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ISS Blog

The Effect of Self-Storage Concessions

This week the self-storage REITs released their financial results for the third quarter ending Sept. 30, 2009. Not surprisingly, they've reported some losses on the revenue side over the same quarter in 2008. But decreased volume is not necessarily to blame. The primary culprit may be what the operators have had to do to attract and keep business.

Sovran Self Storage continues to make extensive use of move-in incentives, according to the company's report. During the quarter, the company granted more than $4.5 million in "first month free" and other promotions. As a result, revenue at the company's 356 stores decreased 3.6 percent over the same quarter in 2008. And it expects more of the same moving forward:

Sovran is experiencing soft consumer demand in many of its markets and expects conditions to remain competitive. It anticipates the continuation of leasing incentives as well as increased advertising and aggressive marketing to improve occupancy and, accordingly, estimates a decline in same store revenue of 2 percent to 4 percent from that of 2008.

From U-Store-It: Total revenue decreased 3.5 percent to $54.9 million from $57.3 million, primarily due to lower occupancy levels and lower average scheduled rent per square foot.

How are store promotions and discounts affecting your business? What is your business philosophy on concessions? Some self-storage operators feel these things are a necessary evil, a way to get bodies in the door until the economy improves and they can raise rates. Others feel this is a Pandora's Box, dangerous for the overall market. What's your take?

Folks on the Self-Storage Talk forum are expressing mixed opinions on the topic but also offering some smart alternatives to reducing revenue. For example, one member suggests giving away free locks or credits for moving and storage supplies rather than free or discount rent. Read about the challenges facility managers and owners are facing and get ideas for tactics to apply in your market in these threads:

Feel free to jump on the blog and share your comments about self-storage discounting. Is it salvation or peril?

Marcus & Millichap Releases Self-Storage Research Report

Marcus & Millichap Real Estate Investment Services, a commercial real estate investment services firm, released its semi-annual report on the state of the self-storage industry.

The Self-Storage Research Semi-Annual Report—2010 Outlook is produced by the company’s research department in Phoenix. It highlights average cap rate trends across the nation, and investment, rent, occupancy and construction trends.

According to the company, the information is drawn from inside and outside of Marcus & Millichap, and is not necessarily accurate on all different classes of self-storage but is an average all. It also doesn’t take into account property size, city population, or classification of the property construction itself. This report and others can be viewed on the “Research Services” page at www.marcusmillichap.com

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Public Storage Reports 3Q Operating Results

Public Storage, a real estate investment trust, reported its operating results for the third quarter ended Sept. 30, 2009. The company reported:

Net income for the three months ended Sept. 30 was $244 million compared to $147.9 million for the same period in 2008, representing an increase of $96.1 million. This increase is primarily due to a foreign currency exchange gain totaling $21.4 million and a gain on disposition of $30.3 million related to an equity offering by PS Business Parks Inc.

Revenues for the Same Store Facilities decreased 4.6 percent, or $16.9 million, in the third quarter compared to the same period in 2008, due to a 4.2 percent reduction in realized rent per occupied square foot, combined with a 1 percent reduction in average occupancies.

Cost of operations for the Same Store Facilities declined 0.6 percent, or $0.7 million, compared to the same period in 2008.
Net operating income for Same Store Facilities decreased 6.3 percent, or $16.2 million, compared to the same period in 2008.

Net income allocable to common shareholders (after allocating net income to non-controlling interests, preferred and equity stock shareholders, and holders of restricted stock units) was $173.5 million compared to $71.5 million for the same period in 2008, representing an increase of $102.0 million or $0.61 per common share on a diluted basis. These increases are primarily due to the net impact of the factors described above.

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Inside Self-Storage World Expo Divulges Education Program for Las Vegas

The Inside Self-Storage World Expo is pleased to unveil the education program for its upcoming event in Las Vegas, March 1-3, 2010. The self-storage industry’s largest conference and tradeshow will offer 36 educational seminars, four add-on intensive workshops, two days of product and service exhibits, and five networking events, including a self-storage Q&A, roundtable discussions, a buyers & sellers meeting for real estate-minded professionals, and a new Technology Marketplace where attendees can demo the latest security, software and Internet-based products.
 
