Writer Kara Jill Stancell-Salazar (right) poses outside San Tan Self Storage in Chandler, Ariz., with her parents--the facility's managers-- Jack and Carolyn Stancell. The Stancells became managers last August, and have been setting a model example for customer service ever since.

When you are offering clean, new, high-tech storage units at a competitive price, just like the storage units at another facility a few miles away, how do you convince a potential customer to choose you over a competitor? Simply, you must offer the customer superior service. But what is that? Can you define service?

"Service with a smile" is the cliché we've all learned and put into practice. Researchers have spent millions of dollars researching how to enhance those smiles in order to bring our competitor's clients to us. But isn't service more than a simple smile?

Generically speaking, service is the way in which you deliver to the customer what he wants. For example, how do you treat the tired, dusty, sweaty person who arrives at your office driving a loaded moving truck an hour before closing time? He needs to rent a unit size that you don't have available. How do you inform him of this? Are you honest with him? Do you offer him options? Are you flexible for him?

While you may not have the air-conditioned, 10-by-10-foot unit he needs, you can have the service he needs but may not even expect. Show that you care. For example, are his physical needs apparent? Often, something as simple as offering a canned soda and a cookie can demonstrate an awareness that equates to service and a new customer. Focus on him and his individual needs at that particular moment.

Above all, be sincere. Don't offer your potential client a soda merely because you want a profit and stand to gain. Offer it because he is thirsty. He'll appreciate it and show his appreciation by signing your contract.

Following are two scenarios that illustrate service much better than words. In both instances, service was an action that demonstrated that someone cared.

Scenario One: Closing Time

When he arrived at the self-storage facility with his moving truck, it was one of those 113-degree Phoenix afternoons. And it was only half an hour before the gates were scheduled to close. He knew he would be charged additional fees if he stayed past closing time. He fumbled as he punched in his access code, spilling his already warm cola on the floor of the truck. The orange and white arm raised, and he made his way to his unit.

Just as he stepped from the truck cab, the self-storage manager drove up in his cart with a dolly strapped beside him and canned drinks in his lap. "It's awfully hot out here this afternoon. You like diet OK?" He handed him an ice-cold soda. He then dismounted his own dolly and proceeded to help unload the truck in record time. No extra charges were incurred. No heatstroke. No, "You'd better hurry--we close in half an hour. You'll be charged a fee in you're not out of here."

Yes, those were the rules, but beyond the rules was a message: "I'm here to serve you." Service was rendered, not with a mere smile, but with a cool drink and some hard work. While this story will be told to friends and possibly neighbors, and may become a valuable networking tool, this wasn't the reason the manager offered his help. The man needed help, and that was the value of service.

Scenario Two: A Near Miss

The wake-up-call service failed to call and wake him. His flight was to leave in a hour-and-a-half for Asia. He only had a half-hour to get his car to his storage unit and get to the airport in time for check-in. Fortunately, he was already packed and had arranged for the shuttle to meet him at the self-storage facility.

He raced along to the facility--no time for eating, showering or shaving. He wore a crumpled, white T-shirt, shorts and tennis shoes with no socks. He looked and smelled horrible--not quite the image he was accustomed to projecting.

Upon arrival at the self-storage facility, he couldn't recall his access code and ran into the office. The managers, a husband-and-wife team, listened to his frantic story. She offered him use of their shower. He looked at his watch. The airport shuttle wasn't due for 10 minutes. He accepted the offer, as well as the razor, aftershave, new toothbrush, clean shirt and socks that had all been placed on the basin.

He now had four minutes left. The husband helped him get his car into the storage unit. Just as they put the lock on the door, the shuttle arrived. The woman walked outside and handed him a sandwich bag full of cookies and a thermos of fresh coffee. "I'll think about you every day," the man said with gratitude as he accepted the care package. "You saved me." He shook hands with the husband, smiled and waved as the shuttle left for the airport. They smiled and waved back. It was service with more than just a smile. The man obviously needed help, and he received it. That was service.

These scenarios define effective service without a written definition. Service is offering help when a person needs it. Service is a cookie, shower, toothbrush. It's honest, hard work. It's an act of kindness, not just that smile you've perfected over the years to win clients. While that smile often works and is fine with some customers, real service is offering of yourself.

Kara Jill Stancell-Salazar served as a legal research analyst prior to her current editorial position at a newswire service. The husband-and-wife team she describes in the scenarios are her parents, Jack and Carolyn Stancell. Newcomers to the self-storage industry, they offer their customers at San Tan Self Storage in Chandler, Ariz., service that is unselfish, honest and helpful.

