Well-known New York writer, artist and socialite Anthony Haden-Guest has begun a public campaign to complain about the legal procedures and customer service at self-storage facilities, particularly those of Public Storage Inc., and kicked off the campaign with a benefit party last week. The campaign accompanies a lawsuit Haden-Guest has filed against the storage company.

According to the source, Haden-Guest became delinquent on a unit at a Queens Public Storage facility two years ago while the writer was temporarily living in London. Haden-Guest, who grew up in England, had been storing what he said were hundreds of thousands of dollars worth of books, art, clothes and personal papers. The facility eventually auctioned the unit for $630. The auction buyer now plans to resell Haden-Guest's goods for a profit, unless the writer can come up with a $350,000 bond to forestall the sale.
I would like the judiciary to scrutinize very closely what these storage companies do, Haden-Guest told the source. Basically, I want to occupy Public Storage.

Haden-Guest argues that while residing in England, he wasn't receiving Public Storage's nonpayment notices (for $1,350) because they were being sent to his former address in New York. By the time he discovered he was in arrears, his property had already been sold. A spokesman for Public Storage declined to comment to the source.

The benefit party, called "Anthony Haden's Public Storage Blues," was hosted at the Hiro Bedroom in the basement of the Maritime Hotel in New York. Its attendees, who all paid $30 to enter, included wealthy New York publishing magnates, artists and many musicians, including Deborah Harry of Blondie and Nile Rodgers of Chic. Rodgers performed for the crowd, and Haden-Guest read a poem he'd written called "Public Storage Blues."

Haden-Guest currently is an art columnist for the Financial Times. His drawings have appeared in the New York Observer, and he has published articles in the Sunday Telegraph, Vanity Fair, The New Yorker, Paris Review, Sunday Times, Esquire, GQ, The Observer, Radar and others. One of his most notable books is "The Last Party: Studio 54, Disco, and the Culture of the Night," which chronicles the last days of the famed New York nightclub.

FindSelfStorageAuctions.com, an online directory that helps people find and publicize self-storage auctions nationwide, is now offering listing capability to all U.S. self-storage operators at no cost. Previously, facility operators had to pay a fee to post or be a member of a partnering self-storage association.

The website allows users to search for self-storage auctions based on various parameters such as date/time, state, city, ZIP code, facility name, number of units being auctioned, unit contents and even auctioneer. The service is free to the public for searching. Participating facility operators can add, edit and control their own listings.

Self-storage operators in states like Arizona are realizing more than 150,000 unique storage-lien auction searches every week, amounting to 5 million publicly viewed auctions per year, FindSelfStorageAuctions.com issued in a press release. Operators can use the website to satisfy lien-law advertising requirements in most states, according to the source.

FindSelfStorageAuctions.com was originally launched in 2009 by Richard Marmor and James Appleton, both executive members of the Arizona Self Storage Association. Marmor is the chair of the AZSSA Legal & Legislative Committee and the associations lobbyist at the Arizona legislature. He is also president of Arbour Development Co., through which he operates two Phoenix self-storage facilities. Appleton is the chair of the associations Communications Committee and an expert in website design and development.

The planning and zoning department in Haverford, Pa., is considering a variance request from Argus Properties Inc. for the development of a three-story facility.

Last week, the Zoning Hearing Board gave the proposed development Mr. Storage favorable consideration. The facility will be located on at the northwest corner of Eagle and Lawrence Roads, and encompass 20,809 square feet and nearly 300 self-storage units.

Argus will need to seek zoning relief or clarifications on several issues, including the propertys slopes, surface, facility signage, loading and unloading requirements, building height, and parking. The company will also need approvals for lot line changes to separate the property from two adjacent ones.

Because the facility will be located on a portion of the Haverford PCP Superfund site, it will also need to meet certain requirements from the Environmental Protection Agency (EPA). The Haverford PCP Superfund site was designated for cleanup by the EPA in the early 1990s after it was discovered the groundwater was polluted by a former wood-treatment plant.

The development must meet requirements for depth and load capacity to avoid damaging the geo-synthetic membrane or cap the EPA installed in 1996. The cap was placed to eliminate exposure risk to contaminated soil from the former National Wood Preservers site.

Louis Gilmore, an Argus partner, said the development will include buildings designed to distribute weight evenly, with load-bearing walls every 10 feet. This will allow for a shallow foundation and enable the project to meet the EPA requirements.

Vertical Consultants, which represents landowners in negotiations regarding cell-tower lease transactions, recently recovered unpaid and underpaid rent from AT&T Inc. to Westport Properties Inc., a California-based real estate developer and self-storage operator. The rent was for the occupancy and use of property in Baltimore.

