Phoenix-based OpenTech Alliance Inc., developer of INSOMNIAC self-storage kiosks, has made its INSOMNIAC software available over the Internet through INSOMNIAC Online.

Licensed on a pay-as-you-go model, INSOMNIAC Online uses cloud computing to rent units on mobile and Web-capable devices. The software integrates with many of the self-storage industrys major management-software programs and is intended to give facility operators the option to change programs without having to pay to redevelop their desktop and mobile websites. Additionally, the software will allow consumers to rent units in real time, make payments, sign up for tenant insurance, update accounts, access gate codes and much more. The service also includes integrated fraud prevention to ensure the identity of new tenants.

Infinite Self Storage, an operator with stores across Illinois, Indiana, Missouri and Ohio, was the first company to implement the new service for its entire portfolio of 23 properties.

"Our company has proactively embraced technology, and we continue to look for ways to become more competitive and serve our customers in ways that are more convenient for them," said Steve Lavery, vice president for Herman & Kittle Properties Inc., which owns and manages Infinite Self Storage.

"We feel innovation that makes a real impact is based on a broad range of experiences, opinions, and beliefs, so we enjoy listening to self-storage operators and collaborating with them to help us develop solutions to their unmet needs," said Robert A. Chiti, OpenTech President and CEO.

Self-storage customers can use an INSOMNIAC kiosk to sign leases, provide fingerprints, scan drivers' licenses and purchase locks. If the customer did not receive a gate code during the online rental process, it can be provided at the kiosk. Consumers can also get personal assistance from a remote "storage counselor" through the kiosk if needed. For security purposes, the entire transaction is digitally recorded.
 
OpenTech products and services include seven models of INSOMNIAC self-storage kiosks ranging in price from $5,500 to $18,000, the INSOMNIAC Live! call center, and the INSOMNIAC Self Storage Network for online storage reservations and rentals. The company will exhibit at the Inside Self-Storage World Expo in Las Vegas, March 14-16, in booths 525-529. Show details can be found at www.insideselfstorageworldexpo.com.

Smart Storage Concepts (SCC), which provides Web-based reservations solutions for the self-storage industry, has created an engine that will allow a self-storage operation's social-media friends and fans to book units while visiting a facility's Facebook page.

The first SCC client to introduce online reservations to its Facebook presence is Budget Self Storage, which operates seven facilities in Florida. Now the company's Facebook friends, fans and friends of fans can reserve a unit through the social-media page.

"We are really excited about this, said Jody Burks, Budget's general manager of operations. Since we first began using SSCs real-time reservations technology on our corporate website back in 2010, weve been able to identify, track and communicate with our online customers. Now with a Facebook strategy, we can spread the word about the kind of service and savings we have at Budget Storage around our communities. Its word-of-mouth advertising at its best.

SSC provides a centralized reservations system that allows online shoppers to deal directly with the self-storage operator rather than go through a third-party website. It is the first and only company to provide a real-time reservations system for self-storage websites, according to Mike Harley, president and chief operating officer for SCC. "With social media rapidly growing, todays consumer expects more than information when landing on a corporate Facebook page. They expect to be able to transact business while there, and in real time. This saves the customer time and money while enabling our client to track every transaction," Harley said.

SSC, a subsidiary of Smart Marketing Concepts Inc., is a technology and marketing company with the purpose of delivering reservations technology and Internet-marketing strategies to the self-storage and mobile-storage industries. Its proprietary platform seamlessly integrates with SiteLink self-storage software, produced by SMD Software Inc. The SCC team has a combined 55 years of expertise in the field of reservations, data management and product distribution.

By Noel Cain

If one of your goals this year includes refinancing the debt on an existing self-storage property or using debt to purchase a new facility, its time to review the loan options available and how you might use these tools to make 2012 a successful year financially. The following overview will summarize the alternatives as well as their pros and cons.

Commercial Mortgage-Backed Securities

Commercial mortgage-backed security (CMBS) lenders are back with revised loan programs that still feature long-term fixed rates up to 10 years. Loans are also non-recourse, with the exception of environmental hazards and fraud. Generally speaking, these loans are best suited for stabilized, class-B and better properties in major metropolitan areas.

