While there’s no shortage of quality brokers who specialize in the sale of commercial properties, selecting the right one to sell your self-storage facility is a critical decision that can go a long way toward ensuring you receive top dollar. The broker you choose should have the following:
- Extensive industry experience
- Local market knowledge
- A wide network of active industry contacts
- The capacity to properly market a property
- A grasp of Web-based technology
- A clearly defined process and timeline
Your broker should have extensive experience in selling self-storage facilities. In fact, the best brokers in the industry focus exclusively on storage. While highly successful brokers across different asset classes will share many characteristics, to maximize the value of your property, industry-specific experience is vital. To ensure you’re working with someone well-suited for your facility or portfolio, ask the following.
- How many years of industry broker or acquisition experience do you have?
- How many facilities have you sold, and at what valuation, over the last year, three and five years?
- Do you have experience in selling assets that are similar to my property or portfolio? (For example, think about a class-A, climate-controlled facility vs. a small, class-C property.)
- Have you sold properties at Certificate of Occupancy or in early lease-up, or only stabilized sites?
Local Market Knowledge
It should be compulsory that your broker have local market knowledge and a track record of sales in your area. Each market and submarket has its own nuances, which can significantly impact target buyers and valuation. For example, the New York City and Austin, Texas, markets are extremely different. Not understanding the specifics of a region can result in a broker setting unrealistic expectations for his client or, worse, severely underpricing the facility.
Network of Contacts
Your broker’s database should be extensive, continually updated and indicative of strong relationships with the most active self-storage market participants. This shouldn’t only include the public real estate investment trusts and national operators but private-equity funds, life-insurance companies, pension funds, family offices and high-net-worth investors.
At the end of the day, the most critical aspect of marketing your facility is personal investor contact through a good, old-fashioned phone or a face-to-face meeting. It’s essential that your broker is a “people person” and, yes, a high-quality salesperson. You’re entrusting him to tell the story of your facility. He should be able and willing to personally and professionally present the opportunity to the most likely investors, gauging their level of interest, constraints and valuation range.
Ask your broker about the composition of his team. Many brokers work in tandem with partners who have complementary skill sets and backgrounds. Some are supported by analysts and graphic designers, and are generally backed by all the resources a national real estate firm brings to the table. A list of interested buyers for any given self-storage facility can number in the teens or twenties, and a broker who works as a “lone wolf” may not have the capacity to properly market your property.
Although your broker will look to you to provide valuable information about the asset, he should also conduct his own comprehensive and independent underwriting of the facility. This includes property research, a detailed financial analysis, competition survey, a full due-diligence review and a physical inspection. This thorough process will provide him with the requisite knowledge to produce a high-quality Offering Memorandum (OM). It’ll also help him identify and mitigate problematic issues that may arise in a buyer’s due diligence.
The OM must look good and be professionally presented, free from grammatical errors or other glaring mistakes. An unprofessional document presents your facility in a bad light and can quickly end up in the trash can of a prospective buyer.
The OM should also be thorough and accurate. This seems obvious, but many brokers rush through the creation of marketing materials and make mistakes along the way. In some cases, they use misleading information to drive initial interest in a facility. Accuracy and completeness allow the buyer to make an informed decision, ensuring offers are based on reliable information and significantly reducing the possibility of a price renegotiation a transaction falling through altogether.
The broker’s financial analysis and pro forma should be based on realistic but aggressive assumptions that are designed to “push” the capital markets, with a focus on go-forward assumptions that capture the upside potential of your facility. Before hiring a broker, ask him for copies of packages he’s created for previously sold or unsold properties, and review them closely.
Grasp of Web-Based Technology
Once you’ve reviewed and authorized the OM, the broker will disseminate it to the marketplace. Today this is generally done through an e-mail blast, which contains an overview of the offering. A cutting-edge broker will also create a property-specific website, with a secured online “war room” that contains all due-diligence items, such as site plans, unit mix, supporting financial data, environmental reports and title policies.
The use of Web-based technology to centralize data in an organized fashion facilitates the most efficient use of a prospective buyer’s time, increasing the likelihood of quick decision-making. The website should also allow the broker to track the movements of each prospective buyer, focusing his efforts on the most interested ones and not wasting time on dead ends. Technology in a real estate transaction translates to speed and efficiency.
A Strong Process and Timeline
A good self-storage broker will have a track record of using a clearly defined process and timeline to successfully market and sell properties. A great process is imperative—this can’t be overstated. In its simplest form, it must facilitate a competitive pricing environment, maintain momentum with the marketplace, create a sense of urgency with buyers, force quick decision-making, and weed out those who are unlikely to close.
A great process means the broker is actively working on behalf of his client, from the call for offers and the offer analysis, all the way through to the selection of the final bidder, contract negotiation and closing. Nothing is worse than a broker who doesn’t drive the process to completion, or doesn’t have a process and allows a facility to languish on the market with indifference.
Finally, a great process involves consistent and regular communication with the facility owner. Sadly, there are no shortage of brokers that don’t effectively connect with their clients.
Before agreeing to list your facility, interview multiple brokers and ask industry colleagues for references. Follow the guidelines above to choose the right person to represent your best interests when selling your storage property.
Todd Dailey is the founding principal of Capella Capital Partners, an Austin, Texas-based real estate firm and developer. With more than 25 years of commercial development and construction experience, he’s developed and opened six storage facilities totaling more than 500,000 square feet of space. By 2020, his firm plans to develop at least 15 more facilities comprising more than 1.3 million square feet of storage in select markets nationwide. For more information, call 512.617.6363; visit www.capellatx.com.