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Man Dies After Crashing Into Wall at Norfolk Self-Storage Facility

A Norfolk, Va., man who crashed his all-terrain vehicle into a wall at an Uncle Bob’s Self Storage facility died on Thursday. Brandon Angelo Via, 22,  was riding in the 300 block of Naval Base Road in Norfolk on Wednesday when he ran into the wall. The preliminary investigation showed the man was traveling at high speed. Police are still exploring the case.
 
Source: The Virginian-Pilot, Norfolk man dies after ATV crash

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ISS Blog

Conversions: The New Way to Build Self-Storage?

Over the past couple of months, ISS has reported on an emerging trend in self-storage: conversions. While retrofitting empty buildings into self-storage facilities has always been a part of the self-storage construction landscape, the lack of available land for new development in many cities combined with the recent availability of large, empty buildings, has given self-storage conversions new life.

Co-owners Dan Kasman and Michael Gyory’s celebrated the grand opening of Thornwood Self Storage in Thornwood, N.Y., a “green-minded” conversion project. Built in the 1960s, the building had most recently operated as a health club. The co-owners were committed to going green, re-using and recycling much of the construction debris. The Thornwood project is the Facility Spotlight in the February issue of ISS.

Another large-scale conversion, iStoreGreen, was a turn-of-the-century, cold-storage building in New York. Owner and developer Jeffrey Sitt was able to repurpose much of the original building’s materials and now uses renewable energy for 100 percent of the facility’s electricity.

City planning and zoning commissions also seem to be on board with conversions, which can give self-storage access to retail areas formerly off limits. Recently, a developer in Summit Hill, Pa., received approval to retrofit an old bakery, once considered a town landmark, into a 13-unit self-storage facility. Another bakery, vacant since 2002, reopened this fall as Lucenda Self-Storage. 

While some developers and investors will always prefer the clean-slate appeal of ground-up construction, conversions should not be overlooked.

Benjamin Riehm of Janus International outlines the advantage—and challenges—of conversions in this article from the ISS archives. You can also read what industry real estate professionals have to say about the future of conversions in the State-of-the-Industry Report, Part 2 in the March issue of ISS.

Finally, Andrew Hyde of Self Storage Affiliates tackles the topic at the Inside Self-Storage World Expo in Las Vegas, March 1-3. To read more about his seminar, “Making Money With Self-Storage Conversions,” and to register, visit www.insideselfstorageworldexpo.com.

If you’ve completed a self-storage conversion project, or are considering one, tell us about it by posting a comment below or head over to Self-Storage Talk, the best self-storage online forum, and join the discussion.

Strategic Storage Trust Buys Two Pittsburgh Self-Storage Facilities for $5.7M

In an all-cash transaction, Strategic Storage Trust Inc., a publicly registered non-traded real estate investment trust targeting the self-storage market, acquired two facilities in Pittsburgh area for a combined purchase price of $5.7 million. The seller, Sovran Acquisition Limited Partnership, was represented by Locke Acquisition Group LLC.

Built in 1990, the 470-unit Landings Drive property is 14 miles northwest of downtown Pittsburgh. The 55,200 net rentable square foot property is strategically located near the I-76 toll-road and State Route 28 interchange. The facility sits on 3.5 acres with six one-story buildings offering drive-up accessible units, and interior climate-control units with security cameras, a secure code access entry gate, perimeter fencing and new concrete drives.  
Left: Landings Drive. Right: Lebanon Road

The 820-unit Lebanon Road self-storage property is just seven miles from downtown at the intersection of two primary arterial roads. The 100,000 net rentable square foot facility sits on 5.7 acres with two two-story buildings and another two-story building which contains an office and residence apartment. Built in 1983, the property offers drive-up accessible units, interior climate-control units, security cameras, a secure code access entry gate, perimeter fencing and asphalt drives. 

Self Storage Strategic Trust has expanded to include 26 properties in 14 states. In an effort to unify and establish a national brand, the company recently launched a major re-branding campaign. The two Pittsburgh facilities will be launched under the new flagship brand Smart Stop Self Storage.

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Self-Storage Talk: Site Selection  

Meta-Search Tool

Salt Lake City-based Self Storage Co. launched a fully featured meta-search tool specifically for customers seeking self-storage in their neighborhoods or major areas in the United States. Customers seeking self-storage can browse by city, ZIP code or even street address. They can also request a quote or reserve a unit.

Self Storage Co. plans to add more customer features including “shop and compare,” which will enable customers to compare unit availability and prices at up to four storage facilities.

Self Storage Co. is a provider of independent self-storage search tools. Its websites list self-storage providers in convenient locations, particularly in major population centers.

