Keylock Storage, a self-storage operator with several facilities in the Pacific Northwest, recently purchased its second location in Coeur dAlene, Idaho. Located off Highway 96 on Fruitland Lane, the facility features a 24-hour, digital-recording surveillance system, drive-up access, boat and RV storage, online bill pay, free use of a moving truck and 24-hour access.

In addition to Coeur dAlene, the facility serves the communities of Dalton Gardens, Hayden, Liberty Lake and Post Falls. We are thrilled to be expanding into new areas of Idaho and the Northwest, said Ron Osborne, owner and founder of Keylock. The Coeur dAlene area is one that offers many outdoor activities year-round. Keylock is proud to offer an outstanding self-storage experience in the area.

New customers at the facility will not be required to make a security deposit and will receive a lock for their unit, company officials said in a press release.

The newest acquisition is the companys ninth self-storage facility. Keylock Storage facilities are owned and operated by Keylock Storage Holdings, which is a wholly owned subsidiary of Bitterroot Holdings. The company opened its first facility in 2003 and has self-storage properties in Idaho, Oregon and Washington.

Self-storage real estate investment trust (REIT) Extra Space Storage Inc. appointed Diane Olmstead to the companys board of directors, effective Jan. 1. Olmstead is the co-CEO of W3 Partners, a real estate management company, which she co-founded in 2009 with Susan Sagy. Olmstead oversees W3's acquisitions, financing activities, fundraising and client relations. She has 32 years of direct experience in investing, corporate finance and raising capital. During that time, she originated and closed more than $2 billion in loans, property acquisitions and joint ventures, and has executed the workout and restructuring of $1.3 billion in real estate assets.

Prior to founding W3, Olmstead was a principal at real estate investment firm CIM Group from 2005 to 2009. She opened the companys San Francisco office where she headed acquisitions and development in northern California and the Pacific Northwest, and was a voting member of the companys investment committee. From 2000 to 2005, Olmstead was an executive vice president of iStar, responsible for all activities in the companys western region, including origination of structured finance transactions and acquisition of triple-net lease assets. From 1983 to 2000, Olmstead worked in positions of asset management, lending, acquisitions and equity-raising with Arthur Andersen LLP, USF&G Corp., Cigna Corp. and Aetna Inc.

Olmstead received an MBA from Pepperdine University. She serves on the board of Mercy Housing Inc. and Synedgen Inc., and is a member of the Urban Land Institute and the Policy Advisory Board of the Fisher Center for Real Estate and Urban Development.

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

Trico Investments, a real estate investment company specializing in self-storage properties, has acquired a two-story facility in Homestead, Fla. The facility at 701 S. Homestead Blvd. features about 500 units and was built in 1986 on 3 acres. It was purchased in cash from Homestead US 1 Self Storage LLC.

Trico plans to reposition the asset, company officials said in a press release. Based in Irvine, Calif., the firm has developed and acquired approximately 100 self-storage facilities by targeting infill properties within populated areas that have high barriers to entry.

The company will continue to target self-storage assets in California, Florida and Texas for acquisition and repositioning in 2014, officials said.

By Aaron Swerdlin

Due to current circumstances surrounding the capital markets, there are tens of millions of dollars of equity looking for a home in the self-storage space. A joint venture can be a great way to leverage equity, benefitting both the equity and operating partners.

Commercial real estate transaction volume is very healthy, and transactions in core markets are at very high levels against the five-year average. Almost five years of sustained low interest rates has a lot to do with the obvious conviction behind the steady volume. The current market is also benefiting from a plethora of capital on the equity side.

The low interest-rate environment permeates the investment world. A general lack of meaningful yield available in lower-risk vehicles forces all investors to get creative and expand their universe. No-risk investors, if there is such a thing, generally focus on a portfolio of Treasury bonds. But with near-zero percent yield on short-duration bonds and going out as far as 30 years for a less than 4 percent yield, the lowest-risk, fixed-income investors have broadened their field of vision. Every time an investor class broadens its risk tolerance, supply-an-demand fundamentals compress yield across the spectrum, and those seeking higher yield are displaced to a higher point on the risk curve.

