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Portable Storage: Understanding the Money, the Market and the Potential

By now, most consumers are familiar with the concept of portable storage. The industry’s most visible operator, Portable On Demand Storage (PODS), has nearly reached the status of being a household name like Xerox or Kleenex.

Many self-storage investors and owners are also considering portable storage. But before you open a site or expand an existing business, there are several aspects of the product to consider. Portable storage is a dynamic industry, but it’s very different from traditional storage.

Finance Differences

When comparing portable to traditional storage by the numbers, you quickly see they’re very different animals. Both types of storage require a significant investment up front, whether in land and buildings for traditional self-storage, or containers and transportation equipment for portable. Portable storage will also require warehouse space, but due to the nature of the business, leasing is an option.

Differing financing terms make it a little more complicated to directly compare the two types of storage. Lenders usually offer a 20-year loan on traditional self-storage facilities, while portable operators will find their units and equipment are eligible for loans of three to five years. Managing the cash flow on a new portable business can be a challenge, but since the assets may be in service for a decade or more after the financing is repaid, you should make decisions based on a time period beyond the loan.

Portable storage can offer owners some tax advantages over traditional storage, too. Since the units are not permanent buildings, they’re not taxed as real estate improvements. Additionally, portable units may be depreciated faster than traditional buildings—as quickly as five to seven years. (Check with your tax professional.)

Traditional storage depreciates over 39 years but offers a significant advantage upon resale, as a fixed site generally appreciates in value as a business. Portable businesses can be sold, but don’t have the track record.

Location, Zoning and Phasing

Developing a portable-storage business brings a new twist on some familiar topics. In traditional storage, the right location with the proper zoning is a key element. With portable, the central storage location is important for different reasons. Drive-by traffic helps during the initial rent-up, but a location that allows for efficient delivery to your target population is also imperative. With portable storage, your own location needs to be zoned correctly, and the customer’s property must also allow for temporary storage. In some communities, there will be limitations or permits required.

The development of portable storage can be riskier than that of traditional. Because it’s a newer business model, there’s simply less history and industry information available to help you make informed decisions. Conversely, as a newer industry, portable storage offers entrepreneurs the opportunity to be the first in their markets or pioneer their own twist on the service. When portable is added to a business that already owns transportation equipment or storage space for another purpose, the risk can be greatly reduced. Portable units can be a great companion business for a towing business, for example.

Getting up and running with portable storage can be a much faster process than with a traditional storage site. Domestic suppliers can provide containers in just a few weeks, compared to the months or even years that go into planning and permitting a new building. Phasing is as simple as ordering a truckload of containers as needed once the initial warehouse or storage yard is in place; expanding your fleet takes just a phone call.

Operations and Marketing

By its nature, portable storage is a far more labor-intensive business. While traditional storage defines itself as a lease on space, portable storage adds delivery services. Scheduling becomes much more important in managing a portable business, compared to a fixed site where customers come and go through an automated gate.

In most cases, a driver is required, and department of transportation laws and regulations must be followed. It’s possible to ease into the business by subcontracting the transportation; however, in doing so, the portable operator loses control of what may be his only face-to-face contact with the customer. Efficient management of the delivery service can be the difference between making or losing money.

Typically, traditional storage draws customers from 3 to 5 miles, with visible doors a key source of business. Portable storage serves up to a 30-mile radius, greatly expanding the potential customer base. Containers in service, branded with the business logo, phone number and website, serve as important marketing tools.

Regions of the country may report different busy times for traditional self-storage. Portable storage also has a busy time. About half of all moves happen during the summer months when school is out, so a spike in portable business is typical. Remodeling and home renovations are another source of business for portable operators, and a decline during the holiday season is to be expected. Traditional storage generally sees longer-term rentals, which helps create a more stable occupancy level.

If you’re thinking of expanding or opening a new site, consider all your options. Aside from portable and traditional storage, there’s also micro/movable storage, which could be considered a step in between. Micros can be moved with a forklift when empty, allowing flexible placement without a foundation.

Both traditional and portable-storage organizations exist to offer education. As with any business, the key is to provide the right product to the right people, at the right price and the right time. The trick is to know what’s right before making that big investment!

Steve Hajewski has been the product development manager for Trachte Building Systems since 2005, leading the development of the company’s portable product line. He now also serves as Trachte’s marketing manager. For more information on the company’s line of portable-storage products, visit www.trachteportables.com.

