This article provides basic information to the self-storage owner who is facing a maturity date of less than 12 months on a note payable or experiencing difficulty keeping the interest and principal payments current on an existing note. The goal is to negotiate a solution that allows you to maintain control of your property until the economy improves.
 
If your loan is maturing in the next 12 months or you’re having trouble keeping it current, begin with a thorough review of your loan documents. Normally, you would hire an attorney to perform this examination.

As a borrower, you need to know if there are any mistakes, errors or omissions in the loan documents that would hurt the lender’s position to collect the full outstanding debt or give rise to potential lender-liability claims. Has the lender neglected to have you sign the notes and guarantee agreements? Has the deed of trust or mortgage been properly recorded? In general, are there flaws in the lender’s loan documents? This review is an important first step to negotiations with your lender.
 
Communicate and Be Proactive

Most lenders want to work with you and will be accommodating and reasonable in a loan-workout process. However, in today’s economic environment, your lender (or its counsel) will be reviewing the loan and, about four months out, will send you a nice letter stating that your loan is maturing, and they may not be interested in renewing or extending it.

It makes good sense to contact your lender first. Always conduct all communication with your lender in a professional manner, preferably in writing so you have a paper trail. E-mail works well here, too.

More than likely, the appraised value of your self-storage facility has declined, and you may be required to inject additional equity to renew the note. Amortization time frames have shortened, which will cause the monthly payment to increase. Finally, with credit continuing to be extremely tight, your interest rate will likely increase, adding further to a larger monthly payment. Debt-service coverage ratios have also tightened, creating less borrowing capacity.

The bottom line: Be ready with a plan to accommodate your lender and, of course, shop this plan among multiple lending sources. Your goal is to maintain control of your property and get your lender to extend the maturity date of the loan, hopefully on the same terms and conditions.
 
Monetary and Non-Monetary Defaults

First, determine if you’re in default. If you’ve failed to make a payment on time, you’re in default. This failure is a monetary default. You may also be in non-monetary default. A common example of this would be the failure of the borrower to submit various financial reports as specified in the loan documents.

A monetary default normally causes an immediate problem for the lender. Do not default on a note payment, if at all possible. It will immediately move you to the top of your lender’s “problem loan” list, and will cause you severe problems in today’s regulation-heavy environment. Contact the lender prior to missing any payments, and always send required reports on time, with notes on the financial statements, if necessary.

When a loan is in default, a lender has several options: 

• Waive the default
• Agree to modify the loan, in which the default is cured or waived
• Enter into a forbearance agreement, in which the default is acknowledged and the lender agrees to delay foreclosing and suing for a set period of time
• Foreclose and sue the borrowers and guarantors

A loan modification is normally the best bet if the borrower can’t get the lender to simply waive the default. The most important benefit to the self-storage owner here is the lender will not be able to foreclose or exercise other remedies unless there is a new event of default.

Normally, the lender doesn’t want to run your self-storage facility. A modification agreement may allow you to get a lower payment for a period of time or lengthen the maturity date, perhaps as much as several years. This “amend and extend” policy of many major lending institutions will come under more regulatory pressure in the future; however, it will yield the best result for both lender and borrower in the self-storage setting.

A forbearance agreement will buy the borrower some time, normally between 90 days and one year, and the borrower normally waives all claims against the lender and admits default of the loan. These agreements pave the way for the lender to foreclose on your property and take control. A forbearance agreement is to be avoided, if possible, because it requires you to admit default and normally doesn’t allow for enough time to correct the financial problems of the self-storage business. A foreclosure limit’s the options of the borrower. A significant financial loss is normally the result for the lender and borrower.
 
The Best Negotiation

If you have a loan coming due, review your loan documents with your legal counsel and understand your options. Next, communicate with you lender to work out a modification that allows you to remain in control of your self-storage business. Let it know you need to renegotiate and extend the term of your loan. The interest rate on your loan may increase, and you may be required to put up additional collateral.

Keep working hard at renting self-storage units and holding down costs, which will lead to improved operating income. Your lender doesn’t want to own your self-storage property. It simply wants to be paid the outstanding balance on the loan. Negotiating a successful loan workout can accomplish this goal.
 
Jeffrey B. Turnbull has developed, owned and operated self-storage facilities in the Charlotte, N.C., market for more than 15 years. He’s a licensed attorney in North Carolina, a licensed commercial real estate broker in North and South Carolina, and a past president and founding member of the North Carolina Self-Storage Association. To contact him, e-mail [email protected].

Learn more about self-storage financing at the Inside Self-Storage World Expo.

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Hersing Corp. of Singapore, which operates StorHub Self Storage, a Western Union money-remittance business and ERA Real Estate, has entered into a joint venture with Cap Store, a wholly-owned subsidiary of CapitaLand, to expand its business in providing self-storage facilities.

The joint-venture, StorHub, will hold the property assets of the business. In the deal, Hersing's subsidiary StorHub Self Storage will sell four of its self-storage companies to the new joint-venture firm for $60 million. The assets will then be bought by StorHub.

