If you are buying, selling or refinancing a self-storage property, you cant have a three-minute conversation without the term cap rate coming up. Everyone acts as if they know what this isa few really do know, many more think they know, and some refuse to admit they dont know. This article should provide a little insight and clarification on the topic.

What is a cap rate? The term is an abbreviation for capitalization rate. It is simply the return an un-financed property yields at a specific value. For example, if a property produces $200,000 in income and you want a 9 percent return on your investment, you would buy it for $2,222,222 ($200,000 divided by .09). The cap rate represents the relationship of the propertys value (price) to its income. Since the numbers are directly related, real estate folks like to talk about cap rates instead of value, since it allows them to compare values of very different properties or property types.

In other words, if someone says one property with a $100,000 income and another with a $1 million income are a 9 cap, he is saying the income from both properties would produce a 9 percent return on their respective prices. The properties are valued the same based on relative income. Alternatively, if one property was valued at an 11 cap rate and other at an 8 cap rate, the fi rst property would be worth much less than the second because the price would have to be lower to generate the higher return.

So, if you know the cap rate and the income, you know a propertys value, right? Well, now things get tricky. Lets refine our understanding.

What Is Income?

The stabilized income used in the calculation of value is not what you put in the bank or report to the government. There are adjustments to be made. First, you do not reduce income by depreciation or debt service (interest and amortization). Second, you subtract from expenses any personal items and add a fair rate for your time spent on the property. (If your miscellaneous revenue exceeds 5 percent of your gross, get some advice, because your situation may be treated differently.) Your adjusted income is referred to as your net operating income (NOI). Cash flow is what you put in the bank after you pay the loan but before you pay federal and state taxes.

What does the word stabilized mean in relation to income? When considering value, i.e., a sale purchase or refinance, the income that produces it must be stable. A couple of examples will show you what I mean. Lets say the Olympics came to town and the contractors rented all of your units at twice your normal rate. That years income would not be normal, or stabilized. Alternatively, income from a year in which fire destroyed half of your units, putting them out of commission for six months, would also not be stabilized. Neither situation represents standard income for the property.

A more typical situation in many markets would be a facility that is 93 percent occupied while others in the market are 78 percent occupied on average. What is stabilized income in this case? It may depend on other factors such as access, location, pricing or management. What is clear, however, is stabilization introduces a large dose of subjectivity to the otherwise simple process of determining value.

There are some shortcuts people use in developing values for selfstorage and other real estate. The most common is the trailing 12 months cap rate. This tactic simply substitutes the average of the previous 12 months NOI for a stabilized one. The assumption is that nothing significant in the facility or market will change. Sometimes this is true, but not nearly as often as the method is used. This shortcut can be risky and can cut both ways. While it may be handy for a quick look, most serious professionals prefer to evaluate all of the information.

There are other items that affect value but are kept separate from the capitalization formula, even though they may relate to future income. These adjustments could include extra land, ground lease, deferred maintenance, and associated businesses. They require a more detailed explanation than I can provide here, but they are important to consider.

What Is the Right Cap Rate?

You have probably heard people talking about cap rates going up or down, or saying things like, I sold on an 8 cap rate or Cap rates are lower in California. What does all this mean? Remember that cap rates are just another way of talking about prices in relation to income. But because of the way the math works, lower cap rates mean higher values. So when someone says cap rates are down, they mean prices are higher.

As we have learned, when a buyer purchases a property at a certain price, he is also estimating the return he stands to receive. That return is the cap rate. Lets revisit our numbers from earlier: A 9 percent return on a $2,222,222 property is $200,000 per year. The cap rate is a 9. If the buyer only needs an 8 percent return, he could pay $2,500,000 for the property (200,000 divided by .08). In that case, the cap rate would be an 8.

When we compare sales in a market, we find that similar properties tend to sell on like cap rates. When someone says a market is a 9 cap market, he means sellers and buyers are tending to agree on prices that yield the buyer 9 percent on the price. Some properties will be less desirable and may sell at a 10.5 cap rate (lower price), while more appealing locations might sell at an 8.5 cap rate (higher price).

The reason for all this agreement between buyers and sellers is they are always looking at alternative investments and evaluating self-storage against them. If corporate bonds are yielding 10 percent, people will be more likely to invest in bonds than self-storage. However, if the bonds are returning only 6 percent, investors may decide the extra risk of self-storage makes a facility at a 9 percent return look good. Thus, cap rates tend to rise and fall with the returns on competitive investments and interest rates. The general (average) cap rate is then adapted to the specific property based on a number of factors.

In the accompanying chart, I have attempted to summarize some of the characteristics of self-storage facilities in different cap-rate ranges. This will give you an idea of some of the property-specific attributes that create and diminish value. The general investment market will rise and fall, but the relationships on the chart tend to remain important as the general levels change. Note the cap rates are not specific, and the descriptions are representations only.

CAP-RATE ADJUSTMENTS
Cap-Rate Range
Item	8-ish	9-ish	10-ish
Occupancy (Last Two Years)	95% - 100%	90% - 95%	< 90%
Rates (Last Two Years)	Continuous Rise	Steady	Falling
Facility Size	>45,000	30,000 to 45,000	<30,000
Competitors (3-Mile Radius)	None	One	More Than One
Competitions Occupancy	95% - 100%	90% - 95%	< 90%
Surrounding Area	Growing Metro	Large City	Rural
Density (5-Mile Radius)	>200,000	100,000 to 200,000	<100,000
Traffic Count	>25,000	10,000 to 25,000	<10,000
Median Household Income	Above Average	Average	Below Average
Manager	Full-Time, Living on Site	Full-Time, Living on Site	Other
Records (Last Three Years)	Computerized and Professionally Audited	Computerized	Other
Technology	Computers and Self-Storage Accounting Software	Computers	None
Construction	Concrete or Brick	Brick and Metal	Metal
Maintenance	Pristine	Little Deferred Maintenance	Modest Deferred Maintenance
Security	Full Gate and Card Access	Full Gate Access	Other
Street Access	Very Direct	Clear, but not Direct	Difficult
Visibility	Can See Sign and Facility	Can See Sign and Entrance	Can See Sign Only
Drives	Concrete	Paved	Gravel

Other Kinds of Cap Rates

Cap rates were originally intended to be a useful tool to compare properties rates of return to their values when the rates are carefully prepared. However, in the real world, something different is happening in the market. Many people are using cap rates for bragging rights. Sellers, buyers and brokers are making up low or high cap rates so they can satisfy their own needs, egoistic or otherwise. They usually justify this by playing with income projections, if they bother to justify it at all.

So, now that you know more about cap rates, be sure you are dealing with real numbers prepared by someone with the professional accuracy required to really understand value. Any other cap rate (too high or too low) is only meant to serve the purveyors interest and not yours.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

Mike Parham, founder of Texas-based Noahs Ark Development, heard a call to create more than a successful self-storage business. In 1996, he formed the In His Steps Foundation (IHS), a nonprofit organization designed exclusively for charitable, religious and educational purposes. Numerous charities, students and churches have benefited from IHS funding. The seed of it all was planted by one little boy with a heartbreaking story: Russian-born Andrey McNaughtan.

