Strategic Storage Trust Inc., a publicly registered, non-traded real estate investment trust (REIT), released its financial results for the quarter ending Dec. 31. The company reported year-over-year same-store revenue and net operating income (NOI) increases of 8.6 percent and 13.9 percent, respectively, for the fourth quarter. For 2013, same-store revenue increased 9.1 percent and NOI was up 17.2 percent.

"Our investment strategy is designed to provide investors with current income through highly occupied stabilized assets, augmented by growth provided through lease-up and development opportunities,” said H Michael Schwartz, CEO. “Our continued growth, coupled with our ability to operate our portfolio with more efficiencies, has contributed to our success in 2013 and bodes well for the future."

In all, same-store average occupancy was at 83 percent for the quarter, up from 79 percent year over year. For the year, same-store average occupancy was up 5 percent, finishing at 83 percent, compared to 78 percent in 2012.

The REIT also increased IPA (Investment Program Association) modified funds from operations (MFFO) by 129 percent to $20.6 million for the year, up from $9 million for 2012. For the quarter, MFFO increased 33 percent to $5.6 million, up from $4.2 million.

Cash flow from operation increased by 67 percent to $5.2 million during the quarter and 102 percent to $19.3 million for the year.

The company acquired nine self-storage properties during the fourth quarter for a total cost of approximately $65 million. The properties are in Alabama, Tennessee and Texas. It purchased 12 properties during the year for approximately $82 million.

Launched in 2008, Strategic Storage Trust operates a portfolio of 125 self-storage facilities in 17 states and Canada. Branded as SmartStop Self Storage, the properties comprise approximately 79,000 units and 10.4 million rentable square feet of storage space.

An art gallery recently opened in a 35-square-foot Manhattan Mini Storage unit in New York City. Juicys Gallery owner Raphael Cohen opted to make use of the self-storage facility because the $30 monthly rental was more affordable than renting a storefront space, according to the source.

The gallery in unit 867 at 28 Second Ave. is featuring a solo exhibition through April 23 by Brooklyn, N.Y.-based artist Lily Wong called, “A Taste of Spring Is a Welcome Thing.” The presentation includes three recent drawings from Wong’s lithographic process. Completed in a brush-and-ink style, each drawing shows a solitary subject in the midst of a banal domestic task. Intended as studies for lithographic prints, Wong’s drawings include imagery from screen captures of movies she watches on her computer, according to the gallery website.

Additional artists to exhibit at Juicys this year include Keith Allyn Spencer and Flannery Silva.

Gallery viewing is by appointment only. Although the self-storage facility’s lights are regulated by a timer and turn off after 30 minutes, Cohen has created a track-lighting system with tension rods and an electrical battery, according to one source.

Dubbed a “pop-up exhibition platform and virtual gallery space based in New York City,” Juicys Gallery was funded through Kickstarter, a website that facilitates the funding of projects through online donations. Cohen’s goal of $2,000 was met on Feb. 22 after just 26 days. The donations will be used to cover expenses such as storage rent, lighting and display materials, shipping, and promotional materials.

Juicys will host exhibitions at self-storage facilities in different neighborhoods each month, according to the gallery website. Before deciding to use self-storage, Cohen and fellow artist Edo Rosenblith considered opening the gallery in a shipping container.

Manhattan Mini Storage operates 17 properties throughout Manhattan. It is owned by Edison Properties, which also operates Edison ParkFast, a network of 40 garages and lots throughout Baltimore, New York City and Northeast New Jersey. The company’s other properties include workspace offices, executive offices and pre-built suites, The Hippodrome office building, and The Ludlow, a luxury residential high-rise on the Lower East Side.

By Stephen Spohn

The international self-storage industry appears to be divided between more mature markets, such as Australia, Canada and the United Kingdom, and very early markets, such as Latin America, the Middle East, Russia and parts of Southeast Asia. Growth or, in many cases, the lack thereof, is often a theme of commentary on the mature markets, characterized by descriptions like “holding steady,” “quiet,” “flat” and “leveling out,” with operators looking inward to optimize profitability. The earlier-stage markets are also characterized by expansion; however, growing pains seem to prevail, including issues such as building codes, public awareness, taxes and the law.

Still, there is a group of “in between” markets that are credible in size and still exhibiting double-digit annual growth rates. They are gradually moving beyond those early growing pains. Japan is one of those markets.

Growing Market Gains Strength

At JPY 24.3 billion in 2012, Japan is the fourth largest self-storage market outside the United States, following Canada, Australia and the United Kingdom. Japan is the fastest growing of these markets, which stands to reason considering penetration (measured as number of storage units per household) is the least developed—0.3 percent compared to the other three markets at 1 percent to 4 percent.