Source:  Earth Times,  Self Storage Company Announces New Storage Finder Websites

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Self-Storage: Part of an International Community

Self-storage markets worldwide are at various levels of saturation in regard to development. The global business community has gained knowledge from watching the evolution of the U.S. industry, which has shortened the learning curve in many areas. The result is newer storage facilities, many of which are upscale and rich in amenities.  
 
Self-Storage Down Under

Outside of the United States, Australia has led the self-storage charge. Established players, prominent in the most populated areas, include Storage King, Kennards Self Storage, Guardian Storage, Fort Knox Self Storage and National Self Storage. The Gold Coast and Brisbane have the highest concentration of square meters of storage space per capita. Overall, Sydney and Melbourne have the highest total self-storage units.

Australian storage sites tend to be larger, containing more units than facilities in other countries. It’s not uncommon to find sites with 2,000-plus units.

Due to changes in the economy since 2008, new projects have become increasingly difficult to fund. The downturn has also caused a decrease in rental demand in Australia.
 
Across the Pond: Self-Storage in Europe

The European self-storage industry has seen extensive growth. Although that market is not as mature as the U.S. market, it contains areas of significant development. There are approximately 1,350 self-storage sites in Europe, with England having the most of any one country. Major players are Big Yellow Self Storage, Access Self Storage, Safestore Self Storage, Shurgard Self Storage and Easybox Self Storage.

“The downturn in the U.S. market has had a ‘knock-on effect’ to the European market,” says Barry Frost of Sentinel Systems Europe, a provider of self-storage management software and security systems. Although this may have slowed new development, he says the demand for storage space has increased due to plant closings, businesses collapsing, and people who have been forced to relocate.

In most European markets, there is room for more industry development. “There are still opportunities in Europe to build profitable self-storage,” says Les Kelly, president of Rite Place International, a Parker, Colo.-based company that offers self-storage design and construction-management services.

He points out that upfront construction costs in Europe are as much as 75 percent more than in the United States; but because there is higher consumer demand, operators can charge higher rates. This means higher net operating income that will more than offset the costs to build, he says.

Finding a vacant factory or warehouse to convert into self-storage is one way to trim construction costs and be in business faster. In addition, the government offers incentives to build new businesses in some areas, such as Wales.
 
Self-Storage in Other Areas

Self-storage development is also expanding in Asia. Big Orange Self Storage now has five facilities in Hong Kong and Singapore. “The industry is in its infancy in Asia, and Asian banks are reticent to lend to this new and niche type industry,” says Angus Miller, the company’s CEO. “The capital side of the business has greater links to the global economy, and this aspect will be slow to recover.”

With an estimated 250 existing self-storage sites and more in the planning stages, Latin America is also seeing growth. Mexico is the leading country for self-storage in this region. Countries such as Brazil, Chile, Colombia, Costa Rica, Ecuador, Panama and Puerto Rico have modern self-storage facilities similar to those in the United States.

Although the global economy has taken its lumps, there are still markets in which demand for self-storage is high. Of course, finding quality real estate in the right location is a crucial element, no matter where development is considered.

The expansion of self-storage across the globe has helped solidify the products and processes of vendors and operators in the United States. The world is moving toward one big marketplace, with less restrictions and more free trade. Self-storage is truly becoming part of an international community.
 
John Fogg is part of the management team at Sentinel Systems Corp., which has been supplying software and security products exclusively to the self-storage industry since 1975. For more information, call 800.456.9955; e-mail [email protected]; visit www.sentinelsystems.com
  
Security in Global Markets

Self-storage operators everywhere understand the critical role security plays at a facility. Tenants need to know their belongings will be protected. They also need to feel safe while on the premises. Studies show that one of the biggest reasons tenants choose to rent at a particular facility is site security.

Self-storage operators throughout Asia, Australia, Europe and New Zealand work diligently with security distributors to coordinate product choices and installation. The key is identifying the necessary system components and understanding how these pieces fit together, particularly how the system is unique to each site. Access control, individual door alarms, surveillance cameras and lighting are all considerations.

The goal is to create a visibly secure and pleasant environment that reassures renters, encourages prospects to rent, and discourages wrongdoers. Working with experienced self-storage security companies has helped many facility operators accomplish this.

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An Overview of Self-Storage Exit Strategies: Careful Planning for Leaving a Business

Self-storage has been and should continue to be a wonderful cash-flow investment. After all, that’s exactly what the business was founded upon: a pure investment real estate that provides steady income.

Economic expansion over the past 10 years produced a doubling in the size of the self-storage industry due to strong consumer spending, attractive interest rate, and generous, available financing. What resulted was not just cash flow but property-value appreciation, something that was not necessarily an initial goal, but a nice surprise.

