Coda Management Group, a development firm that specializes in self-storage conversions, has partnered with private investors to acquire a two-story commercial building in Toledo, Ohio, that will be redeveloped into a storage facility. The 88,000-square-foot masonry structure at 155 S. Superior St. will comprise 700 units. Construction is expected to begin this year and be complete in late 2019, according to a press release.

The facility will include climate-controlled units, electronic access control, enclosed loading/unloading areas and video cameras. Built around 1900, the building was most recently used for document storage. “Most of the characteristic physical aspects of the building” will be maintained, the release stated.

The property is at the intersection of St. Clair and S. Superior Streets, across from a downtown farmers market. It’ll be operated by an unidentified property- management company.

"We are really excited to be a part of the ongoing revitalization of the downtown area," said Martin Taradejna, vice president of acquisitions and investor relations. "Bringing affordable best-in-class storage to downtown core markets is our specialty. Our demand projections show that the storage space our new facility will bring to downtown Toledo is much needed by businesses and residents alike."

Based in Northbrook, Ill., Coda partners with private investors to convert underutilized buildings near city centers into class-A self-storage facilities, the release stated.

Source:
Benzinga, Downtown Toledo Building to be Converted to a Class A Self-Storage Facility by CODA Management Group

Self-storage developer JSM Venture Inc. has purchased a vacant Kmart in Zion, Ill., for $2.3 million that it intends to convert to self-storage. Plans for the 90,426-square-foot structure at 3355 Sheridan Road include 69,750 rentable square feet of indoor storage in 619 units, the majority of which will be climate-controlled, according to the source.

JSM was represented in the transaction by Brendan Green, senior vice president, and Patrick Turner, vice president, of the Chicago office of real estate firm Colliers International Group Inc. The seller, Amin & Shah Solutions LLC, was represented by Paine-Wetzel Associates Inc.

“Given the rise of e-commerce and its impact on retail shopping habits, there is now a surplus of empty big-box retail stores. Many of our clients—like JSM Venture—are looking at alternative uses to fill these vacancies,” Turner said.

Led by Charlie Mengel, JSM is a Northfield, Ill.-based developer specializing in self-storage conversions and redevelopment of existing industrial properties. Founded in 2004, the company has acquired and developed more than 1 million square feet of self-storage.

Colliers is a global commercial real estate services firm employing more than 12,000 professionals in 69 countries. The company offers a variety of services for investors, business owners and developers. These include consulting, market research, real estate intermediation for sale and rent, project management, property management, and valuation.

Source:
RE Journals, Former Kmart Location in Zion Sells, to Be Converted to Self-Storage

StorageMart, which operates more than 200 self-storage properties across Canada, the United Kingdom and the United States, has acquired Safe Place Mini Storage in Virginia Beach, Va. It’s the second facility the company has purchased in the city this year.

The property at 617 Baker Road comprises more than 64,000 square feet in 563 climate-controlled and drive-up units, according to a press release. Property features include access-controlled entry, security cameras, and a retail center that sells moving and packing supplies.

“We look forward to expanding our footprint in this growing community. We can't wait to open the doors at our new location at the corner of Baker and Newtown Road in Virginia Beach. We look forward to offering our brand promise of easy, clean and friendly service to this market,” said Cris Burnam, president.

Founded in 1999 and based in Columbia, Mo., StorageMart is privately owned and operated by the Burnam Family, which has been in the storage industry for three generations. Its portfolio consists of more than 12 million square feet of storage. It serves more than 75,000 self-storage customers, and operates in Chinese, English, Punjabi, Quebecois French and Spanish.

Source:
Benzinga, StorageMart Expands with new Self Storage Facility in Virginia Beach, Virginia

A self-storage feasibility study is an industry expert’s opinion on the financial viability of a property at a specific size and location, based on local research, industry standards and trends. Though it may or may not provide an estimate of what the facility might be worth once it’s built and rented, a feasibility report is not an appraisal.

When I designed my first storage facility as a young civil engineer in 1984, I’m pretty sure no feasibility study was done (or needed). Even in 2006, when I designed and built my first property as an owner, my study consisted of two simple questions: How much did the land cost, and how quickly could the project be built?

