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Access Self Storage Opens New Facility in Red Oak, Texas

Access Self Storage has opened its fifth location in the Dallas area, at 561 E. Ovilla Road in Red Oak, Texas. Owned by Doug Hunt, the facility offers rental trucks, parcel shipping, and a conference room available to local businesses for meetings. It also offers advertising via its LED message board.
 
Access also has locations in Dallas, Garland and Lancaster, Texas.

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AMERCO Real Estate Opens Wall Avenue U-Haul Center in Utah

AMERCO Real Estate celebrated the grand opening Wall Avenue U-Haul Center in Ogden, Utah, Dec. 21. The 36,950-square-foot facility has 449 storage units, 432 of which are climate controlled.
U-Haul purchased the building in April, retrofitting and redesigning it to fit the U-Haul brand.

The facility also has several sustainable elements, including lighting and a self-storage reuse center to provide customers with a location to donate unwanted, gently used household goods, furniture, sporting equipment and clothing for other customers to take for free.

The facility will also sell environmentally friendly packing supplies including boxes made out of recyclable materials, 100 percent biodegradable packing peanuts and moving pads made from recycled denim.

In addition, the location will participate in U-Haul’s Take A Box/Leave a Box program, which allows anyone to leave moving boxes or unwanted electronics boxes for another customer to reuse for free. 

AMERCO Real Estate Company, an affiliate of U-Haul International Inc., provides real estate services to AMERCO subsidiaries that include more than 1,350 U-Haul moving and storage centers throughout the United States and Canada.

Source: Yahoo Finance,  AMERCO Real Estate Expands U-Haul Self-Storage Operations With the Grand Opening of the Wall Avenue U-Haul Center

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AMERCO Real Estate Opens U-Haul Self-Storage in Texas

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Self-Storage Talk: Real Estate Listings and Investment Opportunities

Minker Trahant Sells Ideal Mini Storage in Terrell, Texas

Minker Trahant & Associates represented the seller in the sale of Ideal Mini Storage in Terrell, Texas. The 40,503-square-foot self-storage property was sold at 60 percent occupancy with high delinquency. Brokers Richard Minker and Tyler Trahant structured an owner-financed transaction to allow the buyer flexible terms and provide the seller with the necessary cash at closing.
 
Minker Trahant is an affiliate of the Argus Self Storage Sales Network, which has 36 broker affiliates covering approximately 40 self-storage markets.

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Michigan Governor Signs Bill Improving Self-Storage Lien Law

Last week Michigan Governor Jennifer Granholm signed Senate Bill 204, which allows improvements to the state’s self-storage lien law. Originally introduced to protect military members who had been deployed overseas, the bill includes other changes that are considered a victory for Michigan self-storage operators.
 
Per the law, self-storage lien notices may now be delivered via First Class Mail or e-mail―Certified Mail is no longer required. However, the self-storage operator must make an affidavit stating how and when a notice was delivered. The affidavit must be notarized, with a copy of the lien notice attached.
 
The bill also provides the option for self-storage operators to advertise their auctions on a website. In addition, it stipulates the deferral of lien enforcement against tenants who are members of the armed services.
 
The bill was pushed through legislation via the efforts of the Michigan Self Storage Association, with the support of the national Self Storage Association Legislative Issues Fund.

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Self-Storage Education: Intense Focus on Critical Issues at the Inside Self-Storage World Expo

The Inside Self-Storage World Expo heads to Las Vegas with a powerful education program that couples superlative information with incredible value. In addition to its 36 educational seminars and five premier networking events, the industry’s largest conference and tradeshow offers four intensive workshops covering critical facets of the self-storage business. Whether your focus is day-to-day facility management, legal issues, marketing and sales, or project development, the industry’s most esteemed experts will be at the Paris Hotel & Resort, March 1-3, presenting the following a la carte programs: 

Marketing and Sales Boot Camp
March 3, Noon-6 p.m.
Presented by Tom Litton, President of Litton Property Management

Its’ time to hustle! Self-storage managers and owners have been complacent for too long. To be successful in our business today, you need to change your attitude and tactics regarding marketing, sales and customer service. Discounts, free rent and rampant concessions are not the best strategy for long-term sustainability and success. To survive, we need to refocus on the basics as well as innovative ways to market our facilities.

The most innovative marketing program in the business!