Most lenders prefer loans greater than $3 million, which will limit eligible properties. There are few options for loans less than $3 million, with only one or two lenders offering programs. Borrowers need to have significant liquidity in the neighborhood of 10 percent of the loan amount, with net worth equal to the loan amount.

Pros

• CMBS loans offer long-term fixed rates with terms from five to 10 years.
• Higher-leverage loans are available with advance rates up to 75 percent loan-to-value (LTV).
• Lenders are transactional in nature, with no further banking obligations.
• Loans are non-recourse to the borrower.

Cons

• Few options exist for transactions of less than $3 million, which make up the bulk of self-storage loans.
• There are significant upfront good-faith deposits and high transaction costs.
• After the closing, there's limited flexibility for expansion or significant changes to the property.
• Includes high prepayment costs (defeasance or yield maintenance).

Insurance Companies

Insurance-company lenders are, in many ways, similar to CMBS lenders in that they specialize in long-term, fixed-rate loans to high-quality facilities in major metropolitan areas. Most insurance companies will not lend less than $5 million, with many having minimum loan sizes of $10 million, making it very difficult to qualify for all but a few self-storage properties.

Similar to CMBS loans, insurance-company loans are generally made on properties that are stabilized or near stabilization with strong cash flow. Borrowers need to have significant net worth and liquidity. Insurance companies often offer non-recourse and recourse loan options.

Pros

• Insurance-company loan programs offer fixed-rate, long-term loans including fully amortizing loans up to 20 years.
• Interest rates are generally the lowest available.
• They have greater flexibility after closing for expansion or other significant changes.
• Non-recourse options are available.

Cons

• Borrowers need to have significant net worth and liquidity, similar to CMBS loan requirements.
• Loan advance rates are generally limited to 65 percent LTV, with many insurance companies limiting advance rates to 50 percent or less.
• Very few properties will qualify; most are on the West Coast and East Coast or in large metros.
• There are high prepayment costs (typically yield maintenance).

Small Business Administration (SBA)

SBA loans can offer self-storage owners a wide array of options including short-term loans through the 7a program and long-term options through the 504a program. SBA lenders can also offer fixed and floating rates through both programs.

The SBA programs offer the highest advance rates available of the major loans programsin some cases, up to 90 percent. However, these loans are not meant for all owners. As the name would indicate, these loans are focused on active business owners and operators, not passive investors.

Pros

• SBA loans offer short-term (7a) and long-term (504a) money with floating and fixed rates.
• Higher leverage loans are achievable, up to 90 percent LTV, with realistic LTV at 80 percent.
• Offers the ability to build in additional project costs into financing such as capital improvements and working capital.
• They can be used for property expansion and new construction in some cases.

Cons

• There are stringent document requirements.
• These loans also have high transaction costs, typically between 3 percent and 4 percent of the loan amount.
• Processing and closing times can be long, which poses problems for acquisitions.
• Borrowers with significant net worth and liquidity will not qualify.
• Third-party managed properties will have difficulty qualifying.
• Prepayment restrictions are fixed but can be high.

Banks and Credit Unions

Bank and credit-union loans offer the widest variety of terms and rates. In fact, banks may have more than one of the above-mentioned loan programs in addition to their commercial real estate loan platform. Generally speaking, bank and credit loans are considered short- to medium-term loans from one to seven years that can have a fixed or floating rate or, in some cases, a combination.

Interest rates are typically some of the most competitive available. However, in exchange for access to this money, these institutions want a deeper relationship that may include deposits, lines of credit or additional lending opportunities.

Pros

• Bank loans offer short- to medium-term loans from one to five years.
• Generally, advance rates range from 70 percent to 75 percent LTV.
• Fixed and floating rate options are available.
• Banks may offer construction financing to clients with strong relationships.
• Credit unions typically have no prepayment restrictions.

Cons

• There are no long-term solutions for stabilized properties.
• Banks are generally more relationship-focused and may require a broader depository relationship.

