By Molly Bilker

The Canadian self-storage market is handicapped by limitations on development. Saturated markets mean higher land costs. Building codes and guidelines are stricter than those in other countries and can cause costly changes in development plans.

Despite such setbacks, the market continues to expand, and self-storage is finding a footing in rural areas and small towns where it was once unknown. In addition, rental rates are gradually increasing and demand is picking up, says Marc Goodin, a civil engineer and owner of Caraquet & RV Storage in Caraquet, New Brunswick, Canada.

The Rising Cost of Building

Though the Canadian self-storage market regularly sees new development and an increase in renters, builders face a number of challenges. In some areas, land prices are rising because the markets are flooded, explains Jamie Lindau, sales manager for Trachte Building Systems, a U.S.-based developer that works regularly with Canadian facility owners and investors.

Inflating land prices raise the break-even analysis, which includes the combined costs of development and land, and returns become more unstable. As such, more money is needed for the down payment, Lindau says. "The availability of money is there, but you need a lot of capital yourself to get into the business.

Rigid development guidelines also inflate building costs. Development is guided by building codes, which can vary greatly depending on the region. For example, theres a requirement in Saskatchewan that firewalls must be added between all units or sprinklers should be added inside the building. For this reason, Lindau says, most developments in the region are all single-story to scale back on the expenditures. "The cost to develop is a lot higher, but also, the rental rates are higher," Lindau notes. "The cost is easily 30 percent more [to build] than in the United States."

In British Columbia, however, development costs have dropped. Prices are alleviated by the province's abandonment last April of the harmonized sales tax. Now that the tax has been rescinded, storage rents are once again exempt from the 7 percent sales tax, which is still in effect in Labrador, New Brunswick, Newfoundland and Nova Scotia.

Migration Continues

The migration of residents about the country for personal or professional reasons also spurs new development. Saskatchewan's government and business practices have transformed in light of the province's oil-shale boom in recent years, which has caused more people to move there. With more people comes higher storage demand. "Where the people are moving to is where it looks like there's opportunity for development," Lindau says. "The Maritime Provinces might be closer to saturation, or areas like large cities in Ontario might be overdeveloped. Not everywhere is a great place to build. You have to check it out."

Other trends have begun to emerge. More developers are building climate-controlled units with radiant floor heat to keep them warm during the frigid Canadian winter. Multi-story facilities and conversion projects are becoming a trend in large cities, where self-storage operations are concentrated as well.

Smaller towns are also starting to develop self-storage. Canada is starting to catch up with the U.S., Goodin says. Nonetheless, people in rural areas still dont know enough about the values and uses of self-storage, according to Goodin, and operators and developers will need to continue to educate them through marketing efforts.

Marketing Is Key

Technology has had an impact on the Canadian market, where proximity to the population and an Internet presence are beginning to outweigh the advertising power of street visibility. Goodin stresses that the Internet is a critical part of being a market leader and successful self-storage operator. His facility's website offers an overview of the business, and customers can rent a unit online. Goodin also maintains a Facebook page and participates on Pinterest.

The potential customers ability to search for self-storage via GPS and mobile devices allows him to find out which facility is closest to him, making closeness to a high-density area more important to operators than conventional marketing, Lindau says. Community marketing is also critical to bringing in new renters. Caraquet & RV Storage visits local businesses and participates in local events. This helps the company get in touch with residents who may need storage solutions.

In fact, many Canadian self-storage operators are reaching out to their communities by participating in events, donating money or offering local charities the free use of a storage unit. This spring StorageMart properties in Alberta, British Columbia, Ontario and Saskatchewan acted as donation centers for the nonprofit organization Skate to Great. This summer, Apple Self Storage held a "Meat & Greet" event for the Kingston Interval House for Women and Children in Crisis in Kingston, Ontario. All Canadian Self Storage hosted an event featuring a speech from the Canadian Prime Minister, and Vanguard Self Storage sponsored a car race at the Peterborough Speedway in April.

Community and customer connections may be the most important part of self-storage success in Canada. "There's much hype on new trends, but a basic, quality facility, great customer service and wowing the customers are still the key to success," Goodin says.

