By Molly Bilker

When he first started operating a self-storage business, Robert Clark of Oregon-based South Eugene Storage hired an outside contractor to handle the facility landscaping. The landscaper was the self-storage owner's friend, so Clark thought hed get a great deal. When the bill came in at $1,100, he knew he'd made a mistake. "It turned out, not that good of a friend," says Clark, who's also a member of the Self-Storage Talk online community.

Clark admits he wasn't sure how to negotiate a contract and failed to get all the information he needed to get the best value. Now he swears hell never let that happen again.

Negotiating with a third-party service provider can be a challenging process. While every self-storage operator wants to receive quality service at a fair price, it doesn't always occur. Contract negotiations are about finding a happy, harmonious niche where both parties agree. To make this happen, operators should be prepared and have clear goals in mind.

Know Your Stuff: Contract Types and Terms

There are a variety of service contracts storage operators might consider including pest control, gate repair, office renovation, security monitoring, and telephone and Internet services. Elevator service, search engine marketing, Web design and cable are a few other types they may negotiate, says David Dixon, chief operating officer of Georgia-based Universal Storage Group, which owns seven facilities and manages 44 across the Southeast. "There are a lot of product and service contracts to be dealt with. They vary by time, scope of work, and products/services offered," he says.

Operators need to familiarize themselves with the terms often found in contracts. Some can be filled with unfamiliar words and phrases, which can easily throw a person who's inexperienced with legalese. Don't let yourself get caught in some of the traps that come with the language, says Scott Zucker, founder and partner of law firm Weissman, Zucker, Euster, Morochnik P.C., which advises self-storage operators on legal concerns.

Contracts should contain three elements: the specific product or scope of the work, the price, and the time of delivery, Zucker says. "These are the main points of a contract. Do not sign a contract that is missing important terms or is ambiguous.

The contract should also include precise terms so no one misunderstands it, says Jamey Fawcett, president of Accent Building Restoration (ABR), a self-storage maintenance company based in Salem, Ore. "Many problems arise out of general terms that don't call out the specific terms and services being provided," he says. "I have found the more specific you are, the fewer problems you have, as each side is able to easily understand what is included in the terms and services of the project."

Operators should also read the contract thoroughly. Dale Payne, sales manager for Sovran Self Storage Inc., which manages Uncle Bob's Self Storage facilities, says he makes notes and highlights problem areas, then lists items in the order they appear on the contract for reference. "You will also find by doing this you take control of the negotiation by being prepared," he says. "The other side will respect the time you took to understand the contract."

Don't be afraid to ask questions, adds Zucker. "If you don't understand the contract, it will really be difficult for a judge or jury to interpret it later," Zucker says.

If all else fails, you can always go back to numbers, Payne says. Dates, percentages and dollar amounts should match what you agreed on. Even if the legal language is a nightmare, concrete numbers will always help to indicate whether both parties are on the same page.

Understanding the terms of the contract is key to negotiations, Dixon says. "If there is any misunderstanding in the end product/service, then you will fail at the final negotiations." 

Look for Resources

If you're inexperienced with contracts, you don't have to figure them out on your own, as there are a number of resources to help you define contract terms and zero in on problem areas:

• Attorneys: Most operators likely retain an attorney now and again to handle any legal questions. "When it comes to the language of a contract, it was probably written by an attorney, and you would be wise to have a lawyer who represents your interests review the contract and approve or make changes," Payne says.
• Co-workers: You can also find someone in your company who negotiates contracts regularly. "Usually an experienced negotiator can quickly find items in the contract that may need clarification or an overhaul," says Payne.
• Other operators: Look for peers who have gone through the negotiations, Dixon says. "They can sometimes get you a shortcut to the proper person in the organization or point you to the best product/service to suit your needs."
• State associations: You can also contact your state association to help decipher a confusing contract. Many associations retain legal council for their members, have board members who frequently deal with contracts, or can refer you to another source.

Get What You Need: Negotiate Honestly

Honesty is central to the contract process. Be fair and let vendors know you're getting quotes from others, Dixon says. "The result is typically the best price for what you are looking to purchase, because they will know others are looking to provide a service to you as well."

