The simple truth is business-records storage fits well into the existing operation of many self-storage facilities. Although it is quite different from self-storage in many ways, it has similar components. It takes only a shift in perspective and a desire to achieve higher return on your existing investment.

During the past several years, there has been a consistent increase in those self-storage operators who understand records storage makes for a sound business opportunity within the walls of an existing facility. More and more self-storage developers have made the decision to include records storage as a service at their sites. This shift in perspective has taken place because several operating and technology dynamics have changed, and entrepreneurs have begun to understand the long-term annuity basis of records storage.

Even still, there are naysayers in the crowd. Records storage is not for the timid. It does take a different approach. But those who say it doesn't work are wrong. Time after time, its success has been proven by those adventurers not tied to traditional methods.

The records-storage service is off of the beaten path the elders in self-storage have commonly taken. It is also fair to say the existing, traditional records-management community does not want you playing on its field. But you have a real advantage over the traditionalists: You are not steeped in the "we have always done it this way" syndrome. After all, this is 2003, and there are new approaches, improved methods and ways to create high yield that have never before been developed by the traditionalists in this industry.

The Facts on Records Storage

All business clients have records. Every business has business records. They may vary in volume from a handful of boxes to several thousand. The smaller-volume accounts represent your ideal niche market.

Clients with 25 to 250 boxes provide the highest yield. There are literally thousands of these accounts in your marketplace. They are under the radar for traditional commercial-records vendors because they are under their minimum charge. But these accounts can yield two to three times the quoted price per unit of storage. (For more information, see this column in the May 2003 issue.)

Small businesses have no expertise in records management. But they abound in our economy. More Americans are employed by small businesses than major corporations. Rarely does a small business have any plan at all for managing its business records.

Small businesses are an overlooked market. Since traditional commercial-records centers focus on larger accounts to support their sales efforts and operating costs, small businesses are not regarded as prospects. All businesses start small. If you capture them when they are budding, they will remain your accounts as they grow.

You are the first choice for records storage. The first storage issue businesses encounter is lack of space for records. Self-storage is the most common dumping ground for passive storage--it keeps records out of sight and out of mind. A simple twist in perspective turns a records dumping ground into a thriving business. (For more information, see this column in the March 2003 issue.)

Records storage is "permanent" revenue. One key difference between records management and records storage is the services provided. The client must pay for retrievals and other handling, for example. In addition, a permanent-retrieval fee is a deterrent to clients leaving a facility. The commercial records-management industry regards accounts as permanent, as boxes remain in storage for an average of 16 years and generally grow at a compound rate. (For industry studies that document these facts, write to [email protected].)

You can use existing storage units. The most common component of a records business is storage space, which you already have readily available. Existing units can generate from three to five times the current yield. Yes, there is a required strategy to move yield to this level of productivity, but it works even in 10-by-10 units. Although my recommended strategy prefers larger, contiguous units, other options work well also.

You can use existing personnel. The only personnel requirement is a site manager, and strategic outsourcing of some or all labor components can actually increase yield. Outsourcing any activity requires setting expectations, benchmarks and standards of performance, and measuring those criteria--in other words, it requires management.

There is a low entry cost. Nontraditional records management within the walls of an existing self-storage business can have an entry cost of as little as $10,000 to $12,000.

Implementation can take place in 30 days or less. You can enter the market and be ready to operate in 30 days or less. Implementation can be simple, training can be repeatable and you have total control over the service levels you offer.

Profitability can increase in 90 days or less. Getting to a profitable position within 90 days requires a marketing strategy. You can determine which level of marketing you will implement. Marketing starts with converting existing business accounts from passive unit rental to managed storage.

Records storage provides product diversification. It increases your potential for profit maximization at an existing location. It adds another valuable service level to your business and acts as a product differentiator from your competition.

Records storage gives you a testing strategy. Nontraditional records management provides an inexpensive testing ground for the potential of a more aggressive approach. The low cost and easy entry provide you a way of understanding the industry, determining your interest and lowering your risk of failure.

Records storage provides a launching pad for traditional records management. If you are successful, a low-cost entry into records management provides an excellent basis for moving further into a booming industry.

Regular columnist Cary McGovern, CRM, is the principal of FileMan Records Management, which offers full-service records-management assistance for commercial records-storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.

This month, I gathered a roundtable of experts to discuss the state of self-storage in the southern United States. Let's hear what local experts have to say about their respective cities and regions. Our panel of brokers includes: C. William Barnhill, Omega Properties, Mobile, Ala.; Dale C. Eisenman, Midcoast Properties Inc., Hilton Head Island, S.C.; Mark D. Keys, Cornerstone Realty, San Antonio; Richard Minker and Tyler Trahant, The Richard D. Minker Co., Fort Worth, Texas; and Frost Weaver, Weaver Realty Group Inc., Jacksonville, Fla. Because of the unique economic times in which we find ourselves, I have contributed comments on the national market as well.

WHAT IS THE RANGE OF CAP RATES IN YOUR MARKET? WHAT DETERMINES THE DIFFERENCE?

Barnhill: Cap rates in our market range from 10 percent for larger upscale properties to 11percent to 12 percent for smaller, older properties. The cap rates vary according to size, location and other features of the property as well as the size of the city in which they are located.

