Last week's lien sale of a self-storage unit rented by husband-and-wife magician team "The Pendragons" disappointed the auction buyer, who spent $3,700 and walked away with empty boxes and crates.

Fortress-Secure Mini Storage in Arroyo Grande, Calif., hosted the auction after the magicians, Claude and Charlotte Yarbrough, went delinquent on the unit beginning in May. Sometime before the Yarbroughs lost access, they cleared out most of their belongings, though this fact was unknown to the buyer, who could not view what the crates contained before he purchased them.

Claude Yarbrough has been in the news for much of the past year after he was arrested and convicted for firing a gun through of the floor of his house during a fight with his wife.

The crates are valued at $500 to $700 a piece, and the auction buyer told the source he plans to sell the 11 crates to another magician.

Manhattan Mini Storage in New York City is helping a local animal rescue by offering a discount on a self-storage rental.

The self-storage chain is helping Mighty Mutts Animal Rescue, a volunteer, no-kill animal rescue program that provides food, shelter and medical treatment to stray dogs and cats.

The collaboration came after Manhattan Mini Storage employee Dimitrios Papiris adopted a dog from the rescue. We try to support causes close to our employees hearts, so when Dimitrios brought Mighty Mutts to our attention, we were thrilled to help out, said Stacy Stuart, vice president of marketing. Its in our DNA to be do-gooders, and once you see pictures of the animals Mighty Mutts have helped, its impossible not to pitch in.

Other animal-centric causes Manhattan Mini Storage donates to include New Yorkers for Clean, Livable and Safe Streets, an organization dedicated to exposing the sad plight of the citys carriage horses, and Animal Haven, another non-profit dedicated to finding shelter for abandoned cats and dogs.

Manhattan Mini Storage is part of the Edison Properties family of businesses. The family-owned and operated portfolio includes 17 self-storage facilities throughout New York City.

By Bernard Fensterwald

At some time, most self-storage operators face a tenant who files for bankruptcy. This article offers a framework for how the bankruptcy system operates and the self-storage operators roles and rights.

Bankruptcy in the United States is as old as the Republic itself. In fact, the U.S. Constitution permits the Congress to establish bankruptcy courts throughout the country. Congress passed the first Bankruptcy Act in 1800.

In 2010, nearly 1.6 million bankruptcy actions were filed in the United States. According to a Harvard University study, roughly 62 percent of bankruptcies are due to excessive medical expenses. In 78 percent of these cases, debtors had insurance. The rising tide of unemployment is also a contributing factor.

Some argue bankruptcy is a way for people to engage in fraud and avoid their debts. In 2007, Congress addressed these issues. Now, many debtors must go through a credit-counseling process prior to declaring bankruptcy.

An important first concept to understand about bankruptcy is the courts established to handle these matters are federal, not state or city. The United States is divided into 94 judicial districts. In each, theres a federal district court and a federal bankruptcy court. For example, the state of Florida has three judicial districts: northern, middle and southern. Courts in these three districts sit, respectively, in Tallahassee, Tampa and Miami.

Its important for self-storage operators to know in which federal judicial district they reside. Its also a good idea for them to familiarize themselves with their local bankruptcy court, its rules, contact points and operating procedures.

How Bankruptcy Works

There are typically three parties to each bankruptcy case. The debtor is the person who files the petition seeking a discharge of debts. The creditor is the one to whom a debt is owed. The trustee is the individual whos entrusted to hold the debtor's assets in trust while the bankruptcy court sorts out who has a priority for a return of some or all money owed. In some business-related bankruptcy proceedings, called Chapter 11, the debtor is permitted to control its own assets as a debtor in possession. Self-storage operators are typically creditors.

Bankruptcy proceedings arise when a debtor files a petition with the bankruptcy court seeking a discharge from his debts. These proceedings are normally filed as either a Chapter 7 (complete discharge) or a Chapter 13 (individual-debt adjustment). In the first instance, a debtor seeks total relief from debts; in the second, the debtor seeks to reorganize his finances and pay all or a part of whats owed under a court-approved plan. Theres a separate Chapter 11 proceeding for businesses seeking to reorganize and stay in business.

