Construction Corner is a Q&A column committed to answering reader-submitted questions regarding construction and development. Inquiries may be sent to [email protected]. 

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Q: I am an area manager for five sites in New Mexico.We are having continuing problems with theft at one of our facilities and suspect it to be tenants.We are interested in controlling access to the elevator cars to only those who have units on the upper floors. How exactly does that work?

Brent in Albuquerque,N.M.

A: Elevator control is a great, cost-effective way to keep tenants on only those floors to which they need access. How it usually works is an access keypad is mounted next to the elevator car and requires a tenant to enter a floor-specific code before it allows access to the upper levels. Different systems work in different ways, but the better ones control which floor you can visit, not just the ability to call the elevator.

If you have more than two stories in your building, you want to make sure your elevator company sets it up so anyone can call the elevator, but only those with the correct floor code can travel to the upper floors. You may also want to consider adding individual door alarms to your units so your manager will be immediately notified when a door is opened by an unauthorized tenant.

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Q: My brother and I are trying to decide whetherwe should be using an electromagnetic lock or electric strike for our access door. Is there an advantage of one over the other?

Tina in Glendale,Ariz.

A: An electric strike is a solenoid operated mechanism mounted in the door frame. When power is supplied to the keeper of the strike, the door can be opened without retracting the latch-bolt. An electromagnetic lock is comprised of a steel armature plate attached to the door, which is held against a powerful magnet also mounted to the door. Your consideration should be whether you want your door to be fail-secure or fail-safe.

Fail-secure means the door will be locked during a power outage. Failsafe means it will be unlocked during an outage. Most electric strikes come with an option for fail-safe or fail-secure. Electromagnetic locks are only available in fail-safe, so a battery backup or supplemental locking device may be required. An exit switch or bar is usually required with an electromagnetic lock as well.

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Tony Gardner is a licensed contractor and installation manager for QuikStor, a provider of self-storage security and software since 1987. For more information, visit www.quikstor.com.

Why Convert?

Using existing buildings to build a self-storage property offers many benefits over starting from the ground up. It often means lower building cost, a simplified building process, encouragement by local municipalities for re-use, and relatively lower up-fit costs. The cost of conversions can often be several dollars less per square foot than a ground-up project. Why? The fit-up costs of excavation, landscape, irrigation, foundation pour, electrical and HVAC are less. In most cases, construction enables speedier occupancy for owners and investors, allowing them a faster return on investment.

On average, conventional self-storage projectsparticularly groundup facilities in highly populated urban environmentswill take six months to a year and a half to reach occupancy-ready status. This is because zoning laws across the country are becoming more restrictive, complex and costly. Few things are more discouraging for would-be owners and investors than to spend months locating a potential site, and doing the proper demographic and feasibility research, only to be thwarted or delayed interminably by zoning officials.

Converting existing buildings can bypass many zoning headaches and time delays. For example, the structure and site work on conversions are virtually complete before the project even begins. Ultimately, the conversion project can be completed months ahead of conventional projects. Having this edge in a competitive market will often discourage competitors from entering your market area.

Deck SystemsTypes and Tips

If you are fortunate enough to find an existing building to convert, the building process itself is much like that for new storage. One of the better scenarios is to find a free-spanning building with a clear ceiling height of more than 18 feet. This allows you to maximize the potential of the footprint by using a lightweight, structural deck system, creating a cost-effective way to add another floor within the structure.

Here, experience counts. Stick with manufacturers that specialize in self-storage and can supply light-gauge, sturdy, well-engineered systems that spread much of the structural load across large portions of the existing floor. This can save you some of the expense and hassle of re-engineering the existing structure.

By comparison, it will cost you several dollars per square foot less than the traditional-style, mezzanine, point-load system and will go up much faster. Industry experts will tell you an 18-foot clear-span or higher bay building with a footprint of 35,000 square feet can be converted to a complete facility with more than 55,000 square feet of rentable space.

Product Tips

When shopping for suppliers, one of the most important things to look for is a firm with specific experience in conversions and deck systems. If your goal is to maximize use and leverage the potential of the property, do your homework. Avoid firms that purchase steel components from one supplier, corridors and partitions from another, and doors from yet a third.

Purchasing directly from a manufacturer that supplies all of your components not only guarantees the components will all work together, it avoids placing the middle man on you balance sheet. This will save you money on product costs, allow you more flexibility in your design, and give you a more professional overall fit. It is also important to use a company with its own engineering and design department, one that can provide custom components specifically designed and pre-engineered to fit your building.

The Importance of Shipping

In your search for a conversion supplier, keep in mind special care should be used in shipping light-gauge, pre-painted steel. This is very important, yet commonly overlooked. Search for suppliers who ship, handle and preserve their own products before they arrive at your site. Using unfamiliar shipping companies may cause these prepainted products to be damaged before they get there.

Stick with a company that produces and ships its own products, and can carefully unload and stage all products on your site. Often, with outside trucking companies, products can be mismanaged or damaged during these processes. Unfortunately, damaged parts are virtually impossible for owners to recognize until its too late. Only when the erector starts digging through the pile of steel will damaged components be revealed.

All too often, the frustrated owner will use damaged parts, while trying to negotiate liability with the trucking company. Another alternativeand equally unsatisfactoryis attempting to return defective materials, which causes significant and unnecessary delays. This is why your suppliers level of service should include transporting your product safely to your site.

Installation Tips

Owners want to protect and enhance their investments for years to come, so they expect accountability from their suppliers. Thats why it is important to avoid firms that outsource design, engineering and installation. It has been my experience that these firms realize a high degree of turnover with their subcontractors, which can be problematic for an owner. If you use a manufacturer that subcontracts an erection crew, make sure the crew has the proper training and is certified. Nothing is more disheartening than to spend money on a high-quality product that you expect to last for decades, only to have that investment squandered by faulty installation.

Finally, look for a conversion company with experience in the business and a good track record. Find a company with at least a five-year warranty on construction labor. This says everything about the integrity of the firm and its willingness to stand behind your conversion. You want to ensure someone will be available to quickly and professionally respond to labor and material issues that may arise during the life of the project. After all, this will reflect directly on you as a provider of the self-storage product.

