A town ordinance adopted in December in Middletown, Del., restricts home-delivered portable storage units in residential areas to 60 days.

Christina Hernandez was recently informed she had 30 days to remove a portable-storage container from her backyard due to the code. The family was using the temporary storage following a devastating house fire.

Town leaders voted to restrict temporary storage units after a few complaints surfaced last fall. Other towns in the area have also regulated portable storage. Regulations and fines vary. Middletown's ordinance doesn't carry a fine, and it is unclear how it will be enforced.    

Source:  Delaware Online,  In Middletown, Storage Units in Yards Are a No-No

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Self-storage construction veterans Charles “Chip” Cordes and Tom Hankinson have launched Summit Construction Management Group, a new firm offering self-storage construction, management and consulting services to industry owners and investors. Based in Clermont, Fla., the company provides feasibility analysis, design coordination, entitlement management, construction services, property-condition assessments and managed maintenance programs.
 
The company’s website can be found at SummitStorageGroup.com. There visitors can get detailed information about the company’s services, read about its founders, and submit a Request for Proposal form. 
 
A self-storage industry professional since 1989, Cordes was the co-founder and vice president of U.S. Door & Building Components until last year, when he served as consulting vice president to National Constructors Inc. There he operated four Sunshine Self-Storage facilities in Florida. He has more than 20 years of self-storage construction and operational experience.

 
Chip Cordes (left) and Tom Hankinson (right) have launched Summit Construction Management Group.

Prior to founding Summit, Hankinson was engaged as executive vice president in charge of development and construction at United Stor-All Centers, where he joined as one of the firm’s original members in 1995. There he actively managed all due-diligence responsibilities, project design, entitlements, construction budgets, construction management and cost control for the company. Prior to joining United, Hankinson owned and operated his own general-contracting firm for nearly 15 years. 

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Salinas (Calif.) Self Storage is providing free storage for four Monterey County non-profit organizations to store 40,000 bars of luxury hotel soap. Among the groups is Dorothy's Place Hospitality Center, which provides showers for the homeless at its daytime shelter and Women Alive emergency night shelter, and Interim Inc., which provides the mentally ill with affordable housing and support services. Each group will have a key to access the soap whenever needed.
 
The soap was donated to Interim as a gift from Quail Lodge golf resort in Carmel, Calif., which closed in November. The agency decided to share the wealth with other groups that help the homeless.
 
Five pallets of soap were delivered to the self-storage facility last week. A crew of homeless people from Dorothy’s helped unload the boxes.
 
The palm-sized, flower-shaped soap is made by England-based Molton Brown Co., maker of luxury bath products.
 
Source: TheCalifornian.com, Monterey County nonprofits awash in soap donation

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On a recent visit to a self-storage facility, I encountered a manager who left me shaking my head. As I approached the office and looked through the window, I could see a pair of boots on the front desk, attached to some ragged old jeans. I thought, “Hmmm ... The maintenance guy must be taking a break in the office.”

As I entered the office, I noticed two, ah, gentlemen behind the counter. One was watching TV, and the other appeared to be doing bookwork. With no phones ringing, a TV blaring, and no other customers around, the “boots on the counter” guy asked me if I could hang on a minute.

Perhaps the president was buying another industry or something, and I just didn’t get the memo. After a minute or so, and some light conversation, I learned the guy doing bookwork was the owner, and “boots” was his son, the manager. Are you serious?

It’s amazing the number of owners out there who operate with little more sophistication than a lemonade stand. Complacent managers and distracted owners translate to weakening bottom lines. Can you make money that way?

A lot of self-storage owners have for many years. Keep expenses low and hope for the best. But that’s not good business, and as we all know from recent experience, the best is not bankable. If you want your business to be profitable in the long term, you’d better get serious now. Otherwise, you’ll lose.

Developers, owners and managers should look for better efficiencies, tactical marketing initiatives, and ways to sharpen their competitive edge, no matter what stage of the self-storage life cycle they’re in—development, startup, leaseup, stabilization or sale. The key is to get serious about your business. This article targets the self-storage owner, who always holds the keys to success or failure.
 
Exercise and Strengthen

No matter how good you’re doing, you can get better. And when you’re struggling, there are probably opportunities being overlooked. The whole point of opening our doors every day is to make a profit, not just pay the bills. Focus on being profitable because it’s good for you and good for our industry as a whole.

First, take a hard look at your manager. Don’t be cynical, but as the lifeblood of your operation, your managers deserve a lot of attention. Start this process with a manager’s self-evaluation. The best way to improve the manager’s performance is to engage involvement.

Provide your manager with some guidelines. Here’s the fine line: Be broad enough to allow honest input, and specific enough to attract valuable feedback. Encourage managers to be very specific with this exercise, focusing on internal strengths and weaknesses as well as market or economic threats and opportunities. If this type of formal self-evaluation is new to your employees, it can be a good idea to give them a sample of a completed evaluation, such as this one:  

• Write your ideal job description, custom-tailored to your strengths and weaknesses. Be specific as to duties and time requirements.
• List and describe specific details of our performance over the last year. What could you have done better?
• What is the facility’s biggest weakness? What’s your biggest weakness?
• Provide an analysis of the local self-storage market. Who is the best competitor?
• What opportunities do we need to capitalize on this year? Are we ready?
• What is the biggest threat the facility faces in the marketplace?