The concurrent seminars are organized into four comprehensive education tracks: 

  • Facility Marketing & Sales
  • Day-to-Day Facility Management
  • Finance, Insurance & Legal Issues
  • Construction, Development & Green Initiatives 

Sessions will cover the complete spectrum of the self-storage professional experience, providing something for facility managers and operators, owners, investors, developers, builders and others. Topics will include traditional and online marketing methods, social networking, sales, phone skills, customer service, collections, lien sales, construction techniques, real estate trends, finance options, cost-cutting measures, environmentally sustainable building, bankruptcy, insurance coverages, staff training, tenant screening and much more.  

The four add-on workshops are:

  • Marketing and Sales Boot Camp with Tom Litton
  • Management Workshop with Joe Niemczyk
  • Legal Learning Live with Jeffrey Greenberger
  • Developers Seminar with RK Kliebenstein

The ISS Expo will take place at the Paris Hotel & Resort. To view the details of the educational program, including seminar descriptions and speaker biographies, visit www.insideselfstorageworldexpo.com.

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Hawaii Self Storage Honored for Support of State's Youth

Hawaii Self Storage (HSS) and its owner, Mike Wood, were honored on Oct. 28 in a ceremony to recognize Outstanding Advocates for Children and Youth. The award, which recognizes groups and individuals who go above and beyond to help Hawaii’s “keiki,” was presented to Wood and nine other recipients by Governor Linda Lingle and state representative John Mizuno.
 
In addition to offering a scholarship program for high school students, HSS launched a Lockers for Literacy initiative, and Wood donated $9.2 million of his own money to create Ho'omalu O Na Kamali'I, a safe haven for children on the Leeward side of Oahu. HSS also offers a Transition Assistance Program and participates in numerous community-outreach efforts. The company invests $150,000 annually to programs that support youth education and athletics.
 
HSS has provided more than $200,000 renewable scholarships for graduating seniors of public high schools. It has helped 58 students since the program began in 2005. This year, a member of its first class of scholars graduated from college.
 
In 2007, HSS implemented its Lockers to Literacy program that provides two books each to local first graders to promote literacy. With every new locker rental, HSS donates $2 from its profit to this fund. HSS expects to purchase more than $15,000 worth of books in 2010 for 15 elementary schools.
 
Each HSS location also sponsors two youth athletic teams, donating approximately $4,000 per facility to the teams for uniforms and equipment.
 
Over the past three years, HSS has partnered with the Lokahi Giving Project, which works to gather donations of goods, cash and equivalents for struggling individuals. HSS is an official drop-off location for this well-known project, raising awareness and storing donations.
 
In September, HSS partnered with the Aloha United Way, raising awareness of its new “Load the Locker” campaign and encouraging donations of toiletries for emergency and crisis-service agencies.
 
HSS is Hawaii's largest self storage company, with facilities in Kaimuki, Kapolei, Mililani, Pearl City and Salt Lake. The company was a 2009 winner of the Inside Self-Storage Humanitarian Service Award.
 
Source: Honolulu Advertiser, Hawaii Self Storage and Owner Mike Wood both honored

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Argus Self Storage Welcomes New Broker Affiliates

Four brokers have joined the Argus Self Storage Sales Network, a Denver-based network of real estate brokers experienced in self-storage and income-property investments.

Bill Brownfield, MKP Self Storage LLC in Houston, will represent Argus in south and central Texas.  Brownfield is the managing director of acquisitions for Means Knaus Partners, and directs acquisitions and dispositions, manages the investment process and oversees client real estate investments. His transaction activities exceed 5 million square feet valued at almost $1 billion.   

Robert Fisher, RE/MAX Renaissance Realtors, will represent Argus Tennessee. Fisher’s commercial real estate experience includes the ownership and management of apartments, office properties and self-storage. He is actively involved in creative and practical financing for many types of properties.  

