603 Storage, a Northwood, N.H.-based self-storage operator, and Jernigan Capital Inc., a merchant bank and advisory firm serving the same industry, intend to develop a 74,625-square-foot facility in Salem, N.H. The three-story, climate-controlled structure is proposed for 10 Hampshire Road. Construction is expected to begin during the first quarter of 2018, with completion scheduled for the fourth quarter next year, according to a press release.

Jernigan has committed $8.7 million toward the project, its first with 603 Storage. This would be the sixth location for 603 Storage.

The site is near New Hampshire Route 28, with visibility to an estimated 20,000 cars daily, the release stated. It’s also close to Interstate 95, which is the primary commuter arterial to Boston, about 20 miles away. Since Salem borders the state line between New Hampshire and Massachusetts, the storage facility would also serve Lawrence and Methuen, Mass.

In all, the submarket population is more than 100,000 people, with more than half estimated to live in multi-family housing. Jernigan estimates the self-storage square footage per capita is below the national average. The market also features a wide range of retail, including a shopping center anchored by a Lowe’s home-improvement store across the street from the site, according to the release.

603 Storage operates self-storage facilities in Barrington, Candia, Milton, Northwood and Wakefield, N.H.

Jernigan Capital is a commercial real estate finance company that provides financing to private developers, operators and owners of self-storage facilities. It offers financing for acquisition, ground-up construction, major redevelopment or refinancing. Since Jan. 1, the company has closed 27 self-storage investments totaling more than $357 million. It typically holds a 49.9 percent profit interest in its joint-venture transactions, according to company officials. The firm intends to be taxed as a real estate investment trust and is externally managed by JCap Advisors LLC.

Westchester Self-Storage, which operates 17 facilities under various brand names in New York, has opened Tarrytown Self-Storage in Tarrytown, N.Y. The three-story facility at 63 Cortlandt St. features a pair of “Big Ben-like” clocks that chime at noon as well as framed replicas of Norman Rockwell paintings on the front exterior wall, according to the source.

The site has more than 40 space configurations, with some outfitted as cedar closets with clothes-hanging racks. Additional property features include climate-controlled units, video cameras, a customer lounge, and a retail store that sells moving and packing supplies. The company also provides free item pickup and delivery as a service for renters.

Daily operation of the property will be managed by the three sons of company founder Peter Ferraro Sr., who’s also CEO of the New York State Self-Storage Association. Peter Ferraro Jr., chief financial officer (CFO) for the company, was recently among 13 people named a “Top CFO of The Year” by the “Westchester County Business Journal.” Paul Ferraro is vice president of construction and development, while Philip Ferraro is vice president of operations.

Family-owned Westchester Self Storage opened its first storage facility in Bedford Hills, N.Y., 28 years ago. The company will break ground on a second Tarrytown facility next spring. The property is on the site of the OnTrack Sport Center, south of the Tarrytown Train Station, the source reported.

Hydraulic Road Storage LLC has opened a facility in Charlottesville, Va., that will be managed by self-storage real estate investment trust Extra Space Storage Inc. and branded under its name. The three-story property at 2307 Hydraulic Road is across from The Shops at Stonefield, a mixed-use complex that offers entertainment, restaurants and retail. Offering 600 climate-controlled units and wine storage, the project represents a $7.5 million investment, according to a press release.

The facility is the first of its kind in the city, said co-owner Bill Theus. The wine-storage area features temperature- and humidity-controlled wooden lockers that are protected by a back-up generator and keypad-coded security. “We bring a new level of care to the self-storage experience, and know that in this central location, this innovative facility will be an asset to the community,” Theus said.

The facility was developed by Taylor/Theus Holdings Inc., a limited-liability company based in South Carolina. The company has recently developed several self-storage facilities in Florida, Georgia, North Carolina, South Carolina and Virginia. The assets are concentrated primarily in Florida and North Carolina and are managed by Extra Space.

Headquartered in Salt Lake City, Extra Space owns or operates 1,513 self-storage properties in 38 states; Washington, D.C.; and Puerto Rico. Its properties comprise approximately 1.03 million units and 114 million square feet of rentable space.