In the final analysis, conversions are an attractive and viable alternative to conventional, ground-up projects. The secret to successful conversions is understanding and following an intelligent process. Is the building in the right location for self-storage? What is the condition of the building? Will it suit your needs? Can floors be added? Can you find a reliable, single-source manufacturer that takes responsibility for all phases of the project? These are all questions that, properly answered, will ensure your conversion project is a success.

Kurt Conlon is a sales representative for BETCO Inc., a single-source manufacturer of self-storage buildings. Based in Statesville, N.C., BETCO provides knowledgeable field consultants, engineering and design services from inception through building erection. For more information, call 800.654.7813; visit www.betcoinc.com.

At the Car Wash is a monthly column written exclusively for self-storage operators interested in providing a mixed-use development including a car-wash facility. If there are particular topics you would like to see addressed, feel free to contact the author or e-mail [email protected].

Last Sunday, while watching Andy Rooney, I chuckled to myself as I wondered: What would Andy have to say about stuff? How would he view this driving need in our society to accumulate and store things? Looking at Andys desk, as well as my desk, car, basement and garage, Id say there is no problem hereeverything has a place, and every place has a thing. A life of chaos and clutter is a good life, isnt it?

Im not quite sure how this happened, but sure enough, it did. Yesterday (or what seems like yesterday), I left the nurturing nest of my parents and flew the coop. As I remember it, I had my clothes, a razor and some other necessary gear (like 45- and 33-rpm records)just enough to fill a duffle bag. That was it! Life was simple then. But something in my obsessive-compulsive behavior and need to overachieve told me I needed more stuff. Stuff shows youve arrived. Remember those t-shirts that read, He who dies with the most toys wins? Between the effective advertising of really cool things and wanting to be competitive with my peers, I unknowingly began a life of accumulating stuff.

Here I sit, years later, looking at this vast collection of possessions, wondering: Where did it come from and why does it have me surrounded? I think part of the answer has to do with my parents. (They wont read this, so I think Im safe in saying that.) They were children of the Depression, raised in an era of great Puritanical beliefsyou know, like Eat your spinach, Remember the starving children in (pick your country), A penny saved is a penny earned, and so on.

My mother hadand still hasstuff handed down from several generations, all of which she was convinced shed use and Id need. She is so passionate about this, she has me convinced. Of course, Im not one to break with tradition and, therefore, my children hear the same tune. The garage is full of all the treasures Im going to pass down to them.

Now, normally, this recycling of vintage goodies would be a good thing. We all know there is a future for those old beanbags and lava lamps. That collection of 45s, some original Johnny Mathis LPs, and my bellbottoms will have value and add tremendously to my overall estate. Gosh, Id better decide who gets what in my will. Id hate to see the kids battle over my Motown records and tie-die t-shirts. And lets not forget, along the path from then to now, Ive also done a good job stimulating the economy by collecting my own new stuff.

While wondering how to manage this treasure trove, I discovered a great phenomenon: a wondrous TV show on which people take their stuff and have it inspected and valued by real appraisal professionals! Did you ever wonder what schools these folks attended to learn so much about the value of stuff? What kind of degree is itMaster of Stuff, or maybe just a BS? Well, in any case, Im sure somewhere in my stuff I have some really valuable goods. Maybe that old chest of my grandfathers holds the key to retirement.

In the meantime, while I figure out which of our five lucky kids gets what and how to create space so I dont have to sell my house and move into something bigger (i.e., more expensive), Id better find a way to keep my stuff safe and secure. I discovered another fantastic phenomenon: storage facilities, where, for a minimal fee, all my worldly treasures can be relocated and protected.

Now this is a marvelous invention. I have to think the originator of this idea was someone like myselfa collector of stuff. As a result of the discovery of this wonderful service, I have announced to my wife that the desk will be cleaned, those boxes of old tax stuff will be moved and, yes, we can now put the family car in the garage.

Now the question becomes: What other services can storage facilities provide to make my life simpler? Maybe something to help with out-of-town guests, like a bed-and-breakfast? As so much of the stuff Im storing once belonged to my in-laws and parents, maybe theyd be more comfortable sleeping next to it. This could be a whole new twist to the storage industry: sleep and store!

If anyone has interest in pioneering and using the concept, give me a call. Perhaps it is a bit far-fetched. Hmmmm. What a minute! What about a car wash?

Fred Grauer is the vice president of corporate accounts for MarkVII, a car-wash equipment manufacturer located in Arvada, Colo. He has made a life-long career of designing, selling, building and operating car washes. He can be reached at [email protected].

This month, I gathered real estate experts to discuss the state of self-storage in the Northeast. Lets hear what they have to say about their respective cities and regions. Our panel of brokers includes: Linda Cinelli, LC Realty, North Branch, N.J.; and Joseph Mendola, The Norwood Group, Bedford, N.H. These are unique economic times, so I asked our brokers some straightforward questions every owner will find pertinent. I have also added my own comments and observations.

1. Are appraisal values below actual sale prices? In some of the hot markets, these dont always match. Is this happening in your area?

Cinelli:

Appraisals in my area are typically higher. What seems to be happening is the variable expenses are not being taken into consideration. It definitely has an effect on value. It also depends on who is asking for the appraisal. If its a lender, it could impact the asking price and the market value. Lenders tend to impose greater discipline on the process and, in a very strong market, the appraisal might not match the sales price, which clearly has an impact on the financing.

Mendola:

No, appraisals are coming in at about the same as the selling price; and the selling price is very close to the asking price for a properly valued property.

Many people are often confused with the appraisal process, as they tend to think it is a worst-case condition, not merely a reflection of the anticipated market. The key phrase here is anticipated market. Reasonable professionals can disagree on what is expected in a market, and the perception of value can differ based on assumptions for the future. Appraisers have a rigorous methodology they apply to historical data and projections in arriving at values. Some investors may have a very different view of the futureand, indeed, varying circumstances may impact the valuebut not the market the appraisal tries to forecast.

For example, if an owner has other facilities in the market, he may be able to save money on Yellow Pages advertising and supervision, which creates more value for him; but this cannot be considered by the appraiser in looking at the market. Lenders often have to look past the special circumstances to lend to the higher level of value a buyer may see because of his situation.