Westport approached Vertical Consultants last year to review and provide counsel on its cell-tower and roof-top leases. Upon review of the lease with AT&T, the second largest telecom company in North America, it was discovered that rent was due to Westport back to 2002. In addition, the agreement required modification to increase the rent. Vertical Consultants recovered past-due rent and achieved an immediate increase in rent going forward.

Property owners at all levels would be surprised how many cell-tower and roof-top landlords are not being paid correctly," said Hugh Odom, president of Vertical Consultants. "The prevailing reason for this occurring is that most property owners do not have the information they need to prevent this from happening. We are here to change that.

Founded in 2010 by Odom, Vertical Consultants is comprised of a group of wireless-industry veterans with more than 40 years of combined experience. The company specializes in issues surrounding the wireless-telecom industry, providing property owners with the information they need to make decisions regarding their cell-tower lease agreements. Areas of expertise include telecom-site acquisition and development, lease negotiation, and the legal issues surrounding such transactions.

Launched in 1985, Westport Properties operates more than 40 self-storage facilities under the name US Storage Centers.

Storage Post Self Storage has acquired a self-storage property in New Hyde Park, N.Y., from family-owned The Self Storage Center. The facility, 1990 Jericho Turnpike, occupies nearly 4 acres with more than 138,000 rentable square feet, and more than 1,900 storage units with climate control, covered loading bays and motion-sensor lighting.

Our executive team is excited to bring the New Hyde Park self-storage property into the Storage Post fold. We believe our internal operations, paired with the expertise of our leadership, allows us to maximize the property's performance, said Dylan Delaune, chief investments officer for Storage Post. We look forward to continuing our branding presence and serving the local communities within New York."

Headquartered in Atlanta, Storage Post actively pursues growth opportunities through the acquisition, redevelopment and management of existing self-storage properties. The company  has locations throughout the East Coast.

By Anita Huedepohl
 
Since the market crash, many local and regional lenders are calling in self-storage notes, even those that have performed perfectly for 10 or 15 years without any late payments. The typical call a self-storage lender receives is from a disillusioned bank customer who just received the letter from his local loan officer, the one informing him his loan is no longer needed and he must find a new home for it within 30 to 60 days.

Banks are liquidating commercial loans based on pressure from the federal government to empty their books heavy with mortgage debt in favor of stronger depository relationships. This leaves most borrowers out in the cold, not knowing where to go, since the vast majority of banks are following suit.

What makes an underwriter approve a self-storage loan package? Some facility owners and investors have spent years, sometimes decades, creating the ability to walk into their local bank and sign on the dotted line for millions of dollars based on the relationship theyve built. Since you may not be familiar with all of the nuts and bolts that make up an appealing loan package, nows the perfect time to learn about the loan process and how prepare all the necessary documentation.

A loan package must fit a lending institutions present appetite, meaning it must appeal to the initial underwriter and those beyond. It must also pass a boards approval for final lending authorization.
A lender is looking for a few key things: good credit, debt-service coverage ratio, strong net operating income, and a seasoned borrower with a resume that speaks volumes about his experience. Translated, this means they're looking for someone who will consistently make that monthly payment. Ask yourself, would you loan money to you?

Make a Good Impression

The first thing an underwriter looks for is a clean, well-kept property. The borrower must provide clear photos of the entry, alleys, lots, cell towers (if any), interior doors, long shots of the alley, and two-way street views leading up to the entry. If the photos arent appealing to you, they wont appeal to the underwriter. First impressions are lasting, so make it count.

Make sure the photos do not show stray shopping carts littering the parking lot from the retailer next door, unkempt flower beds, or overflowing trash cans. Clean it up. All of those things are easily remedied with little, if any, cost or time. The lender understands that if you need a rehab loan, things arent going to look like a five-star park; but try to make a good first impression.

Typically, a lender will further require the property financials, including three years of tax returns; a current, year-to-date profit-and-loss statement; and a current rent roll. Lenders understand there are certain one-time deductions like painting all of the buildings one year or replacing security gates, and they will allow for that. They also allow for certain add backs on an annual basis to offset the net operating income. So even if the tax returns dont show what youve netted previously, let a professional loan officer worry about deciphering the financial details and working out the specifics.

Another key piece of information is the rent roll on the subject property. This doesn't need to show each tenants name, but it does need to include the unit number, rental amount and payment status. No hand-written, yellow-pad published scribbles, please.

Although the borrower is required to use his credit score to show hes credit-worthy, the facility income will dictate the rate and term. A well-crafted industry resume goes a long way toward getting that approval stamp on your paperwork, so spend a few minutes illustrating your expertise in the business. Remember, the lender has never met you. He still wants to know who you are and what youve done in the industry. The bank is trusting you with its funds and wants to ensure the handshake on the deal is a solid one.
Getting financing today takes more time and patience, but it is doable. Become familiar with the loan process, and then build an appealing loan package that meets your needs as well as those of your lender.