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Illinois Self-Storage Operators Help Stall Tax Bill

This summer, self-storage operators in Illinois helped to stall a bill that would add a retail/service tax to storage-unit rentals. In a statewide campaign, the Illinois Self Storage Association (ILSSA) reached out to facility operators, asking them to contact legislators and voice opposition to the bill. It also encouraged operators to have their tenants fill out a special card that was mailed to legislators, asking them to avoid this level of taxation.
 
House Bill 174 would amend the Illinois Income Tax Act but include a sales tax on self-storage and other services. The bill narrowly passed the Senate, where four amendments were added, including the one taxing self-storage. While the House concurred on the changes, it did not vote on the bill. ILSSA attributes this lack of legislative action to the amount of opposition rallied in the state.
 
ILSSA also believes the General Assembly will take up the taxation banner in January 2010. “With a $9 billion dollar deficit, lawmakers will be forced to do something,” wrote ILSSA president Tom Drake in a message to association members. “Taxing services like self-storage is, for many legislators, a slippery slope, and most will likely not want to go there. However, in Illinois politics, we must understand that as long as a bill has a pulse, we must watch it very carefully.”

ILSSA intends to revive its call to action if it hears grumblings about taxing services during the October veto session.

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U-Store-It to Sell 22M Shares in Public Offering

U-Store-It Trust, a national self-storage operator and real estate investment trust, will begin a public offering of 22 million shares, the company announced this week. The Wayne, Pa.-based company plans to use net proceeds from the sale to repay existing debt, including part of the outstanding balance under the company's unsecured credit facility. The offering price and other terms will be determined by the company and underwriters, who will be granted a 30-day option to buy up to 3.3 million additional shares. Bank of America Merrill Lynch and Wells Fargo Securities will serve as the joint book-running managers for the offering.
 
Source: Yahoo! Finance, Self-storage owner U-Store-It will offer 22 million shares in a public offering

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MJ Partners Negotiates Financing for Virginia Self-Storage Facilities

MJ Partners Real Estate Services of Chicago announced the completion of a $4 million financing for three self-storage facilities in Virginia. The loan for Winter Properties LLP provides $2 million in proceeds over the existing debt to be used, in part, for site improvements. The loan, provided by a national bank, features a five-year loan term with 25-year amortization, and an interest rate of 6.23 percent. Dennis Nyren and Steve Schwartz of MJ Partners negotiated the loan on behalf of the borrowers.


 
Winter’s Self Storage in Roanoke, Va., contains 43,150 square feet with 403 units and was built in 1997. Winter’s Self Storage in Vinton, Va., contains 47,630 square feet and 482 units. It was built in 1985, with additions in 1995 and 2004. Princeton (Va.) Storage, with 36,995 square feet with 248 units, was built in 1985, with additions in 1995 and 2005.

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Marcus & Millichap Sells Second Kentucky Self-Storage Portfolio of the Year

Marcus & Millichap Real Estate Investment Services announced the sale of Security Self-Storage, a 208,485-square-foot self-storage portfolio in North Kentucky (Cincinnati Metropolitan Statistical Area) for $9.7 million. Adam Schlosser and Brett Hatcher of the company’s Columbus office, represented the seller, a local privately held corporation, and secured the buyer, an out-of-state real estate investment trust. This is the second self-storage transaction Schlosser and Hatcher have closed this year. They were assisted by Matt Amos, Marcus & Millichap’s Kentucky representative.

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DryCool HD Dehumidification System

Munters introduced its new DryCool HD Dehumidification System, which uses a combination of desiccants and non-ozone-depleting refrigerant to deliver cool, dry air for light commercial applications. Unlike typical dehumidifiers, the DryCool HD does not use heat to dry the air, a method that increases the air-conditioning load. Instead, it uses a desiccant dehumidification wheel and environmentally friendly refrigeration (R-410a) to remove heat and moisture from incoming air.  This process uses 40 percent less energy than competing technologies, according to the company. 
 
The DryCool HD helps prevent indoor air-quality problems associated with moisture such as mold, mildew, biological allergens and odors.  Because the refrigerant does not deplete the ozone, it is more environmentally responsible than dehumidifiers that use R-22 refrigeration, considered by many experts to be harmful to the atmosphere.

