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Articles from 2014 In February

Self-Storage REITs Release Financial Results for Fourth-Quarter 2013, Fiscal Year

The four publicly traded, U.S.-based self-storage real estate investment trusts (REITs)CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.have released financial statements for the quarter that ended Dec. 31, 2013 and the 2013 fiscal year. In general, all four entities showed gains in key areas, particularly funds from operations (FFO), net operating income (NOI) and increased occupancy.

All four REITs continue to cite a lack of new competition in their markets for continued financial success. 2013 was an exceptional year for the self-storage industry and for Extra Space Storage, said Spencer F. Kirk, CEO of Extra Space. We saw record-high occupancies and strong operational performance. The inflow of new supply continues to be minimal."

Christopher P. Marr, president and CEO of CubeSmart, added, "Fundamental trends in our self-storage portfolio continue to be positively impacted by consistently improving year-over-year demand and lack of new supply in our markets. As we enter 2014, CubeSmart is well positioned to execute its internal and external growth strategies and generate attractive risk adjusted returns for shareholders."


CubeSmart reported FFO per share of $0.23, a 10 percent year-over-year increase. Same-store NOI at its 298 facilities grew 7.3 percent year over year. The company attributed this to 6.7 percent growth in overall revenue and a 5.3 percent increase in property operating expenses.

The operation gained 420 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 88.9 percent as of Dec. 31. The companys total-owned portfolio, representing 366 facilities comprising 24.7 million square feet of rentable space, had a physical occupancy of 88.3 percent at the end of the fourth quarter.

CubeSmart acquired six self-storage properties during the quarter for $56.7 million including one asset in Florida, two in Maryland and three in Texas. On Dec. 12, the company also completed the $315.7 million purchase of 35 facilities in North Carolina and Texas as part of a joint venture. It sold 22 assets in California, Tennessee and Texas during the quarter for $90 million.

On Dec. 19, the company declared a dividend of 13 cents per common share. The dividend was paid on Jan. 15 to common shareholders of record on Jan. 2. The board of trustees also declared a 4Q dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that was paid on Jan. 15 to holders of record on Jan. 2.

CubeSmart owns or manages 532 self-storage facilities across the United States and operates the CubeSmart Network, which consists of more than 800 additional self-storage facilities.

Extra Space Storage Inc.

Same-store revenue increased 6.6 percent and NOI rose 8.9 percent compared to the same period in 2012. FFO was 57 cents per diluted share, resulting in 26.7 percent growth compared to the fourth quarter the previous year.

Same-store occupancy grew by 130 basis points to 89.2 percent as of Dec. 31, compared to 87.9 percent at the same time in 2012.

The company purchased 50 properties during the quarter for approximately $310.4 million. Twenty-four of the assets were acquired as part of a buyout of partner interests in an existing joint venture. Extra Space has eight additional properties under contract for a total purchase price of approximately $89.9 million. The acquisition of these properties is expected to occur by the end of April.

The company paid a quarterly dividend of 40 cents per common share on Dec. 31 to common shareholders of record on Dec. 13.

Headquartered in Salt Lake City, Extra Space owns or operates 1,029 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The companys properties comprise approximately 680,000 units and 75.7 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 5.4 percent, or $22 million, in the quarter, as compared to the same period in 2012, primarily because of higher realized annual rent per occupied square foot and higher average occupancy. Cost of operations for the same-store facilities decreased by 2.6 percent, or $2.7 million, in the quarter as compared to the same period in 2012.

FFO was $2.13 per diluted common share, compared to $1.86 for the same period the previous year. NOI increased $38.1 million during the quarter compared to the same period in 2012, including $24.7 million for same-store facilities.

During the quarter, the company acquired 89 self-storage facilities comprising approximately 5.6 million net rentable square feet for $765 million. The properties are located in California, Colorado, Florida, Georgia, North Carolina, South Carolina, Texas and Virginia. Public Storage purchased 121 facilities in 2013 for $1.16 billion.

The company reported a regular common quarterly dividend of $1.40 per common share. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on March 31 to shareholders of record as of March 14.