This is one of the principal drivers behind the Federal Reserves bond-buying program. By strategically buying around $85 billion of bonds every month, it's able to strategically displace yields. Theoretically, what the Fed chooses to buy each month is at a higher price (lower yield) than what the next guy in line is willing to pay, so he has to go elsewhere for that yield. Not only does that compress the yield on the bonds the Fed purchases, it sends that next guy to a different duration bond or maybe even a different asset class.

This is why the Feds decision regarding when and by how much to taper its bond-buying program is so critical to pricing. By beginning to remove the artificial compression, the interest-rate market will slowly settle into a supply-and-demand pricing model thats conditioned solely on its own merit.

As the Fed tapers its monthly bond buying to zero, the pricing across all assets classes and the full spectrum of risk will become more fluid and arguably more predictable. Certainly, some of the taper is priced into the market. But the speed with which the Fed reaches zero will have everything to do with how large swings in pricing toggle and the volatility with which those swings occur.

Joint-Venture Leverage

Bringing all this back to commercial real estate, and specifically self-storage, the volume of equity looking for yield has an all-time high amount desirous of landing in the self-storage space. Undeniably, self-storage transaction volume is at very elevated levels relative to historical averages. The most active buyers by volume have been the real estate investment trusts (REITs). But the most active by number of transactions have been the privately held companies.

Driven by those seeking yield, the performance of the self-storage public equity market has been remarkable. It has reinforced that the industry is a valid asset class among investment real estate; that operationally its extremely resilient against a recessionary environment; and comparative operations against other product types gives the nod to self-storage every time.

This has enabled the REITs to finance much of the sectors transaction volume through equity placements, debt placements and preferred and perpetual preferred equity offerings. With ample demand for equity, they will be able to continue to finance their activities from a wide swath of resources. In some cases, theyve joint ventured with private equity firms to acquire portfolios.

In this structure, the REITs bring some of the equity to the transaction, with the joint-venture partner bringing the balance. Structures vary widely, as do the motivations. Generally, it enables REITs to leverage their equity into a greater volume of transactions and dilute risk. They also bring their brand and operating platform to the entire transaction, which gives them more scale and spreads general and administrative costs across a wider portfolio.

Partnership Benefits

Joint ventures dont only benefit the REITs. In fact, local, regional and even national privately held companies have more opportunities than ever to enter joint ventures. There are tens of millions of dollars of equity looking for a home in the self-storage space. A lot of equity firms representing this money are not yet invested in the product type, so they tend to be very open minded with regard to opportunities.

Joint ventures are a great way to leverage equity. Just like the public companies, the operating partner benefits from branding, operational-expense scale and market share as if it owned the entire property; and it accomplishes this with less than 100 percent of the equity.

Because transaction opportunities tend to be limited, with volume not coming anywhere close to matching demand, most joint-venture equity partners look to place as much as 95 percent of the equity in acquisitions and as much as 85 percent in development deals. In core urban markets, whether its an acquisition or a development, some look to provide as much as 97 percent of the equity.

Of course, there are issues regarding control, decision-making, property management and other issues that some privately held companies want to avoid. But generally, when interests are properly aligned, joint ventures enable operators constrained by limited equity to grow at speeds much faster than they can grow organically. As the joint-venture equity partner gains comfort and confidence in its operating partner, broadening the geographic focus of a partnership can further widen the scope of opportunity.

The Long-Term Outlook

As the investment world continues to navigate this low-yield environment and the supply-and-demand fundamentals get closer to functioning without a Fed bond-buying program, the risk-to-return expectations for all the capital in the system will adjust. Allocations away from perceived riskier assets will shift back to perceived safer assets, which could impact commercial real estate at some level. However, as long as the adjustment is measured and not instantaneous, its likely accompanied by stronger inflation, which will benefit asset classes like real estate.

Self-storage is poised to continue to outperform, as its not bound by rental rates tied to long-term lease obligations. Only hotels can put on inflation to its bottom line faster, as it prices its product daily rather than monthly. A very comfortable, long-term outlook and strong expectation for the self-storage industry is excess capital will continue to provide multiple structures that promote growth and flexibility to pursue opportunities.