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Online Ordering for Post Guard Bollard Covers

Street Smart Solutions is now offering online ordering for its Post Guard bollard covers at www.us-postman.com. Bollard covers are protective sleeves made from high-impact solid plastic that easily fit over existing steel/concrete posts and eliminate the need for painting. The ultraviolet-resistant, anti-static sleeve is durable and withstands extreme temperatures. It is designed with smooth sides and two recessed, reflective bands. The maintenance-free covers come in a multitude of colors and sizes.

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Door to Door Storage Hires Vice President of Operations

Jim Wusterbarth has assumed the role of vice president of operations for Door to Door Storage, a national provider of portable-storage and moving services. He will be based at the company’s headquarters in Kent, Wash.
 
Wusterbarth has more than 20 years of operations experience. His most recent roles included site director with Philips DAP North America and director of distribution with Sonicare. His expertise in operations strategy, distribution and logistics will bring improvements and growth to the storage center and long-distance relocation businesses.
 
Door to Door has operations in more than 20 U.S. metropolitan markets, serving more than 170 million people. The company has completed over 400,000 deliveries and 37,000 long-distance moves.

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ISS Blog

The Self-Storage Office Makeover

A few months ago, Self-Storage Talk forum moderator Wayne Docktor, manager of All American Self Storage in Palmdale, Calif., embarked on a complete office renovation—while keeping day-to-day operations running smoothly. The remodel included new carpet, popcorn ceiling removal and new desks and countertop.

Wayne turned to his forum cohorts for advice on minimizing the disruption to the business during the office overhaul. Forum members were full of ideas. In fact, Lisa T jokingly suggested a reality TV show, Extreme Makeover: Storage Office Edition.

Wayne kept forum members up to speed during the tortuous makeover, even posting pictures of the demolition, which you can view from the thread.  Fortunately, the impact on Wayne’s customers was minimal, he noted in May. “We just have a much smaller customer area at this time. So far everyone has been very supportive and loves the changes,” Wayne wrote.

Having been in a two-year total house remodeling project, I have firsthand knowledge of the headaches that go along with repairs and renovation. I also know the joy of a job (well) done! Last Sunday, Wayne posted a victorious, “I’M DONE” on the forum, announcing the arduous renovation was complete. And he posted pictures so we could all ooh and aah over his labors.

If you’re planning a major restoration of your facility’s office, I suggest you give Wayne a holler. You can find him on the forum as Autodoc. His next big project: landscaping. Yikes!

Have you seized and conquered your own office overhaul? Share your story by posting a comment below or join the Self-Storage Talk discussion. The forum is free. Ask questions, seek advice or just see what's hot in self-storage. Also, check out these excellent articles from the ISS archives on facility remodeling.

While tackling an office makeover can be daunting, it's amazing how much of a difference it can make to your self-storage customers. Even a fresh coat of paint on the walls and baseboards can create an inviting look. Take a good look around your office. Does it need some work? Your customers will appreciate your effort and you'll enjoy working in your office even more.

IREM Names Self-Storage Manager of the Year

Sean Barron was named 2008 Manager of the Year at the recent Investment Real Estate Management (IREM) annual sales rally. Barron manages Sadsbury Self Storage in Sadsburyville, Pa., where he has been employed for more than two years. Last year, he grew revenue at the property by 69 percent and occupancy by 20 percent. The 60,450-square-foot facility has 441 units and offers Penske truck rentals.

Barron came to IREM from the food-services industry with an extensive business-management background. With his computer knowledge, he quickly learned the self-storage management software system and became a trainer for new managers. He has assisted in multiple consulting projects.

Other awards announced at the rally were: 

  • Tenant-Insurance Sales: Andy Bradford, Acorn Self Storage, Fishkill, N.Y.
  • Accounting Excellence: Barbara Doty, CaGe Self Storage, Dillsburg, Pa.
  • Best Lease-Up: Jill Tipton, Moove In Self Storage at 741, Lancaster, Pa.
  • Most Improved Property: Renae Shuey, Leesport Self Storage, Leesport, Pa.
  • Marketing Award: Tim Garrett, Moove In Self Storage at Centerville, Lancaster, Pa.
  • Accounting Award: Vic Smith, Sierra’s Glen Self Storage, Harrisburg, Pa. 

Headquartered in York, Pa., IREM provides third-party self-storage management to more than 40 facilities in six states.

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