Bluebird Self Storage scored a partial victory this week when the Scarborough, Maine, Town Council approved one of two zoning requests regarding a facility the operator wishes to build in the Enterprise Business Park on Haigis Parkway. Though the council approved a change that will allow self-storage to be developed on the street in general, it voted against changing the zoning map to allow building on a specific lot facing U.S. Route 1. Bluebird seeks to build a 100,000-square-foot facility on the property, according to the source.

Though Bluebird wants to build its facility facing Route 1, the property isn’t accessible from the highway. The re-mapping request would have altered the zoning from a general business district to the Haigis Parkway District, which is where the council approved self-storage as a use. Councilmembers voted 5-1 in favor of allowing storage in the district but denied the map change 5-2.

Jason Vafiades, an engineer with Atlantic Resource Consultants, who was in attendance as a representative for business park owner David Miley, told the council Bluebird is interested specifically in the lot facing Route 1 and may not consider another parcel in the park.

The proposal is for a climate-controlled facility that would be designed to fit in with area businesses, the source reported. Karen Martin, executive director of the Scarborough Economic Development Corp., told the council the project was a “different animal” from traditional self-storage developments.

Bluebird operates four self-storage facilities in New Hampshire.

Jernigan Capital Inc., a merchant bank and advisory firm serving the self-storage industry, has committed $9.9 million toward a proposed 74,172-square-foot self-storage facility in Louisville, Ky. If approved, the project would comprise 725 units in two climate-controlled buildings on Bardstown Road, just south of Interstate 264. Construction is expected to begin almost immediately, with completion scheduled for the fourth quarter of 2018, according to a press release.

Memphis, Tenn.-based Storage Development Partners LLC will serve as the project’s developer. This will be the third project on which the two companies have co-invested.

The target site is along a stretch of road with visibility to about 45,000 cars per day. The immediate vicinity “has seen rapid redevelopment in recent years,” the release stated. The property is near retail destinations, such as Costco and Target, and less than two miles from The Highlands residential community and the world headquarters for Yum! Brands Inc.

Since Jan. 1, Jernigan has closed 24 self-storage investments totaling $306.3 million. The lender typically holds a 49.9 percent profit interest in its joint-venture transactions, according to company officials.

Jernigan Capital is a commercial real estate finance company that provides financing to private developers, operators and owners of self-storage facilities. It offers financing for acquisition, ground-up construction, major redevelopment or refinancing. The firm intends to be taxed as a real estate investment trust and is externally managed by JCap Advisors LLC.

Self-storage owner and developer Hugh W. Horne is backing a new music venue called The Lodge Room that’s opening next month in a building he owns at 104 N. Ave. 56 in Los Angeles. The entertainment setting will offer 500 seats in 8,000 square feet of space on the second floor of the Highland Park Masonic Temple, also known as the Mason Building or The Highlands. The three-story building overlooking North Figueroa Street was recently renovated but still maintains some of its historic features including Masonic and Egyptian symbols, according to the source.

Horne appeared before the land-use committee for the Historic Highland Park Neighborhood Council last year to discuss his plans for the 1920s building in Italian Renaissance Revival style. He indicated he wanted to upgrade the safety system and add an elevator. “We have no intention of disrupting it,” Horne said at the time of the structure’s historic character. “We would really love for it to be used on a more regular basis.”

The music venue also includes a full-service bar and restaurant, Checker Hall, offering New American cuisine, the source reported. Sid The Cat, a partnership between Brandon Gonzalez and Kyle Wilkerson, will book established and new musical acts. Slated for performances in the coming months are local female vocal artist Bedouine, group Black Marble and solo musical project The Album Leaf.

As CEO and president of Horne Developments Inc. and Horne RPC Storage I L.P., Horne has a long history within the self-storage industry. He served as CEO and president of Storageworld LP and Storage Spot Inc. from 1998 through 2009. He also held several positions with Public Storage Inc., a self-storage real estate investment trust, from 1972 to 1997. While president of the Public Storage development group, Horne oversaw the construction of 750 self-storage properties totaling 45 million square feet and the acquisition of 450 existing storage facilities totaling 27 million square feet. While with the REIT, he also served as corporate secretary and vice president of Public Storage Management Inc., its property-management subsidiary.

Development company RD Capital is seeking zoning approval to build a mixed-use property in Elk Grove, Calif., that will include self-storage as well as a 7-Eleven gas station and convenience store. The proposal is for the 4.7-acre property on the northwest corner of Bond and Waterman Roads, which is bordered by the Fallbrook and Quail Ranch neighborhoods, according to the source.

