RedBin, a valet self-storage operator based in Brooklyn, N.Y., has hired Pete Warhurst, founder of the portable-storage company PODS, to its executive team. Warhurst will “spearhead commercial growth, raise capital and drive expansion,” according to a press release.

Warhurst, who sold PODS in 2007 for $430 million, sees growth potential in the urban-focused valet-storage model, calling it “PODS for city people.” “Mobile on-demand storage is a space that I am very familiar with and believe that these small ‘RedBins’ will be the next big thing in storage,” he said. “I wanted to be a part of it.”

Warhurst also founded EAI Systems, which developed dispatch software for police and fire departments. EAI was acquired by Bell Atlantic Corp. in 1992. The entrepreneur then invented the PODS storage container and PODZILLA transport system, which became the most well-known brand in the mobile-storage space, the release stated.

“Pete disrupted not only the traditional self-storage industry but also the van-line moving space with his PODS innovation,” said Thomas Anderson, founder and CEO of RedBin. “I’m thrilled to have the opportunity to work with Pete in this venture, as he shares my vision that RedBin will redefine how storage will work in major cities around the globe.”

Anderson, who has 25 years of experience in commercial storage and self-storage logistics, launched RedBin in New York City with a model that marries traditional self-storage and valet storage. Its valet component uses an online platform that enables customers to schedule pickup and return delivery of storage items as well as manage a visual catalog of their belongings. The company owns a storage warehouse in Brooklyn. It has roots in traditional storage, as the founders have built, owned and managed self-storage facilities in Long Island, N.Y., since 2001.

ezStorage Corp., which operates 48 self-storage facilities in Maryland, Virginia and Washington, D.C., has opened a newly constructed facility in Columbia, Md., its second in the city. The property at 9002 Red Branch Road contains climate-controlled units ranging in size from 25 to 300 square feet. Security features include computer-controlled gate access, unit-specific pass codes and video cameras.

"ezStorage continues to grow while remaining keenly focused on delivering increased customer value, quality and innovation," said Todd Manganaro, CEO and president. "We believe our customers deserve the best in customer service, cleanliness and security, and our goal is to continue to deliver those core values at our second location in Columbia."

Based in Columbia, Md., ezStorage was founded in 1987. The company’s portfolio comprises more than 41,000 units. The company most recently opened a facility in Burtonsville, Md., that comprises 930 units.

Phoenix-based U-Haul International Inc., which operates more than 1,300 self-storage locations across North America, has purchased two Chicago-area self-storage facilities: Stor-More in Elgin, Ill., and Chicagoland Self-Storage in Streamwood. Together, the properties contain 389 units. The Elgin property will be remotely operated by the other site, according to a press release.

U-Haul Storage of East Elgin at 796 Bluff City Blvd. and U-Haul Moving & Storage of South Streamwood at 529 E. Lake St. offer moving and packing supplies, self-storage, truck and trailer rentals, and more. U-Haul plans to add individual alarms to the units, the release stated.

"We have a huge customer base in this area and, before acquiring these facilities, it was being served by our neighborhood dealers," said Angela Farley, president of the U-Haul Co. of Chicago Western Suburbs. "Now customers have additional moving and self-storage options at U-Haul-owned and -operated locations. As an added bonus, we are able to keep building materials out of landfills by reusing these old self-storage facilities."

The acquisition of the Illinois properties was driven by U-Haul’s corporate sustainability initiatives, which support infill development to help local communities lower their carbon footprint, the release stated. U-Haul’s adaptive reuse of existing structures eliminates the amount of energy and resources required for new-construction materials and helps local cities diminish their unwanted inventory of unused buildings, U-Haul officials said.

Established in 1945, U-Haul has more than 44 million square feet of storage space at its owned facilities throughout North America.

Ten years ago, South Africa had very few self-storage companies. Today, there are three chains with more than 15 sites, each concentrated in Capetown, Durban and Johannesburg. Now developers are setting their sights on attractive markets in East Africa, including Addis Ababa in Ethiopia, Dar el Salaam in Tanzania, Harare in Zimbabwe, Kampala in Uganda, and Mombasa and Nairobi in Kenya.

