Complete customer satisfaction is more than a mission statement, its my mantra, says Kirk Nash, CEO and president of On The Move Inc., the nations fourth largest truck-rental company. Nash and Maury Westerdale, partner and chairman, formed the business in 1991 after seeing the difficulty self-storage owners had when attempting to lease trucks for tenant use. Today, Boerne, Texas-based On The Move supplies the industry with trucks and insurance as part of a turnkey program.

Nash and Westerdales first-hand experience as facility owners gave them special insight into the industry. Westerdale, a storage pioneer, built his sites in Michigan in the '70s. Nashs store, which opened in San Antonio four years ago, was full within a year. As purveyors of rental trucks, theyre experiencing phenomenal growth. Our minimum growth was 20 percent in one year, Nash says. As they abhor the hard-sell approach, the majority of their business comes from customer referrals.

The idea of offering trucks for sale or lease with insurance and promotional graphics just took off, Nash says. In 1992, the partners introduced their venture at a Self Storage Association tradeshow and took nearly 30 orders. Now, 5,400 of the companys trucks can be found in facilities throughout Canada and the United States. There are even two in Russia.

Approximately 20 percent of storage facilities in this country offer trucks. Those that offer truck rental have higher occupancy than equal facilities without them, asserts Nash.

On The Moves truck leasing costs $720 per month, plus a monthly insurance premium of $170 to $230, depending on location. The 48-month contract, which includes unlimited mileage, comes with $5 million in rental insurance ($1 million in New York). Also part of the package are a hand truck, furniture pads, storage products, marketing and training materials, rental forms, truck-condition reports, first-aid kits and fire extinguishers.

Access Self Storage in Dallas uses its trucks for self-promotion.

We offer a guarantee that makes us different, Nash says. If an owner needs an early lease cancellation, it only costs him $2,500, which covers the cost of preparing the truck to re-enter the market.

It gets even better: Trucks can be custom painted with a company logo and other graphics to serve as rolling billboards. On The Move can recommend a graphics company to handle the work, or owners can choose their own. Facilities can use the sides of the truck for self-promotion or rent the space to other companies for a fee.

A rental truck is a profit center for a facility, Nash says. If you comp a customer one month of rent, you never recoup that cash. Instead, operators can offer free truck use. When vehicles arent being used by tenants, they can be lent to out to charities for events. As they travel about town, the trucks advertise the facility and position it as a contributor to the community.

Finally, owners build equity with the lease program, Nash says. Depreciation schedules on trucks still favor businesses. We expect our trucks to have approximately 60,000 miles after four years of service and be valued somewhere between $10,000 and $12,000. An owner can sell the vehicle for a profit over the residual value or extend the lease and retain the insurance.

Innovation Time

Nash figures if youve got an idea, you might as well bring it to life. Westerdale used his 30 years of experience as an engineer for Ford Motor Co. to design an aerodynamic body style for one truck model. In October, the company introduced a rear door that descends over the loading ramp and prevents truck theft. Another innovation is an automatic rear door that opens with a remote control. This door helps eliminate injuries that occur with manual doors, Nash says.

Last January, the company introduced its one-way rental program. A license defines a specific market determined by the number of trucks leased and dedicated to On The Move. Licensees receive 50 percent of each local or one-way rental, and sending dealers receive 20 percent. What makes our one-way plan different is receiving dealers get 5 percent of the rental, something no other truck rental company offers, Nash says. Vehicles are supported with Ford roadside assistance and warranty protection. An online reservation system allows dealers to function via the Internet.

As it becomes more sophisticated, the industry could become impersonal, Nash says. The challenge is to find more needs for storage, to offer superior service yet make the storage experience personal for the tenant. By fulfilling its goal of complete customer satisfaction, On The Move provides a product that allows owners to enhance customer service and provide that personal touch. For more information, call 800.645.9949; visit www.onthemovetrucks.com.

Not too long ago, the term automated meant a storage facility had a gate that could be opened with a keypad. These days, it involves high-tech self-serve kiosks, which allow customers to rent units, make payments, purchase locks and buy tenant insuranceall without manager assistance. Today, automation means leaving the open sign on all the time.

Even the overlock process has been automated with the introduction of electronic door locks. These locks integrate with a facilitys kiosks and management software. They can mechanically allow access, as when a tenant rents a unit using the kiosk, or bar entry when a tenant is past-due on rent. In cases where a unit has been overlocked due to nonpayment, the kiosk and software can automatically unlock the unit when the customer brings his account current. Automation of this process gives managers more time to spend on marketing and customer service.

Thanks to kiosks and electronic locks, operators can even charge a premium for varying levels of access. Three-tier pricing structures are extremely manageable. A facility simply charges a base price for access during office hours, and then adds a premium for extended access and an even higher price for anytime admittance.

The improved operating results at facilities that use these high-tech tools show automation is here to stay. Some facilities using kiosks report a savings of about $63 per day because of more efficient staffing and operational processes. Theyre also able to serve more customers, because the self-serve units take new rentals and payments no matter the time or day of the year. This means higher profit.

The Human Effect

So what does this mean for self-storage managers? Will the position be eliminated? Not likely. Think about it: Kiosks were introduced into banks, gas stations and airports years ago, yet there are still bank tellers, gas-station attendants and airline staff. Instead, the role of self-storage manager will evolve and expand.

To understand automations impact on the facility manager, look at the possibilities it creates. First, there will always be storage operators who avoid technologythe ones who still use index cards rather than management software to record rentals. At these facilities, a manager will always be necessary.