2. What are the cap rates for reasonably projected incomes in 2004?

Cinelli:

In general, Im seeing 9 percent to 9.5 percent, but the range is quite broadlarger than in past markets. The cap rate is clearly dependent on the quality and location of the property. Buyers are more discriminating than ever! Last year, some investors were willing to take returns below those rates, but with the market recovering, they will want a stronger rate of return on their money. Some properties will demand at least 10 percent or better. Newcomers to the industry will sometimes settle for a lower cap rate to get into the business.

Mendola:

Im seeing rates in the neighborhood of 10.5 percent, depending on the size of the property and the quality of the site. In the greater Boston market, however, values are determined by the trailing 12-month income at stabilized occupancies. A cap rate for that number is 9.5 percent to 9 percent. It can go lower if we are talking about a portfolio, or if the barriers to entry are high and the demographics are great.

Linda and Joe have really identified the keystone of todays market: A great property in a great market gets a great price in terms of the cap rate. While there are buyers for lesser properties, they are less willing to pay premium prices for poor locations and quality. There are no greater fools in the market today; they are either experienced investors or well-represented by real estate professionals.

3. Are you seeing markets experiencing moderate (15 percent) or significant (25 percent or higher) vacancy rates?

Cinelli:

This is not a problem in my area; vacancy rates are not high at all. Id say moderate to low. Self-storage facilities are really filled up in New York and New Jersey.

Mendola:

For well-located properties in New England, the vacancies are 15 percent. Otherwise, facilities might experience a more significant vacancy. A rule of thumb would be that the closer to Boston, the higher the occupancy; but there are many other strong markets as well. Having said that, due diligence is very important, as overbuilding is a real possibility in any local market.

It is imperative that every buyer or developer do his homework to make sure the local market can support the project. Overbuilding is a growing problemno pun intendedin every area, even the very strong markets like the Northeast.

4. Have you seen lenders becoming more careful on the underwriting of self-storage loans?

Cinelli:

Lenders are going to be more careful when the borrower doesnt have credit to back up the deal. Then it really depends on the buyers credit worthiness. Otherwise, the lenders are taking a more thorough look at the deal; they are not taking many chances at these low rates.

Mendola:

Yes, particularly where supply and demand are in equilibrium and barriers to entry are not high.

Lenders are having some difficulty with industry data not being accurate or complete. They arent sure the demand is predictable. Industry expert Ray Wilson recently wrote an article in the SSA Globe about this issue of information. It is just beginning to be recognized as a serious problem, and Ray is heading up a task force to work on this. Cooperating with his group could be one of the most important things owners can do.

5. Are the most active buyers in your market newcomers to the industry, or are they seasoned veterans of self-storage?

Cinelli:

Seasoned self-storage investors are always looking. Actually, theres no shortage of potential buyers at all. There are many newcomers who have heard what a great investment self-storage is, and they are excited but cautious. After the fall of the stock market, these folks are looking for a good return, with as much or as little hands-on management as they want. Self-storage is the way to go because it does not seem as complicated as other real estate. Of course, the experienced buyers are very active in the market as well, and are often the surest buyers for good properties.

Mendola:

Buyers fit in both camps. There is still a strong desire to own self-storage; however, buyers are sharpening their pencils more when it comes to valuations and upside potential.

Newcomers are a little more eager but harder to qualify. Veterans know value better, but they are willing and can pay for it. The result is you have to approach both groups to get the best price.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In January 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to the buying and selling of self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

How can you make your time in a different country enjoyable, productive and error-free? After all, many self-storage development companies are looking to expand their markets overseas. But what if you’ve never done business outside the United States? How do you work in a mixed-culture business setting? When it comes time for you to travel overseas, four practical preparations can help you arrive in a courteous frame of mind and start your trip on the right foot:

1. Keep your passport, visas and other important papers up-to-date. If you plan to travel repeatedly to several countries, you may want to apply for a 48-page passport, which provides additional space for visas. Make two photocopies of your passport, and leave one in the United States with a trusted friend. Also consider whether you will need an international driver’s license.
2. When packing, avoid any tags or luggage labels that scream “United States” or “American.” In this post-9/11 era, there’s no such thing as taking too many precautions. Tags and labels may attract the attention of thieves or terrorists.
3. Know what the local currency is and have some on hand. You will need local currency for taxis and any emergencies (the equivalent of $25 to $50); but for most of your needs, plan to use traveler’s checks and credit cards, which sometimes get better exchange rates. Never travel without any local currency already in your possession; you do not want to arrive late at night after flight delays, find the airport banks closed, and be stranded with no way to get funds.
4. It is especially important to have done your culture awareness “homework.” This is one area in which learning by doing is not recommended. By winging it, you could commit a serious faux pas from which you could not socially recover, and your business could suffer as a result.

Cultural Differences

There are three main areas to keep in mind concerning cultural awareness:

• Use of Names—When it comes to names, most cultures are more formal than we are in the United States. So always use a formal title—Mr., Miss, Doctor, etc.—not just a person’s first name in conversation. Always wait for permission to be informal.
• Awareness of Time—Cultures vary when it comes to the importance placed on punctuality. Latin Americans don’t emphasize timeliness as much as businesspeople in some European countries. You always need to arrive on time, but manage your expectations of others.
• Nonverbal Signals—This refers to body language. For example, a negative shake of the head in the United States means “no,” while this same gesture means “yes” in Pakistan and other cultures.

How can you increase your awareness of cultural differences? Study travel guides, attend an intercultural training seminar or speak to citizens of the country you are visiting. You can get additional information about the country from its embassy or consulate. The U.S. Department of State’s Bureau of Public Affairs can be a valuable source of resource material through its series of background notes. These brochures can provide you up-to-date information on a country’s geography, government, economy and history, as well as the languages spoken there and the names of the principal U.S. officials, such as the ambassador.

It’s important you make the most of your time during your trip. You can use informal dinners to become better acquainted with business associates, read the local paper to understand issues of concern to area residents, and taste local specialties to get the true flavor of the area. Part of the success of your trip will come from its lasting effects on your outlook—what you learned as much as what you did. If you approach the trip as a sort of intensive educational seminar, you may benefit more.

