The early-bird discount registration rates for the Inside Self-Storage World Expo in Las Vegas, the self-storage industrys largest conference and tradeshow, expire on Feb. 1. With the discount, attendees will save $305 on the Premium Package, $155 on the Education Package, $50 on the Expo-Hall Package, and $160 on each of the shows four add-on intensive workshops. The ISS Expo will take place at the Paris Hotel & Resort, April 3-5.

The Education Package includes access to more than 40 seminars, the exhibit hall and five networking events. Add-on workshops cover the critical areas of self-storage marketing, legal issues, day-to-day facility management and executive-level facility operation. The shows exhibit hall will feature more than 100 of the self-storage industrys top suppliers representing a highly diverse range of products and services.

Created for self-storage industry owners, managers, developers, investors and suppliers, the ISS Expo comprises three days of education, exhibits, and networking opportunities. The event focuses on strategies for generating revenue and perfecting business branding in a demanding economic environment. Details and online registration are available at www.insideselfstorageworldexpo.com.

NitNeil Partners, an Atlanta-based investment firm specializing in self-storage, has completed the first phase of a multi-story self-storage project in Atlantas Inman Park neighborhood and opened the facility under its trade name, The Storage Neighbor. The company bought the former A.C. White building in August 2012 and said it would co-develop the site with Cartel Properties, an Atlanta-based commercial real estate developer.

"The supply of self-storage in Inman Park and Old Fourth Ward is under-supplied, but what attracted us to the location was the opportunity to participate in the adaptive re-use of an abandoned building and take part in the revitalization of the Edgewood corridor," said Shelby Brennan, marketing director for The Storage Neighbor.

The project involves converting the existing two-level building and constructing a four-story structure at the rear of the property. The .86-acre site will have 52,961 square feet of climate-controlled self-storage and active-use space once phase two of the project is completed this spring, company officials said in August.

The facility will also feature 800 square feet of retail space that the company plans to rent to a nonprofit organization, retailer or other type of business, Brennan said.

NitNeil Partners is a regional investment firm that specializes in the acquisition, development and management of commercial real estate, including self-storage. The company has more than 600,000 square feet of self-storage space currently under management. The Storage Neighbor has several self-storage facilities in the Atlanta metro area, as well as in the Alabama communities of Huntsville and Madison.

Self-storage developer Mark Schaeffer has requested a zoning change in Harbeson, Del., for a 25-building self-storage project by Central Storage at Harbeson LLC. The project is a scaled-down version of a 2009 proposal for which Schaeffer received conditional-use approval but could not complete financing.

Schaeffers lender told him it would not loan him the money for a conditional-use project and to seek a zoning change, he said. Zoning would have to change from agricultural-residential to commercial-residential.

The project would include 25 buildings comprising 60,000 square feet on 8 acres. The self-storage facility would also have an office and a residence for a live-in manager. It would be constructed over a series of phases.

The reality is the project can't be financed as a conditional use, Schaeffers attorney Gene Bayard said.

Some residents expressed concern about increased traffic, fencing and buffers. Schaeffer said he would include fencing and landscaping as buffers. He was not required to submit a traffic-impact study because traffic estimations were below the states threshold of 200 vehicle trips per day or 50 in one hour.

Schaeffer said demand for storage was increasing in the area and that the project would enhance property values. He said he has been in the self-storage industry for 25 years and operates three other facilities in Delaware.

A public hearing on the application was scheduled for Feb. 5.

The self-storage real estate market kicked into high gear in 2012, with dozens of single-property acquisitions and a handful of transactions involving large self-storage portfolios. Investors made the most of historically low interest rates and a cache of market-ready facilities available at competitive prices.

Inside Self-Storage (ISS) recently spoke with Ben Vestal, president and partner of the Argus Self Storage Sales Network, to discuss the industry real estate market. A nationally recognized expert in the field, Vestal talks here about the capital gains tax and how it will affect the industry, whether the acquisition trend will continue, and todays capitalization rates.

What will be the impact of the capital gains tax for self-storage operators in 2013?

