The Texas Self Storage Association (TSSA) recently donated $70,000 to the Shriners Hospitals for Children in Galveston, Texas. The money was raised last year during various events, including the associations annual convention in October. After 12 years of fundraising, the TSSAs goal is to surpass the historical $500,000 mark this year, according to a press release.

A group representing TSSA presented the check to the hospitals board of governors on Jan. 28., following a tour of the facility. Having the opportunity to see how much good is done with the money donated has doubled my resolve to continue supporting the Shriners Hospitals for Children in Galveston, said Mark A. Skeans, TSSA president.

The hospital has been a pioneer in burn-care advancements since the 1960s, including skin grafting and the development of engineered skin. Care is provided without regard to race, color, creed, sex, sect, disability, national origin or ability to pay.

The TSSA fundraising committee is currently making plans for 2013 fundraisers, which will culminate at the associations annual convention on Oct. 27-29.

Established in 1986, the TSSA is a nonprofit trade association dedicated to enhancing the quality of the self-storage industry in Texas. The association provides opportunities for members to increase their knowledge of the self-storage industry through education, research, discussion and exchange of information.

The impact of the United Kingdoms value-added tax (VAT) on self-storage facilities was illustrated this week by operator Safestore Holdings PLC, which announced a pre-tax loss of £19.5million ($30.9 million) for the 2012 fiscal year ended Oct. 31. The loss was in contrast to a £8.5million ($13.5 million) pre-tax profit the previous year. Profit loss experienced by the companys French facilities was attributed to the British pounds 10 percent decline against the euro.

Retail chief executives complained when VAT went from 17.5 percent to 20 percent; weve gone from 0 percent to 20 percent overnight, said CEO Peter Gowers. The VAT went into effect on Oct. 1, 2012. Company officials estimate the tax was responsible for £2 million ($3.2 million) in lost revenue last year.

We have sought to pass on the full additional costs of VAT wherever possible, with targeted discounts provided to a relatively small number of key or high-value customers, company officials said in November. This has resulted in a higher vacate rate and moderation in the rate of new let growth. While it will take more than one month's data to fully assess the impact on our business, early indications suggest that it remains in line with previous guidance.

To help combat the VAT, Safestore will convert to real estate investment trust status in April. The move to a more tax-efficient classification will save the company £3 million ($4.8 million) annually, officials said.

The company also announced the resignation of Richard Hodsden, chief financial officer. Hodsden served as CFO for 10 years and will remain with the company until July. He will be replaced by Andy Jones, currently director of group finance at Worldpay, a payment-processing company.

"The board would like to express its sincere gratitude to Richard for his valuable contribution to the success and development of the company, including its successful listing and subsequent growth, said Richard Grainger, Safestores chairman.

Safestore operates 135 self-storage facilities, including 98 wholly owned U.K. locations and 25 wholly owned facilities in France. The company also has 12 locations under management in the U.K. It serves approximately 43,700 total customers and employs about 550 people.

Self-storage operator AC Self Storage Solutions LLC recently acquired Go Store It, an 870-unit self-storage facility in the Houston suburb of Pasadena, Texas.

Built in 2004, the facility encompasses 144,605 rentable square feet. It had a physical occupancy of 85 percent at the time of the sale. The facility will be rebranded AC Self Storage of Pasadena.

The transaction required the assumption of an existing commercial mortgage-backed securities loan that was serviced by Wells Fargo. The loan was approximately 64 percent of the purchase price.

This is definitely one of the more attractive self-storage facilities Ive seen, said Troy Downing, CEO. The facility has a tremendous amount of curb appeal and is well-occupied in what we believe is a strong market.

AC Self Storage has offices in Carlsbad and Newport Beach, Calif. In addition to owning self-storage, the company offers asset-management services and has more than 1 million square feet of self-storage under management. The company is a joint venture with Axxcess Capital Ventures LLC of Newport Beach, Calif.