Thousands of self-storage managers and owners routinely miss the opportunity to attend industry seminars due to travel costs and staffing logistics. But two industry veterans have finally devised a solution. The Self Storage Education Network (SSEN), to be launched this month, offers affordable Internet education on numerous topics. Further, it will give vendors a unique venue to quickly publicize their products and services.

For years, weve been frustrated at the inability to provide widely accessible, ongoing education, says Mel Holsinger of Professional Self Storage Management, who teamed with Jim Chiswell of Chiswell & Associates LLC to create SSEN. With more than 40 years of combined industry experience, the two worked with web-seminar experts and interviewed hundreds of industry professionals to craft the best webinars possible.

To view presentations, enrollees need only a computer with an Internet connection, speakers and a printer. SSEN is extremely user-friendly, says Holsinger. Simply log on to www.selfstorageeducation.net, select the presentation you wish to view, follow the payment-option steps, download the program, print the handouts, launch the program, and learn. Its similar to a tradeshow seminaryoull listen to the presenter and watch PowerPoint presentations and videos. Students can even e-mail follow-up questions to their instructors.

The programs, conducted by experts in every field, are of different lengths and levels of complexity. For example, you might choose a simple, 15-minute self-help presentation on maintaining roll-up doors or an intricate legal talk about tenant-goods disposal. The cost for each topic varies and packages are available. The best part is the classes dont involve any travel or prerequisites. This is more self-paced, and you learn what you want to learn, Holsinger says.

In addition to recorded presentations, plans call for live, interactive session in which students can actively participate. Several businesses have even expressed interest in having SSEN design company-specific training exclusively for their employees.

SSEN understands the challenges of coordinating multiple sites for an educational event. Ive had the experience of trying to conduct company-wide training for which I had to shut down my stores two hours early and pay for managers to travel to a single location. Sometimes I couldnt even take teams from a particular region, he says. Now Im going to be able to say, At 3 p.m. on Sunday youre going to attend a live meeting from your desk.

Holsinger is enthusiastic about another application of the webinar concept: Vendors will be able to quickly spread the news about new offerings, demonstrating their wares in sponsored video presentations. Rather than wait for a tradeshow or a magazine release, suppliers can reach potential customers any time via the network website.

Meet the Staff

Top names in the industry have been enlisted to serve as SSEN faculty. Additional staff will be announced at the networks booth during the ISS Expo in Las Vegas, Feb. 28-March 3. Current members are:

• Ray Wilson, president of Self Storage Data Services and Charles R. Wilson & Associates, an industry-appraisal firm.
• Jeffrey Greenberger, a partner in Katz, Greenberger & Norton LLP, which specializes in self-storage law.
• Neal Gussis, a partner in Beacon Realty Capital, which provides mortgage brokerage to the self-storage industry.
• Chris McGrath, president of Capital Consultants, which manages several state self-storage associations across the Northeast.

Association Participation

SSEN has invited self-storage associations nationwide to join their Education Alliance. This partnership will allow SSEN to respond quickly to specific educational needs in a state or region. Our technology platform allows us to have a new program on our website within 24 hours of it being recorded, says Holsinger. Participating association members will receive an immediate discount on of all presentations, and well also waive the start-up administration fee.

Holsinger and Chiswell have already reached out to many groups, offering discounts on SSEN programs. The Educational Alliance encourages associations to take advantage of our training classes as a member benefit, explains Chiswell. Well also provide them with the names of nonmembers who enroll so they can follow up with them regarding membership. Well offer alliance participation to national SSA members as well.

While Holsinger admits nothing can beat the in-person experience of a tradeshow that allows attendees to mingle with other professionals, he knows SSEN will fill an important void. I would guess fewer than 10 percent of self-storage managers have ever attended a tradeshow because of travel challenges. This is a way to get a college education in storage without having to go to school. Our mission statement is, Opening the door to education for everyone, and were already well on our way.

For more information, call Holsinger at 520.320.9135 or Chiswell at 434.589.4446; visit www.selfstorageeducation.net.

A Reason to Rejoice

Generally speaking, February isnt a month of great note. In fact, its rather dreary. Whats there to do in the wasteland of time between holidays? Past civilizations knew how to live rightthey had a festival for almost every occasion. If we lived during Roman times, for example, we could celebrate Lupercalia on Feb. 15, which (among other things) commemorates the Lupercal, the grotto where Romulus and Remus were suckled and raised by a wolf, and grew up to found the nation of Rome.