During a pastor visit to Santa Rosa Childrens Hospital in San Antonio, Parham met Andreys adoptive mother, schoolteacher Pam McNaughtan. She told him of the boys brief and already harrowing past. Before his first birthday, Andrey was abandoned and left to die in a Russian orphanage. Born with nearly half his right ribcage missing, Andrey had an underdeveloped lung. He also suffered from severe congenital scoliosis, a misshaping of the spine.

When Andrey was 2 years old, Pam and Greg Roberts of New Zealand adopted him with little knowledge of the seriousness of his condition. A pediatric-orthopedic surgeon explained the urgency of a titanium-rib implant surgery to save the boys life. However, the technology was only available at Santa Rosa. Each visit would cost the family approximately $35,000 in New Zealand currency; 30 visits would be necessary throughout Andreys early years.

Inspired to help, Parham developed IHS to raise funds for the surgeries. Andrey is now an active 12-year-old, expected to live a long and normal life because of technology and the love of others, says Erin Keene, director of marketing for Noahs Ark Development.

Good Works

Since its first charitable mission, IHS has continued to aid those in need. The organization gave financial relief to a family whose provider was unable to work due to muscular scoliosis; a local church brought attention to the mans hardships. In the spirit of teach a man to fish, the charity helped family members establish a home-based business to ensure they would have a livelihood into the future.

Every Thanksgiving, IHS supports the Eagle Scout bunk-bed project for the local Miracle Mansion. The effort enables hungry families to eat and celebrate together, and homeless families to sleep safely and warmly. IHS also donates to the Ronald McDonald House.

Recently, IHS awarded five recipients for its Col. Clayton R. Eldredge Memorial Scholarship, which assists college-bound students in financial need. The scholarship requires students maintain a 2.5 grade point or better. This years winners are:

• Leigh Gregiore, second-year student at Abilene Christian University
• Alexis S. Pack, first-year student at Blinn Junior College
• Bobbi Martin, first-year student at Oklahoma Baptist University
• Peter Lewis, second-year student at University of Texas San Antonio
• Fritz Loeschel, first-year student at University of Texas San Antonio

Act of Faith

Parham doesnt stand alone in his dedication to IHS. The foundation is funded by the employees of Noahs Ark Development, NDS Construction and Joshua Management Corp. Victor Lopez, president of NDS Construction, is a trustee as well as a contributor, as is Leatine Fasano, vice president of Noahs Ark Development. Fasano also oversees the foundations books, gifts and contributions, and correspondence. Other donations and labor for upcoming church-building projects will come from many of the companies employees.

Parham says giving is an act of faitha duty inseparable from his deep religious beliefs. Those who give from the heart understand they are only stewards of what they have received, gratefully knowing God is the rightful owner, he says. Therefore, whenever they are called to give, they do it without question.

The religion-based IHS organization takes pride in participating in outreach programs to spread Christian teachings. Through the Mission of Mercy-Bethesda, the foundation supported 36 children in several Third World countries. IHS also contributed $18,900 to Mission Resource to build a chapel in Romania. Foundation members intend to do far more than donate dollars to the projectthey want to physically go over to help in the construction of the church and to witness to the community, Keene says. Due to political unrest in the area, however, the foundation has been forced to delay travel plans until a tentative departure in 2005.

As IHSs charitable activities reach beyond the borders, they stand as a clear testament to the influence of one human beings inspirationand the power of a single child to serve as spark.

Noahs Ark Development, based in Bulverde, Texas, is the producer of the Noahs Ark Self Storage chain in Florida and Texas. NDS Construction has designed and built more than 250 properties totaling more than 8 million square feet in the past 20 years. Joshua Management is the property-management firm responsible for the day-to-day leasing and operational activities of the Noahs Ark chain and a variety of other properties for investor groups. For more information, visit www.noahsgp.com.

Tobegin, a cap rate is An income rate for a total real property interest that reflects the relationship between a single years net operating income expectancy and the total property price or value; used to convert net operating income into an indication of overall property value (The Dictionary of Real Estate, page 255). When I began appraising nearly 20 years ago, I took courses in capitalization theory and techniques from The Appraisal Institute. Instructors simplified the cap rate by reminding us it is an overall return: to land and building and mortgage and equity. For now, just remember IRV, income divided by rate equals value.

Still confused? A cap rate is to real estate is what a dividend is to stock. It is one measure of the performance of an asset. Now think about the implications. A low return usually implies a high value. Conversely, a high return implies a low value. The return on cap rates can be measured in a number of ways. Appraisers usually look at comparable market data with an alternate technique based on mathematics. This is illustrated by the following example.

Overall Capitalization Rate

The cap rate is calculated by dividing the net operating income by the sales price. Ideally, it is selected from the market through sales of similar property types. The data is based on the rate considered by the parties involved in the sale to be the most relevant.

The data indicates a range of 100 basis points (8.50 percent to 9.50 percent), suggesting further tools of analysis are warranted. To assist with understanding the motivations and expectations of market participants and to provide a foundation for yield analysis, more techniques are presented as follows.

Simple Band of Investment

The simple band of investment is a comparison of financing and equity components. It considers the appropriate return to capital (usually considered interest on a mortgage) and return to equity dividend or on equity. In Table 2, the assumptions are market-based and concluded to be a 6.50 percent mortgage rate with a 25-year amortization at a 70 percent loan-to-value.

The equity component is based on the ratio of equity and forecast dividend, sometimes called cash-on-cash. Over the past several years, investors demands regarding dividends have increased. They want an immediate return rather than relying primarily on appreciation for yield. In comparison, common stock dividends for the 500 index published by Standard & Poors average around 1 percent. Alternatively, real estate investment trusts (REITs) for self-storage indicate an average annual equity dividend range from 2.70 percent to 6.58 percent.

REITs are considered less risky by some portfolio managers because they are more liquid and diversified than a single real estate asset. Conversely, some consider individual assets less risky because they are not as subject to wide, short-term yield swings due to fluctuating trading cycles. Historically, individual assets have been more stable. Under these parameters, the indicated simple band of investment is detailed in Table 2.

The weakness and strength of the band of investment is simplicity. It is easy to use, but does not dynamically account for changes over time. In this asset class, however, static or direct analysis is the preferred capitalization methodology.

Debt-Coverage Ratio

The debt-coverage ratio is the ratio of net operating income to annual debt service. This method is a useful tool for lenders and other fiduciaries because it underscores the safety of the investment by analyzing the ability of the asset to cover debt service. In this regard, the debt coverage ratio generally indicates the lowest reasonable cap rate. However, cash flows are generally modified (such as the exclusion of prospective rent). Consequently, this is considered the least reliable methodology (without modification to the cash flow). The parameters used to analyze the subject under this criterion are derived from the other analyses of the overall capitalization rate such as the mortgage constant and loan to value ratio. The debt coverage ratio is generally linked to the loan to value ratio (indicating a ratio of .70 for the subject). Under these parameters, the debt coverage ratio is summarized in Table 3.

It is important to note a downward trend of more than 50 basis points in cap rates over the past two years. This trend indicates investor interest in the self-storage asset class and a willingness in the market to pay a premium. The overall cap-rate analyses and conclusions are summarized in Table 4.