Naturally, any dishonesty will destroy a negotiation. Dishonesty or fear of discussing something is the most common problem in contract negotiations, Fawcett says.

"It may be a red flag that the relationship will not work out," adds Payne. "Trust must be built throughout the process and maintained to properly carry out the terms of any contract."

Smoothing the Process

There are several ways you can make negotiations easier and more pleasant for you and your vendor. First, start your negotiation as soon as you know what you want. You'll have more time to discuss what you need and a better chance of getting it, Dixon says.

Second, get at least three bids for any contract. Give the vendors specific information about the scope of work or product model or type. After his early contracting experience, Clark says he no longer does any work without getting at least three bids so he can compare prices and services to find the best value.

A third and enormously important part of contract negotiation is the you-get-what-you-pay-for rule. Quality of service after the sale depends on whether youre willing to pay for it, Dixon says. The service provider needs to make a profit just as much as you do, adds Fawcett. "Negotiate terms that are beneficial to both sides, and typically both sides will be pleased with the outcome."

One way to create harmonious negotiations is by starting out positive and conceding to a request from your vendor at the beginning of the conversation, Payne says. "You want to break down the wall between each participant, and giving in to something that is beneficial to the other side extends that olive branch and creates a better atmosphere to cooperate."

Finally, never be afraid to back out before you've signed the contract. Don't make payments or approve work until the contract is signed, Zucker warns. Also, don't accept terms youre not comfortable with or that make you or your company vulnerable, Payne adds. Self-storage operators should never feel the pressure to sign a contract at any given time. If youre not happy, you can always walk away.

Agreement is the key to a successful negotiation, so keep that in mind going in. "Look to bring the two sides together in harmony to make it a win-win situation, Payne advises.

Molly Bilker is a sophomore journalism major at Arizona State University in Phoenix. She is part of ASU's Barrett Honors College and completing a minor in Spanish. She comes from an arts-focused high school with a creative-writing background. She actively participates in the arts, including creative writing, guitar and vocal music, theater, photography, ballroom dance, drawing, and film. To reach her, e-mail [email protected].

Amherst, N.Y.-based real estate investment trust Sovran Self Storage Inc., which operates the Uncle Bobs Self Storage brand, will pay its shareholders a quarterly dividend of $0.68 per share of common stock for the fourth quarter of 2013, which ended Dec. 31. The amount is a 28 percent increase from the third quarter and will be paid on Jan. 27 to shareholders of record on Jan. 16.

Sovrans annualized dividend is $2.72 per share, up from $2.12 per share. This is the companys third quarterly dividend raise in the past 12 months, equating to a total increase of more than 50 percent to shareholders, company officials said in a press release.

Based on our strong operating results over the past two years, our optimistic outlook and the companys solid financial position, we are pleased to share the success with our fellow shareholders, said David Rogers, CEO. We do this while remaining confident in our ability to continually grow and invest in our technology platforms, our properties and our people.

Sovran issued its quarterly earnings for the third quarter of 2013 on Nov. 5. A conference call was held on Nov. 6 to review the companys financial performance.

During the third quarter, total revenue increased 14.9 percent year over year, while operating costs increased 13.9 percent, resulting in a net operating income (NOI) increase of 15.4 percent.

Same-store revenue during the third quarter increased 7.3 percent year over year due to an increase in average occupancy of 250 basis points (90.9 percent), increased rental rates and growth in insurance commissions. Average overall occupancy was 89.9 percent, with units renting for an average of $11.21 per square foot. Facilities showing the strongest revenue gain were in Florida, New York, North Carolina and Texas, officials said.

Sovran acquired three self-storage properties during the third quarter for $27.9 million. The assets are in markets where the company already has a presence, with two facilities in New York and one in Colorado.

Sovran operates more than 470 self-storage facilities in 25 states.

A planned self-storage facility and business center approved more than two years ago in Pomona, Calif., appears to be in jeopardy after a Superior Court judge upheld a lawsuit calling for an environmental-impact review. The City Council was scheduled to vote yesterday on a resolution to revoke the conditional-use permit and a document that previously declared the Fairplex project had no significant impact on the environment.