 
         Bill Brownfield                                     Robert Fisher

N.J. “Joey” Godbold, a principal and president of Percival McGuire Commercial Real Estate in Charlotte, N.C., will represent Argus in North Carolina. Godbold leads a team of more than a dozen commercial real estate professionals who are active in North and South Carolina. In his personal practice, Godbold specializes in light industrial and investment properties and he has more than 30 years of experience in commercial real estate brokerage, management, appraisal and development.  

Joe Pelayo is the broker and president of Total Real Estate Consultants Inc. in Coral Springs, Fla. He will represent Argus in south and west Florida. He has more than 20 years of experience in the real estate industry and has received several awards such as Top Producer and Costar Power Broker in 2006 and 2008 in South Florida.

 
        N.J. “Joey” Godbold                                    Joe Pelayo

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Public Storage Canadian Properties Releases 3Q Results

Public Storage Canadian Properties released operating results for the third quarter ended Sept. 30, 2009 and distributions to be paid on Dec. 31, 2009. Some highlights:

  • Net income of the Partnership was $1.5 million for the three months ended Sept. 30, 2009 compared to $2.1 million for the same period in 2008.
  • Net income of the Partnership was $4.7 million for the nine months ended Sept. 30, 2009 compared to $5.7 million for the same period in 2008. 

The Partnership owns and derives substantially all its income from 27 self-storage facilities in Alberta, British Columbia, Ontario and Quebec. The Partnership also owns parcels of land in Oakville, Ontario; Orleans, Ontario; and Richmond Hill, Ontario, for future self-storage development.

Source:  Earth Times,  Public Storage Canadian Properties Announces Third Quarter 2009 Operating Results and Distributions

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Public Storage Canadian Properties Releases 3Q Results

Public Storage Canadian Properties released operating results for the third quarter ended Sept. 30, 2009 and distributions to be paid on Dec. 31, 2009. Some highlights:

  • Net income of the Partnership was $1.5 million for the three months ended Sept. 30, 2009 compared to $2.1 million for the same period in 2008.
  • Net income of the Partnership was $4.7 million for the nine months ended Sept. 30, 2009 compared to $5.7 million for the same period in 2008. 

The Partnership owns and derives substantially all its income from 27 self-storage facilities in Alberta, British Columbia, Ontario and Quebec. The Partnership also owns parcels of land in Oakville, Ontario; Orleans, Ontario; and Richmond Hill, Ontario, for future self-storage development.

Source:  Earth Times,  Public Storage Canadian Properties Announces Third Quarter 2009 Operating Results and Distributions

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Building and Marketing a Successful Self-Storage Website

When it comes to creating a successful self-storage website, there is good news and bad.

Let’s start with the good news: Websites and Internet marketing are a fraction of the cost of traditional marketing. They allow you to capture as many tenants as possible for the lowest possible cost per acquisition (CPA). Internet marketing is also extremely trackable. You can track visits, leads and click-throughs, and gauge your return on investment easier than you can with other marketing and advertising avenues. You can find out what’s working and where you should be spending your dollars.

Now for the bad news. Here’s a common scenario: You’re thinking about building your facility’s website and beginning the research when you’re hit with an onslaught of acronyms you’ve never even heard of: CTR, SEO, SEM, PPC and so on. You think, “Whatever happened to just having someone you know whip up a website for you?” Times have changed. Whether you’re updating a current website or building one from scratch, there’s a big learning curve regarding building, maintaining and marketing a successful website.

There are four main ingredients to achieving “love at first site” with potential customers: making a great first impression, having solid content, getting your website noticed, and keeping it fresh.

Hey There, Good Lookin’

First impressions count. Having a poor website can be compared to going on a date in your PJs. These days, it’s not enough to show up—you have to look good. If your website looks poorly maintained and out-of-date, potential customers might wonder if your facility is too. Your competition is only a click away. Are you prepared? Think about these questions:

What does your website say about your business? This comes down to branding. Use your logo and slogan to maintain the look and feel of your facility on your website. Think of it as an extension of your other marketing materials such as your brochure, banners, promotional items, etc.