Private Lending

Finally, there are private lenders, which include hard money and bridge lenders. This type of lender offers the most flexibility, as they are willing to lend on non-cash-flowing properties, properties in leaseup, refinance of discounted payoffs, and mortgage-note purchases.

In exchange for this flexibility, interest rates are typically between 10 percent and 15 percent. Due to the high cost, these loans are typically measured in months rather than years. Loans are also typically full-recourse obligations and may require additional collateral to be posted.

Pros

• Loans often close in a matter of days rather than weeks or months.
• Deals can be underperforming/non-performing; however, there needs to be a clear road map to a permanent finance solution.

Cons

• These loans are very short term in naturemonths rather than years.
• Additional collateral is often required to be posted for the loan.
• They have the highest costs in interest rate and transaction costs and upfront points.

How to Choose?

The current interest-rate environment makes this one of the most desirable times to be looking for a loan. While there are many options available, the difficulty arises in selecting the right type and then pushing through to receive the actual capital. Hiring a mortgage professional to help navigate these choices and determine the preferred solution can help ease the process. Whichever option you choose, this primer offers a starting point to successful banking in 2012.

Noel Cain is a vice president at Chicago-based The BSC Group, where he provides mortgage brokerage, financial consulting, and loan-workout solutions to self-storage real estate owners nationwide. To reach him, call 847.778.4661; e-mail [email protected] ; visit www.thebscgroup.com .

Smart Self Storage of Solana Beach, Calif., part of the 19-facility San Diego Self Storage (SDSS) chain, will be a major sponsor of the 16th annual Del Mar Solana Beach Sunrise Rotary Turf Bocce Ball Family Day and Tournament. The event will occur March 4 at Del Mar Horse Park.

The proceeds from the sold-out tournament will benefit three local youth and family charities: Voices for Children, Just in Time and Community Resource Center. Additionally, a portion of the proceeds will be donated to international projects, such as eradicating polio, providing clean water and educating children in developing countries.

Public spectators are invited to attend between 9:30 a.m and 1 p.m. for a $20 admission fee. The admission includes a wristband, which entitles the wearer to breakfast, beverages and lunch.

"Last year, seven SDSS teams advanced to the final round," said J. Terry Aston, managing member of SDSS. "Two of the seven SDSS teams competed in the final round. This year we hope to take home the championship in support of this event that will benefit abused children, foster youth and a refuge for victims of abuse.

The event is hosted by the Del Mar Solana Beach Sunrise Rotary, which is a local chapter of Rotary International, a service-club organization with more than 1.2 million members in 34,000 clubs worldwide.

Founded in 1972, SDSS has 19 facilities across San Diego, Orange and Los Angeles counties in Southern California.

The proposed revision to Florida's self-storage lien statute, House Bill 715 (HB 715), passed the state House of Representatives unanimously on Feb. 23. On Feb. 27, HB 715's companion bill, Senate Bill 646 (SB 646) was heard in the Senate Judiciary Committee and also passed unanimously. The revision is the result of a combined legislative lobbying effort by the Self Storage Association (SSA) and the Florida Self Storage Association (FSSA).

If the proposed legislation passes a full Senate vote and is signed into law, it will accomplish the following:

• Allow a tenant to provide a change of address to the facility using First Class Mail or e-mail. Currently, a tenant must hand deliver his address-change notice or send it via Certified Mail.
• Allow a Notification of Default to a tenant to be sent using First Class Mail with a Certificate of Mailing or e-mail, provided receipt of the e-mail by the tenant is verified. Currently, these notices must be hand delivered or sent via Certified Mail.
• Require that self-storage rental contracts or applications ask whether a person is in the military. By knowing which tenants serve in the military, a facility operator can extend to them protections against lien-sale proceedings according to the Servicemembers Civil Relief Act.

Tallahassee, Fla.-based self-storage operator Steve Chaires, owner of Advanced Moving and Storage, was present for the hearing, representing the FSSA. Tim Dietz, the SSAs senior vice president of government relations, testified on behalf of the national association.