Based in Glendale, Calif., Public Storage has interests in 2,200 self-storage facilities in 38 states with approximately 141 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.

Sovran Self Storage Inc. (Uncle Bob's Self Storage)

Total revenue increased 16.8 percent over the previous year's fourth quarter, while operating costs increased 13 percent, resulting in an NOI increase of 18.7 percent. Same-store NOI increased 7.2 percent year over year for the quarter and 9.9 percent for the year. FFO for the quarter was 98 cents per fully diluted common share, compared to 77 cents for the same period the previous year, a 25.3 percent increase.

Net income available to common shareholders for the fourth quarter was $22.2 million, or 69 cents per fully dilated share. For the same period in 2012, net income available to common shareholders was $13.5 million, or 44 cents per fully diluted common share.

Same-store revenue increased 6.6 percent year over year, helped by an increase in average occupancy of 210 basis points (89.1 percent) and increased rental rates. Average overall occupancy was 88.7 percent, with units renting for an average of $11.37 per square foot. Facilities showing the strongest revenue gain were in Florida, New York, North Carolina and Texas, officials said.

Sovran acquired 11 self-storage properties in 2013 for $94.9 million. The assets are in markets where the company already has a presence. The company also sold four properties during the fourth quarter for $12.3 million.

The company paid dividends of 68 cents per common share, a 28.3 percent increase.

Sovran, which operates facilities under the brand Uncle Bob's Self Storage, operates 484 facilities in 25 states, with a large presence in Texas.


Morningstar Acquires 6 Self-Storage Properties in the Carolinas

Morningstar Properties LLC, which operates self-storage properties under the Morningstar Mini-Storage brand, has purchased four self-storage facilities in North Carolina and two in South Carolina. The new acquisitions add nearly 315,000 square feet of space and more than 2,500 units to the companys portfolio. All six will be operated under the Morningstar Mini-Storage brand name.

The company now owns and operates 27 facilities in nine states, with a high concentration in the South.

The new facilities are: 

  • 2527 Little Rock Road, Charlotte, N.C.The facility encompasses 61,010 square feet with 474 storage units on a 4.5-acre parcel. It was built in 2008.
  • 4023 E. Franklin Blvd., Gastonia, N.C.Built in 2007, the 4-acre parcel includes 63,970 square feet of storage space and 583 units.
  • 935 N. New Hope Road, Gastonia, N.C.Encompassing 40,350 square feet and 290 units on a 4.6-acre parcel, the facility was built in 2006.
  • 542 Main Ave. S.E., Hickory, N.C.The facility is on a 2.9-acre parcel and includes 20,290 square feet and 255 storage units. It was built in 1994 with exterior units, then underwent a conversion in 2010.
  • 930 Retail Drive, Fort Mill, S.C.Located on a 4.5-acre parcel, the facility encompasses 70,040 square feet of space and 629 storage units. It was built in 2006 and expanded in 2008.
  • 2988 N. Highway 17, Mt. Pleasant, S.C.The facility includes 58,990 square feet and 379 storage units on a 8.86-acre parcel. It was built in 2002.

The property in Mt. Pleasant is Morningstars first re-entry to the Charleston region since selling its 43-property portfolio to self-storage real estate investment trust Public Storage Inc. in October 2013. The facility is undergoing a major expansion in which some existing parking spaces and drive-up units will be converted into a new, multi-story building, adding 30,000 square feet of storage space and 250 units.

These facilities are in excellent physical condition and have shown strong results recently in terms of occupancy and rental revenue, said Dave Benson, president and CEO. We expect them to be strong performers right off the bat.

Founded in North Carolina in 1981, Morningstar Properties is a vertically integrated real estate developer, owner and operator of real estate products focused primarily on self-storage and marinas in the Southeast. The company has developed, acquired and operated more than 125 self-storage projects across the country, totaling more than 8.8 million square feet. In addition to storage centers, Morningstar owns and operates 12 marinas across the Southeast and the Great Lakes region. The companys future growth is funded through Blue Doors Capital Management, an affiliated private-equity fund designated for acquisition and development of self-storage centers.