Cap-Rate Conclusion

Typically, market data is emphasized in the conclusion of the cap rate. In this regard, the lag effect common to economics is also common to real estate. In other words, the market (reflected in cap rates) is reacting more slowly than interest rates. Consequently, market data and mathematical techniques must be considered. The selection of the cap rate must be related to the local market conditions (i.e., is the market over-supplied, under-supplied or at equilibrium?) and the subject propertys competitive position in the market area. For the purposes of illustration, a cap rate of 9.0 percent is used in Table 5.

The One True Cap Rate

There is often much discussion about the right cap rate. Borrowers complain appraisers use cap rates that are too high, while banks complain they use cap rates that are too low. In fact, there is not one true cap rate. The data analyzed so far relates to properties operating on a stabilized basis in terms of physical and economic occupancy. However, properties often trade when occupancy is not ideal or stabilized. Watch what happens to our example in Table 5 when occupancy is reduced to 75 percent.

The cap rate declined even as the value declined. It reflects the upside potential in the property because of the vacant area (sometimes this type of investment strategy is called value added). In other words, the buyer can expect a 7.75 percent return on the investment now, but hopes to get a 9 percent return when the property is stabilized. The difference in the value ($4,250,000 to $3,800,000, or $450,000) can be described as absorption costs. Notice, too, the expenses declined in terms of total dollars, but increased as a ratio of the income.

Such transactions are typical to the market. The challenge arises if a 7.75 percent cap rate derived from an as is scenario is inappropriately applied to a stabilized one. The result is a very inflated value scenario. The example illustrates that cap rates must be used reasonably and applied fairly. Citing one example of a cap rate and calling it the market or the one true cap rate for all self-storage properties is a big mistake! As a test of reasonableness, the cap rate is often analyzed in relation to the trailing income, usually in increments of a minimum of three months (latest quarter) and the past 12 months.

Cap-Rate Trends

Interest rates will increase over the next 18 months. This will result in a rise in cap rates, or a decline in returns. As noted in June 19 issue of The Economist, inflationary pressures in the United States include a gross domestic product of 7 percent over the past year, with an inflation rate of approximately 3 percent, suggesting short-term interest rates near 4 percent. In reality, the short-term interest rates are around 1 percent. This gap suggests the supply of available money is too high (or monetary policy supports an inducement to borrowing and spending). Moreover, with a record budget deficit near half a trillion dollars, the fiscal policy means the government is competing with the private sector for the money supply. The tide is rising and interest rates will shortly follow.

Cap rates are highly sensitive to interest rates. As interest rates rise, cap rates do, too. That is only part of the equation, however. Over the past seven years, equity investors have been increasingly interested in self-storage, causing returns to equity to decline (see the band of investment) and putting downward pressure on cap rates.

Therefore, What?

Market conditions, such as oversupply, can cause tremendous upward pressure on cap rates. In this regard, great care must be considered when selecting them. Even in the same city or Metropolitan Statistical Areas, market conditions can vary widely. On the other hand, newer projects with state-of-the-art security and fire/life-safety features tend to trade for a premium, creating a downward pressure on cap rates. Overall, cap rates should be applied only after thorough research that uses several analytical techniques, including survey research, market data and mathematics.

By now, I hope you do not consider cap rates part of an abysmal science. They are an integral component of proper self-storage investment analysis. However, they must be understood correctly and applied properly. A cap rate is a tool and, as with all tasks, the appropriate tool must be used to do the job right.

R. Christian Sonne is principal of Self Storage Economics, a data, research and appraisal firm specializing in the self-storage asset class. For more information, visit www.selfstorageeconomics.com.

Performance Précis is a new quarterly column based on the detailed findings of Self Storage Data Services Inc. and its newly developed National Operating Performance Reports. The complete reports, available via paid subscription, give account of how self-storage is performing in the nations top 50 MSAs (Metropolitan Statistical Areas). These findings are unprecedented, and Inside Self-Storage is pleased to be the exclusive host of quarterly previews.

The operating performance for most types of real estate is measured by studying the revenue generated per square foot. Hotel real estate analysts coined the phase RevPar, which stands for revenue per available room. Regardless of the type of real estate, the goal is the same: to measure operating performance over time.

The technique used to measure performance in self-storage facilities is simply to multiply the asking rental rate by the facilitys physical occupancy. The result is an index called rent per occupied unit, and it is used to judge performance in the current quarter vs. the same quarter in the prior year, thus accounting for seasonality. For instance, if the asking rent for a 100-square-foot unit is $75 per month and the physical occupancy is 90 percent, the rent per occupied unit would be $67.50.

This number is used to compare performance to prior periods and is referred to as the rental rate impact as shown below. While concessions and rental discounts have a direct impact on revenue, they vary in amount depending on the unit size; and they are offered infrequently depending on occupancy, thus they are difficult to measure.

Performance Reports Published

Using the data available, Self Storage Data Services Inc. (SSDS) started measuring the performance of the 100-square-foot units in the nations top 50 Metropolitan Statistical Areas (MSAs) during the fourth quarter of 2003. The company is now publishing the results on a quarterly basis.

The table below reflects the operating performance of facilities nationwide. Detailed reports are also available for each individual MSA, which allow the analysis of market conditions down to the county level. It also allows comparison of the relative performance of one metropolitan area to another.

The following table illustrates how the Miami/Ft. Lauderdale/Miami Beach, Fla., MSA performed. Note the premium for upper-level, climate-controlled units vs. non-climate-controlled units: 54 percent. However, note the continued downward trend in rental rates for those units. In the Orlando, Fla., MSA, the trend is just of opposite, but the premium is lower.

Sample Size

All too often, articles that report trends in rental rates and occupancy use results based on statistically insignificant sample sizes. SSDS has made every effort to use a substantial sampling technique. The margin of error is estimated to be within plus or minus 2.7 percent.

The companys quarterly findings are based on an approximately 25 percent sample of the 17,000 facilities in the top 50 markets. To gain a better understanding of the physical characteristics of the marketplace, it collected data from 6,902 facilities during the second quarter of this year, which represented about 41 percent of the facilities in the top 50 MSAs. (See chart below.)

The new operating performance reports are a first for the self-storage industry. Their real benefit lies in their ability to follow market trends over time. To developers, they offer current data on performance trends to assist in the development decision. They provide construction lenders an unbiased source of information. To owners and investors, they offer a benchmark by which to judge performance.

Self-storage will continue to be built. Now, however, owners, developers, lenders and investors have a source of data on which to base their investment decisions.

Self Storage Data Services Inc. (SSDS) is a market-research company specializing in the publication of site-specific and market-performance reports for the self-storage industry. SSDS maintains the nations largest database of self-storage operating statistics. For more information, visit www.ssdata.net.

During a routine drive about town, people are accustomed to passing a self-storage facility, the car wash down the street, or the local U-Haul rental service around the corner. And most are likely, on some mornings, to frequent the local coffeehouse for that first critical cup. But in Coeur DAlene, Idaho, several enterprising businessmen put all these services in one location. Sherman Self Storage Center combines four distinct businessesSherman Self Storage, Sherman U-Haul, Sparkle Car Wash and Sparkle Espressounder a corporate umbrella.