Be creative in guiding the process. Let managers know the objective is to strengthen the business, and their honest―blunt, if necessary―input is important to the process. Ultimately, you want to encourage your staff to review details of their own performance, and look ahead in offering specific goals and objectives for the year. This also allows you to set a tone of expectation for the future.

By starting with the self-evaluation, you should gain insight to their perception (accurate or not) of the market and their role in your business. Following a careful review of what they present, you can follow up with key objectives for their position.

For example, if performance weakened in 2009, begin reworking goals for 2010, and invite your team to submit ideas for reaching them. When goals and objectives are developed with their input, it’s easier to get their “buy in” on specific new initiatives and activities.
 
Setting the Tone

As the owner, you must develop the type of dynamic that keeps the business strong. If you take details seriously, so will your employees. If you accept a dirty office, so will they. If you give the manager incentive to sell, he’s more likely to think about ways to rent more units, sell more retail or add more to the bottom line. When you create an environment that’s attentive to customer needs and profitability, your team will follow.

After the economy jumped off a cliff in late 2008, everyone talked a lot about efficiencies and cost-saving approaches to operation. But let’s be careful, though, of falling into a single-minded approach in cutting costs. As the owner, you can control expenses through a strict budget. But the quality of your sales and customer-service force is where income is created or lost, and that tone is set by the owner.

In many ways, 2009 forced us all to take a hard look at where we spend money. Perhaps now, in a leaner operational mode, we can focus on better sales, better collections and a stronger bottom line. Get serious, keep your boots off the counter, and take the first steps to strengthening your business in 2010.
 
Benjamin K. Burkhart is owner of BKB Properties and StorageStudy.com, a full-service self-storage consulting and resources firm. He works with developers around the country in assessing site feasibility, market strength, marketing strategies, financial analysis, profit enhancement, site design and deal structure. To reach him, call 804.598.8742; e-mail [email protected]; visit www.storagestudy.com.

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Three people suspected of 14 summertime burglaries at self-storage facilities throughout Onondaga and Oswego, N.Y., Counties were arrested last week. The crimes began at Pack Rat Storage in Cicero, N.Y., at the end of June. Over the following month, similar break-ins occurred in Clay, Cicero, East Syracuse, Lysander, Salina, Syracuse and other areas. A total of 100 self-storage units were compromised.
 
The arrest of Frank Boyd, 45, Jason Lawson, 26, and Jennifer Losee, 32, were the result of the combined efforts of several police agencies. The investigation begun by the Cicero Police Department was later joined by law-enforcement officials in other areas as similarities between incidents were recognized. A DNA swab from one of the crime scenes eventually led to a suspect.
 
In Clay, the suspects were charged with third-degree burglary, fourth-degree criminal mischief, petit larceny and possession of burglar tools. They will be charged with additional incidents in the other towns involved.
 
Facilities affected included Uncle Bob’s Self Storage in Clay, N.Y., and Faulkner’s Trackside Self Storage in East Syracuse.
 
Source: CNYLink from Eagle Newspapers, Detectives arrest T3 In Connection with String of Storage Facility Burglaries

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Whether you’re an experienced self-storage owner or just entering the industry, a review of the elements to consider when acquiring a facility will make for an orderly approach to the decision-making process. This article will not cover every conceivable item, but rather serve as a framework to help you make the best investment. 

Your Goals

The first step when considering a self-storage acquisition is to look not at the property, but at yourself. What are your goals, time frames, budget, resources, location and experience? Is it important to find a property that’s close to home? Do you plan to perform the onsite or offsite management duties or will you hire a third-party management company? What is your cost of capital, both debt and equity? Will you have other investors and, if so, how will their requirements factor into your approach?

The list is long and should be specific to your situation, but the key is to understand your objectives first, and then start the process of determining if a property matches. Bottom line: know thyself.
The second step isto know, not guess, what you can do. What are the strengths and skills you intend to bring to the project? What can you do to achieve the goals and objectives you have set? Is your skill in finance, management, marketing, construction or site selection?

An often overlooked aspect of “what can you do” revolves around capital. Many potential buyers fail to have an accurate or realistic plan for financing a contemplated acquisition. In the current environment, knowing what you can do includes knowing what you can finance (unless you’re a cash buyer). Lenders have become much more conservative in their underwriting. As a result, potential buyers should discuss financing options with lenders prior to spending time and money on investigating properties.

Finding a property that matches your personal criteria is the next step. Everyone wants a PRIME property, but what qualifies? Let’s break it down as an acronym, with each letter representing an element of the process to determine if the self-storage property meets a buyer’s specific criteria. Keep in mind this isn’t meant to be an exhaustive outline but an overview. 