Technically, there are some festivities this month. Theres Groundhog Day, a couple of presidents birthdays, and lets not forget the most Hallmarkorific of them all: Valentines Day. But perhaps all is not lost. Im going to give you two gifts. The first is a story that should help rekindle your appreciation for the day most associate with absurdly expensive chocolates, teddy bears and flowers. The second is a whole new reason to rejoice in the month of February.

Not many people know the true legend of St. Valentine, but its actually rather romantic. In the years 268-270, Roman Emperor Claudius II experienced acute difficulty in convincing his subjects to join the army. To help generate compliance, he passed a decree banning all engagements and marriages. I guess he believed if men couldnt make headway with their women-folk, they would seek another outlet for their aggression and join the ranks. In reality, however, many continued their pursuit of the opposite sex, and sought to marry in secret.

Valentine was one of the few Roman priests willing to flout the emperors ban and perform clandestine marriages; but he was eventually caught, arrested and sentenced to death. In sympathy and thanks, many of the locals sent him flowers during his imprisonment; and the jailers daughter took particular care to keep him in good spirits. Before being put to death on Feb. 14, he sent the girl a note, signing it With love from your Valentine. In 496, the Pope declared him a saint and made the anniversary of his execution a national feast day.

Anyway, now youve had your story, and Ill deliver on my second promise: a cause for revelry. In fact, Ill give you two. First, you should celebrate your involvement in an industry that continues to outperform other businesses in the REIT world. Self-storage topped the list of sectors that finished 2005 on a high note, with performance up nearly 30 percent. As youll read in this issue, the new buzz is about interest rates, how theyll behave in 2006, and how they might affect the storage business. Its good to know outlooks remain positive, and our experts continue to encourage healthy acquisitions and sales.

Reason No. 2 is even better: the ISS Expo in Las Vegas, Feb. 28-March 3. Not only is this the largest trade event of the year, its the most comprehensive in terms of education, network-building and vendor participation. No matter your level of expertise or involvement in self-storage, you wont want to miss this opportunity. Come learn some new things, see a show and try your luck at whatever table suits your fancy.

Self-storage is often a labor of love; and as our authors will tell you, it takes hard work and proper planning to make the most of a venture orif exit is your strategya sale. This month, remember the romance behind your investment. What made you fall in love with storage? Would you do it all over again? If not, take some of this issues sage advice and consider selling. If youre in a committed relationship with your business, explore what you can do to increase value over time. And if youre a tenderfoot ready to be wooed, come to Vegas and see what chances lie in wait.

Happy Lupercalia,
 
Teri L. Lanza
Editorial Director
[email protected]

There are three issues critical to investors as they plan for 2006. First, they need to understand what drives demand and that demand changes as markets develop. They also need to recognize how location and quality affect a facilitys ability to sustain income over the long term. Finally, they must realize that taxing authorities nationwide are focused on self-storage, and the property-tax increase triggered by an acquisition will have a devastating impact on actual yield. Looking forward, the availability of investment opportunities seems to take precedence over concerns regarding storage demand.

Two-Tier Market

A two-tier investment structure is emerging from what has been a very cloudy and imperfect market. One level consists of the large private, public and institutional investors. The other is comprised of small investors, tax-deferred investors and individuals of high net worth. Both tiers have had access to low-cost capital.

The public and institutional investors are buying class-A facilities in major competitive markets. The small, private investors have been aggressive in their acquisitions too; but theyre mostly buying lower-quality facilities in secondary markets, which have fewer barriers to entry.

Investment Classes

Class-A facilities are well-located in markets where rent levels are above average for the region. In these areas, land prices and property values are high, and new development typically requires a lengthy entitlement process, which creates formative barriers to entry. These facilities trade in a cap-rate range of 6.5 percent to 7.5 percent. A premium of 50 to 100 basis points for portfolios is expected to continue, as there are fewer on the market.

Class-B facilities are usually in secondary markets, where there are fewer barriers to entry and more available sites at reasonable prices. They have been trading at cap rates between 7.5 percent and 9 percent.

Class-C facilities fall further down the scale in terms of quality and location. They typically trade at cap rates of more than 9 percent.

Cap Rates

The good news for sellers is cap rates are at their lowest levels in history. The bad news is they will probably start edging upward. Any further decline is unlikely considering a slowing of the overall economy, an expectation that interest rates will continue to increase, and the fact that most markets are becoming intensely developed.