East Africa is the one of the highest-growth economic regions in the world, and probably the last market without a self-storage chain. Local consulting, development and finance firm Aptus Capital hopes to change this. Company co-founder Gerardo Segura, who founded South American self-storage operation Mas Espacio, explains why Aptus is putting down roots in Kenya.  

Tell us about yourself and your company.

Aptus Capital was founded in 2014 with the objective of introducing proven business concepts and helping high-growth companies enter the East African markets. Prior to moving to Nairobi, my brother, Diego Segura, and I co-founded Mas Espacio, a self-storage company in Buenos Aires, Argentina, in 2008. We have two sites and are expanding into other urban centers in the country as well as the South American region.

My career background is in international investment banking, where I held senior corporate finance positions at Lehman Brothers, HSBC Bank and Dresdner Bank in Buenos Aires and London. 

What’s behind your expansion into Kenya?

Kenya, and the East African economies, exhibit the highest gross domestic product (GDP) growth rates. Its relative attractiveness for business has been growing steadily in the last few years, according to Ernst & Young's latest study of the region.

Essentially, Kenya's growing middle class and small to medium-sized enterprise (SME) sector provide the essential components for the introduction of new services and products that have been proven successful in more advanced economies. In every sector you can find opportunities, including financial services, mobile communications, renewable and conventional energy, agriculture, technology, logistics, and self-storage. 

What’s the state of the self-storage industry in the region?

At present, there are no self-storage operators in Kenya. You’ll find various types of removals and security companies offering storage. You’ll even find companies that sell containers for storage. That's it.

The main factors that lead me to conclude that Nairobi [the capital] is an attractive market for self-storage are the following:

• Expanding target market: 45 percent of the population is considered to be middle-class at $1,136 GDP/capita (low), but the top 10 percent of the population (4 million), is responsible for 40 percent of the GDP and exhibits Western-style consumption patterns.
• Increasing urbanization and densification: The city's population is expected to double to 6 million by 2025. 
• Construction boom: People are on the move. In 2014 alone, 2.7 million square meters of space was added in Nairobi, of which 1.5 million square meters was residential. More is forecasted for the next four years, with the introduction of mortgage financing. 
• Diaspora: There are an estimated 3 million Kenyans studying and living abroad. This is a group that’s highly mobile and remains connected to their home country, as evidenced by the more than $100 million remitted on a monthly basis. 
• Expat community: Nairobi is the regional gateway into East Africa. The United Nations has more than 40,000 people working at its various entities, mostly on two-year contracts. In addition, there are 350,000 registered non-governmental organizations in Kenya, most with a base in Nairobi. 
• SME sector: There are approximately 7.5 million registered SMEs operating in Nairobi. The economic significance of this sector has jumped to 40 percent of GDP since 2008. 

More people in Kenya are becoming richer, purchasing more and moving homes. More expats and companies are setting up in Kenya. And the SME sector is booming. They all need storage solutions for personal and business needs. We want to be the first-movers in Kenya and East Africa. 

What challenges do developers and operators face in the country?

Developers and operators face multiple challenges in this market. Let's begin with the real estate. A developer who acquires real estate will often be faced with:

• Imperfect or false titles
• Lack of issue of new titles
• Change-of-use limitations
• Lack of financing
• Unrealistic price expectations
• Generalized corruption

If leasing, the property owner will demand personal guarantees from the directors of the lessee.

Operators will need to educate and inform customers. For example, the wealthy Kenyan will consider it beneath him to box, transport, carry and remove his own goods. Customers won’t like the "self" in self-storage. Thus, we’ll provide free pickup and paid delivery to their homes.

Operators will also need to find and train employees to service customers in an appropriate way. Only employees who’ve worked at multi-national companies or in the tourism sector understand the benefits of end-to-end customer service.

Finally, operators will need to deal with the price-negotiation culture of Kenya, particularly as you fill the leasable space. 

