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San Diego City Council Rejects Proposed Self-Storage Project

On Tuesday, the San Diego City Council voted unanimously against the construction of a 90,000-square-foot Tucker Self-Storage facility proposed for the neighborhood of Tierrasanta. In a 7-0 vote, the council directed the City Attorney’s office to draft the necessary legal findings to reject the project. A final vote is scheduled for Oct. 6.
 
The decision was a victory for the Tierrasanta Community Council, which has been fighting the storage proposal since it was first revealed in 2005. Local residents said the project does not fit with the community’s “character,” claiming it is too big, is not needed, and could invite crime.

The proposal was originally rejected by the city council two years ago. Since then, facility developer Andrew Krutzsch reduced the size of the project from 120,000 square feet. Krutzsch’s attorney said his client feels the project is appropriate for the area and the council made a mistake. 

Sources: NBC San Diego, Community Fights Developer and Wins, and Mission Times Courier, Councilmember Emerald asks Colleagues to reject Self-Storage Project

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The Basics of Cost Segregation: Tax Benefits for Self-Storage Owners

The government has been steadily handing out money to the banks this year, so you may be asking, “Where is my piece of the pie? My rentals and revenue are down. I’ve been doing everything I can to manage expenses, carefully analyzing day-to-day operations, purchasing and marketing.” Or maybe you’re one of the lucky self-storage owners who haven’t been hit as hard by the recession.

Either way, recent allowances by the Internal Revenue Service aimed at helping small-business owners are being used by many self-storage owners to generate cash flow and improve their financial position.

The IRS recently changed the regulations to allow net operating losses (NOL) to be carried up to five years. This means that if you paid taxes in the last five years and are now operating at a tax loss, you can claim a refund on your previous years’ taxes.

How do you create a bigger NOL that will allow you to reclaim your previously paid tax dollars? The answer is cost segregation.

The IRS also reinstated 50 percent bonus depreciation for new construction projects started after Dec. 31, 2007, and placed in service before Jan. 1, 2010. Property with a recovery period of 20 years or less is eligible.

How do you create more property eligible for this bonus depreciation? Once again, the answer is cost segregation.

What It Is

Cost segregation is an engineering-based approach to identifying assets within a facility that can be reclassified into a much shorter depreciation class than the building itself. Non-residential properties (and everything in them) are generally depreciated using a straight-line method over 39 years. The cost-segregation specialist maximizes the inherent tax benefit by identifying, quantifying and segregating the personal property components of a facility, resulting in depreciable lives of five, seven and 15 years using accelerated depreciation.

This is not simply a matter of classifying equipment to a five- or seven-year recovery period. Items typically reclassified include land improvements, such as paving, curbing, site lighting, storm drainage, fencing, and landscaping, and personal property including signage, security systems, certain floor coverings and special climate-control systems. The list is extensive.

The accompanying table illustrates the financial benefits of performing a cost-segregation study for a sample $5 million self-storage facility for which you could reclassify 30 percent of the cost basis to a shorter life.

The best time for a study is when a facility is constructed or acquired, but it’s also possible to obtain these benefits for properties that have been in your portfolio for up to 15 years. A retroactive study can be performed without the problems associated with amending prior year tax returns or IRS approval. You can claim the difference between the allowed depreciation and what you actually claimed in prior years all on your current tax return, which would result in big tax savings for you.
 
How It Works

A cost-segregation specialist uses an engineering-based approach as specified by the IRS. His job is to examine architectural and engineering drawings, cost data and other project specifications for potential asset reclassification. He can use his expertise in construction-cost estimating to overcome the lack of available information if cost data is not available.

The government is doing its part to help owners maximize the benefits of real estate investing. Recent IRS pronouncements have enhanced this tax strategy and made cost-segregation studies an even more beneficial method for increasing project cash flow and profitability.

The IRS also published a 115-page Cost Segregation Audit Techniques Guide, developed to provide its agents with a fundamental understanding of cost segregation. Why? Because property owners throughout all industries are using it, and the IRS wants agents to be familiar with the process.

The following questions will help you determine if your facility is a candidate for a cost-segregation study:

  • Is the cost of the facility (excluding land) at least $1 million?
  • Have you purchased, constructed or renovated any facility in the past 15 years?
  • Do you plan on retaining this facility for at least the next few years?
  • Do you have net income that is currently taxed?

If you can answer “yes” to these questions, cost segregation will increase your cash flow and return on investment.
 