But all journeys must come to an end. Before separating from your international host, thank him for seeing you—visitors, are, after all, a disruption. Determine the next business step—a reciprocal visit, further negotiations, a report? When you arrive home, send thank-you notes and any follow-up material promptly. You can send copies of business photos you took during your trip and any articles you come across that are pertinent to the discussions you had.

Hosting Visitors

Another aspect of doing business with different cultures is when professionals from other countries come to the United States. Following are eight tips to make international business travelers feel less like strangers in a strange land, and make their visit a smashing success.

1. Learn about the visitor’s culture. You need to know, in the literal sense, where the person is coming from. Imagine, for instance, if a foreigner asked you about life among cowboys if you come from New England—it would seem a strange question. It is just as important to understand a visitor’s home country. You want to be able to discuss any neutral, newsworthy events.
2. Always have someone meet the visitor at the airport. While a greeter at the airport is an optional practice for U.S. business travelers, it’s a vital courtesy for international visitors. Again, consider how much more comfortable you would feel while visiting a foreign land if you knew you would have someone to greet you.
3. Understand and use appropriate greetings and titles. This simple gesture can get you off on the right foot. It shows respect for the visitor and his culture. (See the section below on international greetings for more culture-specific tips.)
4. Have foods or flowers delivered to your visitor’s room. This is a gracious, welcoming touch. If you can provide something to his taste, that’s even better. Remember that some flowers have symbolic significance in other countries, so make sure the arrangement is appropriate.
5. Arrange for a driver and/or transportation during the visitor’s stay. This allows for safe exploration without your presence.
6. Respect the visitor’s dining customs. If the visitor expresses an interest in trying local cuisine, that’s fine; but do not force unfamiliar foods on him. You’ll also want to show sensitivity—don’t feed a Muslim a pork-roll sandwich for lunch, for example.
7. Plan interesting things for the visitor to do at night. He will want to enjoy as much as possible of the local culture. Remember what may seem routine to you—such as a dinner cruise—may be enjoyable to a stranger. If a visitor brings family members, arrange for appropriate activities.
8. Show the visitor how Americans live. Invite him to your home. Provide materials about your city. Conduct a tour of your city if it is a first trip. You’re being gracious and helping the visitor understand Americans, including you.

In the end, the key to any business traveler’s success is to have and show respect for the other person’s cultural norms.

International Greetings

There are several forms of international greetings. Whether two businesspeople use a handshake, kiss and/or bow, for example, will depend on their cultural backgrounds. It is always a good idea to check with someone familiar with the customs of your host country before you travel or host international clients so you understand the acceptable and practiced forms of greeting.

Handshakes

Like other aspects of business etiquette, there are different rules of handshaking to be aware of when dealing with foreign visitors or traveling abroad. There are many differences in handshakes worldwide, including who extends whose hand first, how many hands you shake, and whether you shake hands with women. The firmness and duration of the handshake might also change, depending on the location. The significance of handshakes also varies internationally.

Never make assumptions about people based on their handshakes, regardless if you are the visitor or the host. The variations indicate cultural differences rather than a person’s personality, as some Americans may believe. For instance, in Japan, a limp grip is the accepted behavior, not a sign of weakness. A Japanese visitor to the United States may not change his typical shake until he has become accustomed to the American method.

Also be careful about assigning too much significance to a handshake, particularly as a symbol of commitment at the end of business negotiations. In Italy, the handshake is an important gesture of trust; but, in general, doing business on a handshake is dying out in Europe.

To be safe, when shaking hands with someone for the first time, always extend your right hand. Be cautious with the left hand. In parts of Africa, Asia or the Middle East, there are taboos against using the left hand. It is considered “the dirty hand”—the one used for bathroom functions.

In Belgium, France, Germany, Russia, Sweden and most of the rest of Eastern Europe, you must shake hands with everyone in the party upon arriving and leaving—do not simply wave hello or good-bye. Start with the highest-ranking or oldest person. The most important person usually extends his hand first. In Asia, be cautious. You do not want to force a handshake on anyone. In Japan, take your cue about whether to shake hands, bow or do both, from your host. In South Korea, you will probably shake hands. In Arab countries, men may find themselves shaking hands several times a day, whenever you go apart and then meet again.

There are no longer established differences between men and women when shaking hands in the United States; but this is not always the case in other countries. In Europe, a man should usually not extend a hand until the woman does so first. Women should make sure they do extend a hand; they will lose credibility if they don’t. In some European countries, many of the old formal rules are loosening, especially among younger people. This means you will have to gauge the appropriate action by the specific situation.

In Asia, a man should usually wait for the woman to act before he extends a hand. If she doesn’t extend her hand, don’t extend yours. Women should be sensitive to this; it’s not polite to force it. In China and Korea, however, a woman can extend her hand first. In Japan, you need to judge by the situation. Generally speaking, Arab men and women do not shake hands with each other. A woman should be cautious about extending her hand to an Arab, though many Arabs are now familiar with U.S. customs and will shake hands with women.

Handshakes between men and women also are unusual in India. Hasidic Jewish men worldwide will not shake hands with women because a man is not allowed to touch any woman other than his wife.

Kissing and/or Hugging

Two other forms of greeting that vary from country to country are the kiss and hug. In the United States, incorporating a kiss on the cheek or hug as a form of greeting usually only happens between good friends, and rarely between two men. Keep in mind that in other countries, these actions are part of a polite and friendly protocol. What a kiss or hug from your international counterpart generally means is you are being officially welcomed. This kiss-and-hug “hello” has no more significance than a handshake.

Visitors from countries with kiss-and-hug greetings may use them reflexively when meeting people in the United States. If a foreign visitor kisses or hugs you in the United States, it’s appropriate to accept those gestures in the spirit in which they are offered. In Latin America, you may encounter “the abrazo,” a full embrace with pats on the back.

You also may be kissed and hugged in Russia. In the United Arab Emirates, men will kiss other men three to four times on the cheeks. In Saudi Arabia, a male guest may be kissed on both cheeks after shaking hands. In France, you might see people kissing alternate cheeks (actually, rubbing cheeks and kissing the air). Generally, in Europe, kissing occurs only after the relationship has become somewhat more personal. As the foreigner, it is a safe bet not to initiate the practice but let the other person start.