Theres no doubt the increase in capital gains tax will affect the after-tax proceeds self-storage owners will achieve when selling their property. However, with capital gains tax rates scheduled to rise from 15 percent to 23.8 percent (this includes 3.8 percent associated with the Affordable Care Act), its worth noting that a 23.8 percent capital gains tax rate is still below the historical average over the last 100 years. This one issue may have more to do with the amount of money a self-storage investor puts in his pocket, but low interest rates and a robust investment climate will soften the blow.

For more information, read Ben's article, "Capital Gains Tax in 2013: How the New Laws Effect Self-Storage Property Owners."

What kind of interest and capitalization (cap) rate trends are you seeing in the self-storage real estate market today?  

Weve seen a tremendous compression in cap rates over the last 12 months in the major markets and select secondary markets. This will level out over the next 12 months, with cap rates stabilizing close to 2012 levels. This will lead to a slight compression in most secondary markets, as investors will continue to chase yield.

By years end, well see the beginning of expansion in interest rates, which will ultimately lead to higher cap rates across the board.  Investors should consider the old real estate saying, The only thing worse than being a year too early is being a day too late.

There were many acquisitions in 2012. Do you expect that trend to continue this year? What other development trends can we expect in the coming months?

The transaction market for the first half of 2013 will seem relativity slow compared to the very robust first half of 2012, as self-storage owners evaluate the new landscape of higher taxes and stabilizing cap rates.  However, owners who continue to capitalize on the low cap rates and even lower interest rates we enjoy nearly historically high prices, which, in the long run, will make the increase in capital gains taxes seem relatively insignificant over the long haul. By years end, we'll see a very strong push in self-storage sales as investors and buyers clamor to get deals done, as everyone will start to see a modest rise in interest rates and cap rates.  

This year will also see the return of self-storage development! We'll see major institutions and smaller investors breaking ground on a number of new developments in 2013.  This is largely due to the visibly improved fundamentals in some markets and the lack of quality institutional projects on the market.     

How are the buying habits of the real estate investment trusts (REITs) affecting the self-storage real estate market overall?

The buying habits of the REITs have led most self-storage investors to have unrealistic expectations with regard to the value of their property. Only a small percentage of self-storage properties fall into the REIT category. However, facility owners read in the magazines, press releases or other industry publications that REITS are paying 6 percent to 7 percent cap rates and automatically think their property is worth a 6 percent cap. 

Its important to remember a cap rate is deal-specific, and there are a lot of factors that play into what an appropriate cap rate is for a property.  For example, is the facility 65 percent full or 90 percent full? Does the property have land for expansion, and is it located in a major downtown metro area or a small tertiary market? Today more than ever we are seeing a bifurcation in the self-storage property market with institutional-quality properties and non-institutional properties trading for drastically different values.    

For more information about the Argus Self Storage Sales Network, call 800.55.STORE; www.argus-selfstorage.com.

The election is over. The fiscal cliff is over. Are the low interest rates over? Probably not, but theyre not going to get any lower. If youre thinking about refinancing your self-storage loan, theres no better time than the present. Even if you have a prepayment penalty, it may make sense to pay it to take advantage of the lowest rates anyone can remember and ensure you benefit from todays low rates.

So what should you consider when refinancing? First and foremost, give yourself enough time to search for the right program without jeopardizing a maturity date. This means you should start your process at least 120 days prior to your current payoffif thats the reason for the refi. Most refinances take a minimum of 45 to 60 days, with some life-company programs running 75 to 90 days. Appraisals alone can easily run four to six weeks.

Next, you need to decide if non-recourse is an important feature in your loan. If so, youll most likely need to concentrate your options on conduit or life companies.

Once youve narrowed down your preferences on recourse, other important decisions such as length of term, prepayment penalties and amortization will help determine your choice of lender and lending program. There are three main groups of lenders: banks and credit unions, life insurance companies, and Wall Street conduits. Well explore each in this article, understanding there will always be exceptions from the norm and areas of the country will vary; even regions within a state might vary due to factors such as demographics and lender competition.

Banks

With banks borrowing at next to zero, it has allowed them to compete with life companies on some fixed-rate terms up to 15 years. Non-recourse is also an option with some bank programs with a low enough loan-to-value (LTV), although this would be the exception versus the rule.