P = Property

This may seem obvious, but an examination of the physical property and the surrounding area is critical. While some of the in-depth investigation may be reserved for contract due diligence, an adequate initial examination should be conducted prior to entering a purchase agreement. As a buyer, consider at least the following:

• Location: Is the property in a retail setting? Is it conveniently located to its market?
• Visibility: Does the property have good visibility on a road with adequate traffic counts?
• Building layout: Are the drive aisles adequate? Is the layout customer-friendly?
• Unit mix: Are the units of the proper number and size? If not, can they be changed?
• Rental office: Is it of adequate size and layout? Can and should it be modified or relocated?
• Onsite apartment: Is an apartment needed? If not, can the space be converted?
• General condition: Is the appearance attractive? Are the buildings in need of repair? Is the roof sound? Is the pavement in good repair? Are there any apparent water issues?
• Expansion: Can the facility be expanded? What value should be assigned to expansion land?
• Appearance: How does the property rate overall?

R = Records

A review of the records is like a blood test for a patient—it reveals the health of the facility. Look for trends in occupancy, income and rental rates for the past three years, if available. Consider the following:

• Occupancy: Review economic, physical and unit occupancies to determine trends and opportunities.
• Revenue: Review current and recent revenue. Is all the revenue recognized? Are there additional opportunities for revenue?
• Expenses: Review current and recent expenses. Can expenses be reduced? Are the reported expenses realistic?

I = Income and IRR

How does this self-storage facility perform as an investment? In other words, will it provide an adequate return given your contributions (financial and non-financial) as compared to alternative investments such as corporate bonds, stocks, other real estate, etc.?

Most buyers focus on current income and attempt to determine a value by applying a cap rate. While that may be a useful exercise, it’s a bit like driving forward looking in the rearview mirror. Yes, it’s important to review income trends, but it’s more important to use all the information gathered to project future income and returns.

Basically, the only reason a buyer cares how the property has performed in the past is to project how it will perform in the future. It’s essential to prepare and carefully review an internal rate of return (IRR) analysis, which will take into consideration all future cash flow. Consider the following significant items:

• Revenue and rates: Can rates and revenue be realistically increased and, if so, when and how often?
• Real estate taxes: Will they increase based on the sales price, and when?
• Payroll: Will it remain at the same level?
• Repairs and maintenance: Is there deferred maintenance? Will the future expense be greater as the property ages?
• Advertising: Will the budget increase or decrease?
• Financing: What are available financing terms and conditions?
• Sale: What will be the future value of the property?  

M = Market, Management and Demographics

Many in the self-storage industry believe demand should be estimated based on available square feet per capita. Others feel it’s related to households. Each market is different, but whichever indicator you use, it’s useful to look at current demographics to determine the drivers of demand. Some key parameters include:

• Housing units
• Housing type—rental, single-family, multi-family
• Household size
• Household income
• Percentage of renters   
• Home and lot sizes
• Retail activity levels

Those parameters should then be considered in the light of projected demographic trends. Will there be population growth over the next five years? Will there be income growth? Does the average income or net worth in the marketing area support self-storage rentals?

Consider the nature of the competition, including location but, more important, their practices. Do they cut rates dramatically and quickly to build occupancy or strive to maintain rates? Are the properties comparable or less visible and less appealing? Are there significant barriers to entry in the market? Barriers could be financial such as the cost of the land, availability of sites or community attitude as reflected in zoning ordinances. A call to the local planning and zoning authority will provide information as to future competitors.

As our industry becomes more competitive, management is a key element of success. As a buyer, consider what changes, if any, should be made in the management structure. If the onsite team falls in the category of caretaker, there may be a significant opportunity to install a customer- and sales-oriented team who could build occupancy and income. While location, visibility and other elements may be impossible or cost-prohibitive to change, management can be addressed promptly and efficiently. It may be one of the most significant contributors to success. 

E = Expectations and Exit

This is probably the most overlooked aspect of the analysis by a buyer. Unless a buyer defines expectations, how can he know if the property will meet them? Identify, in writing, expectations with regard to budget, cash contributed over the life of the project, acceptable rates of return, growth, expansion, involvement, etc.

Most buyers spend a great deal of time considering their entry to a specific industry or market but little time contemplating an exit. Target how long the property will be held as defined by time, occupancy, income or other parameters. When considering a property and its characteristics, a buyer is well served to consider how those parameters will impact the property’s eventual disposition. Additionally, assumptions necessary to calculate the above mentioned IRR analysis will include those many associated with the planned exit.

As you can see, the last element of PRIME brings us back to the first step—your goals and objectives. It’s where the investigation and buying process begins and ends. Buying a self-storage facility is much more about the buyer’s goals, objectives and expectations than the property itself. The buying process should compare the characteristics of a facility to the specific criteria of the buyer to find a probable match. It’s when a compatible facility is found that a PRIME property should be aggressively pursued.

Dale C. Eisenman is the president and broker in charge of Midcoast Properties Inc., as well as a licensed real estate broker in Georgia, and North and South Carolina. In addition to being a professional pilot early in his career, Eisenman has practiced law, owned and operated several small businesses, and been an active commercial real estate investor for more than 20 years. He now specializes in the self-storage industry as an investor and broker. To reach him, call 843.342.7650; e-mail [email protected]; visit www.midcoastproperties.com.

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