The Bow

Another physical form of greeting is the bow. While most Americans associate “taking a bow” with receiving applause, to bow as part of a greeting is an act of humbling oneself before another, of showing respect. Bowing is just a gracious way to say “hello,” to acknowledge a person. There are three etiquette guidelines for bowing:

First, always return a bow! Failure to return a bow is rude.

The person of lower status bows first.

The person lower in status bows lower.

The bow is part of the ritual greeting in Japan. The Chinese may nod or use a slight bow. A slight bow also is used in Indonesia, Malaysia, Singapore and South Korea. While handshakes are used in most of these locations, adopting the local custom of making a bow shows respect for the individual and the culture.

Men generally bow with their hands at their sides, palms down on their thighs. Women bow with their hands folded in front. There are variations and subtleties to the bow based on the individual culture.

In Thailand, the wai (pronounced “why”) combines a bow with a sort of salute. It is done with the palms together, fingers up (not folded or clasped) and a slight bow. The hands are usually at chest level. When performing this gesture, you say, “wai.” The younger person does the wai first. In addition to signifying “hello,” it can be used to say, “good-bye,” “thank you” and “I’m sorry.” The higher the hands, the more respect you show, although eye level is the highest anyone goes.

In India, a similar greeting is called the “namaste.” It is done with palms together and fingers up and together, usually at the chin level. It is combined with a nod. You say “namaste” (pronounced “nay-mast-tay”), which means, “I bow to you.” It is a sign of appreciation. The host usually does it first, and it’s polite to return it. Do this also for “good morning,” “good afternoon” or “good evening.”

The bottom line is to know the traditions and practices of the nation where you are traveling or visitors you are hosting. Don’t lose business or a client—or, worse, embarrass yourself or your firm—by being labeled rude or ignorant of acceptable international greetings.

Marjorie Brody is a speaker, consultant and coach to Fortune 1,000 executives and the president of Brody Communications Ltd., which started as a part-time training company and is now a successful, multimillion-dollar venture. Brody is author of Professional Impressions ... Etiquette for Everyone, Every Day and Career MAGIC: A Woman’s Guide to Reward & Recognition, as well as more than a dozen other career-related books. She is a recognized media expert whose commentary on workplace/career issues is regularly featured on TV and radio shows, and in newspapers and magazines. For more information, call 800.726.7936 or visit www.marjoriebrody.com.

Does that mean lenders, investors, developers and others should be concerned about the profitability of self-storage in Europe? Should weak U.S. market conditions be interpreted as a sign that international markets are headed for trouble as well? After all, several European markets are showing signs of weakness as demonstrated by sluggish rental-rate increases and slow lease-up rates.

Market Similarities and Differences

To answer these questions, we need to examine some of the similarities and differences between U.S. markets and those newly developing in Europe. There are more similarities than differences when it comes to things like design, management and the investment opportunity self-storage offers.

While there are many similarities, there is one big difference. Self-storage in the United States has been developing for a much longer period. Thus, the level or intensity of development is greater. Developers in many U.S. markets have all but satisfied the pent-up demand they have been building toward for the past 30 years. Many domestic markets are reaching the point of long-term balance between supply and demand.

In our most recent survey of the nation’s top 30 Metropolitan Statistical Areas (MSAs), the worst occupancy reported was in the low-80 percent range. It is important to note the current operating performance of U.S. facilities only reflects but one more phase this young industry must transition through on its way to maturity. When compared to the cycles that retail, office and industrial properties experience, this down cycle for self-storage has been pretty mild.

The European self-storage industry has just begun its journey toward satisfying the pent-up demand for space that took the United States more than 30 years to satisfy. In many European markets, there are millions of people and only a handful of facilities to meet the demand for storage, a demand that is growing daily. Some European developers would have you believe the markets are already overbuilt. The truth is, however, they are far from reaching their long-term level of market stability.

Individual U.S. markets went though many cycles of overbuilding on their way to the point of long-term balance. The current softness in some European markets only reflects overzealous developers who were too eager to supply space faster than demand warranted. International markets take time to develop because the public has to become aware of the benefits of using self-storage. As the public’s awareness rises, the existing supply will be absorbed, just as it was in the States.

Facilities in markets that do become temporarily overbuilt are very seldom, if ever, at risk of being unprofitable or threatened with foreclosure. That assumes, of course, developers do not forget their common sense. They must also remember, to be profitable in the long run, it takes a well-located, properly designed facility that has professional management and is not over financed.

Weak Performance, Strong Investor Demand

There are good reasons investor demand for self-storage has been so high lately, despite soft performance. Remember, self-storage is not the only type of U.S. real estate to post lackluster operating performance over the past two to three years. Virtually every type of commercial or industrial property has experienced increasing vacancy rates and decreasing rental rates during this period.

At the same time, the stock market’s performance did not offer much opportunity; thus, investors have turned to real estate—specifically self-storage, because it is still among the most profitable investments. Access to an abundance of cheap debt, together with plentiful equity and mezzanine capital, has driven self-storage sales prices to their highest levels in history.

At the same time, lenders have continued to demonstrate their confidence in self-storage by their continued willingness to lend capital at the lowest rates in history. In many cases, interest rates on long-term self-storage loans have been lower than 6 percent. These fully amortizing, 25-year mortgages typically have five-to seven-year calls, with loan amounts up to 75 percent of value. Variable-rate instruments have even lower interest rates and similar terms.

National Investment Parameters

Following is a summary of national investment parameters derived from a large sample of self-storage sales across the United States during the periods indicated.

There has been strong competition to buy the few existing facilities on the market lately. Thus, cap rates on some recent transfers have been at historical lows. It is not uncommon for portfolios to receive several bids from potential buyers. Often, the sellers go back for a second round of bidding before selecting the most qualified buyer offering the best price. The investor market in Europe will, one day, reach the same point of competitiveness.

Demonstrated Confidence

At the time of this writing, an institutional investor is purchasing a portfolio of more than 30 facilities. The purchase price reflects a trailing cap rate in the low-8 percent range. Another, smaller portfolio is transferring based on a trailing cap rate of less than 8 percent. An individual investor, long familiar with self-storage, recently purchased several facilities in the Southwest based on a trailing cap rate that was less than 7.5 percent.

