While there’s no shortage of quality brokers who specialize in the sale of commercial properties, selecting the right one to sell your self-storage facility is a critical decision that can go a long way toward ensuring you receive top dollar. The broker you choose should have the following:

• Extensive industry experience
• Local market knowledge
• A wide network of active industry contacts
• The capacity to properly market a property
• A grasp of Web-based technology
• A clearly defined process and timeline

Industry Experience

Your broker should have extensive experience in selling self-storage facilities. In fact, the best brokers in the industry focus exclusively on storage. While highly successful brokers across different asset classes will share many characteristics, to maximize the value of your property, industry-specific experience is vital. To ensure you’re working with someone well-suited for your facility or portfolio, ask the following.

• How many years of industry broker or acquisition experience do you have?
• How many facilities have you sold, and at what valuation, over the last year, three and five years?
• Do you have experience in selling assets that are similar to my property or portfolio? (For example, think about a class-A, climate-controlled facility vs. a small, class-C property.)
• Have you sold properties at Certificate of Occupancy or in early lease-up, or only stabilized sites?

Local Market Knowledge

It should be compulsory that your broker have local market knowledge and a track record of sales in your area. Each market and submarket has its own nuances, which can significantly impact target buyers and valuation. For example, the New York City and Austin, Texas, markets are extremely different. Not understanding the specifics of a region can result in a broker setting unrealistic expectations for his client or, worse, severely underpricing the facility.

Network of Contacts

Your broker’s database should be extensive, continually updated and indicative of strong relationships with the most active self-storage market participants. This shouldn’t only include the public real estate investment trusts and national operators but private-equity funds, life-insurance companies, pension funds, family offices and high-net-worth investors.

At the end of the day, the most critical aspect of marketing your facility is personal investor contact through a good, old-fashioned phone or a face-to-face meeting. It’s essential that your broker is a “people person” and, yes, a high-quality salesperson. You’re entrusting him to tell the story of your facility. He should be able and willing to personally and professionally present the opportunity to the most likely investors, gauging their level of interest, constraints and valuation range.

Marketing Capacity

Ask your broker about the composition of his team. Many brokers work in tandem with partners who have complementary skill sets and backgrounds. Some are supported by analysts and graphic designers, and are generally backed by all the resources a national real estate firm brings to the table. A list of interested buyers for any given self-storage facility can number in the teens or twenties, and a broker who works as a “lone wolf” may not have the capacity to properly market your property.

Although your broker will look to you to provide valuable information about the asset, he should also conduct his own comprehensive and independent underwriting of the facility. This includes property research, a detailed financial analysis, competition survey, a full due-diligence review and a physical inspection. This thorough process will provide him with the requisite knowledge to produce a high-quality Offering Memorandum (OM). It’ll also help him identify and mitigate problematic issues that may arise in a buyer’s due diligence.

The OM must look good and be professionally presented, free from grammatical errors or other glaring mistakes. An unprofessional document presents your facility in a bad light and can quickly end up in the trash can of a prospective buyer.

The OM should also be thorough and accurate. This seems obvious, but many brokers rush through the creation of marketing materials and make mistakes along the way. In some cases, they use misleading information to drive initial interest in a facility. Accuracy and completeness allow the buyer to make an informed decision, ensuring offers are based on reliable information and significantly reducing the possibility of a price renegotiation a transaction falling through altogether.

The broker’s financial analysis and pro forma should be based on realistic but aggressive assumptions that are designed to “push” the capital markets, with a focus on go-forward assumptions that capture the upside potential of your facility. Before hiring a broker, ask him for copies of packages he’s created for previously sold or unsold properties, and review them closely.

Grasp of Web-Based Technology

Once you’ve reviewed and authorized the OM, the broker will disseminate it to the marketplace. Today this is generally done through an e-mail blast, which contains an overview of the offering. A cutting-edge broker will also create a property-specific website, with a secured online “war room” that contains all due-diligence items, such as site plans, unit mix, supporting financial data, environmental reports and title policies.