Molly Bilker is a sophomore journalism major at Arizona State University (ASU) in Phoenix. She is part of ASU's Barrett, the Honors College, and is completing a minor in Spanish. She comes from an arts-focused middle and high school with a creative-writing background. She actively participates in the arts, including creative writing, guitar and vocal music, theater, photography, ballroom dance, drawing, and film. To reach her, e-mail [email protected].

Feeling the need to provide customers with greater convenience while reducing their own workload, resident owners Gene and Jane Mitchell of Store Oronogo Self Storage in Webb City, Mo., decided an infusion of business automation was in order. The couple installed an INSOMNIAC 900 self-serve kiosk from OpenTech Alliance Inc. that they say has helped them provide better customer service and strengthen their relationship with tenants.

"Developing personal relationships is our top philosophy, and the strength of that value is more important now than ever before, says Jane Mitchell. We go above and beyond to earn business, and at full capacity, we needed a better way to service new and existing clients, during and outside normal business hours."

Living onsite in their 70s, the Mitchells say the kiosk has brought peace of mind, and the couple no longer feels obligated to leave their grandchildren, cut dinner short or get dressed in the middle of the night to assist a customers. Instead, the kiosk can automatically handle rentals, payments, facility access and two-way video support during busy periods or off hours.

"We are very satisfied with the kiosk and what it's done, says Gene Mitchell. The investment does a lot for our small facility (200 units), and the technology makes our business more streamlined and easier to manage."

It may also have made Store Oronogo more appealing to investors and larger self-storage operators looking to expand their portfolios through acquisitions. The Mitchells say they are approached monthly with inquiries to buy their business; but with good cash flow on hand and renewed confidence in their operation, they are moving full steam ahead as owners and even planning to expand. You can sell the eggs, but never sell the goose, Gene asserts.

OpenTech President Robert A. Chiti believes the Mitchells are indicative of small storage operators who successfully build their businesses based on strong customer-service principles but can still benefit from adding automated services. "Independent owners like Gene and Jane are at full capacity because they invested in their business to give customers what they want, the ultimate convenience," he says.

OpenTech is a Phoenix-based provider of self-serve kiosks, call-center services and other technology solutions for the self-storage industry. The company is celebrating its 10th anniversary this year.

XtraSpace Self Storage is expected to open the 18th facility in its portfolio on Dec. 1 in Vereeniging, Gauteng, South Africa. The new facility will serve an area known as the Vaal Triangle, an urban center formed by the cities of Vereeniging, Vanderbijlpark and Sasolburg, as well as surrounding communities. Phase one of the property will include 250 storage units, with another 200 units scheduled to be added in 2015.

Units will range in size from 3 to 30 square meters, and 100 covered bays will be available for boat/RV storage. The facility will also include a business center with flexible offices for small and medium-sized companies, meeting rooms, free Internet, and copying and fax facilities. The company will also offer an in-house courier service.

XtraSpace Self Storage entered the South African market in 2007. The companys portfolio comprises more than 100,000 square meters of rentable space.

The four publicly traded, U.S.-based self-storage real estate investment trusts (REITs)CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.have released financial statements for the quarter that ended Sept. 30, 2013. In general, all four entities showed gains in key areas, particularly funds from operations (FFO), net operating income (NOI) and increased occupancy.

The self storage industry finds itself in unprecedented times. New supply remains at historical lows, customer demand is stable, and the economy continues to recover, said Spencer F. Kirk, CEO of Extra Space. These favorable macro conditions, coupled with our advanced technology, marketing and revenue management platforms, continue to produce strong operating results and outstanding earnings growth. We continue to see growth in our portfolio, having surpassed 1,000 Extra Space branded properties during the quarter."

"Organic growth remains robust, as highlighted by a continuation of double-digit same-store NOI growth and all-time-high occupancy levels, said Christopher Marr, president of CubeSmart. Meanwhile, we have continued to improve the quality of our portfolio. We have exceeded our full-year acquisition volume targets in our core markets and have opportunistically reduced exposure to non-core investment markets."

CubeSmart

CubeSmart reported FFO per share of $0.25, a 32 percent year-over-year increase. Same-store NOI at its 299 facilities grew 10 percent year over year. The company attributed this to 7.2 percent growth in overall revenue and a 1.8 percent increase in property operating expenses.