The Senate vote on SB 646 has not been scheduled but can be tracked at www.flsenate.gov. Visitors should hover their mouse over "Session" in the navigation bar and click on "Calendar."

A developer who would like to convert the site of a former Catholic school in Sarnia, Ontario, Canada, into a self-storage facility is facing opposition from the city planner, who wants the city council to refuse the developer's rezoning application at a public hearing this afternoon.

Nelmar Developments Inc., owned by Sarnia residents Robert and Rino Iacobelli, needs a zoning change to convert the 3.7-acre site of the former St. Margaret Catholic Elementary School into a self-storage facility consisting of eight warehouses and an office building. Mayor Mike Bradley told the source the neighbors of the proposed project have no objections to the plan, but Director of Planning and Building Kim Bresee argues the development does not align with the rest of the neighborhood, which is primarily residential.

We are concerned that a neighborhood thats been there for years and years will erode if theres an industrial use in the middle of it, Bresee told the source. Its not an easy or clear-cut situation because theyve taken steps to integrate the mini-storage with landscaping and screening, Bresee said. But the fact remains it is still an industrial use and will abut the backyards of predominantly residential property.

The city currently operates a public-works yard, where waste and recycling are donated, collected and processed, less than a block away from the proposed site. But the planning department would prefer to see development Bresee calls more supportive of residential areas, such as a daycare center or a convenience store.

A petition attached to the application has 34 signatures from neighbors who say they don't oppose the facility as long as the property is fenced and has limited access, and gates are included the plan. Dino Iacobelli told the source a January open house with 40 neighborhood residents in attendance seemed to indicate the neighbors supported the company's plans.

The school has been vacant since 2010, along with three other Catholic schools in the city. Nelmar acquired another former school site and also places to redevelop it but hasn't disclosed plans.

Bradley told the source he has yet to take a position on the application and will wait for the public meeting before making up his mind.

By Jeffrey B. Turnbull

The last several years have been tough for the self-storage industry. Rents are down, vacancies and operating expenses are up, and our net operating income (NOI) has suffered as a result. The quickest way to improve your bottom line, and your facilitys value and bankability, is by cutting expenses.

One of the largest expense items for most owners is the annual property-tax bill. The dilemma is that by lowering your property-tax valuation, and hence your tax bill, the true value of your facility actually increases.

Local property-tax assessors have duly noted the success of our industry as a business model. Our property-tax valuations and expenses have been consistently rising over the years. As owners, we have traditionally been reluctant to contest these rising values. Maybe we thought a higher property-tax value would enable us to sell our facility at an elevated price or finance a greater amount at better terms.

For whatever reason, many owners have left this major expense item untouched. But you canand shouldlook at challenging your property-tax valuation so you can reduce your property-tax bill and raise your overall profit.

Potential Annual Tax Savings

Lets look at a quick example. Say in 2008 you owned a self-storage property producing an NOI of $280,000, with a 2008 tax value of $3.5 million (based in part on a cap rate of 8 percent). With the local property-tax rate of $.01, your property-tax bill will be $35,000 annually.

Now lets say your rental income has dropped by 15 percent over the past several years and expenses have been flat. Your NOI for 2011 is $238,000. Cap rates have moved up to 9 percent for properties similar to yours. Can you demonstrate that your self-storage facility should have a value closer to $2,644,000 for a 2012 revaluation? You now have a strong argument for it. Your new tax bill should drop to $26,440 (other things being equal), saving you $8,560 annually.

The accompany chart demonstrates the potential tax savings. In reality, the local tax assessor may choose not to reduce the bill, even though cap rates increased and NOI decreased. The self-storage owner needs to point out the proper cap rate and the decrease in NOI to get the new "proper" value.

Challenging the Assessors Valuation

You can contest the value of your property yourself, or hire an independent third party to act on your behalf. Many attorneys and commercial-property appraisers will handle an appeal for a reasonable fee. There isnt a nationwide standard for property-tax value assessment, although a property is typically reassessed every four years.