Fairplex is under the direction of the Los Angeles County Fair Association and is home to the L.A. County Fair. The court order was issued in November as part of a lawsuit filed by the Coalition to Make the Fairplex Play Fair after conditional use was granted by the city in November 2011.

The project called for the conversion of 20 Fairplex barn and stable buildings into a business center comprising more than 200,000 square feet of office, medical, educational, retail, restaurant and light-manufacturing uses. A 94,200-square-foot self-storage facility was included in the plans, according to the source.

The city planning commission approved the project in October 2010, but self-storage real estate investment trust (REIT) Public Storage Inc., which opposes the project, filed an appeal questioning the thoroughness of an initial impact study and asked for a full environmental review. The REIT also argued the project would increase traffic, was inconsistent with the city's general plan, threatened historic resources (the buildings targeted for conversion) and would add an unwarranted self-storage facility in the area, the source reported.

Public Storage also threatened to sue the city and Fairplex if the council didnt order the full environmental study. "I'm here to reiterate we will litigate," Jim Fitzpatrick, senior vice president of development, said during the proceedings.

Representatives from Fairplex also filed an appeal at the time of the commissions approval asking that limitations on the amount of space a business-center tenant could use for warehousing be changed or eliminated, the source reported. The council ultimately voted in favor of the plan as it was submitted by the planning commission, refuting both appeals.

The lawsuit filed by the coalition focused on traffic effects, air quality and the conversion of the historic buildings. Attorney Douglas Carstens argued that those factors together warranted a full environmental impact study. Judge Luis A. Lavin agreed, writing, In sum, the administrative record contains substantial evidence to support a fair argument that the project will harm the environment.

A search on the Public Storage website indicates the self-storage giant currently has four facilities near the vicinity of Fairplex. Fairplex RV & Boat Storage is also listed as operational on the Fairplex website and is under the management of Fairplex KOA/RV Park.

U.K. self-storage company Lok'nStore Group PLC recently purchased a 0.9-acre lot in Longwell Green, Bristol, England, to develop a new facility. The citys planning commission has already approved development for a 50,000-square-foot self-storage project. The site is in a busy retail park, according to a Lok'nStore press release, and the development is expected to cost about £4 million.

Once open, this will be Lok'nStore's 26th facility. The company recently opened a store in Maidenhead and will open stores in Aldershot, Reading and Southhampton this year. Construction will begin on the Bristol location following the opening of these stores, according to CEO Andrew Jacobs.

"This is a key part of our strategy and adds a further site to our store development program. The news comes at an exciting time for Lok'nStore as we are currently in an expansion phase, building out our existing site pipeline, and this adds a further site to our portfolio, Jacobs said.

LoknStore builds, buys or leases large warehouses or industrial buildings and rents storage units to customers on a weekly basis. Around 60 percent of the company's 7,000 customers are residential and 40 percent commercial. LoknStore has more than 920,000 square feet of net rentable space, which is evenly split between freehold and leasehold.

TCL Media Group, a developer of websites focused on self-storage auctions, has released a mobile version of VirtualStorageAuction.com, a free listing service for self-storage lien sales. The mobile version has the full functionality of the website, enabling users to view auctions, make bids and check on an auctions status.

Storage units for sale can be listed by facility operators, auctioneers or private sellers, and bidders can use the site to research available units before placing an online bid. Sellers can also post photographs and descriptions of a units contents. Once an auction has been completed, the winning bidder finalizes the sale with the seller.

VirtualStorageAuction.com doesnt take a sales commission, charges no fees to buyers or sellers, and doesnt collect any financial information from users. The site includes an active online community where users can ask questions about virtual auctions.

Not every state currently allows online self-storage auctions. Last October, Maryland and North Carolina passed laws enabling self-storage operators to hold online sales. Oregon operators were given the right to hold online auctions as of Jan. 1.

TCL Media Group also owns Texas Storage Auction Schedules & News and StorageAuctionForums.com, a self-storage auction website.

Steve Hajewski, marketing manager for Trachte Building Systems, a manufacturer and supplier of self-storage buildings, is learning first-hand what its like to be a self-storage owner. The industry veteran plans to open Columbus Self Storage this spring in Columbus, Wis. The facility will open for business with 14,000 square feet of rentable space comprised in 81 units. Subsequent phases will add another 76 units.