The properties are valued at an estimated $63 million by CB Richard Ellis, according to reports. The transaction is expected to be completed on June 30.

Hersing holds the master franchise rights for the ERA Real Estate brand in the Asia-Pacific region as well as Coldwell Banker Real Estate's residential and commercial franchises. Hersing is also Western Union’s agent partner for Singapore.

Source:  Channel News Asia,  Hersing Corporation in JV With Cap Store to Expand Business

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Police arrested a man who helped steal $70,000 in cold cuts and landscaping equipment from a self-storage facility in Wood-Ridge, N.J.
 
An investigation was launched after nearly $35,000 in lunch meat was stolen from a Boar’s Head Provisions Co. truck parked at the storage facility on March 11. The meat was transported using a landscaping trailer that was also stolen from the facility and contained approximately $35,000 of landscaping equipment.
 
A witness reported seeing several people taking meat from the Boar’s head truck and putting it into the trailer. The witness also provided a partial license-plate number for a car that followed the trailer out of the facility. Police located the car in Jersey City, N.J.
 
The vehicle owner, 26-year-old Hector Ocampo-Lopez, was found in Union County Jail on an unrelated charge. He was charged with four counts of conspiring to commit burglary and one count of hindering apprehension on April 1. If convicted of all counts, he could face more than 20 years in state prison. His conspirators are still being investigated.
 
Source: The Record and Herald News, Man charged with stealing $70,000 worth of cold cuts, equipment

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The discovery of a clandestine drug-manufacturing laboratory at a self-storage facility yesterday has led to a major investigation of potential drug-related activity in Coffs Harbour, New South Wales, Australia. A series of drug-related raids on Wednesday led detectives to Hi-Tech Self Storage in Toormina Place, where they found equipment they believe could be used in making prohibited drugs, namely amphetamines.
 
Because of the volatility of the chemicals involved in drug manufacturing and the dangers they pose, police shut down the storage facility and established a crime scene. Specialist police from the State Crime Command’s clandestine laboratories unit were also summoned to the site.
 
On Wednesday, police raided a private residence on Brodie Street, finding 28 grams of cannabis and electrical gear, which has been detained for forensic analysis. A 35-year-old man found in the home was charged with prohibited-drug possession.
 
Another suspected drug laboratory was dismantled by police in Toormina Place last month. Police have urged residents to be watchful for signs of illegal drug activity, such as black plastic over windows and chemical smells.
 
Source: The Coffs Coast Advocate, Local drug labs busted

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Dominion Self Storage I LLC has raised $1.65 million from its $4 million equity offering, according to a Reg D filing with the U.S. Securities and Exchange Commission.

Paulo Poma and Milton Turner are the principals named in the filing for the Knoxville, Tenn., company. The proceeds will be used for construction and initial operation costs.

Dominion Self Storage will receive an amount equal to 5 percent of the construction costs, according to the filing. The issuer plans to pay a 6 percent sales commission on the total amount sold from the offering.

Source:  CityBizList,  Dominion Self Storage Boxes up $1.7M to Construct Facilities

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In a recent meeting with a self-storage owner to discuss his marketing strategies, he made the following admission: When researching the ratio of calls to rentals at his facility, he’d made the painful discovery that it was not a lack of calls negatively impacting his occupancy, but the lack of employee training in sales and customer service.

This isn’t an unusual situation for self-storage operators, but one that’s rampant and needs to be fixed quickly. The average conversion rate of calls to sales in this industry is 35 percent. Many operators do a lot better, but some do considerably worse.

Don’t think this means you have the wrong employees in place, although that could be the case. You may just have good people who need simply training and guidance. Here are some ideas to help increase your conversion rate.

Answer the Phone

It isn’t always the employee who’s at fault; sometimes it’s the system. A recent Yellow Pages Metered Ad Study, conducted by market analysis and consulting firm CRM Associates, demonstrated that more than 25 percent of calls are answered after three rings, but more than half are answered by voicemail, not a live person. The study encompassed 34,205 call samples (more than 34,000 different ads throughout a number of industries).

Employees cannot be everywhere at once, and may not be able to immediately serve every customer. However, a vast majority of prospects who make a call have an immediate need. If they can’t get their questions answered at that time, they’ll call another facility—your competitor.

To prevent this, make sure the phone is answered promptly. Run the numbers to determine what you might be losing in new business compared to the cost of hiring an additional employee or hiring the services of a call center.

For example, let’s say you get 50 calls per month (600 calls per year) and your staff converts 35 percent. Your average unit is a 10-by-10, rented at $100 per month for an average of 13 months. At a 35 percent conversion rate, you should be closing 210 calls per year, for total revenue of $273,000. If you miss even 15 percent of those calls (90 calls), your revenue drops to $232,050. That’s a loss of $40,950 per year. 