 

SpareFoot, an online marketplace that streamlines the rental process for self-storage customers, has released a pin-up style calendar for the self-storage industry titled "Bust a Move-In." The 2013 calendar, which features men and women in humorous and some suggestive poses inside of storage units, will "add some saucy mischief to the storage world," according to the SpareFoot Blog. A slideshow of the calendar graphics can be viewed here.

Weve introduced a few firsts to self-storage, said company founder and December photo model Chuck Gordon. Putting out the first self-storage pin-up calendar is just another in a series of industry innovations.

SpareFoot clients can request a copy of the calendar at no charge. Additional copies can be purchased for $20. A portion of the proceeds will be donated to Kure It!, a non-profit organization dedicated to cancer research.

Creation of the project involved nearly 20 SpareFoot employees who volunteered time on a Saturday to take photos at a Storage Direct facility in Austin, Texas. The scenes were shot over about three hours in a 10-by-30 outdoor unit and a 10-by-5 indoor unit.

It was pretty much exactly what I would expect if you gave a bunch of SpareFeet the opportunity to hang out in a storage unit in front of a camera, said marketing analyst Jeanette DeHay, who appears in the January and May group shots. I was proud and excited to be a part of such a fun and weird company.

While customer-service specialist Albert Hood (October) had no issue posing for the photographer, public-relations assistant Ross Betts (November) had to conquer internal fears before his scene. I felt empowered and vulnerable at the same time, said Betts. I had no idea what to expect, but the photographer really helped me feel comfortable in front of the camera. I have a newfound respect for models and other beautiful people.

The Nevada Self Storage Association (NVSSA) has announced its 2013 board of directors. Michelle Watson, a principal with real estate brokerage Watson Self Storage, was named board president and membership chair. Greg Welsh, director of operations for StorageOne Self Storage, will serve as vice president and education chair.

Other officers are immediate-past president Travis Morrow, vice president of National Self Storage, as legislative chair and secretary/treasurer, and Katrina Bruce, president of association-management firm Alternative Management, as executive director.

Directors include David Edward of Ojai Oil Co. and Golden State Storage, Jeffrey Morrison of Stor-All, Paul Peppard of Storage Depot, Eric Seckner of U-Haul Co. of Nevada, Joshua Steimle of Full Occupancy, and Alex Sugden of AJS Management Co.

Founded in 2005, the NVSSA's mission is to promote professionalism and provide an industry voice in Nevada. The association holds regular conferences and events on industry trends and legislative issues.

Real estate developer Peter Noyer has proposed a 40-unit Village Self Storage facility for Route 6 in Mattapoisett, Mass. In an appearance before the planning board earlier this month, Noyer said the Zoning Board of Appeals had already approved the area for self-storage, but town officials want to follow up with the fire chief before proceeding.

The property currently consists of two houses, a boat-storage facility and a gravel road. Noyers plan is to leave the two residences standing and replace the boat storage with two single-story self-storage buildings. One would be 20-by-100 feet and the other 20-by-40 feet. The gravel road would provide facility access and be widened to 14 feet. An additional 20 feet of access would be added around the buildings.

Units would range from 5-by-5 to 10-by-20 feet, with stored items placed on pallets, Noyer said. The facility would also have low-level, motion-detecting lighting and be open from 8 a.m. to 8 p.m.

The storage units will be available during the day-time hours only. There will be no real reason to come after 8 p.m., he said. Statistics show that these kinds of units are only visited three to four times a year. People basically just put their stuff in there and check on it or add to it a few times during the year.

The planning board will discuss the project again on Feb. 4

By Michael Hoffman

Both good news and bad bolstered the self-storage industry in 2012. The manufacturing sector led the demand, boosting job growth. Technology and oil were not far behind, while Hurricane Sandys unfortunate aftereffects displayed a silver lining for investors. Meanwhile, capitalization (cap) rates are compressed thanks to positive readings by real estate investment trusts (REITs) and private equity groups, sending yield-seeking investors down the ladder to one-off markets and class-B and -C assets.

What does all of this mean for self-storage owners and investors in the year ahead? Read on for a summary of 2012 real estate and performance trends and predictions for upcoming months.