The use of Web-based technology to centralize data in an organized fashion facilitates the most efficient use of a prospective buyer’s time, increasing the likelihood of quick decision-making. The website should also allow the broker to track the movements of each prospective buyer, focusing his efforts on the most interested ones and not wasting time on dead ends. Technology in a real estate transaction translates to speed and efficiency.

A Strong Process and Timeline

A good self-storage broker will have a track record of using a clearly defined process and timeline to successfully market and sell properties. A great process is imperative—this can’t be overstated. In its simplest form, it must facilitate a competitive pricing environment, maintain momentum with the marketplace, create a sense of urgency with buyers, force quick decision-making, and weed out those who are unlikely to close.

A great process means the broker is actively working on behalf of his client, from the call for offers and the offer analysis, all the way through to the selection of the final bidder, contract negotiation and closing. Nothing is worse than a broker who doesn’t drive the process to completion, or doesn’t have a process and allows a facility to languish on the market with indifference.

Finally, a great process involves consistent and regular communication with the facility owner. Sadly, there are no shortage of brokers that don’t effectively connect with their clients.

Before agreeing to list your facility, interview multiple brokers and ask industry colleagues for references. Follow the guidelines above to choose the right person to represent your best interests when selling your storage property.

Todd Dailey is the founding principal of Capella Capital Partners, an Austin, Texas-based real estate firm and developer. With more than 25 years of commercial development and construction experience, he’s developed and opened six storage facilities totaling more than 500,000 square feet of space. By 2020, his firm plans to develop at least 15 more facilities comprising more than 1.3 million square feet of storage in select markets nationwide. For more information, call 512.617.6363; visit www.capellatx.com. 

Indiana Gov. Eric Holcomb signed an update to the state’s self-storage lien law on March 8 that allows facility operators to charge late fees and recover expenses for lien enforcement and rent collection. House Bill 1194 (HB 1194) will go into effect on July 1.

The law enables operators to assess monthly late fees to delinquent tenants of up to $20 or 20 percent of their rent, whichever is greater, as well as recover reasonable expenses incurred for collections and pursuing the lien. It also clarifies that assessed late fees and recoverable expenses are part of the operator’s lien against a delinquent tenant’s property.

HB 1194 was supported by the national Self Storage Association and the Indiana Self Storage Association.

Introduced in January, the bill passed the house on Feb. 1 with an 86-6 vote. An amended version of the bill passed the senate 47-1 on Feb. 26.

Sources:
Indiana General Assembly, HB 1194
The Monday Morning Globe 3/26/18, SSA, Indiana SSA Team Up on Lien Law Reform Bill Becoming Law

Louisiana state senator Regina Barrow has proposed changes to the way self-storage operators enforce the state lien law against delinquent tenants. Senate Bills 258, 290 and 338 combined would require facility owners to file a court action when seeking payment from late payers or pursuing a lien settlement. They would also have to file an annual report with the state attorney general identifying each instance of tenant default in which they chose to enforce their rights.

Updates to SB 258 and SB 338 would alter self-storage lien-law procedures. The new language removes all references to tenant delinquency notifications, public notice of lien sales, and other procedures storage operators must currently follow, replacing them with a mandate to pursue debt owed “by an ordinary proceeding,” meaning court action. SB 290 would change the statute that allows storage operators to enforce their rights under a rental agreement to the annual-report filing requirement. If passed, all three bills would go into effect on Aug. 1.

The changes are opposed by the national Self Storage Association (SSA) and Louisiana Self Storage Association (LSSA).

“The current law, which was modernized through a collaborative initiative of the national SSA and [LSSA] last year and is consistent with laws throughout the country, has been working smoothly,” SSA officials said in a March 26 e-mail newsletter to its members. Several self-storage professionals and members of “other real estate trade associations” planned to attend a hearing on Monday to oppose the bill changes.