The multi-profit center opened less than six months ago and is already a huge success, reports Stephen Cooney, general manager. The storage is 98 percent occupied, and he estimates 500 vehicles per week go through the washplus, the facility enjoys healthy sales at its drive-thru espresso stand. And despite the diversity of services, only six employees are needed under Cooneys management.

An Idea Is Born

Two years ago, several local businessmen with 20 or more years of real estate development experience saw the need for storage and a car wash on the east side of the city. They formed a partnership, Sherman Self Storage Inc., a Montana corporation, to develop their idea.

We did extensive research on the Internet, talked to storage and car-wash owners throughout the country, and got advice from several car-wash manufacturers and distributors on how to design and equip the car wash, Cooney says. The partnership purchased three adjoining pieces of property, one of which was a 40-year-old, nonfunctioning bowling alley. Neighbors were delighted to see the dilapidated building leveled and the new storage facility and car wash emerge.

Coeur DAlene is a quiet, pastoral town with a population of 36,000, nestled on the shores of Lake Coeur DAlene. Its location makes it a recreational Mecca for thousands of tourists every year. Spokane, Wash., is only 35 miles away, and hundreds of Washington and Idaho residents pass through the picturesque city, which lies at the gateway to three lakes and is near the Coeur DAlene Resort and its five-star golf course.

Sherman Self Storage and Sparkle Car Wash are situated off the I-90 interstate exchange on a corner of Sherman Avenue, a main road through the town. The site is ideal for car-wash traffic from all over and is easy to find by local customers looking for self-storage. But the partners also saw the potential of offering a U-Haul service and a drive-thru espresso stand.

Instant Fill-Up

A 98 percent occupancy rate after only three months of operation indicates the partners knew their stuff when choosing to build storage. The facility consists of 345 units and a small office, and rental rates are competitive for the area. The all-steel project was designed by Rolled Steel Products of Spokane, Wash., and Steel Structures of America in Post Falls, Idaho, was the contractor.

Probably a third of our storage clients are business accounts and numerous governmental and municipal agencies. We have a number of partially insulated 5-by-5, 10-by-5 and 10-by-10 indoor units, which were snapped up by customers for document storage, Cooney says. Despite this demand, the partners are not considering climate-control since the areas climate is temperate.

A full range of ancillary storage products such as boxes and locks are available to customers. Office space is limited, so products are displayed in the lobby and stored across the aisle in a unit. As an adjunct business, Sherman U-Haul offers rentals along with U-Haul sales items.

Customers know their goods and vehicles are secure 24 hours a day with the facilitys state-of-the-art surveillance system. The automatic gate entry is controlled by a keypad, and customers need their own entry codes. There are alarms on interior-unit doors, and the Watson Agency in Coeur DAlene responds in the event of a breach. Twelve surveillance cameras are placed strategically throughout the storage and wash facilities. A large-screen monitor in the office allows staff to view all cameras at once, and the digital-recording system has any-time playback capability.

The facility also offers outdoor storage for six boats or RVs. The wash facility can accommodate these vehicles. At the same time, boat and RV owners coming to the wash are made aware of the storage offering.

A Sparkling Wash

With boating, fishing, hiking and other recreational opportunities around the city, there is high demand for the services provided by Sparkle Car Wash. In addition to local customers, people coming from nearby lakes and forests bring their dirty RVs or boats for a quick wash before parking them.

Constructed of attractive cinder block, the wash offers three self-service bays, a touch-free automatic bay, and an 18-foot boat and RV bay. We chose Belangers Touch Free Laser equipment for the automatic bay and Diller-Harris equipment for the self-serve bays, Cooney says. Vacuums and coin acceptors are also from Diller-Harris Inc. Vendor machines supply a full array of items, from shammies to glass wipes to air fresheners.

A Cup of Joe to Go

Drive-thru espresso stands are a phenomenon all over the Pacific Northwest, offering convenience in addition to coffee, lattes, espressos and pastries. Theyre very lucrative, Cooney says. There are probably 20 or 30 drive-thru espresso stands in his town alone. A stand in a good location can do almost as well as a car wash in volume.

A lot of people pull into the car wash and grab an espresso before washing their car. I often see a family come in. Dad will be washing the car, and Mom and the kids are at the espresso stand getting drinks or something to eat, he says.

Little Promotion Needed

Shermans enterprising combination of services has drawn the attention of other entrepreneurs, and companies throughout the country have contacted Cooney for advice on setting up a multi-profit center. While national attention is gratifying, to be truly successful, businesses need satisfied customers. For this reason, the Sherman Center takes service seriously.

Sherman Storage has a large ad in the Yellow Pages, but since the facility is full, it uses no other advertising. The car wash depends on its prime location for its promotion, but it also offers customers a free $5 wash after 10 espresso purchases. We do fleet-account packages for companies using the car wash, and we are partnering with Tesoro Petroleum, the truck stop across the street, to sell car washes as a point-of-sale item from their pumps and cash registers, Cooney says.

More for Multiprofit

What does the future hold for the partners? They intend to look for other locations that could support a similar operation, Cooney says. They are also planning to join the Idaho and Northern Idaho chapters of the Self Storage Association.

Industry trends seem to indicate the need for multiple profit centers like ours, Cooney says. The best advice he offers new entrepreneurs considering this type of business is to focus on location. Many people put self-storage in an obscure location, and thats fine; but for this kind of combination, you have to have high traffic and volume to make all four profit centers work. And the site must be highly visible.

In this day of one-stop shopping, offering four services on one site sets Sherman Self Storage Center apart from the competition. But according to Cooney, its security and friendly service that draws so many customers. For more information, call 208.665.7700.

By Amy Brown

Trees and shrubs contribute to property value by enhancing appearance, reducing noise, cutting energy costs and blocking unsightly views. Unfortunately, trees meant to be part of a facilitys permanent landscape are often vulnerable to damage during construction and storms. Careful planning and maintenance can help reduce property damage and liability claims that result form damaged and neglected trees.

Planting and Replacement

When planting trees on a new site or replacing older ones, take precautions. Planting the appropriate trees is important, so get the facts. Research how a tree will look five to 10 years down the line. Knowing what height it will reach at maturity will help you decide where to plant.

Trees should not grow within 25 feet of a power line, due to increased fi re hazards and the possibility of extensive damage during windstorms. Large trees should be planted at least 50 feet from your facility, as those not properly anchored can be knocked over or weakened by storms and tornadoes. They could subsequently fall onto buildings, causing structural damage and injury to tenants. Heavy limbs can break off and damage roofing and vehicles parked on site.

Check with city or state officials before planting trees on or near a public right of way, such as a street, sidewalk or parking lot. They should not obstruct the visibility of traffic signals for motorists or pedestrians. They will also require routine maintenance and trimming so they dont have protruding and low limbs that can cause injury to passers-by. You also dont want to be responsible for people having to walk around a tree and into a busy street.

Maintenance

Every year, insurance companies see thousands of dollars in damage caused by fallen or uprooted trees. Proper maintenanceand removal when necessarycan significantly lower the risks of property damage.

Older trees should be routinely inspected for damage and disease, especially during construction, heavy storms and floods. Construction of a new facility, expansion of an existing one, or utility installation can weaken trees and damage limbs. Excess water from storms and flooding can cause tree roots to suffocate and rot. Consistently wet soil may cause erosion, which could make even large trees unstable.