ISS Blog

Is Your Self-Storage Manager Prepared to Take the Wheel?

Is Your Self-Storage Manager Prepared to Take the Wheel?

I’ve got a teenage driver in the house armed with a learner’s permit. Would you be shocked if I admitted that not all has gone smoothly with her training? Don’t get me wrong, she is an extremely bright young woman who I believe will be a confident and capable driver—someday. It’s just that our early attempts at applied learning in this particular arena have had some challenges.

I really felt like I was up to the task of training her. After all, I taught her how to ride a bike in what seemed like a blink of an eye. It was a joyous moment for both of us, so I imagined this would be a similarly rewarding experience. It still might be, but so far—not so much. As a result, she’ll be receiving some instruction from a certified trainer, and my wife and I will help reinforce what she learns.

One problem I’ve had is underestimating the complexity of driving for someone who has never been behind the wheel. At the outset, nothing is natural when sitting in the driver’s seat. What eventually becomes second nature with experience is initially foreign and confusing. The controls are intimidating and all the variables of the road can be overwhelming.

The same can be true for an inexperienced manager of a self-storage business. Even if he’s been an able understudy, watching intently the day-to-day management of a facility, being handed the keys and responsibilities can be a challenging endeavor for a new manager and his immediate supervisor or owner.

How does your self-storage operation train its managers? Is there a formal program in place with skilled trainers, or do you rely on your own experience or someone else in the office to show new hires the ropes? If the latter is the case, how confident are you that the ropes they’re showing aren’t frayed or flawed?

Similar to driving, there is no substitute for quality experience in knowing how to respond correctly to common work challenges at a self-storage facility. Having some concept of how to deal with unruly customers, upsell services, handle a crime incident, implement rate increases, process delinquent tenants and so on is much different than sitting in the driver’s seat forced to react to the real thing.

Experienced training professionals certainly need to slow down the processes and communicate best practices and procedures, but they also need to be proficient and capable themselves. Bad drivers may know the rules of the road, but they’re just as likely to teach bad habits as they are valuable skills. Industry consultant and storage owner Bob Copper argues that a similar training dynamic can occur within storage operations in his recent article, “Busting 5 Myths About Manager Training.”

Copper identifies the top five training areas for facility managers as sales, collections, time management, customer service and revenue management. These are critical areas for every self-storage operation and will be largely covered by several industry experts on March 31 in the Management education track during the Inside Self-Storage World Expo in Las Vegas. Sessions will focus specifically on expense management, collections, selling techniques, tricky customer-service issues, pricing strategies and maintenance.

In addition, the Management Workshop hosted by Mel Holsinger, president of Professional Self Storage Management LLC, will provide four hours of in-depth instruction for novice and experienced managers on how to be productive, profitable and successful in their position. The workshop will be held on April 2 and is always among the most popular during the ISS Expo, so be sure to reserve your space before all the seats are filled.

If you can’t join us in Vegas, we also have an abundance of on-demand insight and education on tap in the ISS Store, including manager-training materials in the form of books and online courses. The popular ISS Facility-Management Guidebook 2014 also offers tremendous value, with 85 pages devoted to collections, legal issues, sales, service, money management and more.

It can be a bumpy road trying to take on the training responsibility alone, which is why we work diligently to provide informative, useful resources to help operators smoothly implement a manager-transition plan, new managers to grow competently and confidently into their positions, or grizzled veterans to continue their industry education and keep up with a rapidly changing workplace.

What’s been the most valuable manager-training experience you’ve experienced while working in the self-storage industry? Let us know in the comments section below.

Access Self Storage Keeps Its Tenants Secrets

Sometimes tenants dont want anyone to know what they keep in their self-storage unit. Thats the premise of this video from Access Self Storage. Find out why this guy is keeping his pink elephant costume under wraps.

Self-Storage REIT CubeSmart Wins Stevie Awards for Contact Center, Customer Service

CubeSmart, a self-storage real estate investment trust, received three gold Stevie Awards for Sales & Customer Service during a ceremony on Feb. 21 in Las Vegas. The company was given the top prize for Contact Center of the Year, Customer Service Department of the Year, and Customer Service Training Team of the Year. The annual awards honor achievement in sales, contact centers and customer service.