At the other extreme, new facilities are being built for full automation. One operator in the Midwest has been running more than 50 unmanned facilities for the last five years. A staff member still needs to attend the sites for routine lock checks, property inspections, maintenance and other customer-service duties, but the requirements are minimal compared to full-time, onsite attendance. This type of operation requires a manager who can make good decisions and has an ability to multitask, overseeing many sites simultaneously.

The business model that makes sense for most existing facilities as well as many new ones is a hybrid of automation and an onsite manager. The kiosk, with its ability to take rentals and payments, supplements the managers efforts to serve more customers. Over time, a facility can collect data regarding its customers behavior, and the workforce can be matched to the flow of business. Using these trends, staffing can be geared up when traffic is heaviest and scaled down when business is slower.

Customer service is a competitive differentiator, and kiosks provide tenants with improved service in two ways. First, some customers prefer self-service transactions, and kiosks cater to this level of comfort. When was the last time you paid at the counter for gasoline? On the other hand, some customers prefer to work with a person. Kiosks free up managers so they can spend extra time with customers who value human interaction.

Thanks to automation, the managers job is no longer confined to the office, which means he is free to go out and prospect for new accounts. He can visit businesses in the area to secure commercial customers, who rent for longer periods and are timelier with their payments. He can also attend chamber of commerce meetings and other local networking events.

Land in prime locations is harder to come by, but automation makes smaller and more remote facilities financially feasible. A managers role can easily be expanded to cover several of these properties. In a sense, the manager runs a portfolio rather than a single site. He becomes responsible for maximizing revenue across several facilities linked through kiosks and a central super-center.

Finally, automating routine tasks gives managers more time to analyze and fine-tune their facilities. They become yield-management experts, varying rents according to inventory, occupancy and seasonality to maximize revenue. In addition, they can add new services such as package shipping, records storage, wine storage, eBay brokering and more.

The self-storage industry is expanding and evolving, and automated management plays a key role. Rather than disappear, the role of manager will also change and grow. Those employees with customer-service and business skills will continue to be in high demand. Tomorrows manager will be an essential part of the business, especially one who embraces automation.

Raymond E. McRae is the vice president and director of operations for Mesa, Ariz.-based Storage Solutions, which conducts feasibility studies, third-party management, market surveys, consulting, auditing, acquisitions and development for the self-storage industry. For more information, call 480.844.3900; visit www.storage-solutions.org.

Curtis Sojka is vice president of marketing for OpenTech Alliance Inc., a developer of self-storage kiosks. The companys INSOMNIAC line improves customer convenience, reduces operating costs, and increases revenue for self-storage facilities. For more information, call 480.778.9370; visit www.opentechalliance.com.

We most often associate the word creative with the art world, and too seldom use it in day-to-day professional life. However, creativity could be just the thing when it comes to distinguishing your facility from those of competitors and making the difference in the profitability of your business. Here are a few CREATIVE methods that can be easily applied to daily self-storage management.

C Is for Cross Train

All team members, from office staff to the district manager, should be cross-trained to allow for a smooth-running operation. Each member should know how to operate the computer, process payments, complete a lease, prepare daily close-out and run reports, clean out vacant units, and complete a routine lock check and space audit. By cross-training, you can ensure neither customers nor the business suffer if an employee is on vacation or unexpectedly out of the office.

R Is for Referral Programs

Referrals are a low-cost way of advertising. A good referral program rewards people for recommending new renters and lets customers, vendors and the community know you value their business. You can promote your program with referral cards, signage, fliers, mailers, word-of-mouth, etc. Printed materials can also incorporate facility information, such as its street address, phone number, website and e-mail address. When coupled with a facility map and list of features, solicitations for referrals make great marketing pieces.

E Is for Excellent Service

What business can be successful these days without exemplary customer service? Know who your customers are as well as their needs. Always go above and beyond the call of duty, even when it comes to simple things. Tenants appreciate friendly service and a general willingness to help.

Host events and activities throughout the year to show people you are grateful for their business. Consider sponsoring a formal Customer-Appreciation Week during which new and existing tenants can take advantage of giveaways, promotions, entertainment, food and more. Maybe organize an annual tag sale for customers at the facility or hold an anniversary barbecue. Offer coffee and doughnuts in the office every morning. These gestures show customers you care and promote your business through increased community awareness.

A Is for Auctions

Make facility auctions a marketing event from the start. Provide a copy of the auction schedule in your move-in packets, and explain the opportunity to new customers. Offer drinks and refreshments the day of the sale to increase turnout and collection potential. You can also maintain a mailing list of your frequent auction attendees, and send them an updated schedule each quarter.

T Is for Telephone Script

Provide team members with a phone script to ensure they askand answerthe questions that will get callers to visit the site. The main purpose of advertising is to make the phone ring and ultimately get prospects to rent a unit or buy retail merchandise. The script should address customers common questions and concerns, let them know you care about their business, convince them you can provide for their needs, and ultimately sell your services.

I Is for Inspections

Conduct regular and thorough site inspections. These will ensure staff knows what is expected and allow them the opportunity to show off their skills. Inspections should include random checks of vacant units and a review of company inventory and files. An examination of facility reports is also important, particularly those summarizing daily deposits. In fact, if you insist on the daily or weekly transmission of these reports via fax or e-mail, it will force employees to close-out and balance, which prevents theft. Inspect what you expect!

