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Community Relations Create Self-Storage Profit

For many, these are bleak times. People face hard decisions. During an economic downturn, they find it more difficult to meet financial obligations, and they seek answers to business and personal problems.

A residential community can make up 70 percent of a self-storage facility’s customer base. Consumers are dealing with changes such as downsizing a home, making room for a returning family member, or creating space for a home-based business. As self-storage managers and operators, we need to stop reacting to economic challenges and anticipate the needs of our tenants. We need to turn our thoughts from competitively wooing consumers to finding creative ways to help them.

This is not a new concept. It is simply examining consumer needs to find a niche market, and then providing the service it wants. However, the process does require us to change the way we think and do business.

Wouldn’t it feel good to know you made a positive impact in your community? The goodwill you generate now could have real marketing equity once the economy improves. If we stop focusing on profit and consider how we can meet the needs of customers and prospects, abundance will follow like metal to a magnet.

If you consistently seek ways to help customers, improving existing services and developing new ones, your facility will not only be profitable, it will be recognized as a community resource. To attract and keep customers, look for ways to help them.
 
Community Networking

When looking for ways to support customers, consider networking with other local businesses. For example, contact a reputable moving company to negotiate discounts on moving services for your customers. In this arrangement, your customer saves money as well as the hassle of finding a moving company, and you are viewed as a golden service provider.

In exchange, offer the moving company a discount on storage space. Perhaps the company would even consider using your facility as its home base. There is nothing better than a promotion plan in which everybody wins!
 
More for Commercial Tenants

Commercial customers generally use self-storage to house inventory and materials, but there are many ways for you to become a greater resource of support and help them overcome obstacles. Your commercial tenants are looking for ways to reduce costs; with a little creativity, your facility could serve as inexpensive, satellite office space.

An office can be easily created using a 10-by-10 unit―perfect for salespeople on the go. With a little effort, you can create a conference room in a 10-by-20 space, giving customers a place to hold meetings. Display boards, local phone service, an Internet connection or even a coffeemaker are value-added items that cost little but can make a big difference to your commercial customer.

When the chips are down, the perception of value is the key to growth and prosperity. When people believe you offer more value for their dollar, there is magic multiplication of business and profit. When they sense genuine friendship and concern in your business practices, you grow marketing equity, loyalty and word-of-mouth advertising. Each value-added service you provide brings more recognition to your facility, which ultimately draws more customers.
 
Brian Johnston is the manager of Yorkdale Self Storage in Toronto, Ontario. He was awarded the 2007 Manager of the Year Award by the Canadian Self-Storage Association and is an expert in site management. For more information, call 416.787.3500; e-mail [email protected].

Third Quarter Survey Begins for Self-Storage Confidence Index

The Self-Storage Confidence Index survey for the third quarter of 2009 will begin on May 18, concluding on June 5. The index is designed to anticipate the effects of economic conditions and trends on self-storage operations. The survey records next-quarter expectations in the critical areas of sales, profit, hiring, expenditures and industry economic outlook.
 
The online survey is open to selfstorage professionals in the United States and Canada and is available at www.selfstorageconfidenceindex.com. Participants and other interested parties can complete the new survey and view results from past ones at the website.
 
The index is an initiative of MiniCo Publishing, The Parham Group and Cushman & Wakefield Inc.

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Westport Properties to Manage CO Self-Storage Facilities

Westport Properties has been awarded four new self-storage management contracts in Colorado, bringing its portfolio of owned, operated or managed storage properties to 38. The new contracts are for: 

  • The Storage Center, a 30,000-square-foot, 400-unit facility in Denver
  • Lincoln Storage Center, a 40,000-square-foot, 300-plus-unit facility in Loveland
  • SouthEast Self Storage, a 25,000-square-foot, 230-unit facility in Denver
  • Sable Self Storage, a 45,000-square-foot, 400-unit facility in Aurora

Westport Properties manages more than 3 million square feet of self storage properties in six states.
 
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Sentry Self-Storage Names New San Antonio Area Manager

Florida-based Sentry Self Storage LLC, which provides management services to independent self-storage owners and investors, has promoted Denise Maggio to area manager of San Antonio, Texas. Maggio, who joined the company in October 2007, has more than 15 years of self-storage experience. She started as a property manager with Storage USA and Extra Space, and rose through the ranks to senior property manager, then certified trainer and, most recently, division learning manager. She will now oversee five facilities.
 