Compass Self Storage, a member of the Amsdell family of companies, has acquired American Storage Center in Snellville, Ga. It’s the company’s eleventh location in the Greater Atlanta market, according to a press release. The site was purchased by separate affiliates of Amsdell Group LLC and Compass Self Storage LLC and will be rebranded under the Compass name.

The property at 3464 Stone Mountain Highway comprises 58,000 net rentable square feet in climate-controlled and drive-up units. Compass plans to expand the property and remodel the rental office. It’ll also upgrade the security system with the installation of individual access control. The property offers truck rentals, and a retail center that sells moving and packing supplies.

"We are proud to expand our footprint further in Atlanta, which has proven to be a dynamic market for us. Compass Self Storage will offer our customers top-notch product and customer service to make moving and storing an easy process,” said Todd Amsdell, president.

Compass was represented in the transaction by J.L. “Chip” Mack III, a partner with real estate firm McWhirter Realty Partners LLC.

Compass continues to be aggressive in acquiring self-storage properties, completing three purchases last month, the release stated. The acquisitions included Safe & Secure Self Storage in Ft. Worth, Texas, and Franklin Park Self Storage in Sewickley, Pa.

Headquartered in Cleveland, the Amsdell Cos. draws its roots from the family-owned construction company founded in 1928. Since its inception, the company has been active in several billions of dollars of real estate ventures, with a primary focus on self-storage. It has owned and operated more than 500 storage centers under various trade names in more than 27 states. It currently owns and operates properties in Florida, Georgia, Kentucky, Michigan, Mississippi, New Jersey, Ohio, Pennsylvania, Tennessee and Texas.           

 

Phoenix-based U-Haul International Inc., which operates more than 1,300 self-storage locations across North America, is converting a former Kmart store to self-storage in Kahului, Hawaii, the company’s first facility on the island of Maui. The 107,520-square-foot building on the corner of Hana Highway and Dairy Road is currently open with a temporary showroom, offering moving and packing supplies, and truck and trailer rentals. It’ll eventually house more than 1,000 climate-controlled storage units and offer boat storage, hitch installation and propane sales, according to the source. No timeline for project completion was reported.

The Kmart, which operated for 24 years on the 7.3-acre property, closed in June. U-Haul acquired it in October from 424 Dairy Road LLC. “We are excited that we finally have a U-Haul-owned location on Maui,” said Kaleo Alau, president U-Haul Co. of Hawaii, in a press release. “The Kahului community is bursting at the seams. Residents are having a hard time finding available self-storage for their belongings.”

U-Haul has several conversion projects underway, including repurposing former Kmart locations in Indiana, Maryland, Pennsylvania and Wisconsin. The Kahului facility will employ 10 people, according to the release.

“This is a very large property and people were worried it would become an eyesore,” Alau said. “It has served as the meeting place for many community-related benefits, including the farmer’s market and car washes. We hope to continue that tradition. We want our store to be the glue that holds this community together.”

Established in 1945, U-Haul owns more than 44 million square feet of storage space. The company’s corporate sustainability initiatives, which support infill development to help local communities lower their carbon footprint, has led to dozens of conversion projects in recent years.

Content marketing is a tactic you’ll inevitably need to add to your toolkit to properly market your self-storage business. But what is it, and why should you invest your time, money or creativity?

Content marketing is all about developing unique and relevant content for your target audience, with the goal of attracting new customers. It’s rooted in knowing what people need and want from your company. Good content is important for multiple reasons:

• It helps increase organic search engine optimization (SEO).
• It directs traffic to your website.
• It heightens brand awareness.
• It increases reliable leads.

Content marketing starts with a strategy that involves creating, publishing and distributing authentic information your audience values. In addition to all the digital benefits, it engages and establishes trust with prospective customers.

It also provides a complementary solution to paid advertising. If you have the manpower and skill set, it’s an effective, affordable, scalable way to market your facility.

Finally, it increases your ability to control your website traffic and create reliable leads. Think about it: There’s longevity to creating evergreen content you own, that can continuously generate leads long after the initial publish date.