There are three issues impacting cap rates. First, the lack of uniform asset classification has resulted in some facilities being improperly valued/priced and financed. Second, cap rates need to reflect possible increases in real estate taxes triggered by the sale. The investor who assumes a significant increase in taxes is justified in purchasing at a low cap rate. Ignoring the possibility of an increase, however, could prevent him from achieving his desired yield. Finally, the investment motivation driving the market is changing. Tax-deferred buyers (1031 Exchange) appear to be diminishing, and the aggressive acquisition mode adopted by the REITs also seems to be subsiding.

The competitive bidding for facilities should settle as investors become more concerned about premiums. Its becoming more difficult for them to achieve their desired yield without an enormous increase in cash flow, which isnt likely. Most investors interviewed for this article anticipate making numerous acquisitions in 2006; but the majority said they will not be as aggressive on pricing. Only in instances when they view a facility as strategic to their operations will they make hard-hitting offers.

Self-Storage Performance Index

The Self-Storage Performance Index (SSPI) allows operators and participants in the capital markets to track industry trends. It measures the health of the U.S. market by examining changes in key operating statisticsi.e., rental rates, occupancy, concessions and expensesfrom facilities in the top 50 metropolitan statistical areas. Specifically, it uses the asking rental rate on a 100-square-foot, climate-controlled unit as the benchmark for industry revenue. Data is gathered from sources public (SEC filings of self-storage REITS) and private (surveyed and contributed).

Lets take a look at statistics for the third quarter of 2005:

• The median rental rate increased 1.2 percent between 3Q 2004 and 3Q 2005, from $85 to $86 per month.
• While median physical-unit occupancy remained at 90 percent, the slight increase in rental rates was met by a decrease in average occupancy rate, which dropped from 90.3 percent to 89.4 percent.
• Only 57 percent of surveyed facilities offered some type of concession in 3Q 2005 vs. nearly 63 percent in 2Q 2005 and almost 70 percent in 1Q 2005.
• Revenue per occupied unit increased 1.7 percent between 3Q 2004 and 3Q 2005.

Consumer as well as investor interest in self-storage remains strong. While pricing is above replacement costs in several markets, operating performance continues to improve. The only major threat appears in markets where development is occurring despite a lack of demand and financial feasibility. The increased cost of capital will result in moderate increases in cap rates and contribute to a more conservative view of feasibility on the development side. As a result, yields will continue to pick up.

Note: The Self Storage Performance Index and other products referenced herein are copyrighted or trademarks of Self-Storage Date Services Inc. and are reprinted with the companys consent.

Charles Ray Wilson is the founder of Charles R. Wilson & Associates Inc., a full-service appraisal firm, and Self Storage Data Services Inc., a manager and publisher of economic and operating statistics relating to the self-storage industry. For more information, visit www.crwilson.com or www.ssdata.net.

Dear ISS,

Im writing to you on behalf of the average guy. Ive been reading your magazine for about three months now and have enjoyed all of the articlesfrom how to build a self-storage facility to where to build one, from financing to refinancing. But I was wondering if anyone has ever written an article that would address self-storage financing for someone like me?

Im an average guy who works construction 40 hours a week. After reading articles like Cutting-Edge Finance Trends by Jim Davies and Eric Snyder (November 2005), I have hope for guys like meespecially when I read statements like The latest statistics outlined in Standard & Poors CMBS Quarterly Insights report show that less that .25 percent of the $4 billion in self-storage loans the agency currently rates are delinquent. Of the 30,000 CMBS loans S&P has rated over the past 10 years, those for self-storage have the lowest delinquency rate of all property types.

But after reading that, I still dont understand why most banks and loan facilities are not willing to give 100 percent loans on self-storage. You can get a house or duplex with a 125 percent loan, but when it comes to a business, banks are very skeptical. If self-storage is such a big moneymaker and has such a small delinquency rate, why is it so hard for the average guy to purchase a facility? I know there are buyers out there who know how to do creative financing; unfortunately, Im not one of them.

Why does the average guy get treated like he has the plague? Just because he doesnt have a million dollars in assets or make $100,000 a year doesnt make him a high risk. When it comes to buying a house, lenders look at your credit, tax returns and income. Why dont lenders do the same with a business, i.e., look at the business youre purchasing and check its credit, tax returns and income history? After all, thats where the loan payment is going to come from, not the buyer himself. If you had to make the payment out of your own pocket because the business didnt make enough money, you wouldnt have purchased it in the first place!