If your feel is new and modern, go with a crisp, streamlined look for your website. Use clean lines, simple statements and contemporary colors. If yours is more of a friendly neighborhood facility, go with that design emphasis. Use pictures of your staff and customers. Talk about your community involvement and, most important, great customer service.

Is navigation easy? You can have a fresh, new and innovative website that’s out of this world, but if the customer cannot easily and quickly navigate it, he will move on.

What’s in it for them? Does your website offer the perks your customers seek? Are your prospects looking for online reservations? How about online account management? Do you have a coupon offer with a call to action? Does your website have information about your facility’s unique selling propositions? Does it highlight all the great amenities your facility offers, especially in comparison to competitors? To be successful, the website must be a resource for current and potential tenants.

More Than Just a Pretty Face

You can have a great-looking site, but that doesn’t mean anything if potential customers can’t find it when they’re searching online. A great website has the cosmetic component and a solid foundation. This foundation should be built with search-engine optimization (SEO). Bottom line, you need to rank in searches. Are you high on the list when potential customers are searching for self-storage in your area or not even on the first page? To achieve higher ranking results, do the following:

Know SEO. Research what keywords are being searched in your industry and what your competition is doing. Create valuable content from your research results. This is the key to achieving SEO and higher rankings when people search. You need some pictures on your website for aesthetic purposes, but keywords are the nuts and bolts of SEO.

Consider paid searches. When done well, paid searches can be hugely successful. They’re expensive and time-consuming, but when done correctly with split testing ads and keyword phrases, they can generate a lot of traffic to your website.

Make friends. Consider doing link-building campaigns and getting other websites to link to yours. Using “link bait” such as neat industry widgets, article syndication, press releases, blogs and directories can help with this.

I Now Pronounce You Website and Facility

Once your website has the perfect marriage of attractiveness and solid information, spread the word. Announce your new website and everything it has to offer.

This is a great time to make use of social-media marketing. Set up that Facebook page and Twitter account. Send out press releases to the local media. Write a blog about your new website. These items boost your website’s SEO. Put up banners such as “Find us on Facebook,” outside and inside your facility. This will help you attract new tenants who may need self-storage now or down the road, and will let current customers know you have a new website for their convenience.

Don’t Let Yourself Go

A good website requires maintenance. Changing pictures, adding a new coupon, running campaigns and keeping things fresh is extremely important, along with keeping an eye on your SEO. How is your website popping up? Does it need a little extra work to show up ahead of your competitors? Things can change quickly. Also, make sure you’re keeping up with your social-media marketing. Don’t fall into the trap of setting it up and then never updating it.

Attaining a fresh website and a results-driven Internet-marketing platform isn’t easy. If you don’t have time to become an expert, hire a reputable marketing company or work with a third-party management company who can take care of it for you. Working with Internet-marketing specialists can help you achieve the results you desire, converting leads and increasing customer satisfaction. Who doesn’t love that? 

Julie Purcell is the marketing and advertising manager for Investment Real Estate Management (IREM), a third-party management and consulting company that offers expertise in operations, marketing, Web presence and more to the self-storage industry. IREM manages more than 45 properties in six states. For more information, call 717.779.0804; visit www.irellc.com.

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U-Store-It Reports 3Q 2009 Results and Closes $351M in Capital-Raising Efforts

U-Store-It Trust, a self-storage real estate investment trust based in Wayne, Pa., announced its operating results for the three months ended Sept. 30, 2009. It also announced the closing of transactions related to its capital-raising initiatives including property dispositions, secured loans, a joint-venture transaction and a follow-on equity offering.
 
Funds from operations for the third quarter of 2009 were $14.4 million, compared with $16.3 million for the third quarter of 2008. FFO per share was $0.18 in the quarter compared with $0.26 in the prior-year quarter.
 
