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Articles from 2014 In September


ezStorage Tour Demonstrates How Easy Self-Storage Can Be

In this video from ezStorage, Jen, a friendly manager, offers a tour of what makes the company’s brand stand out from its competitors. Dubbed “The ezStorage Difference,” the tour highlights the operator’s buildings and cleanliness, security, facility amenities, customer service, and online services.

UK Self-Storage Operator Distributes 2,000 Doughnuts to Celebrate Grand Opening

The staff at three UK Storage Co. Ltd. properties will hand out 2,000 doughnuts to community members on Oct. 6 to celebrate the grand opening of the company’s new self-storage facility in Redruth, Cornwall, England. The facility on Cardrew Way opened in July.

The company’s facilities in Camborne and Falmouth will also participate. UK Storage Co. offered the pastries following the opening of its facility in Plymouth and received some “strange looks,” John Lamb, a company representative, told the source. “Some people think we’re trying to sell something and others think we’re a bakery, but most appreciate the thought,” he said.

The company opted for doughnuts over fliers to show it’s “a friendly, approachable company and doughnuts just seemed right,” Lamb told the source.

UK Storage Co. operates facilities in Bristol, Bridgewater, Chard, Gloucester, Plymouth, Redruth and Taunton.

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National Grid Launches Green-Construction Program in Northeast

National Grid, an electricity and gas company that connects consumers to energy sources, has launched an energy-efficiency program to support the design of high-performing commercial and industrial buildings in Massachusetts and Rhode Island. The New Construction Program provides professionals, including those involved with self-storage building design, construction, ownership or operation, with energy-saving resources, financial incentives and training designed to help lower building operating expenses, reduce emissions and optimize energy performance, according to a press release.

The program is open to most non-residential buildings, including commercial, industrial and institutional projects. It provides energy-efficiency support for new construction, major renovations and equipment replacement. Participating projects receive technical and design assistance as well as incentives for both owners and the design team, company officials said.

National Grid services also include a Whole Building Approach option for ground-up or major renovation projects that require collaboration between National Grid and the design team, as well as a Systems Approach option for equipment or single-system efficiency measures. More information on these programs can be obtained from the Trade Professionals area of the company website.

National Grid’s mission is to create new, sustainable energy solutions and develop an energy system that underpins economic prosperity, according to the release. The company serves more than 7 million gas and electricity customers in Massachusetts, New York and Rhode Island. It also delivers gas and electricity across Great Britain.

Creating Your Annual Self-Storage Budget: A 2015 Financial Guide for Facility Owners

Budget Analysis Chart Graph

Have you created a good 2015 budget for your self-storage business yet? If not, there’s no time like the present. Why is budgeting important? For starters, many investors and bankers require it. Even if it’s not required, a budget helps predict cash flow, set goals for revenue growth, and create a framework from which to manage expenses. Without a budget, it can be easy to spend more money than you’re bringing in.

Here’s a step-by-step guide to creating the ideal budget for your self-storage business in 2015.

 

Step 1: Gather the Tools and Data

Before you begin assembling your budget, spend some time gathering important data. If you have a bookkeeper or accountant, ask for copies of your property’s profit-and-loss statements for the last two calendar years and year-to-date for the current year. Find out when paychecks will be cut next year, if payday is every two weeks. Which two months will have three payroll periods instead of two?

Also, review any existing contracts that will extend into 2015. For instance, do you have contracts for preventive maintenance, landscaping or online marketing? If you provide any health or life insurance benefits for your staff, reach out to your broker to find out what they expect to happen to premiums next year.

Also pull a couple of critical reports from your management software, including the most recent monthly management-summary report. It’ll give you starting points for gross potential, occupancy and total actual rent. It would also be helpful to have a historical report that shows move-ins and move-outs, occupied units, total rent collected, and discounts given over the last 36 months.

 

Step 2: Review Current Competition

How long has it been since you visited your competitors? How does your facility compare in terms of quality, service and value to the customer? Are there any changes you could make in 2015 that would significantly improve your occupancy or revenue? These might include adding climate-controlled units, seal-coating your parking lot, buying a box truck to help tenants move in, adding banners to improve signage, offering a new move-in special, or changing your staff.

 

Step 3: Audit for Maintenance and Capital-Project Needs

After you’ve visited the competitors, go back to your property and walk through it, trying to see it from a customer’s perspective. Make sure all of the lights are working, and review the shape of your signage, gutters and roof. Are keypads, gates and cameras all working well? Are there any signs of asphalt damage or wear and tear? Are there any doors that need spring adjustments or replacement? Create a list of capital improvements and maintenance projects you’d like to complete next year, and then gather estimated costs.