V Is for Value

Your management team should understand and know how to explain the value of each of the facilitys products and services to customers. The phone script and any sales presentations should also outline the sites features and benefits. Most customers are only interested in what you can do for them, so tell them!

• We have resident managers, so your valuables are stored right here at our home.
• We offer boxes and other packing supplies, making us the one-stop shop for your moving and storage needs.
• We have computerized access, so we know who enters and leaves the property at all times.

E Is for Endless Technology

Take advantage of ever-improving technology to promote your business and enhance customer service. For example, create a website that will tell your companys story and invite customers to visit your facility. It can be basic, with just a page or two, or sophisticated, with online reservations and payment options. Always use up-to-date management software with reporting tools, and maintain e-mail communication with staff and customers. Other technological advances include kiosks, electronic locks, computerized access control, digital video surveillance and more.

It All Adds Up

Every day, use at least one creative technique that will set you apart from competition, whether its mailing a thank-you card to a new rental, delivering a cold bottle of water to a customer moving into his unit, or giving a gift for a referral. Be imaginative, and watch your business grow. As Dee Hock says, The problem is never how to get new, innovative thoughts into your mind, but how to get old ones out. Every mind is a building filled with archaic furniture. Clean out a corner of your mind, and creativity will instantly fill it.

Madelyn Still holds the Certified Property Manager designation through the Institute of Real Estate Management. She is the director of property management and an area manager for Atlanta-based Universal Management Co., one of the nations 50 largest self-storage operators. The company manages stores in Alabama, California, Connecticut, Georgia, Hawaii, Massachusetts, Nebraska, North Carolina, Okalahoma, South Carolina and Virginia. It also provides consulting and training throughout the United States and abroad. For more information, call 770.801.1888; visit www.universalmanagementcompany.com.

In todays competitive environment, highly motivated staff is vital to any organization that wishes to achieve results. Therefore, learning to inspire employees is essential to success.

Motivation can be defined as that which arouses, sustains and channels an individuals behavior toward a goal. Every employee needs a little extra encouragement now and then. Benefit packages and incentive/appreciation programs can certainly motivate personnel and even increase their job satisfaction. The result is a high-quality product and happy, productive staff members who work better with each other and, more important, your customers.

Maslows Hierarchy of Needs

Theorist Abraham Maslow created the now famous hierarchy of needs, which he believed was the key to motivation and could be applied to every aspect of life. According to his principle, as humans meet their basic requirements, they seek to satisfy successively higher needs:

1. Physiological needs: warmth, shelter, food
2. Safety needs: a sense of security, absence of fear
3. Social needs: interaction with others, having friends
4. Esteem needs: being well-regarded by others, appreciation
5. Self-actualization: realizing individual potential, winning, achieving

As a storage operator, you need to be aware of and apply these motivational forces to achieve the performance you seek from your employees. Start by addressing staffs basic needs:

1. A positive, healthy work environment
2. An equitable salary and benefits package
3. Clearly established policies and procedures
4. Job security
5. Time for a personal life with friends, family and interests

Benefits and incentives alone arent enough to satisfy these requirements. Open lines of communication between all levels of staff are also critical. Personnel must know they can discuss work issues without fear of being ignored, patronized or harassed by supervisors or other employees. If someone comes to you with a concern, go directly to the heart of the issue, and dont make commitments you cant keep. Instead consider the options for resolving the situation and follow through to a reasonable conclusion.

Try to include employees in management meetings and decisions. Allowing staff members to have a say regarding their day-to-day job duties is one of the least expensive and most effective motivational tools you can use. Find out what changes they think could be made for greater productivity and a more positive business environment. Give staff more trust and freedom to make decisions and improvements. It will have an extremely positive impact on your business.

Rewarding Good Work

Once youve established open communication, begin discussion of an incentive program. Ask employees which rewards and bonuses they would prefer. Pay attention, and make a list.

Cash may seem like an obvious choice, but isnt always the best form of motivation. While it may encourage productivity in the short term, over the long haul, employees tend to prefer a pat on the back, time off, dinner for two at a local restaurant or other perks. Following is a list of ideas you can modify to suit your own operation:

• A simple thank you in appreciation for hard work, especially in the form of a personal note from the boss, can sometimes be the best reward.
• Always treat employees with respect.
• Consider holding meetings outside the facility at a nice diner or coffeehouse.
• Make a thank you box in which customers put the names of employees who go beyond the call of duty to help them. Draw a name every month for a reward.
• Deliver a gift to employees during the week of their birthday.
• Host an employee-appreciation day at least once a year at a park, bowling alley or restaurant.
• Give out hats, shirts, jackets, etc., imprinted with the company name or logo.
• Praise a job well done.
• Hold one-on-one meetings with employees who seem unhappy.
• Send employment anniversary cards.
• Award tickets to sporting or cultural events when a goal is reached. Let employees choose.
• Have a casual lunch with staff to discuss how things are going at the property.
• Provide opportunities for professional training such as an industry convention or manager-training course. This makes employees feel valuable and adds to their job competency.
• Reward perfect attendance with time-off certificates.
• Create a contest for Employee of the Year with significant prizes.

Whatever rewards you use, dont throw them around carelessly. There are only so many gold stars you can give out before they no longer hold any meaning.

Setting Goals

Incentives and bonuses are met via goals, so the first rule for establishing a program is to make sure your objectives are attainable. Sometimes a series of smaller aims is better than lofty aspirations. Remember, raising the mark too quickly or in excessively large steps will only discourage employees. Let them get a little comfortable on every level they reach, and work with them to decide if new goals are too high.