Content Types

So, what qualifies as content marketing? It can be as simple as a blog post or as in-depth as a video, infographic, checklist or slideshow. Here are some examples:

Blogs. The key to writing blogs is to provide value, so consider addressing common issues your target audience might face. Examples of effective posts for self-storage operators include those that explain how to do something, such as “how to declutter and organize your space” or “how to pack properly for a move.” Lists like “5 tips for spring cleaning” will also gain traction. Just keep in mind that your blogs should follow online-marketing best practices, including keyword research, to ensure they’re helping to improve organic SEO and drive website traffic and leads. Videos. Video has become the most popular form of content to consume. It’s engaging and will grab your audience’s attention. It also allows you to demonstrate your brand’s personality and unique value proposition. Examples include facility tours and how-tos, such as how to pack a unit safely. Another approach is to highlight is the many uses for self-storage beyond storing stuff, such band-rehearsal space or art studios, if your facility allows either of these uses.

Gated assets. These content offerings, generally hidden behind an online form, require the user to give you something, such as his name and e-mail address, before he can access or download them. The goal is to generate lead or contacts. For example, you might create a storage-tips checklist and offer it as a downloadable PDF, or a slideshow about how to prepare an RV for storage in the off season.

Distribution

Now that you’ve created great content, how do you deliver it? Distribution is the marketing part of content marketing. To effectively promote your information, you must identify the appropriate platforms so it’s delivered to the right people at the right time. Here are some channels to consider:

• Search engines: When people seek a solution, they turn to Google. When you’re creating your content, make sure it’s high-quality, relevant and works in conjunction with SEO best practices. This will ensure it ranks well on search engines and is found by your targeted audience. Creating fresh content also helps search engines understand your website is current.
• Social media: This should be an integral part of your distribution plan. Make sure your content is shareworthy to increase your reach. Organic social media also gives the ability to evaluate what type of content performs well, and what you should optimize with paid social ads.
• E-mail: This is one of the most valuable distribution channels, as it provides a direct link to the loyal audience you already have. Creating new content also gives you a reason to contact your subscribers. However, keep your targeted persona in mind and segment your list to ensure your content remains relevant.
• Syndication: Publishing your content on another reputable website helps build credibility. It also allows you to share your content with a larger audience that might not be captured in your database yet.

Symbiotic Relationship

Content marketing can and should be used in conjunction with your other digital advertising to increase exposure and generate top-of-funnel interest and leads. You can use pay-per-click or Facebook ads to promote your content to a targeted audience. You can also set up remarketing campaigns to serve up your content to someone who previously visited your site but didn’t make a reservation. Providing useful and relevant information helps develop a relationship and positions you as a reliable expert in the industry.

The goal of content marketing is to drive awareness and attract new customers to your business. It helps establish trust and keeps you top-of-mind when prospects are seeking your service. The best way to figure out what type of content resonates with your target personas is to test, evaluate and try again. When it comes to expanding your reach, try pairing your content marketing strategy with digital advertising, or enlist the help of a of a marketing company that can help you create the right mix.

Ashleigh Hinrichs is the marketing campaign manager at G5, which provides Digital Experience Management software and marketing services to the self-storage industry. The company’s offerings include responsive-design websites, search engine marketing, social media, reputation management, lead tracking and management, analytics, and client-performance management. For more information, call 800.656.8183; visit www.getg5.com.

Despite several rate hikes over the last few years from the Federal Reserve, interest rates remain near recent historical lows. Lenders are still aggressively pursuing deals, which means more loans for self-storage borrowers. Many would agree the timing is still advantageous for owners to refinance their existing debt. Prepayment penalties are an important part of your real estate loan terms, and it’s good to understand your options.

Lender and Borrower Strategy

When they originate financing, lenders plan to earn a certain profit through some combination of yield earned on interest-rate spread and points charged on the front or back end of a loan. They rely on prepayment penalties to ensure that if a loan is paid off prior to maturity, they’ll pull in the same yield they would have earned if the loan were carried to term.

It’s extremely difficult to predict changes in the yield curve. Lenders originating longer-term debt are exposed to many years of rate volatility. A longer term will often predicate a more sophisticated prepayment penalty, like yield maintenance or defeasance, to insulate against interest-rate risk. The curve is slightly more predictable over a shorter (three- to five-year) loan term, so lenders have less exposure to rate volatility. In this case, they may be comfortable with a less stringent prepayment penalty, such as a simple step-down method, or even no penalty.

From a borrower’s perspective, prepayment penalties are predictable by lender type. A great strategy is to match your hold period with your loan product. If you intend to hold an asset for a short time, you might be in the market for a bridge, credit-union or local-bank deal. Conversely, long-term holds may be best suited for a commercial mortgage-backed securities (CMBS) or insurance loans.

