It happens to all of us.

Breakdowns in communication just happen. Hey, we're human.

What is unfortunate, however, is how these "breakdowns" affect our relationships, both business and personal. I want first to apologize to all of our advertisers and readers for our show-floor absence at the recent SSA show in Las Vegas. I realize many of you expected to find Inside Self-Storage represented in the tradeshow. We hope this did not cause anyone any inconvenience--we do take our responsibility to our vendors and readers very seriously.

We have had a working relationship with the Self Storage Association ever since the inception of Inside Self-Storage back in July 1991. During the course of the past eight years, there have been many promises made regarding cooperation amongst the organizations. We have been supportive of the SSA, inviting them to participate in our Expos, as well as contributing our presence to theirs. We have publicized information about the association in our pages. It was hoped that this relationship would be symbiotic, but it appears this is not the case.

From meetings that were scheduled but never took place, to conflicts in the dates and locations of tradeshows (which was witnessed just in these past few months), breakdowns have been happening in the lines of communication. This is a sad event for us, and for the SSA--but more so for the attendees and vendors who are unjustly placed in the crossfire. The members of this industry should not be forced to choose between assisting parties, but should be free to benefit from all available resources. This cannot happen where communication fails, as it did this year, as it has in the past.

The new administration for the SSA argued for its relocation to Washington, D.C., supposedly for the purposes of lobbying, of having a greater representation for the self-storage industry when it comes time for the passing of legislation that affects us. But while the members of SSA are paying for the association's presence in a high cost-of-living area, what benefits are they reaping from that arrangement? What are SSA members gaining?

Also, the SSA has made clear its alliance with the Mini-Storage Messenger, naming it the "Official Publication of the Self Storage Association." But in choosing to employ only one publication as its voice, the SSA necessarily estranges us. There has been plenty of talk about expanding that alliance to include ISS, and yet action is never taken. Why is this?

Our supporters have made evident their desire to see the working relationship between ISS and the SSA bolstered. Anyone who can offer any suggestions as to how to bridge this gap in communication is encouraged to share his ideas. At this juncture, let's not allow breakdowns to interfere with all of the success being witnessed today in this industry.

Best regards,

Troy Bix
Publisher
[email protected]

By Scott Zucker

The following was reprinted with permission from the Mini-Storage Law Commentary: A Newsletter for Owners and Managers, published by the law firm Shapiro Fussell Wedge Smotherman & Martin in Atlanta.

As the self-storage industry has grown over the last decade and business has become more and more competitive, so has the number of innovations that are used to differentiate one self-storage company or facility from another.

Just like the development of climate-controlled storage, the industry is now experiencing the development and growth of portable storage. Portable, mobile or "drop-box" storage is where a storage facility offers the delivery of a storage container to a customer's home or office, and the container is packed by the customer and locked with the customer's lock. The container is then picked up and returned to a warehouse where it is placed or stacked with other containers. Certainly this service saves a typical customer from having to rent a truck or hire a moving company to move his property from his home or office to a self-storage facility. With portable storage, the customer is able to remove the transportation concerns involved in storing his property.

However, what is essential to understand is that portable storage is not self-storage. The key to self-storage lies with the lack of care, custody and control that a facility assumes over the property being stored on the premises. Self-storage is based simply on a landlord/tenant relationship where the storage company rents space suitable for storage. Once the tenant stores their property inside the facility, the risk of loss for that property (for the most part) falls on the tenant. The facility need not obtain insurance for the contents of the tenant's storage space because the facility owner is not considered a bailee of the tenant's property.

With portable storage, once the company takes the locked container, places it on the truck and stores it in the warehouse, it has assumed care, custody and control for that property, and a bailment arises. As such, the storage facility now assumes the risk of loss for the tenant's goods, and must insure itself from those losses. Going from a landlord to a bailee changes the level of diligence that is required in safeguarding the customer's property. Whereas a self-storage facility owner may be held liable for the loss of a tenant's goods upon a finding of gross negligence, a bailee can be held liable for the loss of a tenant's goods upon a finding of the lower standard of ordinary negligence.

The Contract Documents

Without question, when a self-storage company ventures into the business of portable storage, it is not as a landlord and, therefore, using a standard rental agreement would not be adequate. A more appropriate document to use comes out of the warehouse industry and would be similar to a non-negotiable warehouse receipt, as that document is defined under the Uniform Commercial Code. This warehouse receipt is a contract between a warehouseman and its customer for the warehouseman to take in the property of the customer, store it, assume liability for its protection and, ultimately, return it to the customer.

What makes a warehouse receipt substantially different from a rental agreement involves the explanation of the facility's liability for loss or damage to the customer's property. With portable storage, a facility can be held liable for loss or damage to the property. Facilities can limit their liability in this area by establishing a maximum limit of value per container that can be stored at the warehouse (i.e., 60 cents per pound per article or $1,200 for all the property in the container.) This is commonly termed the "declared value." Therefore, even though there is potential liability to a facility for loss or damage to a customer's property in the container, limits of value can apply.

A portable-storage contract should include other standard provisions, as well. For example, the facility should recommend that the customer have his own insurance for the value of the contents beyond the $1,200 limitation. The contract should also include a provision prohibiting certain property from being stored inside the container, including collectibles, jewelry or other items having high value or sentimental value to the customer. An additional provision should be added to a warehouse receipt to provide that all claims by a customer for loss or damage to the property in the container must be made within 60 days of the time the customer first becomes aware of the claim. Further, the customer should have only 120 days in which to commence suit on such a claim, or the claim would be deemed to be waived. Finally, the agreement should identify the warehouseman's lien on the property in the container, which allows the warehouseman, upon the customer's failure to pay the rent, to hold the customer's property for sale.

In certain states, those lien rights will be based upon the Uniform Commercial Code, which has a procedure for foreclosure and sale and is very similar to that used in self-storage. In other states, where a container for storage has been included within the definition of self-storage, the state's self-storage act itself can be used as the lien-and-foreclosure process for selling the customer's goods. In some states, the owner's lien is simply contractual, and the procedure for sale would be defined under the terms and conditions of the customer's contract with the facility owner.

Insurance

Unfortunately, insurance becomes an issue when operating a portable-storage business. Again, contrasted with traditional self-storage, portable storage requires the use of a truck, fork lift and drivers. Therefore, a portable-storage facility needs insurance coverage for the trucks being used to transport the containers and needs to apply a different workers' compensation classification for its employees than may have been used previously for on-site resident managers or maintenance workers.