The operation gained 500 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 90 percent as of Sept. 30. The companys total-owned portfolio, representing 361 facilities comprising 24.3 million square feet of rentable space, had a physical occupancy of 89.6 percent at the end of the third quarter.

CubeSmart acquired four self-storage properties during the quarter for $38.8 million including two assets in Arizona, one in New York and one in Texas. It sold eight storage properties in Tennessee during the quarter for $25 million.

On Aug. 7, the company declared a dividend of 11 cents per common share. The dividend was paid on Oct. 15 to common shareholders of record on Oct. 1. The board of trustees also declared a 3Q dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that was paid on Oct. 15 to holders of record on Oct. 1.

CubeSmart owns or manages 518 self-storage facilities across the United States and operates the CubeSmart Network, which consists of more than 700 additional self-storage facilities.

Extra Space Storage Inc.

Same-store revenue increased 7.8 percent and NOI rose 9.7 percent compared to the same period in 2012. FFO was 52 cents per diluted share, resulting in 20.9 percent growth compared to the third quarter the previous year.

Same-store occupancy grew by 170 basis points to 90.6 percent as of Sept. 30, compared to 88.9 percent at the same time last year.

The company purchased 22 properties during the quarter for approximately $214.5 million. The assets are located in Arizona and California. Extra Space has 40 additional properties under contract for a total purchase price of approximately $241 million. Of those properties, 19 are from the purchase of a joint-venture partner's interest in an existing joint venture. The acquisition of these properties is expected to occur by the end of 2013.

The company paid a quarterly dividend of 40 cents per common share on Sept. 30 to common shareholders of record on Sept. 16.

Headquartered in Salt Lake City, Extra Space owns or operates 1,007 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The companys properties comprise approximately 667,000 units and 74 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 5.5 percent, or $22.9 million, in the quarter, as compared to the same period in 2012, primarily because of higher realized annual rent per occupied square foot and higher average occupancy. Cost of operations for the same-store facilities increased by 1.5 percent, or $1.8 million, in the quarter as compared to the same period in 2012.

FFO was $2 per diluted common share, compared to $1.73 for the same period the previous year. NOI increased $27.7 million during the quarter compared to the same period in 2012, including $21.1 million for same-store facilities.

During the quarter, the company acquired 29 self-storage facilities comprising approximately 2.2 million net rentable square feet for $371 million. The properties are located in California, Florida, Massachusetts, Rhode Island and Texas. Public Storage has purchased 32 facilities this year for $392 million.

The company reported a regular common quarterly dividend of $1.45 per common share, a 12 percent increase over the previous quarter. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on Dec. 30 to shareholders of record as of Dec. 13.

Based in Glendale, Calif., Public Storage has interests in 2,110 self-storage facilities in 38 states with approximately 135 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.

Sovran Self Storage Inc. (Uncle Bob's Self Storage)

Total revenue increased 14.9 percent over the previous year's third quarter, while operating costs increased 13.9 percent, resulting in an NOI increase of 15.4 percent. Same-store NOI increased 9.3 percent year over year. FFO for the quarter was 98 cents per fully diluted common share, compared to 85 cents for the same period the previous year.

Net income available to common shareholders for the third quarter was $19.7 million, or 62 cents per fully dilated share. For the same period in 2012, net income available to common shareholders was $18.8 million, or 63 cents per fully diluted common share.

Same-store revenue increased 7.3 percent year over year due to an increase in average occupancy of 250 basis points (90.9 percent), increased rental rates and growth in insurance commissions. Average overall occupancy was 89.9 percent, with units renting for an average of $11.21 per square foot. Facilities showing the strongest revenue gain were in Florida, New York, North Carolina and Texas, officials said.

Sovran acquired three self-storage properties during the quarter for $27.9 million. The assets are in markets where the company already has a presence, with two facilities in New York and one in Colorado.

The company paid dividends of 53 cents per common share.

Sovran, which operates facilities under the brand Uncle Bob's Self Storage, operates 475 facilities in 25 states, with a large presence in Texas.

The Amsdell family of companies has acquired a self-storage facility in East Lansing, Mich. The facility at 4200 Hunsaker St. encompasses more than 52,000 net rentable square feet and will be  operated by Compass Self Storage LLC. In addition to offering drive-up and climate-controlled self-storage units, the facility sells moving and packing supplies, and offers online payment options.