As a self-storage owner, you may contest these values during the time of reassessment, or sometimes on an annual basis. The local property-tax authority, also known as the board of appeals or board of review, will provide you with guidelines on when you may contest or challenge a value, and what items will be allowed for an appeal of value.

Some jurisdictions allow for a two-step informal appeal, then a more detailed quaisi-judicial process a bit later. You just have to ask the local property-tax authority for the rules and follow them. Make sure you abide by the timelines; and, of course, all written information sent to the board of appeals should be Certified Mail with a return receipt requested.

Consider appealing the valuation of any property if you have a reasonable belief the assessors value is wrong (i.e., the wrong building square footage, which is a mistake of fact), or the value seems excessive (subjective determination as to market value). When you receive your property valuation, check it carefully. Does the assessors office have the right information regarding facility size and zoning? If not, immediately contact the assessors office to contest the value based on these inaccuracies. They may have the wrong square footage or overall acreage, which could result in a lower valuation and tax bill.

Many jurisdictions use a market value approach on a certain date, say Jan. 1, of a specified year. Is the value accurate? If youre not sure, simply ask a competent real estate broker who handles commercial property in your area if the value seems correct. The assessor may have the wrong number or type of units. An up-to-date unit listing and rent roll would clear up these errors.

Tax assessors arbitrarily make cap-rate, income and expense assumptions to streamline their process of valuation. Many times, these subjective assumptions lead to unrealistic and inaccurate values. For example, if there are three 100-unit facilities in your market at 85 percent occupancy, a local tax assessor may determine the value of your 700-unit facility at 85 percent as well. They may use a $.75 per-square-foot operating-expense figure (unreasonably low), because one facility in the area reported that number. An organized presentation of the actual monthly income statements for the tax year from you or your accountant would help your case for a lower valuation.

The assessor also may be using a cap rate incorrectly. They may apply a 6 percent cap rate because a commercial building down the street sold at that rate. Finally, you may have a direct sales comparison for your self-storage facility, which would support your case for a lower value. The bottom line in dealing with the local property-tax assessor is to provide ample evidence supporting your valuation through clear and concise facts.
 
Review Your Tax Bill

Its worth your time and effort to review your property-tax bill for any factual errors or obvious over-valuation issues. Review and understand the rules for challenging the new value. Use a clear and organized approach to any appeal, follow the rules and time deadlines, and rely on the facts of your case to support your assertion of value.

You can always get a professional to deal with any tax protest or appeal if necessary. A reduction in your self-storage value for property-tax purposes will lower your property-tax bill (other things being equal), and can make your facility actually more valuable over time.

Jeffrey B. Turnbull is president of Kodiak Mini Storage LLC. Hes been involved in the self-storage business as a developer, owner and operator for more than 17 years, and currently owns two facilities in the Charlotte, N.C., market. Hes also a licensed attorney in North Carolina, a licensed real estate broker in North Carolina and South Carolina, and a past president of the North Carolina Self-Storage Association. He can be reached at [email protected] .

By Bill Alter

In countless articles written by self-storage experts over the years, it has been drummed into our heads that property value is determined by capitalizing net operating income (NOI). The formula is NOI divided by capitalization (cap) rate equals value. The concept to remember is the lower the cap rate, the higher the value.

Cap rate is the yield on an investment, on an all-cash basis. Why is it some investments sell with lower yields and others must offer higher? There must be some logic to that phenomenon, but what is it?

The mystery is who determines the cap rate and how. Will buyers, sellers, appraisers and lenders all use the same cap rate for a particular property? Why do cap rates vary from property to property and market to market? The answers to these questions make you appreciate the subjective components that go into determining property value.

Property value is not simply NOI divided by cap rate, but rather a blend of the current snapshot and the prospect of future growth, which is subjective and varies with investor imagination and skill. Its more of an art than a science. Heres the question that needs to be answered: Is the net income from this property likely to increase over time and at what rate?

This article discusses factors that go into determining the quality of a particular investment as it compares to other (apparently) similar investments. The astute self-storage investor is aware of these subtle influences on value and understands how each one might justify a lower cap rate or require a higher one.