The project would comprise seven structures, including a three-story climate-controlled building containing 780 units. The gas station and convenience store would sit on just under 2 acres, with the rest reserved for the storage facility. The site is currently zoned for commercial, but the developers will need a conditional-use permit, the source reported.

City officials suggested RD Capital meet with residents about the project before submitting its application. "The city was very conscious of what we were putting together," said Steve Diede, a principle with the development firm.

Diede and fellow principle Rohit Ranchhod met with residents twice to discuss the project. During an Oct. 4 meeting at the Fairfield Inn in Elk Grove, Ranchhod spoke to the group about the property’s design and asked for feedback. He presented pictures of a recently completed storage project in Galt, Calif., and stressed the proposed development would be well-maintained and aesthetically pleasing. The storage facility would have little effect on the neighborhoods and would “be a quiet neighbor,” he said.

Following the presentation, dozens of people expressed their concerns about the project and asked questions, including how the company would handle graffiti, if the site’s design would blend with the area’s rural culture, and what the landscaping would look like.

RD Capital plans to continue gathering input from residents and is expected to submit its application to the city early next year. The review process will take about four months before the proposal is submitted to the Elk Grove Planning Commission for the first legislative step of the approval process.

Nothing can spoil a tenant’s perception of a self-storage facility quite like entering a unit and finding a pest infestation. A variety of rodents and bugs, from rats to cockroaches, can damage tenant belongings, not to mention your own property. Pests often spread disease in their droppings or by transporting germs on their bodies. As long as they’re around, you risk looking unprofessional and open your business to liability. If news spreads about the problem and you’re not working to remedy it, you can lose current and potential customers.

It’s worth the cost to protect your facility and units. While there are several do-it-yourself (DIY) tasks you can perform to help keep pests at bay, tenants should also bear some responsibility by not storing items that could carry or attract an infestation. Professional assistance may also be necessary. Let’s look at each prong: tenant cooperation, DIY methods and exterminators.

Tenant Cooperation

Infestations often begin with stored items that contain or attract bugs and rodents, so make sure each tenant understands the types of goods that are prohibited including food or dirty food containers, animals (living or dead), plants (living or dead), and anything damp or wet. In areas that are particularly humid or markets with high concentrations of pests, even cardboard boxes can contribute to the problem.

Create a brochure or pamphlet that covers the items tenants are forbidden to store and why. Include this information in your rental agreement, and provide instructions on how customers should prep goods for storage. All items should be clean and completely dry. Tenants should ensure no food or crumbs are mixed in with their possessions. Stored clothing and linens should be washed in hot water or dry-cleaned to destroy any eggs.

Encourage tenants to leave moth balls or cotton balls dipped in peppermint oil around the inside of their units, as these can ward off rodents. Borax, sold as roach powder, gets roaches and ants to exterminate themselves. The powder sticks to their legs, and when they clean themselves, they ingest it, leading to dehydration and death. You can suggest that renters sprinkle a light layer of Borax where the unit walls meet the floor. If a tenant must store a mattress, tell him to spray it with insecticide and vacuum it. If it has bedbugs, this tactic can kill them and their eggs.

Since you can’t look inside units once they’re rented, tenants should periodically check their own space for pests and contact the manager if they find any signs of infestation. Those who follow these rules will greatly decrease the odds of pests being drawn to their units.

DIY Methods

There are several things you can do around your storage property to discourage pests. First, make sure any landscaping, such as trees and other plants, is trimmed away from storage buildings. This will help prevent bugs from migrating to the units.

Even small cracks can let in pests like ants, cockroaches and spiders. If possible, ensure all units are airtight and watertight. Making a unit airtight may only be possible with your climate-controlled spaces, but take measures to seal gaps wherever possible. Fill spaces around pikes and in the walls with silicone-based caulk. This should also be applied to wall cracks, the area around light fixtures and especially around pipes.

Don’t forget to dispose of garbage regularly. The longer it’s left out, the more pests will find it and breed in it. Ideally, make sure your trash bins seal tightly, and include them in your facility checks. If they’re open, close them right away.

Pests are highly attracted to water. As much as possible, keep water out of and flowing away from units. This means ensuring roof-gutter systems carry water away from the buildings and into drains. Look for any areas where puddles form on the ground and on the roof. Fix these so water drains away or, at the very least, evaporates quickly after it rains.

Exterminators

If you find an infestation, hire an exterminator immediately. The problem with trying to exterminate pests yourself is mistakes can cost you. Professionals are versed in which chemicals are least harmful to people and property, and they’re trained in how to seek and kill pests.