The property will be the ninth location for Compass in the greater Michigan market. This acquisition also marks the companys 10th self-storage acquisition this year. Company growth is projected to continue with the acquisition and development of self-storage properties in select markets, the company said in a press release.

We look forward to serving the storage needs of our new customers in East Lansing, said Todd Amsdell, president.

The acquisition was made by separate affiliates of Amsdell Group LLC and Compass Self Storage LLC.

Headquartered in Cleveland, the Amsdell Cos. draws its roots from the family-owned construction company founded in 1928. The company, which owns and operates self-storage properties in Florida, Georgia, Kentucky, Michigan, Mississippi, New Jersey, Ohio, Pennsylvania and Tennessee, has since been active in several billions of dollars worth of real estate ventures with a primary focus in self-storage.

DGM Minerals Corp., a Canada-based mineral exploration company, has signed a letter of intent to purchase five European self-storage properties in the Czech Republic and Poland for 14 million euros. The deal involves the transfer of purchase rights from a real estate investment group led by Guy Pinsent, a former partner in U.K. self-storage operator Personal Storage, and would bring Pinsent and two investment partners on to DGMs board of directors. Finalization of the deal is subject to several conditions but would mark DGMs entrance into the self-storage industry. The transaction is subject to review and approval by the TSX Venture Exchange, a Canadian stock exchange.

Pinsent secured the rights to purchase the properties last month but has agreed to transfer the rights over to DGM. Three of the facilities are in Prague, and two are in Warsaw, Poland. Four of the assets include attached real estate, according to a DGM press release. The company has identified central Europe as a region poised for enormous short- and long-term growth in the self-storage sector, and officials said the acquisition will make DGM the largest operator in the region.

Under the conditional terms of the non-binding letter of intent, DGM must complete a stock consolidation at a ratio to be determined prior to the execution of the definitive agreement, as well as raise at least $15 million in equity financing. The company will also undergo a name change.

As consideration for obtaining the option to purchase the self-storage properties and other assets, including intellectual property, developed by Pinsent, the deal would also include the issuance of approximately 20 percent of DGM common shares post-consolidation and post-financing to Pinsent's group, which also includes investors Roger Orf  and William Palmer. Peter Smith, DGMs president and CEO, is also a minority partner in Pinsent's group. Pinsent, Palmer and Orf are expected to join DGM's board after the deal closes.

"We've been looking for an opportunity for DGM over the past few months and management feels that this potential transaction has outstanding potential, both because of the growth opportunity for self-storage in central and eastern Europe and due to the very high quality and relevant experience of the proposed additions to the board and management on consummation of the deal, Smith said. However, there is a lot of work to be done between now, signing of a definitive agreement and the closing of the transaction.

Pinsent, Palmer and Orf will bring European business and real estate development experience to DGM, including knowledge of self-storage operation. Pinsent is an entrepreneur with a background in investment banking, real estate and development. Following his partnership with Personal Storage in the United Kingdom, he has focused on self-storage opportunities in Poland and neighboring markets.

Palmer is an entrepreneur and real estate professional who was an early developer in the European self-storage sector, according to DGM officials. Palmer founded European operator Access Self Storage, which sold in 1998 to a $1.5 billion European fund sponsored by Security Capital. Palmer stayed on as CEO until 2000. At the time of his departure, Access operated 65 locations in France, Germany and the U.K., comprising 3.5 million square feet of storage space.

Orf is a partner with Apollo Global Management LLC, a firm specializing in alternative asset management and capital investing. Orf leads the companys real estate business in Europe and has been an active investor in Central and Eastern Europe, including Poland. Prior to joining Apollo in 2010, Orf spent most of his career investing in European real estate markets, including working on behalf of Citigroup, Goldman Sachs and Lone Star.

DGM Minerals Corp. is based in Vancouver, British Columbia, Canada. As a mineral exploration company, it has focused on the acquisition and exploration of mineral projects in Canada. It has its common shares listed on the TSX Venture Exchange.