An important concept to understand in bankruptcy is whats referred to as the automatic stay. Once a debtor files a bankruptcy petition, any and all action by creditors to collect a debt must cease immediately or severe penalties may apply.

What this means for self-storage operators is simple: If youre in the process of using your state's self-storage lien law to enforce your lien, i.e., auction process, and youre notified a tenant has filed a bankruptcy petition, you should immediately freeze the process at whatever stage its in. If youve filed an action in state court to collect money from a tenant whos filed a bankruptcy petition, your attorney must notify the state court.

As a creditor, youll normally receive written notice from the bankruptcy court that a petition has been filed. Of course, this assumes the tenant has listed you as a creditor in the petition. Whether youve been listed as a creditor or not, if the tenant tells you he has filed a petition or you receive notice via a third party, you should stop any proceedings to collect the debt. At this point, its a good idea for you to contact your local bankruptcy court, either by phone or online, to determine whether the tenant actually filed a petition, when it was filed, the file number, the schedule of hearings, etc.

The purpose of a bankruptcy petition is for the debtor to obtain a discharge of debt. Meanwhile, the debtor is happy to leave goods stored at the facility for an indefinite period. This can result in a continuing burden for the self-storage operator.

What You Can Do

As a self-storage operator, your goal in bankruptcy proceedings may be two-fold. First, you hope to recover all or at least a portion of the rent previously owed for storage used prior to the filing, called the pre-petition debt. Second, you want to remove the debtor's property from the storage unit so the space can be leased to a new customer.

As to the recovery of pre-petition debt, it maybe painfully obvious the debtor has little or no assets from which an operator can hope to receive a full or partial recovery of unpaid rent. If thats the case, your focus should be on the second goal. This can go one of two ways, depending on the relative value of the property held at your facility. Also remember you have a lien on the property stored in your facility. This lien may give you a priority over other creditors seeking a recovery from a shortage of assets.

If the property is relatively valueless or the debtor seeks a complete discharge, you may want to contact the trustee and see if its possible for him to abandon the stored property. If the trustee agrees and the abandonment is approved by the bankruptcy court, you may be able to proceed to auction and clear the unit. You should notify the trustee of any funds you receive at the auction to determine how they should be distributed.

If the property in the storage unit has value or the debtor seeks to reorganize his finances, the trustee may wish to hang onto it to pay creditors as a part of the discharge process. In this instance, you may want to contact the trustee to determine if the storage charges that occur after the petition is filed can be paid ongoing out of funds held by the trustee as administrative expenses of the bankruptcy estate. This process may take time, but it may be worth it to keep a paying tenant in your facility.

Its important to note that storage charges that accrue after a petition is filed are not part of the bankruptcy itself. While operators are still bound by the automatic stay, these storage charges are not discharged as a part of the bankruptcy and may be pursued after the bankruptcy process is complete.

Other Key Considerations

Here are some more things to consider when dealing with a tenant bankruptcy.

Know the process. Prior to the start of any bankruptcy proceeding, familiarize yourself with the process and your local bankruptcy court. Know where the court is located and how you can contact it. Helpful information can be found at www.uscourts.gov.

Stop collections. If youre notified a tenant is "filing for bankruptcy," stop any collection actions immediately. Contact the bankruptcy court to confirm a petition has been filed, the file number, when it was filed, a schedule of hearings and other important matters. In these cases, knowledge is a good thing.

Get listed as a creditor. Do not assume the tenant will remember to list you as a creditor. If thats the case and you want to participate in the bankruptcy proceedings, youll need to notify the bankruptcy court. Remember, however, that even if you arent listed as a creditor, youre still bound by the automatic stay once you have knowledge a petition has been filed.

File the claim. If you receive notice from the court that you are a creditor, complete and file the claim form included in the notice. Since you have a lien on the property stored, you may have a priority over other creditors. Be sure to complete and file the claim form on time. Plus, keep a copy for your records.

Attend hearings. There will be a series of hearings during the bankruptcy proceeding. One of these is the creditor's meeting normally held at an early stage with the trustee. Be proactive and attend. Many creditors write off the debt owed them and dont participate in the bankruptcy process. However, because self-storage operators have ongoing relationships with debtors, youll want to determine whether the trustee may be willing to abandon the stored property or be able to pay ongoing storage charges as administrative expenses. Introduce yourself to the trustee and explain your situation to him.