The cost of an exterminator can vary greatly depending on your climate, the type of infestation, the extent of damage caused and other factors. This makes it difficult to estimate price. Contact several providers and get written estimates from those you bring in to examine your property.

Check each vendor’s reputation. The cheapest isn’t always the best deal. Good places to read reviews are Yelp! and Consumer Affairs.

Finally, clearly understand which tasks will be performed, which might include spraying areas of the property, setting rat and mouse traps, sealing cracks, and more. Knowing the basics will give you a better understanding of what’s involved, so if you choose to do the work yourself, you’ll have a reasonable starting point. Conversely, if you decide to hire an exterminator, you’ll know what to expect from the service.

Ongoing Prevention

Once you’ve done everything possible to educate tenants, protect units and buildings, squash infestations and generally make your facility unwelcoming to pests, you might think you’re done. Not so. The goal is ongoing prevention.

Putting all these measures in place is the best defense you can give your facility against pests. It will require persistence to ensure tenants follow the rules and vigilance to ensure your efforts are properly maintained. In the end, staying on top of pest prevention will put your storage facility ahead of many competitors.

Jon Fesmire is a copywriter at Storagefront.com where he writes articles for the company’s blog, “The Renter’s Bent.” In 2011, he earned a Master of Fine Arts from Academy of Art University. For more information, visit www.storagefront.com.

While the 2008 financial meltdown created stormy conditions for commercial real estate owners and lenders nationwide, the climate in the self-storage industry has been relatively mild, with a nice wind at our backs. With high occupancy rates and increasing rents alongside numerous attractive financing options, facility operators have seen their investments appreciate in recent years. Many have exploited low capitalization (cap) rates and sold their properties for great returns, while others have expanded and developed new sites. Many have also refinanced their loans to lower rates and recapture some equity.

Except for new-development financing, there have been few post-recession headwinds when seeking appealing loan alternatives, but don’t expect this calm weather pattern to last indefinitely. There are clear indications that atmospheric conditions are changing within the industry and the capital markets. This will affect your financing and refinancing options. Here’s how.

New Construction

A void occurred in self-storage supply when virtually no new properties were constructed during the height of the recession (2008 to 2011). During the last five years, however, high purchase prices for existing properties and solid anticipated returns for development projects have contributed to the industry’s expansion, with new facilities appearing steadily since 2013.

A governing factor for new construction has been a conservative lending community, which continues to use its discretion when financing developments. Because underwriting standards closely scrutinize any project sponsorship’s financial strength and experience, most of the new supply coming online is being built by existing operators.

The storage industry has enjoyed an expansionary cycle, which many believe will start leveling off in 2018 or 2019. The self-storage real estate investment trusts (REITs) have all reported that year-over-year revenue increases are now receding in many key metropolitan areas. A few markets are even down year over year. Notably, the REITs have also reported offering more concessions and discounts to lure new customers. On a brighter note, they’re all still reporting near-peak occupancy levels.

Construction financing is again becoming more difficult to obtain. There are two primary reasons for this: First, lenders need to maintain balance in their financing portfolios, and in many cases, the construction “bucket” is now full. Second, with this being the fifth year of the current expansion cycle, they’re more closely examining new and prospective competition when offering terms for development loans or refinancing.

Interest-Rate Movement

Historically, the Federal Reserve has used the Federal Funds Rate to stimulate, maintain or slow economic growth. Fed comments and actions have heightened expectations that there will be three rate hikes in 2017, with two 0.25 percent hikes already occurring in March and June. In mid-August, the Fed’s target fund rate was 1.25 percent, with indications it would increase to 1.50 percent when the next rate hike is implemented by year-end.

The Prime rate and LIBOR indices move in sync with the Federal Funds Rate. In August, Prime was 4.25 percent, and the 30-day LIBOR was at 1.23 percent. Both are expected to rise 0.25 percent by year-end as well.

While there are many factors to consider given the capital markets’ dynamic nature, the knee-jerk reaction to the Fed’s decision to raise rates will be higher costs of funds and steeper borrowing rates.

Variable vs. Fixed Rates

To hedge against these rate increases, many storage owners have locked into fixed-rate financing during the past decade, since mortgage rates have hovered at historically low levels. Simultaneously, others have capitalized on favorable variable-rate terms that have been even lower than many fixed-rate options.

