By Cheli Rosa

One certainty about self-storage lien sales is auction day can be stressful. As a facility operator, you have to find a way to balance the crowd of buyers with regular business customers. You need a good team in place to manage the increased traffic. You also need to make sure everyone on the property is safe and you aren’t opening yourself to liability. You have to do all of this while trying to host a successful sale through which all of your delinquent units are cleaned out and you collect as much debt as possible.

This might sound like an impossible feat, but after conducting hundreds of live auctions, I can tell you there are five simple but essential steps you can follow to implement a successful sale at your property. Follow them, and you’ll be better prepared and more relaxed come event day.

1. Check for Scheduling Conflicts

There’s nothing worse than scheduling an auction on the same day that five other facilities near you are also conducting sales. This means you have to compete for buyers; and if you only have a few units up for sale, it’s they’ll go to a different facility.

Luckily, self-storage operators and auctioneers are creatures of habit. They like to have their auctions at the same time every month. You can follow the websites of other auctioneers in the area to see when they typically hold lien sales. If you’re competing against facilities that conduct their own sales, call and ask when they hold theirs. Once you gather your data, select a date that doesn’t conflict with other events.

2. Advertise Your Sale

A lot of storage operators don’t like to advertise auctions because it’s a very negative part of the business. However, if you don’t tell people you’re having a sale, nobody will come!

For a long time, buyers found out about upcoming auctions by looking at the legal ads in the newspaper. While it’s true many still use these ads to find sales, there are many easier ways to discover where they’re being held. For example, there are several websites such as storageauctionunitlist.com, locateauctions.com and globalauctionguide.com on which you can advertise. Buyers use these websites to find sales in their area.

You can advertise without fear of looking like you’re celebrating the auction process. For operators willing to do anything to recover as much debt as possible, social media channels and websites like Craigslist are other viable options. If you conduct your own auctions, you can also keep an e-mail list of buyers so you can alert them when an event is forthcoming.

3. Prepare for Auction Day

Anything you can do before auction day should be done in advance. For example, don’t wait until the day of the event to make the final collection call to your tenant. If he’s going to pay you, you want him to come to the facility before the sale, not during. Also put out parking signs and print any buyer forms buyers the day before.

All staff should be trained on how to best handle the event. Is one person going to take care of regular customers while another conducts the auction? Does everyone know where the delinquent units are located? It might be a good idea to print a facility map and plot the order in which units will be sold.

Finally, be ready to answer bidder questions. They’re going to ask how many units you have left. They may also ask about unit sizes. Are you going to assign bidder numbers or have a more informal process? Make sure your entire team is up to speed with this type of information and ready to answer any inquiries.

4. Come to Work Early and Be Well-Staffed

It never fails … You’ll likely have to drive in the worst traffic you’ve ever seen on the day you really need to get to work and prepare for the sale. Don’t get caught in this situation. Plan ahead to ensure you’re at the office early. If you have staff who have a problem with punctuality, schedule them to work another time. If you don’t have the appropriate number of employees in place on auction day, you won’t have a successful sale.

On the morning of the sale, do a quick check of all auction units to confirm all locks and seal tags are in place. If a unit has been tampered with, it’s best to find out before buyers arrive.

Approximately one hour before sale time, have all hands on deck. Make sure breaks and lunches are scheduled around the auction. The more staff you have in place, the smoother everything will go.

5. Prepare for the Post-Sale

Let all bidders know how much time they have to clean out their units after the sale. This information should be included in any paperwork you have them sign, and it should be announced to the group.

Once the auction concludes, there may be a lot of people in your office waiting to pay, and they’ll be in a hurry. Don’t let them overwhelm you. Take your time. Make sure you count all the money you receive and make appropriate change. Know the answers to the following questions in advance:

• Do you have a receipt template on your computer, or are you going to handwrite receipts?
• How are you going to calculate sales tax?
• Are you going to collect a cleaning deposit, and what’s your policy on returning those deposits to buyers?

It's also important to have a backup plan in the event of a power failure. You’ll need a calculator and receipt book if you’re unable to use your computer. Make sure you have enough cash and small bills to make change when buyers pay.

Auction day doesn’t have to be stressful. I know it seems impossible to prepare for everything, but you can try. If you’ve never held an auction at your facility, attend one at a nearby competitor to get a feel for how it works.