Aaron A. Swerdlin is an executive managing director in the Houston office of NGKF Capital Markets, a group within commercial real estate advisory firm Newmark Grubb Knight Frank. Best known for his self-storage property expertise, Mr. Swerdlin has 20 years of experience in capital markets and serves as NGKFs national practice leader for the self-storage sector. To date, hes led in excess of $4.3 billion in self-storage transactions and more than $4.8 billion in overall transaction volume. To reach him, call 713.599.5122; e-mail [email protected] ; visit www.ngkf.com/storage .

The cremated remains of a woman who died more than a century ago were recently discovered inside a defaulted self-storage unit at Derrels Mini Storage in Modesto, Calif. The womans ashes were turned into the Stanislaus County coroners office by the facilitys owners, along with two other abandoned urns.

The woman was Rose Lyons, who died in San Francisco about a week after a massive earthquake struck the city in 1906. Official records indicate she died from a stroke. Lyons was born in 1836 and lived in the Bay Area and Los Angeles during her lifetime, but it is unknown how her remains wound up in a storage unit in Modesto, about 90 miles east of San Francisco.

The other urns contained the remains of a man who died in 1993 and an animal from a pet cemetery, according to the source. All three cases were assigned to deputy coroners, with Lyons being the most mysterious.

Deputy Coroner Tom Killian said the coroners office receives about 10 abandoned urns a year, but he has never had to search for family members of someone who has been deceased for more than 100 years.

Killian used a genealogy website to learn Lyons remains had been given to her granddaughter Pearl Partridge, who lived in Oakland at the time, but what happened to the urn after that is a mystery. Using the names of other relatives found on the website, the deputy coroner found a distant relative living in Illinois named Janice Levitan.

Although Levitan indicated she was willing to receive Lyons ashes and provide her a proper burial, she and Killian are hopeful they will be able to track down closer relatives. Anyone with knowledge about Lyons or her family can call the coroners office at 209.567.4500.

Update 12/30/13 Real estate developer C&D Assets LLC celebrated the grand opening of Martinsburg Storage and Martinsburg Executive Center in Martinsburg, W.Va., earlier this month. The self-storage and office development project converted a former Potomac Construction Industries property and required the addition of a self-storage definition added to the citys zoning regulations. About 20,000 square feet of the property was redeveloped for storage, according to owners Dan and Mary Dulyea.

The Dulyeas purchased the 2.5-acre tract at 411 and 417 Auburn St. in February for $200,000 during a bankruptcy sale. The property had been vacant since 2011.

The grand-opening event included participation from city officials who have been supportive of the project off of West Race and Baltimore streets. This is an excellent showcase of a redevelopment project, said City Manager Mark Baldwin. This is what Martinsburg needs. We need individuals that are successful in the business world to take buildings over like this because there are uses for these buildings.

The self-storage facility offers indoor, climate-controlled spaces suitable for RVs, campers and antique automobiles, the Dulyeas said. Other areas of the property may be developed to provide outdoor vehicle storage and additional storage units. A 5,000-square-foot executive business center was designed to accommodate more than a dozen small business startups and includes a reception area, conference room, kitchen and virtual office space, Mary Dulyea said.

C&D Assets owns a second self-storage facility in Martinsburg called Wheatland Mini Storage.

By Rob Kaminski

In the self-storage industry, there are a number of myths about buying and selling cardboard boxes, the type customers use for packing and moving and facility operators offer as retail product. Maybe its because so many operators focus only on their core business. Or perhaps its because some myths about the process are so widely accepted. Whatever the reason, it's worthwhile to explore and maybe debunk some of the more harmful misconceptions.

Buying Myth No. 1: All Boxes Are the Same

It's true renters will use liquor cartons, banana boxes and other makeshift containers to pack their belongings. Thats their choice. But if you sell them boxes and they crumple, topple or simply fall apart, their quality reflects badly on your self-storage business, especially when your name is on the box.

