As the economy falters and businesses seek strategic ways to attract and keep customers, marketing and customer service has become more important than ever. In light of this, an entire track of seminars devoted to the marketing and promotion of self-storage facilities has been added to the educational curriculum of the Inside Self-Storage World Expo in Las Vegas. During Jan. 27 and 28, 2009, attendees can attend classes covering topics such as:

• Self-Storage Marketing Secrets for Tough Economic Times
• A Creative Approach to Promotions: Special Events Charity Work and Mainstream Media
• Changing the Mindset, Changing the Results: Capturing Tenants in Tough Times
• Turning Facility Employees Into Effective Marketers and Salespeople
• Dialing for Dollars: Perfecting Phone Skills to Sustain Self-Storage Profit

The ISS Expo will gather self-storage owners, operators, managers, developers, investors and other professionals at the Venetian Hotel Resort Casino and Sands Expo & Convention Center, Jan. 26-29. In addition to education sessions, the conference and tradeshow features the self-storage industry's largest display of product and service exhibits and multiple networking opportunties. Additional information can be found at www.insideselfstorageworldexpo.com.

Door To Door Storage Inc. has donated the use of five portable self-storage containers, including rental and transportation, to The Salvation Army of Austin, Texas, for use in its 2008 Angel Tree Program. The program is part of the charity’s mission to assist neighboring families in need this holiday season.
 
Through an interview process, The Salvation Army identifies local children age 12 and under who qualify as “angels.” Community sponsors select angels, whose names and information are displayed on holiday ornaments, from Christmas trees displayed in public venues. They then donate gifts on the children’s behalf, bringing them to The Salvation Army Christmas Store, where they are stored in the Door To Door containers. The storage units will remain at the store until after the holidays.
 
Thanks to the Angel Tree Program, 7,933 Austin children received new toys and clothing during the holidays last year. The Salvation Army has been serving Central Texas since 1889. It provides a broad range of supportive services to the homeless, near-homeless and low-income populations, and is the largest local provider of emergency shelter for men, women and families. For more information about the Salvation Army of Austin, visit www.salvationarmyaustin.org.
 
Door To Door Storage Inc., a national provider of portable self-storage containers and moving services, was founded in 1996. It has operations in more than 20 U.S. metropolitan markets, with a corporate headquarters in Kent, Wash. For more information, visit www.doortodoor.com.

Arkansas Sen. Bobby Glover, D-Carlisle, has re-filed a tax-cut bill that failed to clear a House committee in 2007 but would repeal the sales tax levied on mini-warehouse and self-storage rental services. SB 2 would go into effect on Jan. 1, 2011. It states that the tax would be repealed if the state’s chief fiscal officer certifies after July 1, 2010, that net-general revenue for the fiscal year ending June 30, 2010, exceeds the amount to fully fund the maximum allocations by at least $ 4 million.

HFF representedHendry Investments Inc. in the sale of its 21-property self-storage portfolio in San Antonio, Texas, to Buffalo, N.Y.-based Sovran Self Storage Inc. for $143.4 million. The 14,589-unit portfolio consists of 21 facilities in Colorado, Florida, Kentucky, Ohio and Texas. The properties will be re-branded Uncle Bob’s Self Storage. Angelo Thomasello of the Locke Acquisition Group LLC represented the buyer. For more information, visit www.hfflp.com.

Cap rates are up. Prices are down. Interest rates are just a little higher. Competition is down. And, best of all, cash-on-cash returns—the Holy Grail of investing—are up!

It certainly appears that some real opportunities exist for experienced self-storage owners to pick up some nicely priced, quality built, well-occupied properties, earn a handsome cash-on-cash return and yet have significant upside potential when the market improves. However, it is not a time for amateurs. One really needs to understand the self-storage business to be sure that the underlying business value is there.

Many of you may ask, “Is this the bottom?” No one knows for certain, but we know one thing for sure: This isn’t the top. If you do have your eye on a property, many other questions need to be posed:

1. Will the facility maintain economic viability well into the future?
2. Can it be improved or better managed to secure long-term viability?
3. Is the cash-on-cash return significant enough to warrant the current investment?
4. Do you have the experience and knowledge to recognize the risks and potentials of the investment and the talent to manage the property in an effective manner?