The business is comprised largely of individual owners who took a chance on a new venture in hopes of reaching their financial goals. But few thought about how they’ll exit the business—and on what terms. Just as starting a successful business requires planning, hard work and a little luck, so does leaving it. Here are some common methods self-storage owners can use when the day comes. 

Estate Planning

Estate planning should involve your attorney and accountant and can range from simple to complex depending on the size of your balance sheet. In any case, wills, trusts, life insurance and family partnerships should be a part of your plan to distribute assets, reduce your tax liabilities and provide for a succession plan.

The succession plan should cover a multitude of life occurrences, such as what happens upon your death, disability, divorce, retirement or partnership split. This should include how the property is passed to your heirs, how it will be valued, and how it will be managed. 

Buy/Sell Agreements

All partnership arrangements should contain buy/sell agreements. At the outset of a partnership, these agreements are crucial to a successful investment experience with others. They should address partners’ rights, capital contributions, distributions of profit and losses, management, transfers of interest, withdrawal of partners, valuation, and dissolution.

The key is to understand how the business is valued and have this done annually. This way you always know what your investment is worth and can manage this asset like you would your other investments, annually re-evaluating your goals, progress and time horizon.

Tax Planning

Knowing the value of your facility annually will help you minimize your tax liabilities. Along with an understanding of the political landscape and your best guess on the direction and timing of future tax legislation, you can plan strategically to pass on your investment to others or sell the whole asset.

Given the economic recession, the shallow recovery expected, and the budget deficits at all levels of government, you can be sure that anything and everything that can possibly be taxed will be under consideration.

The long-term capital-gains tax rate of 15 percent is at its historically lowest level. When you combine this with capitalization rates on self-storage of between 8 percent and 10 percent, self-storage has still maintained good historic valuation. If you can receive several years of cash flow today in the form of long-term gains, which are taxed at 15 percent vs. the same cash flow at higher ordinary income-tax rates, then selling may be your best option.

Sale/Disposition

If you’ve done your estate and tax planning and come to the conclusion that it’s time to sell your facility, then it’s time to prepare for the sale. For a moment, pretend you’re the buyer. When you drive onto the property, is the landscaping maintained? Is the pavement in need of repair? Do the roofs leak? Do any of the buildings or doors need paint?

During your ownership of the property, did you take out all the cash, or did you reinvest some proceeds so it shows well and a buyer can come in and run things without having to put time and money into deferred maintenance? Like the old Purolater commercial goes, “You can pay me now or pay me later.” In this case, a few dollars to shine up the place should garner you a higher sales price.

In addition, have your financials in order. Orderly statements by month, preferably in an accounting system such as QuickBooks, plus operational reports from your self-storage software will improve your chances of a smooth sale. Most buyers want to see 12 to 24 months of income statements so they can see the cash flow and look for trends. Having this critical information at the ready gives you tremendous credibility as an engaged owner.

Prepare all the due-diligence items buyers may want to review immediately after you sign a sales contract. This includes two years of financial statements, rent rolls, delinquency reports, occupancy reports, property-tax bills and utility bills. Other items include site plans, approvals and permits, insurance policies, title reports, environmental reports, a sample lease, service contracts, and loan documents if the buyer is assuming the loan. Marketing the facility with an attractively structured assumable loan or seller financing never hurts, especially today.

The typical length of time to sell a facility is roughly six months. This time frame can be extended if the property is in an inferior location to competition, deferred-maintenance items are extensive, or buyers cannot obtain financing. The primary reason is over pricing of the facility.

To prevent over pricing, work with an experienced broker who specializes in self-storage. A broker can provide you with a valuation of what the property will bring in the market. The facility should be priced at what is commonly called, “the high end of reasonable.” Overall values are not at the market peak today. However, they’re closer to their highs than historic averages, let alone market bottoms.

The biggest threat to completing a sale is pricing the facility to yield investment returns for buyers that make no sense. You can usually get a buyer to look at the property once, but getting him to revisit can be a challenge. Buyers tend to believe a seller is not “real.” Once a seller understands the returns a buyer is receiving, he’ll have confidence that the price he should ask makes sense for both parties.

We are in unusual times and, as is typical with real estate, the value of your facility depends on many unique items specific to your property such as location, competition, condition, financing and pricing. Hopefully, you planned early for the day you’ll leave your business. If not, plan now. Assemble your team of advisors. Know what your facility is worth. Have realistic expectations. Understand how this asset fits into your bigger plan and timeline, and monitor your plan regularly.
 
John E. Barry is the vice president of brokerage for Investment Real Estate LLC, which provides brokerage, management and construction services as well as feasibility studies for self-storage owners in the northeast and mid-Atlantic States. To reach him, call 717.779.0804; visit www.irellc.com.