Ask Questions, Then Listen

When a prospective customer calls, the best way to engage and close the sale is to ask questions. The prospect’s first question will likely be about price. But rather than just giving him a number, find out his needs. Your rates may not be the lowest, but not every customer will make a decision based on price alone. Ask what he’s looking for, what he’s planning to store, and what’s important to him. Then you can begin to sell the value of your service.

For example, determine the importance of security, access hours, drive-up access, climate control, tenant insurance, etc., to the customer. Once you know what the prospect really wants in a storage facility, you can begin to sell your value. He may not even know what’s important to him until he hears the options. Prospects have a need for your service; what they will actually buy are solutions to their problems, delivered in a way that demonstrates you really care.

Attitude Counts

Front-line employees should always be pleasant and friendly to customers, current and prospective. It isn’t always easy. Some customers are difficult, or the employee might have a bad day. But even on the phone, a smile (or lack of one) can be detected. A voice can convey friendliness, helpfulness and respect, or sound sharp, uninterested or rushed.

Employees also need to understand that customers require time, some more than others. A good employee should give the customer quality time for the service of his storage needs. If that’s not immediately possible, the manager should get the customer’s name and phone number, let him know his call will be returned within a specific period, and then follow up within that time frame.

Gather Information

Providing service that exceeds expectations means treating all customers equally, regardless of whether they buy immediately. Get their names, addresses, phone numbers, e-mail addresses—as much contact information as you can for follow-up. Explain that you need this so you can let them know about news and specials. Then send a follow-up postcard thanking them for calling or visiting.

They may not have decided yet where to store, and that small way of reaching out could be the deciding factor. Even if they do not rent from you, your database for future marketing efforts increases. 

Show Employee Appreciation

Employees are your internal customers. Treat them with the same respect you expect them to give customers and prospects. Let them know they’re doing a good job. If and when you begin a training program, be sure they know you’re doing it to help them improve and succeed. When they do well, show appreciation.

Just as you expect employees to know customers, find out your staff’s wants and needs. That way, your show of gratitude can be something that’s important to them, whether it’s a plaque or certificate, paid time off, or dinner at a nice restaurant. Every customer, whether internal or external, wants to know he’s valued.
 
Sue Weinman is vice president of Yellow Page services for Michaels Wilder Inc., an advertising agency specializing in Yellow Pages, Internet marketing and talent recruitment for the self-storage industry since 1989. For more information, visit www.michaelswilder.com.

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To meet the needs of increasingly mobile consumers, U-Store-It Trust launched a mobile website that will allow customers to find and reserve self-storage units from their mobile devices. The company’s mobile site provides easy access to the company's 374 facilities as well as the additional 765 locations that are part of the U-Store-It Network.
 
"Mobile has become an increasingly popular channel for consumers in general, and we've observed this from our customers who access the ustoreit.com website," said Steve Hartman, senior vice president of marketing. "Traditional websites aren't a convenient format for mobile devices, and we realized there was an opportunity for us to better serve our customers' needs. We're excited that we're able to provide this improved level of service." 
 
U-Store-It Trust is a real estate investment trust that owns and manages self-storage facilities nationwide.

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Extra Space Storage Inc. will release its financial results for the quarter ended March 31, 2010, on May 3 after the market closes. The company will also host a conference call at 1 p.m. ET on May 4 to discuss the results. Hosting the call will be Spencer Kirk, CEO; Kent Christensen, executive vice president and CFO; and Karl Haas, executive vice president and COO.
 
During the call, company officers will review first-quarter performance, discuss recent events, and conduct a question-and-answer period, limited to registered financial analysts. All other participants will have listen-only capability.
 
Those interested in participating in the call can dial in by phone or log in through Extraspace.com. To participate by phone, call in five minutes early using the number 877.407.4018 (international callers use 201.689.8471). Enter conference ID 349457. A playback of the call will be available until May 18. For the playback, use number 877-660-6853 (international callers use 201-612-7415). Enter account number 3055 and the same conference ID as above.
 
To participate in the call online, visit the website at least 15 minutes in advance to register as well as download and install the necessary audio software. A replay of the call will be available on the website for 90 days.
 
The full text of the earnings report and supplemental data will be available on the Extra Space website immediately following the release on May 3. Those without Internet access can request a copy by mail or fax.
 
Headquartered in Salt Lake City, Extra Space is a real estate investment trust that owns or operates 768 self-storage facilities in 33 states and Washington, D.C. The company's properties comprise approximately 510,000 units and more than 55 million square feet of rentable space.

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A building that once housed a lumber company for 70 years will be converted into a self-storage facility.

The large warehouse in Louisville, Ky., became empty in 2008 when Boland-Maloney Lumber Co. consolidated its operations. Boland-Maloney Enterprises Inc. recently sold the property to QII for $1.36 million.

According to the developers, it will cost at least $1 million to convert the warehouse into a self-storage facility. The facility was built around 1915. The development plan includes an elevator and a new floor to create two levels in the existing warehouse. The facility, scheduled to open in August, will have 60,000 square feet of storage space, built in three phases.

Source:  Courier-Journal, East Main Lumber Yard to be Converted to Self-Storage Warehouse

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