This high-energy, fast-paced seminar focuses on 50 powerful techniques that can be implemented at any facility quickly and inexpensively―in person, on the phone and online. This workshop will inspire you to think about sales and marketing in a whole new way. You’ll learn what really works and debunk the common myths. Get motivated, and get busy with these dynamic marketing ideas! 

Legal Learning Live
March 2, 10 a.m.-2 p.m.
Presented by Jeffrey Greenberger, Partner in Katz, Greenberger & Norton LP 

The operation of a self-storage facility can be fraught with legal risk. Owners and managers who want to ensure they are covering their legal bases can get the critical information they need during the Legal Learning Live seminar.

This four-hour tutorial will cover several of the industry’s most prevalent legal challenges: lien sales, abandonment of goods and documents, protection of tenant information, and vehicle storage. Attendees will learn in detail about the lien-sale process, including the steps to follow to be prepared in the event of a sale-related lawsuit. They’ll also learn best practices for handling customers’ personally identifiable information; how to deal with situations involving abandonment to avoid exposure to litigation; and proper practices for gathering and retaining information relating to the storage of vehicles.

Special Bonus: An additional hour is offered at no charge to attendees from California who would like to review the specifics of lien law in their state. California-specific documents will be provided.

The seminar includes a comprehensive workbook and a series of sample forms attendees can directly reference in their self-storage operation, including a complete lien-sale checklist template, sale rules, a release for sale participants, a mutual-settlement agreement, vehicle-storage lease clauses, and forms to collect information for vehicles in storage.

Developers Seminar
March 3, Noon-6 p.m.
Presented by RK Kliebenstein, President of Coast-To-Coast Storage 

Is self-storage the right business for you? Get the know-how you need to get started—or avoid a bad investment. This four-hour seminar is tailored to those interested in developing a new project or learning more about the industry, as well as small operators who want to grow their business. Our presenter will cover the process from beginning to end, answering the how, what, where and when of developing a site.

Learn what you need to develop and build in a down economy!

Attendees will also learn how to find financing in this challenging economic climate. Our finance expert will share up-to-the minute market conditions and show you how to get deals done. Come get top-notch information and the opportunity to build a strong network of industry professionals and suppliers.

Management Workshop
March 3, 8 a.m.-Noon
Presented by Joe Niemczyk, President of Executive Self Storage Associates 

Whether you’re new to the industry or looking to hone your management skills, this session is for you. Explore the ins and outs of daily facility operation and what you need to run a successful self-storage business. During this seminar, you’ll learn about operational essentials, customer service, sales skills, site marketing, legal issues and more. Facility performance is intimately tied to these day-to-day issues and tasks, in today’s competitive market more than ever. Every manager should hone his skills with this informative session. 

For managers looking to sharpen their skills and grow in their position!

The ISS Expo focuses on the immediate needs and challenges of self-storage owners, managers, developers, investors and suppliers. The Las Vegas program provides innovative, effective strategies for cutting costs, increasing revenue and operating a successful business. For information on the complete education program, product and service exhibits, and how to register, visit http://www.insideselfstorageworldexpo.com/.

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In the Spotlight: Talking With Big Yellow Self Storage

With nearly 70 facilities across the United Kingdom and Paris, Big Yellow Self Storage is one of the largest self-storage operators in Europe. Inside Self-Storage spoke with several of the company’s executives earlier this fall to discuss how Big Yellow has fared during the global downturn, its new commitment to the environment, and its plans for future growth. Included in the interview were Paul Donnelly, corporate social responsibility manager; Adrian Lee, operations director; Sharon McCarthy, marketing executive; John Trotman, chief financial officer; and Rob Strahan, head of sales and marketing.   
 
1. Tell us a bit about Big Yellow.

McCarthy: We combine the latest technology with excellent customer service and a network of 68 stores in high-profile, easy-to-access, main-road locations. We’re already the leading self-storage brand in London and the South of England, and we’re now expanding to cover the rest of Britain.

Our stores offer sophisticated 24-hour security, including a personal access-code system that allows tenants into our buildings seven days a week, 365 days a year. The system ensures tenants have total control over who enters a storage room.

Our focus on the location and visibility of our buildings, coupled with excellent customer service, has helped to create one of the most recognized brand names in the storage industry.
 
