Despite opposition by Public Storage Inc., city council members in Pomona, Calif., last week approved plans to develop a mixed-use business center and self-storage facility on the grounds of Fairplex, where the annual L.A. County Fair is held.

The development includes converting 20 barn and stable buildings into a 94,200-square-foot self-storage facility and a 208,721-square-foot business center that would include space for office, medical, educational, retail, restaurant and light-manufacturing uses.

Los Angeles County Fair Association, which governs the use of the grounds, said last week development will be completed in three phases in 2012.  The Pomona Planning Commissioners approved the project in October 2010, but faced opposition from representatives for Fairplex and Public Storage, both of which filed appeals. Fairplex officials asked the commission to change or eliminate the limit on the amount of space a tenant in the business center could use for warehousing. Public Storage, a self-storage real estate investment trust, requested an environmental impact study be completed.

In November 2010, city councils members voted to hold an appeal hearing. After several postponements, the council voted 5-0 last week to uphold the Planning Commissions decisions. Representatives from Public Storage said the company will sue the city if a full environmental study is not ordered.

The city maintains an environmental impact study is not needed because the project wont impact the environment and will have little impact on cultural resources. There would also be no  significant impact on traffic. However, a traffic signal in the area of Gate 12 is a condition of project approval.

SmartStop Self-Storage of Ladera Ranch, Calif., opened in July 2003. The property was purchased in July 2011 by Strategic Storage Trust Inc., which operates the SmartStop brand. It has 140,500 square feet, 114, 200 of which are rentable. Of the facility's 980 units, 390 are climate-controlled.

Steve Piazza is the facility manager. The site operates using STORE  self-storage management software by Centershift Inc. and access-control and security components from PTI Security Systems.

The facility design is a mission/ranch style with a large open office and retail area, high ceilings, and exposed beams. In addition to self-storage rentals, the facility also offers RV and boat storage, truck rental, and wine storage, which will soon be revitalized.

Plans for the wine-storage area include the creation of a cellar-type look and feel with stone-accented walls and wood-beam accents on the ceiling. Custom wood storage cabinets and climate-control monitoring devices will be installed to promote temperature consistency. In addition, Strategic Storage Trust plans to create a custom conference room that can double for private customer wine tastings, corporate meetings or field training. 

Demographics

The Ladera Ranch location is Strategic Storage Trusts flagship property, as it is close to the companys headquarters. Discretely situated behind shopping centers and apartment complexes, the facility is tucked into the neighborhood and nestled into a hillside.

The target audience comes from a broad range of ZIP codes, some from as far away as Cote de Casa (north) and extending west to the 5 Freeway. A demographic study by the company shows the median income within a one-mile radius is $147,000, and the population within a three-mile radius is 62,700.

The company is taking a hometown approach to marketing, with the goal of attracting local small-business owners and families. The marketing plan includes personal marketing to apartment complexes, neighborhood community centers, restaurants, dry-cleaners and neighborhood churches along with the local chamber of commerce. The companys participation in all things local has been a focus since it began managing the property in April.

Two brothers in the Philippines decided to open a self-storage facilitythe countrys firstafter  a company asked if it could store financial documents in a warehouse they owned. Mark and Carlo Coronel, along with their mother Celina Martinez-Coronel, opened Safehouse Storage Facility in 2010. The family also owns Insular Rural Bank.

Inside Self-Storage caught up with Carlo to discuss the market in his country, the obstacles the family faced in opening Safehouse, and the unique differences between the U.S. and Philippines self-storage markets. 

What led your family to open a self-storage business?

The opening of Safehouse came as an accident to us. We really didn't plan to open a self-storage facility in the Philippines. A company approached us and asked if it could store its excess financial documents in one of our warehouses. Since we were already in the warehousing business, my brother and I decided to build a 20-square-meter room in one of our 500-square-meter warehouses.

Not knowing that there was that type of business in the United States, we tried to research more about the self-storage industry on the Internet. We then decided to build three more units and tried to market them. Surprisingly, people were calling us and wanted to take advantage of our services. That is the time when we saw there was a market for this type of business. That was basically the birth of Safehouse.

Whats the status of the industry in your country? Are there many facilities or new developments?

Ours was the first self-storage facility in the Philippines. This industry is not yet known in our country. Most of the storage companies here in the Philippines are companies wherein they pack your items and place them in lift vans and not in individual storage units. There are few self-storage facilities in the Philippines, but we are the first to use roll-up doors for each individual unit.

What are the barriers to entering the industry in your country?