I hope the banks can give an average guy a chance. If not, is there someone out there who can help get him to a financial point to purchase a self-storage facility?

Ryan Anderson
West Valley, Utah

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Dear Average Guy,

If the lender were going to lend 100 percent, then it would own the property, not the average guy. To be blunt, Money talks, bull**** walks. Lenders want you to have some blood in the game, even if you are a nice guy.

In reality, many self-storage owners started as average guys with smaller investments that became larger investments over time. If an average guy is good with construction, he may be able to team up with a developer and contribute his investment in the form of sweat equity. The banks can offer creative financing, but I would throw it back in his courthe needs to be creative first.

Neal Gussis,
Principal Beacon Realty Capital
www.beaconrealtycapital.com

---

Dear Average Guy,

Banks wont loan 100 percent on investment property because theyre not in the business of owning real estate. Theyre instead making an investment in the real estate and the borrowers character, capital, capacity, condition and collateral (the five Cs of credit).

Most collateral will not support 100 percent financing, as the debt-coverage ratio would be too low. Borrower character is important, but character wont pay the bills if the economy turns and the borrower doesnt have the capital or capacity to keep the project going through the bad times.

Would the average Joe be comfortable loaning $500,000 or $1 million to another guy like himself if that person didnt have adequate reserves in the bank, or the property cash flow was minimal due to a high loan-to-value (LTV)? If so, Average Joe the Lender would not be making a smart business decision; and odds are he would foreclose some time in the future.

Banks dont typically lend more than 75 percent to 80 percent LTV because the borrower would have very little in the project to lose should he decide to walk away from a bad situationand he would! Mr. Anderson seems to think its a lenders job to take all kinds of risks and look only to the property for repaymentif the property fails, too bad. His comment about a business not being able to make payments as a reason not to buy it is the same reason a lender will not make a loan higher than 75 percent to 80 percent LTV. It puts too much stress on the business and will likely cause it to fail.

Nonrecourse loans, which look only to the property value, are available. But lenders usually limit the LTV to 75 percent or less; and they still look at the borrowers financial strength to make sure they have the ability to step up and carry the property in bad times if necessary.

Comparing a home loan with a commercial loan is like comparing apples and oranges. Youre more likely to protect the home you live in than an investment property, which is why banks are willing to lend so much more on a home. Average Joes typically dont get wealthy without taking risks. Unless they inherit money or property or are fortunate enough to own real estate that increases in value, most of them will remain average Joes, which is OK. Most of us are!

It sounds like Mr. Anderson is a motivated individual looking to do something different, and I applaud that. I myself left a 40-hour-a-week job to start my own business 10 years ago, and it has paid off handsomely. But I took risks: no salary, no benefits, etc. I had a skill and motivation and found my niche. If the reader wants to buy, build or own a self-storage facility, he needs to do one of a few things:

• Talk to a U.S. Department of Agriculture lender about a business loan, as the USDA is making all kinds of loans on nonagricultural property. For more information, visit www.rurdev.usda.gov/recd_map.html. 
• Find a money partner to invest with him. Maybe hell have to split the profits 50/50, but its better than nothing.
• Find a private lender to loan him the funds but expect to pay a high interest rate.
• Continue to work extra jobs and hours to raise more capital and look financially stronger.
• Find a property that isnt doing so well and talk to the owner about turning the business around for him in exchange for a percent of ownership based on performance.

Good luck!

David Smyle,
President Benchmark Financial
www.benchmarkfin.com

The world of investing has its own etiquette to follow. As an investor, if you can present yourself as a professional, youll be taken more seriously by novice sellers and more respected by experienced ones. What you do you bring to the table that will motivate a seller to cooperate with your requests and accept your offer? To answer this, youll need to find out why the holder is selling, how much he owes on the property, and what he needs to seal the deal.

Even in todays exceptional storage market, there are reasons beyond greed compelling sellers to liquidate their holdings. If a propertys listing includes words and phrases such as must sell, illness forces sale, foreclosure, reduced, will sacrifice, transferred, or make offer, then you already know where the owner stands. But not every seller will be so forthcoming. When trying to asses an owners position, consider the following:

• What is the state of local market conditions? For example, what is the unemployment rate? Are population counts declining? Is there an ethnic shift occurring? Are businesses relocating outside the area? Have environmentalists or historical societies stifled potential growth?
• Does the seller have other storage assets? If so, where are they and how are they performing?
• Is there a 1031 Exchange looming and, if so, has the replacement property been identified?