The 2.3-acre property at the corner of Transit Road and Highway 60 is part of a new development that will feature a Shopko retail outlet, grocery store and fitness center, Hajewski said. The self-storage facility will be fully paved and landscaped. I have lived here since 2007 and look forward to building a facility that my family can be proud of for decades to come, he said.

Based in nearby Sun Prairie, Wis., Trachte designs, manufactures and erects a full line of pre-engineered and customized steel self-storage systems. Hajewski has worked at the builder for eight years and said his foray into facility ownership has provided a new perspective and even helped refine the investment calculators the company offers on its website.

Going through this has been a great education on the details of what our customers go through, Hajewski said. Since 2005, Ive been working at Trachte watching our clients succeed in this business. My wife and I saw the need in our own community and decided to take the plunge.

By Bill Alter

For owners and investors who are new to buying or selling self-storage properties, the sales-transaction process may be intimidating. Solid preparation makes the difference between smooth sailing or a bumpy ride. Following are tips to ensure the former.

Selling a Facility: The Loan

So youre thinking of selling your self-storage facility. Now what? While comparing your sell vs. hold options, start gathering financial information and reviewing it for completion, making sure profit-and-loss statements are accurate and you can easily discuss the propertys operating history. Do you think you want to do a tax-deferred exchange? Have you taken the maximum amount of depreciation allowable? This is the time to have a conversation with your attorney and tax accountant about your desire to sell to ensure there are no surprises. Here are seome other things to consider as you move through the process:

Financing. Know whether your sale will require the buyer to assume your existing financing or secure a new loan. You may want to require your buyer to demonstrate his ability to actually obtain the financing needed to close the deal.

Cash vs. buyer loan. Consider whether to accept a lower offer if its all-cash or the buyer can prove his ability to get a loan. If theres an existing loan that can or must be assumed, find out what it will take to accomplish that, and be prepared to share the information with the buyer.

You or your broker should contact a number of prospective lenders so youre prepared to provide whatever documentation a lender may require to process the buyers loan application as quickly as possible. The process of assuming a securitized loan is also difficult and expensive. Find out whats involved and communicate it to the buyer. If theres an existing loan that will have to be paid off, you should be prepared to deal with that and know what it will cost.

Facility Value and Marketing

Once youve decided to sell your self-storage property, a valuation will need to be determined. By setting the asking price too high, you run the risk of not selling at all, thus missing the opportunity to achieve maximum value. By setting it too low, you run the risk of leaving money on the table. Most important, you should understand current market conditions and know if values are trending up or down. With this knowledge, the asking price should be set ahead of the trend, whichever direction its going.

Before the official marketing of the property commences, talk with your facility manager about your intentions. Nothing is more painful than when your manager accidentally finds out youre planning to sell and didnt tell him. An honest discussion thats encouraging and potentially incentivizes him is usually the best option. Cooperation on the part of the manager is beneficial for the sale price and often results in the staff being retained by the new owner.

Marketing a self-storage property can take just a few weeks if the conditions are ideal, its priced right, the existing loan can be easily paid off or assumed, and the operation is well-documented. However, it can take several months if the property is priced too high or there are conditions in place that take buyers longer to understand.

The Sellers Due Diligence

Once youve determined which offer is best, focus on the buyer's qualifications and track record. What transactions has he closed recently and does he have the financial strength to close this one? Does he have financing readily available? Request some proof that the funds needed to close are obtainable. Google your buyer. Yes, use a search engine to find out more about him! Check for lawsuits and criminal activity. If there are skeletons in the closet, you want to find them now, not 30 days from now.

The due-diligence period will be shorter if the required materials are gathered ahead of time so theyre easily deliverable to the purchaser once escrow is open. Typically, buyers will ask for historical financial statements, rent rolls, environmental studies, surveys, service contracts, appraisals, real estate tax bills, and even copies of invoices for expenses paid. Organize all of these documents as soon as possible so they can be delivered quickly to the buyer and get the transaction off to a smooth start.

