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Sovran Self Storage Releases 2Q 2009 Operating Results

Sovran Self Storage Inc., a self-storage real estate investment trust (REIT), reported operating results for the quarter ended June 30, 2009.
 
Net income available to common shareholders for the second quarter of 2009 was $6.3 million, or $.28 per diluted share, compared to $10.5 million, or $.48 per diluted share, for the same quarter last year. Funds from operations for the quarter were $.66 per fully diluted common share. The company said the primary factors leading to the lower earnings were the one-time costs of almost $1 million associated with a first-quarter covenant waiver, higher interest expense associated with the company’s recent long-term financing, and increased customer move-in incentives.
 
Occupancy levels at the company’s 385 storage facilities improved to 82.5 percent, an increase of 360 basis points since March 31.  “In a very challenging environment, we’re pleased to see our marketing and call-center efforts take hold,” said Kenneth Myszka, president and chief operating officer. “During the quarter, we had a net gain of 9,400 customers on a same-store basis, and while we made heavy use of incentives, this got our summer season off to a solid start.”
 
In early May, the company announced it had breached a debt covenant with its lenders. “During the quarter, we took the necessary steps to fix this problem and to improve our liquidity position,” said David Rogers, chief financial officer. “We became even more prudent regarding acquisitions and expansions, reduced the dividend on our common stock, and raised some equity through our DRIP and Stock Purchase Plans. We’ve gained sufficient room concerning the covenant restriction and, at June 30, we have in excess of $60 million in cash and permissible borrowings remaining on our credit line.”
 
To view the company’s detailed financial results for the second quarter of 2009, visit http://www.unclebobs.com/downloads/09-08-05.pdf.

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Bands Battle for the Right to Practice at Sumter Street Storage

Sumter Street Mini Storage of Columbia, S.C., which has been renting units as practice space to local bands since 1986, may soon have to cease such business, thanks to a ruling that says it violates fire-safety laws. Last week, Richland County fire marshal Michael Byrd heard arguments in the case, which started last summer as a neighborhood dispute over noise. Byrd could rule by the end of the month.
 
Referred to by musicians as “the sheds,” the storage facility is near the University of South Carolina and owned by Richard Simoneau, who doesn’t believe the band practices are unsafe. The facility has been used by bands such as Hootie and the Blowfish.
 
A resident complained about late-night noise from the facility a year ago. In November, deputy fire marshal Miranda Spivey ruled that bands could no longer play on site, but Simoneau has continued to rent to them. Nineteen bands are tenants of “the sheds.”
 
Source: The State (Columbia, S.C.), Ruling looms on bands playing at ‘the sheds’

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U-Haul Offers Free Storage to Kentucky, Indiana Flood Victims

U-Haul Co. of Kentucky is offering 30 days free self-storage to flood victims in Kentucky and Indiana. Participating facilities include U-Haul Center Bardstown and U-Haul Center Jeffersonville.
 
U-Haul is also inviting customers to take part in its “Take a Box, Leave a Box” program, in which they can obtain free boxes and are encouraged to return them when they are finished using them. Anyone with reusable cardboard containers can drop them off at the nearest U-Haul location.
 
Source: Business First, U-Haul offers free storage to flood victims

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Developing Self-Storage Condos: A Wild, Unpredictable Ride

If I were designing a ride for an amusement park, I’d model it around the development of a self-storage condominium project. It’d be a ride customers would never forget! The only problem is the cost of admission—about $8 million—and the ride would last about three years, making even the most seasoned rider shudder.

In a nutshell, that’s what I’ve been through in my desire to create the ultimate boat- and RV-storage facility, Eucalyptus at Beaumont in California. My facility has 108 units with resort-inspired amenities. Their prices range from $55,000 to $182,000 and include the extras many owners of luxury vehicles expect, including a 2,700-square-foot clubhouse, individual door alarms and 24-hour access. 