This is the second consecutive year CubeSmart has won three gold awards. Last year, the company won the top prize for Innovation in Customer Service in addition to being named the top contact center and customer-service department. The only other company to win three gold Stevie Awards in consecutive years is Delta Air Lines Inc., CubeSmart officials said in a press release.

More than 1,500 entries representing numerous organizations, industries and sales executives from around the world were submitted.

"We were nominated alongside a number of tremendously admired companies and are honored and humbled to have once again received three gold Stevie Awards," said Christopher P. Marr, president and CEO of CubeSmart. "We have more than 1,500 CubeSmart teammates who are dedicated to delivering an exceptional customer experience day in and day out through unparalleled service and genuine care. To have these efforts recognized is inspiring for us and further solidifies our differentiated service offering within our industry."

CubeSmart owns or manages 532 self-storage facilities across the United States and operates the CubeSmart Network, which consists of more than 800 additional self-storage facilities. According to the Inside Self-Storage Top-Operators List, the company is the fourth largest operator of self-storage facilities in the United States.


ISS Expo Education Track Focuses on Self-Storage Finance and Investing

The self-storage financing landscape has changed drastically in the last three years—moving from a restrictive lending environment to one that offers funds to quality investments. However, knowing who’s lending and the terms available can be confusing to those looking for financing. Self-storage owners, investors and developers seeking details about obtaining a loan for a new self-storage project or to refinance an existing facility will find the information at this year’s Inside Self-Storage World Expo, March 30-April 2 in Las Vegas.

The six sessions that comprise the show’s Investment & Finance Track on March 31 will cover a variety of topics designed to help self-storage professionals obtain financing. The first seminar, which begins at 9 a.m., focuses on assembling a loan package. Neal Gussis, principal of financial firm CCM Commercial Mortgage, will show investors and owners how to choose a lender, prepare their loan request, present their proposal and more.

Shawn Hill, principal of The BSC Group, a financial and real estate advisory company, will lead a discussion with a panel of finance experts at 10 a.m. The seminar will outline the state of the debt market and the current loan products available to self-storage owners and investors. The panelists include Devin Huber, principal of The BSC Group; Pete O’Hern, national sales manager for Titan Bank; Chris Pilat, CMBS and commercial real estate finance for Citi.

The last seminar of the morning, at 11 a.m., will show self-storage operators how to maximize their profit and facility value by exploring the five trends affecting market performance today. Led by speakers Christopher Sonne, executive managing director for the Self Storage Industry Group of Cushman & Wakefield, and Ray Wilson, founder of Self Storage Data Services Inc., the seminar will highlight today’s capitalization rates, who’s buying and where, and what to expect in the year ahead.

Real estate experts John Barry, president of The JEB Group, and John Gilliland, CEO and founder of Investment Real Estate LLC, kick off the afternoon seminars at 1 p.m. with a look at exit-strategy planning. The seminar will provide information about marketing a facility for sale, tax considerations, passing a facility to heirs and reinvestment options.

Those looking to buy a self-storage facility will find guidance in the 2 p.m. seminar, led by Michael Mele, first vice president of investments for Marcus & Millichap Real Estate Investment Services. The presentation will include tips on finding facilities for sale, pitfalls to avoid, and the elements of a good deal.

The final seminar of the day, at 3 p.m., will examine the underwriting techniques used to determine a facility’s value. Moderators Nick Malagisi, national director for Sperry Van Ness Commercial Realty, and Ben Vestal, president of the Argus Self Storage Sales Network, will lead the discussion on how to recognize an under-performing asset, facility value and more. Panelists include Gussis; Amber Hagopian, associate director of HFF; and Steven Johnson, director of Integra Realty Resources.

The expo’s concurrent education program, March 31 and April 1, includes nine tracks covering issues related to self-storage ownership, management, marketing, investment, finance, building, development, liability and more. Five add-on workshop options are also available, focusing on day-to-day management, development, facility ownership, legal issues and social media.