2.  Big Yellow recently committed to corporate social responsibility (CSR). What does this entail?

Donnelly: As a developer and operator of self-storage, Big Yellow sees CSR as a belief that we should take into account the social and environmental impacts of our operation on our stakeholders. CSR policy at our business level entails a vision to “strike the balance” between socio-environmental responsibilities and commercial objectives.

CSR also entails raising the awareness of our domestic customers on space for lifetime events, such as getting married, having children, de-cluttering and moving. Our business customers need to know how we can facilitate continued business growth and regeneration without the expense of relocation from established premises. This can be achieved through our storage building flex-offices, retail and other types of workspace.

From an environmental perspective, our store operation and construction-energy uses have been identified as our most significant impact. This has resulted in our building portfolio evolving from recycled or refurbished buildings to purpose-built, high-quality and well-insulated stores.

These buildings do not require heating and cooling in 97 percent of their areas. More than 20 percent of our portfolio has energy-efficient design, lighting and lifts. Onsite renewable-energy generation through solar photovoltaic panels, wind turbines and ground-source heat pumps reduces energy grid supply and carbon emissions by a further 10 percent to 20 percent. Several green walls, roofs, landscape gardens and rainwater harvesting systems in new stores contribute locally to mitigate the effects of the urban heat-island effect and climate change.

Big Yellow’s environmental investments have already resulted in cumulative long-term financial benefits, and reduced energy use by 11 percent in 2009. By 2010, we will be complying with the Climate Change Act, Carbon Reduction Commitment and benefitting financially from carbon trading. Also by 2010, our renewable energy installations will start to earn an additional income stream from the Energy Act (Feed-in Tariff).

Big Yellow will gain a new brand loyalty through a long-term, low-risk, compliant and ethical image. This image will include being eco-efficient, progressive and potentially innovative. The emerging “green” technology markets and consumers will increase profitability and eventually shareholder value.
 
3.  How has Big Yellow been affected by the downturn in the world economy?

Trotman: Big Yellow’s performance has been relatively resilient, but not immune, to the effects of the global recession. Same-store occupancy has fallen; however, the effect on revenue has been in part offset by the ability to manage yield through customer price increases, and effective controlling of price and promotions to new customers.

New store openings have performed well, particularly in London, and have shown good occupancy growth. In recent months, we have seen a noticeable improvement in activity levels across the group, although these are below those experienced prior to the onset of the credit crunch in August 2007. This is consistent with the increased activity within the housing market in recent months.

Self-storage has proved resilient due to the many different users and usages of the product. For example, during 2008, Big Yellow saw an increase in customers from the rental sector, caused by the dislocation in the owner-occupied sector, driving storage requirements from people who were, for example, unable to upsize, or who had sold their houses and renting until the market reached its bottom. 

Our customer base is 20 percent businesses (occupying 25 percent to 30 percent of the space). This sector has performed well during the downturn, as the flexible nature of storage appeals to businesses who do not want to be burdened with long leases on typical warehousing space.
 
4.  Tell us about the new Big Yellow blog. What can Web users find?

Strachan: The blog aims to be a useful resource for anyone looking for personal or self-storage solutions, with handy hints and tips and tricks on packing, storing and transporting. The blog will also carry company news from our stores about our countrywide and local initiatives. Alongside these are occasional feature articles on initiatives from within the company and the world of self-storage.

Every week, we bring our readers “Did you know” facts about self-storage, and we hope it will be a useful resource for our customers. All of our social-media presences are featured in our very own social-media hub, so the public can interact with us informally via Twitter, Facebook, YouTube or Flickr. We’re due to launch a wine-blog offshoot very soon to highlight some of the great knowledge the team at our wine-storage facility, our flagship Fulham store, has at their disposal.
 
5.  What’s the future for the company?

Lee: The future of Big Yellow will be driven by the potential to lease up the existing 58 stores that are currently trading as Big Yellow Self Storage. These stores offer another 1.8 million square feet to lease up. It will also be driven by continued acquisition of new sites and development of new stores. As of June 2009, the group had 12 sites under development, totaling another 0.8 million square feet of self-storage. New business development through the expansion of international franchise partners and expansion of the Armadillo managed store platform in the United Kingdom is also part of our future.
 
For more information, visit www.bigyellow.co.uk

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ISS Blog

Turning Strangers into Virtual Friends

If you’re like me and you log onto an online forum every day, you start to notice a strange phenomenon developing: people conversing like they’ve known each other for years when they’ve never actually met. 