All three bills were introduced to the senate on March 12 and referred to the judiciary committee.

Sources:
Louisiana Legislature, SB 258
Louisiana Legislature, SB 290
Louisiana Legislature, SB 338
The Monday Morning Globe 3/26/18, SSA and Louisiana SSA Rally to Oppose Threatening Legislation

Diversified real estate firm 10 Federal has opened a new location in Raleigh, N.C. The five-story property at 1515 Sunrise Ave. is in the historic Five Points neighborhood, a cluster of suburban developments that were built in the early 1920s, near the intersection of Glenwood Avenue and Fairview and Whitaker Mill Roads.

The facility comprises 61,000 net rentable square feet in 660 climate-controlled units. It’ll be managed by CubeSmart, a self-storage real estate investment trust and management company, according to a press release.

In February, 10 Federal acquired two properties in Durham and Lowell, N.C. They were the third and fourth transactions completed through the company’s acquisition fund, which launched last year. The purchase included The StoreRoom Self Storage Center in Durham, and Minnie's Mini Storage in Lowell. Both will be converted to unmanned, automated locations, per the company’s business model.

Based in Raleigh, N.C., 10 Federal acquires, develops and manages multi-family and self-storage properties in North Carolina. It now has 11 self-storage facilities in its portfolio. Integrating technology into its operation is a core tenet of the business, according to the company website.

Source:
PR Newswire, 10 Federal Opens Five-Story Self-Storage Facility

Officials in Kamloops, British Columbia, Canada, will open a self-storage facility on April 9 designed to temporarily house items for the homeless. Devised in partnership with the Kamloops Aboriginal Friendship Society (KAFS), the facility will allow homeless residents to store their personal belongings, with the exception of drugs, firearms, perishables and shopping carts, according to the source. The service is free.

“For people who are homeless, a storage facility can be the first step to getting off of the streets,” said Jen Casorso, the city’s social- and community-development supervisor. “Being able to store their belongings assists homeless people with stabilizing their lives, restoring trust, building relationships, connecting with services, attending training and interviews, and even going to work.”

The facility at 48 W. Victoria St., across from city hall, will be open four hours per day, seven days per week, excluding holidays. Two staff members will be present during operating hours. Those who store items will be required to check in with the facility every two to three days either in person or by phone, the source reported.

The program is patterned after a similar one in Vancouver that’s run in conjunction with First United Church. Kamloops staff traveled to Vancouver earlier this month to witness the program operate firsthand, according to the source.

The facility will also help coordinate other support programs based on the needs of tenants.

The project was partially funded by the federal government. The facility is housed in a former gas station. The structure was most recently occupied by the city’s graffiti task force.

KAFS provides support activities and programs for indigenous Canadians living the city.

Source:
Kamloops This Week, Storage Facility for Kamloops’ Homeless Will Open on April 9

As self-storage development in Australia picks up steam, some observers are advocating for greater restraint from builders, investors and municipalities. Sam Kennard, managing director of Kennards Self Storage, which operates more than 85 facilities across Australia and New Zealand, has indicated the company passed up some project proposals it deemed bad for the market only to watch other operators get funding and pursue similar developments, according to the source.

“The problem is that asset prices are quite high, which makes it difficult for new projects to stack up,” Kennard told the source. “There are some crazy projects planned, and I hope good sense prevails—[either] the bank doesn’t fund them or the developer realizes the capital costs are way higher than thought. But some have been built, and they are struggling with anemic occupancies.”

There are 45 self-storage projects in various stages of planning and development in major Eastern Seaboard markets Adelaide, Gold Coast and Perth, with 20 under construction and 15 having been greenlighted, according to Urbis Pty. Ltd., an Australia-based public-policy evaluation and consulting firm. The development activity in those markets represents a 10 percent to 12 percent increase in market supply. “It’s the highest level of self-storage development activity we have ever observed,” said Tim Creighton, a senior valuer at Urbis.