The conference and tradeshow will take place at the Paris Hotel & Resort. Discount registration rates are available through March 28.

Created for self-storage owners, managers, developers, investors and suppliers, the ISS Expo is the industry’s largest conference and tradeshow, comprising four days of education, exhibits and networking opportunities. The event focuses on strategies for generating revenue, best practices, current trends, and new products and services. Details and online registration are available at

UK Self-Storage Operator The Store Room Expands Facility in Bradford, England

U.K. self-storage operator The Store Room has added 5,000 square feet of storage space to its facility on Beckside Road in Bradford, England. The project was the third expansion of the property in less than a year, driven by increased local demand for storage, company officials said in a press release. Previous expansions were completed in March and August last year.

The new section of 40 units includes space from 25 to 1,000 square feet. The facility was operating with 200 units late last year and nearing full occupancy, company officials said. The Store Room also recently completed a pair of expansion projects at facilities in the English cities of Leeds and Leicester.

When the new space in Bradford is added to the expansion projects we have also completed at our Leeds and Leicester locations, our investment in new space so far this year has been significant, said Jeremy Bradburn, managing director. This is all down to an increase in demand, and Im certain that we are not done yet! All of the signs are good from our perspective. Our customer numbers and inquiry levels are at an all-time high, and I am confident that we will soon be building even more rooms to cope with future demand.

Established in 2007 and headquartered in Manchester, The Store Room operates self-storage facilities in the English communities of Bradford, Leeds, Leicester, Manchester, Preston and Rotherham.

Self-Storage Operator Morningstar Properties Appoints New Chief Financial Officer

Morningstar Properties LLC, which operates 27 self-storage properties under the Morningstar Mini-Storage brand, has appointed Wesley G. Carter as its new chief financial officer (CFO). Carter joined the company in 2012 as vice president of finance, responsible for sourcing and executing capital transactions. He has 18 years of financial, consulting and operational experience.

Morningstar-Mini-Storage-Wes-Carter***Prior to joining Morningstar, Carter managed the financial and operational functions of a real estate development company that also owns and manages self-storage facilities. He began his career with Andersen Consulting (now Accenture), and served as a relationship manager at both Banc of America Securities and Wachovia Securities, structuring and executing corporate secured and unsecured lines of credit for real estate investment trusts and real estate opportunity funds.

Wes knows our company and the storage sector well, and he delivers the added benefit of having worked extensively in specialized areas of finance that are vital to our business, said Dave Benson, president and CEO of Morningstar Properties. His skills and insight will be invaluable to Morningstars management team.

Carter takes over as CFO from Phyllis McArthur, who held the position since 1992 and will remain with the company as executive vice president. She will also continue as a member of the investment committee for Morningstars Blue Doors Storage Fund I LP, and help identify new opportunities for acquisition and development.

Carter received a bachelors degree in chemistry from Duke University and an MBA from The University of North Carolina at Chapel Hill.

Founded in North Carolina in 1981, Morningstar Properties is a vertically integrated real estate developer, owner and operator of real estate products focused primarily on self-storage and marinas in the Southeast. The company has developed, acquired and operated more than 125 self-storage projects across the country, totaling more than 8.8 million square feet. In addition to storage centers, Morningstar owns and operates 12 marinas across the Southeast and the Great Lakes region.

The Marijuana Market: Self-Storage Operators Should Stay Informed and Prep for Changes

Pot Marijuana

By Kay Miller Temple

Voters are rapidly pushing marijuana-law changes, with 20 states already legalizing it for medical use. Just last year, voters in Colorado and Washington legalized it for recreational use as well. The Marijuana Policy Project reports on its website that its working on voter initiatives in seven states and bills in six state legislatures to create systems where "marijuana is regulated and taxed like alcohol."

These state changes impact almost every level of every industry, from banking to human resources. The self-storage business, with its attractive, reasonably priced space, may not be overlooked by those who want to store and grow plants. Could there be an opportunity to generate revenue from this niche? How should operators handle inquiries? For now, industry leaders recommend that they stay informed and stick to the laws in their state.