Ask Questions

To arrive at an accurate, fair value for a self-storage property, especially when it is in a city or state with which you are not familiar, it's often necessary to conduct an in-depth investigation of the property and its market. Ask questions of the brokers involved in the transaction and the seller himself. Ask about the city and the submarket.

When considering what the cap rate should be, you must know and understand how asking prices are being determined for similar for-sale properties in the market. Here are some things to consider:

• What are the asking cap rates in this market?
• How do the other properties compare to the your prospective property?
• Are the rents and economic vacancy nearly the same?
• Do the operating expenses of the other facilities for sale include approximately the same line items as your prospective property?
• Are the expense amounts roughly the same?
• Will those amounts go up or stay the same when you own the property?

You must also know and understand recent sales in the market. What has actually sold? What were their cap rates, and how were they underwritten?

You must also know if the city and your specific submarket is growing in population and at what rate. Can you expect that growth to enable occupancy and rent increases? Lower cap rates are justified if you can safely expect population growth to provide consistent increases. The reverse is also true: Higher cap rates are required if the market is oversupplied, creating a situation where it could be a long time before revenue increases.

Competition and Property Condition

Be aware of any possible new entrants to the market or expansions to existing self-storage facilities. Are there vacant land parcels in the area that could allow for new competitors? If so, maybe the cap rate on your prospective property needs to be a little higher to offset that risk. Ask your broker and the seller if theyre aware of any new facilities in the pipeline. They will usually know.

Also consider the existing competition and the physical condition of your prospective property. How does this property compare to others in terms of location, age, curb appeal, security and amenities? Is there any economic obsolescence? What about deferred maintenance? How are the roofs and asphalt? Find out from local contractors how much it will cost to repair physical and structural issues or install improvements that will allow the property to compete successfully in the future. If these issues are minimal, it's not necessary to push the cap rate quite so high.

Is there any room for expansion on the site? This can be in the form of vacant land included with the purchase or land now being used for RV or boat parking. Expansion potential is a good thing because when operating expenses are already covered, virtually every dollar of new income goes directly to your bottom line.  

Facility Marketing

Marketing is an essential part of a self-storage facility's overall success. You should know going into the sale what the current owner is doing in this area. Does the facility have a website? Is it well-optimized so it comes up near the top of all the searches? Are you able to improve on what the seller is doing? You might accept a lower cap rate if you can improve these results without breaking the bank.

All these items need to be considered and factored into your determination of which cap rate is required for a specific acquisition. Dont go into any sale blindly. Ask questions, consider your options, then make the best decision to ensure your investment offers the rewards you seek.

Bill Alter has been a self-storage specialist with Rein & Grossoehme Commercial Real Estate in Arizona since 1986. He has been responsible for the sale of more than 100 storage facilities, totaling more than 5,500,000 square feet and more than $200 million. He can be reached at 602.315.0771; e-mail [email protected].

Using Direct Capitalization to Estimate Facility Value

By Charles Ray Wilson

Though self-storage facility values have declined since their peak in 2007, the industry has outperformed all other real estate types during the recession, and that has once again garnered the attention of investors. Self-storage as an industry is also becoming more transparent. Econometric models designed to measure supply and demand have improved, which allows investors to feel more comfortable with their risk-assessment calculations.

Key industry brokers, property owners and managers still use direct capitalization and discounted cash flow as primary tools of the income approach to estimating facility value. They use the sales-comparison approach as support. For the purposes of this article, I'll focus primarily on direct capitalization as a method for determining value.

Direct Capitalization

While there has been some pretty dramatic changes in self-storage operating performance, i.e., declines in occupancy and rental rates, greater use of concessions, etc., the method investors and appraisers use to estimate facility value has not changedonly the depth and sophistication of the analysis. The value of all real estate is still the present worth of future cash flow.

Thus, the appraisers job is to assess the local market conditions that will influence a property's future net operating income (NOI). An analysis of these conditions is the foundation on which an objective opinion of value can be reached.