Urbis tracks self-storage demand, rental rates, occupancy and revenue along the East Coast of Australia and in Auckland, New Zealand, through its Urbis Storage Index (USI). The USI monitors self-storage performance from more than 70 facilities in seven categorized zones. Along the Eastern Seaboard, occupancy has fallen 2 percent in the last six months to 85 percent, while rental rates have increased 3.4 percent during the same period, outpacing inflation, Creighton told the source.

While some Australia markets face saturation, others like Bondi, North Sydney and St. Kilda could represent smart geographic investments. “This is where there are no storage operations of scale, demand is high and density is strong,” Creighton said.

Kennards is a family-owned business based in Sydney. It opened its first self-storage facility in 1973 in Moorebank, Australia. Kennard has been vocal about Australia’s development boom, including authoring an article on market dynamics for Inside Self-Storage earlier this year.

Urbis has tracked the storage industry in Australia and New Zealand since 2008. For more than 30 years, the company has provided market-evaluation, research and strategic-advisory services to several sectors including commercial, education, government, healthcare, industrial, residential, retail, telecommunications and tourism.

Source:
The Sydney Morning Herald, 'Crazy Projects' as Capacity Booms in Self Storage

Update 3/26/18 – The Wildomar City Council unanimously approved the Smith Ranch Self Storage project. Phase-one construction on the 9.75-acre site could begin this year and will take about 12 months. Sunny Sage expects that first batch of units to take about two years to fully lease up, Yoo told the council.

The second phase of the project will likely begin in 2021, with the erection of one additional building on the interior of the property. Construction is expected to take about six months, with lease-up occurring during the following 12 months. Phase three is currently planned for completion in 2023, the source reported.

Based on community feedback, the facility’s primary ingress/egress will be on Clinton Keith Road, with Smith Ranch Road reserved for emergency access only, Yoo said.

In response to an inquiry from councilmember Bridgette Moore, Yoo also indicated the company is open to discounted storage rates for nonprofits and community groups.

The relocation of the Sunny Sage headquarters will occur once the first phase of the project is complete, according to the source.

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3/8/18 – Real estate development and investment company Sunny Sage LLC received a favorable recommendation from the Wildomar, Calif., Planning Commission last month for a proposed self-storage facility on the southwest corner of Clinton Keith and Smith Ranch Roads. Smith Ranch Self Storage would comprise 172,398 square feet of office and storage space. The project would comprise eight buildings and be built in three phases, according to the source.

A building facing Clinton Keith Road would include 5,987 square feet of corporate office space and a customer waiting area, in addition to 6,598 square feet of storage space in 106 units. Company principal Sam Yoo told commissioners that Sunny Sage intends to move its company headquarters into the facility from nearby Temecula, Calif.

“It’s a family business, and right now our headquarters are in Temecula,” Yoo said during the hearing. “The office component of the project is going to be our future corporate headquarters, so we are planning on keeping this property for future generations.”

The other seven buildings would house 1,195 storage units. The plan also includes 66 RV spaces at the rear of the property.

Sunny Sage has been working with residents in the neighboring Clayton Ranch community to meet their approval. “We had probably a series of 14 different meetings with the community, and we hosted a dinner where we sent out an invitation to all the adjacent community members in Clayton Ranch,” Yoo said. “We actually had a pretty good turnout. There was about 30 residents who showed up, and through that process, I believe we were able to address a lot of the feedback and issues that they had.”

Commission chair John Lloyd raised a concern that one of the storage buildings would be just two feet from an existing structure on an adjacent property, making maintenance tasks like exterior painting difficult for owners of the neighboring parcel. An attorney representing Sunny Sage told planners the developer would be amenable to a system for maintaining the façade of the building in question, the source reported.

Sunny Sage has been in business since 1998.

Source:
Valley News, Wildomar Council Approves Self-Storage Project
Valley News, Self Storage Project Gets Planning Commission Approval in Wildomar

Veneto West Properties, a self-storage owner, developer and management firm, has broken ground on Gilroy Self Storage Outlet in Gilroy, Calif. The $12 million project is expected to open early next year, according to the source.

