By Paulina Pineda

Picture this: A self-storage customer needs to pick up his holiday decorations from his unit, but he also wants to buy a few bottles of wine for a party he’s attending that night. The solution? If he’s a tenant at On the Way Mini-Self Storage in Athens, Ga. , he can simply stop at the facility’s onsite convenience store, good for “when you want a soda or something stronger,” according to the company website. The business also offers a 24-hour gas pump, snacks and soda for the road, party supplies, and more.

Storage facilities across the country have found innovative ways to generate add-on revenue that go well beyond the sale of locks, boxes and other items traditionally found in a facility’s retail center. For example, one facility in New York also provides a pet-grooming business, while another offers a drive-through carwash and redemption center.

I recently asked facility operators for their thoughts on products and services they could use to generate extra income for their business. Potential ideas included equipment rentals, artisan crafts, vending machines and coffee services. Robert Madsen, president of Canada-based U-Lock Mini Storage Group, latched onto the coffee idea, saying he dreams of adding a Starbucks franchise inside one of his facilities to feed his “Americano habit.”

Other owners and managers tossed new options into the pile. Some are practical, others not so much. Here’s a look at some possible revenue generators to consider. Can you use some of these to make more money at your facility?

Start Small

Stephanie Tharpe, vice president of operations and marketing specialist for A+ Management Group in Tennessee, suggests that operators start small with ventures that are practical for the business and easy for staff to juggle. Essentially, don’t forget your main mission: to rent units.

Tharpe once worked for a self-storage company that installed a boutique and full-service shipping center. The offering was successful, but it also caused the storage side of the business to suffer. “There simply wasn’t enough manpower to run the whole combination, and the profit wasn’t there to justify hiring more people,” she says.

Tharpe also suggests trying products or services that don’t require a big investment. She thought she hit the jackpot after purchasing two mobile-phone accessory kiosks that featured phone chargers, headphones and stylus pens. She placed them in two of her most successful stores.

“I thought they would do very well,” she says. “Much to my disappointment, they did not.” Fortunately, the initial cost was small.

Consider Boutique Sales

Selling local, handmade jewelry and other arts and crafts or hosting an arts fair are two other revenue ideas. Gina Six Kudo, general manager at Cochrane Road Self Storage in Morgan Hill, Calif., hopes to launch a seasonal arts boutique at her facility. The state’s popular and successful artisan craft fairs sparked her interest, she says.

Operators who are interested in boutique sales but don’t want to oversee that side of business might consider renting space to local artists for studios or pop-up galleries. However, doing so could be tricky because it would be difficult for a manager to monitor who’s coming and going on the property, says Kudo. A safety and security system would need to be in place.

Another concern could be obtaining the property permits to sell these items, says Jim Chiswell, president of self-storage consulting firm Chiswell & Associates LLC. A handful of operators have added work spaces for local artists, obtaining the appropriate zoning permits, he notes. Insufficient parking to accommodate customers visiting the boutique could be another obstacle.

All About Vending

Snack and soda machines can be profitable, and soda distributors such as Coca-Cola or Pepsi will often provide your company with a free vending machine and even fill it as long as you buy the product directly from them. Chiswell says snack and soda machines are good services to provide, but warned that they must be viewed as a service to customers as much as a source of revenue for your business.

Kudo researched what it would take to install a lottery machine at her facility. After speaking with a lawyer, she determined the business didn’t get enough foot traffic to cover the cost, plus the profit margin would be very slim. The endeavor comes with too many “contractual agreements,” Kudos says, after discovering she’d have to pay for any expired, unsold scratchers. “Not a good fit, but it sounded like fun for a few minutes,” she says.

DVD rentals are another possibility, but they require a lot of hoop-jumping. An article in the small-business section of “The Houston Chronicle” reported that businesses looking to install a Redbox kiosk should tally foot traffic of at least 15,000 people every week. In addition, a Redbox Customer Care statement recently stated, “Due to disappointing results, Redbox is no longer pursuing kiosk placement in airports, apartments, office buildings, hotels, hospitals and universities.”

Things to Keep in Mind

The moral of the story is to keep trying until you find something that works for your operation. “There just simply is not a ‘one-size-fits-all’ for add-on revenue sources,” Chiswell says.