Once you implement all of the above procedures and have a few sales under your belt, the process will run much more smoothly and become a routine part of your business. If you still have concerns about hosting an auction, consider hiring an auctioneer, who can take care of most of the nerve-wracking tasks for you.

Cheli Rosa is director of marketing for StorageStuff.Bid, which provides online storage-auction services. She’s a former high school teacher turned storage professional turned auctioneer. She’s worked in all areas of self-storage. Her constant desire for additional knowledge led her to immerse herself in the lien-foreclosure process. For more information, call 877.758.4243; visit www.storagestuff.bid.

By The Mele Group of Marcus & Millichap

Self-storage facilities provide their owners with a lucrative source of income and a nice lifestyle. However, buying a business isn’t a simple process. It requires a hefty initial investment, which makes the ability to accurately value a property essential—both at the time of purchase as well as when it comes time to sell.

In general, determining the value of a storage facility is the same as for any other real estate. There are several methods used for establishing an accurate assessment. Each bases value calculations on “highest and best use,” an assumption that considers the most profitable, competitive use for the property.

When it comes to self-storage, valuations will vary depending on whether a facility is in lease-up or stabilized. The overall condition of the property is also a factor. For the purposes of this article, we’ll focus on the income-capitalization method of valuation.

Cap Rates

Real estate valuation is complex, especially since there are many elements that affect pricing. In the self-storage industry, a conversation about capitalization (cap) rates almost always arises. Cap rates are determined by the amount of risk-adjusted return an investor is willing to accept for his investment. Property location, age and size are all taken into consideration.

With treasuries at historically low rates—the 10-year note is yielding around 1.57 percent at the time of this writing—investors are clamoring to find yield-producing assets. Institutional investors have recognized the virtues of the self-storage asset class, which has driven down cap rates by 200-plus basis points in recent years. However, cap-rate compression in the self-storage sector has been decelerating, with the average cap rate on transactions currently below 6 percent. Although compression has subdued, properties continue to reward owners with stable income growth and minimal volatility during economic downturns relative to other real estate.

The Importance of NOI

Income capitalization specifically targets a business’ cash flow. With the cap rate, calculations convert annualized income into a return-on-investment (ROI) formula to establish a property’s value. The formula for calculating ROI divides net operating income (NOI)—the amount left over after expenses are subtracted from annual income—by the sale price.

Because self-storage value is based on cash flow, it’s critical to maximize revenue through rent increases and ancillary income streams, such as tenant insurance and administrative fees. Owners should also minimize concessions. While property condition is important, there’s little to no consideration put on the type of construction materials used. Whether the facility is metal or block construction, at the end of the day, value is determined by NOI.

That’s why it’s important for NOI to be calculated using industry-standard parameters for other income and operating expenses. Owners who operate their own facilities often fail to include the cost of their management company or a payroll cost for themselves in their financials. In addition, there’s often an increase in real estate taxes for the new buyer that will change the NOI. These factors should be carefully reviewed when determining value. For anyone looking to buy, a self-storage facility, one of the most important things to know is the property’s true cash flow.

Without an accurate NOI, your property valuation could be inaccurate. This is critical since unexpected expenses that arise after purchase could reduce your expected ROI.

Profit and Loss

When buying a self-storage property, you need to perform due diligence before closing. This process allows you to get a complete understanding of what you’re purchasing, including any risks or issues with property condition. The most critical part is reviewing the facility’s financial records, specifically the profit-and-loss (P&L) statements, rent rolls, real estate taxes and insurance.

When examining P&Ls, review and verify all monthly revenue and expenses and match bank deposits to reported revenue. You’ll also want to compare and examine invoices and bills to confirm reported expenses. Make sure you understand the accounting methods used and capital expenditures, such as roof repairs and HVAC replacements. Keep an eye out for any inconsistencies.

Other Value Factors

Remember, there are some major fixed costs attached to a self-storage business. You’ll need enough storage space—typically at least 40,000 square feet—to support staff and meet expenses.

For a facility to experience maximum cash flow, population density is key. A location with a local population of at least 50,000 within a three-mile radius is desirable. A small town or rural community isn’t going to support a self-storage complex. Without a robust population, there’s limited demand. It’s also critical that the market not be oversupplied.