Coastal Cities and Jobs Lead Recovery

Demand for self-storage space will be sustained by an improving job market and the daunting effects from Hurricane Sandy. With the economy on the mend, the nation has gained 1.3 million jobs in 2012, which enhanced consumer confidence to a four-year high and boosted retail sales.

The catastrophic events unfolding from the hurricane resulted in an estimated $20 billion to $30 billion in damage along the Eastern Seaboard. Typically after a natural disaster of this magnitude, demand for self-storage accelerates as homeowners store undamaged goods during the cleanup process, while contractors and local suppliers use commercial space. As such, operators with heavy exposure to the East Coast will see a sharp increase in business over the next six to 18 months.

Occupancy, Rates and Sales by Region

Eastern Region. As employment grew in most of the eastern region, demand for self-storage space remained robust, while limited new construction supported positive net absorption. As a result, occupancy in the region surged 350 basis points in 2012 to 85 percent, which bolstered asking rents 5 percent to $1.02 per square foot.

Robust competition and low interest rates applied downward pressure on cap  rates throughout the region, with first-year returns compressing 40 basis points to the low 8 percent range. As several older buildings with deferred maintenance sold in secondary and tertiary markets, the overall median price for the region slipped 8 percent year over year to $55 per square foot. A few class-A products in prime areas such as northern New Jersey and Washington, D.C., fetched more than $175 per square foot.

Midwest Region. In the Midwest, the manufacturing industry once again helped to sustain demand for commercial and residential self-storage units. For the year, occupancy was up 140 basis points to 86 percent, representing the highest level since 2008. In response to the intense demand, landlords enhanced asking rents 3.1 percent in 2012 to $0.77 per square foot.

With a couple of class-A assets trading at cap rates near 6 percent in 2012, yields across the Midwest tightened 60 basis points to the mid to high 7 percent territory from a year ago. The median sales price in the region surged 40 percent year over year to $42 per square foot, as REITs snapped up high-end properties trading above $100 per square foot in Chicago.

Southern Region. Fostered by firm demand in the Texas markets, occupancy in the southern region soared 250 basis points to a four-year high of 83.4 percent. As a result, operators increased asking rents 2.1 percent to $0.81 per square foot.

Despite sales activity rising by 32 percent from a year ago, multiple transactions involved properties in tertiary markets. As a result, cap rates climbed 30 basis points in 2012 to the low 8 percent range. The median sales price was relatively unchanged compared to the previous year at $46 per square foot. Newer, high-quality properties in prime markets fetched above $180 per square foot in some cases.

Western Region. Elevated net in-migration supported by healthy job growth across the West boosted demand for self-storage space as homeowners relocating to new markets downsized into apartments, using storage for excess items.

Occupancy finished 2012 at 83.2 percent, marking a 210-basis-point improvement from 2011. Asking rents, however, fell 3.4 percent to $1.04 per square foot.

As sales velocity in the western region accelerated by 66 percent, initial yields compressed 30 basis points to the high 7 percent range. The median price was unaffected by the robust demand, staying flat from 2011 at $56 per square foot. Older assets in tertiary markets sold below $30 per square foot, while class-A products traded above $120 per square foot.

Looking Ahead

As REITs and private-equity groups remain bullish on high-quality self-storage investment product, cap rates will stay compressed into 2013, pushing some yield-seeking investors down the quality scale to capture higher returns. To satisfy investment objectives and grow portfolios, this pool of buyers needs to place liquidity into top-quality properties in primary markets.

Bidding will remain competitive for any new class-A listing, which will prompt most investors to pay cash to stave off the competition. With cap rates for these properties already treading near the sub 7 percent range, buyers looking to maximize returns may target stabilized assets in one-off markets, which can generate up to a 150-basis-point premium.

Meanwhile, smaller, local and regional investors priced out of the top-tier sector will purchase class-B and -C assets with proven cash flows in secondary and tertiary markets. Qualified buyers with a solid operating history may be able to use the Small Business Administration 504 loan program for the acquisition. Due to the attractive debt being offered, investors who use leverage could realize a cap rate spread of up to 400 basis points.