Maintaining an adjustable-rate mortgage is a risk tolerance and timing equation. As long as variable rates stay low, you come out ahead. Conversely, if rates begin to rise, it may cost you more in the long run. There are some indications that the benchmark Fed Funds Rate could reach close to 3 percent at some point in 2018 or 2019, which means variable-rate mortgages will likely be in the range of 5 percent to 6 percent within the next two years.

If you have variable-rate financing, seriously consider moving to a fixed-rate loan now, especially since many variable-rate loans offer this as an option. Further, many lenders have vehicles that allow you to fix an adjustable loan by entering a swap agreement.

The indices and spreads associated with five- to 10-year fixed-rate loans depend on many factors beyond the benchmark rate and, therefore, don’t move in the same manner. Since the beginning of 2017, the Treasury yield has remained relatively flat, along with the corresponding spreads lenders quote above the indices.

Despite typical market cyclicality and three recessions since 1985, there’s been a noticeable pattern of long-term Treasury yields declining and moving in a distinctly different manner than the short-term Fed Funds benchmark rate. The primary factors influencing Treasury yields include bond supply, investor demand, economic conditions, monetary policy and inflation. With so many variables, Treasury yields aren’t an easy equation to understand or predict.

The U.S. economy is currently supported by the lowest unemployment rate since 2007, and the stock market is reaching new heights, with the Dow Jones average eclipsing the 22,000 mark for the first time. While strong economic results often usher in inflation, national and global inflation rates have remained low. While everyone can make conclusions on whether Treasury yields will rise or continue to stay relatively flat, there’s no question that it’s a good time to consider fixing a mortgage rate given the strong certainty that variable-rate loans will climb.

Headwinds Facing New Development

No matter which way they turn, developers are getting a face full of financing headwinds. In addition to increased lender scrutiny and a limited supply of construction loans, rising short-term rates will certainly increase a developer’s cost of funds. Consider, as well, that developers are seeing higher construction costs and, in many cases, long lead times for permitting and building approvals.

Nearly all construction loans are variable-rate products. On top of potentially higher material and labor costs, developers should anticipate an interest rate increase of 0.5 percent to 1.5 percent on their construction loans. Lastly, they should be certain their pro forma has conservative lease-up projections that consider the future supply of storage units in their local marketplace.

Make Your Own Forecast

While the self-storage industry has proven its resiliency time and time again through stormy development and capital-market cycles, we should expect varying degrees of headwinds during the next couple of years. As we all know, great weather never lasts.

Prepare for these changing conditions by forecasting your own upcoming needs, while keeping your operation competitive. You can do this by considering potential new competitors and staying informed about available financing terms. For some, it may be time to refinance an existing loan, especially if you have variable-rate financing. More than ever, developers should closely scrutinize new projects to determine if their projections require updating and if the expected returns still meet their investment criteria.

Neal Gussis is a principal at CCM Commercial Mortgage, a mortgage-banking firm that secures financing for self-storage owners nationwide. With more than 25 years of experience as a national self-storage mortgage broker and adviser, Neal has secured more than $3 billion of self-storage transactions for operators. For more information, call 224.938.9419; e-mail [email protected]; visit www.ccmcommercialmortgage.com.

Rental rates for self-storage units in Arizona have increased 15 percent since 2013, though the pace of growth has slowed during the last three years, according to data released this week by SpareFoot, an online marketplace for self-storage consumers. The average monthly unit rate across the state this year is $72.60, a bump of $1 (1.2 percent) from last year. By comparison, rates grew 5.4 percent in 2015 and 4.4 percent last year.

Rates across Arizona were mostly flat through the Great Recession to 2014 due to a surplus of storage development prior to the financial crisis. Since then, steady increases have coincided with population growth and high occupancy rates, according to the data. The unit price per square foot has grown from 69 cents in 2014 to 79 cents this year, a 14.5 percent increase. The 2017 figure is the highest since 2010.

Within the state’s local markets, Scottsdale, an affluent area northeast of Phoenix, commands the highest self-storage rental rates at $116 per month. Despite the high price, the city’s rates grew 5 percent year over year. Mesa had the largest price increase this year, jumping from an average of $67.44 in 2016 to $75.22, an 11.5 percent increase. The trajectory of rental rates in Phoenix and Tucson have closely mirrored each other, growing 23.5 percent and 16 percent, respectively, between 2014 and 2016, before falling 4 percent this year.

The most popular unit size in Arizona is a 5-by-10, representing 31 percent of rentals, according to the source.

SpareFoot also released data on California self-storage rental rates last month.