Additionally, your buyer will be more comfortable with the property if its owner is meticulously organized. He may even agree to a shorter due-diligence period if records are available quickly.

Buying a Facility: First Considerations

Purchasing a self-storage facility can be intimidating. There's so much competition from other investors and so few properties available that actually make economic sense. But even under these conditions, opportunities do exist if you know how to find them and what to look for.

The first thing to do is decide where it would be best to own a self-storage facility. Consider things like:

• What are the growth markets?
• Will you manage the facility yourself?
• Will you hire an offsite company to manage it for you?
• How often will you visit the facility?

To be competitive, be prepared to offer a fair price. Offer the largest possible earnest-money deposit and the shortest possible due-diligence period. You can only do these things safely if youve already researched and understand the local market.

By this time, youve likely contacted several self-storage lenders to know what loan programs are available so your financing contingency, if any, is realistic. Available properties often have existing loans that must be assumed. In those instances, know whats involved in qualifying for the assumption. Sometimes loan assumptions can be more difficult to accomplish than originations.

The Inspection

When buying a self-storage facility, its important to allow adequate time to inspect the property and confirm all your due-diligence information. Your purchase and sale agreement should contain a provision allowing a due-diligence period during which these inspections and audits can take place.

An onsite inspection may involve soil tests, environmental inspections and engineering inspections for improvements such as roof, utility and HVAC equipment. It may also be necessary to review existing surveys or complete a new one. This may take up to three weeks, so an early start is essential.

Financial and other records to be inspected may include any previous environmental studies or engineering reports, utility bills, tenant leases and correspondence, profit-and-loss statements, bank statements, and cancelled checks. These should be reviewed so you can confirm that actual rental income shown on profit-and-loss statements were actually deposited in the bank and there are no unreported expenses. Ask the seller to certify the material is true and correct. If youre obtaining financing for the purchase, this seller certification is important because the lender will require the same from you.

The length of time needed for inspection varies depending on whether the property is vacant land or improved with buildings. If its vacant, you may easily do your inspection in 15 to 30 days. If its an existing storage facility, 30 days is a minimum with 45 or 60 days being more typical. If the purchase contract you and the seller sign doesnt provide for a separate "financing contingency," allowing you to terminate if financing is not obtained, then any financial approvals will need to be obtained during the inspection period. In this case, 60 days is a recommended time frame because this gives the buyer 15 to 20 days to do physical inspections followed by another 45 days to obtain financing approval.

The Buyers Due Diligence

Buyers also need to be prepared to do their own due diligence. Study the financials with a fine-tooth comb. When preparing your pro-forma financial analysis, make sure to do a sensitivity analysis. What will the return on investment be if rents are slightly higher or lower than anticipated? Whats your exit strategy? What are markets likely to be then? Know what youre looking for and there will be fewer surprises in the purchasing process.

Whether youre a seller or a buyer, good preparation makes the difference between smooth sailing or a bumpy ride during the sales-transaction process.

Bill Alter has been a self-storage specialist with Rein & Grossoehme Commercial Real Estate in Arizona since 1986. He has been responsible for the sale of more than 120 self-storage facilities, totaling more than 6 million square feet and more than $250 million To reach him, call  602.315.0771; e-mail [email protected].

We never stop learning. Even once we master a skill, we have to continue to hone it. That's why, in business and in life, we should seek out educational opportunities whenever and wherever possible. In the self-storage industry, theres a once-a-year opportunity to absorb a massive amount of knowledge in a single setting: the Inside Self-Storage World Expo.

This years event, March 30 to April 2 at the Paris Hotel & Resort in Las Vegas, packs in the schooling for investors, developers, managers and owners. With multiple seminar tracks, five workshops, more than a hundred exhibitors and new events, the 2014 Expo promises an instructive smorgasbord. This limited print space cannot do justice to the all-encompassing agenda planned for this years event, so well just hit some of the highlights. To view a complete agenda and register, visit www.insideselfstorageworldexpo.com.

Facility Operation

With competition fierce in just about every market, self-storage owners and managers have to be at the top of their gameevery day. This includes everything from creating fantastic curb appeal and offering excellent customer service to overseeing expenses and being present on the Web and in social media. Theres no such thing as good enough when it comes to being the market leader.