Anita Huedepohl brings more than 25 years entrepreneurial experience to her current position as owner of Liberty Funding. Shes worked in the financial sector for more than 10 years and is experienced in all types of mortgage financing. She launched Liberty with the goal of providing market expertise to underserved sectors, namely the self-storage industry. To reach her, call 615.417.4710; visit www.libertynationwide.com .

A Canadian startup is helping self-storage operators earn revenue by accepting and holding parcels for customers.

Kinek.com has assembled a network of more than 1,000 pickup spots in the United States and Canada. The companys pickup locations, called KinekPoints, include self-storage operators and other retail companies. Kineks charges $1 per parcel to each partner KinekPoint. KinekPoints either recoup the fee through their own customer fees, or offer the service for free and consider the value of bringing a customer into their store to be worth Kineks fee. 

Kinek customers can register online and choose which KinekPoint to have their package delivered. Customers using bigger companies will receive a tracking app and a text message when the package arrives.

Much like offering rental trucks, retail products or other ancillary products and services, adding parcel pickup can increase a facilitys foot traffic. When businesses become KinekPoints, they typically see a boost in foot traffica lift which would otherwise require a significant marketing investment, said Kerry McLellan, CEO and founder of Kinek. Kinek has the ability to expose a business to new customers by making it convenient to utilize a particular facility to accomplish more than one task.

Location and extended hours make self-storage facilities ideal KinekPoints. We typically select facilities that have convenient operating hours and are in proximity to residential and commercial areas so that it would make sense for people to route their packages to a particular location, McLellan said.  A facility also needs to have the staff and capacity to support the intake of a medium volume of packages, and to be able to distribute them to their recipients when they come to pick them up.

Self-storage operators interested in becoming a KinekPoint, can contact [email protected]. A representative will walk operators through the process of becoming part of the network and answer any questions.

Private-equity firm Ducalian has launched a new self-storage venture by acquiring a warehouse in Littlehampton, West Sussex, England for about $1.9 million (£1.2 million).

The building, purchased from Falcon Property Trust, will be redeveloped by Ducalians in-house development team to provide 30,000 square feet of net rentable self-storage space. A management contract has been signed with Engage Management Services to operate the building as a self-storage facility under the Titan brand.

Ducalian offers private investors the opportunity to make direct investment in individual assets rather than investing in a blind fund. This allows investors the opportunity to select assets that meet their risk-return profiles, while also benefitting from Ducalians investment expertise.

The demand for self-storage space, especially in the under-served South Coast market, remains considerable, and we are anticipating a strong and growing revenue stream from this asset," said James McCulloch, investment director of Ducalian. What is more, the self-storage model under the Titan brand is easily scalable and holds considerable growth potential across the United Kingdom and even further afield.

Ducalian is a private-equity firm specializing in creating value through planning, developing and occupancy growth in the U.K. real estate market.

U.K. operator Titan Self Storage has multiple locations and targets businesses, students and private customers.

The California Self Storage Association (CSSA), a non-profit trade association dedicated to the local self-storage industry, is releasing a new publication titled "Greetings from California: Best Practices from the California Self Storage Association." Available for $29.95, the book is a collection of industry insights and knowledge from experienced facility operators, property managers and marketing experts.

Chapters cover facility operation, technology tools, acquisitions and sales, and financial facts. Authors include CSSA Executive Director Erin King as well as representatives from Extra Space Storage, MiniCo Insurance Agency LLC, Storage Auction Experts, OpenTech Alliance Inc., USStoragesearch.com, PhoneSmart, SMD Software Inc., Bancap Self Storage Group and other companies.

The publication is available now for pre-order and will be mailed in March. More information can be found at https://cssaweb.site-ym.com/store.

Founded in 2002, the CSSA is dedicated to serving the California self-storage owners, operators, facility managers and vendors. The association represents more than 450 direct member companies that own and operate more than 1,200 facilities. Direct members range from individual facility owner-operators to multiple-facility operations to publicly traded real estate investment trusts.

In 2011, CSSA was the winner of the Inside Self-Storage "Best of Business" award for the self-storage association category.

An optimistic outlook for the self-storage transaction market means great opportunities for industry buyers and sellers. The year ahead should see great equilibrium, with buyers and sellers coming together on lucrative deals.

As 2012 picks up momentum, the self-storage transaction market is showing signs of equilibrium, which hasn't happened in the last few years. It appears buyers have regained confidence. They're being more disciplined with their assumptions, and they're willing to move forward with acquisitions that push the envelope of historical underwriting parameters.