Jerome Kootman is a Certified Public Accountant and the managing tax director for Cost Recovery Solutions LLC, a specialized engineering firm that provides cost-segregation services. Kootman has provided cost-segregation studies for hundreds of clients ranging from small businesses to Fortune 100 companies. To reach him, call 732.548.3855; e-mail [email protected]; visit www.crscostseg.com

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A+ Storage Supports Susan G. Komen Race for the Cure

A+ Storage of Nashville, Tenn., is providing space for the organization and support of the Susan G. Komen Greater Nashville Race for the Cure, which will take place on Oct. 10. For the second consecutive year, the self-storage facility has donated space for the organization to assemble its participant racing packets. The packets will be assembled by community volunteers and distributed from A+ Storage’s 10 Nashville-area locations.
 
The race will begin at 6:30 a.m. at Maryland Farms in Brentwood, Tenn., and will include a 5K run, a 5K walk and a one-mile walk.
 
Up to 75 percent of net proceeds raised by the Komen Greater Nashville Affiliate is dedicated to fighting breast cancer in Middle Tennessee. In 2008, it funded 11 local programs and distributed more than $600,000 to the cause.

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NitNeil Acquires Georgia Facility for $3.6M

NitNeil Partners LLC acquired the former Lock Inns Mini Warehouses in Alpharetta, Ga., from Lock Inns Inc. for $3.6 million. It is located in the North Fulton/Forsyth County Industrial submarket. Built in 1995, the one-story, 51,000-square-foot, Class C industrial property includes 424 self-storage units. The facility will be renamed The Storage Neighbor. Nancy Miller of Bull Realty represented the buyer. The seller did not use a broker.

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ISS Blog

Looking Forward to the Inside Self-Storage World Expo in Washington, D.C., Oct. 5-8

With the Inside Self-Storage World Expo just a few short weeks away, I’d like to give you a short overview of all the amazing events we have planned for this year’s show. As always, we have a fantastic education program, packed with new and relevant topics for managers and owners alike including: 

  • Lien sales and bankruptcy
  • Cutting costs and running more efficiently
  • Improving sales
  • Unique marketing strategies

Industry veteran Tom Litton breaks down sales and marketing even more in special add-on intensive workshop, Marketing and Sales Boot Camp. Litton, an engaging speaker, will share powerful strategies every owner and manager can use to increase rental activity. 
 
Investors eyeing the self-storage industry can get a comprehensive overview in the Developers Seminar with RK Kliebenstein of Coast-To-Coast Storage. The add-on workshop will delve into all the critical components of developing and building a self-storage facility.
 
Speaking of building, you all know how fond I am of “green” topics. Buster Owens, president of Rabco Corp., will share how self-storage developers can go green. Buster received LEED certification just a few months ago and he’s eager to share his growing knowledge. We also have a special seminar on solar panels from Bob Hayworth of Baja Construction. More facilities are looking at solar panels to save money and attract green-minded tenants. .
 
I’ve only mentioned a handful of the diverse seminars being offered at this year’s show. Plus, there’s also the security and software marketplace where you can speak with vendors, the buyers and sellers meeting, cocktail reception and more.

The expo hall will be open for two days and feature an array of vendors including builders, door manufacturers, real estate and finance experts, access-control companies, marketing experts and so much more!
 
If you’ve never visited Washington, D.C., read up on all the historical and interesting places to visit in industry consultant Jim Chiswell’s D.C. overview. Jim gives the lowdown on all the major historical sites—Vietnam Memorial, White House—and some not-so-obvious places, such as the Library of Congress and the Smithsonian.
 
We hope you’ll join us for the last industry tradeshow of the year. Register today!

Five Questions With Extra Space Storage Chairman and CEO Spencer Kirk

1. Extra Space Storage has launched a third-party management program called 3Plus. What fueled this decision?

Extra Space Storage has offered third-party management for many years, but just recently made a push to expand this area of the business. The company’s large footprint gives us the ability to add sites in almost any major market in the United States. Adding to this footprint brings synergies to Extra Space and the owners for whom we manage.

One of the best synergies we share with owners is increased brand awareness, especially on the Internet. The more stores a company operates in a market, the more Internet exposure it can receive―if marketed properly. We have found Internet customers stay longer in our facilities and come from further distances than more costly Yellow Pages customers. 

2. How do third-party management services lower expenses for owners?

Extra Space divides operational costs over all of its sites regardless of ownership. By adding more facilities, we lower costs for all owners through increased purchasing power. Most see a tremendous savings in multiple expense line items when being managed by our program. The savings in Yellow Pages, Internet costs and property insurance alone usually makes up for the cost to manage. 

3. How many facilities does Extra Space manage, and how do you ensure every owner gets the attention he deserves?

Extra Space currently operates 740 facilities, 224 of which are wholly owned by us and 386 of which are varying types of joint ventures. The remaining 130 facilities are pure third-party management with no ownership by Extra Space. These owners range from large publicly traded financial institutions to individual owners with one facility. We’re set up to manage for all, regardless of the number of properties.