The 4.5-acre property at 9080 San Ysidro Ave. will feature six single-story buildings containing 793 storage units. It’ll also include a two-story office and residence for the onsite manager. The site will include a perimeter wall, electronic gate access and video cameras.

The facility is being developed by principal investors Ted Crocker, CEO and president of Darme Holding Co. Inc., and Veneto managing partners George Huff and Sean Venezia. Newmark Realty Capital Inc., a Phoenix-based mortgage and banking firm, provided the financing.

“We plan to build this and operate it in our family as an investment we can keep forever,” Venezia said. “We don’t buy and flip, or build and sell.”

Veneto is also building Oakley Gateway Self Storage in Oakley, Calif. Once complete, the project will include 78,771 square feet of storage space in 810 units.

Veneto develops, owns, operates and manages self-storage facilities in East Texas and the San Francisco Bay Area. Its California facilities include Anchor Self Storage in Vallejo, Empire Mini Storage in Cloverdale and Point Richmond Self Storage in Richmond. In Texas, it operates five AAA Self-Storage locations in Lufkin and its surroundings. It also provides third-party management for two sites in Danville and Middletown, Calif, according to its website.

Source:
Gilroy Dispatch, City Welcomes Big Storage Center
Veneto West Properties, Website

 

U.K. self-storage operator Big Yellow Group PLC has acquired a site in Hove, England, on which it intends to build a new self-storage facility. Pending city approval, the property will comprise 56,000 square feet of storage space.

Big Yellow had been tracking the site for nearly 20 years as the town has limited available land for development, according to the source. The property is near another company facility in Brighton, England.

The operator has 10 projects and 620,000 square feet of storage under development in England, at a cost of £173 million, the source reported. The projects include locations in Bracknell, Slough and Manchester. Big Yellow also recently opened a 55,000-square-foot facility in Central Guildford., and an expansion of its property in Wandsworth is due to open in May. Construction will begin on a new site in Wapping this spring. Expected to open this fall, it’ll contain 20,000 square feet of storage space.

“Securing sites and procuring planning permissions remains challenging and complex, and there will be setbacks,” said CEO James Gibson. “Notwithstanding this, we are confident of making progress and we have, therefore, decided to update the market more regularly with newsworthy events.”

Source:
Insider Media, Big Yellow Acquires Site in Hove

As a business operator in the fastest growing sector of commercial real estate, you have the exciting challenge of maintaining a high occupancy rate. But whatever type of customer you’re trying to rent to at your self-storage facility—residential, commercial, vehicle storage, wine storage, etc.—he may have some qualms about the service in general or your property in particular. You may experience a moment during the sales presentation when the potential tenant hesitates or expresses doubt. Below are the 10 most common objections and how to respond to them.

Objection 1: It’s Too Expensive

As in any retail operation, the No. 1 sales objection in self-storage is going to be based on money. Many consumers will rent a unit based on price alone. If your 5-by-5s aren’t the cheapest in town, you’re going to have to make a case for why you deserve the customer’s business.

You can do this by breaking down what’s included in the rent so the price makes sense. For example, perhaps it includes a free lock or free use of the company’s moving truck. You can also emphasize any specials your facility is running that will bring down the cost.

Also, if you have stellar online reviews, point to those. A customer is more likely to pay an extra $10 per month to rent at a facility with a four-star average on Yelp than one with a mere two stars.

Objection 2: There Are Too Many Fees

The second hurdle you’ll have to clear is fees. If you charge an administration fee, a security deposit or any other fees, there’s a chance the customer is going to feel as if you lured him in with low rent only to hit him with hidden charges.

Be upfront about your fees, and be specific about what each covers. Emphasize which are refundable so the customer feels he’s putting down a deposit rather than just throwing away money. You might also consider including something tangible like a lock, key fob or moving boxes so the cost goes toward something the tenant can actually use.

