Strategic Storage Trust Inc. (SSTI) finalized the $9.9 million acquisition of three high-profile self-storage facilities in busy traffic corridors in the greater metropolitan area of Cincinnati. Completing the purchase of the three Best Self-Storage properties brings an additional 1,295 storage units and 211,000 square feet of leasable space into the portfolio of SSTI, a publicly registered, non-traded REIT. All three Best Self-Storage properties are in Northern Kentucky within 15 miles of downtown Cincinnati and in areas with above average household incomes.
 
Source:  The Earth Times,  Strategic Storage Trust Inc. Closes on $9.9 Million Purchase

The long-term outlook for the nation’s self-storage market remains positive, despite the current global current economic crisis. Overall, the commercial real estate sector faces many challenges as cap rates rise, the market for fully occupied properties shrinks and acquiring financing becomes more difficult. Investor confidence in commercial real estate continues to wane as the economy moves further toward a recession.

During this time of uncertainty, sellers and investors require more information on the state of the self-storage investment market and more personalized client service. Today’s biggest challenges for self-storage investment specialists are acquiring financing for transactions and moderating sellers’ expectations based on actual demand.

In this tumultuous market, utilizing the services of an experienced, third-party intermediary is more vital than ever. Acquiring qualified buyers for self-storage properties has become more difficult as buyers have become much more selective. Buyers are scrutinizing every deal; the slightest mistake in underwriting will lead to deals collapsing. The fact is its more challenging to get deals to the closing table, increasing the value of self-storage specialists.

The Close

There are several key components to closing a self-storage transaction in today’s economic environment. The underwriting must be based on actual net operation income (NOI), with absolute transparency in the deal. Also, the self-storage property must be priced and positioned properly in its submarket. The buyer should be selected not only because he makes the highest offer on the property, but also because he has the ability to close. The buyer should possess equity, a banking relationship and experience to operate self-storage facilities.

Some self-storage sellers may want to sell their properties themselves to save on broker fees; however, what those sellers save in broker fees they will most likely lose at the bargaining table. A qualified broker offers a client local market expertise with a national marketing platform and perspective, matching every property with the right investor.

Brokers should be excellent marketers since marketing plays a larger role in this current real estate climate. A broker has to demonstrate why a potential investor should acquire the property by revealing the property’s upside. When looking out for their clients’ best interest, brokers must also be excellent negotiators, possessing the ability to cut through the red tape to get both the seller and the buyer to agree to work toward closing.

To manage the expectation gap between buyers and sellers, brokers must document every sale in their local market and track every listing to demonstrate which properties are receiving offers. By tracking all comparable assets in their respective market, brokers can show sellers the true value of their property. A seller may have been offered a certain dollar amount in the past, but in today’s market, the price at which deals are being trading has likely dropped between 30 to 60 percent.

• When hiring a professional, experienced broker, you can expect:
• Expert market knowledge
• Extensive access to private and institutional equity
• Custom-tailored marketing
• Strong banking relationships
• Ability to negotiate on the client’s behalf
• Appropriate underwriting to match current market conditions

Looking Ahead

Commercial property sales were abnormally high in ’06 and ’07 because of the frenzy in the market. Since then, the capital markets crisis has caused the shift to the other extreme, which has pushed property sales to abnormally low levels. In 2008, sales volume dropped approximately 70 percent over last year’s pace. In the next several months, investment sales are likely to remain hampered due to the ongoing credit crisis and a major price expectations gap between buyers and sellers.

By mid-2009, many brokers expect financing to become at least moderately more available as banks begin to lend again, albeit with tight standards. Also expect to see the pricing gap to begin to narrow in the next two to three quarters. For lower quality assets in secondary and tertiary markets and/or distressed properties, sellers will have to become realistic about pricing in order to clear the market.

On the other hand, there are no indications of wholesale discounting of quality real estate in strong markets so buyers will have to recognize that value. Most activity will continue to be driven by private capital in the first phase of the recovery.   

The market is evolving to keep up with the changing economy, shifting demographics, land-use issues and consumer tastes. One thing that does not change for investors, however, is the importance of proper due diligence and the value of a qualified broker. Investments in self-storage can be very profitable, but it pays to make the right decisions up front.

Michael Mele is vice president investments and senior director of Marcus & Millichap’s National Self-Storage Group in Tampa, Fla. He can be reached at 813.387.4700; e-mail [email protected].

Investment Real Estate brokered two self-storage transactions in Lewisberry and Huntington, Pa. Both were sold to first-time buyers. Storage World, a 22,800-square-foot facility with 202 units on 2.85 acres, was 85 percent occupied at time of closing. An additional 2,470 square feet of apartments and onsite management office space was included in the sale. John Gilliland and Jason Kolivoski handled the transaction for the seller and buyer. Smith Country Storage, a 6,400-square-foot facility, has 44 units on 3 acres and was 98 percent occupied at time of sale. John Gilliland and Nancy Mitchell brokered the transaction. For more information, visit www.irellc.com.

Commuting to work aboard a Boeing 727 recently, I looked out the window and caught a magnificent view of a snow-covered volcano peak above the clouds. I was so taken by this view that the gentleman sitting next to me apparently thought I was praying because of the turbulence we were experiencing. He kindly explained that the choppy weather is quite normal in the Andes. When I pointed out the cause of my commotion, he immediately went back to sleep. Obviously, he has seen the view so many times before he is used to it to the point of boredom. Meanwhile, for me it was the equivalent of Christopher Columbus when he first laid eyes in America.