An examination of these factors can provide an indication of how receptive a seller may be to an offer and under what terms. But before you enter the negotiation process, you must know: Do you have the funds in place to do the deal, either equity or debt? What will be your exit strategy? How is the property currently managed, and how will you manage it after taking ownership?

The Official Presentation

In an ideal situation, youll work with a flexible seller whose property has favorable financing in place. But since that wont always be the case, here are some tips to follow when submitting an offer and negotiating the sale:

• Establish credibility and a friendly rapport with the seller. Offer to release your financial statements or a letter from the bank indicating you have funds to close.
• Put everything in writing and present all offers in person, making sure necessary parties are in attendance.
• Avoid using round figures in your offer. For instance, use $60,480 instead of $61,000. The seller will think you have a specific reason for doing so, which makes you appear more savvy.
• Consider using a net/net offer or multiple offers.
• Use nonessential contingencies.
• Present your offer in reverse order, discussing contingencies before giving your offering price.
• Let the seller do some of the talking, and be a good listener. Once you make a negotiating point, be quiet. The one who speaks first usually loses.
• Dont get emotionally involved. If you do, you lose objectivity and your negotiating skills.
• Respect the brokers, but assure them of your position in the deal. If youre able to establish a rapport, negotiate as principal to principal. If not, let the brokers to present to each other (though this will take longer).
• If there are contingencies with significant negative impact or any negative negotiating points, let your broker break the news. Then deliver the compromise.
• If your broker has any sort of conflict with the seller or his agent, remove him from the negotiating process immediately.
• Never argue with your broker in front of the seller. It will hurt negotiations.
• Be diplomatic. Dont overly criticize the property, and do not disparage the seller.
• When being inflexible on a point, feel free to let your partner or some other absent party pose as the bad guy.
• When necessary, use third-party examples and references to overcome seller ignorance.
• If negotiations seem to be at a standstill, leave the paperwork and make arrangements to speak the next day.
• If price is an issue, be willing to share your underwriting.
• Consider offering to let the seller carry paper, but state your interest rate in dollars rather than as a percentage.
• Try not to re-trade a deal. Put forth an offer you can close on.
• Never negotiate a price reduction for any reason other than to get a better deal.
• Dont enter a transaction thinking youll secure a better price by getting the brokers to reduce their commission.
• Assure the seller you are ready to commence due diligence, and have your service providers in place before the offer is signed. Let him know which vendors will be accessing the property.
• Explain the due-diligence process and what will occur during the inspection period. Notify the seller of all actions beforehand and perform them in a timely manner, i.e., the physical inspection or Phase I environmental survey.
• Try to negotiate extensions in advance.
• Never give the seller more than 24 hours to accept or counter an offer.
• Let the seller know youre looking at other properties.
• Reinforce the peace of mind that will come once the property is sold.

In short, you need to draw out the owners motivation for selling. Listen to what he has to say, what he plans to do when he sells or, better yet, what he plans to do if he doesnt sell. If youre successful in getting the seller to volunteer information, youve established trust, and the deal is as good as done. Good luck, and happy investing.

RK Kliebenstein is president of Coast-To-Coast Storage, a self-storage consultancy firm, and co-author of How to Invest in Self-Storage , now available through national booksellers such as Amazon.com. For more information, call 561.963.4004, ext. 81; e-mail [email protected]. John Michael, also known as the King of Bling, is an investor, mentor and author. For more information, e-mail [email protected].

First, decide whether youre going to try to sell your property yourself or enlist the help of a broker. All the following recommendations assume youre working with an agent, so if youre going it alone, transfer to yourself all the responsibilities assigned to the broker. If you decide to use professional representation, be sure to select the right onesomeone who knows the self-storage business, has a proven track record of helping owners, and knows your market.

Setting Price

The broker will establish realistic expectations of what the property will sell for and set an appropriate asking price. Set the price too high, and you run the risk of not selling at all, thus missing the opportunity to achieve optimum value. A low asking price could leave a lot of money on the table. In this market, one-quarter of 1 percent on the cap rate could cost you more than $150,000 on a property with a net operating income of $200,000.

Maintenance

Deferred maintenance issues should be dealt with before marketing the property; but unless your facility is new, the buyer should not expect it to be in like-new condition. It may not be necessary to spend much on improving its physical condition. Simply take the time to replace fizzled light bulbs, fix minor damage to doors and building corners, replace faded or missing unit numbers, and do some general clean-up. Apply a seal coat if the asphalt is showing signs of deterioration.