 

Step 4: Ask Experts for Help

Who knows your property better than you? Your property managers! So include them in the budgeting process. Ask what they would do differently if they owned the property and it was their money. Managers often have great ideas for improving a facility and bottom line but are hesitant to say something because they’re afraid to overstep boundaries. Your managers should also be able to provide you with their expectations for growth in occupancy and rates next year.

If you know other storage owners in your region, give them a call. Operators are generally friendly and eager to help each other. Brokers and appraisers who specialize in self-storage usually have a great sense of the overall market as well. Share your thoughts on the market and expectations and ask for their opinions. Maybe they’ve heard rumors of a potential new competitor you don’t know about. Other storage investors can be a great source for information on the industry and your market.

 

Step 5: Analyze Trends

Analyzing the trends in key numbers at your property over the last couple of years can help you make a more accurate prediction for the next 15 months. If you have some experience with Microsoft Excel, creating quick-line charts will be a piece of cake. If you haven’t done it before, visit the Microsoft Office website for a quick tutorial.

I suggest plotting these six line items on individual charts by month for the last two to three years:

  • Total revenue
  • Total discounts given
  • Total expense
  • Move-ins
  • Move-outs
  • Square-foot occupancy

Look for seasonal as well as long- and short-term trends. Does occupancy usually peak in August? Do move-ins spike in May as local college students leaving school? Do you give more discounts in the summer months or winter?

 

Step 6: Make Projections

Now the fun really starts! To predict rental income, start with last month’s rent, add in the expected rent from move-ins next month at your average street rate per unit, and subtract the expected move-outs at your average rate per occupied unit. If you’re raising existing tenant rates on a regular schedule, add an appropriate amount on a monthly basis for those increases. Lastly, subtract the amount you expect to give in discounts and bad-debt write-offs.

Remember to add to your “other revenue” line items. For things like administration fees and merchandise sales, it’s easy to predict using an average amount per move-in. On a monthly basis, for example, the admin fees should be $20 multiplied by the number of move-ins you’ve predicted. Looking back at the last six months, on average, what were your merchandise sales divided by the number of move-ins? Use that number to predict next year’s merchandise income. Insurance premiums, truck-rental income and rent from any other sources such as cell towers, office spaces, etc., should be factored into your budget as well.

For expenses, really review the amount you’ve spent for each line item over the past couple of years. For many categories, you can assume an annual growth rate, maybe 3 percent.

For marketing, decide if you want to spend more or less. How did the advertising investments you made work last year? For items like credit-card processing and management fees, calculate the percentage of revenue you paid last year, and apply the same percentage to your projected revenue for 2015. Use the contracts you gathered and maintenance list you created earlier to predict your repairs and maintenance budget.

 

Step 7: Final Review

A good exercise to check the “sanity” of your new budget is to add a line for your 2015 projections to each of the six charts you created in step 5. The result should look similar to the charts you see here for move-ins and gross profit.

Self-Storage Gross Move-Ins Chart***

Self-Storage Gross Revenue Chart***

Do the 2015 lines form the same general shape and slope as the 2013 and 2014 year-to-date lines? If they vary dramatically, you may not be predicting realistic numbers. However, there could be a good reason for it. Maybe your occupancy is so high now that you don’t have many empty units, which can affect your move-in rate.

After spending hours or days working on your budget, the numbers can start to blend. This is a good time to ask someone else to take a look. Your bookkeeper or accountant has a keen sense of expectations, especially for expenses. Ask him to review your proposed budget and provide feedback.

Hopefully, this article will help you organize your thoughts, streamline the process and help create an accurate prediction of net operating income and cash flow for next year.

Alyssa Quill is an owner of Storage Asset Management Inc., a third-party management and consulting company that oversees 45 self-storage facilities across the East Coast. To reach her, call 717.779.0044; visit www.storageassetmanagement.com.

Sovran Self Storage Names Northeast Regional Vice President

Real estate investment trust Sovran Self Storage Inc., which operates the Uncle Bob’s Self Storage brand, has named Philip Wilfong as its regional vice president of operations in the Northeast.

A Pensacola, Fla., native, Wilfong joined Uncle Bob’s in 2008 as an area manager and served in that capacity for Pensacola and later Atlanta. In his new role as regional vice president, he leads a team of six area managers who oversee approximately 100 self-storage facilities, according to Wilfong’s LinkedIn profile. He has more than 20 years of experience in management, leadership and team-building, with past positions including district manager at CVS Caremark Corp. and store manager at Rite Aid.