Explore your options, thinking beyond traditional products and services. Be on the lookout for something that could be fun or unique to your tenants and community, but it should still be a business that’s manageable for your staff. Above all, any add-on profit center should complement, not detract from, your main business of renting storage space.

Paulina Pineda is a senior journalism major at Arizona State University (ASU) in Phoenix. Her emphasis is print journalism with minors in “Spanish for the Professions” and history. She recently interned as a daily wire correspondent in the Washington, D.C., bureau of ASU’s Cronkite News Service and hopes to find her way back to the nation’s capital after graduation. To reach her, e-mail [email protected].

The Inside Self-Storage World Expo, the industry’s largest conference and tradeshow, is holding an early Black Friday sale for industry owners, managers, developers and investors interested in attending the 2015 event at the Paris Hotel & Resort in Las Vegas, April 7-9. From now through Nov. 30, attendees can purchase a standard Education Package for $349 exclusively through the ISS Store, an e-commerce website providing research and education products for industry professionals.

The limited-time offer is more than $200 off the full package price and more than $50 off the event’s early-bird rate, which will be available beginning Dec. 1.

The ISS Expo Education Package includes access to the show’s opening session and all concurrent education tracks. In addition, it enables attendees to access the exhibit hall, evening cocktail reception, Self-Storage Q&A, Buyers & Sellers Meeting, vendor presentations and roundtable discussions.

The 2015 expo will include 10 education tracks comprising more than 40 seminars on April 7 and 8. Sessions will cover issues related to self-storage ownership, management, marketing, investment, finance, building, development, liability and more. The Education Package doesn’t include access to any of the expo’s six add-on workshops, which will be available for purchase when registration officially opens through the expo website on Dec. 1.

The Black Friday offer can be purchased by visiting www.insideselfstoragestore.com and clicking on “ISS Expo Package” on the left navigation bar. Attendees may buy as many packages as they want, but each must be paid for in a separate transaction. A PDF voucher for each package will be issued through the customer’s “My On-Demand Library” inside his ISS Store account. The ISS Expo team will contact attendees to complete their registration during the week of Dec. 8. The discount package is non-refundable and non-transferable.

Created for self-storage owners, managers, developers, investors and suppliers, the ISS Expo comprises four days of education, exhibits and networking opportunities. The event focuses on revenue-generation strategies, best practices, current trends, and new products and services. Details and online registration for the 2015 show will be available beginning Dec. 1 at www.insideselfstorageworldexpo.com.

Klövern AB, a Sweden-based commercial real estate developer and self-storage operator, has rebranded its Klövern Self Storage properties as Big Pink Self Storage. In conjunction with the move, the company also launched a branded website for storage customers, with information presented in English and Swedish.

"We see good growth opportunities for Big Pink, not the least in several of the regional cities where Klövern has a strong position as property owner," said Rutger Arnhult, Klövern CEO.

Big Pink currently operates five self-storage facilities in the Swedish cities of Gothenburg, Karlstad, Malmö and Norrköping. A sixth location is under development in Västerås and is scheduled to open in December.

Klövern has commercial property holdings throughout Sweden. As of Sept. 30, the value of its portfolio totaled SEK 29 billion, with an annual rental value of SEK 2.9 billion. The company is listed on Nasdaq OMX Nordic Mid Cap stock exchange.

A three-property A Self Storage portfolio in Arizona recently sold for $5.5 million to a Portland, Ore., investor. The seller was a group of investors from northern California. Two of the properties are in Mesa, and the third is in Glendale. The portfolio consists of 177,185 square feet of storage space in 1,695 units.

All three storage facilities had occupancy rates of less than 50 percent at the time of sale, according to a press release from Rein & Grossoehme Commercial Real Estate, which brokered the deal. They sold for a combined capitalization rate of 2.6 percent and a cost per square foot of just under $31.

Rein & Grossoehme brokers Bill Alter and Denise Nunez represented the buyer and seller in the transaction, their 138th self-storage closing. Founded in 1993, the company specializes in the sale of investment properties and retail, office and industrial leasing.