Unit Specs

The facility offers five unit sizes, all with 14-foot door heights. Nearly all units have a depth of 50 feet. A few are 35 to 45 feet deep, and some units can be combined to create a unit up to 100 feet deep. Widths range from 11 feet to 26 feet, with 10-  to 20-foot-wide sectional doors. The doors are insulated and have automatic openers integrated with the unit’s alarm system. Each unit has private electricity with 60-amp sub panels and 30-amp RV plugs.

A Good Start

The ups and downs of the project have been mind-bending. The emotions I endure on a daily basis range from euphoria to absolute terror. Instead of ending the ride in a cool pool of water, I landed in a boardroom full of angry bankers. The water would eventually evaporate, but the angry bankers won’t.

Finding a location was the real first challenge. Over three years, my proposed facility plans were rejected by 15 cites. Zoning boards said vehicle storage wouldn’t bring in residual revenue for a city or enough employment opportunities.

A typical garage at Eucalyptus at Beaumont.

In 2005, I finally found a 4.5 acre parcel in Beaumont, Calif., and began pre-selling units. More challenges lurked on the horizon. Midway through the project, the city changed from adhering to Uniform Building Codes to International Building Codes, which completely threw off our building design. In addition, our local utility company insisted we install industrial-sized meters, even though our electrical use only trickles.

The biggest blow came with the U.S. financial collapse. I pre-sold 50 percent of the facility’s units in two initial offerings before construction even began. But with the banks no longer lending, many of my potential buyers didn’t have access to financing.

Panicked, I spent three months seeking financing for my anxious buyers with absolutely no results. I often heard, “Sorry, we’re not making loans,” or “We’re trying to shrink our balance sheets.” Some lenders had never heard of self-storage condos and were not interested in becoming educated on the subject. There’s nothing more devastating to a developer than having a prospect walk out due to unavailable financing, knowing full well there was nothing I could do to help.

Looking Ahead

The clubhouse at Eucalyptus at Beaumont.

All is not lost, however. In June, my construction lender stepped up and put together a loan package that works and is actually pretty generous. I’ve contacted hundreds of prospective tenants and there is now a resurgence of interest.

The outlook is bright, despite what I’ve written here. While composing this, I made two appointments for folks to come out and view the project. One is even a potential tenant who failed to find financing two months ago.

Despite its many challenges, the project turned out to be an amazing structure. Nothing like it has ever been built. I’m proud to show it, and potential tenants really enjoy what we’ve created. What a wild and rewarding ride it’s been!
 
Ted Deits is president and CEO of 20 Seconds and Building LLC, the creator of Eucalyptus at Beaumont. He is the former vice president of Alloy Research Inc., a metallurgical services company founded in 1977. For more information, call 714.280.4201; visit www.rvstorage.biz.

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Baja Construction Introduces Solar Support System

The boat/RV-storage market has seen a boom in recent years as more people purchase large “toys” but have fewer places to store them. Most residences don’t have storage to accommodate such big vehicles, and many cities and communities are becoming stricter about curbside and driveway parking. As a result, consumers turn to storage facilities, which provide a valuable service to the user and a great return on investment for the owner.

Baja Construction is taking the value and profitability of boat and RV storage further with the introduction of its Solar Support System. This innovative new product allows storage-facility owners to make money using solar panels on their rooftops. The structure protects boats and RVs from the elements while harnessing the sun’s energy to generate power.

The result of integrating Baja’s solar boat/RV cover into a storage facility is reduced energy costs, the ability to take advantage of rebates and tax incentives, and customers feeling good about where they store, says Robert Hayworth, president of the Martinez, Calif.-based company, which designs, engineers, supplies and installs self-storage and boat/RV-storage buildings and carports.

 
 
How It Works

With the patent-pending Solar Support System, designed by Hayworth, photovoltaic panels are used to produce free, clean power. They can be mounted on the ground using clip-rib steel panels or mounted on an elevated structure to provide shade and parking. To be suitable for the system, a site must get at least five hours of sun daily and have a southern exposure.