One of the barriers to entering the industry is the location wherein you would place the facility. It is a blessing that we are in the warehousing business, so location is not a problem. For some people, it would be hard for them to pick a strategic location and pay a minimal fee for rent.

Another thing would be the knowledge about this type of business. It is not just simply leasing out storage units, but also making sure the logistics are smooth. In our storage facility, we handle moving items from the customer's place to the storage unit. We make sure the client would not need to worry about how to transport his items to the storage facility.

What are some market differences between the Philippines and the United States?

One main market difference is people in the Philippines rely on service. That's why we can't fully attach the word "self" to our brand. We give the clients a personalized storage solution. It's not just accommodating their storage needs, but also doing the packing, moving and management for them.

In the U.S., you can rent out a truck and the client could use it for hauling his furniture. Here in the Philippines, we can't offer that type of service. People here won't go through the hassle of driving the truck and moving their furniture to the facility. They would pay to make their lives convenient. I wouldn't say that people here are spoiled, but most of our clients are professionals, so they wouldn't have the time to do those things. They would rather seek our services and not worry about it.

Are customers embracing the service, or are you educating them about how it works and what it means for them?

Customers are embracing the service. Every time they inquire, they tell us that it's about time that someone put this kind of business in the Philippines. However, we still need to educate them on how it works. As I mentioned, this is still new in the Philippines; people still don't know how this works. What we need to achieve is awareness. We need to make people aware there is this kind of service here.

Whats the future of the industry in your country and what challenges will it face?

There is such a bright future for this kind of business in the Philippines. More condominiums are being put up near our facility. There is even a resort-type condominium 10 minutes away from the facility designed by no other than Paris Hilton. Fort Global City is a growing business district in Metro Manila. Aside from Makati, which is the central business district in the metro and is just 15 minutes from the facility, Bonifacio Global City (BGC) is even closer. High-rise commercial buildings and condominiums are already cluttering the BGC skyline. With these developments, more  people will need extra storage.

One of the challenges our company will face will be competition. The awareness of this kind of business will either bring in more customers or more competition. To prepare us for the latter, we are now going full blast on our expansion by adding more features and services. Were developing a sales team that will bring awareness to the people that theres this kind of business. Were now adding more units and putting up more branches that could also cater to the people living in the northern part of metro Manila.

Self-storage operators around the world are getting into the holiday spirit by kicking off various charity drives.

Big Key Self Storage in Miami is collecting unwrapped gifts for the U.S. Marine Corps Reserve Toys for Tots Annual Holiday Toy Drive. The facility is also donating use of its rental truck to the organization. In addition, Big Key will also lend its truck to the Toy Fest at Es Morada Florida on Dec. 16-18, and made it available during a NASCAR event Nov. 18-21 in Homestead, Fla.

1st Security Self Storage in Davenport, Fla., is hosting a toy and food drive. New, unwrapped toys collected through Dec. 22 will be donated to the Toys for Tots, while non-perishable foods collected until Nov. 22 will be donated to the Agape Food Bank.

Atlanta-based Storage Post Self Storage is partnering with the non-profit organization Jersey Cares to distribute 50,000 donated coats to at-risk men, women and children in New Jersey. The companys storage facilities in Linden and Jersey City, N.J., will act as official drop-off locations for donations through Dec. 15. The drive is seeking  gently-used, freshly-laundered coats in good condition. The storage facilities have also offered the use of their storage units and moving trucks to other local groups participating in the collection.

Guardian Self Storage is also participating in a coat drive. The facility in Newburgh, N.Y., is sponsoring the Hudson Valley Coat Drive. The Newburgh Free Academy Interact Club donated 75 coats it collected on its campus in October. The club also donated blankets and sweaters.

Lock+Storage in Singapore is teaming up with the Society for the Prevention of Cruelty to Animals (SPCA) to urge people to adopt rather than buy pets this holiday season. The two organizations have launched a series of postcards, each featuring an animal currently up for adoption. The postcards, which also include profiles of the animals, also help raise funds for the SPCA.

The Storage Inn in Egg Harbor Township, N.J., provided Thanksgiving baskets to local churches to deliver to community members. Each basket contained all the ingredients for a Thanksgiving meal along with a gift certificate to Shop Rite for choice of either a turkey or a ham. The facility has been owned by the Meckel family for more than 30 years.

A police raid of a self-storage unit at Manhattan Mini Storage on East 62nd Street in New York revealed expensive wine, more than $1 million in cash, and skimming and counterfeiting equipment, all attributed to an indentity-theft ring allegedly orchestrated by servers at high-end New York restaurants.