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Former Bakery in PA to be Converted into Self-Storage

The former Baldini's Bakery in Summit Hill, Pa., will be turned into a 13-unit self-storage facility. Approval for the conversion was granted by the Summit Hill Zoning Hearing Board Thursday after a zoning hearing was rescheduled in November. 

The developer, Todd Mason of Mason Realty, converted a former bar into self-storage units and also owns units in Nesquehoning, Pa. Mason purchased the Baldini building nearly a year ago after the business closed. The bakery is considered a landmark in Summit Hill. 

Although Mason considered other applications, including re-opening the bakery or an apartment complex, parking and zoning restrictions made these options not feasible. 

Although the building has three floors, the units will all be located on the first floor and new siding will be installed to enhance the building’s appearance.
 
Source: Times-News,  Ex-Bakery to Become 13 Self-Storage Units

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ISS Blog

The Danger of Specials: Dealing With Tenants Who Pay More

Each day for the past two weeks, I have been digitally bombarded with sale and discount offers from nearly every online retailer with whom I have shopped over the past year. Free shipping, 25% off, cash rebates, buy now and pay later ... There seems no end to what sellers are willing to do to move product this season.

Many self-storage operators have felt a similar compulsion this year to offer discounts. Even the REITs have been willing to sacrifice income to entice customers, using free and low-cost rent specials. But the effect on revenue aside, we're all aware of the other possible landmine involved in these sales tactics: fallout from existing customers who pay a higher monthly rent than your new ones.

I often get e-mails from disgruntled tenants who think ISS is some sort of consumer-protection agency that will come to their aid in struggles with storage operators. They seem to assume that because we wield the power of industry media that we will rally to their cause, contacting whichever operator is giving them  grief and demanding justice on their behalf. Today, I received just such a message through the software that allows readers to post comments to our website.

Without burdening you with intricate details, I'll tell you this customer is engaged in a scuffle with an operator in California. He claims a fellow tenant urinated on his unit and he wanted the manager to get involved—but that's not the sole basis of his complaint. When he got no immediate satisfaction locally, he went to the corporate website to find additional contact information. There he noticed the company is currently renting his unit size at a lower rate than the one he is paying, and he wants the operator to downwardly adjust his rent accordingly. (You can read all about it on the company blog.)

Ah, see how the onion unwraps. I guess you could say that had the facility manager been able to satisfy the customer regarding the "tinkle attack," the issue of rent might have been avoided. But there simply is no way to avoid having current customers be aware of your lowered rent or special promotions—not if you're marketing them correctly.

So how do you deal with current customers who come to you with complaints or requests to have their rent lowered? I'm curious to know how managers are coping with this very real and likely prevalent situation. Please post your comments to the blog; I'd love to hear your potential solutions to this customer-service conundrum.

1-800-Mini-Storage Wins 'Best of Troy' Award in Michigan

1-800-Mini-Storage of Troy, Mich., received a "Best of Troy" award for its newest self-storage facility on West Maple Road. The company was chosen from more than 40 applicants by the Troy Chamber of Commerce.
 
Early this year, 1-800-Mini-Storage opened the 137,000-square-foot building after razing an old metal fabrication on the site. Every unit is climate-controlled, and the facility includes a covered and heated drive-through, a conference room with Wi-Fi, and storage for RVs and trucks.
 
The chamber collects nominations for the "Best of" awards from individuals and businesses. It votes primarily based on building design, focusing on functionality, use of space, aesthetics and uniqueness.
 
The Best of Troy winners will be celebrated at the chamber's annual holiday luncheon on Dec. 10, at the Somerset Inn in Troy. Hall of Famer Lem Barney, a former defensive back for the Detroit Lions, will present the keynote address.
 
1-800-Mini-Storage also operates self-storage facilities in Oak Park and Redford Township, Mich.

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Tuxis Self Storage Owner Reports 3Q 2009 Financial Results

Tuxis Corp., which operates self-storage facilities in Connecticut and New York, reported its financial results for the third quarter ended Sept. 30. The company recorded a net loss of $119,549 ($0.12 per share) for the third quarter of 2009 compared to a net loss of $112,297 ($0.11 per share) for the third quarter of 2008. For the nine months ended Sept. 30, Tuxis recorded a net loss of $227,517 ($0.23 per share) compared to a net loss of $361,639 ($0.37 per share) for the same period a year earlier. More detailed information can be found at the company’s website, Tuxis.com.
 
Tuxis Self Storage at Heritage Park in Clinton, Conn., is a 185-unit facility. Tuxis Self Storage at Millbrook Commons in Millbrook, N.Y., is a mixed-use facility consisting of 118 climate-control units and office/retail space.

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