Some peddlers will show up with bargain boxes. They may be a factory closeouts or oddly sized. Ornow this is trickythey may be green boxes that are made mostly of recycled, corrugated material. While we all want to recycle, material that is more than 20-percent recycled weakens dangerously if it's corrugated. One tipoff is these boxes tend to have a lighter, almost yellow color.

The boxes you buy should all display a manufacturers certification stamp on the bottom. Aside from identifying the maker, it should show an edge-crush-test figure of 32 pounds per square inch or better. Now, there have been some who fraudulently display the stamp. Your best defense is to deal only with well-established suppliers. They wouldnt risk losing your business for a one-time sale. Once you know not all boxes are the same, youll be more likely to question why these peddlers can sell their boxes so cheap, right?

Buying Myth No. 2: You Have to Buy a Lot to Save a Lot

How many times have you seen stacks upon stacks of boxes on display at a self-storage site? And you can bet there are more in the back. The facility probably has enough tape and bubblewrap to last a year, too. The manager probably thinks he saved a bundle. But did he? Consider the capital hes tied up in all that inventory.

Retail professionals are smart enough to use their suppliers warehouse as their own. They try to keep inventory as low as possible. They rely on trusted suppliers who can deliver orders in a few days. Such suppliers offer free shipping, which is a big savings, on reasonable minimums and inventory-control systems such as reorder tags for displays and ordering histories to help determine product movement. Moreover, reordering boxes regularly makes it a snap to order smaller quantities of other retail needs on the same order.

Buying Myth No. 3: Corrugated Prices Rise Without Warning

This is another myth some box merchants use to oversell their customers. While its true the corrugated-cardboard market fluctuates due to domestic and overseas demand, established suppliers can usually anticipate those price moves. Partnering with a respected supplier is how you can anticipate them as well.

A reputable supplier will notify regular customers before prices jump so they can calculate how much additional stock the customer might wantor not. A supplier who wants to keep your business will never pressure you to overbuy.

Selling Myth No. 1: Customers Are Very Price-Conscious

Some self-storage pros still believe their prices have to match that of Walmart or The Home Depot. The fact is the average consumer is only aware of how frequently bought products are typically priced. Thats why supermarkets have to work on such low margins.

Sure, major retailers may sell cheaper boxes, but you offer something they cant: convenience and packing expertise. Buying from you saves renters time. You can advise them on what they'll need and how much to meet their needs. Have doubts about the value of convenience? Consider this: Convenience stores sell many of the same products as Walmart, yet they still do very well. Why? Because convenience has value.

So dont feel you have to buy cheap boxes to sell cheaply. You set your rental rates on what the market will bear, dont you? Do the same with boxes. Youll be surprised how much profit youve been leaving on the table.

Selling Myth No. 2: Anyone Can Sell Boxes

Correction: Anyone can ring up box sales. Selling boxes is another matter. Selling means engaging the customer and making helpful suggestions. Most people have little idea what theyll need to pack their belongings. A well-trained staff is one that can suggest a proper mix of box sizes, tape, bubblewrap and more. Proactive selling, youll find, will not only increase your average sale, it will improve customer relations.

To really sell boxes, provide training literature to each staff member. If you dont have training materials of your own, your supplier should be able and happy to supply them for free. After all, if you sell more, they sell more.

Selling Myth No. 3: Mass Displays Sell Boxes

Youve seen themstacks upon towering stacks of flat boxes filling the floor at self-storage offices. The rationale is it helps sell bundles. But does it really? Where does that leave businesses that lack the square footage to devote to such displays? If a facility has the excess space to serve as display floor and warehouse, fine. But here are some other approaches that might do well, too.

Make a pyramid of assembled large, medium and small box samples. On each box, tape a simple sign explaining the purpose each serves and its price: "Small box for books, dishes and other heavy items: $ X. You can even add 10 percent off bundles of 20. This will guide your customers to buy what they need and promote bundle sales without the mass displays.

Demonstrate product usage to educate your customers and staff. Want to sell dish kits? Load a small box with a divider/bubble kit filled with dollar-store glasses or dishes. Cut a diagonal window slot so customers can see inside the packed box. To sell wardrobes, display one with garage-sale clothes hanging inside. Wrap the drawers of a used cabinet shut with shrink wrap and customers will see its usefulness.