Eisenman: Cap rates in this market range from 10 percent to 11 percent on trailing income--unless there is a clear reason, in the buyer's mind, to use pro forma income, such as additional rentable square feet, land not included in the net operating income, or some other factor that creates additional value.

Keys: Cap rates are now generally running between 9 percent and 11 percent based on the past year's historical performance for stabilized facilities. What determines the difference is largely the buyer's perception of the income stability and potential upside the investment offers. Newer facilities with appealing features situated in prime locations with barriers to competitive entry are commanding the highest prices and, conversely, the lowest cap rates. Older, less functional properties are more difficult to keep leased and more expensive to maintain. Buyers recognize this and require a higher cap rate to "risk adjust" their investment.

Minker/Trahant: We are currently seeing cap rates in the range of 10 percent to 13.5 percent. The lower cap rates are for class-A facilities with strong stabilized occupancy. The higher cap rates reflect either underperforming new properties or older properties with lower occupancy rates. Mid-range cap rates are for newer properties with moderate occupancy and future lease-up potential. There are some buyers who will pay 9 percent-plus cap rates--but on actual income not pro forma--for class-A-type properties.

Weaver: Cap rates on listed properties have fallen as low as 9 percent on properties of marginal quality for several reasons. First, some brokers are very aggressive in trying to get listings and will represent to an owner a higher price than is obtainable in the market. Second, due to lower interest rates for financing, leverage returns are higher, giving a justification for a lower overall cap rate on quality properties. Finally, due to the fact there are not a lot of quality properties on the market at this time, owners believe the supply-and-demand factor justifies lower cap rates. While there is certainly some justification for this, in theory, I don't see transactions being consummated at these lower rates. Recent transactions have still been in the 10 percent cap range for quality properties and higher cap rates for the smaller owner/operator properties.

Weaver makes a great point when he suggests many properties are listed at higher prices than market because the broker is simply "buying" the listing with the promise of a higher price than market and hoping that the seller will capitulate on the price as the true market value unfolds. As beguiling as the promise of an unrealistic price is, the result is often that sellers miss potential sales to serious buyers, thus missing the great "market" sale that exists at today's market cap rates. It is shame to see sellers miss a good market because they are induced into a listing on false expectations.

IS OVERBUILDING BECOMING A SIGNIFICANT FACTOR IN YOUR MARKET? DESCRIBE THE CURRENT SITUATION.

Barnhill: Overbuilding has been and continues to be a significant factor in our market. Developers continue to add product even in markets that are not fully absorbed with existing product. I do see most banks are demanding more due diligence, and even a feasibility study in some cases.

Eisenman: Like everywhere, there are pockets of overbuilding or, as I like to say, "capacity well-positioned for the future."

Keys: Overbuilding is a significant factor in the Texas market, but it is spotty rather than epidemic. Developers are still managing to identify pockets of demand and build profitably. Yet there are facilities that have been open for two years and are only 50 percent leased. Overall, the pace of new construction in the market has outpaced absorption for the last several years. And with the current economic downturn, facility owners across the board are starting to feel the effect all this new space has on the market.

Minker/Trahant: Overbuilding is continuing to become a bigger factor in the overall market, but it is not yet a significant factor except in selected geographic areas. In North Texas, those markets appear to be in North Fort Worth, South Arlington/Mansfield and North Dallas/Plano/Frisco.

Weaver: Overbuilding is a significant factor in the urban market areas. Due to a lack of quality product for sale, many investors that would acquire existing properties are now looking to buy land and build. The economics look good on paper, and banks are still willing to lend. There are still several inherent factors that are affecting the lack of product available for sale. If a seller cashes out, there are few attractive investment alternatives. Interest rates are still very low and the stock market is still very volatile. There is a lack of quality product available for 1031 purposes, even in other types of real estate. In general, retail and industrial properties are very hard to find, and while there are numerous office properties for sale, there is a high vacancy factor statewide.

The comments our brokers provide on overbuilding are generally true across the country. While the problems are currently somewhat isolated to specific markets, the trend is to entire cities being overbuilt. However, a major problem is our industry does not have information available to determine the exact extent of the problem. All other categories of real estate keep track of such statistics, thus enabling lenders and developers to moderate the development plans prior to a major overbuilding. Obtaining this information should be the highest priority of the national and local associations, as not having it harms every owner in a market. Right now, with low interest rates making investments (i.e., development) particularly attractive and no reliable information to dissuade them, developers are going to continue developing--it's what they do! Market surveys and feasibility studies are a must.

ARE OCCUPANCIES DECLINING AND RENTAL RATES DECREASING? WHY?

Barnhill: Well-run properties are maintaining occupancies. However, older properties that are poorly managed are losing ground. Effective rental rates have declined somewhat due to the rental discounts offered by most facilities.

Eisenman: There are some signs that rentals are picking up or becoming more stable after a soft December and January. The weak economy, seasonal trends and overbuilding make an analysis of the relative causes of market softness difficult to isolate, but it certainly appears they are all contributing factors. It is likely overbuilding will turn out to be the most significant cause and will have the longest effect on rates and occupancies.

Keys: Overall occupancies have declined in the major Texas markets, as well as in some secondary markets when you take into account new facilities in lease-up. New facilities often offer rental discounts to encourage a quick lease-up, which has the effect of depressing the overall market rental rates. Still, many properties have managed to maintain their occupancy and income despite the effect of new competition and a softening economy. Storage facilities have fared better than other types of income properties during the current downturn. Both are favorable indicators for the industry as a whole.