But, alas, times have changed. There are still many great sites available—more than many in the industry would like to admit. But do you want to be the one to invest more than $5 million only to break even or perhaps run out of money because it took 48 months to lease up?

Why You Need It

In today’s climate, there are four main reasons to perform a feasibility study for a self-storage project:

• To confirm your own initial findings that a site has the required demand and other features needed for a great self-storage location
• To obtain estimated construction costs, along with an income-and-expense pro forma to better understand the financial scenarios and opportunity for profit
• To better understand your competition so you can plan accordingly
• To satisfy the feasibility-study requirement of many banks (especially Small Business Administration lenders) or investment partners

Essentially, a good study will answer several questions and provide a wealth of information to guide planning as well as the site and building design. Here are some other things a study can do for you:

Provide data. Though it’s getting easier to conduct your own initial study with the aid of online tools, it’s still critically important to have an expert confirm your opinion and provide supplemental material and analysis through online data and first-hand research. The information you gather may look decent, but mitigating factors can turn an initially good site into a bad investment, for example, if you miss just one project in the pipeline, fail to recognize the competition is renting 10-by-10 units for $75, or overlook certain site conditions. By the same token, a site that may not appear to have enough demand based on national standards may very well be an excellent location once details are revealed through local investigation.

Offer design assistance. A good feasibility study will help determine the best design for your facility, guiding you on unit mix, climate-control considerations, and amenities the competition has or is missing to ensure you offer what customers in your area want. In addition, the construction costs, financials and rent-up period outlined in the study will help you understand equity required for the project, carrying costs, and whether you should develop the project all at once or in phases.

Provide local expertise. Self-storage feasibility experts can be international, national or local. It’s important to hire someone who is familiar with the area since demand (available square feet per person) can vary significantly from state to state and even between cities. Construction costs can also vary widely.

Construction costs and market trends used to change slowly, but this isn’t always the case anymore. It’s important that your study provider has his finger on the pulse of the industry and is in regular contact with industry experts, developers, self-storage associations, building manufacturers and owners. Many of the best feasibility practitioners also regularly attend self-storage conferences to help them stay current.

Most providers are one- or two-person outfits, so studies can take up to a month or longer. If time is of the essence, there are a couple of larger firms that can often get reports completed more quickly.

What It Should Contain

A thorough feasibility report should include:

• Detailed project description
• Review of the community and demographics, including the site’s micro-market description
• Self-storage trends that may affect the facility
• An in-person review and analysis of competing facilities (often those within a three-mile radius) including square footage, age, location, unit sizes, street rates, features, occupancy rates, etc. (more on this later)
• Review of any previously approved but not yet built projects and developments in the planning stages (must be included!)
• An in-person review of the proposed site, including features such as street view, road-network traffic, access, etc.
• Analysis using national and local self-storage standards and a summary of these standards
• Clear confirmation that there is or isn’t sufficient demand to justify the proposed net rentable square feet
• Projection of future self-storage development and how it may impact your facility
• Total construction costs, including soft and hard expenses
• Proposed unit mix (how many of each size), and proposed rental rates for each
• Estimated operational costs broken down into typical self-storage expenses
• Explanation of assumed financing, matching current lending standards and options available
• Loan equity and required carrying costs based on lending option and pro forma analysis
• Estimated lease-up rate and duration based on local conditions, including any required to meet the rent-up schedule
• Month-by-month pro forma providing income, expenses and net operating income, typically provided for two full calendar years past optimal occupancy of 90 percent
• Development, operational and marketing recommendations

Rate and Competition Analysis

As mentioned, the feasibility study should propose a unit mix with rental rates for each size based on local competition. The proposed rate won’t necessarily reflect your marketing and sales expertise or how your property may differ from others. Typically, since your facility will be a new-generation site while many of your competitors are second-generation, the rates proposed in your study will be in the mid to upper range of the market.

Since the facility that charges the most is typically the most profitable, closely review the competition and your proposed rates. The right product in the right location with the right management can often charge more (sometimes much more) than other storage facilities; but you can’t determine if this is true for you without a thorough understanding of the market.