Banks will provide the most flexible structure and prepayment options but typically dont want to fix a rate longer than five to seven years or amortize a loan longer than 20 to 25 years. In addition to bank-portfolio programs, higher-leveraged Small Business Administration (SBA) and United States Department of Agriculture (USDA) purchase or refinance programs are usually obtained through banks with LTVs up to 85 percent. However, SBA will not refinance an existing SBA loan.

Expect LTVs to be all over the board, from 60 percent up to 80 percent on non-SBA deals, and rates ranging from the high 3 percent on shorter three-year fixed rates to the low 4 percent to mid 5 percent range on five- to seven-year fixed rates. Ten-year or longer fixed rates are available with some banks, and rates will depend on leverage and other factors.

These rates, at least in California, have been done in the high 3 percent and low 4 percent on the bottom end of the range, but expect a normal rate for these terms to be closer to the mid 4 percent to 5 percent or more. Most banks will charge .5 percent to 1 percent in loan fees but require fewer costs related to legal, third-party reports and processing compared to life companies and conduit lenders.

Credit Unions

Credit Unions offer very similar terms to the banks with a couple of exceptions. Prepayment penalties are either minimal or non-existent. Also, with most credit unions, youll need to qualify for membership, which genearlly means living, working or worshipping in the general geographic area where the credit union operates. Recourse is almost always a requirement. Not every credit union offers commercial loans, either.

Life-Insurance Companies

Of all the lender types, life companies will typically offer the lowest long-term fixed-rate options, which, in this environment, means never having to refinance again if youre a long-term holder. This is also a great loan if youre looking to sell in the future and get a premium price, as your buyer can assume a fantastic rate in a possibly higher interest-rate environment.

Life companies can fix a rate for 25 to 30 years or offer 10- to 15-year fixed rates with up to 30-year amortizations. However, theyre typically more conservative in their LTVs or use an artificially higher cap rate than what might show on the appraisal to arrive at their value. They also like better located and well-occupied properties in major population centers.

What often draws people to life money is the long-term fixed rates, which can start under 4 percent for a 10-year fixed with 30-year amortization, and can be structured to be any term of self-amortizing program. For example, a recent closing on a 15-year fully amortized loan in Virginia closed at 4.25 percent, and 10-year full-pay loan in North Carolina closed at 3.5 percent. Also unique is the non-recourse aspect of this type of financing, meaning in the event of a default, the lender can only go after the property and not the borrowers personal assets. Combined with usually the lowest rates and longest terms and the ability to lock your rate up front for a refundable deposit, this financing vehicle is the preferred method for most institutional and multiple property owners. Many individual owners also take advantage of life financing, but its not for the faint of heart.

To obtain life money, theres typically a 2 percent refundable deposit required up front or early on in the application process. An additional lender fee is usually between $5,000 and $7,500 and is non-refundable. Lender legal fees can run between $7,500 to $15,000 or more. Third-party reports include an appraisal, phase one, property condition report and, if applicable, a seismic study. Altogether these can run between $8,000 and $10,000. An ALTA Survey, which is made for the title company and/or lender, is also needed. This can vary and easily run $4,000 to $8,000.

The property-insurance requirements and endorsements can also be more comprehensive than bank requirements, adding to the annual premium as well as additional title-insurance endorsements costing more at closing. All this, of course, is added to the loan fee, which can vary based on loan amount but is typically 1 percent. Prepayment penalties usually yield maintenance but can be step-downs and other structures.

Because of these costs, most life-company loans are larger ($3 million-plus) to make the fees cost-effective. For the smaller loan, there are a few smaller life companies that dont require surveys, legal fees and property-condition reports, which significantly reduces the costs. Loan amounts under these programs start at $500,000 to $1 million, and still offer longer fixed-rate terms and upfront rate locks, although theyre typically full or partial recourse. Most life companies fund exclusively through correspondent mortgage bankers.

Conduits

Conduits are similar to life companies in many respects such as long-term fixed rates typically in the low 4 percent to low 5 percent range, non-recourse, similar costs and fees, but with mainly defeasance prepayment penalties. Expect legal fees to approach $20,000.