Minker/Trahant: Occupancies are declining pretty much across the board. In some selected markets and/or facilities, some of those declines are significant where extensive new development is taking place. Self-storage operators are attributing the decline to the overall state of the economy, job loss, etc., and the mindset since Sept. 11 from which they have never fully recovered. As to rates, we are seeing very limited or small rate increases. Most owners are pleased to be able to hold their current rates, but many are discounting to match the deals offered by newly opened or slower leasing facilities.

Weaver: There is a trend of declining occupancies in the major cities due to continued building and oversupply. In the smaller markets, occupancies remain strong, with rental rates stable of increasing. In the major markets, published rates have not been decreasing, except in certain market areas; but there is a trend toward concessions as an inducement to the consumer.

WHAT TYPE OF FINANCING IS AVAILABLE FOR FIRST-TIME BUYERS?

Barnhill: Local bank financing is the predominate method available for local properties. Refinancing is usually with a 15- to 20-year amortization and a five-year balloon payment fixed for five years at 6.5 percent to 7 percent. Variable rate loans are at least 250 to 350 basis points over one-month LIBOR, or prime plus 1 percent. For first time buyers, the equity requirement is 25 percent to 30 percent, and the underwriting requirements are quite stringent unless the owner is very strong financially and has a good banking relationship. Additionally, the debt-coverage rate is about 1.30.

Eisenman: Local banks are willing to finance self-storage buyers based on normal credit underwriting. Banks with existing loans for self-storage may be the best sources for the first-time buyer. If one is buying an existing facility, he should explore financing with the existing loan holder. The first-time buyer should strongly consider hiring existing management or using a professional third-party manager, which will demonstrate to the lender a greater likelihood of success and loan repayment.

Keys: First-time buyers may find favorable financing with a local bank or conduit lender. Currently, a first-time buyer can expect a 70 percent to 75 percent loan on a 15- to 25-year amortization, due in five to 10 years. Interest rates have been running in the 6 percent to 7 percent range. Most lenders want a debt-service coverage ratio of 1.3 or better. These are broad parameters; the actual terms a buyer can achieve will depend on the facility being purchased and the buyer's credit worthiness.

Weaver: There is financing available for first-time buyers, provided they have decent credit and general business experience. This financing is generally available from local banks that know their markets and the property being acquired. The local banks have money to lend and understand the favorable economics of self-storage facilities. I have recently had local banks contact me regarding their interest in lending on self-storage facilities.

WHAT IS THE STATUS OF FINANCING FOR EXPERIENCED BUYERS?

Barnhill: Experienced buyers can command five-year money at 5.5 percent to 6.5 percent with a 15- to 20-year amortization. The equity requirement is usually about 20 percent to 25 percent, providing the debt-coverage rate is at least 1.20 to 1.25. Some experienced buyers in our area have opted for variable-rate bond financing with LIBOR rates. The overall effective interest rate is currently about 3 percent floating with LIBOR. These loans usually have a 20-year amortization with a five-year balloon.

Eisenman: Experienced operators with a proven track record will have an easier time securing financing. While rates are low, underwriting is becoming more conservative, so an experienced operator who can demonstrate past success in self-storage will find banks more receptive than one who cannot.

Keys: Experienced buyers are finding financing in essentially the same places, as well as with regional banks with which they have established a lending relationship. These buyers can often obtain financing on so-called "value-add" facilities--those that have not achieved a stabilized occupancy level--much more readily than a first-time buyer. For the experienced buyer, the operational history of a facility and debt-service coverage ratio may be less critical.

Weaver: The local bank is also a very viable source for the experienced buyer, but other options are available to him in the national lending market, including banks, insurance companies and conduit lenders. I was recently contacted by a regional bank interested in self-storage loans in Florida. At this point, financing does not appear to be a limiting factor in self-storage transactions or development. However, the favorable economics of self-storage development and the lower perceived risk is increasing supply at a faster rate than absorption. This is increasing supply to a precarious level in many selected markets, leading to higher risks for the developers and lenders and lower returns for the investors.

As can be seen from our Brokers' comments, the availability of loans at great, historically low rates means buyers can get a terrific cash-on-cash return and sellers can get the best market price in years. The dark side is development will continue and could cause serious problems for individual properties. This suggests two strategies: 1) if you are going to be a seller in the next couple of years, now is the time, before interest rates go up and occupancies go down; and 2) if you don't plan to sell, make sure you have refinanced and lowered your debt-service costs so you can compete in a difficult market.

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 nation's 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.

I want to tell you about a great concept recently shared with me by the manager of a self-storage facility in the Moreno Valley of Southern California. This unusual philosophy of management has helped keep all the facilities in the area full and otherwise successful.

The local managers decided to take a positive outlook toward what is normally referred to as "the competition". They began to regard each other not as rivals, but as compadres in the same industry. The result was the formation of the the Moreno Valley Self Storage Managers Social Club, which works to achieve maximum incomes and occupancy levels at all of the facilities in the area.

Each member works with others by referring prospective renters to another facility if he himself cannot accommodate them. Every month, the managers exchange rental rates, occupancy levels, and numbers of units and sizes available. This information is then put into a spreadsheet and faxed to each member. This greatly facilitates recommendations.