Most importantly, insurance needs to be obtained for the contents stored on the premises, which changes the coverage requirements for a standard self-storage facility. Certain insurance can be obtained to protect a portable-storage company from customer claims arising from lost, stolen or damaged property. However, exclusions may only provide for coverage in the case of an accident with the truck or clear damage to the exterior of the container.

Accordingly, storage owners should provide restrictions in their contracts that hold their customers responsible for the proper packing of the container to prevent shifting or movement of the property during transportation, and holds the customer liable for any loss, damage or injury relating or arising from the packing of the property in the container. Obviously, obtaining contents insurance not only raises costs for a business, but acknowledges the shift in the risk of loss to the facility rather than the customer. That is a dramatic shift that, once again, does not apply to traditional self-storage and the rental of space.

Conclusion

Clearly, the growth of portable storage means that storage companies have recognized a customer need and have acted to provide that service. However, if a storage company chooses to offer portable storage, it needs to understand that it cannot be a simple extension of its self-storage business, but is a new business altogether, with different responsibilities and liabilities. The key thing to remember from all of this is that when you take the "self" out of self-storage, the rules change, and new rules must be followed.

Scott Zucker is an attorney with the firm of Weissmann & Zucker, P.C. Mr. Zucker, who specializes in self-storage law, is a frequent contributor to Inside Self-Storage and a regular speaker at Inside Self-Storage Expos. He may be reached at (404) 364-4626.

By Neal Gussis

If lenders were baseball players, they would be in the Hall of Fame with all the bases they cover.

As self-storage lenders, it seems we're always looking for something. That's because in order to create the best financing package for your property, we need information--and lots of it--to analyze and underwrite a loan request. For those of you who have financed and refinanced multiple properties, it may seem like we're covering too many bases and always looking for answers to the same questions about operating histories, vacancies, net operating income, environmental issues and facility amenities. We have to ask these questions in order to analyze our credit risk. Loan applications provide us with an abundance of information, but we need to go beyond the application to truly understand your property and its operations.

For many, it may seem the lender requests too much information for a property, especially for one with a long track record of good performance. At some point, every self-storage facility owner--even financing and refinancing veterans--has probably questioned how a lender determines a loan amount, its interest rate and its terms.

Lenders have matured along with the self-storage industry. The lending community's underwriting and analysis expertise has become more sophisticated, and the industry's established lenders are extremely knowledgeable about facility strengths and weaknesses. The rating agencies and investors who buy securities originated by conduits (or securitized lenders) and collateralized by self-storage mortgages have also become more sophisticated. And, as we have become more sophisticated, the number of questions we ask potential borrowers seems to have increased accordingly.

But you shouldn't feel like a minor leaguer when you begin a loan transaction. You can help yourself during this process and better understand how to cover the bases. There's no doubt that, with basic financing-process knowledge, you can optimize permanent financing for your facility.

The Basics

There are fundamental pieces of information we need to process a loan request. The more you know about our requirements, the smoother the transaction and the less frustrated you may be with the lender.

We created a game plan to help you cover your financing bases. The plan can help you understand a lender's requirements and prepare you for a smoother loan transaction. Take a few minutes to complete this game plan. You may see some real benefits the next time you seek financing, such as with a lower interest rate and/or a higher loan amount. It can also save you time.

Before we review the game-plan elements, you should recognize that no two deals are alike. You can't stack your transaction up to another self-storage deal and expect to achieve an apples-to-apples comparison. Every facility and borrower is unique.

The game plan includes seven categories:

• Loan information
• Property information
• Borrower/principal information
• Operating history (books and records)
• Market strength
• Neighborhood characteristics
• On/off-site management

Let's see how your loan request stacks up. The object is to shoot for a low score.

Loan Information

Your loan information includes three main factors:

1. Loan amount. A lender's earnings are primarily based on loan volume. Larger loans are generally more profitable to financing institutions. Is your requested loan amount:

a) less than $1 million? (3 points)

b) greater than $1 million? (2 points)

c) greater than $2 million? (1 point)

d) greater than $4 million? (0 points)

2. Loan-to-value ratio (LTV). This measures your equity level. A lower LTV means you put more equity at risk, thus creating a better credit risk for the lender. Is your LTV:

a) More than 75 percent? (3 points) (Loans for LTV ratios this high are frequently not available.)

b) 70 percent to 75 percent? (2 points)

c) 51 percent to 69 percent? (1 point)

d) less than 50 percent? (0 points)

3. Debt-service coverage ratio (DSCR). This is a ratio of the property's net cash flow (NCF) to debt payments. Note: Lenders generally include in expenses an imputed capital reserve of 15 cents per rentable square foot. While lenders' thresholds vary, a higher DSCR is more desirable. Is your DSCR:

a) less than 1.30? (4 points)

b) 1.30 - 1.40? (3 points)

c) 1.40 - 1.50? (2 points)

d) 1.50 - 1.75? (1 point)

e) greater than 1.75? (0 points)

Property Information

This includes six main factors:

1. Property condition. Is your property:

a) in need of repairs and/or capital improvements? (2 - 4 points)

b) well maintained overall? (0 point)

2. Size. Is your property:

a) less than 40,000 rentable square feet? (1 point)

b) more than 40,000 rentable square feet? (0 points)

3. Location, Exposure, Visibility and Accessibility. Is your property:

a) Poor: poor access, limited exposure, minimal signage? You will need to explain the facility's viability. (3 points)

b) Average: has good exposure, but average accessibility, average signage? (1 point)

c) Good: located on a main arterial street and easily visible and accessible? (0 points)

4. Amenities. Does your property:

a) lack a management office or fencing? (5 points) (Note: Limited financing available.)

b) have a management office and is fenced, but amenities are inferior to the competition? (2 points)

c) fenced, have a management office and other amenities comparable with local market? (1 point)

d) have state-of-the-art amenities, superior to local competition? (0 points)

5. Zoning. All zoning variances and permitted uses, a certificate of occupancy and the ability to continue operating as self-storage should be disclosed to the lender. Your property is:

a) not zoned appropriately for self-storage or does not have required permits or certificate of occupancy. (5 points) (Consult with lender.)

b) appropriately zoned and has all required permits as well as a certificate of occupancy. (0 points)

6. Environmental. There are a host of minor and major issues regarding environmental compliance. For this game plan's purposes, your property either has:

a) environmental issues. (5 points) (Consult with lender.)

b) a "clean" environmental report. (0 points)

Borrower/Principal Information

Even with non-recourse financing, lenders closely scrutinize the borrower's and principal's financial histories for creditworthiness. You and your principals have:

a) past or current bankruptcies, major credit problems or major litigation. (5 points) (Consult with lender.)

b) minor credit issues or limited net worth. (1 point)

c) a strong credit history and high net worth. (0 points)

Operating History (Books and Records)

Here, lenders review three key areas:

1. Organized records. Do you have complete and organized records for your facility's historical operating results? Do you also have all required operating and organizational documents? If no, give yourself 1 to 3 points, if yes, give yourself 0 points.