In many cases, the prices being paid for these portfolios, as well as individual facilities, reflect a large premium over replacement costs. The justification offered is the barriers to entry are becoming higher and higher. As development continues, cities start to become concerned about overbuilding. Some have even passed ordinances prohibiting new self-storage development, and others have passed moratoriums. The European markets are far from reaching the point where cities should become concerned about overbuilding. Why, then, should European investors or lenders be concerned today, when the risk of long-term overbuilding is so far into the future?

Risk: United States vs. Europe

The value of real estate, whether here in the United States or in Europe, is calculated the same way. It is based on the present worth of the future benefits, i.e., the cash flows. Thus, the risk associated with an investment must properly measure the likelihood the cash flow will continue beyond the term of ownership.

For years, there was a “perceived” risk of U.S. self-storage that kept lenders from lending, and helped to keep overbuilding under control. Investors typically added 50 to 100 basis points to cap rates to reflect this perceived risk. Today, that premium on the cap rate is gone. Lenders and investors in the States understand this investment vehicle; and it is only a matter of time until European lenders and investors understand it also.

Conclusion

Considering the intensity of development of self-storage in the United States and the high level of rental rates and occupancies facilities have sustained, one can only conclude real opportunities exist in the European markets. European lenders’ lack of familiarity with self-storage is a negative and a positive. It’s a negative because developers trying to find construction financing will soon learn it is not only hard to find, but very expensive when and if they do find it. It is a positive because it puts a lid on how much is built, and controls overbuilding to some degree.

The real opportunity, therefore, will be for equity developers who understand selfstorage. Their goal will be to develop as much as they can, as fast as they can, before everyone else wakes up to an opportunity that comes but once in a lifetime.

Charles Ray Wilson is the owner of Charles R. Wilson & Associates Inc., an appraisal firm that specializes in self-storage valuation nationwide. He is also owner of Self Storage Data Services Inc. (SSDS), a research firm that maintains a database of more then 40,000 self-storage facilities and tracks operating performance. For more information, call 626.792.2107 or visit www.crwilson.com.

Can you imagine how you would handle some losses if they were reported to you late? For example, lets say you learned three years after the fact that your retirement pension had gone bankrupt. How would you feel? Like many of us, you might be very upset and think you had few options. Viewed from that perspective, it is understandable that insurance providers require their insureds to report losses in a timely manner.

Be Timely

Virtually all insurance policies specify when losses must be reported to insurers. Actually, youre supposed to report any event that may give rise to a claim. One policy may require notice be given as soon as practicable after a loss occurs. Another may require the insured to give prompt notice of a loss. The words used often vary, but the intent is usually the same: If you want your insurer to pay for the loss, you have to report it promptly.

So what is prompt notice? Courts have interpreted the phrase differently. Some policies set specific time limits. Its best to check your own policy to determine what you have already promised to do. Generally, notice needs to be given as soon as practicable, meaning whatever is practical, relative to all facts involved (from Principles of Insurance by Robert I. Mehr and Emerson Cammack, p. 214).

Occasionally, insurers have to decline coverage for a loss because of late notice. Insurance companies have a contractual and statutory duty to investigate losses promptly and pay claims fairly when liability for a loss becomes reasonably clear. Often, when losses are reported late, evidence has disappeared. If insurers cant tell what they owe or determine who is liable, they may have to decline coverage; and courts have allowed them to do so. Its impossible to list all the circumstances that may cause an insurer to decline coverage or prejudice it against late notice of a claim; suffice it to say, receiving a coverage denial from your insurer is no fun.

Build a Sound Relationship

At the heart of the requirement for prompt reporting of losses is the relationship of trust that must exist between insureds and insurers. Much of modern business relies on trust to some extent, inasmuch as not every contingency in a contract can be spelled out or some claims proven without expense. Insurance policies are two-party contracts, with promises made on both sides in exchange for coverage and a premium payment. Most agreements we make are good-faith contracts. However, insurance policies are contracts of utmost good faith, which is a higher standard.

This standard developed many years ago when insurance contracts were agreed too far away from the subject property of the insurance (i.e., you and your agent are in Boston, but your facility is in Florida). Insureds must be able to rely on their insurers to provide the coverage and service as stated in the policy; and insurers must be able to rely on their insureds to effectively underwrite protection and handle claims. How awful would it be to conduct business if we couldnt rely on anything anyone said? It would certainly be expensive and time-consuming.

Of course, dont even think about settling a claim made against you before reporting it to your insurer. Your attempt could waive all kinds of coverage and liability defenses. For example, perhaps you do not actually owe the claim, but other customers hear about the settlement and expect similar treatment. Once your insurer learns about it, after the fact, it may be inclined to cancel your coverage since you have violated your policy conditions, which allow it to handle claims that arise under your policy. The long and short of it is: If a loss occurs that might be covered under your policy, report the claim without delay.

Whats the worst that can happen when you dont report a loss promptly? You may have to pay for the loss and the resulting expenses yourself. If its a loss that cant be resolved outside the courthouse, the resolution could be extra expensive. Finally, why go through the grief of dealing with difficult customers who suffered a loss if you dont have to? Clearly, its best to report losses in a timely fashion.

Jeffrey Duke is a claims manager for Phoenix based MiniCo Inc., a provider of specialty insurance coverage for self-storage businesses and customers. For more information, visit www.minico.com.

At the time of this writing, I have just returned from the Inside Self-Storage annual expo in Las Vegas. Many consider this event to be the leading tradeshow of the industry, not only because of the number of participants, which continues to grow substantially, but also its superlative educational and networking opportunities. This year, the quantity of attendees topped 4,000, which does not even include the staffs of more than 200 vendor exhibits.

Attending the Vegas show is always a bit like going to the grocery storeyou have no idea of the innovative and sometimes crazy products on the market until you go browsing down the aisles. I always relish the occasion to speak with new merchants, inspect groundbreaking technologies and catch up with old favorites. But perhaps the most interesting discoveries of all occur when I stand in the magazines own booth and let attendees come to me.