If improvement of some aspect of the property might enhance its marketability or increase rental rates, then it should have been addressed long ago. Now isnt the time to take on major enhancements. In other words, property value is mostly a function of current income, not what profits could be if you repainted all the doors or remodeled the office. Spending a lot now is unlikely to translate into a substantially higher sales price because it takes time for improvement expenses to show up as increased revenue.

The most cost-effective way to achieve optimal value is simply to be sure the facility is clean. Many buyers even look for properties in need of upgrades because they believe they have a better chance of growing income than with a newer property in perfect condition.

Manager in the Loop

Sellers are divided on the subject of whether to inform the on-site manager that the property is for sale. Those who choose to keep quiet are either afraid the manager will begin looking for other employment, or they dont want to unnecessarily upset him.

You cant expect to keep a manager in the dark for long when you have countless buyers, brokers, lenders, appraisers, insurance representatives and engineers visiting the property. Hell figure it out sooner or later, and its best that the news come from you. Let him know at the beginning of the marketing process so he can assist you in presenting the property in its best possible light.

The majority of buyers will want to maintain management continuitylet your employees know this. Also assure them that if they are not retained, youll provide a severance package that will give them time to secure new employment. Its much better to have staff on your sales team than to keep them uninformed and run the risk of harming a potential sale.

Instruct all employees to direct any and all questions concerning the financial aspects of the property to you or your broker. You should also tell them to be completely honest when answering questions concerning the physical aspects of the property.

Due Diligence

The negotiation of contracts can be time-consuming and expensive, so be prepared to respond to offers with a contract with which you are familiar, one prepared in advance by your attorney or broker. It should allow for minor changes to fit your counteroffers. Request the buyer to use your contract if negotiations are to continue.

Any contract will contain a list of items to be delivered for the buyers review during the contingency period. These documents should be prepared in advance and given to the buyer quickly to minimize the time necessary for due diligence. They typically include:

• Year-to-date income and expense statements
• Income and expense statements for the past two years
• Most recent real estate tax bill and notice of valuation
• Current rent roll
• Most recent ALTA Survey and Phase I environmental report
• Building plans, if available
• Service agreements and contracts with outside companies including Yellow Pages, insurance, computer service, etc.
• Preliminary title report
• Copies of loan documents for existing financing

If you dont have the most recent ALTA Survey and Phase I, get them done before marketing begins. Make sure each engineer understands his reports will be updated for the buyer for a nominal charge.

Prepare for Financing

Find out if your sale will require the buyer to secure third-party financing. If an existing loan can or must be assumed, you should know what it takes to accomplish that and be prepared to share information with the buyer. In cases where an existing loan must be paid off, educate yourself on what it will cost (if anything) and be prepared to deal with that as well.

With current low interest rates, its likely your buyer will want to put a new loan on the property. You or your broker should contact several prospective lenders so youre poised to provide the documentation they need to quickly process the buyers loan application. The probability of a smooth and timely closing will be improved if you can furnish your buyer with interested lenders names and phone numbers. There may have never been a better time to sell a storage property, but its still important to plan the process and follow the plan.

Bill Alter has been a self-storage sales specialist with Rein & Grossoehme Commercial Real Estate since 1986. He has been responsible for the sale of more than 90 storage facilities totaling more than 5 million square feet and $150 million. For more information, call 602.315.0771; visit [email protected]. 

One of the ways to master the art and science of selling is to learn a few key phrases, or strategic moves. There are many sharp sales maneuvers from which to choose, but a few are so powerful that a prospect simply cant resist them. Consider, for example, this enticing proclamation: I can help you with that.

When a customer walks into your office or calls on the phone, no matter how he initiates the conversation, what hes saying is he has a problem or a need. If your immediate response is I can help, he will warm to your business like chestnuts on an open fire. However, this statement isnt a magic spell; you have to back it up with action . You have to show the customer what you can actually do to assist.

First, you have to learn about the prospects requirements, enough so you can determine the best solution. You might need to take him on a property tour, showing him different unit sizes and explaining how storage works. Perhaps youll discuss ancillary products and services such as boat/RV storage or moving supplies. After a decision has been made, you need to walk the customer through the lease, discuss payment options and tenant insurance, sell him a lock, and possibly make arrangements for the move-in.