One way to improve your income and expense record-keeping capability is to utilize the standardized "Chart of Accounts" offered by Self Storage Data Services (SSDS). Call (626) 792-2107 for more information.

2. Average occupancy. Is your average occupancy:

a) less than 70 percent? (3 points) (Consult with lender.)

b) 70 percent to 80 percent? (2 points)

c) 80 percent to 90 percent? (0 points) (Note: Most lenders do not count average occupancies above 90 percent in establishing loan amounts.)

3. Net operating income (NOI). This is the key measure of your facility's income-producing capability and your ability to repay a loan. Is your facility's NOI:

a) declining? (2 points)

b) stable? (1 point)

c) increasing? (0 points)

If your property is in lease-up, consult with lender to determine when permanent financing may be available.

Market Strength

In general, a lender's analysis includes a review of:

a) occupancy consistency (a high consistency level is desirable).

b) competitive pricing (whether your rents are proportionate to the competition and relative to your facility's amenities).

c) saturation level (the square footage of rentable space in proportion to the area's population).

d) future competition (the amount of supply being built and being proposed in your marketplace as well as availability of appropriately zoned land suitable to construct self-storage).

If your facility's market strength is favorable, give yourself 0 to one point, if not give yourself 2 to 3 points.

Neighborhood Characteristics

Lenders want to ensure your neighborhood supports a self-storage facility. Does your neighborhood:

a) not have a mix of nearby residential, multifamily and commercial properties that will support your facility? (3 points) (Consult with lender.)

b) have this combination of supporting properties? (0 points)

On/Off-Site Management

Strong off-site management is extremely important. Good management typically creates a solid on-site team, optimizes operating results and preserves the physical property. Management should have prior successful experience in managing self-storage and/or other income-producing properties.

If your off-site management characteristics are not noted above, give yourself 5 points (consult with lender), if they are give yourself 0 points.

Scoring

Remember, this is only a guideline and does not represent a complete scenario of how a lender determines your loan; however, if you scored:

a) 5 or below: You appear to be in the best position to obtain financing at the lowest market rates available.

b) 6 to 15: You can obtain attractive financing quotes.

c) above 15: Your financing choices may be limited or you may want to improve areas where you scored poorly.

If you had any "consult with lender," notations, you may have an issue that could preclude you from financing at this time.

Neal Gussis is a senior vice president at First Security Commercial Mortgage (FSCM) in Chicago, where he directs the firm's self-storage financing programs nationwide. FSCM is one of the country's largest and most established self-storage lenders. Mr. Gussis can be reached at (888) 425-9310.

By Joe Fordonski

Finding the type of financing that best fits their needs is key to self-storage owners today. Given the volatility in the commercial mortgage backed securities (CMBS) market over the past 12 months, lenders are offering different types of financing to meet their borrower's needs. This type of environment allows the borrower great flexibility.

Fixed-rate financing is still the most common financing vehicle. This structure is most common with those owners looking to hold on to the property for a long time. Fixed-rate financing can be achieved through a lender who has a CMBS division. CMBS loans are pooled and securitized on Wall Street and provide some of the lowest-rate financing in the market. The overall interest rate is determined by adding a spread (also called a margin) to the 10-year Treasury rate. The loan is typically amortized over 25 years with a balloon payment due at the end of 10 years. Again, this option fits best for borrowers planning to hold their facility for a long period as a fixed-rate loan can contain considerable prepayment penalties.

If you have recently acquired a poorly managed facility or are expanding your facility and experiencing rapidly increasing net operating income, an earnout structure may better fit your needs. An earnout loan allows you to qualify for more loan dollars, based on certain benchmarks, within 12 months of the initial funding. This second funding can provide you additional dollars once net operating income has increased, although typically at a higher interest rate.

There are options available through a non-CMBS division of a lending institution. You may want to consider a bridge loan if you plan on increasing the net operating income of the facility then sell it in the near future. This kind of loan will usually consist of a variable interest rate and a short term (typically three years). Instead of being priced over the Treasury rate, bridge loans are priced over LIBOR. Unlike a CMBS loan, bridge loans have minimal prepayment penalties. In most cases, facilities financed with a bridge loan are either sold or refinanced with a CMBS loan at the end of their term.

Once you have decided on what type of financing best suits your needs, a financing package must be prepared a submitted to the lender. A package should include the following items:

• Brief summary of your financing request and the history of the property;
• Description of the property;
• Photographs of the property;
• Occupancy reports for the previous 12 months;
• Operating statements for the past 12 months and previous three calendar or fiscal years; and
• Financial statements and resume of the borrower.

It is very important to provide good historical records and explanations for the property. Complete records will benefit you as they assist the lender to adjust income and expense levels up or down, which, in turn, affects the level of loan dollars available. For example, the facility may have required repairs in 1998 that are not typically classified as "ongoing" or "routine" maintenance. Loan dollars can be maximized if these types of expenses can be documented. The lender will exclude these types of items from its underwriting, thus enabling maximum loan dollars to be achieved. Failure to identify non-recurring items will affect the amount of underwritten net operating income.

Once the lender has reviewed and underwritten your loan package, a formal application will be prepared for your review. This application should be reviewed by you so that all the components of the transaction are thoroughly understood. You should also review the "Glossary of Commonly Used Terms" on page 32. Understanding these terms will help you to better negotiate the loan application and better understand the structure of your loan.