In the past week, I have had the pleasure of meeting Suzanne Repol, director of operations for StorageMaxx Canada Inc.; Claas Nieraad of City-Lager, which is presently building self-storage facilities in Germany; and a gentleman who owns and operates two facilities in Mexico City and is looking to build more. Domestic conferences and expos continue to be meeting grounds for developers from many nations, who come to learn from the American experience, meet potential investors and shop for cutting-edge products. Las Vegas has always been a diverse playing field (in more ways than one); but for self-storage, this was never truer than in recent years.

This issue is largely dedicated to the basics of international business. For those interested in expanding their portfolios or assuming intercontinental roles in their companies, advice from U.S. experts can help pave the way for a more rewarding global experience. Though the process of constructing and marketing self-storage overseas can be dramatically different, similarities on the operational side create a cohesive industry community. Anne Ballard, founder and president of Universal Management Co., who recently spent a week consulting with a facility in Ireland, sums up the scenario nicely:

Although each market, country and culture has its own idiosyncrasies, some things are constant in the self-storage industry worldwide. Customers everywhere want clean, dry, well-lit spaces with professional managers who provide world-class customer service and great storage products. Storage owners and developers want stores that lease up as soon as possible and the lowest cost per lease. Getting these two sides of the equation together is the art of self-storage management.

Inside Self-Storage

would like to extend its gratitude to the vendors and attendees who helped make the Las Vegas show an unprecedented success. A special thanks goes to those who traveled from abroad. Diversity in the marketplace bolsters the strength of this industry, here in the States and across the world.

Best wishes,

Teri L. Lanza
Editorial Director
[email protected]

Site Selection

A site should offer good visibility and access, and have well-established, drive-by traffic flow. As the awareness of self-storage grows, this visual presence will play a more important role in fulfilling occupancy goals, as well as help reduce marketing and advertising budgets. However, it is not always possible to find the right site with an acceptable building. For the prospective owner, when an existing building is not suitable, two choices are available: find another site, or construct a new building.

The majority of European operators will simply look for another site rather than build new, assuming this is a cheaper and quicker option. The main exceptions to this rule are Shurgard Self-Storage SCA in Europe, Big Yellow Self Storage in the United Kingdom, and Dein Lager Self Storage in Austria. Martin Gerhardus of Dein Lagerraum has five sites in Vienna and one in Munich, of which five are new builds and only one is a conversion.

New Builds

Building a facility from the ground up offers owners the opportunity to design according to their needs. With a goal of achieving a good rentable-yield ratio, the facility should offer drive-thru and direct access units. The optimum size seems to be about 80,000 gross square feet, which provides approximately 55,000 to 60,000 square feet of rentable area.

Storage buildings will vary from country to country in accordance with traditionally accepted construction methods. In the United Kingdom, the standard design is a heavy-steel, portal-frame assembly and steel composite panel cladding, with individual floors independent of the main structure. By keeping the floors free-standing, local authority rate charges can be minimized. These floors are typically constructed using square, hollow-section columns that support a steel framework of cold-rolled sections and are decked with compressed chipboard. This style makes the building suitable for any use should the self-storage project fail. New builds in other areas of Europe could be constructed with concrete columns, or integrated concrete floors with steel, masonry or concrete panel walls.

Due to the additional time it takes to obtain local-authority approvals for a new build, it is essential the construction timetable is kept to a minimum. It is not unusual for the main-building construction and internal fitout to be handled under separate contracts. This minimizes the higher supervision and preliminary costs charged by the primary contractor, which are not usually required for smaller, internal fit-out operations.

Typically, a primary contractor is responsible for site clearance; foundations, footings and services; building frames and cladding; main doors; lift shafts; and ground work and landscaping. A secondary supply company installs the mezzanine floors and stairs, internal- partition fit-out, office, internal security gates, lifts, electrical smoke-detection and alarms, access control and CCTV. It is common for all these trades to work together on an overlapping schedule to complete the work in the shortest time.

Conversions

Conversion construction is similar to the second or interior phase of a new build, but normally also requires repair work. The important elements for determining the viability of a conversion and current state of repair include the ground-floor footprint, wall heights (to determine number of floors), the means of access from the roadway, and potential escape routes from the building. Once these have been determined, the existing floor structure must be tested for its capacity to sustain the point-load weights of the mezzanine columns. This can be done with either a core sample or from original design details.

With the options available for internal-partitioning systems, it is easy to make the inside of an existing building look like new. There are excellent lightweight, integrated building systems specifically designed for the self-storage market. These are being used for single-level, detached, drive-up units, which are a popular way of filling vacant car-parking areas. These systems have been successfully used for multilevel facilities in Austria, Scandinavia and the United Kingdom.

Often, buildings selected for self-storage conversions were used for some form of storage and do not normally require planning permission. However, approval will be required if the building exterior is to be altered, especially where signage is involved. The acquisition of a site for a new building will always be subject to planning approval.

Permits and Regulations

Whether a facility is a new build or a conversion, all work is subject to building-control approval. Requirements apply to all structural elements, which must be detailedfrom the slab design to roof flashings. Also important to building control are fire regulations, which not only vary from country to country but from region to region. In the United Kingdom, emphasis is on protection of structures, whereas other countries are more concerned about smoke extraction so people can easily exit the building and firefighters can see to fight the fire.

A typical mezzanine-floor, fire-protection system includes a fire ceilingwhich can be a lay-in grid or fixed-plasterboard designunder the steel work. Columns are covered in a bespoke casing, which is generally galvanized plate with rock wool adhered to the inside. The ceiling is then sealed to the casings and building walls to create a complete, enclosed compartment. The stairs are enclosed in fire-proof pods, usually constructed from lightweight stud sections and plasterboard.

The alternative method is to have no structural fire protection but provide a means of smoke extraction. Rolf van Berkel of Kubus Mini Opslag in Holland is considering the installation of metal perforated plates to the corridor sections of the mezzanine floors, which will allow the smoke to pass through. These corridors will have to be positioned under the main extraction vents in the roof. Although this is probably a cheaper option, it may come at the expense of a good facility layout.