Positive trends will persist through years end, with an additional 400,000 jobs being created in the final quarter. Technology-driven markets, including Boston, Los Angeles, New York City, San Francisco and Seattle, along with oil-rich regions in North Dakota and Texas, will realize a significant portion of these gains. As residents continue to relocate to these areas, many will enter the rental community and use storage units for excess items. This rise in demand, coupled with limited construction, will support positive absorption across the nation.

Michael Hoffman is the first vice president and national director of the Marcus & Millichap Real Estate Investment Services National Self-Storage Group. The company specializes in commercial real estate investments and has more than 1,200 professionals in offices nationwide. To reach Hoffman, call 303.328.200; e-mail  [email protected] .

Butler Manufacturing, a manufacturer and builder of metal buildings for self-storage and other industries, has named its 2013-14 Butler Builder Advisory Council. The council provides strategic direction on company products, services and programs. Members are comprised of Butler contractors who represent the companys six business regions across the United States and Canada. Members serve two-year terms, with four members carried over for a second term.

The advisory council is tasked with staying on the pulse of industry trends, enabling Butler to continue to deliver innovative solutions to building decision-makers, said Tom Gilligan, company president. Drawing on the expertise of our advisory council, our company closely monitors the markets changing needs, and then responds through the continuous development of new standards in building technology and industry best practices.

For the first time in its 57-year history, the council will be led by a Canadian builder. Scot Rutherford, president of Scott Builders Inc., was elected chairman. Rutherford has nearly 30 years of leadership experience and has been a full-service contractor in Alberta, Canada, since the early 1980s.

Helming the advisory council is a unique opportunity to contribute to the vision of the organization, Rutherford said. During my term as chairman, I look forward to collaborating with our network of 1,200 full-service contractors to share insights on trends in sustainability, training and technology with both company leadership and our customer base.

The other members of the 2013-14 council include:

• Duane DeGaetano, Construction Systems Inc., Fayetteville, N.C.
• Bruce Forster, Stuart Berger Construction Corp., Lynbrook, N.Y.
• Dan Freeman, Freeman Building Systems Inc., Wooster, Ohio
• Tom Gunsinger, Bel-Con Design Builders Ltd., Belleville, Ontario, Canada
• Jerry Klassen, Klassen Corp., Bakersfield, Calif.
• Mark Lewis, Cedar Falls Building Systems Inc., Menomonie, Wis.
• Chris Rice, Rice Building Systems Inc., Sauk Rapids, Minn.
• Marius Rygg, Gateway Building Systems Inc., West Fargo, N.D.
• Dean Taylor, Design Systems Builders Inc., Nashville, Tenn.
• John Vallé, Park Avenue Construction Ltd., Laredo, Texas
• Jeff Van Hoose, Van Hoose Construction Co., Oklahoma City, Okla.
• Aaron Wolf, Fleming West Building Co. Inc., Chandler, Ariz.

Members of the council will attend the companys national sales meeting next month in Dallas. The council will also hold its next biannual meeting in April.

Butler Manufacturing, a division of BlueScope Buildings North America, designs, manufactures and markets metal building systems for commercial construction, including self-storage. The companys systems are marketed through a network of more than 1,200 full-service contractors with local trade areas.

Apple-Atcan Self Storage recently opened a new, 35,000-square-foot facility in Kingston, Ontario, Canada. The Canadian company chose Kingston because of its growing population, large concentration of college students, strong military presence and the appeal of a new housing development, according to a press release.

The facility was designed with vehicle accessibility in mind. All units are on the ground level, including drive-up heated spaces, which are a first for the area, company officials said. The location also offers 24-hour computerized access, vehicle storage and security features.

The company is running a New Year move-in promotion in which customers pay just $20.13 for the first four weeks on select units.

Apple-Atcan Self Storage operates 15 locations throughout the Canadian provinces of New Brunswick, Nova Scotia and Ontario.