How will self-storage design in Kenya compare to that of other countries?

The design will be similar to what’s seen in developed markets such as the United Kingdom, Australia and South Africa: free-standing, modern warehouses of approximately 5,000 square meters of leasable space. 

What are your long-term goals?

To be the leading self-storage operator in key African markets. I’m engaging with a pan-regional Africa investment company for the structuring and financing of the business. We plan to lease the first unit in Nairobi on a long-term basis to get up and running, and then quickly follow with the acquisition of land for the development of the second Nairobi unit.

Thereafter, the expansion plan would be to set up sites in Mombasa, Dar el Salaam, Addis Ababa, Kampala and Harare. We believe demand in each of these cities could be addressed by one or two sites with 5,000 square meters of leasable space each. 

For more information, visit http://aptuscap.net or http://masespacio.com.ar.

The Inside Self-Storage (ISS) Store, an e-commerce website providing research and education products for industry professionals, has added the mystery novel “Hot Storage” as its latest fictional product for sale. Written by author Mary Mead, the book is about the trials of self-storage manager Marlena Montoya, who must hunt for the truth when two men connected to the facility are murdered.

Marlena first finds cartons of drugs in a unit that was supposed to be empty, and then things go downhill. A county task force puts an undercover cop on the payroll, one of the owners gets personal, and the local detective stays for dinner. When the murders occur, it falls to Marlena to hunt for the truth with an assist from Monarch Beach detective John Kincaid.

Mead is best known for her mystery series of novels set in Monarch Beach. Though “Hot Storage” includes Kincaid as a familiar figure for dedicated readers, the story takes place in nearby Jade Beach and isn’t officially part of the Monarch Beach series. Titles in the series include “Out of the Blue,” “Wild Blue Yonder” and “Bluebonnets.” The author is working on two follow-up titles connected to the series. “My books are meant to entertain, with maybe a little dose of knowledge, shared from my own experience,” Mead said.

Available in softcover, “Hot Storage” is 254 pages and priced at $12.95.

Conceived as a central hub that allows self-storage owners, operators, developers and investors to obtain cutting-edge information and resources, the ISS Store is owned and operated by ISS, a dynamic services provider that has served the self-storage industry for more than 25 years. The brand includes ISS magazine, the ISS Expo and Self-Storage Talk, the industry’s largest online community.

Update 1/10/17 – Global has completed its acquisition of two self-storage facilities and a commercial property from Tuxis. The company agreed to pay $6.9 million, which includes $5.925 million in cash and $975,000 in common stock. An additional $900,000 in cash is conditional based on expansion and redevelopment approvals and other factors, according to a press release. Global has already submitted permits to redevelop and expand the Millbrook facility.

“The addition of these stores is expected to have an immediate accretive impact on our property revenues, net operating income and funds from operations,” Winmill said. “The expansion opportunity at the Millbrook property has the potential to further increase the store’s revenues and net operating income.”

The deal brings the number of self-storage facilities in Global’s portfolio to 11.

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11/29/16 – Global Self Storage Inc., a self-storage real estate investment trust, has agreed to purchase the two storage facilities operated by Tuxis Corp., a real estate development company and affiliate of Global, for $7.8 million. The properties in Clinton, Conn., and Millbrook, N.Y., comprise a combined 40,705 square feet in 327 units. The deal includes an adjoining 1,875-square-foot commercial property that will be used to expand the Millbrook facility, according to a press release. Global President and CEO Mark C. Winmill will discuss the company’s self-storage business with investors next month during the LD Micro Main Event in Los Angeles.

The Tuxis Self Storage property in Clinton is at Heritage Park. It comprises 25,705 square feet in 185 units. The Millbrook Commons location in Millbrook is a mixed-use facility comprising 15,000 square feet in 142 climate-controlled units, including wine storage and rental office space. Global will pay Tuxis $5.925 million in cash, along with $975,000 in Global common stock. An additional $900,000 in cash is contingent on certain conditions, including the expansion of the Millbrook asset, the release stated. The deal is also contingent on approval by Tuxis shareholders.