A tree that is sickly and shows signs of rot or decay may need to be removed if it poses a threat to the facility. Trees whose trunks have large cavities with extensive decay should be eliminated, as the trunk will be weak. Lopsided trees or those with excessive lean should also get attention. Having a tree pruned can relieve the weight on the heavier side and balance the tree top. Following are tips on how to care for and maintain trees on or near your facility:

• Check all trees for healthy roots. If you are unsure how to do this, contact an arborist or landscape company.
• Follow recommended fertilization practices.
• Stake newly planted trees.
• Thin out thick canopies of trees to reduce limb breakage from heavy winds.
• Remove old trees or those weakened by construction, insects or disease.
• Contact the local utility company to remove limbs that hang over power lines or roofs, or any others that risk damage to structures.
• Inspect drain lines and channels and remove any obstructions to avoid soil saturation.
• Remove dead leaves, branches and broken tree limbs from your site. Allowing buildup of such refuse increases the potential for fire and bodily injury.

If a Storm Hits

If a storm does damage your trees, analyze your site and perform any necessary repairs to trees and structures. But take safety precautions when cleaning up, such as being on alert for downed power lines and hanging branches. Always keep storage tenants away from damaged areas until they are deemed safe. Other guidelines include:

• Document property damage with photography.
• Submit a written report to the insurance company.
• Prune storm-damaged trees. It may be best to hire a contractor to ensure trees arent over-trimmed.
• Remove all overturned trees and those with damaged trunks.
• Replace damaged fence panels or boards.
•  If you are unable to conduct tree maintenance for any reason, consider using the services of a professional arborist.

This article was written as a guideline to aid in minimizing risk in self-storage facilities. The information contained in this document is intended to be of general interest and does not address the circumstances of any particular individual or entity. Nothing in this document constitutes legal advice, nor does any information constitute a comprehensive or complete statement of the issues discussed or the laws relating thereto.

Universal Insurance Facilities Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the selfstorage industry. For more information, or to get a quick, no-obligation quote, call 800.844.2101; e-mail [email protected]; visit www.vpico.com/universal.

Competition in self-storage isnt going away; its getting tougher. In many markets, storage is regarded as a mass-produced commodity. What sets your facility apart?   Dont hesitate to take a hard look at how you compare to the guy down the block, because potential clients surely will. Enhanced customer convenience and expanded services is a proven recipe for outpacing the pack. Those who exceed expectations by going beyond vanilla self-storage are more likely to be here tomorrow, and to enjoy higher profits. Current ancillary offerings include truck rentals, records storage, wine storage, mobile options, mailboxes and business centers and, of course, retail sales. One or more may be right for you.

UPWARDLY MOBILE

WHAT: A mobile-storage company delivers a box-like container to the customer who fills and locks it. The storage company picks up the container and returns it to the facility.

HISTORY:

A relative newcomer to the industry, mobile storage emerged less than a decade ago. Big boys such as Shurgard Storage Centers and Public Storage heavily invested in the niche, but in 2003 backed off due to poor profits. Customers simply didnt see the delivery service as valuable enough to justify the extra expense, according to Shurgard. Others, however, such as Door-to-Door Storage in Kent, Wash., and Storage Banc of St. Louis, have found success.

INSIDER ADVICE:

Try to target commercial businesses because they rent for long periods, a crucial element to success in mobile storage. The short-term renter is a real liability.

PROS:

Mobile storage sets you apart from the competition. Customers like the added convenience of delivery when they are moving, storing or both. It also allows expansion of the self-storage customer base beyond the typical 5-mile radius and competition with moving and storage companies. Some operators stack boxes not requiring climate control in previously unusable perimeter space.

CONS:

Obstacles include low customer awareness and high start-up, operating and labor costs. Insufficient cooperation between independent operators hinders the potential for one-way interstate business. Some potential clients find the rates intimidatingyou may have to charge double the rental rate to make up costs. Coordination of resources is a challenge.

NEW AND EXCITING:

The Mobile Self-Storage Association (MSSA) was recently created to facilitate interstate shipment of containers between operators and assist those entering the business. The associations goal is to foster cooperation and boost customer awareness. Charter memberships are $1,000. For more information, call 314.872.1600; visit www.ms-sa.org.

INVESTMENT CHECKLIST:

Start-up capital is needed for containers, tarps, flatbed trucks, forklifts, drivers and more. Costs vary but can be as high as $2 million. Alternative opportunities exist as an agent or cooperative network member for other companies.

VENDOR SAMPLING:

A)

DropBox Inc. provides containers made from sturdy steellife expectancy is 20 years and capacity is 30-plus tons. Also available are trailers with self-contained hydraulic power; guidance/support for industry newcomers. (888.388.7768, www.dropboxinc.com)

B) Havener Enterprises produces waterproof, rust-resistant steel containers, easy to set up and tear down. Assembly takes less than 30 minutes. Sizes range from 300 to 900 cubic feet of storage. (815.935.0138, www.havenerenterprises.com)

C) HomePak is an easy-to-use, exterior-grade, plywood container featuring a swing-open metal door. Also offered are consumer promotional materials; a lease-to-own program; and referrals to delivery systems. (800.566.8263, www.homepak.com)

QUOTABLE: If you havent done your homework [on mobile storage], youre going to have a hard time. You have to understand your resources and the logistics. Your capacity will be limited by the number of trucks, containers and labor you have on a given day. (Randy Weissman, president of Storage Banc and MSSA executive member.)

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WINE NOT?

WHAT:

Wine-storage units or lockers are created on the self-storage property, usually in a specially designed, insulated area with a dedicated HVAC system.

HISTORY:

Wine storage cropped up as a rare ancillary self-storage business in the mid-80s. Demand grows as more baby boomers collect wine and need a place to store and age their cases.

INSIDER ADVICE:

Unless youre sure of your market, start small and add on later if necessary.

PROS:

Wine storage can produce a per-square-foot return higher than traditional climate-controlled storage, and competition is still relatively low. Rental rates run about $1.50 per case monthly; an eight-case locker nets $144 annually. The service brings an upscale image to your facility, and may result in crossover customers.

CONS:

Success is defined by geographic locationif youre not in wine country, people must collect wine in your area. Wine storage is considered expensive to build due to temperature, humidity and light control, and top-notch security. Youll have to deal with government liquor regulations. The fill-up rate is slower than for self-storage. Plan for heavy marketing.

NEW AND EXCITING:

Interstate shipping of wine is limited or not allowed in most U.S. states, which hurts storage businesses. The U.S. Supreme Court is expected to re-examine interstate commerce regulations this fall, possibly lifting the ban.

INVESTMENT CHECKLIST:

For a wine room, youll need proper insulation, a dedicated HVAC system supplying precise environmental conditions for wine, a back-up system and generator, separate secure entry, and lockers. Security should include video-surveillance cameras and individually alarmed lockers or storage rooms. Example: One facility spent more than $70,000 to construct 640 feet of wine storage featuring 88 lockers.