The two most important qualifications in the loan application in determining your final loan amount are the loan-to-value (LTV) and debt service coverage ratio (DSCR) requirements. LTV is expressed as a percentage and compares the loan amount to the value of the property as determined by a third-party appraiser. In most cases, lenders will not exceed 75 percent. Some lenders, however, will lend up to 80 percent. DSCR is a ratio that compares annual net operating income to annual service payments. Most lenders require a minimum DSCR of 1.25:1.00.

After the loan package has been submitted and the loan application executed, it is time to move to the actual loan closing. Typically, this process includes:

• Submitting due-diligence items;
• Ordering an appraisal report;
• Ordering a phase-one environmental report;
• Ordering an engineering or property-condition report;
• Ordering a seismic report (depending on property location);
• Loan document preparation.

The lender will provide the borrower with a substantial list of items required in order to begin a thorough analysis of the loan request. The lender will require such items as operating statements, occupancy reports, partnership agreements, management agreements and many other items deemed necessary for review. At the same time, the lender will engage third parties to prepare the appraisal, environmental and engineering and seismic report (if required).

The appraisal will be used in determining whether or not the loan-to-value requirement has been achieved as presented in the application. The engineering report will identify any immediate repairs required and will also verify the amount of reserves the lender will be required to escrow. The phase-one environmental report details any environmental concerns at the property. In the event the phase one uncovers items that require further investigation, the borrower will required to have these completed prior to the funding of the loan. Depending on where the property is located, the lender may require a seismic report. The seismic report will determine a probable maximum loss (PML) percentage. In most cases, if this number exceeds 20 percent, the lender will require an earthquake insurance policy be issued prior to closing.

Once all the reports have been received and the property visited, the lender will review the due-diligence items submitted and submit a credit committee package summarizing the deal. This package will be reviewed by individuals within their lending institution who have authority to approve a loan. Typically, once the loan is approved, an approval letter is sent to the borrower, and legal counsel will be engaged to prepare loan documents. Following review and negotiation of the loan documents by the borrower's counsel, the loan should be in a position to close within a few weeks.

It is important to remember that the loan process can be rather time consuming. Substantial information must be gathered prior to closing. It will benefit you to maintain thorough and accurate records at all times. This will enable you to obtain optimum financing for your facility. The "typical" loan process takes approximately 90 days. Allow 30 days to prepare the loan package and identify a lender whose program best suits your needs, and another 60 days for the loan to close. The key to the whole process is identifying up front what your exact financing needs are.

Joe Fordonski is responsible for the analysis and negotiation of self-storage loan requests at FINOVA Realty Capital (formerly Belgravia Capital) in Irvine, Calif. For more information, call (949) 442-8000; www.finova.com.  

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Glossary of Commonly Used Terms
Understanding your loan application

Amortization--The number of years necessary to pay the loan balance down to zero. This includes principal and interest payments. A typical fixed-rate loan is amortized over 25 years.

Assumption/Transfer Provision--Most lenders will allow a one-time assumption of the loan subject to the lender's approval and payment of a 1 percent fee.

Debt Service Coverage Ratio (DSCR)--A ratio used to express the relationship between annual net operating income and annual debt service. Most lenders require a minimum DSCR of 1.25:1.00. For example, if the annual debt service is $100,000, the annual net income has to be equal to or greater than $125,000.

Impound/Escrow Account--An account used for the deposit of valuable considerations, such as money. The most common use is for the collection of property taxes and insurance premiums.

Index--The instrument used in determining the base for the cost of money. The Treasury rate is most commonly used for fixed-rate loans while the LIBOR index may be used for variable-rate transactions.

Loan-to-Value (LTV)--The percentage amount borrowed in the acquisition or refinancing of a property. The value of the property is determined by a third-party appraiser.

Margin--The spread between the index and interest rate.

Mortgage Constant--An equal annual payment, expressed as a percentage, that will amortize the principal and pay interest over the life of the loan. It is important to look at the application and determine if there is a minimum constant required by the lender.

Prepayment Premium or Penalty--A penalty for an advanced payment on a mortgage. The most common penalty is known as defeasance, which is the substitution of Treasuries for the remaining payments on the loan.

Reserves Account--An account to collect reserves for capital improvements. Most lenders will require that an account be established to collect reserves in accordance with the report prepared by a third-party engineer. In most cases, there will be a minimum collection of 15 cents per square foot, regardless of the results of the engineering report.

Securitization--A securitization involves a lender bundling similar mortgages that are analyzed by rating agencies and then used as collateral for bonds purchased by institutional investors. This type of financing is ideal for borrowers looking for low fixed-rate financing.

Single-Purpose Entity--A requirement by all CMBS lenders, a single-purpose entity restricts the borrowing entity from owning any other facility other that the property being financed.

Term--This is the period of time between the borrowing date and due date. In most cases, the term of the loan will coincide with the Treasury bill. For example a 10-year loan will be priced over a 10-year Treasury bill.

By Harley Rolfe

Pricing is one of our most useful yet dangerous of business acts, and Halloween provides the perfect analogy. If you are only going to do one thing to change your marketing "mask," pricing is your choice. The plan is to be sure that there are "treats." The assumption here is that you want to maintain and improve your market stance without changing your actual offering.

You face a conspiracy aimed at making your life difficult. When the only difference among products is price, you are playing their game--that of the government and customers. The customer wants the lowest price and he also wants the buying decision to be simple, so he needs to regard all the choices as the same. Then he can play one rival off the others and just compare prices. As to the "Feds," U.S. businesses agree to abide by the anti-trust laws. These are mostly aimed at maintaining competition. Most of these laws were written as a result of excesses by suppliers and are aimed at what many aggressive marketers want. We must figure a way to prosper without running afoul of the Feds and still attract sufficient prospects to keep the joint full. It's what we marketers do for a living. Are we up to the task?

Time out for a moment here: You have a "sleeper." Self-storage units don't cost much. A 10 percent advantage on a $40/month unit is $4--no big deal. The real problem is that the prospect needs some basis on which to make his decision. Self-storage prices are not, by themselves, significant; they become so only if there is no other basis on which to make that decision.

Engineers use the laws of physics to make things work; we marketers use the laws of human nature/behavior. All animal life (that's us) seeks to conserve the expenditure of effort/resources to achieve its ends. "Price" extracts resources from the buyer. His normal reaction is to resist or minimize them. He can't help himself: It's as fundamental as dealing with hunger, maintaining body warmth, reproducing, etc. Concern about price is visceral.