For facility owners, the system has numerous financial benefits. Solar power can offset rising electricity costs by reducing or even eliminating the power purchased from utility companies. There are also significant cash rebates and tax credits available from the state and federal governments. Possible incentives include:  

  • The federal solar tax credit for commercial buildings is 30 percent for an eligible property. This can be elected as a grant (check) from the federal government until December 2009.
  • There’s a five-year accelerated depreciation, with 50 percent eligible in the first year.
  • The interest paid on the debt to acquire the asset may be eligible for a federal or state tax credit or rebates.
  • Utility-company rebates may also be available.
  • Net metering is available in some states. Operators can use surplus energy from the spring to pay for extra power needed in the summer, for example.

Finally, more customers are looking to support green products and services. Investing in a solar product creates an invaluable marketing opportunity for the owner and a value-add proposition for the customer. An owner’s commitment to a green initiative such as solar power can help his business generate and keep more customers.

“Your customers’ decision on where to store their vehicles will likely be swayed by their perception of your business’ environmental responsibility,” Hayworth says.

Baja Construction works with boat/RV-storage owners to evaluate a site and determine if it’s right for solar power. Engineers then determine the best placement and slope for the panels. “From shovel in the ground to power on takes about six to eight weeks,” Hayworth says. “We encourage everyone to challenge the status quo and go green.” 
 
To learn more about specific state and federal incentives, visit the Database of State Incentives forRenewable Energy at www.dsireusa.org.
 
To contact Baja Construction, call 800.366.9600; visit www.bajacarports.com.

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Big Yellow Self Storage Goes Green

In its 2009 annual financial report, Big Yellow Self Storage announced that it has achieved a record 11.5 percent drop in total carbon emissions over the last year, greatly reducing its carbon footprint and contributing to a savings of £100,000. The drop coincides with the company’s commitment to reduce the effect of climate change, and demonstrates that energy-efficient lighting and renewable-energy generation can be beneficial for self-storage firms.

In the year ended March 31, 2009, Big Yellow stores in Balham, Barking, Fulham and Merton, England, generated renewable energy totaling 57,000 kWh, resulting in a carbon-emission savings of 24.5 tons of CO2 equivalent. The facilities’ solar-photovoltaic installations are approaching the 10 percent CO2-reduction targets set by local planning authorities. In addition, ground-source heat pumps have provided heating to the facility reception areas in the winter season.
 
The company’s green initiatives include eco-labeled packing materials, and Big Yellow as established a formal CSR (corporate social responsibility) structure to encourage best practices within the U.K. self-storage industry.
 
“We want to meet the self-storage needs of both private and business customers, while helping to create local employment and contribute to local community regeneration,” said Paul Donnelly, Big Yellow’s CSR manager. “Prevention of pollution and natural-resource waste, and providing capital for sustainable development that is economically viable are key goals.”
 
To keep the online community up to date on the development of its green initiatives, Big Yellow has launched a blog at www.bigyellow.co.uk/selfstorageblog.
 
Self-storage operator and developer Big Yellow was incorporated in 1998. It believes its CSR activity will create a more sustainable business, encourage customer loyalty and ultimately grow shareholder value.

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Bancap Brokers $1.65M Sale of All Storage

Bancap Self Storage Group Inc. brokered the $1.65 million sale of All Storage self-storage in Lancaster, Calif. Company president Dean Keller represented both parties in the transaction.

The seller was the original construction-financing lender who obtained the property through foreclosure. The buyer was American Self Storage Center, a family-owned, independent operator of self-storage properties. 

Built in 2005, the single-story facility contains approximately 30,000 square feet in 330 units. The capitalization rate was approximately 8.8 percent on the 2008 net operating income. Occupancy was approximately 65 percent, though the property had been experiencing decreasing income. The seller provided financing of 75 percent of the purchase price to give the buyer time to improve occupancy and income over the next few years.

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PODS, UniGroup Agree to Marketing Alliance

Mobile-storage company Portable on Demand Storage (PODS) has agreed to a marketing alliance with UniGroup Inc., the parent company of United Van Lines and Mayflower Transit. 