From 2008 to 2012, the Japanese market grew an average of 10 percent, as measured by gross potential revenue (GPR). GPR is defined as industry revenue, accumulated location by location, at published, undiscounted asking rates, at 100 percent occupancy.

As an additional reference for market trajectory, the revenue growth tallied by Quraz, Japan’s largest operator of indoor self-storage facilities, averaged 15 percent from 2010 to 2012. Demand and growth in 2013 is also noteworthy. As the business has grown in size, year-over-year growth has actually accelerated. This is partly attributable to healthy and improving natural demand, produced by ongoing improvements in consumer awareness and improvements in the Japanese economy as a whole. The Japanese market is beginning to exhibit credible, absolute size similar to more mature markets, while still rapidly growing like younger markets.

Dodging Growing Pains

Many of the growing pains experienced by less mature self-storage markets are due to ambiguity and uncertainty in property, tax and consumer law. Property rights and the rule of law in Japan, however, are transparent and enforceable, which should come as no surprise, since it's the third largest economy in the world. These laws will continue to benefit self-storage development, gradually separating it from many other markets, primarily in its ability to attract institution-grade capital.

As a case in point, Evergreen Real Estate Partners LLC secured JPY 20 billion in non-recourse, long-term debt financing to complete its purchase of Quraz in September. The loan, provided by  Prudential Mortgage Asset Holdings 1 Japan Investment Business Limited Partnership, part of the Prudential Financial Inc. Group, includes terms typical for self-storage asset or platform purchases in more mature markets. Though Prudential has had previous, positive experiences with self-storage assets in other parts of the world, this is the first such self-storage financing by any creditor in Japan.

 
Quraz uses a mobile-marketing strategy that includes advertising affixed to bicycles riding through town (left). A local television crew films outside a Quraz facility in Sapporo, Japan.

This financing is a major breakthrough for the Japanese industry, as it lays a path for other overseas and domestic lenders to follow. It was enabled in part by the clarity and enforceability of Japan's property rights and rule of law, which is arguably a meaningful difference between this country and other less mature self-storage markets.

Last year, Quraz was particularly bullish about the potential of the Japanese self-storage market. Now we’re even more confident about its potential. Our belief is driven by demonstrated actual and ongoing demand growth combined with gradual improvements in the credibility of self-storage as an asset class. The Japanese market has a long runway of outsized growth ahead. It’s showing signs of attracting institutional attention that could eventually accelerate that growth as more sources of investment capital take notice.

Steve Spohn is the president of Quraz, Japan’s largest owner and operator of indoor self-storage facilities, which was recently acquired by Evergreen Real Estate Partners LLC. Spohn has been living and working in Tokyo, Japan, for nearly six years. He can be contacted at [email protected]; visit www.quraz.com.

Stuff Hotel plans to spend $150,000 to add solar-panel systems to its self-storage facilities in Corpus Christi, Denton and Pleasanton, Texas. Three years ago, the company hired Austin, Texas-based Self Reliant Solar to install a 28-kilowatt solar array at its San Antonio facility. It recently added another 21 kilowatts to that system. The same supplier will also execute the new installations.

The expanded San Antonio system is expected to save the company 80 percent on its annual electric bill, according to Chris Price, president of Price Asset Management, which manages the facilities. He estimates the system will save the company $6,000 annually and pay for itself within three years.

Stuff Hotel is taking advantage of solar-power rebates, tax credits and incentives offered by energy-provider CPS Energy to install the panels, Price told the source.

In addition to solar, the company is also converting lighting at its facilities to LED, which will use 60 percent to 70 percent less energy, according to the company’s website. Stuff Hotel properties also feature recycling bins for tenants and staff.

Stuff Hotel operates one self-storage facility in Mississippi and nine in Texas. In addition to storage, the properties feature rental trucks, P.O. boxes, office-warehouse rental and storage supplies.

Price Asset Management is a storage development and management firm based in San Antonio.

U.K. self-storage operator Storing.com has introduced a complimentary moving service for customers who opt to rent a unit for a minimum of 26 weeks. After conducting its own study on customer preferences, the company launched the service to differentiate itself, as the British storage market has become more competitive, officials said in a press release. The average U.K. tenant rents a unit for 38 weeks, according to the Self Storage Association of the United Kingdom.