Know military status. Individual debtors serving in the military pose a separate problem. Not only does the bankruptcy process govern them, there are separate considerations due to the Servicemembers Civil Relief Act. You should use extra caution when dealing with these types of cases.

Retain a lawyer. Depending on the situation and amount of funds at stake, you may want to retain a bankruptcy attorney to represent you. Its always good practice to know one upon whom you can call. Remember, however, that you will be unlikely to recover any attorney's fees that you incur from the debtor.

The purpose of bankruptcy proceedings is to give people in financial distress a "fresh start." While it often appears to be unfair, its an accepted part of our financial world. By understanding the processand your role and rightsyoull be in a good position to make the best of a bad situation.

This article is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Bernard Fensterwald III is a consulting attorney with 25-plus years of experience. Hes licensed to practice law in Maryland, Virginia and Washington, D.C. Hes also a principal in U-Store Management, a Washington, D.C.-based self-storage company, and a past president of the Washington Area Self Storage Association. To reach him, e-mail [email protected]; visit www.fensterwald.weebly.com.

By Walt Denny

Internet searches are reaching all-time highs. Your self-storage facilitys website is crucial when making a great first impression with prospects online. However, technology and online behaviors are constantly evolving. Reap the rewards of an engaging and effective website by keeping the content fresh, using appealing visuals, and ensuring browser and mobile-device compatibility. You should also integrate social-media marketing efforts and focus on the user experience. These website tips can help make 2011 your best year yet.

Tip No. 1: Flash Forward  

Weve all been to a website heavy on Flash elements, splash screens and other glitzy animations. Flash is an attractive, exciting way to grab attention, create a unique experience and use visuals to convey a message. However, before sprinkling your website with Flash, ask yourself, How does this enhance my visitors experience?

Internet users expect to see websites that combine interactive elements like Flash with intuition. Instead of weighing down the speed and reliability of your facilitys website with too many animations, harness functional Flash elements to provide visual interest that optimizes the look, feel and navigation of your website.

Tip No. 2: Take a Page From the Print Playbook

The Web cannot replicate the feel of printed pages. As more people migrate from traditional press to online information, your storage facilitys website is challenged to welcome them with an easy transition. With the popularity of tablet devices such as the iPad, a design with print-like features allows visitors to easily explore your websites information. Use headlines, captivating copy and storytelling to move readers through your websites benefit-driven content for maximum impact.

Tip No. 3: Balance Design With Engineering

The average user only views a few pages of your entire website during his visit. To make it more impactful, use a unique, fresh and friendly design. However, a layout change may not be enough. The ease of which visitors can interact with the site plays an equally large role. A balance of strong information architecture, usability engineering and design impact is best.

Tip No. 4: Mobile Web to Imitate Native Apps

In 2010, mobile Web use experienced new heights. Forty percent of American adults turned to the Internet via mobile devices at least once per day. Expect the number to continue rising through 2011 as new, Web-capable devices begin to flood the market. With 4.6 billion global mobile-phone owners, your self-storage website needs to look great on desktops, laptops, mobile devices and smartphones.

It doesnt have to be rocket science. Instead, create a sleek, clean and easy-to-use design that looks and feels more like a smartphone application. Avoid cluttering the small screen with images and links. Mobile-friendly content such as facility brochures or slide shows are a superb way to showcase your offerings and can be easily rendered for mobile devices.

Tip No. 5: Win With Word of Mouth

Facebook, Twitter and YouTube have experienced astonishing growth in impressions and user bases. While social media is a great way to share news about your business, its foremost about dialog. To increase your chances of social marketing success, conversationalize your marketing by weaving your social media accounts, blogs, microsites, press rooms, etc., onto your homepage. Move website visitors into your marketing funnel by encouraging them to visit your other online initiatives, and then share your information with their online peers.

Your self-storage website doesnt need a lot of bells and whistles to attract attention. Instead, focus on the five tips above to make a great first impression online with your current and future tenants. 

Walt Denny is president of Walt Denny Inc., a full-service public-relations, advertising and marketing agency specializing in the home-products arena, digital marketing and social media. Denny has worked in the advertising/public-relations agency business for 35 years. His company works with a national client base to building positive brand awareness through individualized strategies. For more information, visit www.waltdenny.com.