Headquartered in Buffalo, N.Y., Sovran operates more than 500 facilities in 25 states. The company ranked fifth on the Inside Self-Storage 2014 Top-Operators List. Its portfolio comprises more than 34 million square feet in 305,000 units.

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Marcus & Millichap Releases National, Local Self-Storage Reports for Second Half of 2014

Marcus & Millichap Real Estate Investment Services, a commercial property investment firm prominent in the self-storage industry, has released a series of semiannual reports for the second half of 2014, including one national report and more than 40 reports on major U.S. markets. The reports are produced by the firm’s National Self-Storage Group and released through its Research Services arm.

The two-page local reports cover trends in employment, population, unit vacancy and asking rental rates. They also provide an overview of rentable square feet per capita by state and median price and capitalization-rate trends by region. Recent self-storage property sales are also highlighted.

The national report covers key factors driving self-storage use including job growth, industry cap rates compared to the 10-year Treasury average, construction, occupancy and property sales.

“The national self-storage sector steams into the second half of 2014 following several quarters of strengthening property operations. Space demand is growing significantly in conjunction with an expanding economy, while restrained supply growth persists,” Marcus & Millichap analysts wrote. “Recently, the exceptional property performance posted by self-storage [real estate investment trusts] has brought greater attention to the sector and raised its stature among commercial real estate investors. Self-storage has long been cited as a sound portfolio diversifier by large multi-faceted investors and is a source of livelihood and wealth creation for small local investors. Improving economic conditions will support a favorable climate for transactions, while the near-term outlook for further strengthening in vacancy and rent growth is promising.”

Among the drivers creating demand for self-storage space is an increase in apartment rentals compared to declines in single-family homeownership. There has been an increase of 700,000 apartments rented during the last four years, according to the national report.

The Self-Storage Research Semiannual Reports are published twice each year and may be downloaded for free by users who register with the company’s website.

Marcus & Millichap produces more than 2,000 research products each year, officials said. The Research Services department offers a range of publications, from national economic perspectives to property-type-specific analyses at the market level. The company website enables users to search for reports by multi-family and commercial property type, as well as by location and keyword.

Marcus & Millichap has more than 1,300 investment professionals in offices throughout the United States and Canada. The company closed more than 6,600 transactions last year with a value of approximately $24 billion.

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U-Haul Loses Trademark-Infringement Lawsuit With PODS, Jury Awards $60M in Damages

A Tampa, Fla., jury this week unanimously found self-storage company U-Haul International Inc. liable for federal and state trademark infringement for using the word “pods,” and has awarded $60.7 million in damages to the plaintiff, PODS Enterprises Inc. U-Haul was also found responsible for federal and state trademark dilution, unfair competition and deceptive trade practices, according to the source.

PODS Enterprises brought a lawsuit against U-Haul in U.S. District Court in Tampa in 2012, alleging the company “improperly and unlawfully'” used the trademark word on its website as a way to divert sales. U-Haul uses the word “pod” to describe its U-Box mobile-storage product. PODS delivers mobile-storage containers to homes and businesses, and then transports the filled containers to its storage facilities.

The trial began on Sept. 8 and lasted two weeks. It included eight jurors who listened to expert testimony about word definitions and usage. Deliberations lasted about four days, according to the source. U.S. District Judge James Whittemore presided over the trial.

“We thank the jury for their hard work and dedication,” said Aaron B. Parker, PODS’ senior vice president and general counsel. “PODS is the genuine brand leader in the containerized moving and storage industry and the jury’s finding recognizes that the PODS brand has become famous nationwide.”

PODS sought an estimated $170 million in the lawsuit, the source reported. The jury awarded the company $46 million in damages and $16 million in profit attributable to U-Haul for using the word “pods.” The source said it was unclear if U-Haul planned to appeal the verdict.

“U-Haul International is disappointed in the jury's verdict in the lawsuit brought by PODS Enterprises Inc.,” Sebastien Reyes, a U-Haul representative, said in a statement. “U-Haul respects the legal process, even when it is disappointed with the results, and it will continue to work within that process in this case.”

An attorney for PODS said the company plans to seek an injunction to force U-Haul to stop using the words “pod” and “pods,” the source stated.

Florida-based PODS is a provider of residential and commercial moving services in 46 U.S. states as well as Australia, Canada and the United Kingdom. Founded in 1998, the company has more than 150,000 portable-storage containers in service.

Established in 1945, Phoenix-based U-Haul has more than 40 million square feet of storage space at more than 1,000 owned and managed facilities throughout North America.