SpareFoot.com helps consumers find and reserve self-storage units, with comparison shopping tools that show real-time availability and exclusive deals. With a network of more than 12,000 storage facilities ranging from mom-and-pop operations to real estate investment trusts, the company reaches prospective storage renters though partnerships with brands including SelfStorage.com and Penske Truck Rental.

SimplyStow, a Lancaster, Pa.-based startup, is scheduled to launch a peer-to-peer self-storage marketplace next month that will serve the local community and student body at Franklin & Marshall College (F&M). Similar to other shared-economy networks, the app-based company will provide an online platform where people in need of storage can find local hosts willing to rent available space.

Beginning Nov. 16, those in need of storage will be able to peruse the SimplyStow app in search of local storage options. The company is currently running a beta program, allowing hosts and storage seekers to sign up for early access. Thus far, 250 people have registered, with 60 percent listing space for rent and 40 percent looking for storage space, according to the source.

There aren’t any size constraints for hosts to list, and they’ll be allowed to set their own rental price. Listings will include space descriptions and photos. Those looking for storage will be able to consult user ratings and reviews. App-user accounts will be verified through social profiles, the source reported.

Unlike other peer-to-peer storage marketplaces, SimplyStow intends to offer a valet-storage component through which customers will be able to schedule item packing, pick-up and delivery. The company also will provide a digital inventory of stored belongings.

SimplyStow will charge for pickup and delivery based on travel distance, and intends to take a cut of space rentals by charging a transaction fee, possibly 15 percent, according to CEO Paraj Mathur, a 21-year-old senior at F&M, who conceived the company at the end of his junior year.

A business and computer-science major, Mathur is working with fellow student Ionela Turcin, a 21-year-old carrying a double major in biology and Spanish. Mathur came up with the idea for the peer-to-peer service when storing his belongings at Turcin’s house for the summer, while he returned home to California. “Our goal is that no college student or anyone [who has more stuff than space] will need to suffer through self-storage again,” Mathur told the source.

SimplyStow is seeking outside investment to help with startup costs, staffing, further app development, and pickup and delivery services. Mathur plans to eventually expand the service’s reach to other colleges and cities.

“Our goal at a larger scale is to bring the tech-company ecosystem to Lancaster,” he told the source. “That’s a big part of who we are. Whatever our success comes as a company, it stays rooted in Lancaster.”

Simply Self Storage (SSS), which owns or manages 210 self-storage facilities in the United States and Puerto Rico, has acquired a facility in Seattle, its first in Washington. The property at 2811 N.W. Market St. is north of Salmon Bay in the Ballard neighborhood, which includes the city’s Scandinavian seafaring community. It’s next to the Portage Bay Cafe, and across from Marine Lenders Services LLC and the Republic Parking 30-241 Jacobson Terminals Lot.

The facility comprises more than 85,000 total rentable square feet of storage space in 577 climate-controlled and drive-up units. Property features include security cameras, keypad entry, and a retail store that sells moving and packing supplies.

“Our Market Street Seattle location marks the first footprint in the beginning of our expansion to the West Coast,” said CEO Kurt O’Brien. “We are excited about offering world-class service to the residents and businesses of Seattle, and we look forward to other openings in Washington and other locations along the Pacific.”

Founded in 2003 and headquartered in Orlando, Fla., SSS properties comprise more than 16 million square feet of storage space. The company is looking to aggressively grow its development pipeline, with  projects underway in California, Michigan, Minnesota, New Jersey, New York, Ohio, Tennessee, Texas and Washington.

Inside Self-Storage (ISS) and Janus International Group have released a new publication titled, “Case Study: Tri-Village Self Storage Offers a Tasteful Balance to Downtown Columbus Market.” The free downloadable PDF highlights the challenges faced while building this six-story facility in a busy market.

The study explains how the owners overcame a variety of obstacles such as building on a small land parcel, dealing with inclement weather and getting permit approval. It also provides details about the facility itself, which includes wine storage and a wine-tasting room, a diverse unit mix, and advanced technology,

This and other case studies can be downloaded from the Whitepapers page of the ISS Resource Center. Another recent Janus whitepaper, “Case Study: Top Self Storage Proves Why It's Tops in Miami,” can be downloaded from the same page.

Headquartered in Temple, Ga., Janus has eight U.S. locations as well as manufacturing facilities in Europe and Mexico. The company is owned by Saw Mill Capital Partners LP, a New York-based private equity investment fund managed by Saw Mill Capital LLC.

For more than 25 years, ISS has provided informational resources for the self-storage industry. Its educational offerings include ISS magazine, the annual ISS World Expo, an extensive website, the ISS Store, and Self-Storage Talk, the industry’s largest online community.