Other important factors are strong visibility and a high-traffic roadway. If a facility is easy to locate and convenient to access, customers will come.

A self-storage facility can be a lucrative investment. Once you know your way around the market and understand the key factors that affect cash flow and value, you’ll be on the road to success.

The Mele Group is the predominant self-storage advisory team for commercial property-investment firm Marcus & Millichap. Its client base consists of individual property owners, real estate investment trusts, and private institutional-level funds and firms. In 2015, the group closed 47 self-storage transactions in 11 states for more than $280 million. For more information, call 813.387.4790; visit www.melestoragegroup.com.

By Carlos Lutteroth

There are a seemingly infinite number of articles on the Internet about digital marketing, social media marketing and all the ways small business owners can showcase their products and services online. But just because we’re living in the Digital Age doesn’t mean traditional marketing strategies are extinct. In fact, word-of-mouth marketing is the most effective form of advertising, according to “Forbes” magazine. In addition, Nielsen reports that 92 percent of consumers trust recommendations from friends and family over all other types of advertising.

As the owner of a self-storage business, you can generate legitimate buzz about your business by reaching out to prospective customers in the real world in addition to your digital-marketing strategy. Let’s take a look at seven of the best non-digital ways to market your facility.

1. Send Postcard Mailers to Previous Customers

Every small business owner will tell you it’s important to keep in touch with previous and existing customers. You can send them tips on how to optimize their stay at your storage facility, alert them about upcoming discounts and giveaways, or treat them to special coupons. It’s much easier to ignore an e-mail newsletter than a physical postcard received via traditional mail. It doesn’t cost a lot to send out hundreds or even thousands of postcards to the people who matter most—your customers.

2. Establish Relationships With Local Partners

It takes a village to grow a successful business. Your community is filled with people in storage-related industries who can help take your business to new heights. Reach out to some local real estate agents, moving companies or anyone in your neighborhood who might know of someone who needs access to additional storage space. You can return the favor by referring your customers to other moving-related businesses in the area.

3. Advertise on Your Own Real Estate

Never underestimate the power of good signage. If your self-storage facility is close to a major intersection or busy highway, you can reach thousands of new customers by using your own real estate. Invest in a few colorful, attractive signs as a way of advertising the wealth of storage options your facility offers. You’d be surprised how many people pass by your facility every day without realizing what your business is all about.

4. Host a Local Art Show

Take advertising on your own facility a huge step further. If you have vacant units, large open hallways or giant empty walls, why not put that space to good use and host a community art show? Local artists are always looking for a place to exhibit their work. You can make valuable connections and gain some free press in the process. This also creates an opportunity to draw potential tenants to your property who might otherwise never step foot on site.

5. Set Up a Referral Program

The most valuable asset you have in your advertising arsenal is the community you’ve already created. If you offer stellar customer service with a number of top-of-the-line storage options, your customers can and will reward you. Give them another reason to refer your facility to their friends, family and co-workers by setting up a referral program. You can give your existing tenants a slight discount every time they refer someone new to your business. It’s the gift that keeps on giving.

6. Participate in Industry Events

The self-storage industry is always evolving. You can become a more active member of the community by attending national and local storage events, such as conferences and tradeshows. Stop by a local real estate summit to connect with agents in your neighborhood. Learn about the latest marketing techniques at one of the many industry events hosted by your state self-storage association. Become a notable player in the industry and make valuable connections that last a lifetime.

7. Give Back to the Community

Floods, fires and other natural disasters can occur anywhere and at any time, and assisting those in need has to be the most feel-good marketing activity. Making a donation to your local food bank, a homeless shelter or another charitable organization is a great way to give your business some prominence in the community.

Providing flood victims boxes in which to pack their belongings is an easy start. Honestly, giving away free stuff is the easiest, cheapest type of promotion you can do for your business. Try it; it’s fun. Besides, this is a strategy that can give a staff member the opportunity to be involved in the decision-making process who might not otherwise act in such a role. Show your customers that you care about the local community and give back to those who need it most.

There are many ways to advertise your self-storage facility beyond the usual digital-marketing tactics. In-person events, referral programs and outdoor signage can be much more effective than a simple Facebook post. Expand your marketing reach and harness the power of non-digital advertising.