SpareFoot, an online marketplace for self-storage consumers, has released a free whitepaper offering marketing advice that will help independent self-storage operators compete with the industry’s real estate investment trusts (REITs). “Modern Marketing Tactics to Keep the Storage Industry Independent” outlines revenue strategies for small to mid-size operators and dispels myths about industry aggregator websites, according to an announcement on “The Storage Facilitator,” the SpareFoot blog. The asset is available for download from the company’s “Free Resources” page.

Because REIT acquisitions are increasing, it’s important for smaller operators to “act more aggressively in the face of big competitors with even bigger marketing budgets,” according to the blog.

“Now is the time to test marketing strategies, claim online shelf space and hone operational best practices,” the whitepaper recommends. “Set your facility up for success, so when more inventory hits the streets, you’re ready to hold your ground and compete with the big guys.”

Founded in 2008, 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 7,000 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.

Wilmington Capital Management Inc., a Canadian investment and asset-management company whose real estate investments include self-storage facilities, reported a net income for the quarter ended Sept. 30 of $265,000 compared to a net loss of $2 million for the same period in 2013. The earnings equated to $0.03 per share during the quarter compared to a loss of $0.23 per share last year. For the nine months ended Sept. 30, the company’s net income attributable to shareholders was $247,000 ($0.03 per share) compared to a net loss of $2.3 million ($0.27 per share) for the same period last year.

During the third quarter, the company continued to focus on executing the strategic plans approved in early 2014 for each of its three operating platforms: self-storage, private-equity funds and natural-gas assets. Wilmington owns 42 percent of Real Storage Private Trust, a portfolio of 20 self-storage facilities in western Canada comprising 791,350 square feet of rentable space.

The company’s storage facilities, which were largely in lease-up in 2013, began to reach stabilized occupancy levels this year, according to a press release. Same-store occupancy averaged 86 percent compared to 85 percent for the same period in 2013. Same-store operating margins for the quarter improved to 63 percent compared to 60 percent last year. The trust issued a quarterly distribution of $605,000, equal to 3 percent per annum on invested capital.

As at Sept. 30, Wilmington had assets under management in its operating platforms of approximately $173 million, with $59 million representing its share.

 

By Liz Wolf

Reprinted with permission from "The Storage Facilitator" blog.

While it may seem like the well-capitalized self-storage real estate investment trusts (REITs) have all the advantages—including huge marketing budgets, beefed-up staff and deeper market penetration—smaller, independent operators are finding ways to compete with and even outperform these powerhouses. Strategies include everything from mimicking these companies and borrowing their ideas to using targeted local marketing and outdoing them with better customer service.

“These REITS are billion-dollar companies, but in the whole scheme of self-storage, they’re small,” says Mike Moyer, president and co-owner of Budget Store and Lock Self Storage in Pennsylvania. “We’re in the low to mid-90 percent occupied at all times companywide, so we’re doing something right.”

Mirroring Goliath’s Success

Moyer’s company owns 18 facilities in Pennsylvania’s Lehigh Valley. His biggest competitors are Public Storage Inc. and U-Haul, but he welcomes them.

“The REITs are the Goliath, the 800-pound gorilla, but they do a lot of things right because they have the resources,” he says. “My whole thing is just mimic them on a smaller scale. If they’re selling tenant insurance, why don’t we? If they’re getting a $22 admin fee, why aren’t we? It’s just seeing what they’re doing, and taking the things you think are working and running with them.”

Moyer attends national self-storage conventions and listens to REIT executives speak. Since they are publically traded, the REITs share useful information. For example, Moyer says a REIT might push up rates at a facility in Indiana to see how much more it can charge during the summer. If it can successfully pushes up rates there, it can roll out the increase to more stores. If that works, it can take the rate hike companywide. “We don’t have that luxury, but we can watch what they do,” Moyer says.

Public Storage and U-Haul are the price leaders in Moyer’s market, and that’s fine with him. “We’ll gladly be a solid second place because my managers can say, ‘Look, you can get a 10-by-10 with us for $102, or you can go to Public and pay $130.’ We can show customer value.”

However, some operators have advised him to raise rates. “They say, ‘If they’re at $130, you should be at $128,’ but we’d rather do a slow burn and work up to that over time,” Moyer says. “You can argue all day whether we should go up and be right behind them. Maybe we’re leaving money on the table, but it’s been our philosophy for 17 years, and it’s working for us.”