I’ve witnessed this occurring on Self-Storage Talk, the online community affiliated with Inside Self-Storage that’s open to self-storage industry professionals. Since I joined the ISS team and began working with the site earlier this year, I feel like I’ve gradually come to know many of the users based solely on their posts.

Granted, I have met a handful of users in real life in Washington, D.C., at the Inside Self-Storage World Expo, but most are individuals writing posts anywhere from the other side of the state to the other side of the world. It feels strange to say this, but I feel like I’ve made quite a few new friends. 

For example, there’s MusicCity Gal, a fun-loving Nashville native who loves her family, country music and what she does for a living.

Astro, hailing from the bustling metropolis of Cashiers, N.C., seems like one of the most affable guys you’d ever want to meet. Or how about Storman, the quick-with-a-joke Californian who’s got a son poised to play wide receiver in college football? 

If I passed these people on the street, I wouldn’t recognize them. I couldn’t describe them to a sketch artist. But I feel like I know them, at least a little bit. That’s the beauty of Self-Storage Talk, which, when you think about it, is one example of the social media explosion of this decade.

Contrary to the opinions of many sociologists, people can and do form meaningful relationships—or at least begin them—over the Internet. I’m holding out hope that I can officially meet some of my online buddies at an industry event, such as  the next Inside Self-Storage World Expo in March.  

If you haven’t experienced what I’m talking about, you should give Self-Storage Talk a shot. It’s a place where you can get more than a recommendation on what management software to buy or how to keep pests out of your facility. It’s a place to share with people who understand what your day-to-day life is like. And as hokey as it is, the forum is a place to make friends, too. Who wouldn’t want more of those?  

A Lesson in Self-Storage Value Limits and Wrongful Sale: Dubey vs. Public Storage

In late October, the Illinois Court of Appeals released its decision in Vartik Dubey vs. Public Storage Inc., another harsh verdict against the self-storage industry for wrongful sale of goods.  I’m not personally involved in the case; the facts I cite are those delivered in the decision, and I don’t know if Public Storage plans to appeal to a higher court. As of November, the case had been remanded for review of a portion of punitive-damage award, so it’s not final. But the decision is worth noting.

Here’s a recap: Ms. Dubey rented a unit at a Public Storage facility in Illinois and, at the time, advised an employee that she had a large amount of goods: a washer, dryer, refrigerator, bikes, lawnmowers, televisions, jewelry, basketball hoop, etc. She picked the larger of the two units she was shown, and agreed to come back later to sign the rental agreement.

The manager prepared the rental agreement for unit C-10. Dubey signed it. Then the manager took Dubey to her unit and placed her lock on it. A day or so later, the tenant began to move in. 

Unfortunately, the unit on which the manager placed the lock was E-11, not C-10.  E-11 had been rented to someone else, who consequently failed to pay rent. Public Storage sold the contents of E-11―Dubey’s property. Dubey, by the way, had been on automatic payment via credit card and was not delinquent at the time her unit was sold.

When Dubey discovered she could no longer access her unit, the manager explained the unit had been sold to recoup the $191 past-due balance, and items of a personal nature that could not be sold (photos, for example) had been thrown out. The manager wouldn’t even tell Dubey where the garbage was so she could attempt to retrieve her items. 

Assessing the Damage

Dubey claimed her goods were wrongfully sold and she was given no notice of the sale. She also claimed to have stored $150,000 worth of goods, even though the rental agreement she signed contained a provision limiting the value of personal property stored to $5,000. She further testified that the rental agreement was only explained to her for five minutes, the unit number on the agreement was not clearly disclosed, and she wasn’t informed of the value limit.

This case was tried partially by a jury and partially to the court. The verdict in Dubey’s favor was $5,000 for breach of contract and $5,000 for conversion. The jury also awarded punitive damages in the amount of $745,000 (this amount has been remanded for reconsideration). The trial court handling the Consumer Fraud Act claim awarded compensatory damages of $69,145, an additional punitive-damage award of $207,435, plus attorneys fees of $185,849, bringing the wrongful-sale verdict total to $1.217 million, upheld by the Court of Appeals. 

Value Limits

There are two things you need to take from this case as it pertains to value limits. First, value limits in the rental agreement should be highlighted or bolded and pointed out if not explained to tenants. Also, make sure you include language in your agreement stating that higher value limitations may be available for consideration if requested. This is mandatory in New York and recommended in light of several cases on the subject.