A self-storage industry veteran, Carlos Lutteroth is a writer, thinker and business professional who seeks new, creative and recycled ways to connect businesses with customers. At The East Lake Self Storage in Chula Vista, Calif., Carlos finds ways to promote the business while doing good in the community. The facility is committed to empowering youth, civic and cultural institutions through numerous sponsorships. For more information, visit www.theeastlakeselfstorage.com.

Metro Storage LLC, which operates more than 120 self-storage properties in 12 states, has purchased a former manufacturing facility in Wood Ridge, N.J., that it plans to demolish to make way for a new Metro Self Storage facility. Slated to open in late 2017, the development will be the company’s 13th in its joint venture with Fremont Realty Capital, the real estate merchant-banking arm of Fremont Group.

The 4-acre property at 765 Route 17 is near the Meadowlands Sports Complex and two airports. Once built, the facility will comprise 85,000 rentable square feet of storage space in 883 climate-controlled units. Property features will include covered loading/unloading areas, elevators, state-of-the-art security components, and a modern retail office, according to a company press release.

“We’ve had great success in the New York/New Jersey market and are looking forward to continuing our expansion with the repurposing of this property into a modern, consumer-friendly, self-storage facility,” said Matthew Nagel, chairman of Metro Storage.

“We knew this property was a good selection for development due to its excellent location on an extremely busy arterial street in an area with great demographics,” added Blair Nagel, CEO of Metro Storage. “This new facility with its state-of-the-art amenities will effectively serve the storage needs of the surrounding community.”

Headquartered in Lake Forest, Ill., Metro Storage is a privately owned, fully integrated real estate operating company specializing in the acquisition, development and management of self-storage facilities nationwide. Its facilities comprise more than 8.1 million square feet of storage space.

Fremont Realty has been an active investor in the European and U.S. self-storage sector since 1997. It originates, structures, closes and manages private-equity investments in public and individual real estate projects, programmatic real estate investment vehicles, and private real estate operating companies.

Update 12/22/16 – A 6-1 vote by city council members yesterday will allow Firehouse to move forward with its proposed development. The vote came after eight pilots voiced their concerns about the danger of allowing the property so close to the runway, and how it might affect their safety during takeoffs and landings. Councilwoman Polly Christensen cast the dissenting vote.

During the meeting, pilot Ken Bickers recounted the time his home-built plane died mid-flight in 2015 and he was forced to crash in a field west of the airport. "I hurt some corn, but I was completely unhurt," he said. "If I had taken off to the east that day and the same kind of thing happened ... the lawyer says this complies with all the rules ... but I ask you, would you have gotten in that front seat of that airplane?"

The storage facility could also jeopardize the airport’s development plans and its ability to increase jet traffic, said Dan Berry, a former member of the Airport Advisory Board. "This sounds like a completely legal, completely compliant bad idea," he said. "Every one of these operators have a flight-operator center that measures the risk of coming into an airport and leaving. That risk will go up [if you approve this] no matter what, and jets may choose, most likely, to go somewhere else with a lower risk profile."

Scott Dunn, the Burton’s legal council, reminded council members the storage owners had complied with all city laws and FAA guidelines in its site plan. “Basically, when some of these things are being referred to, they're related to safety issues," said Dunn, a former member of the city’s planning and zoning committee. "They're critiquing planning and zoning for not applying criteria that simply do not exist. Denying these property owners the right to develop their property would result in a taking of the owners' property."

Prior to the vote, several council members said they were sympathetic to the pilots’ concerns, but had to follow council procedures and city code. Christensen even sought a compromise. "Does it have to have a 34-foot building? Does it have to be adjacent to the landing zone? Can't we have a meeting where everybody compromises a little bit for the safety of all instead of turning this into a legal issue?" she asked.

Councilman Brian Bagley, a defense attorney and owner of a hangar at the airport, said he would stay in accordance with the law. "If the airport hangar owners want to get together and buy that land and keep it as open space, go for it. I'd like to see it as open space. I'd love to see a huge empty area around the airport," he said. "However, we must balance that with the rights of property ownership. They have a right to build their business light industrial [development], because that's what city council approved in the 1990s."

Following the meeting, Christopher Burton, who’s also a pilot, told the source he didn’t believe the storage building would present the danger the pilots believe it will. "If the FAA came back and said, 'lower it,' we would lower it. We want to be cooperative and we want to be good neighbors with the airport. We don't want any danger to the pilots," he said, adding he’ll take off and land from the runway near the proposed building.