Objection 3: My Belongings Will Be Damaged

Many people think their possessions are safer where they can see them. If a customer expresses concern that his property might get damaged, whether by the elements or some sort of accident, list out the concrete steps your facility takes to prevent spoiled goods. You might mention your pest management, plans for snow removal and reputation for cleanliness. Suggest climate-controlled storage, which happens to be a great upsell, and share things the tenant can do to keep items safe while in storage.

Objection 4: My Stuff Will be Stolen

If your property has never had a break-in, or it’s been a really, really long time, then say so. If this isn’t the case, don’t lie, but point out your security features, especially if they’ve been recently upgraded or you have plans to upgrade them soon. Be specific about what makes your security so great. Maybe you’re the only facility in town with onsite management. Maybe you just installed state-of-the-art video cameras. This is your moment to brag about what makes your site protected.

Objection 5: There Are Other Facilities That Better Meet My Needs

All customers have unique needs. If they express doubt about your ability to meet theirs, spend a little time finding out what exactly they’re looking for and then demonstrate how your business can deliver. Even better, if your facility has an amenity that no other competitor offers—say, wine storage or an onsite business center with free printing—point that out.

Objection 6: If I Get Behind on Rent, My Unit Will Go to Auction

This objection typically comes from someone who’s seen too many episodes of “Storage Wars” or heard incorrect information about predatory business practices in the self-storage industry. It’s an easy protest to overcome. Simply explain your policies regarding late and unpaid rent in clear terms. Clarify exactly how much effort your business puts into communicating with tenants if there’s an issue with rent.

Objection 7: I’m Not Going to Need Storage Long-Term

You might hear this from a college student, military tenant or anyone who’s only going to be living in your area for a short time. Let this apprehensive customer know your units are rented on a month-to-month basis. Don’t assume everyone knows this. You might also mention how much notice a tenant needs to give before moving out and how easy that process will be.

Objection 8: I Can Just Store This in My Attic, Basement or Garage

As a self-storage professional, you know that an attic, basement or garage is no match for a storage unit. Explain which items need climate-controlled storage. List some objects the tenant is likely storing, such as photographs or leather furniture. Without getting too technical, explain how climate-controlled storage works and why a basement, garage or attic can’t provide this level of protection from the elements.

Objection 9: This Location Isn’t Convenient

Besides low price, the most important thing tenants will look for in a storage facility is convenience. Why should they rent at your site when they can rent at the one around the corner from their home?

Give them a reason. Maybe your facility charges lower prices because you aren’t centrally located. Maybe you offer some service no other facility in town can. Perhaps you’re one of the highest-rated locations in your community.

You can also ask the tenant how often he thinks he’ll visit his storage unit. Unless he’s going to drop by on a daily or weekly basis, location likely won’t be an inconvenience.

Objection 10: I Should Probably Just Throw Away This Stuff Instead of Storing It

Some people see self-storage as a reminder that they own too many things. They feel guilty about even thinking about renting extra space. After all, can’t they just recycle, donate and discard the things for which they don’t have room?

If your facility has a recycling bin or partners with charities that accept donations, especially those that pick up from your property, this is the time to mention it. It won’t dissuade the customer from renting with you. You can offer to help recycle or donate items and suggest a smaller unit than the size originally considered. This will make you look like a trustworthy, service-oriented operator, and it’ll still score the business.

In self-storage, operators deal with sales objections daily. Use the above techniques to turn a “no” into a “yes,” but also take the time to listen to customers’ concerns. These aren’t just doubts; they’re opportunities to improve and capture their business the next time around.

Krista Diamond is a staff writer for StorageFront, which allows customers to custom search and compare thousands of self-storage facilities. She’s a graduate of the University of New Hampshire and lives in Las Vegas. When she isn't writing about storage, she’s climbing mountains in the desert. For more information, visit www.storagefront.com.