Finally, display signs listing the mix of box sizes and tape it might take to pack a bedroom, a kitchen, a bathroom and more. For more demonstration ideas that help your displays do the cross-selling and upselling for you, talk to your retail-products supplier.

Dont buy into the misconceptions about buying and selling boxes. Keep your inventory low, sell quality boxes and educate your customers. If you follow these guidelines, youll be sure to increase your facilitys box sales.

Rob Kaminski is vice president of Supply Side USA, a national distributor of packaging, moving and storage supplies for more than 50 years. He has helped self-storage owners improve their retail sales for more than 25 years. He has written numerous articles on the topic and speaks at industry tradeshows. For more information, call 800.305.6110; e-mail [email protected]; visit www.supplysideusa.com .

By Beth Mattson-Teig

Reprinted with permission from "The Storage Facilitator" blog.

The U.S. oil industry is producing new hot spots for growth that are sparking the interest of self-storage investors. In Texas, North Dakota, New Mexico and certain parts of Ohioreally anywhere there is an oil boomwe have seen incredible demand for self-storage products, which has led to increased net operating incomes and increased values for properties, said Ben Vestal, president of the Argus Self Storage Sales Network in Aurora, Colo.

An oil boom often produces a ripple effect of positive economic growth across a region. The surge of workers pouring into an area to service the oil industry typically creates a need for more infrastructure and services, ranging from housing and grocery stores to restaurants and hotels. That growth is driving development in some markets where, frankly, there hasnt been any new self-storage construction in years, Vestal said.

North Dakotas oil boom is putting the state on the map for potential investors. Closing in on 1 million barrels a day, North Dakota now ranks second only to Texas in oil production. We think there are significant opportunities there, said Peter Elzi, a principal at land planning firm THK Associates Inc. in Aurora, Colo.

THK has conducted self-storage market analysis for clients whove been eying potential investments near the Bakken shale in western North Dakotaspecifically in the cities of Dickinson, Minot and Williston.

Existing self-storage units in those three cities are pretty much 100 percent occupied, with a number of facilities reporting theyve got waiting lists, according to Elzi. In addition, most of the existing facilities are quite old, with gravel and dirt parking lots and few amenities. Furthermore, few units in the area are climate-controlled, which Elzi said is mind-boggling, as the region experiences temperature extremes in the summer and winter. All of those markets are in great need for new, modern facilities, he added.

North Dakotas rental rates arent high by national standards, largely because of the age of the facilities. In Minot and Dickinson, average monthly rents are 50 to 60 cents per foot. The Williston area is commanding slighter higher rents, as thats where much of the significant growth related to the Bakken shale has happened. Self-storage facilities in that area are seeing monthly rents average about 75 cents per foot, according to THK, with some newer facilities commanding rents up to $1.30 per foot.

Long-Term Outlook

A key question for investors is whether this oil-fueled growth is sustainable. Oil markets are notorious for their boom-and-bust cycles. Historically, oil booms have lasted five to 10 years. In the Bakken, we firmly believe this is not a five- or six-year cycle, Elzi said.

Based on current technology, companies are drilling at a rate of 2,500 wells a year, with the total amount of accessible oil reserves estimated at 50,000 to 80,000 wells. That puts the drilling timetable for that oil at 20 to 30 years.

Texas has long been a leader in the oil industry, and the heart of the current growth is the Midland-Odessa area of West Texas. The region has been recognized as one of the fastest-growing metro areas in the United States. It was that growth that prompted real estate real estate investment trust (REIT) W.P. Carey Inc. to buy four properties in Midland-Odessa a year ago. The four properties comprise 2,541 units and span 361,940 net rentable square feet.

Despite the Midland-Odessa areas growth, W.P. Carey did a significant amount of due diligence before committing to the deal. The company was wary of investing in an oil-driven economy.

If you are a long-term holder, like we are, you want to make sure there is sustainability there, and its not just a five-year boom and then you have problems on the downside, said Ann Coolidge Taylor, managing director in the Dallas office of W.P. Carey. The REIT holds ownership stakes in about 170 self-storage facilities in the U.S.