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12/19/16 – Firehouse Self Storage is facing opposition to the 235,000-square-foot facility it’s attempting to build near Vance Brand Municipal Airport in Longmont, Colo. City council members will hear an appeal on Tuesday regarding the planning and zoning commission’s approval of the project on Airport Road. The plea was made by Dale VanZant, a member of the airport’s advisory board, who’s among several people against the project, according to the source.

The proposal includes several single-story buildings as well as one two-story building containing an office on the first floor and a manager’s residence on the second. Though Federal Aviation Administration (FAA) regulations prohibit buildings of higher than 31 feet, and the Firehouse building is designed at 34 feet, the FAA has said the extra height would have "no substantial adverse effect on the safe and efficient utilization of navigable airspace by aircraft,” the source reported.

Airport manager David Slayter sent a letter to the FAA in November asking it to reconsider its decision. In it, he wrote that the airport has seen an increase in jet and air-traffic pilots who use instruments rather than sight during take-off. "In a visual [or non-instrument departure], the pilot can see obstructions visually and the safety concern is not as great as for instrument departures," he wrote.

Slayter suggested the FAA might be underestimating the number of instrument departures and landings because they’re sometimes canceled. "We feel that based on what we have been experiencing with increased traffic of a certain operational type and the instrument departures [as well as arrivals], that such a penetration does classify as a hazard to air navigation," he wrote.

In his appeal, VanZant noted planes will fly over the storage site 70,000 times a year, including 40,000 takeoffs. “As shown on the proposal's plat plan, the storage units will be about 1,500 feet from the southeast end of the runway. At approach speeds for a typical flight plan, this distance is traversed in less than 15 seconds. Any problem encountered on landing will almost certainly be exacerbated by having buildings, trees and people in the potential off-airport landing that will follow."

During a Nov. 16 planning and zoning meeting, commissioner Michael Polan asked the developer if the two-story building could be moved to a different location on the parcel. The structure will be near the facility’s entrance, which was required to be off Rogers Road rather than Airport Road, city planner Ava Pecherzewski told the board.

The site will also require three feet of fill due to drainage issues, which will cause its height to increase, said Barbara Brunk, the project’s representative and manager of Resource Conservation Partners LLC. Brunk told the board in November it was too late in the process to change direction. "Could we redesign the whole site to make it work? Absolutely. But somebody asked us to go to the FAA and ask if it was OK, and they said it was. So, we're pretty far down the road on a site design to start again.”

Howard Morgan, president of the airport's Hangar Owners Association, also wrote a letter to the commission asking it to reconsider its decision. "To build something like this right off the end of a runway is stupid,” the letter stated. “A building at this location would leave pilots having a problem making it to the runway [with] zero options. If an airplane has a problem, not only would the crew and passengers be in jeopardy, but anyone in the facility would also be in jeopardy."

In a letter to the city, Lisa Doughty, the wife of a pilot, called the proposed building dangerous and likened it to “putting a building right at the edge of a highway.”

"The proposed location of this facility in the 'bail-out' zone of Vance Brand Airport poses an unnecessary safety risk to pilots, passengers and people on the ground," Doughty wrote. "I'm very afraid that this development will kill my husband or someone like him."

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5/20/16 – Self-storage owners Barbi and Christopher Burton are building their second Firehouse Self Storage facility in Colorado. The new development, situated on a 42-acre parcel at the intersection of Airport Drive and Rogers Road in Longmont, Colo., will resemble a 1900s firehouse and carry the theme throughout. It’ll be nearly double the size of the couple’s existing facility in Loveland, Colo., which sits on 24 acres and offers 1,500 units, according to self-storage industry blog “The SpareFoot Storage Beat.”

The Burtons decided on the firehouse theme several years ago after learning the Larimer County Search and Rescue (LCSAR) team was in need of cash. Barbi Burton suggested rebranding their existing facility as well as donating money each month to LCSAR, a nonprofit search and rescue resource for Larimer County, Colo. The Burtons continue to offer a percentage of revenue from every storage rental to the organization.

To establish the theme, the couple purchased several old fire trucks as well as other firehouse-themed memorabilia. The Loveland site includes a fire-truck coffee bar and a waiting area with chairs made from fire hydrants. “The whole thing is an experience,” Barbi Burton said.