Servers from Smith & Wollensky, The Capital Grille, Wolfgangs Teakhouse, JoJo and two other restaurants were allegedly involved in a credit-card scam that swiped the identities of at least 50 customers. The crew of thieves has reportedly spent $600,000 on luxury purchases. The raid and confiscation resulted from an 18-month-long investigation that has led to 28 arrests.

The alleged ringleader gave waiters electronic skimmers, allowing them to steal customers identities and create fake American Express cards. They used those counterfeit credit cards to shop at luxury stores such as Chanel, Neiman Marcus, Cartier, Hermes, Bloomingdales, Bergdorf Goodman, Waldmans, London Jewelers, Burberry, Jimmy Choo and Lord & Taylor. The items were sold to complicit customers for cash, and then the customers resold them online, prosecutors told the source.

The thieves specifically targeted black American Express Centurion cards, an invitation-only card that requires spending up to $250,000 in one year. Logically, these customers probably are less likely to notice smaller expenditures on their credit-card statements.

Together, the servers have been charged with 172 counts of racketeering, grand larceny and other charges. At the request of the assistant district attorney, all of the defendants were ordered to be incarcerated until after arraignment in Manhattan Criminal Court so that authorities could verify that their bail was not paid with stolen money.

Stor-Age, the largest operator of self-storage facilities in South Africa, opened a new self-storage facility in Johannesburg, South Africa, in October. The facility is in the heart of the Johannesburg Central Business District and enjoys exceptional exposure to traffic on the busy M2 highway.

Phase 1 of the six-floor facility began in April and took six months to complete. Upon completion of phase II, it will consist of more than 500 self-storage units and 7,000 square meters of storage space. 

Stor-Age operates approximately 20 self-storage facilities throughout South Africa, with a corporate office in Cape Town.

By Ben Vestal

Over the past year, the self-storage real estate market has shown more activity as investors began to once again seek quality properties. To get answers to questions relevant to todays facility owners, buyers and sellers, I recently assembled a roundtable of real estate experts to discuss the state of self-storage in the western region. Ive asked them to comment on capitalization (cap) rates and the availability of financing in their markets. Joining us in the discussion are: 

• Jim Berry, CRG Utah, Salt Lake City
• Steve Boldish, Coldwell Banker Commercial N.W., Medford, Ore.
• Tom de Jong, Colliers International, San Jose, Calif.
• Jeff Gorden, Eagle Commercial Realty Services, Phoenix
• Joan Lucas, Joan Lucas Real Estate Services, Denver
  

What is the current cap rate in your market, and what are your predictions for cap rates in 2012?

Berry: In Utah and Nevada, cap rates have not shown any particular trend either up or down. New properties are entering the market with cap rates as low as 7.25 percent and as high as 10 percent. I expect this range to hold steady throughout 2012.

Boldish: Im predicting that cap rates will remain steady through the end of 2012 in the Oregon market. In 2011, verified sales produced a range of cap rates from 8.4 percent to 10 percent, and properties currently for sale have cap rates in the range of 8 percent to 12 percent.

de Jong: Cap rates in the primary Bay Area market have compressed noticeably over the past year. Weve seen cap rates dip below 7 percent for institutional-quality facilities in good locations. Outlying cities such as Gilroy, Morgan Hill and Vallejo have seen trades in the 7.3 percent to 7.6 percent range, while Sacramento, the Central Valley and rural locations have suffered from a lack of sales transactions.

Cap rates will remain depressed in the primary markets due to the lack of available inventory and the amount of capital looking for acquisitions. The other driver will be the continued aggressive nature of the large real estate investment trusts looking to consolidate the market while the interest rates remain historically low. Cap rates will likely compress in the outlying markets as a result.

Gorden: In the Arizona market, cap rates for institutional-size properties have generally trended downward. Non-institutional-sized and rural properties have not traded with enough frequency to determine a trend. Predictions for 2012 will follow interest rates and the economy. Low interest rates result in low cap rates, and a better economy and more confidence to invest will also result in lower cap rates, and vice versa. I expect cap rates to compress outside of the Phoenix market as smaller investors begin looking to secondary markets for opportunities and as financing becomes more readily available.

Lucas: The last six to 10 months have presented a very interesting playing field for us in Colorado. Early in 2011, many of the nationals let it be known that they were looking and had money to spend. All the major buyers were looking for the same thing: class-A properties with strong operating histories and great demographics, and several opportunities in the same market were ideal. Just like in 2007, cap rates started dropping. We saw deals being done from 7.75 percent to 8.25 percent.

