One of the looming questions for any self-storage owner or would-be investor is how to best determine the value of an existing facility. Whether you’re in the market to buy or sell, mastering how value is factored within the self-storage sector and assigning a reasonable figure to any given asset is strategically advantageous. After all, self-storage value isn’t just what the land and buildings may be worth; it also includes myriad business factors like profit and loss statements, rental rates, economic occupancy, overdue accounts, expenses, intellectual property, market demographics and competition, forecasting and so on.
For sellers, holding a stacked hand and knowing how savvy buyers will scrutinize your property enables you to create a compelling case for why your facility should command a certain price. For buyers, being armed with accurate, detailed information regarding an asset you’re interested in acquiring enables you to confidently go into a deal with your eyes wide open, sharpen your negotiating arguments and make an attractive case to lenders or other investors.
This year, the ISS Store has added a spate of resources designed to aid buyers and sellers in their quest to receive the best deal. These products can be used together to sharpen your real estate acumen, reasonably reduce investment risk and minimize the guessing game in formulating a strategically smart transaction. Any investment is a gamble, but your end-game should strive to play with house money.
In February, we added a new book that examines self-storage facility value. Written by valuation experts Michelle Gigowski and Timothy Moffit, “What's It Worth? Making, Managing, and Measuring Value: Self-Storage Facility” applies theory to help owners and investors understand how value is made, managed and measured within the self-storage asset class.
The authors have experience as educators, analysts, appraisers and turnaround consultants, which enables them to help readers connect the dots between valuation theory and practice. Topics covered in the book include facility financial statements, external and internal value drivers and destroyers, valuation creation and facility-turnaround tips, 10 reasons to buy self-storage, valuation approaches and models, and more.
In March, we began offering two types of custom data reports. Both are based on a specific U.S. property address submitted by the customer and produced on demand by real estate firm Colliers International Valuation and Advisory Services LLC.
For the “Self-Storage Custom Expense Report,” Colliers uses property information provided by the customer to research and analyze the typical income and expenses of comparable self-storage facilities. The report offers a comparison against national data as well as income and expense metrics from six self-storage facilities as close in proximity and type to the subject property as possible.
The report can help both buyers and sellers better understand some of the extenuating valuation factors tied to a specific asset and gain perspective on market dynamics and facility operating performance.
In contrast, the “Self-Storage Custom Cap-Rates Report” addresses applicable capitalization rates for specific properties and regions using the Colliers Rating System, which uses eight performance and property metrics to rate a facility as class A, B or C. The report includes an appropriate cap-rate range for the subject property supplied by the customer, sections on national and local cap-rate trends, and information from six comparable properties hand selected by Colliers.
The report can be a valuable tool in helping to understand market trends, estimate an effective rate of return and discriminate between potential investments to zero in on the best deal.
Last week, we made available Version 2 of Storage World Analyzer Software. If you’re not familiar with it, this cloud-based tool is designed to provide self-storage buyers and investors with internal rate of return forecasting, cash-on-cash return estimates and 10-year cash-flow projections based on unit mix and assumption variables. Be sure to check out the sample reports to get a better idea of the modeling at your fingertips.
Version 2 of the software has been streamlined for efficiency and ease of use, and includes new and refined modules that allow users to make long-term projections on all types of self-storage property investments including existing facility acquisitions, raw land with new construction, conversion projects and facility expansions.
It also offers pricing-optimization tools, the ability to create and print detailed reports, and video tutorials from self-storage investor Mark Helm, who created the software. The Analyzer works well on its own or in tandem with Helm’s book, “Creating Wealth Through Self-Storage,” in which the author shares many of his investment strategies and how he uses the software to identify good buys with room for financial growth.
Helm also presented at this year’s Inside Self-Storage World Expo. His session on “Insider Strategies for Buying Self-Storage in Today's Crazy Market,” offered insight on important numbers to know, identifying properties with upside, and the best opportunities in today’s market. It is one of several sessions on buying and investing featured during the 2017 expo that are now available for purchase on DVD and on-demand video format.
Other related education topics from this year’s event include feasibility and due diligence; whether to buy or build; investing in underperforming storage properties; and the self-storage real estate cycle, which examines market dynamics, property value and more.
With millions of dollars at stake, there’s no reason to hedge bets or gamble unnecessarily. Use all of the resources, tools and experts at your disposal to go all-in on a killer investment or ensure the exit strategy you laid out for yourself at the outset of your self-storage journey is everything you envisioned.