Two self-storage facilities in Los Angeles County recently sold for $26 million. The seller was a local private party, and the buyer was an affiliate of a real estate investment trust specializing in self-storage properties.

El Dorado Park Self Storage in east Long Beach contains more than 87,000 net rentable square feet and 825 units. The second facility, 405 Self Storage in the Hawthorne area, has about 87,000 net rentable square feet of self-storage space with 770 units. 

This was a very rare opportunity to purchase two trophy quality properties in high-density coastal L.A. County locations, said Dean Keller, president of Bancap Self Storage Group Inc., and the sole broker in the transaction. These are the types of properties that every self-storage investor would love to owngreat infill locations, strong markets, good occupancy and first-class construction.

The price represented a capitalization rate on the current net operating income. The all-cash transaction equaled nearly $150 per net rentable square foot.

Other than a couple of portfolio transactions, there have been very few non-distressed self-storage properties that have sold in Southern California this past year, Keller said. Most owners think they cannot obtain a good price in todays market, but that just is not the case. The key for the seller is to hire a self-storage broker with a proven track record of getting the highest and best price possible. Self-storage is such a unique property type and it takes a very specific expertise with decades of experience to maximize value for sellers in this unique property niche.

Bancap Self Storage Group has more than $900 million in completed self-storage sales, including many lender-owned properties and numerous portfolio sales.

San Diego Self Storage sponsored its annual holiday toy drive benefiting the U.S. Marine Corps Reserve Toys For Tots by collecting toys at each of its 19 locations throughout the greater San Diego region. The campaign collected a record 8,570 toys.

"We are very proud to announce that our 12th annual Toys For Tots toy drive exceeded our expectations, said Managing Member J. Terry Aston. We tripled the number of toys donated over last year and have been incredibly impressed with the outpouring of support, particularly given the current economic situation. This indicates that despite challenging times, people are willing to give to those less fortunate. We are pleased to have played a significant role in delivering toys to worthy children this holiday season.

San Diego Self Storage facilities that participated in the campaign include Carlsbad, Carmel Valley, East Lake, Encinitas, Golden Triangle, Jamacha Point, La Jolla, Mira Mesa, National City, North County (Escondido), Temecula, Olivenhain, Otay Crossing, Otay Mesa, Poway, Solana Beach, Sorrento Mesa and Sorrento Valley. 

Founded in 1972, San Diego Self Storage is one of the largest self-storage providers in San Diego County, with a network of 19 local facilities and additional sites in Los Angeles and Orange County. The company is locally owned and operated. 

ezStorage Corp. was awarded Gold LEED Certification for its newest self-storage facility, located at 7078 Washington Blvd. in Elkridge, Md. This is the second such honor for the company, whose facility in Charles Village, Md., was also awarded certification.

LEED (Leadership in Energy and Environmental Design) is green building certification system developed by the U.S. Green Building Council. To be certified, buildings must meet strict requirements for being designed and built to improve metrics such as energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.

LEED Certification is based on a 100-point rating system and divided into four levels: basic certified (40-49), silver (50-59), gold (60-79), and platinum (80-plus). Additional points may be awarded for innovation in design and regional priority.

Headquartered in Columbia, Md., and established in 1987m ezStorage is a self-storage operator with more than 41,000 units throughout Maryland, Virginia and Washington, D.C. According to the company website, all future ezStorage locations will also become LEED Certified.

The Illinois Self Storage Association has elected new officers and board members for 2011. The new ISSA leadership team is:

President, Michael Metzger, Peoria

• Vice President, Mary Ellen Brown, Chicago
• Sec/Treasurer, Linda Withrow, Lynwood
• Director, Carole Grigiski, Springfield
• Director, Phillip Murphy, Crest Hill
• Supplier Director, David Kohn, Chicago
• Supplier Director, Larry Rolando, Phoenix

The following directors will remain on the board from last term:

• Casey Cavell, Danville
• Tom Drake, Lockport
• Jim Whitesides, Imperial
• Michael Tolva, Oak Brook

For more information, visit www.ilministorage.org.