Sometimes youll need to try different motivation methods until you find one that works for the staff as a whole. For example, rewarding the person with the highest sales may only pit employees against each other. But compensating the entire staff for good customer service and team spirit may make the entire group more productive. A positive, enjoyable work atmosphere can be its own prize.

Through Employees Eyes

Put yourself in your staffs shoes. Could you live reasonably on the salary and incentive package you provide? What about the work conditions, hours and environment? Sometimes you need to step back and look at things from your employees perspective. How can you make their lives better? You can often provide a simple solution to a difficult or unpleasant situation.

To get the best performance from your team, develop an effective incentive and rewards program. Set objectives, encourage initiative, monitor performance, reward exceptional performance and keep motivation high.

Thomas Krendl is the owner of SkilCheck Inc., which provides auditing, feasibility studies, management and training services for the self-storage industry. Mr. Krendl has more than 20 years of experience in upper management and has trained thousands of personnel in management and leadership duties. Currently working on several development projects, he has performed turnarounds on numerous distressed storage properties. He has also conducted training seminars on sales and marketing techniques, legal issues and state lien procedures. For more information, call 800.374.7545; visit www.skilcheck.com.

Ididnt always love the process of firing. It took me a while to figure out what a positive, business-enriching tool a termination can be. A lot of emotions are involved in letting someone go, and its a skill youre not taught in business school. Such authority is a big responsibility and must be exercised with caution. Its like a big hammer: Used well, it can help create beautiful things; but used recklessly or without skill, it can hurt the wielder and others.

There are four general situations in which a self-storage operator should consider terminating an employee:

• It has become obvious the employee is not qualified for the job.
• The employee is stealing from the business.
• The employee has not meshed well into the business culture.
• The operator needs to cut expenses.

There might be other applicable situations, but whatever the cause, a termination is a touchy state of affairs. You dont have to love it, but sometimes its necessary for the health of your business. These guidelines will help see you through.

Not Qualified

If you hired someone who was unqualified, no one is happy. The employee is frustrated. Your customers are aggravated. Your business is not running smoothly. You have to fix the problem for everyone concerned, and you have to do it fast. In the end, its a tremendous relief when the person is let go. Customers get the service they deserve, and the business can move forward. The employee can find a position for which he is better suited. Everybody wins.

Business owners may know the qualifications they seek in a candidate, but its often hard to tell if a person is the best choice for a position until they are actually in it. An applicant can look good on paper, but the proof is in the pudding. Thats why most companies have a probation/orientation period that lasts long enough to determine if a hire is decent. If he isnt, the company can release him from employment and move on. No one has to become emotionally tangledthings just didnt work out. Everyone tries to make a better choice next time.

Whatever you do, dont let your business suffer. Dont let someone linger in mediocrity for an extended period. He thought he could handle the jobso did you! The best course of action now is to sit the person down and say it straight: Thank you for trying. I dont think this is going to work out. We are not going to have you continue on, and we are releasing you effective immediately. In the end, hell be happy to go on about his life, knowing you didnt string him along.

If youre just not sure if you made a good hire, discuss your concerns with the employee and explain what improvements can be made in a specific time frame. Then its up to him to make the cut. If he does, hell feel good about it, and so will you. If he doesnt, then he cant question your decision to terminate.

Each time you realize youve made a bad choice, step back and review your recruiting and interview practices. You may have a loop in the system that is letting poorly qualified people to slip through. Or it may be the person had the initial qualifications, but was unable or unwilling to transfer a skill set to your operation. You cant bat 1,000 when it comes to hiring; but you can learn to recognize when youve made a mistake and deal with the situation expediently.

Employee Theft

If you discover an employee has been stealing from you, you may actually enjoy firing him. The person could be stealing money, or it could be resources or time. Rude, uncooperative and lazy people should not be a protected class. Laziness is a form of theft, so take steps to motivate people out of their idleness, and fire them quickly if they dont mend their ways.

I once had an employee work a very lame con on my company. He was a talented, bright young man who, for whatever reason, scammed us for about $50 per week. It only took about three weeks to notice the discrepancy and another three to figure out his game and nail him. Because of the relatively small size of the theft, the prosecuting attorney let him off on a plea for 12 months of probation; but I hope it was enough to stop him from moving in a criminal direction. It did put our other employees on notice that even petty theft would be prosecuted.

Sometimes its hard to prove someone is stealing. In this case, an audit may be the answer. Even if there are no suspects other than the employee in question, youll need hard evidence before you can act. Sometimes it may be easier to terminate the person for a reason other than stealing to get him to go away quietly. You can give him the choice to resign, or fire him for any of the reasons outlined in the unemployment claim forms. It will give you a lot less satisfaction, but it will get this person off of your payroll and his hands out of the till.

If you decide to terminate on the basis of theft, its best to fire the employee and get him off your premises as quickly and quietly as possible to avoid outbursts or other repercussions. When you lay it on the line, you may get denials and please for mercy, or you may get stone-faced silence. In either case, make it clear that he is released and follow through with a letter of termination.

If you wish to prosecute, consult with local police before terminating. They may want to gather evidence while the person is still in your employ. This is your choice. Most business owners want the perpetrator off their property as soon as possible after a discovery of this sort. In many cases, the conviction may not amount to much, but the fact that you have sought justice may be gratifying in itself. In any event, you will have gotten a well-earned education in employee theft.