The managers also send a creative monthly newsletter via fax to each site. It contains information such as who is having a birthday during the month, and who is a new manager, with a welcome note for that person. If there is an issue that needs to be addressed, such as a rodent problem or a new facility that was just approved to be built, this kind of information is included.

These managers get together every other month, at their own expense, for a casual dinner during which they bond and discuss issues such as changes in lien laws, new marketing concepts, delinquency problems, rental rates, new facilities coming on line, etc. They take this time to exchange ideas and build friendships, viewing each other, not as competitors, but colleagues sharing the same ideals and goals. This is a positive step for these managers. It was very insightful of them to take the initiative in creating such a club. It helps them keep their facilities full and provides an opportunity to interact with one another.

Some states have their own self-storage associations and, of course, we have the national Self Storage Association; but let's face it--most of these organizations are primarily for owners and management companies. Facility managers are, for the most part, ignored. The cost of membership is usually too prohibitive for most managers, as are the fees to attend industry conventions.

California owners and operators recently formed the California Self Storage Association. Its annual dues are purposely kept very low so the organization can attract site managers. The CSSA recognizes site managers are a key element in the operation of local facilities. It wants them to join the association and contribute their ideas and expertise.

If more managers across the country would work together and form their own loosely based social clubs, it could be a win-win situation for all parties involved--owners, management companies, managers and tenants. By taking a positive approach to competition and changing the attitude from antagonistic to cooperative, many possibilities can be explored. Not only could all facilities enjoy the highest level of occupancy and income, but they could offer excellent benefits to customers.

Managers could learn from one another about marketing, reducing delinquencies, using software or offering ancillary services. And there is no reason owners can't get involved in clubs such as these by supporting their managers. They could begin by providing a budget for the bimonthly dinner or newsletter, or hiring industry professionals to speak to managers at the social gatherings.

By working together, we can build a strong, well-educated industry to meet customers' needs while earning greater profits. Kudos to those managers in Moreno Valley. Congratulations on a job well done!

Pamela Alton is the owner of Mini-Management^®, a nationwide manager-placement service. Mini-Management also offers full-service and "operations only" facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call 800.646.4648.

Keyboards, mice, printers... It's not exactly riveting dinner conversation, is it? Au contraire!

New technological products on the market include keyboards that reduce hand fatigue, read driver's licenses and credit cards, or have an integrated trackball. Wireless microphones provide hands-free typing, and there are printers so complete they fax and copy, or so portable a manager can print a lease while standing beside a rented unit.

If your site is large, you may have one staffer who spends most of his day entering data into the management computer. This level of use can lead to a repetitive strain injury that reduces his typing efficiency and may burden you with a worker's compensation claim. The problem is a standard keyboard causes the human hand to twist at an angle. The easiest solution is to use a split keyboard like the Microsoft Natural Keyboard Elite 2.0 ($30).

Another clever keyboard is the UniTech K2724 ($150), which has a built-in magnetic card reader. If your management software supports on-demand credit-card processing, this keyboard with save you time and reduce typing errors. You'll also receive the lowest merchant-banking fees available.

Management software requires constant hand travel between the keyboard and mouse. The DataDesk TrackBoard ($63) has an integrated trackball that replaces the mouse. Unless you have ever tried a trackball, you might not appreciate its ease of use. Having a trackball in the keyboard minimizes hand movement while your eyes stay focused on the management screen.

Voice-recognition software is an alternative to using a keyboard. The software installs on your management computer and analyzes your voice commands. This is a great tool for writing letters and issuing keyboard commands. When paired with a wireless microphone, you have a powerful office tool. The ever-popular Naturally Speaking Preferred 7.0 by Dragon is only $145. However, voice-recognition software won't save you time entering a new tenant's information when the name or address is difficult to pronounce.

A more common input tool is the scanner, which is a tabletop unit that digitizes leases and driver's licenses for permanent storage within your management computer. Scanner software lets you print copies or translate the image into a text document. A good quality 600x1200 resolution scanner will run you less than $80 and represents an indispensable office tool.

You can acquire a single unit that is scanner and printer, but combining hardware does not ensure the best of both products. In fact, these do-everything units use complex software that may be problematic to your computer's stability and performance speed.

It is safer to purchase a printer as a separate device. Personally, I am partial to the Epson brand. Its units are fast, quiet and rarely need servicing. Epson paper trays are large, and the ink cartridges are reasonably priced. If portability is your strongest need, try the Canon I-70 color bubble jet ($280). It weighs only 6 pounds (with an optional I-50 lithium battery) and is quite portable. When used with a wireless laptop, it can print lease agreements from anywhere on the facility grounds.

My favorite computer accessories is the Flash Pen Drive. My CD Cyclone 64MB ($40) allows me to easily back up data files and critical programs in seconds. I just plug the thumb-sized unit into my computer's USB port and I can instantly drop and drag the files I need to copy.

Finally, I recommend you put a sound card ($25) into your management computer and add some speakers ($15). Some self-storage software includes dozens of video tutorials that use your computer's sound system. This is a fantastic way to train new employees and refresh the experienced user. This alone can reduce your expenditure on technical-support calls.

There are dozens of other gadgets that connect to a computer, but it is important to remember this is a business machine. The management computer should be powerful enough to get the job done but not so heavily accessorized as to make it unstable or a source of distraction for the manager. I remember one facility where the manager had installed dozens of multimedia programs and then wondered why his management computer became unreliable. My advice is to keep it simple.