As you answer these questions, listen to both your gut and brain, making sure they both answer “yes” before you decide.

A Closer Look

To gain better insight, let’s look at some numbers that illustrate the recent history of self-storage real estate. As you may have noticed in the example, provided below, the price is down, the loan is smaller, relative leverage has dropped and the cash-on-cash return on equity is up a whopping 77 percent to 9.4 percent—not a bad tax-sheltered return.

The only negative is the equity requirement is up, but then again, you are earning a great return on that equity, which is really the name of the game. And this comes with a nice advantage: If cap rates go back down, at the same income the facility will produce a $400,000 increase in value—a 57 percent return on your new larger equity.

Worst-Case Scenario

Take a moment to think about what will happen if this isn’t the bottom and prices go down further. First, your returns will not change and all of the positive things mentioned before will remain true. Not a bad outcome for being partially wrong on the timing.

There is one possible serious downside to waiting too long to see if prices go down further. Think for a minute about the potential of inflation going up and the Federal Reserve aggressively raising interest rates in earnest, or the banks really tightening up on lending and rates. Take it from a guy who had a construction loan ticking off at 19 percent in 1983: You won’t like it at the bottom.

One last item: Very few people who own self-storage do sell because of changes in the market. They usually sell for personal reasons, such as retirement, relocation, illness, divorce, etc. This means many fine performing properties could be on the market at any given time.

Don’t let this unique time in the real estate market pass you by. Be sure to do your homework and consult a self-storage expert to make sure the opportunity is right for you!

Michael L. McCune is president of the Argus Self Storage Sales Network, a self-storage real estate brokerage and development company based in Denver. Argus also operates www.selfstorage.com, a marketing medium for owners in the industry. For more information, call 800.55.STORE.

This month, Inside Self-Storage has released its 2009 Factbook, a comprehensive collection of instructive articles to educate and inform readers on all topics related to the self-storage experience. Chapters cover development, finance, construction, management, marketing, real estate, legal issues, insurance, security, technology and add-on profit centers such as boat and RV storage.

The Factbook is designed to educate all levels of self-storage developers, owners and managers. Published annually in November, it contains hundreds of articles authored by experts from all aspects of the business. For information and to purchase a copy, visit www.insideselfstorage.com/factbook.html.

Bancap Self Storage Group Inc. sold Hyer Quality Storage in Lake Isabella, Calif., for $2.2 million. Jason Allen represented the seller and buyer. The single-story property features 232 units with nearly 37,000 rentable square feet plus 25 RV spaces. In addition, there is an auto shop and dealership under newly executed leases. The facility was approximately 80 percent occupied at the time of the transaction closing. For more information, visit  www.bancapselfstorage.com.

Janus International introduced a new handle for self-storage roll-up doors. Made of acrylonitrile-styrene-acrylate materials, the handles have been developed to better withstand outdoor applications—resisting rust and moisture, as well withstanding high impacts, extreme temperatures and chemicals.  

Janus manufactures steel doors, rolling steel doors and building components for the self-storage, commercial and industrial markets. Info: www.janusintl.com

Across the country, there has been a dramatic increase in the theft of catalytic converters from all types of vehicles. As the price of recycled metals has spiked, a black market in catalytic converters is emerging, according to a spokesman for the Washington, D.C.-based Institute of Scrap Recycling.

The part, easily removed by a portable saw from under a vehicle, contains a variety of precious metals including platinum, palladium and rhodium. The amounts in each converter are tiny, but the current prices of $2,000 an ounce for platinum and $9,000 for rhodium are tempting thieves to take their chances. The converters can net anywhere from $70 to $200 per part. Although typically covered by insurance, a vehicle-repair cost can run from $500 to $2,500.

I issue this warning for several reasons. First, you need to ensure RV- and vehicle-storage customers are properly protected. Do you have adequate lighting and security cameras watching your parking areas?

Under the terms of a self-storage lease, managers do not have care, custody or control of tenants’ belongings, including vehicles. However, it behooves us to be aware of the growing problem and watchful of activity within outside parking areas. A loss of even a few catalytic converters from customer vehicles could produce negative reactions in the form of move-outs.

