ISS Blog

The Need for Communication

Feb 23, 2010

Communication is a commonly known word that encompasses our lives in more ways than we imagine until we stop to consider the word.

We communicate through so many various forms as humans have done since the beginning of time. The world revolves on communication and in the times we’re now living in, you can communicate with someone on the other side of the world without blinking an eye or crying over $5 per minute overseas charges from your local telephone company.

We connect with each other not through the U.S. Postal Service (or snail mail) as we once used to with reverence. The written letter seems to be headed the way of the Pony Express and carrier pigeons as relics of the past.

In this age of instant gratification, we Twitter, LinkIn, blog, text message, instant message, and get feeds from our news sources. We will occasionally pick up the telephone to hear a real voice. This is not our grandmother’s world.

Humans communicate through body language—a furrowed brow, a look of consternation, arms crossed or relaxed facial muscles, open body postures and inviting smiles. We use hand gestures and shoulder shrugs to display various emotions. The seeing and hearing impaired among us use special communication devices and languages to communicate. Even those with mental or physical handicaps can now express themselves via creative or instrumental vehicles. Humans need communication as much as they require food and water.

Communication can come with the simplicity of the wink of an eye, or the look contained within the eyes, a brief touch of sympathy or longing from one human to another. Yes, we communicate in so many ways, with our families, customers, bosses, and even right back to that one-day relic, our postal carrier.

Many studies over the years have found that infants who have no social interaction can actually fail to thrive. The elderly, I believe, can suffer from this syndrome as well. When they outlive family or find themselves in a solitary living environment, they cease to try to enjoy life as they are devoid of communication and interaction. Yes, you can be surrounded by people, yet still be so very alone in this crazy world.

The topic of communication is key to our mental health. Each person stands alone, but when a need arises the world can act with one voice of love and support, encouragement and compassion, sympathy and laughter. The average life of a resident self-storage manager is not one filled with parties and jet-setting, large family gatherings or garden parties with children laughing about and playing. It’s more of a 24/7 job since a resident manager never truly leaves work.

Virgo Publishing and the folks at Inside Self-Storage, either through design or sheer luck, happened to provide a vehicle, nay a voice, for the self-storage managers with no neighbor tochat with over the back fence to be able to engage, socialize and interact. It's Self-Storage Talk, an online forum where friendships have been formed, businesses have seen their bottom line profit from ideas exchanged and, most important, some of the less mobile members have found a way to interact socially with others who share a common bond.

A team, or some might call it a family, has bonded and they thrive! Just like the topic of the presentation I’ll be doing at the Inside Self-Storage World Expo next week in Las Vegas. I’ll be focusing not on simply surviving but on forming teams and relationships to help you thrive in the shifting self-storage world.

When empty and devoid of experiences, people cease to thrive. The line from the John Donne poem says it best, “No man is an island.” This line was expanded upon in a song by Joan Baez, and the familiar lyric continues, “No man stands alone. Each man's joy is joy to me. Each man's grief is my own.” We share a bond within our industry and it’s the combined efforts, interaction and all forms of communication that make us stronger.

I look forward to meeting you next week in Las Vegas for the Inside Self-Storage World Expo where, hopefully, we’ll get a chance to communicate with one another. Until then, log on to Self-Storage Talk and let’s get acquainted.

Extra Space Storage Reports 4Q and Full-Year Results

Feb 22, 2010

Extra Space Storage Inc., an owner and operator of self-storage properties, released operating results for the three months and year ended Dec. 31, 2009. Highlights include:

Achieved funds from operations (FFO) of $0.22 per diluted share including development dilution of $0.03 per share. FFO as adjusted was $0.23 per share after excluding approximately $0.01 of non-recurring severance charges associated with the company's closure of its Memphis, Tenn., marketing operations.
Same-store revenue and net operating income (NOI) decreased by 4 percent and 6.9 percent, respectively, when compared to the three months ended Dec. 31, 2008.
Increased same-store occupancy to 83.2 percent as of Dec. 31, 2009, compared with 82.2 percent as of Dec. 31, 2008.
Secured $63 million of debt financing as part of the company's efforts to strengthen its balance sheet.
Completed the development of four self-storage properties at a total cost of approximately $36 million.
Declared and paid a dividend of $0.13 per common share.

“Despite the challenging environment, we realized numerous achievements in 2009. These include improving our balance sheet, maximizing our property performance and expanding our operational footprint by 10 percent,” said Chairman and CEO Spencer F. Kirk. “As we look to 2010 and beyond, we are more optimistic as occupancy and rental rates strengthen. We are also encouraged about the options available for Extra Space to grow in an intelligent manner through our third-party management program and potential acquisition opportunities.”