In the Dubey case, the Court seems particularly concerned with a $5,000 limit on a large unit, particularly when the occupant notified Public Storage of the items she needed to store.  As operators, you need to think about whether it’s appropriate to have ascending value limits based on unit size, perhaps limiting $2,500 value to smaller than 100 square feet, $5,000 for 200 or less square feet, and a different value limit for larger units.

The other lesson you can take away from this case is the Court was disturbed that Public Storage had no remorse and did nothing to help Dubey retrieve her sentimental items once it learned of its mistake. In addition, Public Storage never seemed to admit, at the time relevant, that there was a wrongful sale. The company also showed no policy or procedure to describe how it made sure it was selling the right unit.

If you find you committed a wrongful sale, sticking your head in the sand is the wrong action. Showing appropriate contrition, assisting the tenant in recovering any sold property, and excluding items with no saleable value such as pictures, diplomas, etc., may not have averted a wrongful-sale verdict in the Dubey case, but it certainly could have taken the wind out of the sails in upholding punitive damages. 

Lien Sales

If you feel uncomfortable about how you’re performing lien sales, proceed with caution. If you don’t understand your state statute, you feel your process is sloppy, or you let emotions get in the way of common sense during the sale, take note: The Dubey case is now the third largest verdict in a year against a self-storage operator for wrongful sale. 

Understand there’s little your attorney can do to protect you if you commit a wrongful sale. That’s why you should have wrongful sale and disposal insurance. Given the large recent verdicts, $25,000 or $50,000 for this type of coverage may not be adequate anymore, even if you have a value limit in your rental agreement. You can see how easily a court, if it’s looking to do so, can get around the value limit by disregarding it or awarding compensatory or punitive damages as well as attorneys fees.

Wrongful-sale verdicts are skyrocketing in value. Protect yourself and your business. You cannot afford to have a million-dollar verdict against you.

This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney. 

Jeffrey J. Greenberger is a partner with the law firm of Katz, Greenberger & Norton LLP in Cincinnati and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; visit www.selfstoragelegal.com.

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Resolving Self-Storage Defaults and Avoiding Lien Sales

Self-Storage Sale and Disposal: Know the Law Before Acting

National Snapshot 2010: The Self-Storage Real Estate Market

Near the end of 2008, the U.S. Secretary of the Treasury was on his knees begging Congress for Trouble Asset Relief Program money, essentially telling congressional leaders the sky was falling and only the better part of a trillion dollars would cure the problem. Never mind that the money wasn’t spent on what was promised.

In the ensuing months, banks went bust (or should have), loans were impossible to get, home mortgages were being foreclosed left and right, stocks dropped like a rock, and asset values were cut in half or more. Consumers quit spending. CEOs let go of employees by the droves (but not their own bonuses) and, thus, more mortgages went unpaid. In short, everybody was seriously scared and had a right to be.

In the commercial real estate markets, liquidity (i.e., loan availability)completely dried up, causing buyers to disappear and sellers to freeze in place. Goldman Sachs was suggested that cap rates would go up (values down) by 300 to 500 basis points. It looked pretty bleak for commercial real estate, and for several months, transactions were almost nonexistent.

Office buildings cast out their mortgage-broker tenants. Shopping centers lost tenants and renegotiated leases with those that remained. Hotels were hit hard as business and tourist travel came to a near halt. Real estate investment trusts (REITs) discovered they were out of money, and some were forced into bankruptcy. In short, 2009 was a long, slow, scary year.
 
Why Self-Storage Is Different

A wise man once said, “There must be a pony in here somewhere.” Sure enough, there is a pony, and it’s self-storage. While the industry hasn’t been entirely immune from the effects of the recession, the colossal devastation that has visited other types of real estate has been less damaging for storage properties. This isn’t because of luck; it’s because of natural, positive differences in the way self-storage works as a business.  

In the self-storage industry, many follow the REITs quite closely. The U.S. Securities and Exchange Commission requires REITs to publish their audited results on a quarterly basis. Since the self-storage REITs have a broad distribution and large number of stores, this information provides us with a reliable gauge of what the entire market is doing.

When comparing the quarterly results of the REITs for the last year,  same-store revenue shows a decline of about 2.7 percent to 3 percent. By order of magnitude, these results are better than those experienced in other real estate categories. While it’s somewhat painful, it certainly isn’t devastating to self-storage operators.  