A competition analysis should include the age and rates of individual locations, and the distance between your site and each competitor. It should evaluate each site’s visibility, access, office quality, manager, traffic, property condition and curb appeal, and provide an overall rating for each site. It should note whether each facility has boat/RV parking, covered parking, gated access, paved or gravel drives, truck rental, 24-hour access, security cameras, door alarms, climate control, fire sprinklers, a retail office, etc. This data will help you understand why your state-of-the-art, next-generation facility should command premium rental rates.

Project Particulars

The more information you can provide your feasibility expert about your goals, plans, site and anticipated facility design, the more accurate the study will be. Valuable information includes the property address, assessor’s parcel numbers, property area, property map and deed, land purchase price, traffic counts, zoning and approval process, land easements and restrictions, proposed net rentable square footage, number of stories to be built, unusual land features, out-of-the-ordinary construction costs, phasing plans, your background and a marketing summary. Share any information you have about self-storage expansions in the area or proposed facilities in the pipeline.

The feasibility study will assume your facility will be attractive, with all the latest amenities renters want. It’ll also assume construction by an experienced developer and operated by an experienced industry professional capable of executing a high-end sales and marketing plan. These are real factors that affect the success of a facility and shouldn’t be taken lightly. Poor execution in development or operation will alter the report findings.

Construction Costs

Too often, I see construction costs based on past projects completed one to three years ago, without adjusting for increased costs or reflecting current soft costs. Review the cost ranges with your report provider. It’s best to assume the high-end cost until you have bids in hand and added a 10 percent contingency.

It’s important to know that feasibility experts aren’t typically engineers or architects, so they may not be able to evaluate how much self-storage can realistically fit on the property or the viability of getting regulatory approvals. If your civil engineer can provide a conceptual plan prior to the study, with square footage, based on local zoning and other regulations, it’ll allow the report’s findings to be more specific to your final development.

The conceptual plan and input on regulatory approval should be considered as part of overall project feasibility. These are especially valuable for small lots that require a multi-story building. Be aware, though, that while some architects offer feasibility studies that include a zoning review and concept plan, your lender may not accept it for consideration if it requires a report from an independent, third party.

Marc Goodin is president of Storage Authority LLC and the owner of three self-storage facilities that he personally designed, built and manages. He’s been helping others in the industry for more than 25 years. To reach him, call 860.830.6764, e-mail [email protected], visit www.storageauthorityfranchise.com. You can also purchase his books on facility development and marketing in the Inside Self-Storage Store.

It can be tempting to keep the planning and execution of your company marketing in-house, but is it the right move for your self-storage business? If you’re spending more time compiling data and reacting to market shifts than strategizing and preparing for the future, it’s probably time to consider a marketing partner. A good collaborator will help you reach more prospects by amplifying your impact across multiple channels and providing insight to the performance of your campaigns.

Ways to Tackle Marketing

There are about four primary ways to go about marketing, three of which include some form of outsourcing. Let’s look at the pros and cons of each.

In house. This is what many self-storage operators do, using their own employees to perform all marketing activities.

• Pros: Intimate knowledge of the brand, dedicated staff, quick communication
• Cons: Lack of experience/expertise, limited resources, no new perspective

Agency. An agency is a specialized team of professionals who work with you on specific marketing initiatives. It may focus on branding, design, advertising or search engine optimization (SEO).

• Pros: Quick results, strong branding, specialized knowledge to supplement in-house efforts
• Cons: Budgetary limitations, lack of industry expertise, priorities may not align, non-scalable solutions

Front end. This is a holistic marketing approach across online channels. It tracks individual traffic sources, so you can calculate conversions and true return on investment for each of your campaigns. Services include digital advertising, SEO, website design, and reputation and social media management.

• Pros: Data-centric, focus on campaigns and tracking, focus on innovation, generally industry-specific
• Cons: Doesn’t address backend campaigns like e-mail, direct mail or pricing of your businesses vs. competition

Full stack. Full-stack marketing works across a variety of disciplines to deliver an all-in-one solution. In addition to all the services provided by front-end marketers, backend management and pricing, and e-mail marketing may also be included.