Related Articles:

Five Questions With Extra Space Storage Chairman and CEO Spencer Kirk

Extra Space Storage Reports 3Q 2009 Results

Extra Space Storage and HSRE Close Joint Venture

Florida Self Storage Association Introduces New Board Members

Feb 22, 2010

The Florida Self Storage Association (FSSA) welcomed new board members Michael Mele, Lainie Miller and Matthew Van Horn. Each will serve a three-year term. In addition, the FSSA welcomed Scott Kelly and Mike Pontillo, who are alternate board members with a one-year term.

The 2010 board convened in January under President Rick Yonis to strategize and set goals for the upcoming year. “We are excited about the upcoming year and the challenges ahead of us,” Yonis said. “The board is working diligently to make vital changes in the lien laws to take out some of the antiquated clauses that lead to excessive costs to the operations of our facilities.”

In working with the national Self Storage Association, FSSA membership and liaisons in Tallahassee, the FSSA is hopeful to incorporate these technical changes into law.

The FSSA is a non-profit organization comprised of individuals and business people who have an interest in the self-storage industry in Florida.

Related Articles:

Florida Self Storage Association Opens Registration for May Conference & Expo

Florida Self Storage Association Summarizes 2009 Achievements

Florida Self Storage Association Hosts Executive Retreat

Self-Storage Talk: Inside Self-Storage World Expo Las Vegas 2010

Online Reservation System for Self-Storage Independents

Feb 22, 2010

Smart Marketing Concepts LLC, an Internet business-strategy and software-development company, is introducing two subsidiaries: Smart Storage Concepts, an online self-storage reservation system, and Usave Storage. The companies will make their official debut at the Inside Self-Storage World Expo in Las Vegas, March 1-3, 2010.

Smart Storage Concepts will provide real-time access to tools necessary for generating and capturing online sales including:

White-label reservation services
Internet marketing services
National brand membership
Website design services
Merchant services

“Today, staying ahead of the technology curve is critical to the success of any business,” said CEO Mayra Harley. “When we first took a look at the self-storage business, we quickly realized the industry was primarily made up of a diverse group of independent operators who owned one, to maybe five or six facilities. Writing user-friendly software and creating new technologies are cost-prohibitive for most small businesses.”

Headquartered in Tampa, Fla., Smart Marketing Concepts was formed in 2003 to provide next-generation technology and Internet marketing solutions to a wide variety of companies in need of a unit-based Internet transaction processing, real-time management, and online reservations system.

Related Articles:

OpenTech Launches Insomniac Self Storage Network for Online Reservations

Building and Marketing a Successful Self-Storage Website

Is the Future of Self-Storage Software Online?

Self-Storage Talk: Shifting Marketing From Offline to Online

Self-Storage Property-Management Software Integration

Feb 22, 2010

USstoragesearch.com, an online self-storage directory, now integrates with all the major self-storage property-management software systems including Centershift STORE, SiteLink PC, SiteLink Web, DOMICO, Syrasoft, Storage Commander, StorMan, Symbio, Task Master, Total Recall and WinSen.

Any USstoragesearch.com member facility using one of the above property-management systems now has a way to display available inventory and secure online reservations via the USstoragesearch.com website.

Through the USstoragesearch.com online reservation network, facilities can offer customers real-time inventory of available storage units, pricing and specials, 24 hours a day, seven days a week. Reservations are confirmed by credit card and delivered in real-time through the property-management software.

USstoragesearch.com completed the integration in partnership with the ISSN Network, creating custom development for certain software that didn’t yet allow for online reservations.

“We’ve been able to customize a solution that gets around the built-in limitations within some software,” said Megan Eckert, executive vice president. “This is good for our industry and opens our online reservation network to storage operators who have been waiting for the same convenient access to real time reservations as everyone else.”

Related Articles:

USstoragesearch.com Offers Up Real-Time Self-Storage Rentals

USstoragesearch.com Self-Storage Members Raise $5k for Toys for Tots

Supplier Spotlight: USstoragesearch.com

Self-Storage Talk: Are Things Picking Up for You?

Commercial Mortgage-Backed Securities and the Self-Storage Market Today

Feb 22, 2010

In what is surely a welcome sign for commercial real estate borrowers, the commercial mortgage-backed securities (CMBS) market finally started to demonstrate some positive signs of life in 2009’s fourth quarter, after almost 18 months of complete inactivity. Toward the end of the year, three separate issuers successfully brought deals to market and sold their mortgage bond issuance. This is a big step forward for commercial real estate investors as well as the financial community at large, and is hopefully the beginning of a return to lending-market normalcy.

As a quick review, CMBS are bonds backed by commercial mortgages. A basic CMBS transaction structure starts with lenders who pool the loans of multiple commercial properties, and then sell the income stream from the mortgage payments to investors in the form of bonds. When the bonds are sold to the investor community, capital is returned to the lender, who is able to redeploy that capital and make more loans. In this structure, capital flows efficiently between borrowers, lenders and investors; hence the name “conduit” is given to lenders using these financing approaches.