Penalty Types

Following is a breakdown of the types of prepayment penalties and what they entail.

Step down. This penalty is arguably the simplest prepayment structure for a commercial loan. The step-down method refers to a declining structure—for example, from a 5 percent fee to 1 percent—on a five-year loan. Effectively, the fee would be 5 percent in year one, 4 percent in year two and so on, until a 1 percent fee is imposed in year five. Further, banks may offer open prepayment during the last 90 days of the loan.

Defeasance. This method means replacing the collateral that generates the anticipated stream of debt-service payments, which is frequently achieved with some combination of government securities. The cost to defease decreases as rates increase and vice versa.

Disadvantages of defeasance are the time and complexity of securing the replacement collateral as well as the ancillary costs. Defeasance is typically the most time-intensive of all prepayment methods to execute—to the tune of 30 to 45 days. Additional costs may include legal fees, consultant fees, bond-trader fees, servicer fees and more. One distinct advantage is the absence of a prepayment floor. If rates have risen since origination, there are cases where it can be advantageous for the borrower to defease.

Yield maintenance. This prepayment structure consists of two payments: outstanding principal balance on the existing loan and a predefined prepayment fee. There are several methods to calculate the penalty associated with yield maintenance. While not quite as simple as the step-down structure, it’s certainly more straightforward than defeasance.

As with defeasance, the cost of yield maintenance decreases as rates increase. However, yield maintenance typically includes a prepayment floor that prevents this structure from becoming an asset for a borrower. The floor is typically 1 percent, which curbs the benefit that may be realized with defeasance in a rising rate environment.

Comparing Options

Yield maintenance and defeasance are typically the most time-intensive and costly structures, and commonly offered by CMBS lenders. CMBS products aren’t selected for their prepayment flexibility, but rather for their long-term, fixed-rate, nonrecourse nature. Step-down prepayment structures are typical of life-insurance products, local and regional banks and some bridge lenders. Open prepayment is popular among credit unions.

Remember, you can strategically choose a loan product based on individual goals and intended hold period. If recapturing equity and nonrecourse financing are priorities, and there are no plans to sell during the term, CMBS might make the most sense. Meanwhile, if the ability to sell during the term or even refinance early is important, a local bank loan might be a better option.

When Prepayment Makes Sense

Prepaying a loan can be costly depending on the timing of the payment and the applicable penalty. Certain situations may force a borrower into a very costly proceeding. However, there are times when the pros of prepaying outweigh the cons. In a yield-maintenance or defeasance situation, it’s a good idea to conduct some level of prepayment-penalty analysis (or hire a professional to do one for you).

I’ve found it makes sense to pay the defeasance or yield-maintenance premium in situations where there’s significant equity trapped in a property and a refinance would generate substantial cash out. Consider this real-life example:

A $5 million CMBS loan was placed on a self-storage asset five years ago, with an interest rate of 6 percent. At the time, the property had cash flow of $500,000, and physical occupancy was in the low 80 percent range. Cap rates were at 7.5 percent, rendering a value of $6.67 million. Today, occupancy has increased to 92 percent, rents are up 20 percent, cap rates have compressed to 6 percent and net operating income (NOI) has ballooned to $680,000. The defeasance cost to refinance this loan is approximately $1 million (20 percent of the original loan balance).

That seems pretty steep, right? Keep in mind, though, that when considering the terms of a new loan, the cash out accessible to the borrower, coupled with the opportunities to reinvest that cash, might make defeasance a strong strategic play.

Given the growth in NOI and compression in cap rates since origination, the property’s value is now more than $11 million, which could reasonably fetch a loan of about $8.25 million. After paying off the loan and defeasance penalty, the borrower is left with a $2.25 million cash-out. In addition, he locked into a new 10-year loan at a rate of around 4.5 percent, which is 150 basis points lower than the original rate five years earlier.

Not only is the borrower saving $75,000 per year in interest, he has fresh cash to reinvest. If he’s considering other prospective developments or value-added opportunities, it’s not unheard of to invest that cash in a project generating a double-digit return. Under this scenario, the payback period on the $1 million penalty is rather short. Further, the defeasance penalty is tax deductible, which is valuable to some investors.