If youre new to the industry, a handful of seminars will help guide you to becoming a pro. You'll get tips on facility maintenance, how to master your sales approach, and easy ways to create a collection program that gets results. Managers and owners with industry experience will find useful information on pricing strategies, facility auditing, using management software to create valuable reports and much more.

Marketing

Hand in hand with facility management is marketing. With the Web becoming the place to be to attract new tenants and retain existing ones, both self-storage veterans and newbies need to keep up-to-date on the ever-changing online landscape. Lets not forget how often the search engines like to reconfigure their analytics and the explosion of social media. Needless to say, were all spending a lot more time on the Internet these days.

To help operators engage their online audience, the ISS Expo will include marketing seminars focused on maximizing and maintaining a Web presence. Learn about the all-important topics of search engine marketing and optimization, the costs and value, and why your websites content truly matters. Just having a website is no longer enough. Operators need to dig deeper if they want to compete.

Offline marketing is still valuable, too. One of the best marketing avenuesand a feel-good approachis community marketing. If youre not developing your community ties, come find out why its critical and how to do it.

Development and Investment

If youre a first-time developer or investor, a number of seminars will get you up to speed on the feasibility process, site selection, balancing form with function, and where to find the capital to fund your dream project.

Speaking of money, industry finance experts say nows the time to refinance an existing loan or seek a new one for business expansions. First, you need to understand the state of the debt market, the current loan products available to self-storage owners and investors, and how to determine your facilitys value. Next is assembling your loan package to ensure it attracts lenders. Youll learn about these topics and more in a variety of seminars.

Workshops

This years workshops, which require separate registration, offer something for everyone. The Developers Workshop, a favorite in years past, is back with a whole new angle. After nearly five years of little to no new construction, the industry is once again seeing activity. Whether youre looking to build from the ground up, convert a structure or add to an existing property, youll gain insight on whats new in this information-packed workshop.

Another attendee favorite, the Legal Learning Live Workshop, is also getting a makeover this year. With many states updating their lien laws, its imperative that operators be current on whats going on in their region. In addition to lien-sale requirements, processes and risks, this workshop will address the latest trend, online auctions. This cant-miss workshop is for everyone in charge of a self-storage business.

Think youre managing your social media in the most effective manner? These days it takes more than just having an online presence to make a difference. Learn what SERP means and how to do it in the Social Media Mastery Workshop.

This years show will also include separate workshops for owners and managers. The informative workshop for owners walks through the hiring and training process, how to build successful marketing programs, revenue management and much more. The Management Workshop will cover the A to Z of facility management, including customer service, delinquencies, time management and other issues critical to the daily operation of a facility.

Whether the 2014 ISS Expo will be your first or fifth, there will be numerous ways to learn new skills and explore innovative ideas and concepts. Its an enlightening opportunity you cant miss.

For the complete agenda and details regarding events, exhibits, seminars, speakers, workshops and more, visit www.insideselfstorageworldexpo.com .

Self-storage real estate investment trust CubeSmart has completed a transition in its senior leadership positions as well as a relocation to new headquarters in Malvern, Pa.

As of Jan. 1, Christopher P. Marr is the companys president and CEO and has joined the companys board of trustees. Marr has held a variety of positions at the company including president, chief operating officer, chief investment officer and chief financial officer. His appointment coincides with the retirement of Dean Jernigan, who served as CEO from April 2006 through December 2013. In addition to his retirement as CEO, Jernigan will no longer serve on the companys board.

On Dec. 16, CubeSmart completed its relocation to 5 Old Lancaster Road in Malvern from its former offices in Wayne, Pa. The company-owned headquarters is 86,000 square feet and offers an open and collaborative work environment for staff including its National Sales Center, company officials said in a press release. The new location will also support future growth.

In addition to serving as a corporate center for 160 employees, the new CubeSmart complex includes a 236-unit self-storage facility that will be used as a resource for training, systems implementation and business development. The storage facility is scheduled to open for external business on Jan. 16.

CubeSmart owns or manages 527 self-storage facilities across the United States and operates the CubeSmart Network, which consists of more than 800 additional self-storage facilities.