To look at an even more positive aspect of these numbers, let’s run through some math. Let’s say the average self-storage tenant stays a year. If occupancies declined only 10 percent in 2009, then 90 percent of current tenants were new at some point during the year.

This statistic says something very good about the self-storage product and the strong demand and need for it. This isn’t a claim any other real estate class can make about its consistent demand, especially in the worst recession in nearly 80 years.

Every other type of commercial real estate spends huge amounts of money to acquire new tenants. Office-leasing brokers often collect a dollar per year per square foot of space leased, and the landlord pays as much as $25 to $45 per square foot to remodel the space.

Retail, industrial and hotels have their own unique but expensive ways of acquiring tenants. Self-storage seldom requires large capital expenditures of any kind, and rarely does an empty unit require material refurbishing after a tenant moves out. The apartment landlord can only dream of this situation as he repaints, buys appliances or installs carpet between each tenant.

The most important factor contributing to the effectiveness of self-storage is leases are usually 30-day contracts. This allows the owner to adjust rent at any time and react quickly to changes in the market. Increases can be as frequent as the owner wants, and can be relatively small in dollar terms but significant in percentage terms. Apartment leases, on the other hand, usually run 12 months, and other types of real estate lease terms are usually counted in years.

This ultimate flexibility allows self-storage owners to take advantage of lowering rates when demand is low and raising them when demand is high. Many self-storage management firms adjust their “street” rates every day, sometimes more than once a day, and set schedules for each tenant’s future rate increases, sometimes as often as twice a year.  The ability to manage revenue is an important and distinctive characteristic of self-storage.

Finally, most self-storage owners have a conservative streak that provides a lot of security in these troubled times. Most have a responsible amount of leverage in their properties. This trait not only protects owners, it collectively helps preserve an orderly market for those that want to sell or buy facilities. Many, if not most, other commercial real estate owners are leveraged to “the hilt.” By way of example, there are a trillion and half dollars worth of commercial mortgage-backed securities loans maturing in the next three years.
 
Obtaining Financing

To a large measure, these positive fundamentals of our business have saved the day for self-storage owners—so far.  First, let’s remember what the first six months of this debacle looked like in terms of the commercial real estate market. The REITs’ stock values plunged because of the projected decline in property value and, more important, their excessive debt and the close maturity of that debt.

Many of the REITs have scrabbled hard to raise equity and refinance maturing loans, but it was at great expense to their shareholders in terms of dilution of share value. The combination of the high leverage on most of the commercial real estate loans and the close maturities make their repayment problematic. The banks―and not just the big ones―simply do not have the capital or risk appetite to make new loans or renew the existing ones. That’s not to say new loans are impossible, but they’re going to be difficult to find and will have dramatically less generous terms.

Current interest rates are in the 6 percent to 8 percent range, with a loan term of 3 to 5 years―on a very good day, maybe 10 years. The underwriting of the loan will be more strenuous, with the value determined by the trailing 12 months of net operating income divided by the cap rate. No pro forma income or excessive “other income” is likely to be counted in the calculation of value.  In most cases, the loans will provide for recourse to the borrower, which is a significant change from the CMBS loans they may replace.
 
Cap Rates

Cap rates have also changed during the last year, and new loan proceeds may not be sufficient to retire a maturing loan amount, which might require an owner to put up more equity. Because of low leverage applied by many self-storage owners, this may not impact as many in our industry as other commercial real estate; however, it will be a serious problem for those it does affect.

Cap rates in the beginning of the first quarter of 2009 went up dramatically, and quickly cut the theoretical value of all commercial real estate, including self-storage. Cap rates before the crash were significantly below the rates prevalent in the past 40 years (meaning higher values than in the past). However, because there were virtually no sales occurring, it was difficult to know exactly what the cap rates were in the early months of the downturn.

By looking at comparable sales and listings at the time, it appeared the asking cap rates were roughly 7.5 percent to 8.5 percent, and the offering cap rates were at 10.5 percent to 11 percent. Sellers were saying, “Would I earn a better return just holding my property?” and the buyers were just hopeful bottom fishers. The result was there were not enough sales to accurately define a real cap rate for several months in the first part of 2009.