Doug Carner is on the Western-region board of directors for the Self Storage Association. He is also the vice president of QuikStor Security & Software, a California-based company specializing in access control, management software, digital video surveillance and corporate products for the self-storage industry. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.

The U.S. Chamber of Commerce reports that in the United States alone, billions of dollars vanish every year due to employee theft. Stealing is a severe threat to any facility, and it only takes one or two people to cause financial chaos. Owners should recognize the risks, deter dishonest employees from their facilities, and understand the benefits of employee-dishonesty insurance.

Theft can be committed by one employee or several. Forging and hiding receipts, pocketing loose change and stealing merchandise from the managing office are common practices. There have been reports of managers creating bogus payrolls, overbilling expenses and committing purchase fraud. Theft can even go as far as breaking into storage units and stealing tenants' goods. Some offenders have actually taken advantage of their employment by breaking into units in the off hours and calling the police to report the crime the next morning.

So what can you do to protect yourself from employee dishonesty? Employee theft can be hard to detect, especially if the criminal is good at what he does. There are several ways to keep a closer eye on your facility and minimize the risk of theft. Start by watching out for unusual occurrences in your facility, such as discrepancies of cash amounts and missing supplies and merchandise. Take notice of your employees' behavior. Watch for unusual working hours, poor work performance, constant complaining and defensive behavior when discussing work issues.

Implementing an anti-theft regime in your facility can also reduce your risk to exposure. Employees will be less likely steal from you if they think there is good chance of being caught. Perform regular surprise visits and audits to keep track of any merchandise or receipt problems. It's recommended to have managers and accounting personnel take vacations so the fill-in can be used to double-check for payroll and accounting discrepancies.

Set up surveillance in key areas such as the managing office and storage areas. Not only will surveillance keep a record of events, it can also help deter theft from outside burglars. Avoid retaining tenant keys to eliminate access to tenants' goods. Most insurance companies won't write policies for storage owners who retain keys because of the increased risk factor.

Know who you are hiring. Some people have theft in mind from the beginning, and you should avoid hiring these people by conducting thorough background checks and obtaining previous job references. Last but not least, if you have many employees, it might be beneficial to start an awareness program. By doing so, you can inform workers about stealing and keep them on the lookout for theft.

In addition to deterring crime, secure an adequate amount of employee-dishonesty insurance. Unlike those from burglary and robbery, losses due to employee dishonesty are excluded under most commercial policies. Many owners do not realize this coverage can be just as important as fire or liability insurance. Crime coverages can protect against losses from robbery, burglary, theft, embezzlement and other risks, and can be tailored to fit the size and scope of your self-storage operation. In most cases, your business-property and liability package policy can be endorsed to provide coverage against employee dishonesty, loss of money and securities from your premises, and loss of other covered business property such as computers.

One important point to remember about employee-dishonesty claims is the act must have been committed with "manifest intent"; in other words, the loss must be the result of an unethical act, such as lying, through which the employee sought personal gain. Without manifest intent, such claims are generally disallowed.

Also, inventory-shortage claims are excluded from employee-dishonesty policies because losses can occur from a variety of reasons beside theft, such as accounting errors. Consider also that money and security claims and business-personal claims are not the only losses that can be covered under employee dishonesty. Endorsements might be available to protect you against check forgery, credit-card misuse and computer fraud to supplement your existing protection at extra cost.

Universal Insurance Facilities Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; call 800.844.2101; fax 480.970.6240; e-mail [email protected]; visit www.vpico.com/universal.

Permits and Licenses

Permits, as required by law, were not secured for the pyrotechnic display the performing band used the night of the Station fire. If you are installing a door-alarm system and access-control gate at your facility, specific permits and licensing may be required by your state. Check with your local building officials and State Department of Business Regulation. Simply having an electrical permit for your electric service and lighting may not be enough to comply with the law.

The contractor doing the security installation may need a separate data-communication license. Some states require all workers on site have this license for low-voltage installation work. This would apply to door alarms and access-control gates. There may be a further requirement that all workers have a security badge, requiring their fingerprints be documented and registered with the FBI.

Once your security system is installed, you have the option to have an independent alarm company monitor the system and report to your local police station. Having an installation company with security-badge clearance is important, as you have a substantial investment in your facility. Asking your contractor to be properly permitted and licensed is a reasonable request.

Proper Insurance

After the Station fire, records indicated the night club had no worker's-compensation insurance. Most states have a law requiring a business have this coverage. If it does not, it can face civil and criminal penalties. The insurance is important for two main reasons:

• It generally pays a portion of lost wages and provides medical coverage for a worker who suffers a work-related injury.
• It generally protects a business and its owners from liability if a worker is injured or dies on the job. If a business does not have the coverage, a worker (or his estate) can seek to recover costs by suing the business and property owners directly. In addition, the business owners can be sued personally, "piercing the corporate veil" that typically shields them from liability.

If your security subcontractor "business owner only" is exempt by law, request a copy of the waiver he had to sign with his insurance company. Always have a Certificate of Insurance on file before he mobilizes on site. Also, be listed as an "additional insured" on the certificate. This allows you to correspond with the insurance carrier. You are entitled by law to be listed as an additional insured. Again, you have a substantial investment in your property. Make sure your contractors are properly insured.