Growing and Storing Marijuana

Whether a self-storage facility is the right fit for the storage and growth of marijuana is debatable. Growing the plant is a convoluted process that requires many checks and balances. It can be grown with hydroponics and plant cuttings in soil made from inert materials, according to online sources. Plant growth relies on appropriate ratios of calcium and fertilizer, and water from a reverse-osmosis system that eliminates heavy metals is needed.

In an interview with Business Insider, Nick Hice, chief grower at the Colorado dispensary Denver Relief, said environmental control is "absolutely paramount." Humidity should be kept around 45 percent to 50 percent and temperatures at 75 degrees to 77 degrees. Temperatures are affected by heat from the 12-hour daily light requirements. Light exposure, not plant numbers, has the most influence on productivity, Hice said.

Production requires two rooms: one for the growing cycle's first 60 days and a second for the 70-day flowering cycle. Like the majority of plants, marijuana doesn't escape notice of the usual pests including spider mites, whiteflies and stem rot. Rodents, such as gophers and rats, are also attracted to cannabis. For self-storage facilities, storing anything that might entice pests is strictly prohibited, as they can quickly multiply and affect other units.

Even with climate-control measures, marijuana can be susceptible to spoilage. Several medical-marijuana webites suggest that storage methods should focus on protecting trichomes, the hair-like structures containing the plant's active ingredients. Glass containers and refrigerator temperatures are best since static from plastic bags retain active ingredients and frigid temperatures create easily-fractured trichome icicles.

Dried cannabis is susceptible to mold, viruses, bacteria and fungi. Aspergillus, a fungus that grows in decaying plant material, can contaminate marijuana and has been reported to cause disease in humans with weakened immune systems, such as those with cancer or organ-transplant patients.

Due to these reasons and more, Andy Betts, general manager of Denver Relief and Denver Relief Consulting, says marijuana production would be an "unlikely fit" for the self-storage business. "There is such a regulated model here in that it's tracked from seed to sale. Security and access, labeling, compliance, and odor control are storage challenges in addition to regulatory issues, he says.

A Case Study

Self-storage may not seem like the best place to grow or store marijuana, but at least one operator is giving it a try. In 2012, "Inside Self-Storage" reported on a Sedro-Woolley, Wash., facility that was entertaining the use of its units for the controlled growth of cannabis. A1 Heated Storage found itself at the center of a debate when it applied for additional permits to add medical-marijuana growing rooms to the facility, which is in a residential area.

Neighbors expressed concern that the facility, which is allowing tenants to store and grow dozens of legal pot plants in units that have access to water and artificial light, was creating traffic and safety problems in the neighborhood. They also feared an overall increased number of cars and impaired drivers resulting from a proposed facility expansion.

Over the next couple of years, the request to expand went back and forth between local governing bodies. Though A1 was not available for an update on the progress of its original application, a Jan. 24 article in the Skagit Valley Herald reports that after reviewing several zoning proposals, Sedro-Woolley's city council decided "to consider allowing some recreational marijuana businesses in both industrial and residential 5 zones." However, the council ruled any businesses selling, storing or growing recreational marijuana would be required to meet the state's minimum 1,000-foot buffer from public property, schools and child-care centers.

Now, with the legalization of recreational marijuana, Washington city and county governments have new laws to consider in regard to marijuana production, processing and retail activities. Skagit County offers online information for recreational-marijuana permits that includes language addressing the "production inside an opaque structure," such as a self-storage unit.

Self-Storage Industry Leaders Speak Up

With the recent approval of recreational marijuana in its state, the Colorado Self Storage Association is watching how regulations unfold. "We will be following the implementation of the new marijuana law for awhile, and then we will make a presentation to our members," the group said in e-mail communication with Inside Self-Storage.

Lynn Prather, a past president of the Washington State Self Storage Association and a current member of its board of directors, also believes a wait-and-see stance is best. "People in self-storage should not be concerned about it right now. My personal feeling is that it isand should below on the self-storage radar because we don't know what is going to happen. Colorado doesn't, Washington doesn't, and there's a lot that our state is going to learn by trial and by error."