One factor that helped put W.P. Carey at ease with the West Texas acquisition is new hydraulic fracturing, or fracking, technology. Some data suggests fracking makes it economically feasible to drill even if the price of oil were to drop by up to 30 percent, Taylor noted. In addition, the area is also seeing new industries popping up alongside the oil. For example, Seattle-based Summit Power Group LLC is building a $2.5 billion clean-coal facility near Odessa. W.P. Careys Midland-Odessa properties, which operate under the CubeSmart brand, are experiencing average occupancy rates of more than 90 percent.

Barriers to Entry

While the growth opportunities are attractive and potentially lucrative, getting a foothold in oil-rich markets is not easy. The biggest barrier to entry is finding capital, Elzi said.

Fearing the bust part of the boom-and-bust cycle, banks are wary of lending money in oil-boom regions. And then there are development challenges. In North Dakotas Dickinson-Minot-Williston area, land prices have spiked thanks to increased commercial development, and obtaining industrial zoning for land near residential areas can be difficult.

The remote areas of North Dakota can be a tough sell for some national investors. I dont think the national players will be going to a Williston, North Dakota, anytime soon, simply because the scale of operation up there for self-storage is better suited to the local and regional operators, Vestal said. However, North Dakota is seeing more out-of-state interest from regional investors. Argus recently brokered the sale of a property in Williston to an investment group from Aspen, Colo.

Yet another barrier to new construction in oil markets such as West Texas is a shortage of resources, such as construction workers and equipment. Self-storage tends to fall fairly low on the priority list for infrastructure projects in oil-boom areas. At the time W.P. Carey was considering its Midland-Odessa acquisition, seven hotel projects were under way in the region.

When some of the infrastructure has been built out and there are extra resources for self-storage, then there will be the demand to accommodate the extra supply, because it is an area of high growth, Taylor said.

Beth Mattson-Teig is a contributing author to a variety of national business and trade magazines, including National Real Estate Investor, "Shopping Centers Today, Franchise Times, Independent Banke, and Commercial Investment Real Estate among others. The Storage Facilitator is a self-storage blog  managed by SpareFoot  and hosted by partners SelfStorage.com .

Realty Mogul, an online marketplace that allows accredited investors to pool money online and buy shares of pre-vetted investment properties, has announced the first-ever crowdfunded self-storage facility. Through a private placement traditionally offered only to larger institutional investors, the platform helped raise $1 million to convert an existing self-storage property in Fayetteville, N.C., to a StoreSmart-branded facility, which will have a new management team.

The infusion of capital to the newly acquired 168,540-square-foot, 24-building storage facility will smooth the transition to a new operating center for StoreSmart, which operates 20 facilities in six states, according to the Inside Self-Storage 2013 Top-Operators List.

"The fundamentals of both the property and its market area are solid," said Jilliene Helman, CEO and co-founder of Realty Mogul. The facility is in a strong market but had below-market occupancy due to some much-needed renovation as well as some leasing and management issues that Helman believes StoreSmart can correct. "We believe that the strategic renovation and rebranding program proposed by StoreSmart can bring the facility up to standards consistent with a class-A self-storage facility and get the occupancy rate back to market levels," she said.

The Realty Mogul marketplace allows investors to become equity holders in real estate opportunities that were historically difficult to access. Through the use of the Web platform, investors can browse and screen real estate investments, view investment details and sign legal documents online.

"We're very pleased to be the first real estate crowdfunding company to get a self-storage facility under our belt, and delighted that we had such a robust reaction from our investors," said Helman. "Our team had been actively searching the market for just such an opportunity, and this new self-storage transaction now joins the many multi-family apartment buildings and retail shopping centers that we've already handled nationwide." 

Realty Mogul will continue to move into other real estate sectors, according to Helman. "Commercial real estate is comprised of several major asset classes, and we intend to be a player in most if not all of them," she said.

Realty Mogul gives investors tools to browse investments, conduct due diligence, invest online and have 24/7 access to an investor dashboard that allows them to see how their investments are performing.