Local Presence Is an Advantage

Local marketing is key in landing tenants, Moyer says. He recommends remaining visible among local media outlets, creating good pages for social media, and posting content that resonates with local consumers. While Moyer can’t compete with the REITs’ huge marketing budgets, he can have a presence by targeting a neighborhood around a facility by getting involved in the chamber of commerce or supporting local sports teams or schools.

“We’re involved in a ton of local community events, whether it’s sponsoring a golf tournament or a little league team,” Moyer says. “I think if we’re out there and people see us, they think of Budget Store when they need storage.”

Like many independent operators, Moyer uses online lead aggregators and maintains a strong website. “There’s nothing we haven’t tried, and at the end of the day, you just have to have a big website presence,” he says. “We’re No. 1 organically in our market.”

Is Technology the Equalizer?

Various software programs help level the playing field with the REITs, says Phil Murphy, president of Next Door Self Storage, which operates 14 facilities in Illinois. “However, you have to find the management software that’s really going to home in on what you’re missing—whether it’s working your collections or leads,” he says. “You can’t do it all, and no one software company seems to be able to do it all.”

For Murphy, lead conversion is one way he competes. “When leads come in, often they’re not worked,” he says. “Now, we take a multi-step approach, so we’re following up on every lead, whether it’s e-mails, texts or phone calls. We’re using a storage-management software that handles that for us.”

The company has also revamped its website. “The faster and more consistently you engage potential customers, the more likely you’re going to get them to come in,” Murphy says.

Are REITs Actually Beneficial?

Next Door Self Storage is growing, despite stiff competition. It’s building a three-story, climate-controlled facility in Algonquin, Ill., with plans for another facility in Crystal Lake, Ill. Across the portfolio, occupancy rates range from 84 percent to 96 percent.

“We have all major REITs in our market,” Murphy says. “The Chicago market is pretty crowded. But to be honest, sometimes REITs can be beneficial. In those markets where the REITS are, it’s a lot harder to get attention and get to the top, but when you get there, there’s a lot more revenue management and standardized practices. You see a more common approach to storage in those markets than if you go out into markets that REITs aren’t in.”

Murphy says the REITs will push up rates because they’re motivated by Wall Street and must show investment returns. “They’re not going to sit there and leave a flat rent,” he says. “Those are the practices that everybody should be doing, but not everybody has the technology or market forces to do it.”

Onsite Decision-Makers

While Port Orange, Fla.-based All Aboard Storage competes with powerhouses like Public Storage, director of operations Amy Holley says her company wields some advantages over the REITs. “We can operate a little faster with problem-solving than they can,” she says. “Where they have to go through their corporate levels to do certain things, sometimes even customer complaints, we solve everything on the ground.”

The company operates 13 facilities in the Daytona Beach, Fla., area and has a 48,000-square-foot facility under development. The chain’s portfolio is about 82 percent leased.

“Our customer service sets us apart because we empower our managers to treat their facilities like they’re their own,” Holley says. “If we have that unhappy tenant, instead of checking with corporate to see what we can do, it’s ‘Let me see what I can do,’ and if that’s not enough, then we’ll go to corporate. It’s about empowerment.”

Liz Wolf is a Twin Cities-based freelance writer with 30 years of business reporting and writing experience. She’s currently a contributor to “The Storage Facilitator,” a self-storage blog managed by SpareFoot and hosted by partners SelfStorage.com.

Silver Bayou LLC recently purchased Storage Masters Self Storage in Mesa, Ariz., from Val Vista Lakes Self Storage LLC for $6.5 million. The facility has been rebranded as Storage West Self Storage.

The property at 3840 E. Baseline Road encompasses 61,701 square feet of storage space on 4.25 acres of land. It features 558 storage units, about half of which are climate-controlled, and 50 RV-parking spaces. Built in 1999, the property is constructed of concrete block and has a metal-seamed roof.

The facility was 83 percent occupied at the time of sale, according to a press release from Empire Commercial Real Estate, which brokered the transaction. Norman Herd, a partner with Empire, represented the seller in the deal. The Phoenix-based company offers brokerage services for a variety of commercial investment properties including self-storage, retail, medical offices, multi-family housing, and lender-owned real estate and special assets.

