By Bryan Hurlbert

In 2007, David Bonadies partnered with some friends to purchase a 50,000-square-foot former department store and convert it to a self-storage facility. Despite poor economic conditions over the last four years, occupancy has risen at Stafford Storage. This success is a testament to the owners ability to be the first choice for their customers.

If we take care of our customers, they will continue to vote their confidence in us by continuing to do business with us, Bonadies said. A side benefit to creating satisfied customers is it increases positive word-of-mouth advertising for the business, he added.

But dont let its customer-centric approach fool you into thinking Stafford Storage isn't about turning a profit. The owners believe they can create revenue while focusing on its customer base and the environment.

They recently examined their business-cost driversproperty taxes, labor costs and utilitiesto see if they could reduce expenses. While they can't control their property taxes, and they're comfortable with their labor costs, they decided to hone in on utilities as a way to reduce environmental impact and minimize overhead. This strategy enabled them to operate within their corporate mantra, people, planet, profit.

Lighting Showed the Way

Lighting was an easy target to pursue. While fluorescent lights are not expensive, they're pricey to maintain. Stafford Storage has high ceilings, which makes changing bulbs difficult. The owners had to hire a cherry-picker to change out the lights, which cost more time and money than desired. With a burn-out rate of 5 percent to 10 percent, it was getting costly.

In addition, the light levels emitted by the old-tech florescent tube fixtures and bulbs depreciated quickly, making it necessary to keep new lights in the fixtures as much as possible. The fluorescent light also did not work well with the facility's digital surveillance cameras. The recorders couldnt pick up areas with low light levels, decreasing the effectiveness of the security system.

Continually replacing fluorescent lights no longer  seemed to make sense. Instead, the facility owners upped the ante by implementing the most commercially viable level of technology available to them: LED  lighting.

LED Costs and Benefits

Lighting from light-emitting diodes (LEDs) is greener than fluorescent lighting, in part because it doesnt contain any carcinogens or nasty chemicals. The lights also last longer than fluorescents and provide a better, brighter light. The LEDs outperform the fluorescents and use significantly less energy.

A professional survey was conducted to measure Stafford Storages energy consumption and determine how much it could be improved. The facilitys owners wanted to make sure there was a reasonable business case for the upgrades before purchasing. It was estimated the facility consumed 51,942 kilowatts per year. At a rate of 10 cents per kilowatt hour, the annual electric bill was $5,194. By upgrading to LEDs, Stafford Storage could reduce its energy consumption to approximately 26,411 kilowatt hours, resulting in 49 percent lower energy costs.

In addition, the maintenance, labor and capital costs associated with changing out the fluorescent lights wa more than $3,000 annually. Roughly 37 percent of the companys total lighting costs was allocated toward buying new tubes and paying someone to install them. Stafford Storage chose LEDS that have a life of 80,000 hours. In the 18-hour-per-day facility, that equates to more than 12 years of life per tube. An ongoing benefit to extending the life of the lighting is the costs created by purchasing and changing out the old fluorescent tubes is nearly zeroed out.

On a month-to-month comparison of energy bills from 2010 to 2011, Stafford Storage realized a 35 percent savings. Presented with nine financing options by its service provider, Green Garage Lighting, Stafford Storage had ample choices to end up cash-flow positive on a monthly basis.

Helping the Planet

While the facility owners were initially interested in saving money, in the end, they were also pleased they could do their part in saving the environment. LEDs use so much less energy than conventional lighting that theres a meaningful reduction in the greenhouse gases produced by energy plants. The retrofitting completed at this facility alone will reduce 21,738 pounds of carbon from the atmosphere. In addition, the project will reduce sulfur dioxide and nitrogen oxide emissions by 15 and 16 pounds, respectively.

Although these numbers are nice, what do they mean? Changing the lights to LEDs in a 50,000-square-foot facility is equal to planting an additional 95 trees. Its also equal to taking 52 cars off the road or purchasing 10 carbon credits. These are numbers that dont get applied to the bottom line of operating a self-storage facility, but they do matter to a much larger bottom line.

While Stafford Storage has not yet marketed itself as a green facility, the owners open-minded approach to environmentally friendly solutions also leaves the door open for additional sustainability measures.

We are committed to making sustainability investments that make sense for us, the customer and the planet, Boandies said. If that means theres a place for another solution, perhaps solar on the roof or wind power on the property, we would be interested if the return on investment makes sense. It has to fit our budget and needs. We were able to complete this retrofit without increasing our rates, which is a huge bonus for everyone.