In addition to supporting LCSAR, the Burtons have donated free storage during natural disasters, including a September 2013 flood in Colorado. Firefighters, police and military personnel all receive rental discounts, and the business offers an “emergency price guarantee,” claiming it will beat any comparable competitor’s price by 5 percent. The company also hosts various community events throughout the year and participates in local charity drives.

S-5!, a supplier of roof accessories for self-storage and other industries, has hired Frank Hogan in the newly created position of business development director. Hogan will focus on deepening relationships with the company’s original equipment-manufacturer market to maintain market share and capture additional sales opportunities, according to a press release.

Hogan previously served as a national sales representative and field support manager for S-5! in Canada and the United States from 2007 to 2012. He’s also held a variety of sales and management positions with several metal-roofing manufacturers.

Based in Colorado Springs, Colo., S-5! manufactures several snow-retention systems, including ColorGard, DualGuard, SnoFence, SnoRail, VersaGard, X-Gard 1.0 and X-Gard 2.0. The patented clamps can mount banners and signs, light fixtures, snow-retention and wind-performance systems, solar arrays, stack/flue bracing, and more.

 

Despite tighter requirements on exterior building materials, self-storage development is on the rise in Plano, Texas, with six facilities recently opened or under construction. Projects include three by developer Ron Valk for self-storage real estate investment trust CubeSmart and one by Advantage Storage, which will be its third in the city, according to the source.

Though the city updated its exterior-material requirements in June for all commercial buildings, including self-storage, the city has also had an increase in residents moving to the area. This, coupled with seniors downsizing their residences and increased commercial needs by the city, has helped spur new self-storage projects in the area, the source reported. Still, Plano allows self-storage only through specific-use permits or as part of a planned development district, said planning director Christina Day.

Plano emerged from the Great Recession with an underserved market for self-storage, according to Eric Kaplan, senior vice president of business development for Advantage. “As soon as money loosened up, the storage business survived,” he told the source. “Money started flowing in big time. Demand was very high because for years there had been no development.”

Valk has been a self-storage developer and owner since 1975, primarily with Platinum Storage. He has said he is actively looking to acquire and develop storage facilities in the Texas market.

CubeSmart owns or manages 762 self-storage facilities across the United States. Its operating portfolio comprises 50.6 million square feet.

Based in McKinney, Texas, Advantage Storage owns 29 self-storage facilities in Arizona and Texas. It’s total portfolio of owned and managed properties comprises more than 2.3 million square feet.

American Structurepoint Inc., an Indianapolis-based architectural and engineering firm that intends to build a seven-building self-storage facility in Westfield, Ind., may be in for a battle with the city council. The company aims to develop 5 acres at the southwest corner of Indiana State Road 32 and Oak Ridge Road. However, council members expressed concerns about the development’s design and location during a Dec. 12 meeting.

Though the council didn’t take a vote, several members said the proposal doesn’t meet the standards set forth by the 32 Overlay Zone, which has stringent development and architectural standards for the underlying general business district, the source reported. Among its standards is a provision that reads, “Modulation of the roofs and/or roof lines shall be required in order to eliminate the appearance of box-shaped buildings.” One of American Structurepoint’s buildings would be three stories high.

“One of my first concerns with this project is I don’t think this was what we envisioned for the 32 corridor in terms of use,” councilmember Cindy Spoljaric said during the meeting. “We are looking for employment-generating uses.”

“If this were to move forward, I think architecturally there would have to be some significant improvements on the exterior buildings, even those on the sides,” agreed councilmember Steve Hoover. “The interior where you can’t see them, that’s one thing; but the east and west elevations will be visible from [Ind. 32]. Like Cindy, I would question if this is even the use we want on 32.”

Some council members indicated they’d prefer the proposal not be heard during an advisory plan commission meeting on Jan. 4, but American Structurepoint remains on the presentation schedule, according to the source.

“We spent a lot of time on the 32 Overlay, and it’s very important to maintain the integrity of this plan,” councilmember Jim Ake said. “I don’t see this fitting in.”

Founded in 1966, American Structurepoint offers architectural, economic-development, engineering, planning and other services. It has eight offices throughout Indiana as well as locations in Florida, Illinois, North Carolina, Ohio, Tennessee and Texas.