Storage West Self Storage is the operating brand for LAACO Ltd., a California limited partnership that acquires, develops and builds self-storage facilities. The company owns more than 48 facilities in Arizona, California, Nevada and Texas. The connection between LAACO between Silver Bayou is unclear.

U-Haul Co. of South Philadelphia has acquired a self-storage facility in East New Market, Md. The former Baytree Self Storage at 5403 Mount Holly Road has been branded as UHaul Moving and Storage of East New Market.

The facility encompasses 101,487 square feet of storage space on 6.9 acres of land. It features two two-story, climate-controlled buildings as well as three single-story buildings. The property also has a single-story warehouse that contains an apartment and showroom. The warehouse, a former skating rink, was constructed in 1980, while the remaining buildings were built in 1999, 2000 and 2003. In addition to self-storage, the facility offers truck and trailer rentals, U-Box portable-storage containers, and 14 RV-parking spaces.

“We are right off of Route 50, which provides easy access for our customers," said Dominic Catalano, marketing company president. "We look forward to meeting the self-storage and moving needs of the residents in East New Market."

The acquisition of the East New Market facility was driven by U-Haul’s corporate sustainability initiatives, which supports infill development to help local communities lower their carbon footprint, according to a company press release. U-Haul’s adaptive reuse of existing buildings eliminates the amount of energy and resources required for new-construction materials and helps local cities diminish their unwanted inventory of unused buildings, U-Haul officials said.

Established in 1945, U-Haul International Inc. has more than 40 million square feet of storage space at more than 1,000 owned and managed facilities throughout North America.

Jernigan Capital LLC, a merchant bank and advisory firm serving the self-storage industry, recently introduced three new loan programs and named Greg Ward as its new chief financial officer (CFO). The new programs provide funding for self-storage development, refinancing and acquisitions.

The terms of the development loan program include 90 percent loan-to-cost, non-recourse, with generally a six-year term for loans from $2 million to $15 million, according to a company press release. Key features of the refinance and acquisition loan programs include the same terms with a 90 percent loan-to-value. Jernigan Capital is now accepting loan requests and issuing term sheets.

“We are pleased to offer these loan programs to the self-storage sector,” said Dean Jernigan, founder and president. “As seasoned developers and operators now entering into direct lending, we understand the needs of the self-storage borrower and stand ready to meet those needs with the loan programs we are announcing today.”

Jernigan, former CEO of self-storage real estate investment trust (REIT) CubeSmart, launched his finance company in January. He has more than 30 years of industry experience, having founded Storage USA Inc. in 1984. In 2006, he became CEO of U-Store-It Trust Inc., which changed its branding to CubeSmart in fall 2011. He officially retired from the REIT on Dec. 31.

Jernigan’s new CFO has more than 20 years of experience in commercial real estate lending, according to the release. Prior to joining Jernigan Capital, Ward was a senior vice president at Wells Fargo, where he provided debt to public and private commercial real estate companies for all asset types, including self-storage, and originated loans totaling several billion dollars.

Prior to Wells Fargo, Ward served as vice president of commercial real estate lending at KeyBank, with roles in Cleveland and Chicago. During this time, he originated loans totaling more than $1 billion. In addition to his career in commercial real estate lending, Ward has been active in the Urban Land Institute and local community-redevelopment efforts in Cleveland, serving in several board roles, including as treasurer. He’s also served as a mentor or guest lecturer at several universities and colleges.

“Greg’s impressive background in commercial real estate lending makes him a great fit for his new role at Jernigan Capital,” said Jernigan. “We welcome him to our team and look forward to utilizing his considerable expertise as we grow our business.”

Ward earned a Master of Business Administration from Case Western Reserve University’s Weatherhead School of Management, with concentrations in finance and accounting. In addition, he holds a Bachelor of Arts degree in economics and English from Allegheny College and is a member of the school’s Alumni Council. Ward will be based in Jernigan Capital’s finance office in Cleveland.

“I’m excited to join the executive team at Jernigan Capital under the leadership of self-storage industry leader Dean Jernigan,” Ward said. “I am impressed by the team’s dedication to solid strategic growth,   and I am excited to assist in that growth as CFO.”

Headquartered in Miami, Jernigan Capital provides loans in markets across the United States. Its senior staff has participated in more than $6 billion of self-storage transactions over the past 30 years.