If youve ever done business with someone who has an I can help with that attitude, you know how gratifying it is to be that customer. Recently, I got a nail in one of my car tires. I drove to the tire-repair shop near my office and told the person behind the desk. Within moments, he had my signature on the work order and keys in hand, and I was comfortably seated in the waiting room with a cold drink.

Before the end of my first magazine, he came to let me know the patch was in good shape and I was ready to go. He led me to the counter, took my payment, thanked me for my business, gave me my keys, and pointed to where my car was waiting by the front door. There was no other possible outcomehe made sure he could help me with my situation, and I made sure to let him.

You can do the same with your storage customers. When a prospect or tenant walks into your store, say, I can help you with that, and dont ask or wait for permission. Quickly figure out what is needed and make it happen. When youre done, the customer shouldnt even know what hit him. All he knows is he has a solution to his problem and a smile on his face.

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].

Selling records-storage services within a self-storage operation can be tricky, which is why many operators choose to hire an outside sales force. Part-time personnel and independent agents are a great resource for growing business. But without the skills of a sales manager, how do you guide reps to meet expectations? Control your sales volume and quality by selecting the right sales method, hiring the right candidates, and offering appropriate compensation.

Finding Sales Staff

Agents work independently, outside the control of your enterprise. You just provide them with the means and inclination to sell for you. They can generate qualified leads or actually close deals on your behalf. Compensation will be structured accordingly.

The best agents generally come from your communitys existing sales force, i.e., they already call on and sell to businesses in your market. When possible, choose those who work in fields related to records storage. They fall into three categories:

• Small-business owners These entrepreneurs may offer items such as copiers, printers, business forms, imaging/ scanning services and office products.
• Over-the-counter businesses These might include the local copy center and package-shipping store.
• Accountants and lawyers These professionals have a responsibility to assist clients in protecting their records. Referrals from them come with a great deal of trust.

Part-time personnel are different, as they are actually part of your company. This gives you a greater degree of control. They can be hired to work any number of hours, and their pay is based on closed deals only.

Part-time staff is more difficult to find, but with a little homework and planning, you should be able to locate highly qualified people. Consider stay-at-home parents, for example. Many were once part of the active work force, and are well-educated and trained in any number of professions, including sales. Eager to continue using their skills, they are generally available to work between 10 a.m. and 2 p.m., when their children are at school.

Making the Right Hire

During the selection process, you need to address two key issues: First, consider whether a candidate is someone you would want to represent you in the marketplace. Then determine if he possesses the talent you require. Once you have found several prospects, interview and test them for the appropriate skills. There are many online testing resources that provide profiles of potential hires and generate a series of effective follow-up questions.

The Compensation Plan

Setting expectations for sales reps is fundamental to achieving results. Without goals, there is no way to determine if an employee is performing to standard. The trick is knowing what you want, which may take time and effort. You need to decide how you want the agent or employee to represent you. Also important is a system for referring leads and closing deals, as well as a compensation program that clearly states the method of payment and rules of engagement. This is usually documented in a formal agreement.

Developing a compensation plan isnt difficult. It simply requires a thoughtful process to determine what you are willing to sacrifice for the desired result. Records storage is a long-term revenue opportunity, and the amount you pay on the front end can be directly related to overall growth. Storage revenue is considered permanent, as the accounts will remain with you for many yearsif you provide good service. For this reason, its not uncommon to pay out as much as 50 percent of your first-year storage revenue to sales reps.

Compensate agents with a set fee for each referral that closes. If they participate in the actual selling, pay them more. Part-time staff, on the other hand, is responsible for the entire sales process and should only be compensated for completed deals. The commission structure can be the same as that offered to full-time sales staff (minus the salary).

Set new goals annually for all members of your sales staff, whether they are agents or part-time hires. The success of your records-storage enterprise depends on stating expectations. If you dont feel up to the task of managing your reps, consider hiring a professional sales manager to coach and enable your team.

Cary F. McGovern is the principal of FileMan Records Management, which offers full-service assistance for commercial records-storage startups and sales training in commercial records-management operations. For help with feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; visit www.fileman.com.

After its recent expansion toward the East Coast, California-based Buchanan Storage Capital was featured in Commercial Property News magazine. The company, which arranges debt and equity for self-storage owners nationwide, has opened branch offices in Atlanta, Chicago and New York City to provide a multitude of products and services to clients. The CPN article highlights the company's acquisition investment goals, as explained by President and CEO Robert Brunswick. To read the full article, visit www.cpnonline.com.