Safety and Liability

Blame is being pointed at just about everyone related to the Station fire. The costs of the litigation may exceed the limits of the insurance policies. If someone is injured while working on your property, what precautions did you take to prevent this from happening? To simply comply with the law is not enough. Most self-storage facilities have automated security gates. One crucial precaution is to comply with UL 325.

What is UL? Underwriting Laboratories Inc. is a not-for-profit organization that was established in 1894. Its primary mission is to "evaluate products in the interest of public safety." A UL label is not generic--it represents a brand name, and there are other organizations that provide safety-testing standards. According to the Occupational Safety and Health Administration, electrical equipment is acceptable if it is listed by a nationally recognized testing laboratory. UL 235 is a specific code standard that addresses the prevention of personal injury from automatic gates.

For example, UL 325 states that gates with picket spacing of more than 2.5 inches requires a safety mesh. There are many other safety standards within the UL 325 listing. It is voluntary for a manufacturer of gates and gate operators to participate in the UL process. However, in the future, states or municipalities may mandate the code standard. If you are ever sued for a workplace injury related to facility security and its installation, make sure you took all the steps possible to prevent it.

Al Costantino, owner of Northern RI Self Storage Inc., is new to the self-storage industry. With a background in government and commercial contracting, he is currently building a 100,000-square-foot facility in Smithfield, R.I. For more information, call 401.232.1000.

The quality of the security system you select is critical. Of course, the location and general appearance of the property plays a major role in attracting customers. However important these basic considerations may be, they represent only part of a facility's attributes. A comprehensive communications system will keep customers informed and offer immediate access to assistance.

A communications system can include a combination of intercom and paging capabilities for convenient customer service. In addition, broadcasted music creates a more comfortable, pleasant storage experience; and broadcasting of canned messages transforms the communications system into a savvy marketing tool. While the system incorporates state-of-the-art technology, the price is surprisingly affordable. Once you have purchased a system from a reputable supplier with installation expertise, the benefits are immediate.

With communications technology in place, your storage facility transforms from a silent maze of corridors into a more welcoming place of business. Customer assistance is available at the touch of a button should a problem arise. Important messages can be transmitted in a heartbeat. A wide array of choices exist to enhance customer service through a communications system.

Customer Communications

Imagine one of your customers entering your facility on a Saturday morning. It's hot outside, and he is burdened with a long list of errands and time constraints. Spending one more minute than necessary at the storage unit is the last thing he wants. Although this customer has never encountered trouble with his lock in the past, on this busy Saturday, the lock isn't functioning. After jiggling key and lock to the point of complete frustration, he admits he needs help. Can you sense the mental and emotional state of this customer? Do you think he would rather rush all the way to the office to find the manager, or push a button on a conveniently located intercom and call him directly?

Most customers will never require assistance, but every customer can appreciate that level of service when it is available. Should a problem or question arise, the office managers are as close as the push of a button. "We are here for you" becomes more than an empty promise. By placing two-way intercoms strategically throughout the facility, the manager is ready to assist the customer and resolve any issue at the time help is needed.

The Convenience of Paging

In a world where cell phones and pagers are commonplace, the value we place on being accessible is beyond question. Being able to receive personal messages during a visit to the storage facility is convenient to any customer, but especially to those who make regular pick-up and drop-off trips to their units. Whether they forget their cell phone--or even if they have such a luxury--their family, friends and associates will have a consistent line of communication to reach him.

Similar to the paging/telephone system in a large airport, the facility paging capability integrates directly with the two-way intercom system. Should a call come into the office for a visiting customer, the manager will usually know whether the customer is on the premises. A facility-wide page can request the customer contact the manager via the intercom. This approach makes it possible for the original caller to remain "on hold" for a quick answer to an urgent question.

A Pleasant Storage Experience

Along with paging capability comes one of the most appealing features of a facility communications system: the potential to fill the air with soothing music. The value of music as a calming, uplifting influence has been proven again and again. Silence seldom prevails in public areas where an atmosphere of warmth and comfort is important. In fact, our culture is so accustomed to the lulling effect of background music that we are not always consciously aware of it playing. Still, we respond emotionally.

Today's self-storage facilities focus on high security, including controlled access, individual door alarms and surveillance. The addition of facility communications, especially the constant flow of music or another human's voice, can diminish the sensation of being alone and enhance the feeling of security. Knowing that assistance is available at the touch of an button adds even more subliminal reassurance.

Enhancing Profitability

Have you ever called a business that promoted its image, products or services in a recorded message that played while you were waiting to speak to a representative? A complete and comprehensive communications system allows a facility to promote its unique special offers, products or policies. These prerecorded promotional broadcasts can be a powerful marketing tool that increases profitability.

Studies show customers remain at their storage units an average of 20 minutes per visit. Perhaps you are offering a special incentive for customers who refer new business to your facility. Maybe you are introducing new merchandise for sale. Through a comprehensive communications system, the possibilities are endless for promoting and enhancing the facility, extending customer appreciation, offering helpful storage hints, conveying important announcements or all of the above.

From the moment you introduce a potential customer to your facility, the added convenience and service of your communications system can serve as a strong selling point. Any advertising, including direct mailings, posters and signage, that highlight these service-oriented benefits will attract prospective customers above and beyond the competition.