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The Legalities of Storing Vehicles: Insight for Self-Storage Operators

Self-storage operators who offer vehicle storage encounter a number of challenges unique to this business service. To ensure rentals go smoothly, they have to consider their rental agreement, value limitations, lien sales and other issues. To learn more about related risks and solutions, “Inside Self-Storage” spoke with Jeffrey Greenberger, a partner with the law firm Katz Greenberger & Norton LLP and the owner of Late2Lien LLC, a company that assists self-storage operators in automating their lien-sale notice process. Here’s what he had to share.

What are some of the legal challenges for self-storage operators who offer outdoor vehicle storage?

Vehicle storage is really a different business from traditional self-storage. There are many reasons for this, not the least of which is the value of the stored property is often going to be higher. The insurance requirements are often different, as many self-storage insurance companies don’t offer coverage on vehicles, even if you want it.

With outdoor storage, you can see the vehicle; therefore, you know its approximate value and condition, and whether it’s deteriorating or has been damaged. You also know whether it’s been broken into, infested by vermin or potentially stolen. All of these things add up to a much higher level of responsibility on the operator’s part. This all indicates a bailment as opposed to indoor storage, where you really don’t know what’s going on or what’s stored behind the closed door locked by your tenant.

How should facility operators address vehicle storage in their rental agreement?

The most important thing, particularly if you’re not renting outdoor spaces, is to ask whether the tenant is storing a vehicle. Sometimes this can unwind into many different questions, as people don’t always define “vehicle” the same as you do. You also need to ask whether a vehicle may be stored later during the tenancy and if a vehicle is going to be switched out during tenancy.

In either situation, once you realize you have a vehicle that’s going to be stored, make sure you get all the necessary information at the time of rental. Consider this the “honeymoon” phase. The occupant is willing to give you information now that he’ll never be willing to give you again, so get it.

Obtain the VIN or hull number, and the make, model, color and year of the vehicle. Most important, make sure you know, with certainty, the names of title holder(s) and lienholder(s). Too many vehicles are brought to storage that are not titled in the name of the person who’s signing the storage lease. This is an important decision for you to make. Many operators have decided not to lease vehicle-storage spaces to non title holders because of the risk that the vehicle could be stolen or hidden from others, including creditors.

Understanding the identity of the lienholder is critical because many states require you to notify the lienholder in the event of default. It’s imperative that you know who the lienholder is upfront, as this will save you time, energy and money if there’s a default. Rather than trying to obtain all this information from your state’s department of motor vehicles, you’ll already have it. Remember, the vehicle may not even be registered in your state, meaning you’ll be searching out of state to get all of this info if you don’t get it in the beginning.

Finally, connect the dots. The face standing in front of you ought to match the one on the photo ID being presented. The name on that ID should correspond with the name on the vehicle title and insurance card. The VIN or hull number should be identical to the one on the registration, title and insurance card. If any of these things fail to match, it would be a good time to decide if you can figure out what’s wrong so you can proceed, or stop the rental because you’re taking on a potential risk.

What are some concerns in regard to insurance?

In every vehicle-storage situation, there’s clearly a great concern about expenses for loss, given the value of the vehicle stored. Unlike regular self-storage where property may have limited actual cash value that you can’t even know about, in vehicle storage, the fact that you know and perhaps have even seen the vehicle adds risk that any loss or damage could result in a high-dollar-value claim.

While there’s no easy answer to this question, the best way to approach it is to have a solid, maximum-value limit in your rental agreement and a negligence or covenant not-to-sue-in-excess-of-limit clause in your agreement. While you may be aware that a vehicle is worth $100,000, you want to contractually limit yourself to a lower number in the event of dispute, loss or damage so the tenant or insurance company can’t bring a large claim against you.

You shouldn’t allow people to store without adequate and proper insurance in force at all times. You want to make yourself liable for only a limited amount of money in the event that loss or damage is your fault. We explain it as limiting your liability to the amount of the vehicle’s insurance deductible. You can’t offer to be responsible for the full amount of the vehicle. You need to think through this process and be ready for it rather than caught off guard.

Also, get a copy of the insurance card. Many operators ask to become an additional noticed party. This is different than being an additional named insured, but you want to at least be notified if there’s going to be a policy change or cancellation so you can react.

How should operators handle a default?

The issue of default is so state-specific that it’s almost impossible to answer. The Self Storage Association has worked with many state associations to modify state statutes to allow for towing. Many operators fail to realize that if there’s a lien on the vehicle, it’s superior to their storage lien—meaning that even if you could find a way to get a title and sell the vehicle, if there’s a lien, all you’re doing is working to sell the vehicle for the bank. Plus, if you don’t get enough money to cover the lien, the bank may not release it, and you’ve sold something you can’t transfer with a clear title. For this reason, in most states, selling vehicles is generally a fruitless proposition.