The biggest difference is the conduits typically prefer loans starting at $5 million. In addition, commercial mortgage-backed securities (CMBS) lenders do not offer early rate locks, have no upfront refundable deposits, and will do loans in secondary and tertiary markets. Theres one conduit that will write loans starting at $1 million with lower fees, and a few that will go down to $3 million. Most conduit loans are funded through the use of mortgage brokers and mortgage bankers.

Theres still time to take advantage of the low interest-rate environment, and theres a myriad of options for properties with good cash flow and acceptable leverage. While working directly with your local bank works for many, employing a professional mortgage banker or broker can open up other excellent possibilities from lending companies that may not be local but will lend in your area.

David Smyle is a vice president of Pacific Southwest Realty Services, a San Diego-based commercial mortgage banking firm founded in 1972. The company has a servicing portfolio of more than $4.3 billion, offering life-company financing from more than 18 investors as well as conduit, commercial mortgage-backed securities loans, and bank and credit-union options. For more information, call 619.602.6365; visit www.psrs.com.

World Class Capital Group LLC (WCCG), an Austin, Texas-based real estate investment firm, has acquired Nellis Self Storage in Las Vegas from a Missouri-based private investor. The property comprises 131,000 square feet of storage space in 696 units and will be rebranded as Great Value Storage. Financial terms were not disclosed.

The purchase follows the acquisition of two larger portfolios late last year, which added more than 11,000 units to the companys growing portfolio. In August, WCCG bought a 12-property portfolio from real estate investment trust (REIT) Sovran Self Storage Inc. comprising nearly 1 million square feet. In November, the company acquired an eight-property portfolio in Ohio consisting of approximately 450,000 square feet from CubeSmart, another national REIT.

This opportunistic single-asset acquisition allows us to enter the Las Vegas market, a market where we plan to expand and grow our national self-storage platform, said Nate Paul, president and CEO. We plan to make immediate capital improvements to renovate the Nellis facility and will implement our operating best practices.

WCCG pursues investments in all U.S. markets, primarily focusing on real estate and private equity. In addition to self-storage, the firms portfolio includes office, retail, industrial, multi-family and land. Great Value Storage currently operates 33 self-storage facilities comprising more than 17,000 units and 2 million square feet.

The U-Haul Co. recently purchased four self-storage facilities comprising more than 168,000 square feet of net rentable space in more than 1,400 storage units. The facilities are in Colorado, Louisiana, South Carolina and Texas. No financial terms were disclosed.

The acquired self-storage facilities are:

ABDM Storage
3113 E 1/2 Road, Grand Junction, Colo.
13 single-story buildings (44,400 square feet of rentable space in 331 units)

Lafitte Self Storage
4860 Opelousas St., Lake Charles, La.
One single-story building (26,900 square feet of rentable space in 257 units)

Adams Self Storage
7910 and 8161 Eastex Freeway, Beaumont, Texas
Five single-story buildings (40,250 square feet of rentable space in 425 units)

Stars and Stripes Self-Storage
8222 Dorchester Road, North Charleston, S.C.
Seven single-story buildings (57,200 square feet of rentable space in 397 units)

Established in 1945, U-Haul has 36 million square feet of storage space at more than 1,000 owned and managed facilities throughout North America. The company recently completed the acquisition of additional self-storage facilities in Arizona, Georgia, North Carolina and Wisconsin.

Brett Hatcher, a senior associate and self-storage specialist with Marcus & Millichap Real Estate Investment Services, has been named associate director of the companys National Self-Storage Group (NSSG). The NSSG assists self-storage investors and owners by matching them with available properties and active buyers.

Hatcher joined Marcus & Millichap in 2005 and was quickly promoted to associate and then senior associate. He has closed more than 40 transactions totaling more than $100 million.

Hatcher will be speaking during the Inside Self-Storage World Expo, April 3-5, in Las Vegas. He will address Investment Trends in Major Self-Storage Markets: Cap and Interest Rates. The session will examine cap-rate trends by region over the past decade as well as current rates, and discuss the general state of the self-storage real estate market and the effect interest rates have on property value.

Marcus & Millichap has more than 1,000 investment professionals in offices nationwide and closed more than 5,000 transactions in 2011.