Bryan Hurlburt is a business developer for Green Garage Lighting, a provider of environmentally friendly LED lighting. The company works with high-energy-use clients to find the best green solutions to reduce energy consumption and environmental impact. For more information, visit www.greengaragelighting.com .

Jonathan Pedraza, 26, was found guilty of first-degree murder, felony vandalism and two misdemeanor counts of hit-and-run driving stemming from the killing of his father, 62-year-old Miguel Pedraza of Glendora. Miguel Pedraza was found dead inside a storage unit at A-1 Mini Storage, 4391 Irwindale Ave., beaten to death with a free weight, investigators told the source. The jury classified the dumbbell as a "deadly and dangerous weapon." Authorities told the source the younger Pedraza struck his father with the weight at least five times, causing 10 lacerations.

According to the source, shortly after the murder, Jonathan Pedraza rammed his car though the facility's gate before becoming involved in a hit-and-run crash at a nearby park. Police found and arrested him on the roof of an apartment complex near the park.

Though the facility closes daily at 7:30 p.m., A-1 Mini Storage's website advertises "24-hour security," video surveillance and motion sensors. The source does not share if any footage or security logs were used as evidence in the trial.

Pedraza faces a maximum sentence of 27 years to life in prison at his Feb. 10 sentencing in West Covina Superior Court. A judge ruled in October 2011 that Jonathan Pedraza was mentally competent to stand trial.

USSelfStorageLocator.com, an online self-storage marketing aggregator, is now offering two pricing options to its members, a flat-rate monthly fee or a pay-per-rental model. The monthly fee is based on a self-storage operator's number of facilities: $45 for 25 or fewer facilities, $40 for 26 to 75 facilities, and $35 for 76 facilities or more. In this model, each facility can receive unlimited rentals each month. The per-rental fee correlates with the unit size: $40 for a 5-by-10, $60 for a 10-by-10, and $80 for a 10-by-15.

After numerous conversations with our network members and feedback from e-mails, tradeshows, expos, conferences and blog comments, we realized that every company is unique and has their particular needs, said CEO Victor Dante.

Some facility owners prefer the pay-per-rental model, while others favor the unlimited flat-rate model," added chief operating officer Tony Prada. "Our goal isnt to alienate any company because were not flexible or understanding of their business needs. Every self-storage facility should have the advantage of being able to reap more rentals with our website.

USSelfStorageLocator.com offers self-storage facilities increased online exposure, reservations and online-marketing assistance and information. The site's goal is to promote the self-storage industry while making it convenient for consumers to find and rent units online.

By Michael Hoffman

Positive signs in the U.S. economy could mean improvement in the self-storage sector in 2012. Low interest rates, unemployment and strategic home foreclosures could mean a higher demand for storage space in some areas, and unique opportunities are developing on the investment side of the business.

The latter part of 2011 brought a steady stream of positive readings for the U.S. economy and commercial real estate. The data points failed to shatter any recovery records, but they reaffirmed that the economy and commercial real estate sector are headed in a positive direction.
Underlying data on jobs, core retail sales and corporate profit beat expectations by a margin large enough to substantially reduce recession fears:

• Private-sector hiring in the fourth quarter totaled 466,000, up from 438,000 in the fourth quarter of 2010, which helped push hiring to 1.8 million for the year.
• Government job losses appear to be easing, and the prior months' overall job readings have consistently been revised upward for several months.
• Core retail sales continue to show year-over-year growth in the 5 percent to 6 percent range, and holiday sales grew by 3.8 percent over 2010.
• Consumers are still under tremendous pressure but have shown significant resilience amid the financial-market turmoil and recession talk. The labor market is on a gradual recovery trend, which is expected to have a positive impact on commercial property occupancies. Preliminary data shows occupancies across all property sectors, including self-storage, improved moderately in the fourth quarter of 2011.

Self-Storage Operations Strengthened

By the end of the third quarter of 2011, self-storage operations in the Northeast began to improve after two quarters of losses. Occupancy increased to 89.7 percent in the third quarter of 2011, an increase of 2.7 percent on a year-over-year basis. Assets in Boston and the New York-Newark metropolitan statistic area (MSA) were among the most sought-after in the region. Boston occupancies increased 300 basis points to 90.8 percent by the third quarter, while New York-Newark occupancies jumped 120 basis points to 90 percent. Rents increased 2 percent in the New York-Newark region to $1.55 a foot.

Occupancies stabilized across the Midwest, with East North Centrals rate increasing 20 basis points to 82.2 percent and West North Central jumping 10 basis points to 83.6 percent. Ohio markets boasted some of the best fundamentals: Occupancies in both Cincinnati and Cleveland rose 1.8 percent to 80 percent and 84 percent, respectively. Cincinnati rents also jumped 1.4 percent to 75 cents per square foot.