What does this have to do with self-storage? Well, it has occurred to me more than once that the United States has grown accustomed to self-storage, but Latin America is seeing it for the first time—and is in awe.

A Quick Overview

When I meet with local owners and operators of self-storage in Latin America and show them how this business is handled in the United States—from due diligence to operations—I see excitement in their faces. You know what I am talking about: that same excitement you got years ago when you first realized what a great business this is.

The fact that I fell in love with this mountain does not make me ready to climb it; I need training. The same is true for newcomers to the self-storage industry. With networking at industry tradeshows and timely information from magazines like this one, they can get the much needed knowledge that can help them reach the summit. I feel blessed with the fact that I can help them along the way.

At this early stage of discovery, we are still gathering data, but what we have discovered so far is quite impressive: There are self-storage facilities in almost every country in Latin-America. For the most part, facilities are mainly brick and mortar, but the more developed countries—such as Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama and Puerto Rico—have third-generation facilities like the ones we are accustomed to seeing in the United States.

The Challenges Ahead

It’s estimated that there are more than 250 facilities in Latin America and a lot more coming on line in the next couple of years. The leading country is Mexico, in which we have identified at least 36 operators, most of them owning more than one facility.

One challenge they are facing, like in the United States, is finding suitable real estate, especially in large metro areas. Therefore, we are starting to see a tendency toward more multi-story facilities. This multi-story development is a big shift since most of the customers are use to drive-ups, but it does make it easier to identify older facilities knowing most are single-story types.

In order to compete with new businesses on the block, most operators have added services such as free lifts for tenant use or personnel assistance to carry items to storage. Of course, these practices are easily provided due to inexpensive labor and the lack of security enforcement in most of these countries.

Another interesting shift in Latin American countries is owners/developers are taking advantage of old warehouses with the right height, installing mezzanines and converting them for self-storage use. This is quite common in Puerto Rico, where the manufacturing industry has moved to the Dominican Republic and Chile.

Opportunities for North America

Latin America is looking to learn from North American self-storage standards, which in return provides an excellent opportunity to both regions. First, it offers opportunity for U.S. vendors to showcase the products and services that took this industry to a complete new level. Second, it provides examples for Latin America to gain that competitive edge that characterizes U.S. business models.

Much of business news these days focuses on globalization and how it has forced the implementation of free trade agreements with all its pros and cons. The fact is the world has become one big market, especially when we consider that 95 percent of the world’s population lives outside the United States.

It’s a great time to fall in love again with self-storage and feel proud to be are part of a truly international industry. In Latin America, many owners and operators speak Spanish, but self-storage is quickly becoming an international language.

Nancy Torres is the business director for Latin America at Janus International and the executive director of the Latin America Self Storage Association. To reach her call, 770.880.4659; e-mail [email protected]; visit www.janusintl.com.

Quality Self Storage of Englewood, Fla., will be collecting donations for the new food pantry opened this month by the Englewood East Church of Christ. Dubbed "Handfulls on Purpose” by its organizers, the new venture was founded to work with the Harry Chapin Food Pantry in Fort Myers and will accept gifts of money and food for distribution throughout Charlotte, Lee, Collier and Hendry counties. Donations can be made at the storage facility during regular business hours.
 
The legal process for the pantry began in October. Now, it has been inspected and everything is in place to begin distribution as soon as the shelves are filled, church members said.
 
Source:Charlotte Sun, Church Starts Food Bank

After months of negotiating, the economic stimulus bill is one step closer to reality. 

Negotiators have resolved the differences between the House and Senate versions of the stimulus bill, Sen. Harry Reid said Wednesday. The $789 billion package is lower than the House's $819 billion version and the Senate's $838 billion bill.

President Obama said he wanted the bill on his desk by Presidents Day, which is next Monday.

Before the stimulus bill can be signed into law, the House and Senate must reconcile the differences between their bills and pass a final version of the package.

Source:  CNN.com,  Agreement Reached on Proposed Stimulus Bill

The U.K. self-storage industry is continuing to grow despite the economic difficulties, according to a Mintel report commissioned by the U.K.'s Self Storage Association.

The number of self-storage sites has grown by more than 10 percent in the last year to 750 primary facilities, generating revenues of around £360m.

The growth in the amount of rental space available in 2008 remained consistent with the previous five years at around 8 percent. However, the market has further to grow, according to the report, as the U.K. market is not as mature as it is in the United States or Australia.

Awareness of self-storage is increasing as well due to wider trends such as family break-ups and downsizing. Nearly 50 percent of the population is now aware of the industry, up from 29 percent two years ago, the report said.

Source:

Continued Growth for Self Storage

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Scotty Sundin was named Western regional sales manager, self-storage division for JanUS Door.  Sundin has been in the self-storage industry for more than 12 years, managing accounts at LST Erectors and DBCi. Most recently, he served as vice president of sales for Diamondback Metal Systems, where he sold complete building packages. For more information, visit www.janusintl.com.

SMD Software Inc., maker of SiteLink management software for self-storage and portable storage, has partnered with Merchant Services Network to provide SiteLink Web Edition users with integrated, secure credit card payment solutions. Merchant Services Network’s MyMerchantGateway is a in-house gateway that replaces pc-based credit card software and handles all transactions, including those at stores and on websites.
 
SiteLink has more than 8,000 installations worldwide. For more information, visit www.smdsoftware.com.
 
Merchant Services Network is a nationwide merchant-processing company that specializes in the self-storage industry. It handles credit/debit card processing, electronic check conversion, recurring ach and gift cards. For details, visit www.msnps.com.