"Our sister logistics business means we have vehicles delivering daily in London and the surrounding areas, so we can offer a high-quality collection and delivery service for our self-storage customers more cost-effectively than the customer hiring a van or using their own vehicle,” said Guy Burridge, director of Storing.com. “This takes away the hassle of transporting possessions to the self-storage site, and by using our professional two-man team, the customer has peace of mind knowing that their belongings are taken directly from their home to our site in one of our own vehicles."

Although still a relatively young industry, the U.K. storage market is comprised of more than 400 operators ranging from national brands with large facilities to local, family-owned businesses, company officials said. Storage.com is based in Bedford, England.

“This massive expansion of the industry is partly due to the increasing availability and falling cost of warehouse space since the industry first started,” company officials said. “During that time, consumers' needs for additional space have also grown, as storage in the average new home, in particular, is no longer adequate for the average family's needs and as people own more and more things.”

Storage.com serves residential and business customers across London and in England’s eastern and southeastern counties. In addition to its moving promotion, the company offers document management and archiving services.

Storage.com, an online directory and provider of search engine optimization (SEO) packages for self-storage facilities, announced membership growth through the first quarter of the year. Including network facilities, the website now lists more than 8,000 U.S. storage locations, company officials said in a press release.

In addition, more than 2,000 self-storage facilities have signed up for the website’s membership services since it launched a new lineup of marketing packages on Jan. 1, officials said. The three tiers of pay-for-performance services—Plus, Pro and Premier—are designed to help storage facilities become more visible on the Web and increase occupancy.

“The reaction to our new service line has been overwhelmingly positive,” said Nick Bilava, director of sales and marketing. “Our members appreciate the fact that they don’t owe us anything unless new tenants are moving into their facility.”

Storage.com is hopeful it will continue to grow its membership base to give storage consumers a wider selection of facilities in their local markets. “Our goal at Storage.com is to provide the user with a wide selection of quality storage facilities to choose from,” said Bill Hipsher, co-founder of Omaha, Neb.-based Web-development and Internet-marketing firm B² Interactive, which operates Storage.com under a licensing agreement. “As our member base grows, the quality of product we provide both our members and storage consumers will improve along with it.”

In addition to its online marketing products, Storage.com launched several new Web features during the first quarter of the year, including a more robust member dashboard, easier-to-use account management tools and additional software integrations, company officials said.

Storage.com was designed to help storage businesses compete more effectively in the online marketplace and allow potential customers to search for self-storage in their area, according to company officials. The website integrates with a facility’s property-management software. For those operating without such software, it offers inventory-management tools. It also delivers exclusive reservations to operators and provides an SEO package.

By Savion Sage

Since 2010, mortgages for businesses, commonly called commercial mortgages, have been getting the attention of all the prominent American banks. By following the statistics, you can assess how commercial-mortgage loans have recuperated during these years, including those in the self-storage industry. In the times of financial crisis, consumers are more interested in paying off debt than investing in real estate. So banks find it easier to lend to companies rather than fetching general consumers.

With the gradual increase in the commercial-mortgage count, banks and other lending institutions have increased the opportunities for businesses by offering numerous lending programs and repayment options. All self-storage owners and investors have to do is select the most suitable option.

The Benefits

Mortgages for commercial purposes are essential, helping a business grow by providing necessary funding for a real estate purchase. With the help of commercial-mortgage loan, you can purchase land to construct new buildings and buy multiple properties. Here are some benefits of a commercial mortgage:

• Assists in cash-flow management. There are several types of commercial mortgages available such as fixed-rate, variable-amortized, mortgages with balloon-payment options and interest-only. Among them, with the help of fixed-rate mortgages, you get a fixed interest rate charged on the loan. Due to the static interest rate, it’s possible to manage the cash flow in business. The monthly payments remain the same, keeping the overall property cost under control.
• Loan terms are generally assumable. If you decide to sell your property in the middle of the tenure, the terms of the existing mortgage loan will be carried over to the new buyer. The new buyer won’t have to go through the approval process again.

Obtaining a Commercial Mortgage Loan

The eligibility criteria for commercial mortgages is far more difficult than for home mortgages. Your credit history, prospects of your business, expansion plans and cash flow will be reviewed by potential lenders. The two significant ratios every lender will check are:

• The debt-service coverage ratio (DSCR): This is evaluated after dividing the net operating income of your business by the monthly mortgage payment, including the interest rate. To obtain a commercial mortgage, you need a ratio of 1.25 or higher. Having a higher ratio will only make it easier for you to convince the lender.
• Loan-to-value ratio (LTV): This is evaluated after dividing the overall amount you need to borrow by the appraised value of your property. Suppose you decided to put 35 percent down and borrow the rest. Your LTV will be 0.65. To get a reasonable loan, you must work on increasing the down payment and reducing this ratio.