• Pros: Single vendor, strong backend/accounting knowledge, fills personnel gaps, breadth of knowledge
• Cons: Marketing services are secondary, less specialization, lack of industry data and expertise, many touchpoints within a single company

What You Can Outsource

Knowing the types of marketing partners you can work with is one thing, but understanding where you can gain the most leverage is quite another. Let’s review the types of marketing you can typically outsource.

Website. Pull up your website. How long did it take to load? If it took more than three seconds, 53 percent of mobile users will abandon your site during their search. That’s an important statistic. In the second quarter of 2018, 51 percent of all self-storage queries came from a mobile device, making it imperative that your website is optimized for these users. In March, Google recognized this and started to boost the search engine rank of mobile-friendly websites.

In addition, as your first “leasing consultant,” your website must feature an intuitive, attractive design that leads users down the path to conversion. Offering online leasing can help you convert more prospects because your office is now open 24/7. When you fit into searchers’ schedules—and not the other way around—you reap the rewards.

Social media. Leveraging social media is key to successful marketing and even reputation management. Every piece of content you share, tweet, like or post, regardless of the platform, is an opportunity to connect and engage with current and potential customers. It’s also a chance to reinforce or establish your brand as an authority in the marketplace by opening a channel for two-way conversation.

One of the simplest ways to manage social media is to invest in a tool that automates your efforts. Consider software that monitors your review and social channels so you can respond directly. Many of these tools also have built-in analytics monitoring, making it easy to draw insights to the performance of different campaigns. Once you know what resonates with your audience, you can target your content more directly.

Digital advertising. Software firm Marketo defines digital advertising as a tactic for leveraging the Internet and its properties to deliver promotional ads to consumers on various channels. Simply stated, digital advertising puts you in front of the right people at the right time. It includes paid search, display ads, paid social and remarketing. And, with 65 percent of people clicking on paid ads when they’re ready to buy, advertising is a necessary part of marketing in today’s fast-paced world.

If that sounds like a lot of lingo, let a marketing partner take care of it. This person or company should be an expert in digital advertising who understands the ins and outs of the game: setting budgets, adjusting for seasonality, targeting the correct keywords and locations, etc.

When done correctly, digital advertising doesn’t just drive traffic, it drives insights. Skilled digital advertisers continuously perform A/B testing for audiences, keywords and content, all with an emphasis on delivering the highest performing strategy for your business goals.

Creative. Your brand is at the forefront of everything you do. It’s more than just colors, fonts and a logo. It’s who you are, and that’s not something to be taken lightly. Is your brand authoritative and professional? Are you targeting businesses in need of reliable offsite storage? To convert that audience, your brand first needs to align with your goals to find those types of prospects.

A creative marketing partner will help you define your brand and develop a strategy that speaks to your personas. Firms can do everything from crafting website content to designing new brochures and letterhead. Most important, they can connect you with your audience of choice. For marketers, these are the customers that bring the highest lifetime value to your business.

Questions to Ask a Potential Partner

When selecting a marketing partner, it’s important to ask the right questions to find the right match for your business. Here are a few to get you started:

• What is your experience in the self-storage industry?
• What products and services do you offer, and is there an opportunity to customize my solution?
• Do you have any case studies demonstrating your success?
• How do you assign a main point of contact, and can this person help me with my performance goals?
• Do you have a support team to quickly address my requests?
• What other benefits does our partnership offer?

Choosing to work with a marketing partner can benefit your self-storage business in a big way. Whether you’re filling the gaps with an agency, upping your inbound game with front-end marketing, or offloading all your efforts to a full-stack provider, there are plenty options available to fulfill your needs.

Celena Canode is a marketing campaign manager and Emily Pick is a content marketing manager at G5, which specializes in real estate marketing optimization. As a predictive marketing SaaS company, G5 uses artificial intelligence and other emerging technologies to help marketers amplify their impact. Its Intelligent Marketing Cloud offers predictive analytics, personalized customer experiences, and continuous spend optimization. For more information, call 800.656.8183; visit www.getg5.com. 