But what is price? There are at least three elements: the price in dollars, the price in shopping time and the price in analysis effort of various choices. The prospect wants the lowest and/or simplest. This is further complicated for us because, in many cases, he doesn't want a self-storage unit in the first place. The buying process is a hassle when the prospect associates it with little pleasure, so attempts by us to deliver our pitch can create enmity. When the prospect calls asking for the rate on a 10-by-20, he's already decided that the location is OK--he just wants the cheapest price. We must create our offerings so that there is legitimate need (as seen by the buyer) not to provide this information.

Price plays many roles. It is a powerful attention-getter. It is used exhaustively by many retailers, such as grocery stores, auto dealers and furniture dealers. Mass marketers such as Kmart and Wal-Mart make their living by suggesting that all their prices are lower. Check the Wal-Mart's motto--"Always low prices." The secret is the whole price. An important part of the prospect's resource allocation is his personal time. If Wal-Mart can get the prospect to make a trip to its store, the store has won. So, imply low price, but deliver convenience. How about self-storage? Same thing.

But how do you do that with a one-dimensional product? Create a choice that depends on the tenant's attitude. Here are some approaches:

• Offer differing rates based on the value differences of units in the facility. Distinctions might be style of access (man-door, overhead, roll-up), width of driveway, position in the building (hallway, direct-driveway access, grade-level or upstairs, etc.) Proper presentation of these choices sets up your request that the prospect come take a look for himself. In this case, the fact that most purchasers of self-storage are not familiar with our facilities helps to generate curiosity--and a visit.
• Offer the prospect varying rate levels depending on the length of time he will stay. Ideally, every prospect will qualify. You can't quote a price until the prospect tells you what the length of his tenancy will be. That requires consideration by him. It interrupts his inclination to just ask for the price of a 10-by-20 and hang up.
• Use rebates to activate your approach. Conceived in the late '70s and early '80s, rebates have become the choice for discounting. The appeal rests on the idea that the customer has earned the rebate by purchasing and following up on certain conditions. There is a measurable "rush" when the check shows up. Capitalize on this good feeling by pressing the ex-tenant for referrals.
• Good marketing practices discourage open-ended discounting. Bad marketing practices are an invitation for the prospect to try to bargain you into a still lower price. Case in point is the "half-off-first-month" discount. A better practice is to place conditions on your offer that "firewall" or contain it, such as offers that end on the 30th of the month, implying that the offer will come to an end. This adds both urgency to the appeal and marks it as being temporary or unusual. It is never good practice to discount your main product outright as it implies that there is something wrong with your regular price. Also, it isn't good for existing tenants to see that newcomers are paying less.
• Watch out for employees flirting with fraud, for instance, using a low price to induce a visit to the facility and then announcing that they are out of the units being promoted, but have a similar one for an enhanced price is an absolute invitation for trouble. This tactic is likely to work pretty well because the prospect is usually in a hurry and cannot make use of a restitution offer calling for the facility to call when the correct one frees up. Plus, the prospect has already invested in a trip to the facility. This fraudulent practice may yield results, but the penalty can be cataclysmic. This why I suggest that aggressive owners closely monitor marketing. You should get a primer conversation on the dos and don'ts from your lawyer.

Price does many things well. It gets attention, it permits the offering of choice, it sets the terms of your tenant contract. But it can also get a facility into a peck of trouble if not used carefully. Use pricing creatively, but watch out for spooks!

Harley Rolfe is a semi-retired marketing specialist whose career included executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book Hard-Nosed Marketing for Self-Storage.

By Maurice Pogoda

It's no secret that we are experiencing a self-storage boom. Occupancies are high, rents continue to increase, and most owners have cash flows they never dreamed possible. With business so good, why would anyone consider selling? And, if they did decide to sell, why bother with a broker? As usual, the answer comes down to time and money.

A Growth Industry for the New Millennium?

What a difference a few years can make: Just seven or eight years ago many owners were worried about holding onto their properties in the face of the Savings-and-Loan crisis. In contrast, the late 1990s have been characterized as a period when self-storage appears to have come into its own. Wall Street, institutional investors and a multitude of individual investors have all discovered the viability of self-storage as a real-estate form that can achieve exceptional returns.

The late 1990s have been a seller's market. While hordes of first-time self-storage buyers search for the right property, real estate investment trusts (REITS) became the buyers of choice for any well-located property greater than 40,000 square feet. REITS were so aggressive in their desire to secure market share that prices rose to unheard of--and what many considered to be unsustainable--levels. The fall 1998 crash of the securitized loan market hurt the REITS' ability to raise capital, effectively taking them out of the market for about six months. Starting in the spring of 1999, the REITS slowly began to search for new properties, but were not paying the same prices as before.

As sale prices increased above replacement cost, investors and developers, many with no self-storage experience, began searching for land to build new properties. In the mid-'90s, after years with little or no construction, new facilities began to mushroom. High consumer demand and cheap money fueled the greatest self-storage building boom since the late 1980s.

For those of us who lived through the real-estate depression of the early '90s, it seems like "deja vu all over again." Some areas have already become saturated, with occupancies starting to dip. Occupancies in the 80 percent to 90 percent range have once again become commonplace. Rental rate increases, while commonly 5 percent to 8 percent every year in the mid-'90s, have slowed down considerably in all except select locations or on specific sizes that tend to vary by area.

Have You Missed the Boat?

If you have not sold your facility, but are considering selling, your local market conditions will determine if you can achieve a high sale price or not. The industry psychology stills favors the seller. We are not yet in the downward phase of the real-estate cycle as is evidenced by relatively low interest rates and the strong national economy. Buyers still consider self-storage to be a "hot" property type.

The greatest concern to a potential seller is overbuilding. It is a concern not just for the new self-storage developer, but to existing stores as well. While it is likely that a new developer has the most to lose (higher land costs, higher construction costs and no occupancy), the owner who would like to sell his store will not get the highest price if he is in a market with falling occupancies. The owner with an older property can probably weather lower occupancy because of his lower initial costs and a base of existing tenants.

An area with falling occupancies will also have decreasing rental rates as competitors resort to discounting prices to attract tenants. This vicious cycle is nothing but trouble for the owner who wants to sell. Most buyers look at current and future income. If your occupancy and income are going down, you will not receive the same price that you might have before new competitors spoiled the fun.