The Loan Process

The application and approval process usually takes about 60 days but could be longer depending on your circumstances. Here are the steps you’ll follow to obtain a commercial mortgage loan:

• Zero in on the property first. You must have a property in mind before applying for a commercial-mortgage loan. This will make it easier for your broker to find the right lender. You must choose the property, keeping your affordability in mind.
• Contact the right lender. Set up meetings with several lenders and find which offer the best possible terms. It may take time to find the right lender, so be patient.
• Apply with proper documents. You’ll need to provide the last three years of financial statements for any businesses you own along with your personal finances. You must submit your bank records, documents related to tax returns and other operating statements, too. The application process may require you to pay fees, so ask your lender.
• Get assistance of an experienced lawyer. If possible, ask an attorney to aid in your quest for a commercial-mortgage loan. He can often assist you in understanding the loan terms.
• Fulfill the underwriting requirements. After the document analysis and environmental inspection, the lender may approve or reject the application. If the application is approved, the next thing will be the underwriting process. The lender will underwrite all the terms and arrange funds for your commercial-property mortgage. This process may take a few months, depending on the complexity of your deal.

The process for obtaining a commercial-mortgage loan may take time and your financial documents must be accurate. If you have enough confidence on the financial prospects of your business, then you can apply for the loan. Otherwise, it’ll be better to wait and work on improving your business prospects first.

Savion Sage is an experienced financial writer who has specialization in business development. He writes informative financial articles for numerous business-related blogs and websites. For more information, visit www.facebook.com/mortgagefit.

Inside Self-Storage (ISS) will host a one-day Developers Conference on June 3 at the Jacob K. Javits Convention Center in New York City. Designed for investors, developers and aspiring self-storage owners interested in the business as well as current operators with plans to expand their portfolio or renovate facilities, the event will provide expert insight to ground-up construction, conversions and remodeling projects. Shared case studies will also be used to illustrate specific development strategies.

“After several years of low activity, self-storage development is once again burgeoning, with previously stunted projects coming back on line and new facilities being planned in communities nationwide,” said Troy Bix, vice president of ISS. “If you're interested in building a new project, converting a property from another use, or renovating an existing self-storage facility, this detailed conference is what you need to start strong and end victorious in your journey.”

The conference will begin at 8:30 a.m. with an overview of the current development climate, including why investment opportunities in self-storage construction are on the rise, economic impacts on storage demand, forecasting the year ahead, and expectations on development investment returns.

The event will be separated into nine 45-minute educational segments, covering all aspects of self-storage development, including feasibility, financing, new construction, the conversion process, facility renovation and expansion, boat and RV storage, and a question-and-answer period.

Seating is limited. Complete conference details and registration information are available on the ISS website.

For nearly 25 years, ISS has provided informational resources for the self-storage industry. Its educational offerings include ISS magazine, the annual Inside Self-Storage World Expo in Las Vegas, an extensive website, the ISS Store, and Self-Storage Talk, the industry’s largest online community.

Self-storage real estate investment trusts (REITs) trailed only apartments in the U.S. REIT market during the first quarter of 2014, according to new statistics released this week by the National Association of Real Estate Investment Trusts (NAREIT). The publicly traded self-storage sector posted a 13.12 percent increase during the quarter compared to apartments, with a 13.84 percent gain.

U.S. REIT total returns were nearly five times greater than those of the broader equity market during the first three months of the year, with nearly half of all REIT segments delivering double-digit returns, according to the report.

The total return of the FTSE NAREIT All Equity REITs Index gained 8.52 percent, and the FTSE NAREIT All REITs Index was up 8.57 percent during the period, compared to 1.81 percent for the S&P 500.

“REITs demonstrated their resiliency in the first quarter of this year,” said Steven A. Wechsler, NAREIT president and CEO. “On a long-term basis, REIT performance has been competitive with the broader market. Over the 20-year period ended this March 31, the FTSE NAREIT All REITs Index produced a compound annual total return of 10.17 percent compared with 9.53 percent for the S&P 500.

“REITs don’t, however, move in lock-step with the equity market,” he continued, “which is why they function as an important diversifier in investment portfolios, reducing overall portfolio volatility while increasing overall portfolio returns.”

FTSE is an independent company jointly owned by “The Financial Times” and the London Stock Exchange. The Index Series presents investors with a comprehensive family of REIT performance indexes spanning the commercial real estate space across the U.S. economy, offering exposure to all investment and property sectors.

As of March 31, the FTSE NAREIT All Equity REITs Index included 205 REITs with a combined equity market capitalization of $757 billion.