U-Store-It reported net income of $7.5 million, or $0.09 per share, in the third quarter of 2009, compared with net income of $4.4 million, or $0.07 per share, in the prior-year quarter. Total revenue decreased 3.5 percent to $54.9 million from $57.3 million, primarily due to lower occupancy levels and lower average scheduled rent per square foot. Total property operating expenses decreased to $23.2 million from $24.7 million, primarily due to lower advertising and utilities costs this year as compared to the prior-year period. General and administrative expenses decreased to $5.6 million from $5.8 million.
 
Interest expense decreased approximately $0.8 million in the third quarter of 2009, primarily as a result of reduced levels of debt outstanding and lower interest rates during the third quarter of 2009, compared with the same period in 2008.
 
As of Sept. 30, the company's 368 owned facilities, containing 23.8 million rentable square feet, had a physical occupancy of 75.7 percent and an average physical occupancy of 76.6 percent.
 
U-Store-It’s same-store pool at Sept. 30 represented 361 facilities containing approximately 23.3 million rentable square feet, and included approximately 97.9 percent of the aggregate rentable square feet of the company's 368 facilities. The same-store facilities represented approximately 97.8 percent of property net operating income for the quarter.
 
Same-store total revenue decreased 4.9 percent, and same-store operating expenses decreased 6.4 percent compared with the third quarter of 2008. Same-store net operating income decreased 3.9 percent in the third quarter of 2009, compared with the prior-year quarter.
 
Same-store average physical occupancy for the third quarter of 2009 was 76.4 percent, compared with 81.8 percent in the third quarter of 2008. Realized annual rent per occupied square foot (rental income divided by average occupied square feet) increased 1.3 percent over the prior year quarter.
 
On Aug. 5, the Board of Trustees declared a dividend of $0.025 per share. The dividend was paid on Oct. 22 to shareholders of record as of Oct. 7.

For 2009, U-Store-It expects fully-diluted FFO per share will be between $0.72 and $0.73, and fully diluted net loss per share will be between $(0.05) and $(0.04).
   
In the third quarter, U-Store-It announced the closing of several capital-raising transactions. The company also accessed the public equity market, raising $161 million in proceeds from its follow-on equity offering. It expects to close on its previously announced $450 million secured credit facility in the fourth quarter.
 
On Aug. 13, U-Store-It closed on its joint venture with an affiliate of Heitman LLC, receiving approximately $51 million in cash for a 50 percent interest in the unleveraged joint venture. The company contributed 22 of its wholly-owned properties in eight states. U-Store-It receives a management fee and continues day-to-day operation of the properties.
 
During the third quarter, U-Store-It sold 13 facilities for an aggregate sale price of $67.3 million and closed on seven secured term loans totaling $21.4 million. At the end of the quarter, the company closed on the sale of three additional facilities for $9.9 million and closed additional term loans for $40.6 million. To date in 2009, U-Store-It has raised $88.9 million through the disposition of 19 facilities and a total of $113.4 million through 16 secured loans.
 
On August 19, 2009, the U-Store-It closed its public offering of 32.2 million common shares at a public offering price of $5.25 per share, including 4.2 million common shares purchased by the underwriters pursuant to an overallotment option. The company received approximately $161.2 million in net proceeds.
 
Company management will host a conference call at 11 a.m. ET on Nov. 6 to discuss financial results for the quarter. A live webcast of the call will be available online from the “Investor Relations” page at Ustoreit.com. The dial-in numbers are 800.860.2442 for domestic callers and 412.858.4600 for international callers.
 
After the live webcast, the call will remain available on U-Store-It's website for 30 days. In addition, a telephonic replay of the call will be available until Dec. 6. The replay dial-in number is 877.344.7529 for domestic callers and 412.317.0088 for international callers. The reservation number for both is 431540.
 
U-Store-It owns and manages 367 self-storage facilities and operates the U-Store-It Network, which consists of approximately 547 additional facilities.

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