"Both of these facilities fit our current acquisition criteria, as they are performing well and located in secondary and/or tertiary cities where new development is muted," Winmill said. "After a thorough review and evaluation by a special committee of independent directors, we believe these two stores will be very complementary to our existing portfolio of self-storage facilities."

Winmill also serves as president, CEO and director of Tuxis. Though the development company’s primary source of revenue has been through the two self-storage facilities, this transaction will allow Tuxis to pursue other real estate development and management opportunities, Winmill said.

Winmill will represent Global during the 9th annual LD Micro Main Event investor conference, Dec. 6-8, at the Luxe Sunset Boulevard Hotel in Los Angeles. He’ll present to investors on Dec. 6 at 2:30 p.m. PT and then hold one-on-one meetings throughout the day, according to a press release. The LD Micro Main Event is designed for small and microcap firms and will feature 240 presenting companies.

Founded in 1983, Global focuses on the acquisition, development, operation, ownership and redevelopment of storage facilities in the United States. Through its wholly owned subsidiaries, it currently owns and operates nine properties in Illinois, Indiana, New York, Ohio, Pennsylvania and South Carolina. The company changed its name from Self Storage Group Inc. in January.

Menards, a home-improvement chain with more than 280 stores in 14 states, is converting its retail store in Burlington, Iowa, to Menards Self Storage. The company relocated its retail store to a newly built site in June, according to the source.

The self-storage facility at 922 W. Agency Road will contain 450 climate-controlled and drive-up units as well as vehicle parking. It will be open 24 hours per day, seven days per week. Security amenities will include perimeter fencing and video cameras. Onsite staff will be available Monday through Friday, 8 a.m. to 5 p.m.

Menards operates two self-storage facilities in Eau Claire, Wis., and one each in Davenport and West Burlington, Iowa. Headquartered in Eau Claire, the family-owned company was founded in 1958.

By Adam Karnes

Historically low interest rates coupled with strong operating fundamentals equate to readily available mortgage capital for self-storage owners who seek financing. Those aiming to lock in longer-term debt and insulate themselves from prospective rate increases will find a number of attractive options in the market. Following is a summary of some common debt products available for borrowers.

Local and Regional Banks

According to data compiled by the Mortgage Bankers Association (MBA), the dollar volume of commercial bank originations through the second quarter of 2016 was up approximately 33 percent year over year. As a result, banks and thrifts maintain their position as the largest holders of commercial and multi-family debt at nearly 40 percent of the $2.9 trillion outstanding. While this indicates strong commercial bank lending, there’s evidence that local and regional banks are experiencing a “lending chill” because of the regulatory scrutiny of real estate loans.

Local and regional banks are relationship-driven lenders that can offer very competitive interest rates. Borrowers should be prepared to place their operating or depository accounts with that bank and should also anticipate the bank conducting an extensive credit review.

Banks will lend up to 80 percent loan to value (LTV), offering terms ranging from one to 10 years, which amortize over 20 to 25 years. They commonly require personal-recourse guarantees, which can be scaled back or even eliminated at lower leverage. They typically aim to maintain transaction costs at a reasonable level, and owners can often negotiate prepayment provisions. Finally, the interest rate will vary based on the factors above, and the rate package is often executed through a swap agreement.

The CMBS Market

The commercial mortgage-backed securities (CMBS) market appeared to be finding its post-recession footing in 2015, which at approximately $101 billion of total U.S. issuances was the strongest year since the recession. The sentiment going into 2016 was it would be similar to and possibly surpass 2015. However, through October, issuance was down nearly 37 percent year over year.

Jamie Woodwell, vice president of commercial real estate research for MBA, has said the CMBS market is seeing far more loans paying off and paying down than new loans being originated. This is despite $232 billion in CMBS loans scheduled to mature in 2016 and 2017—affectionately labeled “the wall of refinances” by Trepp.

