My foray into self-storage started serendipitously in 2013. I’d been working in a single-family office doing mostly equity analysis, but had started to delve into some of the company’s private-equity dealings. It was around this time that a longtime friend of the family needed to rent a storage unit in his hometown of Oldenburg, Germany. He was very familiar with the concept of storage from his frequent visits to the United States; but when he went online to search for a facility, he was surprised to find no self-storage in Oldenburg and hardly any in Germany at all, apart from the capital cities.
We started to discuss the possible reasons for the dearth of self-storage in Germany. After scratching our heads for a good number of months and finding no decent answer, we did our own due diligence and came up with a business model that seemed too good to be true. We decided more storage was needed. Now, who was going to build it?
This is one of the biggest problems facing investors who want to tap the burgeoning European self-storage market: The literature is out there and it’s compelling, but how do you gain exposure? There aren’t any real estate investment trusts in which you can purchase stock. It seemed that short of moving to Germany to start a storage business, the only alternatives were to throw a bunch of money at a current operator or find a local consultant who wanted to have a crack at it. Frankly, these options presented too many unknowns for us. Besides, we’d heard a horror story or two about investments that went sour.
I was never one to back out of a good idea on account of difficulty, so I proposed to move my family to Germany and start a business with our friend. It was a tough sell (to my wife, especially). Ultimately, having a team the investor group could trust, one that was willing to put quite a lot of skin in the game, triggered the investment to move forward, so off we went!
Storage Awareness
It’s been quite an adventure so far. There are so many parallels with the U.S. market but, at the same time, massive differences. For example, let’s take advertising and marketing. If you simply advertise for “self-storage” in Germany, people will acknowledge your ad and move on, never giving it a second thought. There are a lot of people who just don’t know what self-storage is. 
At this point, advertising is more for educational purposes—explaining the concept of self-storage and how it can provide fantastic solutions and improvements to a cluttered life or expanding business. A blanket campaign just doesn’t work. You must explain exactly what you can do for every application until the population is comfortable enough with the idea that they start being creative in using self-storage to solve their needs.
Financing
It’s not just the users who don’t understand self-storage, but lenders as well. I’ll never forget the first time I walked into a German bank with my business partner. We had set up a meeting to discuss a potential loan for our first project. After the usual formalities, we got down to business. The first question was, “What is self-storage?” Coming from the U.S., I’d never thought about that question. Everyone just knew!
After providing a brief description, we got to the fundamentals of what drives our business, namely renting units to people who don’t have enough space. I led off by noting that our assumptions for monthly rentals were well under the German average of around €20 per square meter per month. I was halted again when the loan officer said, “What? Why on earth would someone pay two to three times the cost per square meter of an apartment just to rent space?”
I’m sure you can see where this meeting was going. We didn’t receive a loan from this bank, but I use the anecdote to illustrate a similar theme—a lot of people in Germany just don’t know about self-storage.
All in all, we probably spoke to a dozen or so banks. Our proposal and presentation were solid. Lenders were always impressed by our immaculate financial forecasts. In our experience, it seems like the bigger banks are only looking to loan big money, so our initial commitment to open three facilities wasn’t worth their time. My business partner, however, had a great connection at one of the smaller regional banks. Through this relationship, along with an extremely well-thought-out business plan and growing awareness of successful storage facilities in Germany, we secured reasonable levels of financing at incredible interest rates.
Funny enough, a year and a half later, the bank that financed our third facility was the same one that had declined our first proposal. In summary, while it’s not easy, it’s not impossible to get bank financing. Plus, the trend looking forward is positive.
Market Potential
We’re really excited about the storage industry in Germany. The country has the largest population on the continent, the largest gross domestic product and yet the smallest amount of storage space. Even if it only catches up to its neighbors, which have more storage per capita, there’s an incredible amount of self-storage to be built.
Todd van Steenwyk is a co-founder and managing partner of All Seasons Self Storage, which operates three facilities in Oldenburg, Osnabrück and Porta Westfalica, Germany. Having started his career as an equity analyst, he’s been involved in the German self-storage industry for four years. He’ll earn a Master of Business Administration from the IE Business School in Madrid, Spain, in December. For more information, visit www.allstorage.de.