Not a Good Fit

If you have an employee who simply doesnt mesh well with the rest of your team, make sure he understands why he doesnt fit and give him some turnaround time for improvement. Sometimes a bad fit is nothing more than miscommunication, which can be easily rectified. Other times, personalities clash and people do not work well together.

Some employees develop a chip on their shoulder or go sour on you after theyve been hired. Some become overprotective of their turf and drive off other staff. It might even be a very productive member of the team who is creating a poor work environment. If theres a lot of drama involved, it can be tricky to determine whos responsible for the problem and who needs to be let go. Youll have to decide which staff members are the most valuable and make the call.

A termination of this sort saves the team as a whole and puts it back on the right path. The remaining staff generally feels an overwhelming sense of relief after the bad apple is gone, which gives the workplace a boost and leaves everyone free to pursue a new level of work satisfaction.

Not every business can enjoy a perfect society. A minimal amount of background static is normal and shows you have employees with personalities and ambitions; but ongoing conflict is never productive. You may not enjoy firing a bad-fit employee, but it will certainly feel good after you have done it.

Cutbacks

If you need to cut expenses and find the only way to do it is by letting someone go, make it happen. Sometimes payroll is the only flexible item on your list. In this case, make it as quick and painless as possible. Let the employee know you have explored all possible options, and you simply do not see another out. Thank him for his service and send him on his way. He wont be happy, but hopefully the move will allow your numbers to recover, and you can begin to build your business to a more profitable level.

A severance package can help lessen the blow and make the termination easier for everyone. When possible, offer this assistance to employees who are let go for something other than poor performance. Be generous without going overboard. If you offer too much, the employee will wonder if your financial concerns are genuine. Offer too little, and he may harbor bad feelings and ill will for the company.

A Clear Conscience

For whatever reason you terminate, make sure your motivations are valid and completely unrelated to discrimination. Rely on good business practices and sound management principles when making your decision. To do otherwise could cost you in legal fees, fines and settlements. Before you terminate, make sure your conscience is clear and your motives untainted.

I once knew a female delivery driver who didnt like her job, called in sick all the time, and was consequently fired. She knew she deserved to be let go for poor attendance, if not a poor attitude. But during the termination, her manager said, We didnt really want a girl delivering for us anyway. That stupid utterance cost him about $15,000. Her gender had nothing to do with the fact she was not meeting expectations, but the manager let slip his idiotic thought.

During a termination, communicate your intention to the employee as quickly and clearly as possible. Its best to have another manager or supervisor in the room as a witness, because it can be an emotional situation. Keep a clear headdo not get angry or upset by anything the employee says to you. Its also best to write up a termination sheet with any applicable conditions and have each party sign it. This will prevent future complications.

If you have not already consulted a workplace legal advisor, do so. Your state, municipality or employment contracts may outline obligations, guidelines or restrictions you must follow. A termination should be approached with reason and tact. Wield your hammer of authority wisely and with care, and you will learn to appreciate it.

Tron Jordheim is the director of PhoneSmart, an off-site sales force that helps storage owners rent to more people through its call center, secret-shopping service, sales-training programs and Want2Store.com facility locator. You can read what he is up to at www.selfstorageblog.com. For more information, e-mail [email protected].

News From Around the World

Facility Plan to Save Historic Mill

After standing empty for three years, a historic mill in Manchester, England, is being revived as part of a mixed development that includes self-storage, industrial units and a gym. Mile End Estates is refurbishing Boltons Swan Millonce the biggest spinning mill in the worldin a multimillion-pound project, according to a recent article in The Manchester Evening News. The buildings originally opened in 1904-05, and the development scheme for the 4.75 acre site is extensive and long-term. The company, which was set up to buy and restore the mill, is also planning a project in Liverpool and looking for similar investments.

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Canadian Tire Building Converts to Storage

In Milton, Ontario, a former Canadian Tire building could be turned into a self-storage company, reported The Canadian Champion. At a September meeting, town officials reviewed a proposal that calls for the building to be expanded to 9,295 square meters and divided into 894 interior self-storage units. The units would be individually alarmed and climate-controlled, ranging in size from 2.5 to 18.5 square meters. Balmoral Group Development Corp. applied for a zoning bylaw amendment to change the site from highway commercial to a site-specific employment zone.

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Storage Goes on Stage

An original play called Self-Storage was performed at the Vancouver, British Columbia, Fringe Festival in September, according to Straight.com. The work received fairly good reviews. The main character, who lives in a storage unit, is quoted as saying, Im not afraid of life. I just dont know what to do with it right now.

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Big Yellow Expands

Big Yellow Self Storage has expanded into West Yorkshire, United Kingdom, according to a Sept. 19 report in The Huddersfield Daily Examiner. The company, which has 35 sites across the south of England and Wales, spent £7.5 million on a store at Gelderd Road, Leeds.

This month, I gathered real estate experts to discuss the state of self-storage in the West. Let’s hear what they have to say about their respective cities and regions. Our panel includes: Richard Arnold, Arnold/Forcum & Associates, Portland, Ore.; Roxana Baker, Grubb & Ellis, San Jose, Calif.; Clifford Crowe, Lee & Associates Inc., Carlsbad, Calif.; Larry Hayes, Hayes & Associates, Missoula, Mont.; Larry Kudla, American Realty & Investment, Las Vegas; Joan Lucas, Joan Lucas Real Estate Services, Denver; Michael McVay, Lee & Associates Inc., Carlsbad, Calif.; and Jim Ramsay, Coldwell Banker Commercial, Redding, Calif. My comments are in italics.