This is largely due to the increased sophistication of many self-storage operations and the overall perception of lower risk in today's market. As demonstrated in the accompanying chart, the self-storage real estate investment trusts (REITs) outperformed all other REIT property types last year. The chart is just a snapshot of how the overall industry performed in 2011, but it has added fuel to buyers confidence, which will continue through 2012.

Self-storage owners are seemingly confident as well, with many of them happy to simply operate their property, with little or no motivation to sell. Most have survived the recession, and with minimal new product being built over the last few years, they're enjoying increased occupancy and firmed rental rates. Owners will continue to enjoy occupancy and rate growth this year due to sound fundamentals and the lack of new competition.

The outlook for self-storage is one of optimism. Below are a key points and opportunities for self-storage sellers and buyers in todays market.

Sellers

Single-asset sales are at the highest level since 2007, according to data provided by CoStar Group, a commercial real estate information company. In addition, pricing is at the highest level since 2008, with an average price per foot of $72.96 in 2011, according to PricewaterhouseCoopers LLP.

Increased interest in self-storage investment is expected to continue. This will keep the capitalization rates down and prices near historically high levels as new investors continue to enter the industry.

U.S. capital-gains taxes are close to an all-time low. No one knows what will happen to the U.S. tax structure, but with an election year upon us, taking profit when capital-gains taxes are so low isn't a bad thing. It's worth calling your accountant to see what your after-tax proceeds would be under the current tax structure. You might also want to see what your after-tax proceeds would be if the capital-gains tax were to increase 5 percent or 10 percent.

While most self-storage investors are focused on class-A facilities, the intense competition for these assets will drive the prices higher for class-B and -C assets in the year ahead.

Over the last few years, the focus has been on risk aversion. The key component that seems to inspire buyers and their lenders is core or core-plus assets and low leverage. With a new fiscal year upon us, buyers and lenders have received their annual allocations and should be more receptive to transactions in the grey area compared to what weve seen over the last few years.

This leads me to believe this is the year to "make it happen." Asset prices will be pushed higher by an increased demand from self-storage buyers. All of this reminds me of the old real estate saying, Its better to buy a year too early than a day too late.

Self-storage owners should take a hard look at their investment goals. You'll make more money if you sell when the time is right than just renting more units and improving operational efficiency. The REITs and other large institutional buyers have access to a tremendous amount of capital, and through the points outlined above, you may be able to reach your investment goals this year.

Buyers

Self-storage buyers are also presented with a number of compelling scenarios. In the last few years, new investors wanted to dip their toes in the self-storage industry. Now most of them want to dive in head first. With most of these investors experiencing an above-average return without all of the volatility of the stock market, small and large investors are taking advantage of our industry's stable nature. Below are compelling reasons why a self-storage investment makes sense in this year.

The self-storage REITs outperformed all other property types in 20101. This will continue for the foreseeable future.

• With interest rates for 10 year loans ranging between 4 percent to 6.5 percent, depending on the loan to value, and overall cap rates ranging from 6.5 percent to 9.5 percent, we are seeing spreads between interest rates and cap rates of 250 to 300 basis points. This arbitrage that an investor can enjoy has motivated buyers to take action.
• With the ever-present cloud of inflation hanging over the U.S. economy, we have seen investors find comfort in real estate assets and the flexibility the self storage owners have to raise rents. Keep in mind that this strategy has not always worked out during past inflationary times. Only time will tell how it works out this time around.
• With the cost of debt for most deals hovering between 5.5 percent and 6.5 percent, and cap rates hovering between 8 percent and 9 percent for class-B and -C properties, it's worthwhile to do a little math. The accompanying chart outlines a very basic cash-on-cash analysis to consider. Note the class-B/C property enjoys a 58 percent greater return than the class-A property.
• With the continued expansion of the U.S. apartment industry and the volatility of the U.S. housing bubble, self-storage is positioned to capitalize on the increased movement of the American population.

Self-storage investors/buyers should take a closer look at their investment criteria. By thinking outside the box and considering investments that are passed over by some of the larger buyers, a savvy investor will be able to achieve a meaningful increase in his return. This will have a compounding effect as the industry continues to strengthen, and will lead to a very profitable investment.

Clearly, there is value in understanding what affects cap rates and property values in todays market. Buyers should remember that sellers are not benefiting from low-interest-rate loans, which are creating increased cash flow and helping to make buyers' numbers work. Sellers should note: If it's a good time to buy, it's a good time to find a buyer. Barring any natural or financial disaster, the market will reach equilibrium this year, with buyers and sellers coming together on a number of deals.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail [email protected].