The basis of direct capitalization starts with making an estimate of the facility's potential gross income, which involves a detailed analysis of asking and actual rental rates by unit type compared to competitors in the local market. Then an estimate of the stabilized vacancy is made, based on the current supply of competitive units in the market. Vacancy is comprised of three main components: stabilized physical vacancy, collection loss and concessions.

Next, the appraiser must estimate total operating expenses, which typically include:

• Real estate taxes
• Property insurance
• Repairs and maintenance
• Administration
• Onsite management
• Offsite management
• Utilities
• Advertising
• Miscellaneous

NOI is derived by subtracting vacancy and operating expenses from the estimate of potential gross income. Its then capitalized into a value estimate by dividing it by the cap rate. The appraiser must select an overall cap rate that reflects facility quality and location and the risk of its future performance.

Investors consider the gap between class-A and -B self-storage facilities to be much smaller than the gap between class-B and -C properties. Cap rates for stabilized, class-A assets can fall below 7 percent, but tend to hover near the low to mid 7 percent range for class-B assets. The market generally indicates that overall cap rates for class-B assets are 25 to 50 basis points higher than class-A assets. For class-C assets, the spread increases to as much as 100 basis points. Thus, class-C cap rates can be 8.5 percent or higher, depending on quality and location.

Cap rates have been declining, and cap and yield rates continue to decline, according to the most recent self-storage investor surveys by PricewaterhouseCoopers (formerly Korpacz). With new capital (equity and debt), cap rates have decreased 45 basis points to an average of 7.3 percent (stabilized) from one year ago.

The accompanying direct-capitalization model assumes the self-storage facility is operating at its long-term level of economic occupancy. If the facility is not stabilized, the appraiser must estimate the value of the rent loss between today's level of performance and stabilization, and then deduct that amount from the stabilized value estimate.

Though good-quality, stabilized facilities are in the most demand, limited available product has caused some investors to consider the purchase of unstabilized, lower quality" or value-added assets. This is bringing more focus on facility classification as it relates to investment risk.

Self-storage investment conditions have improved significantly over the past four years as a result of the industry's outstanding performance. Public and private real estate investment trusts as well as large national and regional companies are competitively bidding on the limited supply of available investment-grade sites. Investor demand for good-quality, stabilized facilities is pushing cap rates down and values up to near pre-recessionary levels in many markets.

Charles Ray Wilson is the founder of Self Storage Data Services Inc., an independent research firm that maintains the nations largest database of self-storage operating statistics. Hes an internationally recognized leader in providing independent research on the self-storage industry. For more information, visit www.ssdata.net.

U.K. self-storage operator Safestore Holdings PLC released an unaudited report on its trading progress for the first quarter of its fiscal year, which ended Jan. 31, 2012. The report indicates Safestore has experienced growth in residential and business rentals. Highlights include:

• Revenue was about £24.6 million ($39 million), a 6.7 percent year-over-year increase.
• Total revenue per available foot was about £19.24 ($30.40), a 3.4 percent increase over the previous year.
• Closing occupancy on Jan. 31 was approximately 3.2 million square feet. This represents an overall occupancy level of 62.7 percent, a 4.5 percent year-over-year increase.
• Average rental rate for the quarter was about £25.59 ($40.43) per square foot, a 2.7 percent decrease over the previous year.
• The company opened two new stores in the quarter, one in London's New Southgate and the other in Gonesse in the Paris area. Safestore now claims 121 trading stores in its portfolio97 in the United Kingdom and 24 in Paris.
• Paris continues to be the company's strongest performing market, with a year-over-year revenue increase of 9.6 percent, followed by London and South East at 6.5 percent, and the rest of the United Kingdom at 4.4 percent.
• In a period traditionally characterized by a high number of self-storage move-outs, Safestores first-quarter 2012 occupancy decreased by 24,000 square feet from the fourth quarter of the previous year, compared with a 77,000-square-foot drop-off at that beginning of 2011. The company attributes this to a higher number of move-ins to offset the loss.

Safestore has nearly 41,000 customers and employs approximately 500 people. Excluding the 12 Space Maker facilities under its management, Safestore boasts 5.2 million rentable square feet of storage, including 10 expansion pipeline stores.