Every facility has a local district manager, marketing manager and revenue manager. Each owner has access to his property accountant. Every district manager is required to have contact with the owner on a monthly basis. We give each owner Web access to the property software in real time. An owner can see what happens at his property from anywhere in the world. In addition to relationships with daily operations personnel, all owners have contacts at the corporate headquarters.

Also, we do not build a first right of refusal into our management contracts. Relationships keep us close to our owners. We like them to think of us as a possible exit strategy. When they’re ready to sell, on their timeline, we’re happy to give them our offer. Because we manage the facility, we can close quickly. We’ve acquired many sites from our partners; we’ve also had partners sell sites to other companies unrelated to Extra Space. 

4. With so many owned or joint-venture sites, how can the owner of one property be assured no preference is given?

Extra Space is colorblind and indifferent to ownership when it comes to operation of the facility. Every site is branded with Extra Space signage (which we are willing to pay for when an owner switches to our management system), so customers have no idea who owns the site. Our call center representatives are unaware of the ownership of the site, so they have no way of treating one property differently from another.

We encourage people to test the Internet and call centers all the time just to verify this approach. We’ve partnered with some very large institutions for many years now. They require professional service that would never tolerate any kind of preferential treatment. Our track record speaks for itself.

5. How do you see third-party management as a long-term strategy for Extra Space?

For Extra Space, third-party management is here to stay. It’s a great, low-cost growth strategy that benefits us and the people for whom we manage. In the year since we’ve started to push third-party management as a growth initiative, we’ve added more than 10 percent to our portfolio.

Our message to owners is simple: We know how to manage storage. We have a lot of tools in our toolbox that help drive customers to your property and no other management companies can provide. We can lower expenses and increase the profitability of your storage property beyond what you could do alone. Again, it’s a win-win proposition. With acquisitions and development difficult in today’s environment, this initiative becomes even more important to us today.

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Women Robbed While Trying to Sell Goods in Storage

Two tenants of Walthall Self Storage in Chesterfield County, Va., attempted to sell some of their stored items on the Internet and got robbed instead. The women agreed to meet a potential buyer at the self-storage facility on Saturday. When they arrived, they were confronted by three men, one of whom identified himself as a police officer and demanded that they exit their vehicle. The perpetrators absconded with the car and the purses that were inside. The women were not hurt, and their vehicle was recovered a few hours later.
 
In light of the incident, local police have offered some suggestions for selling items online and meeting with potential buyers and sellers. They suggest meeting in a public place during the day, checking out the person’s background if possible, and making sure family and friends are aware of your plans.
 
Source: NBC News 12, Women robbed while trying to sell items online

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Stockade Storage Supports Charleston Charities

Stockade Storage of Charleston, S.C., is donating storage units for use by the Salvation Army and the Lowcountry Food Bank during the fall and winter.
 
The Salvation Army will use the units to store items collected for their Christmas assistance program. The program collects donated food, clothing and toys for distribution to more than 3,000 families and 15,000 individuals in need in the Charleston area. The Salvation Army will also use the units to store supplies and equipment to be used for other purposes including times of disaster.
 
The Charleston Lowcountry Food Bank will use the units to store non-perishable food items donated throughout the area. The food bank is sponsoring several food-collection drives in the coming months.
 
Stockade Storage will also be serving as a collection point for the annual Toys for Tots program sponsored by the Marine Corp Reserves at all of their Charleston locations.
 
Stockade Storage owns and operates 16 facilities throughout Florida, Georgia and South Carolina.

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San Diego Residents Oppose Self-Storage Project

A proposal to build a 90,000-square foot self-storage facility at the entrance to San Diego's Tierrasanta neighborhood goes before the City Council today, and some residents are outraged. Last year, the Tierrasanta Community Council voted against the project, but the city’s planning commission voted to approve it. Under a 1989 land-dispute settlement, property developer Andrew Krutzsch is allowed to lease the 3-acre site from the city for commercial or industrial development for 55 years.
 
Source: San Diego Union Tribune, Tierrasanta self-storage plan to go before council

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Metro Self Storage of Mound Donates $700 to Food Shelf

Metro Self Storage of Mound, Minn., recently donated more than $700 to the Mound Westonka Food Shelf. Local Boy Scout Troops 569 and 571 collected more than 200 pounds of non-perishable food items and $728.26 in cash contributions for the Food Shelf during the Spirit of the Lakes parade on July 18. Self-storage owners Del Meismer matched the cash donation.
 
Source: The Laker Sun Patriot, Foodshelf Support

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