A practical approach for operators is to stay informed, follow industry best practices and abide by current rental agreements, says Prather, whos also owner and president of Sound Storage Management Inc., which owns and operates two Washington facilities.

"Things are going to change, day by day, minute by minute, and we need to just keep our eyes open and ears open and read about it," she says. "Follow routine business practices, the things that you know are right, and you'll be fine."

A Canadians Perspective

Putting aside all other concerns, one operator questions how allowing the storage or growing of marijuana might change the operational goals of a self-storage facility. Robert Madsen, president of the U-Lock Mini Storage Group, president of the Vancouver Island Self Storage Association and director of the Canadian Self Storage Association, says allowing tenants to grow marijuana in units for profit would be a "totally different business" from the traditional self-storage profession. "In Canada, the space is strictly for storing items so you are not supposed to operate a business in which there are activities inside the lockers," Madsen says.

Canada has a national medical-marijuana law and, so far, has resisted recreational approval. Since 2001, licensed medical-marijuana patients could grow their own supply or purchase cannabis from small-scale producers. However, the law will soon change. In April, medical marijuana users must purchase directly from operations that have authorization from Health Canada, which is the federal department in charge of the countrys healthcare system.

A Legal Perspective

Self-storage legal expert Jeffrey Greenberger, a partner with the law firm Katz, Greenberger, & Norton LLP in Cincinnati, noted there are multiple issues that raise concerns for industry professionals considering cannabis production and storage. "It would be a business decision that needs to be very well thought through.

A cannabis operation may actually be a mortgage-agreement violation since marijuana possession is a federal offense, according to Greenberger. "We've agreed to run a self-storage facility, and we've told the bank what the self-storage facility is going to be. And they've said, We're going to lend you this money, and you're not going to allow any hazardous materials, not going to allow any illegal activity, and you're going to take care of our asset and be a good steward.

For similar reasons, most insurance companies will not offer coverage in this scenario, Greenberger says. "I don't think the insurance companies have caught up with the idea that if it's legal in a state it might be legal to do in a facility," he said. "As I understand it, they still consider it an illegal activity."

On the pro side, tenants involved with the cannabis industry are assumed to be "good payers," since they often deal in cash, Greenberger notes. Though this may be attractive to struggling self-storage businesses, he cautions operators that large cash transactions come with their own set of problems. "It's a very creative idea for a way to use the facility. But you have to really think it through."

Whether self-storage will be a good fit for the cultivation and storage of cannabis remains to be seen. With marijuana legislation changing state by state and year by year, staying informed will be key to the industry's evolution in management strategies.

Kay Miller Temple is a physician and recent graduate from the masters program at Arizona State Universitys Walter Cronkite School of Journalism and Mass Communication. To reach her, e-mail [email protected]

UK Self-Storage Operator Safestore Reports Financial Results for First Quarter of Fiscal 2014

U.K. self-storage operator Safestore reported a drop in its monthly rental rates during the first quarter of its fiscal year, which ended Jan. 31, but indicated a slowdown in declines across its portfolio in France and the United Kingdom.

The average monthly rate across the companys portfolio dropped 2.8 percent during the quarter to £24.18. In the U.K., rates dropped 4.8 percent during the three-month period, but less than 1 percent from the previous quarterthe lowest fourth-quarter to first-quarter reduction in three years, according to the source.

Although the first quarter is historically the companys slowest, Safestore officials credited improvements in the U.K. housing market for marked, year-over-year improvements. The company reported a 5.9 percent increase in revenue, year over year, for its French holdings.

Our French business has made a particularly good start, and we are seeing improving occupancy and rate trends in the U.K., said Frederic Vecchioli, chief executive. The measures we are taking to improve rental rates will take some time to impact the entire customer base and feed through to revenues, but we are encouraged by the improving trend.

Safestore operates 134 self-storage facilities, including 97 wholly owned U.K. locations and 25 wholly owned facilities in France. The company also has 12 locations under management in the U.K. It serves approximately 46,000 total customers and employs about 550 people.