In the South, self-storage occupancy rates increased 10 basis points to an even 80 percent. Atlanta and Orlando, Fla., were standout performers in the Southeast as occupancies in both metros jumped 3 percent to 80 percent by the end of the third quarter. Meanwhile, Atlanta rental rates shot up 2.7 percent to 75 cents a square foot.

The San Francisco Bay Area boasts some of the strongest self-storage fundamentals in the nation, trailing close behind the New York-Newark MSA. Occupancy accelerated 5.9 percent to 85.9 percent in San Francisco, while the entire western regions occupancy dropped a nominal 10 basis points to 83.9 percent.

More Improvement on the Horizon?

Bolstered by generations-low interest rates, the self-storage investment sector should continue to improve in 2012. Areas with high barriers to entry, such as Boston, New Jersey, New York and San Francisco, are expected to stage a strong performance this year. Muted construction in these major metros will allow operators to burn concessions and raise rents to pre-recession levels.

The southern states will see steady population growth as residents migrate to Texas, which has created 50 percent of the nations new jobs since the onset of the recovery. As a result, demand for self-storage space in most of the Lone Star states metros will improve.

Meanwhile, in the West, elevated unemployment and strategic home foreclosures will encourage residents to downsize into apartments, buttressing the need for self-storage space and lengthening average stays. Formerly overheated housing markets such as the Inland Empire, Las Vegas and Phoenix will benefit from this trend through 2012.

However, when the tax break afforded to homeowners who short sale or foreclose as part of the Mortgage Debt Relief Act of 2007 expires, fewer residents will walk away from underwater mortgages. This will add clarity to home prices and slow the migration to apartments. This could, in turn, temporarily soften self-storage demand.

Unique Opportunities Arise

In the self-storage investment arena, the real estate investment trusts (REITs) will remain bullish on discounted class-A and -B properties in primary markets, while smaller, private buyers will shift toward secondary and tertiary areas. The Sunbelt will garner the most attention this year, as a wave of real estate-owned properties emerge in overbuilt markets such as California and Florida.

Well-capitalized institutions that can achieve efficiency through economies of scale will acquire distressed assets for value-add plays. These investors will lease up the properties to achieve maximum occupancy levels and refinance the portfolio within a two-year period to leverage additional acquisitions.

As competition intensifies for upper-tier assets, cap rates will continue to compress in the second half, averaging in the mid-7 percent range. Private buyers, meanwhile, will target markets in Georgia, Michigan and Utah, paying cash for highly vacant class-B and -C properties for potential upside. Assets in these areas will trade below replacement costs and can produce returns in the low 10 percent range.

The guarded optimism for a better year for the economy and self-storage market should give way to more cheer when it comes to investing in commercial real estate. Private investors have become more active, and more capital is flowing to class-B assets and secondary markets in light of rapid tightening of yields in the upper tier of the market. The current prospects of investing in a hard asset that is set to improve along with an expanding economy, even at a moderate pace, with generations-low cost of debt locked in for five to seven years and competitive cash flow yields, point to a unique commercial real estate investment window.

Michael Hoffman is the first vice president and national director of the Marcus & Millichap Real Estate Investment Services National Self-Storage Group. The company specializes in commercial real estate investments and has more than 1,200 professionals in offices nationwide. To reach Hoffman, call 303.328.200; e-mail  [email protected] .

Jan. 30 was National Bubble Wrap Appreciation day, and self-storage operator StorageMart celebrated with a unique "eggsperiment" and some pure and simple fun, all of which it captured on video for the company YouTube channel. Newly added videos include "Favorite Ways to Pop," "Egg Drop" and "Egg Drop 2: Eggbert's Revenge."

As a seller of packing and moving supplies in addition to being a renter of storage space, the company wanted to see if one of its best-selling itemsbubble wrapcould protect an egg from a 20-foot fall. The egg, known as Eggbert, survived the drop, but not the food fight that followed.

As part of the celebration, StorageMart employees also demonstrated some of their favorite techniques for popping bubble wrap.

A poll conducted by Sealed Air Corp., the maker of the Bubble Wrap brand, revealed that popping bubble wrap seems to lessen Americans' stress over their health as well as unexpected events, such as a missed flight, according to a StorageMart press release. In its videos, the company suggests that bubble wrap can help eliminate moving stress by protecting valuables and providing diversion.

Bubble Wrap Appreciation Day is celebrated every year on the last Monday in January. The term "bubble wrap" was coined in 1960 by engineers Marc Chavannes and Al Fielding, who intended the material to be used as textured wall paper. Bubble wrap was also tried as a greenhouse insulation. Eventually, it came to be known as the addictive packing material people seem to love.