Historically, conduit lenders provided significant lending volume and liquidity to the commercial real estate community. According to the Mortgage Bankers Association’s Q3 2009 Quarterly Data Book, CMBS and other securitized products comprise nearly 21 percent of today’s roughly $3.43 trillion in outstanding commercial-property debt. Ignoring the peak, when conduit volume originations exceeded $200 billion in a single year, the average annual CMBS volume during the past decade ranged from $80 billion to $100 billion.

But when the music stopped in 2008 and conduit lenders could no longer actively securitize commercial-mortgage debt, there was simply not enough capital available elsewhere to meet the commercial-property market’s financing needs.

A positive sign that we’re likely to see more CMBS conduit lending activity is many lenders have begun rehiring staff after eliminating their capital-markets lending groups just two years ago. In addition to several new lenders entering the market, established firms such as JP Morgan, Goldman Sachs, The Royal Bank of Scotland and Wells Fargo are all believed to have begun hiring and, in some cases, even lending in their revamped conduit programs.

Self-Storage Still Faces CMBS Hurdles

Though CMBS programs are returning to the market, don’t expect them to be a significant source of self-storage capital. Conduit lenders will focus first on the “low-hanging fruit” of refinance deals whose economics make them extremely attractive transactions. There’s currently a glut of these loans on lenders’ books that have been previously extended due to a general lack of available refinancing capital.

In addition, prior to purchasing new CMBS bonds, end investors will look for assurance that the collateral quality is extremely high, the lender’s underwriting is transparent and prudent, and leverage is extremely conservative. For CMBS bond pricing to again become consistent and somewhat predictable, the real estate collateral and lender underwriting must initially be generic, giving comfort and familiarity to market participants and allowing the market to first gain a foothold and then build some momentum.

Another challenge self-storage owners will encounter with CMBS programs in the near term is the government’s TALF (Term Asset-Backed Securities Loan Facility) program. Most new issuance CMBS transactions to date have used some form of the TALF to help support their transactions. However, the program includes eligibility guidelines that currently make it very difficult for self-storage loans to conform.

Self-storage was not initially included as an eligible property type under the program. Recently though, Park Bridge Financial successfully obtained approval from the New York Federal Reserve to include self-storage as an eligible asset class in the TALF program. Nevertheless, costs and other factors involved with a TALF execution mostly limit the product at this point to only the largest institutional borrowers such as real estate investment trusts, Few self-storage borrowers fit the current program’s criteria.

A final hurdle storage owners face is active CMBS programs have loan size, property classification and other restrictions that do not favor self-storage economics. Most have minimum loan-size criteria of $10 million (in some cases as high as $20 million), which alone presents a major obstacle for many self-storage owners and investors.

It’s also not uncommon for lenders to limit their current CMBS offerings to retail, office and industrial properties given their familiarity and expertise with these asset classes and the sheer volume of transactions available. Over time, these restrictions will become less onerous, as additional capital providers enter the space and lending competition increases.

The good news is that as CMBS lenders and insurance companies begin to lend again in earnest, the liquidity they present to the market will take pressure off the system down the line, freeing up capital at the regional and local bank level. With CMBS lenders providing a much-needed outlet for larger financing transactions, local and regional banks will once again be able to concentrate on a greater number of borrowers, such as storage property owners, with smaller loan needs.

Hard-Fought Victories Bode Well Long-Term

Despite that it may take time for CMBS capital to make itself available to mainstream self-storage borrowers, our industry has achieved two hard-fought victories during this current recession and period of unprecedented illiquidity. First, the government’s willingness to analyze and accept self-storage as a TALF-eligible property type validates storage as an acceptable asset class for all institutional investors. Second, self-storage has outperformed all other property types in terms of CMBS loan delinquency rates throughout the recession; a fact that will surely resonate with lenders and investors as financing markets improve during the next several years.

Each individual battle victory helps put self-storage on equal financing footing with better-known commercial-property types. Thanks to these achievements, we expect lenders will be more willing to include the storage-asset class in their product mix going forward, which is a positive trend for self-storage investors given the rocky roads they’ve been forced to travel in recent years.

Shawn Hill is a principal at Chicago-based The BSC Group, where he provides mortgage-brokerage and financial-consulting solutions to self-storage and other commercial real estate owners nationwide. He can be reached at 773.517.8504; e-mail [email protected].

Related Articles:

Extend and Pretend: Finance Regulators Support Self-Storage Borrowers

Self-Storage Financing: Facing the Break Point and Predictions for 2010

Managing Self-Storage Debt: Solutions for Under Performing Properties

The Quest for Self-Storage Financing: Who Has It? How Do You Get It?