If you are blessed by being in a market with little or no new competition, there is probably no better time to sell than now for the reasons mentioned above (low interest rates, strong economy, etc.). If you are aware of new competitors considering entry or about to start construction, it may not be too late to still achieve that dream price.

How Can a Broker Help?

A good broker can help you realize a sale price considerably higher than you might receive on your own, even net of commission. A self-storage specialist will know how self-storage properties are sold (e.g., capitalization rates), who the buyers are--both locally and nationally and--in general, will understand the nuances of the industry.

A knowledgeable self-storage broker will guide you and the buyer through what is often a very complicated process. He will be comfortable dealing with attorneys, bankers, inspectors, the title company, environmental company and surveyor.

The first place to start in finding a good broker is to ask some questions:

• Are they properly licensed?
• Are they specialists in self-storage brokerage?
• Will they supply you with references?
• How many facilities have they sold?
• How will they market your property?
• What are their fees and what do they include?

Finding a broker who specializes in self-storage is of paramount importance. Giving your friend at the local Century 21 office your listing will cost you time and money.

The Sale Process

Once you have hired your self-storage sales specialist, he should help you set a realistic sale price, allowing some room for negotiation, and put together a marketing program that combines advertising, direct mail, personal contacts and property showings. This is a targeted program focused on the most likely prospects for your property.

The first step in this program is a detailed brochure for potential buyers. This package should contain all the necessary information that a buyer will need to make an educated offer on your property. It should include: property address, directions, lot size, information about the area, zoning, a unit mix with rental rates and occupancy by size, current income and expense information for the past 12 months and prior year, an as-built survey of the property, location maps and pictures of the property.

Once you have approved the marketing brochure's contents, your agent should search his database of self-storage buyers, contact other self-storage brokers, advertise in appropriate mediums and arrange showings of the property with the most qualified candidates that will consider buying your property. If the above process is followed by a qualified self-storage sales specialist, you will most likely have numerous offers to consider. Now the fun begins.

Negotiating the Sale

Negotiating the sale can be the most challenging part of selling. The sales agent can be most useful in guiding both parties through what can often be a very tense situation. The agent's value becomes apparent by the skill they show in helping the seller and buyer achieve mutually agreeable price and terms without rancor. The agent is the "buffer" between buyer and seller.

The period between the signed purchase agreement and the closing is usually several months. During this time, known as the "due-diligence" period, the buyer will examine your physical property and financial records and obtain financing. A good agent will be instrumental in helping make this as smooth a process as possible. Coordinating the closing with the attorneys, title company, mortgage company, buyer and seller is the final task performed by your self-storage sales specialist.

So, Do You Really Need a Broker?

It depends. Theoretically, a broker that specializes in self-storage sales will expose your property to qualified buyers, which will result in more offers and a higher price. He will also save you much time and effort by coordinating the myriad of nitty-gritty details inherent in any transaction. If you value your time more than the cost of the commission, it is well worth it to hire a qualified broker. If you consider yourself to be an "insider" who is well-versed in real-estate transactions, knows the "players" in the industry, understands sales trends, is a good negotiator, and is willing to do a tremendous amount of legwork that will consume an inordinate amount of your time, selling your property yourself may be the right way to go. If not, leave it to the professionals.

Maurice Pogoda is president of the Pogoda Companies based in Farmington Hills, Mich. Pogoda specializes in the brokerage and management of self-storage facilities in the Midwest. The company has brokered more than 50 self-storage sales and currently manages or owns 22 self-storage facilities, with two more under construction. For more information, call (800) 326-3199.

By Kim Alton

With the year 2000 fast approaching, all self-storage owners and management companies need to take a hard look at all areas of the self-storage market. In the following sections are the questions you need to ask yourself to decide if you can stay successful in a highly competitive industry. No longer can you remain complacent and be happy with 100 percent occupancy. With stiff competition and modern technology, self-storage will continue to change.

Equipment

At your facilities, are you using the proper equipment to manage the accounting of the site? The days of manual accounting and file boxes are obsolete. Take a look at the accounting capability of any major software package. Most programs are running in the DOS mode and are quickly becoming outdated. Consider a Windows-based product for all of your management needs. This includes a gate system and credit-card program that will interface with your facility-management program. Credit-card terminals and printers are becoming a thing of the past. The accountability each one of these programs provide--together and separately--will also force the manager to conduct business in such a way to help reduce some of the theft that followed the old computer programs.

There are more areas that can be audited and many more ways to spot-check employees. Also involved with the new programs are the management reports available to owners that analyze and compare multiple sites. If you are using a computer program, make sure you have investigated the Y2K compliance of the program. Do you need to send for a disk or download a patch? What about the gate system--will it shut down as you are celebrating the arrival of the new year?

Management

Is your staff properly trained? Do you have a strong policy manual? Are your managers up to speed on all of the marketing ideas available to them? Gone are the days when managers played the role of mere overseer. Business degrees and experience are becoming necessities for this position. You will want your staff to be knowledgeable enough to be on the same page as the company.

Facilities

Make your facilities a site of one-stop shopping. Most potential tenants are hurried, hot, moving--they are not listening and do not have a lot of money to pay upon a move-in. You will want to assure that renting a storage unit from your manager is the easiest thing they do all day.

Is your facility ready? To offer packing supplies, boxes and locks is not only convenient for the customer, but it also generates revenue. Offering mailbox rentals will keep tenants for a longer period of time, and offering records storage will attract a strong business-tenant base. When you accompany service with door alarms, climate control, moving aides, electronic gates, individualized security codes, cameras, professionally dressed and trained managers, and a clean, sparkling facility, you will only create a win-win situation for everyone. Customers are your bread and butter. Ask what you can do for them, not what they can do for you.

Kim Alton is the assistant operations manager and trainer for C.N. Lyons Development Company based in Newport Beach, Calif.

By Jim Chiswell

To Plan Ahead, You Need to Look Back

Many of us are busy putting the final touches on our budgets and goals for the new year. However, are you looking back over the results of this year and really comparing what you actually accomplished to what your target was? This process is not only important in doing the financial budget, but should also be undertaken in planning all the goals you set for the new year.

You planned to repave part of your facility. Did you get it done? Was it on budget? Do you need to do more paving in 2000? Did you update your signage like you planned? Did you design that new Yellow Pages ad? Were your goals for occupancy achieved each month? Did the ratio of phone calls to appointments to rentals increase like you had planned? Did you send your managers to that training course that you promised them? Did you get the maximum benefit from your membership in your state or national industry organization?