Maggio has a proven track record of taking over an under performing asset and turning it into a well-managed operation within 90 to 120 days, according to Sentry. She knows how to motivate her team to maximize revenue and increase occupancy.

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U.K. Self-Storage Operator Revamps Website

U.K.-based Access Self Storage has appointed Redweb to re-design and build its company website to improve the user experience, increase sales and showcase its new corporate branding. Redweb has also developed a search-engine marketing strategy to drive traffic to the site. The revamped site features an improved online rental process and clearly defined pricing structure. It will be supported by a paid-search campaign spanning Google, MSN and Yahoo!.

Access operates 50 storage facilities, including 34 in London.
 
Source: Revolution Magazine, Storage company rebrands website

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Satirical News Site Pokes Fun at Self-Storage

Satirical fake-news organization The Onion today published a story to its website that presents the self-storage business as an occupational magnet for losers. With a headline, “Life Choices Leading Area Man to Career in Self-Storage,” the spoof article is about a 28-year-old sculptor who moved into a neighborhood of “old warehouses,” close to a self-storage facility. The article implies the sculptor will have to apply for a job at the facility because he never graduated from college or got married. It concludes by saying that although the man is “powerless to avoid his future occupation, he will quickly be promoted to manager thanks to his preternatural ability to hand out metal keys.”
 
Source: The Onion, Life Choices Leading Area Man to Career in Self-Storage

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AZ Self Storage Association Draws a Crowd

Yesterday, I attended the Arizona Self Storage Association's Conference and Tradeshow at the Mariott Buttes Resort in Phoenix. The Buttes is built into the side of a mountain so it's a lovely place to host a conference.

The association did an amazing job, pulling together two days of excellent seminars and attracted several big-name vendors for the tradeshow floor. Local companies The Mahoney Group, TLW Construction and OpenTech Alliance talked with Arizona self-storage professionals. Other companies included BETCO Inc., The Chamberlain Group, JanUS Door and Mako Steel.

Although there were many existing self-storage operators in attendance, a large number of people looking to get into the self-storage industry also walked the floor and attended seminars. One man I spoke with had a large plot of land he was hoping to develop. Another woman said she and her husband wanted to buy an existing property but had yet to find the right one.

Attendees also soaked up information from several key industry people, including Tom Litton, president of Litton Management and Consulting. Tom gave a seminar on auditing self-storage, an important topic in today's economic environment. Other speakers included ISS columnist Derek Naylor, president of Storage Marketing Solutions, Bill Alter, Rein & Grossoehme Commercial Real Estate, Shawn Hill, Beacon Realty Capital and Chris Sonne, Cushman & Wakefield.

If you have a state self-storage association, I encourage you to join it. State associations offer self-storage operators many wonderful opportunities for education and networking.

Looking ahead, be sure to attend the Inside Self-Storage World Expo in Washington, D.C., Oct. 5-8. Tom Litton will be speaking as will many other self-storage industry experts. Register online today.

 

CCTV Technology Evolves in Self-Storage

Over the past few years, we’ve seen an explosion of new security products and features. This has impacted everything from surveillance cameras and recording devices to the wiring and connectors used in today’s camera systems. We have left the VCR and analog days and plunged headfirst into the digital age, complete with a whole new set of rules, opportunities and language. And as with everything else in life, about the time you think you understand it, it will change.

There are still three major components to consider with closed-caption television (CCTV) systems: cameras, storage devices and monitors. Let’s look at these components in detail as well as the differences between analog, digital and Internet protocol (IP)-type models.

Improved Monitors

We now have the ability to connect almost any video monitor to a CCTV system. This includes flat and plasma screens and LCD monitors. This is one of the best improvements in CCTV. You can have great cameras and recording devices, but if the monitor is not of the same quality, you’ll still have a system that is not up to speed.

With the cost of flat screens dropping, you can afford to have a large screen or several mid-size monitors for the same price as a conventional CCTV monitor. Most recording devices will accept VGA, S-Video and composite video output. This gives users unlimited choices. Because the monitors can be mounted on the wall, we now have more desk and counter space. Be careful, however, and invest in a quality monitor, not a low-end budget model.

Picture-Quality Cameras

The biggest improvement in cameras has been in picture quality and the ability to see in low-light conditions. With the coming of the digital technology, we have gone from 320 lines of resolution to more than 500. This gives us the same result as high-definition (HD) for our camera systems. Picture quality is markedly better than with analog cameras, even if the rest of the system is still analog.