While many operators rue the idea that they should “give the vehicle up” to a tower or lienholder without full remuneration, the reality is a vehicle in storage default is nothing more than a great liability to you and is continuing to accrue rent you may never recover. Why let a vehicle accrue past-due rent if you’re going to be capped at some number or bound as a second lienholder to a bank lien? The goal is to get it out quickly and without liability to you, if possible, rather than incurring more rent charges, fees, title searches, etc.

To reach Jeff, e-mail [email protected], or visit his website at www.selfstoragelegal.com.

Extra Space Storage CEO Spencer Kirk to Present at ISI 2014 Real Estate Conference in New York

Spencer F. Kirk, CEO of Extra Space Storage Inc., a self-storage real estate investment trust (REIT), will participate in a panel presentation on Oct. 2 during the ISI 2014 Real Estate Conference in New York City. The event is hosted by International Strategy & Investment (ISI), a full-service broker-dealer that provides macro and fundamental research, sales and trading.

Kirk will join Michael Barnello, chief operating officer at LaSalle Hotel Properties; Tom Bartlett, chief financial officer (CFO) at American Tower Corp.; and Thomas S. Olinger, CFO at Prologis Inc., in a session titled “Cyclical vs. Defensive REITs: Who Has the Better Growth Profile?”

The presentation is scheduled to begin at 11:25 a.m. Eastern Time and will be accessible via a webcast presented by Veracast. The webcast will be recorded and viewable through Nov. 2, according to a press release issued by Extra Space.

ISI hosts several investment-related events during the year, including conferences focused on the energy, health care, housing, retail and REIT sectors. Founded in 1991, the company has offices in London and Shanghai as well as several in the United States.

Headquartered in Salt Lake City, Extra Space owns or operates 1,071 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 715,000 units and 79 million square feet of rentable space.

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Startup Business Vaultd Targets Valet, Peer-to-Peer Self-Storage to University of Michigan Students

Vaultd, a startup business offering valet self-storage and peer-to-peer storage networking services, has launched in Ann Arbor, Mich., specifically targeting students from the University of Michigan (UM). The company recently received a $5,000 investment from Start Garden, a $15 million seed fund based in Grand Rapids, Mich., according to the source.

Using a Web platform, students can schedule delivery and pickup of Vaultd storage bins, which are then stored in a secure warehouse. Storage fees typically run $10 per bin, although customers may also pay upfront for an 8- or 12-month period, the source reported. The company also offers same-day delivery when returning stored items, although it isn’t clear from the company website if there’s a fee for this service.

UM students Brett Mecham and Mikey Shen came up with the idea while taking an entrepreneurship course. While conducting research, they discovered many students have challenges with using traditional self-storage facilities because some don’t have their own vehicles to travel back and forth to the storage property, according to the source. Student enrollment at UM in 2013 was 43,710, according to the university website.

“We drop off heavy-duty, durable boxes to students for free, and then they can fill up the boxes with whatever they want, taking as much time as they want to fill them up,” Mecham, CEO, told the source. “Once they do, they just contact us via our website, and we will come pick them up for them and take them to our secure warehouse. If they ever need a box again in the future, they can schedule a drop-off, and we can drop off whatever box they need. They never have to leave their house or their apartment.”

Their research also revealed the potential to offer peer-to-peer storage, in which users pay to use storage space at another student’s home. Customers can use the Vaultd website to list and price available space or search for host opportunities. Vaultd will pick up and deliver the storage bins to the host house. The host gets paid after returning the Vaultd items, and the company collects a commission fee, according to the website.

“Students on campus who live in a house tend to have storage space in their basement, so we are trying another model where students can store other students’ stuff if they have room,” Mecham said. “That way, these students can make money, plus also store their stuff locally on campus.”

Vaultd will use the seed money it received from Start Garden to purchase additional storage bins and acquire larger servers it can use to develop a mobile application, according to the source. As part of the Start Garden investment, Vaultd is required to participate in a monthly Update Night event to report on its progress to be considered for additional funding, the source reported.

The company is similar to other recent startups across the nation, including Boxbee Simple Urban Storage in San Francisco, Closetbox in Denver, Cubiq in Boston, MakeSpace Labs Inc. in New York City, Remote Garage in San Antonio, and Storrage Inc. in Seattle. Its peer-to-peer service model is similar to Roost Shared Storage Inc., which launched its Roost.com marketplace recently in San Francisco.

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