Unless you write out specific goals for the new year, you will be just left with the budget as the measuring tool of your success. Take the time to discuss your objectives for the new year with your entire management team. Get them involved and keep them involved in creating the budget and the other benchmarks that you set for the year ahead. You will be surprised all that will be accomplished when everyone knows the targets to shoot for in 2000.

The Final Countdown to Y2K

OK, I know you are sick of hearing about the Y2K thing. It still remains a mystery to me how some individuals and businesses have just ignored this issue completely in their self-storage operations. I just wanted to wish you luck at the end of December. There is still time to think through what could happen and to develop some contingency plans, just in case. Drop me a note, fax or e-mail with your Y2K stories sometime in January.

Your Customers Are Changing? Do You Know It?

As I travel across the country, I have been struck by comments from owners and managers about some of the differences that they are seeing in their customer base. A USA Today story from Beloit College in Wisconsin brought home this very point to me. The story commented on the frame of reference that this year's class of college freshman have with which to view the world around them.

Members of the class of 2003 have never dialed a phone. They have only known one Pope. Space travel has always included women. A woman has always been on the Supreme Court. "Moonwalk" to them is something that Michael Jackson does, not Neil Armstrong. They have no idea who "Ma Bell" is. They don't understand why Solidarity is spelled with a capital "S," and they have never heard anyone say "Book 'em, Dano," "Good-night, John-Boy" or "Kiss my grits" on prime-time TV.

Are you paying attention to how your customers are changing? Are you adjusting your operations to meet their needs? If not, as you are doing your planning for next year, make it a priority to determine how these shifts can impact your business and how you can take advantage of them in 2000.

Still Time to Participate in Traffic Study

I want to thank all of the individuals and companies that have already responded to my request for average daily traffic counts from their facilities. I am tabulating the results and finalizing the report; however, there is still time if you want to participate in this industry-wide study. Within the next two weeks I would need from you, on an anonymous basis should you so desire, the following information:

1. Total rentable square footage in your facility
2. Number of total units
3. Percentage of units rented
4. How many customer vehicles come into your facility on a daily or weekly basis.

I am asking owners and/or managers to participate in this study with me and Inside Self-Storage. Please send your information via mail to: Chiswell & Associates Ltd, 1260 N. Forest Road #A2, Williamsville, NY 14221; fax (716) 634-2428; e-mail [email protected]. Everyone who participates will receive a complete report right after the first of the year.

Take the Time to Talk

Back in August, my mom, Nora, suffered a stroke. As I write this column, she is making good progress. However, in those first couple of critical days, I was forced to contemplate the possibility of her passing. In those quiet and private moments, I was so grateful that I had taken time, over the years, to express my love to her. My closing Thoughts From the Road for 1999 is to encourage all of us to grasp the fact that waiting until tomorrow to show others we care about them could be too late. Take the time, today, to reach out to your loved ones because, sometimes, we are not given a second chance.

Thanks to everyone who has written or called me about this column. I have enjoyed sharing these thoughts with you. Enjoy your New Year's celebration and I'll see you at the Las Vegas Expo in February.

Jim Chiswell is the president of Chiswell & Associates of Williamsville, N.Y. Since 1990, his firm has provided feasibility studies, acquisition due diligence, and customized manager training for the self-storage industry. In addition to contributing regularly to Inside Self-Storage, Mr. Chiswell is a frequent speaker at Inside Self-Storage Expos. He can be reached via e-mail at [email protected] or by calling his office at (716) 634-2428.

By David Wilhite

Are you ready for winter? Freezing temperatures, blustery winds, ice, sleet and snow can all cause severe damage to your self-storage facility and property, especially if you are not prepared for them. Winter conditions can present severe exposures to your building(s) and the systems necessary to keep your self-storage facility running. Wet and icy conditions can also increase your liability risk by presenting greater potential for your tenant to slip or fall.

To give you some idea of just how damaging cold temperatures and heavy snow can be, consider the blizzard of 1993, which was the fifth most costly insured catastrophe in the history of the United States, causing an estimated $1.75 billion in damage. Much of the damage attributed to this storm--frozen pipes, roof collapse due to the weight of snow, and interior water seepage due to blocked roof drains--could have been reduced or eliminated had business owners been properly prepared. Unfortunately, due to the late date of the storm (mid-March) and its unusually wide geographic coverage, many unsuspecting business owners found themselves either unprepared or uninsured, and suffered major losses.

When considering the risk that winter weather poses to your self-storage facility, keep in mind that significant property damage may not necessarily occur only in those states that experience the harshest winters. Regions in which cold weather is the exception may suffer even greater losses. For example, an Arctic cold wave hit the Deep South in December of 1996, plunging temperatures toward record lows. At that time, below-freezing conditions extended from the citrus country in Florida, all along the Mexican border, reaching far into Texas and causing major losses. (Of course, northern locations are most likely to be hard-hit on a regular basis. That same year, Minnesota and Iowa experienced record blizzard conditions, with wind chills reaching 55 degrees below zero; and many residents of the Dakotas were stranded after two days of heavy snowstorms left drifts at rooftop levels).

Don't wait until disaster strikes--now is the time to take preventive action to minimize your risk exposures and reduce your damage claims. The following checklist can help you get started on a safe, loss-free winter.

Winter Weather Precaution Checklist for Storage-Facility Owners

Buildings

• Maintain indoor temperatures above 40 degrees in heated areas to prevent pipe freeze-ups.
• Ensure that doors and windows are weather-tight and secure any unnecessary openings.
• Inspect remote areas for possible freezing and keep portable heaters on hand.

Roofs and Gutters

• Assess your roof's capacity for excessive snow loads (with the help of a structural engineer) and keep levels within safe bounds.
• Monitor snow levels in roof areas susceptible to large drifts and clear excess accumulation immediately.

Heating Systems

• Examine the entire heating system on a weekly basis during cold weather and repair any deficiencies immediately.
• Ensure heating equipment is capable of maintaining building temperatures above freezing at the coldest point within the building.
• Boilers: Completely drain idle equipment, elevate low points and dead ends, and check all service lines for freezing. Install heat tracing around control-line transmitter boxes and piping that carries water glass.