While a $1 million defeasance seems unbearable at first glance, consider the flip side: If investment opportunities exist and interest rates are lower than the existing loan’s rate, it may be worth the minor headache.

Know What to Expect

If you plan to hold an asset to loan maturity—and nothing happens during the term to force an early payoff—prepayment penalties may not be a huge concern. Then again, things don’t always go as planned, and it’s valuable to understand what can happen if the unexpected does occur. Though the example above is somewhat simplified, it demonstrates how a real-world prepayment scenario can play out.

A borrower can calculate a step-down prepayment penalty relatively easily. In the case of a more complex prepayment method, such as defeasance, it may be worth the extra cost to hire a professional to conduct the analysis.

Devin Huber is a principal at The BSC Group, a Chicago-based commercial real estate financing firm, where he supports self-storage owners nationwide with their lending needs. His expertise and advisory services span all property types, with a specialization in the self-storage asset class. Prior to helping found BSC, Devin was a senior vice president at Beacon Realty Capital and a key member of the firm's Self Storage Group. To reach him, call 312.207.8232; e-mail [email protected]; visit www.thebscgroup.com.

U.K. self-storage operator Big Yellow Group PLC has acquired a 2-acre parcel within the 13-acre Segro Park Bracknell development in Bracknell, England. The land was purchased from real estate investment trust Segro PLC, which is developing a 90,000-square-foot warehouse inside the park, according to a press release. Big Yellow intends to build a self-storage facility on the property, though no details were provided.

The business park is on Ellesfield Avenue, less than a mile from the A329 highway that connects the M3 and M4 freeways. The location is “ideal for distribution companies and those who need to be close to their customers,” Segro officials said in the release.

“Segro Park Bracknell is a high profile, strategically located development opportunity for Big Yellow Self Storage. Bracknell fits very well within our existing network of trading stores and benefits from a fast-growing population and an excellent range of large-scale employers,” said Dave Potter, head of acquisitions for Big Yellow. “Once built and trading, this facility will help us continue with our rapid expansion throughout the major towns and cities in the U.K. We look forward to securing planning consent during the coming year and working alongside Segro in this highly desirable location.”

Segro’s warehouse project is expected to be complete this month. The remaining sites in the business park offer up to 185,000 square feet of industrial space, “with detailed planning granted for two units of 60,000 square feet and 31,000 square feet,” according to the release.

“We are pleased to welcome Big Yellow Self Storage to Segro Park Bracknell, as it is an excellent location and well -positioned to service the growing needs of their business,” said Paul Lewis, regional director for the Thames Valley and data centers for Segro.

Segro specializes in light-industrial and warehouse development. It owns or manages 69 million square feet of space valued at £8 billion, the release stated. Its properties are in or near major cities and key transportation hubs in the United Kingdom and nine other European countries.

Big Yellow Group operates 92 self-storage locations in the U.K. under the Big Yellow Self Storage and Armadillo Self Storage brand names, with most concentrated in Greater London. Its total portfolio comprises 5.4 million square feet.

Phoenix-based U-Haul International Inc., which operates more than 1,300 self-storage locations across North America, is converting an abandoned strip mall to self-storage in Baraboo, Wis. The facility at 625 Linn St. opened last month with a temporary showroom, offering moving and packing supplies, truck and trailer rentals, professional hitch installation, and U-Box portable-storage containers.

The 16.11-acre property was once anchored by a JCPenney store, but has been vacant for more than eight years, according to a press release. Renovations are underway to add indoor, climate-controlled units, which are expected to be available early next year. Propane sales will also be offered in the future.

"This is a beautiful community and it doesn't deserve to have empty buildings sitting around and becoming outdated," said Adam Sonnleitner, president of the U-Haul Co. of Southwestern Wisconsin and Rockford. "We're excited to make our community look more welcoming while serving the moving and storage needs of our residents here."

U-Haul has several conversion projects underway, including a JCPenney store in Spokane, Wash. U-Haul Moving & Storage of U-City opened in June with a temporary showroom.

Established in 1945, U-Haul owns more than 44 million square feet of storage space. The company’s corporate sustainability initiatives, which support infill development to help local communities lower their carbon footprint, has led to dozens of conversion projects in recent years.