UniGroup will have access to PODS' fleet of 138,000 moving and storage containers serviced by 166 franchise and corporate locations through out the United States. In exchange, PODS will have access to professional packing and loading services through a network of United Van Lines and Mayflower Transit agents with nearly 750 locations. 

UniGroup entered the portable-container moving and storage market in 2006 with its brand SAM – Store and Move. The SAM network of 92 dealers in 65 cities in the United States will continue to provide portable containers under the new agreement.
 
Founded in 1998, PODS provides moving and storage services to more than 238 million consumers in 48 U.S. states, Canada, and Australia.

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ISS Blog

Selling Tenant Insurance in New York

Tenant insurance is a staple of self-storage operation. Though facility owners are not liable for loss of or damage to tenant goods in storage, their ability to offer insurance coverage for that property gives everyone peace of mind. The discussion of insurance with a new customer allows the manager to address critical points of the rental agreement that relate to liability. And while purchasing coverage may not actually make the customers’ goods any more secure, he can at least rest easy that he has some recourse should something happen, whether that be theft, fire, flood, etc.
 
Self-storage operators in New York got a bit of a blow last week when Governor David Paterson vetoed Senate Bill 3577, an act that would have amended the insurance law and ultimately allowed them to offer tenant insurance. (See "New York Governor Vetoes Self-Storage Insurance Legislation.")

One of the organizations taking credit for dissuading the governor is the Council of Insurance Brokers of Greater New York Inc., an association of independent insurance brokers throughout Metropolitan New York as well as Long Island and the Lower Hudson Valley. Yesterday, the group published a release praising and thanking the governor in his decision. Its reasons for opposing the bill?

CIB President Anthony Aquilino said the act would only benefit self-storage owners and could adversely affect customers who may already have coverage under their homeowners or renters policies. His legislative chair, Anthony Calafiore, added that CIB has consistently opposed efforts to offer limited insurance licenses, emphasizing the importance of education and regulation in regard to insurance sales.

Unfortunately, the governor concurred. In his letter to the Senate, he cited four policy and technical concerns behind his disapproval:

1. Consumers are often unaware as to whether their goods in storage are covered by their homeowners or renters policies, and so they may purchase insurance from the self-storage company unnecessarily.

2. The bill does not require self-storage operators to file their insurance brochures and materials with the Department of Insurance for review.

3. The bill does not amend other insurance law that outlines requirements for the cancellation and non-renewal of insurance policies. If left unamended, the law would not provide appropriate protection for self-storage customers and could cause unnecessary confusion, error and expense.

4. The bill provided for an immediate effective date, which would make it very difficult for the Department of Insurance to appropriately implement its provisions.

Thankfully, not all states have faced these same challenges. Limited insurance licensing legislation has been passed in 10 other states, including California, Florida, Illinois and Texas. New legislation was passed in Washington state just a few weeks ago. And I understand that the New York Self Storage Association as well as the national Self Storage Association may consider renewing their efforts on this front during the next session.

What do you offer by way of insurance at your own facility(ies)? In a brief poll conducted on the Self-Storage Talk forum last August, 43 percent of respondents said they offer insurance brochures at their counter; 34 percent offer pay-with-rent insurance; 20 percent said they don't offer insurance at all.

If you're interested in learning more about offering tenant insurance, check out these articles:

I particularly encourage any New York self-storage operators or representatives of the NYSSA to chime in on this topic. How do you feel about the veto, and what does it mean for self-storage operation in your state?

U-Store-It Announces Dividend for Quarter Ending Sept. 30

The board of directors for U-Store-It Trust, a real estate investment trust focused on self-storage facilities, declared a quarterly dividend of $0.025 per common share for the period ending Sept. 30, 2009. The dividend is payable on Oct. 22, 2009, to common shareholders of record on Oct. 7, 2009.
 
U-Store-It is a self-administered and self-managed REIT. The company provides self-storage in all 50 states through its 384 company-owned facilities and the U-Store-It Network, which consists of approximately 263 third-party locations.

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