Water Lines

• Regularly clear snow away from sprinkler-control valves, vents and other vital equipment.
• Leave outside water faucets open to drain.
• Install snap-on insulation on pipes subject to extreme wind chill.

Fire-Protection Equipment

• Establish a regular maintenance program to ensure that snow and ice is cleared away from hydrants, sprinkler-control valves, smoke and heat vents, and other essential equipment so that all equipment is accessible during emergencies.
• Lubricate all sprinkler-control valves and locks to prevent freezing.
• Label the locations of outside sprinkler-control valves and hydrants for easy visibility.

If you do have a loss, take steps to control the damage. Move property out of harm's way and protect it from the elements. Contact your insurance agent or broker as soon as possible. Remember, no matter how large or small your self-storage facility may be, securing adequate coverage is essential for protecting your business and your peace of mind.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc. Universal offers a complete package of coverages specifically designed to meet the needs of the self-storage industry, including loss of income, employee dishonesty, comprehensive business liability, hazardous-contents removal and customer storage. For more information, contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (480) 970-6240; www.vpico.com/universal.

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Winter-Weather Terminology

Know the terms used to forecast winter-weather conditions.

Winter-Storm Watch--Severe winter weather is possible in the affected area, which may include snow, ice or dangerous wind chills.

Winter-Storm Warning--Severe winter conditions have begun or are about to begin in your area.

Blizzard Warning--Snow and strong winds (generally above 35 mph) will combine to produce a blinding snow (near zero visibility), deep drifts and life-threatening wind chill.

Heavy-Snow Warning--Snow accumulations of six inches or more in 12 hours or eight inches or more in 24 hours is expected.

Freezing-Rain Warning--Significant, and possibly damaging, accumulations of ice are expected.

Snow Advisory--New snowfall of 15 inches is expected.

By Cary McGovern

The most important issue in operating a commercial records business is limiting your liability. This article discusses what you need to know and how to protect yourself.

What Do I Need to Know?

Records are the memory of an organization. They are very valuable because they are used in courts of law, used to prove regulatory adherence and to document internal controls in business systems. Records are defined as "the results of business transactions." The record documents what happened during the transaction. In order to be used as proof, it must have integrity; that is, it must not be tampered with. The technical term used to describe this attribute is "unalterable."

So Why Is This Important to Me?

Any commercial records center operates as a custodian of records. A custodian is generally considered a caretaker. That responsibility must be clearly defined in your contract. So the first issue that you must consider is requiring a contract with every records-storage customer. Your self-storage contract is not appropriate for records management or storage.

The Contract

The contract wording should protect you against any liability. Although you may choose to have your attorney draft a contract from scratch, that decision may be an expensive one. The records-management business has been in existence for more than 40 years. The experiences of the industry have provided a proven basis for contract design. The good news is there is a standard, industry-wide contract form.

PRISM International (formerly the Association of Commercial Records Centers) has drafted a standard contract form for use by its members. This contract (or a form of it) is in use by hundreds of commercial records centers worldwide. Membership in PRISM is inexpensive--only $500 annually for new members. This $500 investment will save you more than that in legal fees for the development of your contract form. This contract is tried and true and has been tested successfully many times; however, PRISM still recommends that any contract should be reviewed by your attorneys and not just used as provided. There may be additional wording required to give you protection. Additionally, PRISM requires you to sign a form to hold them harmless for using their standard contract form. Joining PRISM today could be the best short-term investment that you can make in your records-management business.

Contractual Issues

Limitation of Liability. The most important issue is the limitation-of-liability statement. The industry standard is $2 per carton or storage unit. This is a very important factor. Records may be worth millions of dollars to a customer to defend himself against litigation or regulatory audit. Since many records cannot be reconstructed, it is impossible to give them a dollar value. Needless to say, your goal is to fix value at a reasonable dollar amount. Since this is the industry standard, customers have no option.

Excess-Valuation Insurance. You may choose to offer your customer excess-valuation insurance. The customer contracts directly with an insurance carrier to provide some valuation above the $2 per carton that you guarantee. Many commercial records centers offer this excess-valuation insurance through a broker and share in the insurance revenue.

Price-Escalation Clause. Your contract should clearly state how prices are increased and what criteria those increases are based upon. If you include this in your contract, you will avoid futile arguments with customers concerning pricing.

Bonding and Drug Testing Employees. You should include employee bonding and drug testing as part of your employment requirement. Bonding is inexpensive, shows your commitment and will demonstrate your desire to protect their records.

Employee Confidentiality Policy Statement and Training. All employees should sign a confidentiality statement and be trained annually on the company's policy regarding the confidential nature of your customers' records. Typically, commercial records centers have a standard policy statement and a form to sign annually. You should assure your customers that confidentiality is one of your most important priorities.

Access to Records. Your contract should clearly state that it is the customer's responsibility to inform you of changes to their authorized personnel list. You should maintain a list of customer employees that have authority for retrieval or destruction of files. This list should be updated annually or as your customer's employees change. Under no circumstances should records be transferred to employees who are not authorized.

Reference Level. You should not retrieve files from boxes unless you have inventoried (indexed) those files. Since you are the custodian of the records, you are responsible for boxes said to contain certain records. Without an inventory, you may be blamed for files that are missing even though they came to you without those files. Limiting your liability here is an important issue. It will save you a great deal of heartache in dealing with your customers.

Recommendation. I have been in the records-management business for nearly 25 years and have seen some very dumb things. One of the most common in the non-traditional records-management environment such as self-storage or moving-and-storage is the lack of a formal contract. Just recently I visited a records center with nearly 200,000 cubic feet of records and well over 100 accounts that had no contracts with its customers. This is a dangerous practice. In addition to the potential liability that you have, you have absolutely no protection against a customer leaving your facility to go to a competitor.

Your contract should spell out the terms that allow a customer to pull his records out. This is common in the contracts used by the major-market players such as Iron Mountain and Pierce-Lehey. This permanent-removal fee is typically referred to in the industry as the "hostage fee." Although this fee has gotten bad press lately, it is a legitimate fee when reasonably priced. You have invested thousands of dollars in racks, equipment and personnel. You should charge a permanent-retrieval fee for at least the first few years. Without a contract, you will be hard pressed to maintain your accounts. The permanent-retrieval fee gives you leverage and insures that you won't lose money on large transfers of records to a competitor.

Always have a contract. Always fix terms and price to the contract. Never vary from this policy.

Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.