VENDOR SAMPLING:

A)

Roll Right Industries Inc. of California includes locker boxes in its complete line of mini-storage products. (800.848.8106, www.rollright.com)

B) DHS Worldwide Software Solutions, based in Florida, offers software for wine-storage management. (800.377.8406, www.dhsworldwide.com)

C) Wisconsin-based Aprilaire supplies humidifiers. (608.257.8801, www.aprilaire.com)

QUOTABLE: Before starting, get out and talk to everybodymerchants and distributors. I did that, and everybody said it was the greatest idea in the world, but the biggest issue is how to get that to the public. (David Leonard, owner, Grand Central Self Storage, featuring Michigans fi rst wine storage facility. After one year, only seven of 54 lockers are rented.)

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KEEP ON TRUCKIN

WHAT: Trucks and trailers are rented to the public at your self-storage site. You have the option of owning the trucks, leasing them or becoming a dealer for a truck-leasing company.

HISTORY:

The jury is in: Truck rentals and storage meld beautifully. The 10 largest self-storage companies offer it, and upward of 50 percent of all facilities are believed to be in the business. U-Haul International estimates 3,500 of its dealers are storage operators. On The Move Inc. calculates 8 percent of the countrys 30,000 storage facilities lease or own its trucks.

INSIDER ADVICE:

Every truck-rental call is an opportunity to sell storage space and boxes. Comp your rental truck instead of a months rent for contracts and bolster your bottom line. Truck lease or purchase allows total autonomy over who rents and at what cost. Plus you can brand your truck and it becomes a moving billboard. However, leasing also requires a substantial monthly payment. As a dealer/agent, your cash investment is minimal.

PROS:

A successful rental business can bring in $1,500 a month per truck, and your customer is right there. U-Haul research shows 23 percent of customers who rent a truck from you also will rent a unit. The convenience of truck rentals on-site makes you more competitive. Some facilities offer free truck use to hook new contracts.

CONS:

Truck rental requires more energy and salesmanship from a manager. Call volume for the service is generally higher than for storage alone, so time is a factor, too. You must have room at your site to park the trucks. Maintenance and insurance are concerns for those with their own trucks. Availability is a worry for dealers in summer months, etc.

INVESTMENT CHECKLIST:

Become a dealer, and all you need is space, Internet access and a dedicated phone line, according to U-Haul, which also will assist with an online billing system. Commission averages 20 percent. Cost to lease a truck of your from On The Move is about $875 a month and includes bells and whistles. Dont forget to set up a commission for managers who sell the service.

VENDOR SAMPLING:

A)

Texas-based On The Move Inc. supplies trucks (buy or lease), insurance, hand trucks, furniture pads and rental-form agreements. Graphics can be put on trucks to advertise a self-storage business. (800.645.9949, www.onthemovetrucks.com)

B) U-Haul International, headquartered in Phoenix, offers the opportunity to become a dealer with no investment.

Affiliation allows operators to save money on software and merchant fees. (800.528.0361, www.uhaul.com)

QUOTABLE: You can have a facility thats too small for trucks, but the biggest potential negative is the work, responsibility and due diligence that go along with offering a truck. (Kirk Nash, owner, On The Move Inc.)

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DOWN TO BUSINESS

WHAT:

Business amenities much like those at a Kinkos are offered to tenants. Services may include a copy machine, fax, phone, ATM, Internet connections, private work areas, conference rooms, mailboxes, packaging and shipping, and drop-off service.

HISTORY:

The concept is new, but industry research indicates business centers fulfill a growing niche of self-storage customer, such as the home-based business owner who is expanding.

INSIDER ADVICE:

Receiving and shipping packages is easy, profitable and a huge attraction to commercial customers. Coin-operated faxes and copiers dont get used; instead charge per page on a debit-card account.

PROS:

Most of the industry targets the residential customer, so a business center is rare and attracts valuable commercial clients. Diversification makes your investment more secure and helps level the winter seasonal slump with business tenants. Additional income can be made off copies, faxes and shipping. Mangers dont have to invest much time in the operation.

CONS:

Without a base of commercial tenants, a business center wont get used. The public likely wont expect selfstorage facilities to have such services, so lively marketing may be necessary.

NEW AND EXCITING:

Mini-offices are starting to be included in a few self-storage facilities that target the commercial client.

INVESTMENT CHECKLIST:

To position yourself as a business center, at least provide phones, faxes, shipping/receiving, copiers and e-mail. Private mailboxes, a conference room, notary service, mini-offices, a retail area with office supplies, and Internet connections are also possibilities (think Wi-Fi).

QUOTABLE:

The way I look at it, commercial tenants are the ultimate tenants. Typically, they pay on time, stay a long time, and arent as sensitive to price bumps. If thats the kind of tenant you want, its a minimal amount of work to give them a big benefit. (Mitch Rhoads, owner, Denver Storage Solutions of Colorado, on his popular business center and shipping services.)

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CHECK OUT THE MERCHANDISE

WHAT:

Packing supplies and security items are for sale in a facility area set aside for retail.

HISTORY:

Retail has increasingly become a part of self-storage as the industry gets more competitive, and ever-busier customers take advantage of one-stop shopping. They get convenience, and owners reap additional profits.

INSIDER ADVICE:

Once customers decide on a self-storage facility, they arent fazed by reasonable markups on locks and packing supplies. Ask your customers what products they need so you know what to stock.

PROS:

The majority of retail items can be marked up 100 percent and you dont need a huge investment to get started. Almost any size facility can make room for a display area, perhaps designating an empty, close-by unit. By advertising a packing-supply store, you surpass the competition by attracting leasers who want the convenience. Shoppers who come in for boxes may end up renting, too.

CONS:

Selling retail is more work for manager and staffproducts dont fly off the shelves by themselves. Planning should include marketing strategies, advertising, window signage and an attractive display. Other jobs are sales tracking, inventory, pricing, restocking, taxes and maintenance. Product that is chosen unwisely may have to be sold at a loss.

NEW AND EXCITING:

Some facilities are selling their moving supplies online or adding office products to the mix as a customer convenience.

INVESTMENT CHECKLIST:

Every facility should sell locks, tape, markers and three sizes of boxes. Other products to stock include bubble-wrap, packing paper, garage-sale kits, and sofa and mattress covers. An investment of $500 can get you off the ground with a few items and promotional aids, while $2,000 should outfit an attractive retail area. Factor in effective marketing and advertising tools. Staff will need sales training and an incentive program, i.e. commissions. You may want to buy software to track sales, etc., or work with a supplier who provides it.

VENDOR SAMPLING:

A)

Chateau Products of Florida has more than 400 self-storage products including disc locks, padlocks, retail-store fixtures and packing supplies. (800.833.9296, www.chateauproducts.com)

B) Ohio-based Supply Side manufactures, distributes and develops products and merchandising programs. (800.305.6110, www.suplyside.com)

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GO POSTAL

WHAT: Storage facilities offer private mailbox rentals.

HISTORY:

About three years ago, some self-storage shops began installing banks of postal boxes to rent to existing customers for additional income. Theoretically, with proper advertising and a high-profile location, postal-only customers would begin to crossover into storage.

INSIDER ADVICE:

If you dont have commercial renters, hassling with mailboxes is a big pain for a minimal profit, according to many facilities. As part of a business center, however, the service is a value-added incentive for commercial contracts.