The main difference between analog and digital cameras is the use of digital chips or imaging devices. These allow for a picture to be transmitted in digital format much like digital TV. If you are looking to upgrade your system, consider improving all your equipment. Any new installations should be done using digital equipment with no exceptions.

Many cameras also have night-vision abilities by using two technologies. The first is infrared (IR) illuminators. These are small, LED-type lights that illuminate the picture field of view, allowing the camera to see in almost total darkness. These LEDs have a soft glow and do not emit any visible light.

When looking at this technology, look at the number of LEDs and the specified range. Some cameras rate for distance farther than 50 feet, but the picture quality tends to be grainy and the image may not be useful. The other consideration for IR is they have a tendency to over illuminate reflective materials. This means items such as license plates will be too bright to be viewable. This does not mean you shouldn’t use IR illumination, just be aware of the limits.

IR technology is gaining ground, and there are now numerous low-cost IR cameras with great quality and reliability. If you lack good lighting on your site, changing your cameras to IR-type will make a big difference in what you see.

The second type of technology used for low light is digital intensifiers. This is where we really see a difference in what digital has brought to the camera side of the equation. By using digital technology, we are able to enhance the picture and boost the light the camera sees.

Cameras can see in almost total darkness. We measure the light a camera needs to see in lux. A lux of 0.27 would be a full moon on a clear night; 0.01 is a quarter moon on a clear night, and .002 is a moonless night sky. Analog cameras cannot see below about .02 and are grainy at this level. Digital IR can see at .002 but, again, at these levels, the picture is grainy. Digital-intensified cameras can see in .003 and the picture is usable.

The other advantage to intensifier technology is that in bright sunlight, like that reflected by a front door or concrete drive, the camera does not get a backwash of bright light. This is referred to as white-balance correction or backlight compensation. The camera takes into consideration the complete picture and balances it digitally. This includes lighting, distance, white balance and focus to make sure the entire picture is correct. In the event you want to zoom in or enlarge the picture, these types of cameras give you the best file with which to work.

Storage Devices

VCRs are just like the ones you used to have before DVD and Blue Ray. They are single-channel units that use a cassette tape to record your video from a camera system in time-lapse. Simply put, this enables you to get 24 hours on an eight-hour tape. But VCRs are dead. Tapes are becoming non-existent. Just as you do not use one in your home, you should not use one for your self-storage facility. If you are, upgrade now. 

Digital video recorders (DVRs) have replaced the VCR along with multiplexers, quads and switchers, allowing more flexibility and features in one unit. DVRs are computers that have a single use: managing video. They use a hard drive to capture images from cameras and store them in files. They have the ability to store more images for a longer time period than a VCR tape. This is done by setting the cameras to record only when there is motion or a change in the camera’s field of view.

Setting to record on motion eliminates hours of unwanted video. This allows us to have more storage for video files and search for an event faster. Searches are easier because events are stored in records that are date- and time-stamped. Records can be viewed, played back and copied to a CD, DVD or thumb drive for distribution. DVRs can also record and play back simultaneously, allowing for uninterrupted recording while doing searches.

Because we control the cameras and monitors through the DVR, we have the ability to view camera footage on the monitor in a variety of ways and still have the footage recorded even when it is not being displayed. Some DVRs allow for multiple monitors showing different cameras or views. This can be a useful addition to public viewing by giving your office a modern appearance.

Network video recorders (NVRs) are fast becoming the storage device of choice. They retain all the features of conventional DVRs but have several advantages. NVRs still record video at the site like a DVR, but we begin to see the IP architecture. IP cameras have an IP address, which allows them to be viewed through any Web browser. An NVR is the gateway to the cameras and storage device.

This unit is installed in much the same way as the DVR, but it’s also connected to the Internet, either directly or by connecting to the facility’s local area network. This connection now allows for remote viewing and operation. NVRs enable you to view your cameras over the Internet as well as conduct searches and save recorded files. You can bar cameras from being viewed locally and make them viewable only through the Internet via masking or password protection.

Moving to an NVR doesn’t mean you have to replace your existing cameras. You won’t get all the features or the higher picture quality if you’re not using digital cameras, but you can still use many NVR features including Internet viewing. If you’re looking at a new DVR, you might want to look ahead to an NVR, especially if you’re considering remote viewing of your camera system and moving to digital.

Network video servers (NVS) are a lot like NVRs. The main difference is the NVS connects directly to your network and has no storage device. This is a hardware device and a software product. IP cameras can connect to your network through any IP connection point you have. This gives you the ability to use your existing server and network to build your CCTV system. The best part is you don’t have to be a member of the geek squad to install it or make it work. This is all thanks to new technology and user interfaces.