The Overall Value

Communications systems provide value-added service to any self-storage facility, from sprawling single-story properties to multistory structures with long hallways and elevators. Each of the system's features can be customized to a facility's exact needs: quality and number of intercoms and intercom placement; music sources, including CDs, radio or tapes; and frequency and content of broadcasted messages. When the goal is enhancing the overall appeal of a self-storage facility, adding a communications system is one of the simplest and most cost-effective solutions in today's self-storage market.

Karen Genualdi is a marketing representative with Scottsdale, Ariz.-based PTI Integrated Systems Inc., which offers a complete, integrated management-control system for self-storage. For more information, call 800.331.6224; visit www.ptiaccess.com.

When referring to self-storage, the phrase "set 'em up and sell 'em on" makes the whole business sound so simple. Last year's acquisition of Aardvark Self Storage Ltd. and Rent-A-Space by Mentmore PLC demonstrated the "sell-out" most dream of may have been oversold. But the big sale has become significant news because of its positive impact on the fledgling European marketplace.

I'm a great lover of win-win situations, and I think any market sell-out or takeover is good news for all involved. First, the small guy who sells makes a bundle—subject to his assumed debt—for his hard work and risk. Second, the buyer gets profit-making power, positive cashflow, and a site at a good discount to its 85 percent occupancy earnings potential. Third, good news travels fast. The industry gains credibility in a sale of this nature, which leads to more lending for small and large operators alike.

And so the cycle should continue—even in times of war and recession. Our fantastic product will seem safer and safer in investors' eyes, especially when profits are proven by the "big guys" in the not-too-distant future. But back to the point: Nothing is ever this simple, even self-storage—if it were, everybody would do it. Even when you have the necessary time, financial resources and expertise to set up a small chain of facilities, it doesn't mean you will be able to sell it at your target price, let alone find anybody who wants to buy it.

Taking this into consideration, the best thing to do is build to operate, not sell. That way, you can't lose—if you can fill the place, of course. If you want a steady, pension-style income, set up one facility, get it profitable, and sit back and reap the best return you could ever get on a self-administered pension scheme. But if want more excitement (and risk), open three facilities in three or so years and try to secure a sell-out.

The most important piece of advice I can give anyone who fancies his chances of a multifacility set-up and sell-out is location, location, location. Wake up! I'm not talking about a nice drive-by location, I'm talking about the strategic location of sites in relation to the "big boys." You need to research and find an underdeveloped area for your facilities within an established self-storage market.

For example, France, the Netherlands and the United Kingdom all have established self-storage marketplaces in key cities or large urban areas; yet the bigger players are still concentrated and generally represented in only a few regions in these countries. So don't go and set up in a competitive market with plenty of current supply—like London, for example. Focus on under-represented cities or large towns and urban areas in the provinces. OK, the going might be tougher initially, but again, it's a win-win situation. You benefit from being the pioneer, and you don't have to operate in a price-cutting environment. Think positive!

One major reason the large operators have focused on London and Southeast England is because, quite simply, it's easier. It's easier to fill facilities, and easier to build brand awareness and critical mass in a more educated, space-starved market (although recently, supply may have exceeded market demand in some hot spots in Greater London.) So if you understand the big boys' logic and model, copy it.

Focus on building your small chain of high-quality facilities with a strategic outlook. Find an area where you feel a big operator might eventually want representation and build a small chain of sites that fit well together on the bigger area map. You create value because you end up with sites that allow potential buyers to expand within and near the area, justifying a regional infrastructure to build more facilities and marketshare. Suddenly, your sites have value and appeal—but only, of course, if you can tick the rest of these items off the list:

• The facilities must generate month-on-month operating profit.
• Although producing profits, the facilities shouldn't be full.
• The facilities must be second or third generation.
• The facilities must be in good drive-by locations.

I said it wasn't as simple as it sounds. Let's be honest—for the new operator, it's bloody hard work finding a single site, securing it, financing it and filling it. It takes time and commitment, and is a long way from a strategically located chain. It is possible, and if you can successfully build one, the second is certainly easier. If you can establish a good monthly income stream in the first six to nine months of opening while looking for a new, tactically located site, you're a winner. If you can prove to yourself and your financier that you can build one from start-up, hopefully, the next facility will come along in time.

Now let's talk about sell-out valuations. We'll keep it simple. I am going to suggest the easiest way to value a facility in Europe is to predict what the site could make when 90 percent occupied (deemed full). If a facility for sale is in month-on-month operating profit and 65 percent to 70 percent occupied, the buyer and seller both win. The seller sells at eight to 10 times his annualized monthly revenue—less debt—and the buyer, although buying at eight to 10 times the revenue, is, in the long term, getting the facility at three to four times its value.

When you look at selling your business as a going concern at eight to 10 times current earnings, it sounds fantastic; but when you consider you've already done the hard work—getting the business to break-even—and that, in the long term, you're only getting three to four times future earnings, it may be time to reconsider whether you want to sell at all. So what's the solution? Build to operate but within a strategic framework. That way you're in control, and you can consider the sell-out when a window of opportunity is open.

Andrew Donaldson is chairman of Active Supply & Design (CDM) Ltd. and Storage World Self-Storage Ltd. He established, built and sold a chain of facilities in the United Kingdom to a PLC formally known as Rent-A-Space. He is also chairman of The Princes Trust in Cheshire, England, and a former director of the Self-Storage Association of U.K. & Europe. For more information, e-mail [email protected]; visit www.askactive.com.