Today, the frenzy has settled back down to equilibrium in the marketplace. There are still many buyers in the market, but theyll only consider acquiring one property in a region if theyre already operating there. They will look at class-B sites with upside, continue to look at 12 months of trailing history, and will make adjustments for increases in property taxes. This change has accounted for a more appropriate cap rate range of 8 percent to 9 percent for decent sites.

Is financing available in your market? If so, what loan terms are you seeing?

Berry: I would describe todays loan market as a designer market. Those with AAA credit can get what they want as long as the loan to value (LTV) doesnt exceed 75 percent. The approval process can be arduous, and without a AAA credit rating, loans will be very tough to get, period.

Boldish: In Oregon, cash transactions and owner financing are dominating most of the self-storage sales. Bank financing is available, but with most lenders not exceeding 70 percent LTV and a 10-year call. Rates vary from 5 percent to 7 percent.

de Jong: Financing has resulted in a further bifurcation of the market with a competitive advantage to the largest, best-capitalized operators. Interest rates and underwriting standards have favored these larger operators for the past several years, and this has not shown any significant signs of lifting. The larger the acquisition, the more capital required and the better the rates. Although the Small Business Administration (SBA) has been aggressively marketing to the self-storage community, we have not seen any deals completed in the Northern California market to date.

Gorden: Yes, financing is available for 60 percent LTV or less. Terms are generally 60 days to close with rates at 5 percent for life company loans on cherry-picked properties, or 5.75 percent to 6 percent on everything else. Ive recently seen a 4.75 percent refinance. As yet, I have not seen an SBA deal close in the Phoenix area.

Lucas: Refinancing has been a challenge for some owners whose commercial mortgage-backed security loans have come due and their properties are no longer worth what they were a few years ago. This weakness, combined with tighter lending regulations, necessitated owners bring money to the closing table, take on a capable partner or even sell.

Today, typical loan terms are a 6.25 percent rate on a 30-year amortization with a 10-year call. Lenders are looking for debt yieldthats the net operating income (NOI) divided by the loan amountthey want to see at least 10.5 percent on self-storage. If the numbers work, and the borrowers are really qualified, you can get the deal done. Timing is anywhere from 60 to 90 days.

As the investment market continues to stabilize, are you seeing any signs of new development in your area?

Berry: In Utah and Nevada, we are not seeing any current development of self-storage properties, but developers are beginning to shop for land. This could mean an increase in development activity in the coming years if developers are able to finance their projects.

Boldish: There are still non-performing properties available throughout Oregon. Our unemployment rate is higher than the national average and new development is slow. There are a few major developments in progress by nationally known companies, but Im not seeing any speculative projects being built.

de Jong: There are several construction projects that will have been completed in the last 12 months in the San Jose area, including a development by Bay Area Self Storage and another by Extra Space Storage. These projects had been planned prior to the recession and were in markets where the occupancies and rates justified the additional capacity. Im aware of several other projects in various stages of planning, and at least 17 additional sites where facilities that had been planned but are currently shelved for numerous reasons, including lack of available financing and excess supply.

Gorden: Currently, Im aware of one development project thats underway in a metro area, but in general the market demand has been met in Arizona. Several large lenders were still interested in funding the construction loan at 50 percent LTV. Im not aware of any other experienced developers who are pursuing new development at this time.

Lucas: Im currently aware of six different projects in Colorado that are in various stages of development. Im just amazed. I thought it would be at least another year before this market took off again. Obviously the people who are developing have expertise and deep pockets to get the deals done.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail [email protected].

South African self-storage operator Storage Genie hosted grand openings for its newest Storage Genie Zones, facilities designed to correspond with retail areas, in Zambezi Mall in Pretoria and Stoneridge Mall in the Edenvale area in Johannesburg. The newest zone joins the pilot Storage Genie Zone in Rivonia Square Mall in Sandton.

These new facilities feature more than 150 units in Zambezi Mall and 300 units in Stoneridge Mall. The units range in sizes from half garage, full garage and larger garage sizes.

The facilities offer 24-hour security and drive-up access to the indoor, under-roof storage units. Other amenities include boxes and moving supplies for one-stop shopping, online rentals and call-center bookings during office hours, online payments, commercial delivery acceptance, lock-up units for vehicle storage, a customer-business center with free wireless Internet, 24-hour digital surveillance cameras at selected locations, coded keypad entry, and much more. Store and access hours are 8 a.m. to 6 p.m. Monday through Friday, and 9 a.m. to 1 p.m. on Saturdays. They are closed on Sundays, though access can be made upon special request.

Established in 2007, Storage Genie provides self-storage property management and development within South Africa.