The introduction of NVR and NVS technology has given us the final piece for true remote viewing—the ability to log into your camera system via any Internet connection at any time. 

Remote Viewing

With remote viewing, managing the connection is only half the problem. You need a connection that will handle the demands of video streaming across the Internet. Unless you have the ability to install a T1 connection, you won’t be able to handle video streaming to more than one source at a time. In other words, only one person at a time could view the camera system. The way around this is to use a data bank, a service that allows you to have several people viewing data at the same time.

You also have the ability to view multiple sites simultaneously. This is accomplished by re-broadcasting your video through multiple T1 lines which, in turn, gives you faster video connections.

There is a bonus to using a data bank. By connecting to one, you have the ability to use offsite storage, which acts as a backup to your system and allows for storage of critical files for an unlimited time. You can also have the data bank alert you if you have video loss due to a camera outage or system problems. You’ll know within minutes if you have a problem and can contact the site or service provider for corrections. You can even review files and look at the system at the same time. This eliminates gaps in service and security.

We live in an ever-changing world, and we’ll certainly see more changes in the CCTV market. If your system was installed more than five years ago, it’s time to look at some of the new features and abilities. Consulting with a qualified distributor can be an eye-opening experience and allow you to see what you’re missing.

Chester A. Gilliam is the president of Wizard Works Security Systems Inc. in Centennial, Colo. The company specializes in self-storage security systems and has worked across the United States installing the latest technology for the past 18 years. For more information, call 303.798.5337; e-mail [email protected]; visit www.wzrdwrks.com.

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Multi-Story Self-Storage on the Rise in Canada

Three years ago, I predicted that multi-story construction would grow throughout Canada. I developed this forecast from simply observing the U.S. industry that began 15 years earlier than the one here. Today, a review of the Canadian industry supports my prediction.

It makes sense to build multiple stories when you consider cash flow. To maximize return on investment, a storage operation must have an abundance of rentable square footage in an area where space is in high demand. There is more potential for success in areas of dense population and higher income per capita.

We’re seeing multi-story self-storage development in every large city in Canada, from Victoria, British Columbia, to St John’s in Newfoundland. Developers are becoming creative when designing multi-level facilities consisting of two to five stories and even higher. 

Storage With a Twist

In the Ottawa area, a relatively new player is on the rise. Dymon Self-Storage is constructing high-end, multi-story facilities with a unique twist, putting retail outlets on the main floor as a value-added feature to attract customers and maintain the upscale appearance. The storage office also has a retail appearance to remain consistent with its neighbors.

Keep in mind that retail is as good as self-storage when you compare income per square foot. Also, a large retail tenant generates great cash flow and reduces the demand on management services. A primary benefit is long-term cash stability provided by the terms of lease for retail customers, as they normally consist of a five-year minimum with an option to renew for another five.

The Value of Conversion

Existing industrial buildings with enough ceiling height can sometimes be converted to multi-story self-storage construction. Due to their advantages, internal, multi-story conversions have spurred self-storage development in many cities.

Existing buildings can often provide a great location with built-in traffic. Every day, we find available buildings in proximity to large shopping centers―ideal locations for self-storage development. In addition, it often takes less time to complete a conversion project. A multi-story conversion can often be done in half the time of a ground-up, high-rise build. Finally, because 90 percent of the work is done inside the existing building, weather does not interfere with installation schedules.

Our U.S. counterparts have gained a lot of knowledge as the self-storage industry has grown into the thriving entity it is today. Canadians have not overlooked the U.S. discovery that multi-story developments are often good investments. As result, we’re seeing facilities rise wherever the population density will support them and their massive margins.

Shawn Baker is the president of Ontario, Canada-based Canadian Metal Manufacturing Inc., which develops turnkey self-storage systems. Established in 1999 as a metal fabricator, the company has been in the self-storage industry since 2003. For more information, call 888.951.1762; visit www.canadianmetal.ca.

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Self-Storage Financing in Canada: Opportunities Lost and Gained

As of February 2009, large Canadian financial institutions were continuing to pull out of self-storage, leaving little hope for their return. The big banks and lending institutions on which owners and operators relied were no longer lending to this asset class.

Consequently, as mortgages begin reaching their renewal dates, money may not be available. Owners with mortgages coming due in the near term may have to rethink their game plan. Finding financing will become more difficult, and some owners may even need additional capital to replace all or some of their financing. If they cannot find the needed capital, they may be forced to sell.