In your market, have you seen cap rates fall in the last three months? Are they higher than they were at the end of 2004?

Arnold:

I’ve seen cap rates fall in the past 12 months, but not the past three. I believe cap rates have fallen about 1 percent in the past year.

Baker:

Cap rates in Silicon Valley and the San Francisco Bay area have been very low for the last year or so, in the 6 percent to 7 percent range. There’s a lot of money chasing a limited number of viable properties in addition to low interest rates and lack of investment alternatives. Cap rates are still going down into the 5 percent range.

Crowe:

In Southern California, cap rates seem to be lower in the last several months than they were earlier in the year.

Kudla:

I have seen cap rates get lower in the Las Vegas market.

Lucas:

Due to a shortage of supply in my area, demand continues to affect cap rates. In reviewing a list of closed transactions from the last several years, I’ve seen a steady decline in cap rates from a high of 11 percent to a low of 7.5 percent.

McVay:

The cap rates on properties sold by brokers have not changed over the past year. If anything, they’re lower.

Ramsay:

I’ve seen cap rates in California dropping to a new low over the past 12 months. They seem to have stabilized over the past 90 days, with investors realizing how low you can go and still make a reasonable, safe investment. Rates are definitely lower now than they were at the end of 2004.

How low is low? With interest rates rising for the 11th time, cap rates will eventually increase. A 2 percent rise in cap rates will drop the price of a facility by 20 percent and the average equity by about 50 percent. It looks like the risk is greater if cap rates go up than the gain if they go down. (See my recent article “Interest Rates, Cap Rates and Betting the Farm” in the November 2005 issue.)

Are self-storage transactions harder to close? If so, why?

Arnold: I don’t find transactions harder to close, except in cases where the seller is attempting to make a tax-deferred exchange. It’s becoming more difficult to find a suitable exchange property.

Baker:

Lenders on all types of investment properties seem to have more stringent parameters and require larger down payments, slowing down the buyer’s mortgage processing and final close of escrow.

Crowe:

With a tighter market, buyers and sellers are more concerned about the details.

Kudla:

I don’t think transactions are harder to close—just the opposite, since lenders and investors have a better acceptance of the product.

Lucas:

Whenever conduit lenders are involved in a transaction, much more documentation is required during due diligence. For sophisticated sellers and buyers, this is no problem. On the “mom and pop” transactions, we’re typically dealing with local lenders who understand the property and type, and the closings are relatively painless.

Ramsay:

All transactions are harder to close. As investments are more difficult to find, sellers and buyers become more demanding. The risk factors are approaching the same costs as fed and state capital-gains taxes, leaving all parties feeling pressed. Sellers seek to find another 1031 Exchange property that is equally as good (and most can’t). Buyers demand to know their investment dollars are buying “near perfect condition” properties while paying 4 percent to 6 percent cap rates. Sellers are not willing to fix anything that would generally be repaired or replaced under normal market conditions.

McVay:

Transactions are not getting harder to close. Lenders still desire the self-storage sector, and the loan-to-values are still being quoted around 80 percent.

The first indication that a good market is going soft is the deals are more difficult to close. Buyers are a little less convinced and, thus, tougher to deal with on smaller issues. When it becomes a pattern, it’s a sure thing the market will change.

Are you seeing more buyers or sellers in your market? Have you seen an increase in both over the last year? If so, what do you think has caused the influx?

Arnold:

I’m finding lots of buyers and very few sellers. I think the market is at its peak, and though buyers are plentiful, owners are not interested in becoming sellers. This is likely due to the fact they don’t want the tax bite and have trouble finding other real estate that will give them a similar return.

Baker:

There are lots of buyers and “tire kickers.” Not many have switched to self-storage from office, R&D or retail properties just yet. Most get turned off by the high prices relative to achievable cash flow no matter what the product type. It looks like the large self-storage chains are selling portfolios, but not many “moms and pops” are selling.

Crowe:

I haven’t seen much of an increase in sellers, but we continue to have a ton of buyers. A lot of them purchasing at lower cap rates are those coming out of 1031 Exchanges.

Hayes:

There are still a lot of buyers and little inventory in my market. I don’t think there are more buyers than in the past, just frustrated ones who have not found something to meet their criteria.

Lucas:

The situation has not changed in the past decade. There are probably 100 buyers for every good self-storage facility. The reason is everyone hears about the great returns an investor can achieve, pure and simple. Are there more sellers? Definitely. But several years ago, there were many developers looking for sites on which to build. That is the piece of the industry that has diminished, due to overbuilding in so many sectors of the state.

McVay:

There are definitely more buyers in Southern California, but we’re also starting to see more owners thinking about selling.

Ramsay:

There are a lot more buyers looking for investments. It seems to be somewhat of a seller’s market in California, but sellers can’t seem to replace their properties for the same return on investment. The market is settling down, and buyers/investors are realizing they can’t pay current prices with any degree of safety. In areas of heavy residential growth, self-storage can still expand to some extent; however, in stable areas or those with little or no growth, the market may soon be overbuilt. Investors are always looking for alternatives and opportunities. Cash flow with safety seems to be the norm.

It appears we are approaching some balance between buyers and sellers. Will we overshoot it? Who knows, but it usually works that way.

Do you have any stories to share about overbuilding in your market? Is it becoming a problem?