The second reason is to make sure the legal basis of the relationship with your customers, as it relates to insurance protection, is not skipped over or rushed during the rental agreement review. The Texas Self Storage Association felt that the issue of vehicle storage was so important that it commissioned attorney Jeffrey Greenberger (www.selfstoragelegal.com) to assist in the creation of a totally separate document to be used by member companies.

Finally, this is to make you aware of the problem because some thieves may be using units to keep their ill-gotten gains until they can be sold to a scrap-metal dealer. A catalytic converter is not easily dropped into a paper bag and secretly placed into a unit. They are large and dirty; any tenant loading a half-dozen of these parts into a unit from a pickup or van should be easily pegged.

Stay on guard. Your actions could help to keep your facility off the front page of tomorrow’s newspaper or local newscast. Spread the word in your self-storage community.

Still Some Tough Times Ahead

As the third-quarter of the year comes to a close, we are still seeing weakness in many areas of the economy and steep declines in some cities and communities. The staggering financial losses of GM, Ford and Chrysler have put them in jeopardy. The closing of entire restaurant chains like Bennigan’s makes us look closely at consumer patterns. The decline in home values and the numbers in foreclosure are also still alarming.

One area in particular is the overall drop in credit card usage. A recent report by Javelin Strategy & Research showed that 37 percent of Americans had reduced spending on their credit cards. Fifty-four percent of those surveyed said they plan to spend less on discretionary or luxury items in the year ahead, and only 5 percent anticipated spending more. Within the target market of 35 to 64 year olds, the percentage of those spending less was even higher.

However, a supplemental chart submitted by Public Storage from their second quarter shows minimal revenue impact from the housing slowdown. The chart specifies major metro markets, the time of peak housing values in each market, the number of homes in the foreclosure cycle and the company’s self-storage facility’s occupancies and net income within each selected market. It is a chart worth reviewing and using as a model for constructing our own target market areas.

Keeping a close eye on tenant payment trends and taking maximum advantage of every inbound telephone call from a prospective customer will be important for a long time to come—for obvious reasons. The days of the next replacement renter walking in the door are gone. We all need to be more aggressive in our closing techniques. The mantra: If they walk into the office, don’t let them leave without renting a unit!

I am still an optimist about the future of our industry, but we have to have patience and maybe work a bit harder to keep things positive.

Music to My Ears

The announcement that the Omni Hotel chain would be joining Hyatt Hotels, Westin and Sheraton hotel companies in a decision to eliminate Yellow Pages books from their hotels is music to my ears. Anyone who has heard me rant about Yellow Pages advertising knows why I am so excited by this news. I am firmly convinced that this could be the proverbial first hole in the Yellow Pages Dam.

The publishers of the phone books will probably try to put a PR patch on it quickly, if they can, but over the next several years their strangle hold on the self-storage industry’s perception that we “just can’t live without them” will burst. The growing list of hotels dropping the books should be the clarion call for all to reconsider the millions spent in countless Yellow Pages nationwide.

Ask one of your kids or grandkids and I bet you’ll find some have never opened a Yellow Pages directory. The impact of the Internet can’t be denied. As you start to consider next year’s budget, take a long hard look at your Yellow Pages expenditures compared to website costs. Are you really positioning yourself for the future reality that when someone is looking for a storage solution they will turn to keyboards rather than the Yellow Pages?

See you in Vegas, Baby!

The ISS World Expo in Las Vegas, Jan. 26 to 29, is shaping up to the biggest industry event of 2009. Vegas continues to be one of the best and easiest travel destinations from every part of the country and around the world. Returning to the Venetian Resort Hotel Casino for the conference means exceptional hotel rooms, outstanding meeting space and an exhibit hall capable of staging the largest tradeshow in the industry.

I am honored to have been asked to once again be among the industry experts selected to present a variety of industry topics at the 2009 Expo. I hope that you plan to attend.

Jim Chiswell is the owner of Chiswell & Associates LLC, which has provided feasibility studies, acquisition due diligence and customized manager training for the self-storage industry since 1990. He is a member of the Inside Self-Storage Editorial Advisory Board, a moderator for the Self-Storage Talk online community, and a faculty member of the Self-Storage Training Institute. He can be reached at 434.589.4446; visit www.selfstorageconsulting.com.