Investment Real Estate LLC (IRE), a property-management and consulting firm serving the self-storage industry, has hired Chris Riley as chief operating and financial officer. He’ll be responsible for strategic planning and company-wide goals for IRE as well as the other divisions of Investment Real Estate Group Cos. (IREGC), including Investment Real Estate Management LLC, Investment Real Estate Construction LLC and Moove In Self Storage.

His responsibilities will include driving growth, profitability and operational efficiencies, as well as providing a hands-on leadership role in all aspects of financial and operational management, according to a press release.

“I am really excited to have Chris on board at the Investment Real Estate Group of Cos. He has the perfect mix of operations and financial background to lead us to the next level,” said John H. Gilliland, CEO and president of IRE. “His extensive background in various forms of real estate assets will serve us well as we grow the self-storage portfolio and expand our brokerage platform.”

Riley earned a bachelor’s degree and MBA from the University of Baltimore. He has more than 20 years of commercial and residential real estate experience in the public and private sectors. He’s served in various financial and operational leadership roles, acquiring extensive experience in land acquisition, development, construction and property management in the outlet retail and residential industries, including apartments, condominiums, single-family homes, townhomes and senior-living communities throughout the mid-Atlantic area.

“I am very excited and proud to be part of such a dynamic team within the Investment Real Estate Group of Cos., true industry leaders in the self-storage business. I look forward to helping the team members along their journey of success, growth and fulfillment,” Riley said.

Since its inception in 1998, IRE has provided brokerage, construction, development and management services to self-storage owners and investors.

W. P. Carey Inc., a global net-lease real estate investment trust (REIT) that owns more than 100 self-storage facilities nationwide, completed a merger with its managed fund CPA:17 – Global (CPA:17) on Oct. 31. The $5.9 billion deal brought 44 net-lease self-storage properties, among other assets, fully under the W. P. Carey wing, boosting its global, diversified portfolio to 1,186 net-lease properties comprising 133 million square feet. The properties, primarily in the United States as well as Northern and Western Europe, are leased to 304 tenants.

"The completion of this transaction marks an important milestone for W. P. Carey, essentially transforming us into a pure-play net-lease REIT with a simpler business and more valuable earnings," W. P. Carey CEO Jason Fox said in a press release. "We've added a high-quality diversified portfolio at a favorable cap rate of approximately 7 percent and, having assembled and managed the assets on behalf of CPA:17, expect a seamless transition.”

It’s not clear whether W. P. Carey will hold on to the CPA:17 storage properties or sell them. During the REIT’s Nov. 2 earnings call with financial analysts, Brooks Gordon, head of asset management, indicated the company was exploring its options, including a possible sale, according to the “SpareFoot Storage Beat,” a self-storage industry blog.

“We are comfortable holding those until we have the best option for us,” Gordon said during the call. “I would say stay tuned on what we end up doing there.”

The CPA:17 facilities are expected to generate $26 million in annualized net operating income, according to Toni Sanzone, the REIT’s chief financial officer.

Industry analysts have speculated the properties could generate a bidding war between large self-storage operators and investors looking to quickly build a sizable portfolio, if they came to market. “Any stabilized portfolio, including the W. P. Carey portfolio, currently generates tremendous interest from both private-equity capital firms and several of the public companies, as well as joint ventures,” Marc Boorstein, principal at MJ Partners Self Storage Group, told SpareFoot.

Michael Mele, executive managing director of investments for real estate firm Marcus & Millichap, told SpareFoot the CPA:17 properties are managed by publicly traded self-storage REITs CubeSmart and Extra Space Storage Inc. Those assets are separate from the 78 net-lease self-storage properties W. P. Carey owned prior to the merger, which are occupied by U-Haul International Inc.

The unloading of CPA:17 self-storage facilities wouldn’t be unprecedented. In 2016, National Storage Affiliates Trust acquired a 22-property portfolio in California from the fund. Those facilities comprised 1.6 million square feet and were under management by Extra Space at the time of the deal.