PROS:

With a minimal one-time investment, owners and operators can boost their long-term monthly incomes. Once rented, the boxes pay for themselves quickly. Current tenants are prospects, particularly if they are small-business owners, marina users or college students. Manager time can be minimal, with about 30 minutes spent daily sorting mail for 30 boxes, and the postal boxes take little maintenance.

CONS:

Not every location is suited to private mailboxes (PMBs). Evaluate your tenant mix and location; few residential customers will be interested. Red tape and paperwork with the U.S. Postal Office is substantial. The service may attract shady customers involved in mail fraud. Mail forwarding, mail holding and lost keys are also hassles.

INVESTMENT CHECKLIST:

Mailboxes run about $500 for a bank of 30 and $400 for a bank of 10 larger compartments. Smaller boxes rent for approximately $15 monthly, though many stores are charging only $5 and swapping several months of free rental for a contract.

RESOURCES:

Research the trials and tribulations of commercial mail-receiving agencies at www.postalwatch.org, which includes links to official regulations.

QUOTABLE:

I dont like it one bit. I can be in the middle of a rental agreement, and a slew of people will come in not having their mailbox key, asking for help. You would probably make more money with a $100 banner saying We sell boxes than you would investing $1,000 in mailboxes plus an hour of your managers time per day. (Chris Sanders, manager, Foothills Self Storage of Upland California, which rents about 20 of its 70 boxes, many to outside customers.)

So far the mailboxes have not yet been a profit center. They are, however, a value-added benefit that we can offer to our tenants. I think that to be a true profit center, you would have to market them heavily. It appears that the United States Postal Service is moving more and more into these types of products and servicesmailboxes, boxes, moving supplieseveryday. (Scott Harris, president, Dana Management Group, one year after initiating mailbox service with self-storage.)

By Cary F. McGovern

This article discusses why small records-storage clients may be more valuable than large accounts in a self-storage records center. It is possible to yield three to four times per unit of storage compared to the local full-service commercial record centers in your town.

For several years, records-storage providers operating within the walls of self-storage have discovered the amazing yield of the small-business client. In fact, the smaller the client, the greater the yield per unit of storage. How can this be? It is an interesting phenomenon that has escaped the notice of major industry players. As a self-storage operator, you actually have several advantages over the big guys:

• VisibilityYou have curb appeal and high visibility in your storage location and Yellow Pages advertisements.
• Walk-In TrafficYou have a steady flow of prospects and clients through your facilities.
• Turn RateYour units usually turn over in seven to 12 months, so you service a constant flow of new prospects.
• Business ClientsDepending on your location, you could already be servicing many businesses.
• Sales OpportunityYour walk-in clients may not be looking for records storage, but nearly every one will be either an employer or employee, both of which are prospects for records management.
• MarketingSelf-storage operators know their markets within the five-mile radius of their operations. Depending on your location, there could be hundreds or even thousands of small businesses in your area. You already have a focus market.
• Target-Market IdentificationSince small businesses are strung together in neighborhoods by block, it is possible to market records storage to these groups using guerilla marketing.

The Convenience Store

Why do people choose to go to a convenience store instead of a supermarket, especially when they know theyre going to pay more for the things they need? Its fast and easy to get in and out. I like to compare commercial records centers to supermarkets and self-storage facilities to convenience stores. There are several good analogies at work here:

• Closer to Your ClientsProximity allows the client to avoid delivery costs. He can easily come to your facility for his records.
• Neighborhood BusinessesSmall companies like to do business with their neighbors and form relationships with others in their same shoes.
• FlexibilityUse of small-business packages (as described in last months column) allows customers to choose a service that fi ts their budget.
• Same Value but Less HassleYou can offer the same value as full-service records centers but with much less trouble for the customer. His records are out of sight but well-controlled and in a safe place.

Small-Business Clients

The traditional, full-service, commercial records center markets its services to larger businesses because of the relatively high cost of sales. A sales call and client-needs assessment can cost between $100 and $500 or more depending on the size of the business. For this reason, commercial centers cannot waste their time on 50- to 100-box accounts. Remember, prospects do not go to them, and rarely does a small business even know or understand the value of the service.

According to the most recent census data, small business enjoys the largest market share in the American economy. It remains virtually untouched by traditional commercial records centers. It is easy to identify small businesses in your area: Simply go to www.superpages.com, type in the city, and select a business type. The results are your prospect database. Of course, there are many other options for finding prospects to whom to market your services.

Smaller but More profitable

Your records-storage volume could be one-tenth the size of the full-service commercial competitor in your town. You could also earn more profit, make a greater return on your investment and diversify your services. There are several important things to keep in mind:

• Yield is Different than PricePrice is the amount stated on your price list. Yield is the actual amount each storage box generates. A previous column discussed the differences between price and yield. You can read more at www.insideselfstorage.com by entering price and yield differences into the keyword search.
• Small-Business PackagesDevelopment of these packages is crucial to improve yield in records storage. You must understand how to present, offer and bring value to your client while maximizing your return.
• Simplify Your OperationYour operation must be simple and easy for clients and staff to use. It must also minimize your expense and overhead while improving yield.
• Offer Ancillary ServicesBuild your base revenue and add value by offering services through outsourced resource partners who do the work for you.
• Create Permanent Annuity RevenueUnderstand the principles of customer service and follow through so you never lose a client.
• Creep GrowthCreep refers to the annual internal growth rate that normally occurs in the records-storage industry. Creep averages as much as 13 percent to 17 percent a year from existing accounts.
• Minimize Labor-Intensive ServiceLabor costs are your primary enemy in the records-storage business. Operating practices must be designed to eliminate or reduce labor costs.
• Minimize Delivery and Fuel CostsWill-call pickup and courier delivery reduces or eliminates the high cost of resource-intensive delivery options.

The most misunderstood area of records storage is the small-business concept. It is a gold mine for those who put this to work in their facilities. If you have multiple store fronts, there is an even higher yield potential.

Regular columnist Cary McGovern, CRM, is the principal of FileMan Records Management, which offers full-service records-management assistance for commercial records storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.

Whether offered as a stand-alone business or part of a traditional self-storage operation, boat and RV storage is on the rise, and one of the primary questions of operators in the industry is: How can I make this kind of storage work on my property? Land costs are also climbing throughout the nation, so before committing to the business, you must determine if your site will attract enough clientele to make a boat/RV-storage venture profitable.

Boat, RV and other vehicle storage can yield many benefits to the savvy operator. The most notable are:

• Customers tend to be long-term, resulting in low turnover and high occupancy rates.
• Facility management is less intensive (reduced customer turnover equals fewer operational issues and paperwork).
• There is usually less competition for this service in most markets than for self-storage.

But there are also drawbacks:

• Boat and RV storage is land-intensive.
• Depending on your location, business may be only seasonal.
• Rental rates are usually lower on a per-square-foot basis than traditional self-storage.

Design Options

There are three basic design options for boat and RV storage: complete outdoor parking, canopy parking (or roof-only storage), and fully enclosed storage. Outdoor parking is the simplest and cheapest choice, as it involves only paving and striping for spaces. Land parcels often have some amount of "dead space," meaning a piece of land that may be unsuitable for enclosed storage or traditional self-storage. These plots may work well for outdoor boat and RV parking.