Harvey Lenkin, former president and director of Public Storage Inc., a self-storage real estate investment trust (REIT), has died. He was 76. Lenkin joined Public Storage in 1978 as president of management operations. At that time, the self-storage industry was in its infancy, and Lenkin was instrumental in leading the company's growth, company officials said in a press release. During his career, Lenkin helped organize the trade groups that established basic operational procedures and drafted the multi-state legislation the industry still follows today.

His contributions to the self-storage industry were numerous, including the first issuance of preferred stock by a REIT (1992), the conversion of Public Storage into a public company (1995) and the merger with Storage Trust (1999). Lenkin retired as president in 2005, but was instrumental in the Shurgard merger in 2006. He was also responsible for the founding of PS Business Parks in 1998 and served as its director until 2011.

Within the REIT industry, Lenkin was an active participant in many industry events and a member of the executive committee of the board of directors for the National Association of Real Estate Investment Trusts (NAREIT).

Lenkin was born on April 15, 1936, in Brooklyn, N.Y., and moved with his family to Los Angeles in 1950. He graduated from Los Angeles High School, and then the University of California, Los Angeles (UCLA), where he was president of the Sigma Alpha Mu Fraternity. He then attended Officer Candidate School in Newport, R.I., and the U.S. Naval Training Academy in Great Lakes, Ill. He served in the U.S. Navy as a lieutenant, where he was assigned to the USS Magoffin and observed the atomic explosions at the Eniwetok Atoll, a large coral atoll of 40 islands in the Pacific Ocean.

After leaving the military in 1961, Lenkin attended commodities future-training school, and served as a branch manager for Shearson, Hammill & Co. from 1961 to 1970. From 1970 to 1978, he served as a branch manager for DuPont Glore Forgan & Stotts through its merger with Walston & Co., and then through its acquisition by Reynolds Securities. Lenkin became president and director of Public Storage in 1991.

Lenkin was an avid skier and sailor, racing sailboats for many years at the California Yacht Club. He was a member of the board of trustees of the Huntington Memorial Hospital, where he also served as chairman of the building committee. Lenkin and his wife, Heather, were instrumental in establishing the Harvey Lenkin Pet-Assisted Therapy Program at the hospital. He was also a member of the board for UCLA UniCamp, the Ronald McDonald Charities and Paladin Realty Partners LLC.

Lenkin is survived by his wife, Heather Henricks Lenkin, sons Brett Lenkin and Todd Lenkin, and stepsons William Cundiff Lenkin (and his wife Patrycja) and Daniel Cameron Cundiff (and his wife Kate Singleton).

Services will be held at the Tanach Chapel at Mount Sinai Memorial Park in Los Angeles on Nov. 8. Donations in Lenkins memory can be made to Huntington Memorial Hospital in Pasadena, Calif.

Based in Glendale, Calif., Public Storage has interests in 2,081 self-storage facilities in 38 states with approximately 133 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.

 

3 Mile Domination, a provider of training resources for the self-storage industry, has launched a free weekly podcast that offers tips on staff training, sales, facility operation and day-to-day management. The podcasts are hosted by industry veterans Jim Ross and Matthew Van Horn.

The company has released 21 podcasts to date including discussions on the importance of maintaining a clean and organized office, using cloud storage for business purposes, and creating a budget. 3 Mile Domination also has released several Quick Hit videos that provide tips for self-storage operators, some of which have been featured on Self-Storage TV, an online video platform launched earlier this year by Inside Self-Storage (ISS).

"Matt and I are passionate about the self-storage industry," Ross said. "We wanted to bring our unique experiences into a weekly discussion format that everyone in the self-storage business can benefit from. We have both been in the industry from a manager level, regional manager up to owner level, so we have a unique perspective to draw upon in our weekly program."

The podcasts can be accessed for free on iTunes as well as through the 3 Mile Domination app available for Apple and Android devices.

Ross and Van Horn are vice presidents with Cutting Edge Self Storage Management, a full-service company specializing in facility management, feasibility studies, consulting, development, and joint ventures. The two men teamed to present the education session 3-Mile Domination: How to Lead Your Self-Storage Market, during the 2013 Inside Self-Storage World Expo in Las Vegas.

The session focused on how self-storage operators can dominate their local market through technology, marketing, customer service, revenue management and training. The presentation is available in on-demand video and DVD formats from the ISS Store, an e-commerce website providing on-demand insight and education products for self-storage professionals.