Despite W. P. Carey’s prominence among self-storage owners—the company ranked No. 11 on the 2018 Inside Self-Storage Top-Operators List, with 113 facilities comprising more than 8.6 million net rentable square feet—self-storage is the smallest segment of the company’s portfolio at 3.3 percent of its holdings. In contrast, industrial/warehouse properties comprise 44 percent, followed by office (25.2 percent) and retail (18.5 percent), according to the company website.

Despite those numbers, U-Haul is the company’s second largest tenant behind Hellweg, a German home-improvement and lumber retailer.

Based in New York, W. P. Carey is an investment-management company that oversees a global investment portfolio and has an enterprise value of more than $17 billion. It manages a series of non-traded, publicly registered and private investment programs with assets under management of approximately $7.5 billion. It provides companies worldwide with long-term sale leaseback and build-to-suit financing, and engages in other types of real estate-related investment.

Sources:
SpareFoot Storage Beat, W.P. Carey May Unload Newly Acquired Self-Storage Portfolio
W. P. Carey, Website

Industry consulting firm Dynamic Self Storage Solutions has named Kevin Leebrick as a partner alongside founder and principal Cynthia Ashby. In addition, Crystal Tyler has joined the company as corporate administrator, according to a press release.

Leebrick joined the self-storage industry in 2010, working his way from store manager to part owner. He’s overseen every aspect of the business for portfolios of various sizes. Leebrick has also consulted for clients including a publicly traded real estate investment trust (REIT).

“Kevin’s experience, quick mastery and extensive knowledge makes him an ideal partner,” Ashby said. “His focus will now be to help our clients run more efficient and profitable operations through consulting, education and/or management of their properties.”

Tyler is an accomplished corporate trainer in the self-storage industry with 20-plus years of experience. She began her career in the industry as an assistant manager, then became a district manager and corporate trainer for self-storage REIT CubeSmart. Tyler has made her mark in hiring, training and exceeding budgeted expectations, the release stated.

“Crystal is a remarkable addition to our team,” Ashby said. “She has been a key figure in the creation of our training videos and programs for private and group training sessions.”

Launched in 2017, Dynamic provides feasibility studies, staff training, due diligence, consulting, third-party-management, market and operational analysis, focused auditing, revenue management, staffing, and more. Ashby has more than 25 years of experience in multiple executive-level positions. Most recently, she served as vice president of operations for Prime Self Storage.

Are you ready to offer your self-storage tenants coverage for their stored possessions? If so, what kind of plan should you offer? Will your customers appreciate the service? Will it be a burden on your management staff?

These are questions every facility operator faces. Below, I’ll discuss how tenant insurance and protection plans work. I’ll also offer advice on how to choose the right provider for your business and how to offer your program to customers.

Tenant Insurance vs. Protection Plans

Self-storage tenant insurance is the transfer of risk from one entity (your tenant) to another (your provider’s insurance carrier) in exchange for payment. This is a two-party contract. Payments are pooled by the insurance carrier to pay claims within the pool. The carrier is required to provide the tenant with a contract (policy) that outlines the terms of coverage and his rights under the agreement.

Selling insurance requires an “agent” or “producer” license in all 50 states. Special limited licenses that have a special class for self-storage operators are available in about 30 states, with legislation pending in a few more. The limited license simplifies the licensing process for operators and their employees, but still requires stringent procedures and recordkeeping, which can be a burden. As licensed insurance professionals, storage operators must adhere to their states’ insurance laws and regulations.

Protection plans involve three parties. The storage operator and the tenant enter a contract as part of the lease agreement, and then the operator purchases a contractual liability insurance policy to protect against financial loss brought on by this contract. The insuring agreement under the policy indemnifies the operator for any loss he sustains from damage to tenant property.

Again, the terms and conditions are between the storage operator and the tenant. Since they’re part of the lease, there’s no requirement for the facility operator to be licensed. Currently, no states forbid the sale of contractual liability insurance policies that, in this case, protect the storage operator from financial loss incurred as a matter of business practice.

When choosing the right program for your business, you must first determine whether your state offers a limited lines license for self-storage tenant insurance. If it doesn’t, a protection plan will be your option. If it does, you have a choice. When considering tenant insurance, research your state’s licensing requirements, including background checks and costs.