Arnold:

While discussing overbuilding with one seller, I was told that although his vacancies had slightly increased, he had raised rents to be in-line with those needed by new-facility developers to accommodate higher construction costs. Vacancy increased, but rents improved enough to offset it.

Baker:

Silicon Valley doesn’t have much available land zoned for self-storage. Buyers looking to develop have few infill sites from which to choose, and labor and construction costs are quite high. Therefore, overbuilding hasn’t been a problem in most cities in my market.

Crowe:

I think each pocket within a major market needs to be evaluated individually.

Kudla:

There is no overbuilding is my market. This is a growing area. I would venture to say it’s is not an issue in other Nevada markets either.

Lucas:

Several years ago, an experienced developer got approvals to build a 100,000-square-foot facility in a thriving part of town. The plan was staged development. Unfortunately, due to problems with the city, he was forced to complete the entire project at once. A year and a half later, a second developer came into the market with a similar facility on a less favorable site just two miles away. Does anyone want to guess how long it took the facilities to reach breakeven?

McVay:

There really isn’t an excess of overbuilding in my area because of zoning restrictions. There are a couple of markets in the Los Angeles area that may be overbuilt, which causes facilities to offer numerous discounts, but they aren’t suffering.

Unfortunately, California and Las Vegas are the exceptions in comparison to the rest of the country. I’m hearing more stories like the one Lucas related. It’s time to do a check up on your facility and market.

As you look back at 2005, what are your thoughts on the self storage market in general? What would you like to see in the coming year?

Arnold:

I think self-storage is the best investment available in the real estate market. In the upcoming year, I’d like to see more owners become sellers, but I really don’t expect that to occur—just yet.

Baker:

Lots of additional housing units are being built, replacing some obsolete industrial areas, and there aren’t a lot of new self-storage facilities under construction. This should portend well for existing facilities, which are running at about 90 percent occupancy in the greater San Jose area. Also, quite a number of new retail centers and mixed-use developments are going up. It’s probably a good time to build a limited number of self-storage facilities or expand existing ones in or near the changeover areas, providing the cities will allow the use.

Crowe:

The storage market continues to be a good one. I see more lenders and investors recognizing self-storage as a good property type compared to others.

Lucas:

This is a thriving niche of commercial real estate. There are many sophisticated buyers looking for quality properties. If a facility is priced right, everyone is assured of a successful closing within the shortest amount of time. Our markets are going to be overbuilt for quite some time. I hear from new people in the industry who want to build, build, build. They tell me there are 15,000 new homes going into a given area. What they haven’t taken into account is the time it will take for a community to be fully built out. Couple that with the fact that only 10 percent to 12 percent of the population uses self-storage. We continue to create our own problems.

McVay:

I think a lot of owners who were thinking about selling but didn’t will regret it. It looks like there will be much more product available next year, and it will cause values to slightly decrease.

Ramsay:

As investment opportunities become more competitive, self-storage is more acceptable to lenders at competitive rates. Since the stock market crash in 2000, investors have been looking at more reasonable and steady income streams. Self-storage fulfills these requirements. In my market, I’d like to see sales prices related to cap rates become more realistic—7.5 to 10—and have more sellers selling established sites. Also, where there is economic demand, I’d like to see more property zoned for self-storage and more facilities constructed.

McVay made a very important point. If you’re thinking about selling in the near to intermediate term, now is the time. Waiting is risky business with limited potential rewards. If you plan to hold for five years or longer, it’s still a great opportunity. Just keep an eye on new competitors.

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Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nation’s largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE; visit www.selfstorage.com.

The process of finding, hiring and training quality staff requires dedication. It involves a conscious decision to profile the ideal employee, identify key job characteristics and responsibilities, establish the necessary skill sets, and use creativity to discover pools of qualified candidates. It also takes a commitment to employee training and to providing the benefits and growth opportunities that build team loyalty and empowerment.

Recruiting

When creating your employee profile, be clear and precise. Know the education level, job skills, experience and qualifications you feel are necessary for success in your organization. Once you have established these criteria, you can begin looking for candidates who fit the bill. There are several possibilities:

• Recruit from within. You can often find the ideal employee within your current organization. Internal promotions send a message that the company offers career-advancement opportunities for qualified, hard-working, dedicated individuals.
• Seek personal recommendations. Ask current employees, former employees, vendors and business associates for recommendations.
• Create an internal referral program. Consider offering a bonus for any recommendation that results in a successful hire. The incentive should be contingent upon a minimum length of stay.
• Advertise. This method should yield the broadest response. One of the keys to successfully advertising a position is to write a clear description of the job being offered, including the title, salary, benefits, requirements and qualifications. Next you need to choose the size and placement of the ad. Know how much you are willing to spend, as some resources can be expensive. Just as with any marketing campaign, you want to attract the highest number of hits for the least amount of money.

Evaluating Resumes

Hopefully, your recruitment efforts will attract more candidates than you can handle. The most efficient way to weed through the list is to peruse the resumes looking for key phrases and buzz words that match your employee profile. Separate them into three piles: definite, maybe and no way. Beginning with the definites, read through each resume again, following these simple guidelines:

• Start at the end, where many applicants include their least flattering and relevant information. Be suspicious of functional resumes that focus on tasks and duties without clarifying dates of employment. These candidates may look qualified, but they could be job jumpers.
• Look for worthwhile accomplishments that have benefited employers. This will be a good indication of a candidates profit-mindedness.
• Steer clear of trivial information. Some candidates puff up their resumes with achievements or experience that is unrelated to the work at hand. For example, an excessive list of hobbies may indicate the applicant is more interested in extracurricular activities than a strong work ethic.