A few large self-storage institutions and portfolios will still be able to acquire financing; however, it will not come without added cost. An example of the impending pressure of refinancing is Instorage Real Estate Investment Trust's mortgage-renewal deal. The company recently refinanced a $29.2 million loan on which it had previously paid less than 6 percent interest.

In the renewal, the company was only able to secure $25 million at a 9.65 percent interest rate for three years. This means that in addition to paying an increase of approximately 4 percent interest, Instorage also had to come up with $4.2 million in equity. The company is now paying approximately 650,000 more interest annually for less money. If these sites were 100 percent occupied, Instorage would have to increase rent $2.65 per square foot to maintain its bottom line.

Instorage’s mortgage refinancing is a good example of what the future may hold for many self-storage owners. Looking at the number of mortgages possibly coming up for renewal, the prospects are astonishing.

For the sake of argument, let’s say the Canadian self-storage market is a $5 billion industry, and 50 percent of that is leveraged with most mortgages on five-year loans. This would mean $500 million will be coming to term in the next year. If we do not have the resources to renew $500 million, the industry will see a portion of that amount hitting the market in one year. The most the Canadian market has seen exchanged in a year is $300 to $350 million, 65 percent of which was likely financed.
 
What Happens Next

The potential impact could result in a disheartening situation, one owners and operators should be aware of and thinking about. However, it may not be a devastating situation for everyone.

Although interesting and trying times lie ahead, there will be unique opportunities that arise. Our industry still appears to be in a relatively good position if we consider there are still many underserved markets. Although there are definitely markets that are overbuilt or have significant product still in lease-up, many also have considerable room to grow.

One positive aspect of the industry’s financial state is there is a large number of owners who are underleveraged, having little to no debt on their facilities. Being underleveraged in boom times is generally perceived as negative; however, it may prove to be a positive situation in our current economy. Since acquiring financing has always been more difficult in the storage-asset class, people with low financing are now in great shape.

The downside is this situation will hurt the industry’s bottom line. Even if the industry is 50 percent leveraged, interest rates are still going up, weakening cash flow. It won’t break people in good positions, but it will hurt. The owners who will be hurt the most are those looking for take-out financing or extended bridge loans on highly levered development properties still in the process of stabilizing.

However, opportunities will still unfold down the road. We will see opportunities arise in two key areas:

  • An owner may be forced to sell if his property has been too highly leveraged due to lease-up expectations, and those expectations were not met.
  • An owner may be forced to sell if he is getting margin calls on periphery businesses, and liquidity needs to be placed elsewhere.

As a result of the economy, we may also see self-storage move back to more traditional growth, as owners focus more attention to traditional ways of running a business, concentrating on renting and occupancy.

Portfolio growth will happen through development and the odd acquisition. More depressed product will be sold. We will not see the consolidation we have seen over the past few years. The market will return to value buyers and less financial engineers. There will be adjustments in cap rates. How much they adjust will depend on how much product hits the market and in what time frame, as well as the degree of distress on the owner. If everything hits the market at the same time, cap rates will have more meaningful movement, and the worst product will be the last to go, unless priced properly.
 
Financing the Best

One point to highlight in this economic transition is investors are only investing in the best operators. Likewise, the best operators cannot rely on banks or financiers the way they have over the last five years. Capital will come in the form of mezzanine financing or equity. With their capital, some storage owners will be in excellent positions to take advantage of distressed assets that fit their portfolios as well as the ability to take advantage of cheaper land or buildings for conversion.

We are currently seeing investment opportunities with operators and developers who have good track records with existing facilities or developments. There is opportunity to invest with these businesses to foster growth through acquisition of land or build onto existing properties. Matching equity with existing business operators and developers is one unique situation arising in the absence of big institutional financing.

We are also seeing less competition from more traditional forms of commercial real estate providing self-storage owners with increased opportunity to compete for prime real estate and buy at attractive prices. Our industry is still in demand, and we have more opportunity to grow in underserved markets compared to more traditional real estate. While other forms of real estate asset classes may weaken, self-storage should remain competitive and continue to grow.
 
Michael Foy founded Foy & Co. Investment Real Estate Services, a full-service company specializing in raising equity and brokerage services for the Canadian self-storage market, in 2002. The company publishes the “National Self-Storage Review," an industry newsletter that reports on the Canadian self-storage market. Jenna Charlton is the company's communications coordinator. For more information, visit www.foyco.ca