Canopy parking can be surprising to developers when it comes to cost. Depending where your facility is located, "roof only" structures may still need to comply with local building codes. Even though there are no walls, the footings will need to be deeper and the roof may require additional bracing to handle the uplift loads. With these two factors combined, fully enclosed structures begin to look more attractive at least from a cost standpoint, since you'll be able to charge more for the rental of the unit.

When building fully enclosed storage for boats and RVs, carefully consider your layout and unit mix. You'll fi nd you are able to use approximately 35 percent of the land parcel for actual storage. The remainder will accommodate aisles and turnarounds. It's crucial to give amateur drivers enough room to safely maneuver their vehicles. Driveway widths average between 55 and 60 feet. Bay widths are usually 13 feet, with building heights of 16 feet to accommodate 14-foot doors.

Staying Atop the Market

While operating boat and RV storage may mean you have fewer competitors in your market, it does not mean you can just sit back and watch the profits roll in. Marketing and competitive rental rates are critical.

There are two key elements to keeping your boat and RV storage consistently full. First, visit other facilities in your area. Talk to managers. Find out what unit sizes are popular. Are customers being turned away because unit sizes are too big or small? Are their access doors big enough to accommodate larger vehicles? What rental rates does the market support?

You should also visit local marinas and campgrounds to find out what potential customers desire in a storage facility. What features are most important to them? What do they consider to be a reasonable cost? What is an acceptable distance between the storage site and their home or place of play? While visiting these places, make contact with the on-site management. They may be willing to produce referrals on a commission basis.

The second key to success is diversification. People with "big toys" usually have big wallets to match. Help them spend their money! If market research and property allow, provide all three types of storage to accommodate different needs and budgets. Offer a variety of unit and door sizes. You can also offer amenities such as vehicle washing and maintenance, ice service, dumping stations, gas stations, parking services, or whatever else you can do to make things easier for customers. This range of products and services will help your manager sell your facility to prospects and create better relationships with clients.

Boat and RV storage is a booming business that can be combined with conventional self-storage or stand on its own. As community restrictions and homeowners' associations increasingly prohibit storage or parking of leisure vehicles at residences, people will need storage for their expensive hobbies. Today, demand for this type of storage exceeds supply in most areas, creating tremendous opportunities for wise investors.

Caesar Wright is president of Mako Steel Inc., which designs, supplies and installs steel buildings for the self-storage industry, including boat/ RV storage, multistory and custom buildings. Mr. Wright has been in the steel business for his entire career and is respected in the industry for his ability to manage, negotiate and succeed without compromising his integrity or sense of humor. When not ruling his business empire with an iron fist, he can be found on the river, at the golf course or following his beloved Pittsburgh Steelers. For more information, call 760.634.5495; visit www.makosteel.com.

RentPlus Terminal Services Edition

Central server, many sites

By Kimberly Hundley

Got internet? If so, you also have the capacity for a centralized data/program locale linking to multiple sites. This fall, Hi-Tech Smart Systems Inc. released the Terminal Services Edition (TSE) of its popular RentPlus Windows self-storage software. TSE lets companies manage any site from any location with an Internet connection. Unlike similar types of server software, Hi-Techs new edition features the rich, full-featured interface of a Windows application. Its the best of both worlds, says Michael Richards, president of the Kailua, Hawaii-based company.

Designed for companies with five or more facilities, TSE runs on a single server instead of individual site computers. Under the old scenario, copy of RentPlus Windows would have to be installed at each facility. TSE, however, uses the Internet to link software and data from the home server to remote sites as well as local area networks.

In addition to geographic convenience, TSE gives systems the power to quickly and easily access data. The home office has all the information under its control, explains Richards. It can run reports and do backups and updates as needed without having to travel to the site and do the work there. It really is a big revolution in the whole way people operate.

Improved speed across the board is a factor because data doesnt have to be exchangedall work is done on the server side. Technical issues such as backup and restoring will basically leave the managers hands and become the responsibility of home-office staff. Managers, who arent necessarily technically oriented, can focus more on customer service and not whether the backup has been done or the update has been installed. And, of course, when you have that scenario over multiple facilities, it becomes more of an issue, says Richards.

Midsize businesses in such sectors as apartment management and healthcare have been using technology similar to TSE for years. Its relevance to self-storage has grown along with the surge in multifacility owners. Increased reliability of the Internet has also driven demand. These days, its rare for DSL or cable to go down. In cases where it does occur, clients can dial up through their phone lines to reconnect to the TSE system.

Ultimate Access

TSE costs a bit more upfront than standard editions of RentPlus; the more sites that participate, the more economical it becomes. Long-term savings come through easy access to data, enhanced information management and labor reallocation.

Richards points to a current industry pressure: Central offices are expected to have better and more combined reports as well as information access in near to real time. Though its obviously possible to retrieve data from numerous sites on a daily basis without a central clearinghouse like TSE, mistakes are bound to occur. Youll never have 100 percent reliability that way, because there is no such thing as a perfect system, Richards says. With our Terminal Services Edition, you have no loss of speed or functionality, yet you have all the data where you want it, in one place.

Operators neednt be in the office to enjoy wide access to any facilitys data either. They can be anywhere an Internet-linked computer is available. If you get a call from a manager having a problem with customer Jones, you can be in your office or at home in the evening, and look at that customers data and fix the problem, Richards says.

Subscribers find overall IT costs are reduced for remote sites because only thin client computers are needed vs. fully equipped PCs with bulky hard drives. If a company needs to add new sites and users to the system later, no problem; the process is easy and painless. VPN, or Virtual Private Network, security is fully supported, and TSE furnishes two additional levels of access control to ensure information is protected.

Because TSE isnt web-based, it provides the same experience to users as a Windows program. For instance, users control the printer directly without having to use the browsers web button to print, and frames arent lost during back-and-forth page navigation.

Tech Advantage

Hi-Tech developed TSE in conjunction with the Microsoft Empower Program, which supports small companies by providing access to development software and technical expertise. The collaboration protects Hi-Tech customers, says Richards. Were committed to developing products we believe are the industry standard, and our solutions are based on technology thats not going to go away or be bought out by anybody else, he explains. That adds stability to our products.

Two main companies provide server software; Hi-Tech recommends running TSE with Microsoft Terminal Services. The server itself can be in a home office or outsourced to a host. A lot of people we are talking to are not putting the server in their office but a server farm, which is outfitted with generators and back-up emergency equipment, says Richards. Those are a good way to go, particularly in areas with power issues.

Launched in 1998, RentPlus is a complete self-storage management system featuring more than 100 reports and graphs, onscreen interactive maps of facilities and their rentals, multiple collection and discount plans, and automatic charges and printing of notices. The software comes in four editions: Standard for small facilities; Professional for the majority of storage companies; International for operators outside the United States; and TSE. Each package includes technical support, updates and a guarantee. Also available are corporate-office software, interfaces with popular security systems, and automatic credit-card payment options.

Hi-Tech will exhibit at the Inside Self- Storage Expo in Miami, Nov. 17-19. Attendees are invited to visit the companys booth for a detailed explanation of TSE and how it can benefit their enterprises. For more information, call 800.551.8324; visit www.hitechsoftware.com.