Furthermore, a new round of risk-retention measures took effect in December as part of the Dodd-Frank Act, which has already caused some choppiness in CMBS activity and may continue to do so. While commercial banks and life-insurance companies have stepped up to the plate and taken on some of the maturing volume, it stands to reason the balance sheets of these institutions will inevitably fill up. As such, a case could be made that the market needs a CMBS recovery.

While they’ll vary based on individual deals, here are some common CMBS debt terms:

• Non-recourse loans
• Leverage up to 75 percent (can increase with mezzanine)
• Five- to 10-year terms
• Fixed interest rate
• Amortization schedules up to 30 years
• Interest-only periods available
• 8 percent debt yield minimum
• Large primary-market deals preferred; may compete for smaller loans in secondary markets
• Closing costs of approximately $50,000 all in; some lenders offer a fixed-cost option for $25,000 (excluding survey, title and borrower legal fees)
• Prepayment typically yield maintenance or defeasance

The interest rate in CMBS transactions is calculated by adding a risk-spread premium to the “swap side” offering index. For example, a 10-year rate is found by adding the lender’s risk-spread premium to the 10-year swap. Therefore, with spreads in the 2.75 percent range (275 basis points) and the 10-year swap at 1.5 percent, the applicable rate on 10-year CMBS money would be 4.25 percent.

CMBS lenders are aggressive in nature and have historically produced extremely compelling quotes for self-storage owners, regardless of what the CMBS market might suggest. CMBS debt allows borrowers to lock in low rates for up to 10 years, and the loans are also assumable—both valuable hedges against rate increases. Assuming the industry can wade the regulatory waters and capital-market volatility, CMBS loans can present a very attractive piece of financing going forward.

Life-Insurance Loans

Life-insurance companies are another source of commercial debt for self-storage owners. According to the MBA’s “Quarterly Databook,” the second quarter of 2016 marked the second largest origination quarter ever for life companies. As such, these lenders account for 14 percent of all outstanding commercial/multi-family mortgage debt.

Insurance lenders allow borrowers to lock in longer-term rates on a non-recourse basis, similar to CMBS. However, unlike CMBS, life companies are extremely conservative and prefer to lend on high-quality stabilized assets in primary markets.

While insurance lenders historically enforced $5 million loan minimums, increased competition has encouraged some to lower this threshold. Life companies are notorious for stressing cash-flow underwriting and capitalization rates applied to determine value, which typically yields loan advances of not more than 65 percent LTV. For many of the reasons listed above, they don’t compete as directly with CMBS lenders for proceeds.

A cornerstone attribute of life companies is their flexibility. They can offer among the lowest interest rates available depending on structure, often allowing rate lock at application. Furthermore, while five- to 10-year fixed-rate terms are most common, fully amortizing terms up to 20 years may also be available. Finally, life companies offer flexible prepayment structures and generally reasonable transaction costs.

Construction and Land Loans

New construction was the name of the game in 2016. According to a second-quarter 2016 report from real estate firm Colliers International, the industry witnessed the construction of more than 600 new facilities last year, with some estimates tripling that number. Some merchant builders are capitalizing on the chance to sell their newly developed facilities to publicly traded real estate investment trusts with certificate-of-occupancy (CO) deals. While a CO sale is definitely not the norm, there are facilities being built to meet certain criteria that make them a primary acquisition target for large operators.

The most likely lending partner for a developer with a feasible project in a high-demand trade area is a local or regional bank willing to partner with the sponsor. Full recourse with a completion guarantee is typical of construction financing, at least until CO (recourse may burn down afterward). For the right project, conventional lenders are advancing up to 75 percent loan to cost (LTC) at fixed or floating rates, with interest carry and operational reserves often built in.

With consideration to the terms laid out above, the proliferation of new storage construction has encouraged some institutions to launch competitive lending platforms. For example, one specialized lender can offer up to 90 percent LTC on a non-recourse basis, under a participating debt structure for qualified projects. Alternatively, borrowers may secure higher leverage financing through the Small Business Administration (SBA).

When negotiating a construction loan, it’s important to structure an interest-only period that mirrors the timeline required to bring the property to breakeven occupancy. Furthermore, careful budgeting of the construction costs and development timeframe can help identify an appropriate loan structure.