Interviewing

Once you have narrowed your list, youll move on to the interviews, the most critical step in the hiring process. Keeping your employee profile in mind, write a series of pointed questions that will help you get the most mileage out of this brief dialogue. Place a number value on each and award candidates scores during the interview. This will help you when it comes time to make a decision, as it can be difficult to remember your impressions after conducting several meetings.

Following are some questions that will help you see through each applicants interview persona and discover the real employee:

• Describe the type of people who most annoy you. (This should identify characteristics the candidate does not see in himself.)
• Describe the types of improvements you would make at your last job if you could. (This will help you gauge the candidates creativity and general sensitivity.)
• Why have you chosen to make a job change at this time? (Be aware of candidates who bad-mouth former supervisors or coworkers.)
• What are your expectations of a new employer in terms of support and assistance? (Equilibrium is important here. Watch out for applicants who seek too little or too much.)
• Can you give me examples of emergencies that required you to reschedule your time? (This is a good way to determine if an employee is willing to go the extra mile.)
• What did you like about the last company you worked for? (A thoughtless answer may indicate the candidate is just going through the motions.)
• How would you describe the best person you have worked for? (This helps identify qualities the candidate admires.)
• What has been the most interesting assignment of your career? (This will help you determine how the candidate responds to challenges.)

Ending an interview can be just as awkward as beginning one, so set strict parameters and time limits. While 16 minutes is usually enough time to determine the qualifications of any candidate, allow 30 to keep it more sociable and leisurely. Announce the time limit at the start and have a clock visible. Give the candidate clear indications when the interview is coming to a close, and end decisively. If the candidate is strong, let him know your interest. Otherwise, simply provide a time frame in which he can expect to hear about your decision.

References

There are only two ways to handle references: thoroughly or not at all. If you decide to be thorough, which is recommended, here are several points to consider:

• References should be checked by the person who will be the candidates supervisor. Only he knows the pertinent questions and responses he is seeking.
• Dont hesitate. Check references as soon as the candidate gives you clearance to do so.
• Do not base your decision solely on letters of recommendation, which could have been written by anyone. Always follow up with a phone call. This will also help you gauge the level of scrutiny provided by the reference.
• Call as many former employers as possible, especially those who were not listed as references. Most candidates only list those who will give them positive reports.

After all the proper procedures and techniques have been followed, your remaining failsafe tool is gut instinct. Ask yourself which candidate came across as the one who could do the best job and fit into your work culture. Which has the most outgoing, personable attitude and customer-service orientation? In the end, what you want is the kind of employee you would want to deal with if you were your customer.

David Blum, an industry consultant, is president of Blum Management Services Inc., based in South Florida. He is also past president and founder of the Florida Self-Storage Association. Mr. Blum has more than 10 years of experience in self-storage and more than 35 years of business experience. For more information, call 954.255.9500; e-mail [email protected]; visit www.blumms.com.

This year will go down as one of major transition for the electronic-payment industry. Several related issues have had an effect on the self-storage business and the way facilities operate:

• Compliance
• Cost
• Alternative payments

Compliance

In the credit-card arena, compliance has been a buzzword for the last five years. In the past, merchants had to deal with competing requirements from Visa, MasterCard, American Express and Discover. In January 2005, however, a set of uniform requirements was released. These 12 basic requisites, known as the PCI Data Security Standard, outline security requisites for members, merchants and service providers that store, process or transmit cardholder data.

In addition, compliance now affects all merchants. Most self-storage operators fall into the Level 4 category, which comprises any merchant that processes fewer than 20,000 Visa e-commerce transactions or up to 6 million standard Visa transactions per year. The recommended observance is an annual self-assessment questionnaire and penetration scan.

Cost

When it comes to whether a business will accept plastic, cost is always an issue; and several important meetings occurred during 2005 that will have a major impact on charges. The most significant was held during the summer by the Kansas City Federal Reserve. It addressed Interchange, the amount an issuing institution receives every time a cardholder uses his card.

Participants asked the question: Should the government regulate Interchange, and is the current methodology justified? System-wide prices changes were put into effect, including a reduction in the cost of debit acceptance and an increase in the cost of reward points. Finally, a number of new Interchange levels were introduced, as were some new categories. Categories supersede traditional levels, of which there are currently more than 100.

Alternative Payments

Alternative payment methods such as debit cards and electronic checks are gaining significant momentum. During 2005, debit transactions exceeded traditional credit-card transactions, which is important because the cost to the merchant for debit vs. credit is significantly less.

The use of electronic checks through the Automated Clearing House (ACH) continues to increase. The cost of receiving ACH payments is also significantly less than the cost of accepting credit cards. This year, we saw the long-reaching effects of the Check Clearing for the 21st Century Act (Check 21), which went into effect in October 2004. This act allows an electronic image of a paper check to be substituted for the original at a bank or in a court of law. There have been regulatory conflicts related to this, but they are being resolved.

Ross Federgreen is a co-founder of CSRSI, which provides an integrated approach to the analysis, design, implementation, deployment and management of electronic transaction services and systems. Since 1999, the company has helped more than 350 public and private institutions reduce the cost of acquiring money and minimize the liability exposure related to payment transactions and customer data. Its products include the Credit Card Analysis System. For more information, call 866.462.7774, ext. 1; e-mail [email protected]; visit www.csrsi.com.