The allowable travel distances for evacuation due to fire will also affect the facility layout, and these distances vary from country to country. The extent to which they differ seems to depend on how well the self-storage industry is understood in the region. Where there is little knowledge of the industry and the exact fire category cannot be determined, a worse-case scenario will preside.

When the company first broached the subject with the fire-control board, Secur Self Storage in Germany was originally told it could have travel distances of only 10 meters. Distances between 15 to 25 meters are now generally accepted for a single exit or up to 50 meters if more than one exit is available.

Finding Help

Knowledge of self-storage is still scarce in the architectural, engineering and building-control professions in Europe. Educating owners design and planning teams as to what is acceptable and why and how other companies are overcoming issues is critical. Owners should seek knowledgeable builders that can use independent companies to process building-control certificates rather than work directly through local authorities. This will allow companies to become more experienced in the industry and argue a stronger case for realistic solutions to various building-code issues.

With the present uncertainty regarding regulations, many site and building-procurement deals must include obtaining permissions clauses to provide security for the buyer/owner. As the industry grows, variances to building codes will eventually be resolved, and it will be possible to have standard building models that can be easily constructed. Local building styles, techniques and products will always be preferred for exteriors, but interior products and layouts will become more standardized.

Dave Betts is the sales manager for Steel Storage Europe, a supplier of self-storage building systems and specialized products in the United Kingdom and Europe. He has been involved in the construction and sales sides of the industry for five years. Mr. Betts specializes in turnkey projects and new developments. For more information, call +44 (0)20 8744 9444; visit www.steelstorage.net.

My experience with international business started years ago at the first trade expo I ever attended. I was giving a demonstration on our access-control system to a gentleman from Brazil and was asked if our keypads spoke Portuguese. Not knowing the answer, I asked him to bear with me while I found out, almost laughing to myself, “There is no way our keypads speak Portuguese.” To my surprise, the answer was yes. It turns out our keypads speak eight different languages!

At that time, our company did not have many international customers. But we had the ability to offer our products and services to many different countries, so why not? The simple answer was technology was not where it is today. The main ingredients used to build a successful business are a lot more complex when you have to cross the globe to do it. How do you support your customers? Is there a language barrier? How do you handle a difference in currency? These are all questions that have to be answered.

With improvements in technology, we are now able to offer international clients more than we have in the past, for example, toll-free support lines to make it easier for customers to reach us. In some instances, the time difference is too great to serve them on the phone, so we also offer a trouble-shooting section on our website to help them through those difficult times. E-mail offers another option for servicing international clients—60 percent of the international business I conduct is done via e-mail.

A Solid Network

Having good dealers and distributors is one of the key ingredients to a successful overseas business. In Australasia, our operation is run by one exclusive distributor that handles customer support and sales from a central location. The key to the relationship’s success is giving the distributor all the tools and support necessary to run a successful distributorship. In this case, the distributor’s team has spent numerous hours educating itself on our product line as well as learning how to support the products. Because of the great efforts the company has made, it is now able to operate with minimal assistance from our corporate headquarters.

Taking your business global by no means happens overnight. You have to be patient while building your customer base. It is a difficult task to earn the trust of prospective clients overseas, as they are unsure if you will be there for the long haul. Would you want to do business with a company you were not certain would be around in a year? Our global business has increased every year since we attended our first overseas tradeshow, and I think that relates directly to our support of the international self-storage associations.

The first year our company attended international expos, our booth did not receive a lot of attention. In the past, too many American companies have exhibited for one year, never to be seen again. This has caused the international market to be very wary of new entities. As an established U.S. self-storage supplier, it is a very humbling experience to have to explain time and again that your 28-year-old company is hardly a new player in the market; but the reality is, in the eyes of international storage professionals, that is exactly what you are.

At our first Australian expo, we met a gentleman who summed up the experience quite well. He was looking over our goods in the tradeshow hall and, on hearing our corporate history, gave us some really sound advice: “Be patient,” he said, “Quite often, things here work on the ‘mate network.’” Puzzled, I asked what that meant. He explained that if his mate (friend) had something that worked and worked well, it would be good enough for him, too!

Patience and Particulars

Going into a new self-storage market with the expectation of being an instant success is not only shortsighted but a surefire recipe for failure. You must be able to see the big picture, break it down into the smallest detail, and plan accordingly. The old saying sums it up: “God is truly in the details” when you are dealing with a project a continent away.

We have encountered our share of resistance when entering international markets. Some of it comes from the trade associations that put on the expos, and their perception of our organizations and the motive that might have brought us to their doorsteps. Some of the hesitancy comes from established competitors who do not want you to get in on the good thing they have made such efforts to establish. Once the business starts rolling, these things seem to work themselves out; but getting to that point can really try your patience.

Educate yourself about the market you are trying penetrate. Understanding the business climate as well as the business culture is probably the most demanding challenge when trying to crack a new marketplace. For example, in Europe, developers are more likely to do a conversion or retrofit than a new build. Multistory buildings with multiple entry doors prevail over single-story sites with only an automatic gate at the front. This is just one of a long list of differences we have seen.

The fact that there are more facilities within 50 miles of New York City than in all of Europe tells you they have just scratched the surface of what is possible in the European marketplace. As the self-storage industry in the United States is by far the largest, one would assume all of the latest and greatest information would come from there. That is not necessarily true. I have attended shows all over the world and learned something new at every single one.

One of the best aspects of our industry is there really is no right or wrong way to run a facility. Being open to new ideas is paramount when learning about a new market. I am particularly impressed with the way the Australasian market continues to grow. The trade expo hosted by the Self Storage Association of Australasia is always one of my favorites to attend. I learn new ideas every year and often implement them into what we do here in the States.

I find it fascinating and rewarding to experience the culture in other countries. Patience, perseverance and a passion to serve the market you are pursuing will ultimately bring international success—as well as a great opportunity to immerse yourself in the sights, sounds and cultures the world has to offer.

Jon Reddick is vice president of Sentinel Systems Corp. of Lakewood, Colo., which has manufactured self-storage software and security systems since 1975. Mr. Reddick has extensive experience in sales and marketing in the electronics and telecommunications industries. He can be reached at 800.456.9955 or via e-mail at [email protected]. For more information, visit www.sentinelsystems.com.