SBA Loans

SBA loans are a capital source that have helped secondary-market owners secure fixed- or floating-rate loans at elevated leverage. The two SBA loan programs available for real estate borrowers are summarized below.

7a loans

• Variable rate, adjusted quarterly
• Maximum proceeds of $5 million
• 25-year loan term, fully amortizing
• Five-three-one percent penalty in first three years, followed by open prepayment
• Available for acquisition or refinance

504 loans

• Fixed rate on SBA lien, variable rate on first lien
• Max proceeds of $14 million
• 20-year loan term, fully amortizing
• Step-down prepayment, starting with 10 percent in year one
• Available for refinance or acquisition

It’s worth noting the 504 program historically was limited to acquisition loans, but as of June 2016, the SBA now offers a refinance option. When applying, seek a lender that’s certified for the SBA Preferred Lender Program (PLP), which allows it to approve loans on behalf of the administration. As a government-sponsored program, the process is document intensive and can be tedious, which is why it’s important to work with a PLP entity.

No Time Like the Present

Whether you plan to refinance an existing self-storage facility, or acquire or construct a new one, there continues to be debt products available. The quality, location, cash flow and existing debt of an asset will largely dictate the loan required, but it’s important to consider your long-term goals. This prolonged low-interest-rate environment coupled with strong operating fundamentals marks a desirable time to seek financing. Lenders are working hard to win business, which means borrowers are often presented with one or more very competitive bids.

Adam Karnes is a senior credit analyst for The BSC Group, where he specializes in the packaging of debt and equity financing requests for all commercial property types nationwide, with an emphasis on self-storage assets. Adam is based in Chicago. To reach him, call 312.878.7561; e-mail [email protected]; visit www.thebscgroup.com.

Update 1/9/17 – GYS has added a second self-storage project to its activity in Fort Collins. The company recently closed on a property at 2120 Midpoint Drive and 1615 Specht Point Road and expects to break ground on Timberline Self Storage this month. The facility will be built by Grow Your Storage General Contracting LLC and comprise 88,500 square feet of climate-controlled and drive-up storage space in phase one, according to a press release. The asset is expected to open this summer.

The facility will feature access control, onsite management and security. It will be operated by GYS partners Denise Bowley, Lee Fredrick and Brandon Grebe. The project is in partnership with investment firm All Pro Capital Inc., which secured the debt and equity for the project, the release stated.

Timberline is approximately 6.5 miles from the previously announced College Ave. building site. A two-story flex-office building has been approved for phase two of the development, the release stated.

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10/7/16 – Grow Your Storage LLC (GYS), a construction, development and property-management firm, is developing a mixed-use project in Fort Collins, Colo., that will include apartments and self-storage. The site at 6020 S. College Ave. is a vacant 12-acre field on the southwest corner of Skyway Drive and South College Avenue. Preliminary plans filed with the city show the storage units will front College Avenue, with the apartments built to the west, according to the source. Access to the storage property would be off Skyway Drive.

The proposal, submitted by GYS partner Brandon Grebe, has passed a preliminary review by the city planning department and a neighborhood meeting. Although the initial drawings show more than a dozen storage buildings and four residential structures, the number of each has yet to be determined. "We are still evaluating what that looks like," said Grebe, adding the apartments will help the project blend with the neighborhood. "We wanted to respect that use."

The facility will include some climate-controlled units and higher-end finishes. "A class-A self-storage facility makes sense to us there, so it meets the compatibility of the trade area,” Grebe said, who’s also working with city staff on plans for a detention pond near the front of the site, which is considered wetlands.

The formal plans for the project have yet to be submitted. "Nothing is in stone at this juncture," Grebe said. "We are truly evaluating really what the market will dictate as far as residential uses."       

GYS is a fully integrated self-storage firm that offers development and entitlement services, construction design and management, and property management in Colorado and Texas. The company has an additional project under development in Fort Collins and another in Fountain, Colo.