The cap-rate spreads have now narrowed and are starting to stabilize in the self-storage market. We’re seeing transactions for well-occupied, well-maintained, demographically superior properties at 8 percent to 10.5 percent. There are a limited number of buyers, but inquiries from prospects are increasing to an encouraging level. Most sellers recognize that 2006 and 2007 were years of exuberance in the market, both as to price and ease of sale.

Buyers are equally tamed by their experience over the last several months and are becoming more realistic about pricing. There seems to be more rationality in the self-storage real estate market, and pricing appears to be approaching equilibrium. The demand for self-storage rentals seems to indicate the business is much less fragile than we feared, and the market for buying and selling will be more accommodating in the months to come.

Having made these predictions, here are three cautionary comments: First, if you have a loan maturing in the next year and a half, start planning to replace that loan now if you can. Much of the information in the financial press leads me to be concerned that the smaller banks will be restricted in commercial real estate loans because of their past over aggressive lending and pressure from the FDIC.

Second, now is the time to out-compete your competition by improving your property and marketing. A little money spent now when your competitors are holding back could improve your future competitive situation dramatically.

Finally, be conservative with your cash and watch for signs that the economy doesn’t go in reverse.
 
Michael L. McCune is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE.

Related Articles:

Self-Storage Valuation: A Technique for Checking an Appraisal's Fairness

Self-Storage Real Estate Challenges: Pricing, Debt and the Market

Take Advantage of a Buyer’s Self-Storage Market

Self-Storage Talk: Real Estate Listings and Investment Opportunities

ISS Blog

The Self-Storage Top 10!

I’m a huge fan of lists. The end of the year—or in this case a decade—typically brings a slew of them on everything from best-selling music artist to biggest business blunders of the year. And while it’s been a really rough year for most, there have been some bright spots. Looking back over the past 12 months, can you name a few “top” moments in your professional life? I’ll start: 

  1. The Inside Self-Storage World Expo in Las Vegas, Jan. 26-29. The world was just beginning to really feel the recession. Yet thousands turned out for the annual show in Vegas to learn about their industry.
  2. Gina Six Kudo joins ISS as a blogger and feature writer. Gina’s passion and warmth shines through in every blog she writes. She’s also a savvy businesswoman who knows her stuff. 
  3. ISS magazine focuses more on “green.” After dipping our toes in the “green” waters a few times, ISS focused more on sustainability this year with articles on solar, green building and eco-friendly topics.
  4. Self-Storage Talk member numbers soar. SST saw a huge jump in participation this year. Plus, several frequent posters became moderators. That’s commitment.
  5. Speaking of SST: John Carlisle joins the team as community manager. Not only has John done an amazing job on the admin side of SST, but he brings a sense of humor to the job.
  6. ISS website traffic grows. The ISS team concentrated on bringing more up-to-date news and articles to our readers. Obviously, you like it!
  7. A more diversified group of ISS columnists and feature writers come on board. In addition to Gina, ISS also welcomed Benjamin Burkhart, John Roser, Sean Cargo, Kent Flake, Alyssa Quill, Jackie Ulfig and a handful of others this past year.
  8. A Washington, D.C., vacation. Ok, so I was actually there for the Inside Self-Storage World Expo last October, but with a setting like the Gaylord National Resort and Convention Center, located on the Potomac River no less, it almost didn’t feel like work. It was a beautiful setting for an action-packed show.
  9. The 2010 ISS Factbook. This is a labor of love. It’s a chance for the ISS team to grab all our best features and columns from the year and pack it into one convenient location. If you don’t have one, get one.
  10. Getting ready for 2010 ISS shows. Technically, this dips into next year, but the ISS team has been working diligently for the past couple of months to bring you the best expos yet. First up: Las Vegas, March 1-3. Start your year off right with the best education around. Plus, we have add-on workshops, hot-topic round tables and a pretty spectacular cocktail party. Then we head to the land of Mardi Gras—New Orleans—Sept. 28-Oct. 1. It’s guaranteed to be a show to remember.

While I’m sure you can think of 50 things that went wrong this year—lower occupancy and more concessions included—you can probably also come up with a few good ones. Maybe it was a particular tenant, a pat on the back by your boss or just a good day. Share your top 10 (or even a couple) moments in self-storage this past year on Self-Storage Talk.

Finally, I’d also like to give a very heartfelt thank you to all our writers and advertisers and you, our readers. Your support during this difficult year has meant a lot to the ISS staff. Have a wonderful and safe holiday!