The StorageMart bubble wrap videos can be viewed at www.youtube.com/StorageMartMedia.

StorageMart is a full-service self-storage provider with more than 130 locations in the United States and Canada. It funds the StorageMart ScholarSmarts program, which annually awards $10,000 in educational scholarships.

New York City-area self-storage operator Storage Deluxe donated 732 coats and $3,660 to the non-profit New York Cares on Jan. 17, helping the organization get closer to its goal of collecting 100,000 coats for low-income men, women and children. The operator solicited coat donations at each of its 10 locations throughout Brooklyn, the Bronx and Queens as part of its third annual coat drive.

"It just made sense," said CEO Nick Coslov. "Many of our customers use their storage unit as an off-season closet, and as the temperatures dropped, they were coming in trading in summer items for winter. Most of them tend to find an old coat or two that they no longer want or need. And rather than see those tossed out, we wanted to help reach the goal New York Cares had set."

Storage Deluxe had good company in serving as a drop-off facility for the New York Cares Coat Drive. The New York City Police Department and Metropolitan Transit Authority are avid supporters of the program every year, creating more drop-off points.

In accepting the coats and funds donation from Patrick Geoghegan of Storage Deluxe, Diane Conroy, officer of service events for New York Cares, noted the organization has collected more than 60,000 coats this year and expects 70,000."We cant thank Storage Deluxe enough for becoming a valuable partner to us and exceeding the number of coats we collected last year. Also, the unexpected generosity of the matching donation is truly a testament to what a great New York-based company they are."

Storage Deluxe consists of 12 facilities, 18,000 storage units and more than 1 million rentable square feet.

A self-storage manager in Lansing, Mich., is a key witness in a murder trial in which a man is accused of killing a retired detective and his wife Sept. 22, then accessed his girlfriend's self-storage unit to store items stolen from the victims home.

Stacy Schneider, the resident manager of Allsafe Mini Storage, identified the defendant, Christopher Perrien, in court Tuesday. She told the court Perrien arrived at the self-storage facility just before 4 p.m. the day of the murders. Perrien paid the $168 in late rent and fees so he could access his girlfriend's storage unit.

Inside the unit, investigators found numerous items taken from the home of the victims, Michael and Terri Greene, including Greens Michigan State Police-issued handgun, badges,  and other personal affects. Police also recovered the gun allegedly used in the homicides. Investigators said the Greenes were killed between noon and 2:30 p.m. Each was shot multiple times.

Perrien faces two counts of felony murder and two gun charges. His next court appearance is Feb. 14.

State legislatures continue to look at the self-storage industry as a source of tax revenue, with South Dakota the latest to propose the imposition of sales tax on unit rentals. Meanwhile, lawmakers in New Jersey have introduced a bill that would lower sales tax by 1 percent on services that include self-storage rentals.

The South Dakota bill, SB 142, was introduced Jan. 24 and would impose a 4 percent sales tax on the gross receipts derived from self-storage unit rentals, and a 4 percent privilege-use tax on the rental payments for use of the property.

The measure is similar to a law struck down three years ago by the South Dakota Supreme Court. In that case, self-storage operators successfully argued storage units were rented real estate and not a service that should be subject to sales tax.

The Self-Storage Association indicated it will battle the legislatures new bill on behalf of South Dakotas self-storage operators, who do not have a state association. The proposed bill is scheduled for a hearing on Feb. 6.

If SB 142 were to pass, it would become the first state bill to inflict sales tax on self-storage operators since New Jersey raised its sales tax from 6 percent to 7 percent in 2006. Although sales-tax legislation that would affect storage operators has been introduced in North Carolina and Illinois in recent months.

New Jersey Democrats Louis D. Greenwald and Paul D. Moriarty introduced a state assembly bill, A1322, on Jan. 10 that would reduce the sales and use tax rate from 7 percent back to 6 percent on certain services, including self-storage. Although the measure would benefit self-storage operators and save customers several dollars per month on unit rentals, the self-storage industry believes the rental of storage units should be exempt from service sales tax altogether because storage units should qualify as rental property.

The sales-tax rollback bill was introduced as an alternative to Republican Gov. Chris Christies proposal to cut state income taxes by 10 percent for all New Jersey residents. The governor said the tax cut would stimulate the states economy as it is phased in over three years. Opponents argue the cut would reduce state tax revenue too much, estimated as much as $1.1 billion. Some opponents believe reducing property taxes and sales tax would be more effective strategies.