Their expertise and negotiation skills make a compelling case for enlisting their services. By doing so, you’ll position yourself to optimize the financial outcome of your sale and ensure a smooth transaction.

Understand the Process

Finally, knowing what to expect during the sale process is vital for effective planning. This typically involves marketing the self-storage facility, conducting due diligence, negotiating price and terms, and closing the deal.

First, you’ll work with your agent to develop a targeted marketing strategy using online platforms, industry publications, email campaigns and broker networks. Highlight the facility's unique selling points, such as location, security features, occupancy rates, expansion options and income-growth potential.

With most larger sales, a call-for-offers date will be set after an initial marketing period of 14 to 21 days. This allows maximum time to expose the facility to the market. Having multiple offers is critical to pushing up the price!

Generally, offers are presented in the form of a “Letter of Intent,” which includes basic terms, pricing, contingency period, financing contingency (if any), possible extensions, amount of earnest money deposit and more. After receipt of offers, there may be a second round or a best and final round, or a buyer may be selected from the initial list depending on the range of pricing and terms received.

Once a prospective buyer is selected, they’ll conduct due diligence to assess the facility's financials, operation, legal compliance and physical condition. To expedite this phase, ensure all relevant documents and information are readily available and accurate. Your broker should have a list of items typically requested.

Next up is negotiations. Be prepared to discuss terms and conditions, including price, contingencies and closing timelines. This is a great place to leverage your broker's expertise to achieve the most favorable terms. Most contracts are reviewed by legal counsel for both parties. This process can take up to three weeks depending on deal complexity and attorney availability.

The closing process involves finalizing the sale and transferring ownership. It includes legal and financial steps such as verifying the terms of the agreement, transferring property titles, signing documents, recording the deed and paying funds.

Selling a self-storage facility is a multi-faceted endeavor. By understanding these essential steps and engaging with experienced professionals, you can optimize the sale of your asset and extract the maximum value from the transaction. Make informed decisions, stay organized and work closely with your team to navigate the process successfully.

Tom de Jong is executive vice president for Colliers International and a founding member of the company’s de Jong I Becher Self Storage Team, which has more than 30 years of combined industry experience and more than $1 billion in closed transactions. To reach Tom, call 408.282.3829 or email [email protected].

About the Author(s)

Tom de Jong

Senior Vice President of Investing, Colliers Self Storage Group

Tom de Jong is senior vice president of investing for Colliers Self Storage Group, which specializes in the acquisition, disposition and financing of self-storage facilities nationwide. He has worked with self-storage buyers, sellers and developers for 14 years. To reach him, call 408.282.3829 or email [email protected].

Subscribe to Our Weekly Newsletter
ISS is the most comprehensive source for self-storage news, feature stories, videos and more.

You May Also Like