Choosing a Provider

Critical in your decision-making process will be your research regarding providers. You want to work with a company that’s customer-oriented and will be responsive to tenants. Remember, it’s your facility’s reputation on the line. No one will know or care about your provider or its insurance carrier. Tenants want their claims handled quickly and fairly.

So, how do you evaluate providers to ensure that you find the right one for your business?

• Research the financial strength of the carrier behind the provider’s obligation, whether that’s the tenant insurance “insuring carrier” or the owner’s contractual liability policy backing the protection plan. The A.M. Best website provides consumers with information regarding company financial size and stability ratings.
• Research you provider’s claims-paying record. Google is a great way to find out how providers rate for customer service. Check with fellow owner-operators you trust and inquire about what works for them.
• Request a copy of the provider’s insurance-carrier policy terms and conditions so you’ll thoroughly understand how it affects your tenants and what duties you’ll have as the licensed agent. In the case of a protection plan, get a copy of the lease-addendum indemnity agreement from the plan provider. In both cases, read the fine print.
• Make sure the provider is integrated with your management software to make reporting easy for your staff and operation isn’t burdensome and time-consuming.

As you weigh your options, remember that you’re in control of establishing the plan and training employees on how to sell it, as well as ensuring each tenant signs and understands his obligation and yours. Having a signature on file makes for a much easier conversation with an irate renter if something does go wrong. In court, it certainly looks better that you not only offered the tenant an insurance or protection plan, but that he was aware of his options, attested by his signature.

Offering Types

Now that you’ve selected a program and provider that work for you, how do you roll out your offer to tenants? Operators who provide a tenant-insurance program or tenant-protection plan can make it optional or “lease-compliant” (mandatory).

Optional means the tenant is offered the coverage at point-of-lease and can accept or decline it. Operators in competitive markets may elect to run an optional program to stay price-competitive. New locations in lease-up may choose optional until they reach an occupancy conducive to the additional pricing pressure of a lease-compliant program.

Lease-compliant programs require the tenant to provide proof of insurance for his goods in storage as a requirement of the lease agreement. If he doesn’t provide proof, he’s automatically enrolled in the program of choice for the minimum coverage available to satisfy the obligation.

Large industry operators and real estate investment trusts have been using this model for many years. As small and mid-size operators strive to produce greater revenue, this type of program is gaining favor with them as well. In some cases, operators surrounded by competitors that use a lease-compliant program may choose to “fall in line” to remain viable. The key benefit is that when a loss occurs, hassles are considerably reduced, as all tenants are properly indemnified.

A third offering type, exclusive to protection plans, is a bundled plan, in which a standard coverage limit is included with every lease as a tenant amenity. The customer doesn’t have an option to accept or decline coverage, as it’s automatically included in the rental price. This takes the burden of selling off the manager’s shoulders. This method is also popular for unmanned sites, where there isn’t a manager to actively sell the program. Keep in mind, nearly every state’s insurance laws restrict this type giveaway in anti-rebating laws, so this offering isn’t legal for tenant-insurance programs.

Filling a Need

Offering goods coverage at your storage facility, regardless of type, fills a valuable need for your tenants. Ninety percent of people who live in apartments have no coverage option for goods stored off the premises. Similarly, those between houses have no homeowner’s coverage for their goods in storage. Most aren’t aware of this until a loss occurs and they’re now looking at the storage operator for resolution and reimbursement. Your insurance or protection plan meets a need when the customer has no other coverage option.

In addition, tenant insurance or protection plans are the second leading source of revenue behind rent for storage operators who properly implement a program. For some operators, this income generation is the true motivator. For others, it’s the peace of mind of knowing tenants are protected in the event of an unfortunate occurrence. Again, operator preference and business model will dictate how the program is offered.

Matt Schaller is president of Arizona-based Tenant Property Protection, which partners with self-storage operators nationwide to provide protection of tenant goods while maximizing facility revenue. He has more than 30 years of experience in the self-storage and insurance industries and has worked with companies that provide tenant insurance and property-protection plans. He’s licensed as a Certified Insurance Counselor and a Certified Risk Manager. For more information, call 877.575.7774; visit www.tenantpropertyprotection.com.