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

What should I look for in an access-control keypad for my site? I currently have about 25 units behind my moving center and would like to offer my tenants a better form of access control.
--Alvin in Provo, Utah

First of all, consider installing a keypad for entrance and egress. This allows you, the site owner, to better track how long a particular tenant is on site. Also consider what conveniences you would like to extend to your tenants.

For example, an access keypad can usually do so much more than grant access to your facility, such as allow two-way communication with the office via an integrated intercom. This can be a very useful (and marketable) tool in the winter months when a tenant has a quick question and doesn't want to make the trek into the office.

On higher-end keypads, you will also find an LCD display that can greet a tenant or let him know when his next rent is due; built-in video cameras that can take a picture of a tenant or potential intruder when he enters an access code; and card-swipe technology that allows a tenant to use his driver's license or similar magnetic card in lieu of a code. The ultimate in convenience is allowing a tenant to pay his rent at the keypad. This feature can allow a delinquent tenant to pay his balance and gain immediate access to his unit without ever stepping inside the management office.

I own a self-storage facility outside of Boston and am in the process of building another. The electricians laid all of the conduit for the gate and keypads under the concrete drive. We had a severe snowstorm, and when the installers tried to pull wiring through the conduit, it was frozen. I am now trying to back-charge the electricians for having to dig up the driveway, but they are telling me it wasn't their fault--they can't control the weather. From a construction standpoint, does this make sense?
--Joe in Medford, Mass.

Though the electricians can't control the weather, they can control how they terminate their conduit. Good electricians will take the extra care to insert end-caps or at least duct tape over the end of exposed conduit. It is likely your electricians did not cover the ends of the conduit, therefore allowing water to get into the pipes and freeze. If that is what happened, you have a good case to request the electrical contractor cover your costs to lay new conduit.

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.

Three words can describe the new technological innovations happening in the CCTV industry: digital, digital, digital! Everywhere you look there is some sort of new digital product or technological innovation on the market that offers to make a video-surveillance system smarter, smaller and more cost-effective. Trying to keep all of this information straight is quickly becoming a full-time job for even the most seasoned security experts. If you take the time to read this article, you will find information beneficial to you, whether you are considering buying your first system or upgrading an existing one.

While the security industry has gone through a major technological revolution over the past couple of years, there are a few main areas where the improvement has been drastic. Those are the evolution of day/night cameras, wireless signal transmission, and what has been the biggest revolution in the CCTV industry in some time, the advent of digital recording.

Day/Night Cameras

In the past, an organization would have to first decide its No. 1 priority when deciding on a security system. Was it more interested in obtaining the additional detail color cameras provide (as long as there was enough light), or the increased visibility a black-and-white camera would provide in low-light situations? That decision is one that no longer needs to be made thanks to the advent of the day/night camera.

In its simplest form, a day/night camera is actually two cameras in one chassis. When enough light is available, it produces high- quality color images that provide crisp detail for the viewer. However, when the amount of available light drops below a certain level (usually preset by the manufacturer, but in some cases, selectable by the consumer), the circuitry in the camera switches to a black- and-white signal, allowing for continuous surveillance in almost any lighting condition.

Wireless Signal Transmission

Expensive, cumbersome and unreliable were once accurate descriptions when talking about wireless systems. Today, these adjectives are being replaced with cost-effective, powerful and inconspicuous.

Wireless systems have changed dramatically in the recent past. Now, many people consider them a viable alternative where hard-wired (coaxial cable) systems may not be an option. Wireless systems offer multiple channels--in some cases, up to 10--and a wide range of transmission spectrums, from 900 MHz to 5.4 GHz. This virtually ensures a clean signal when working with a direct line of sight. They have also become quite cost-effective when faced with laying long runs of conduit or having to trench an existing facility.

While wireless technology has come a long way from its earliest forms, a word of caution is still in order. Just because you have an effective wireless system when it is first installed, outside influences still have a chance of causing problems down the road. This is due to the increased use of wireless and cellular technology in the consumer market.

For example, most wireless phones in use today operate on a 900-MHz cycle. However, as people replace their current wireless phones with new ones, they are purchasing systems that run on 2.4-GHz cycles, which is where most wireless CCTV systems operate. Also, cellular towers are popping up everywhere it seems, and while they might not be running directly on 2.4 GHz, they are still throwing off signals that can cause interference with your wireless system.

Phone-Line Video Transmission

Until recently, the only way to see what was going on at a facility at any given time was to actually be at the site. This would lead to a lot of windshield time if a person had multiple sites to manage. Now imagine being able to call up a site at any time, from any location, and viewing what is going on at that very instant.

What used to be a fantasy has become reality. With the advent of phone-line transmission systems, a property owner or regional manager can call up a specific facility 24 hours a day, seven days a week, and see what is going on. Some of these systems are even powerful enough to allow the individual to turn lights on and off, sound alarms, and open and close gates. These systems also have the ability to call a pager, telephone or remote computer if an alarm is triggered. This is an excellent add-on piece to an existing system that can provide peace of mind to those who aren't always at their sites.

Digital Recording

Now we get to one of the largest innovations in the CCTV industry in many, many years: digital recording. In the past, if a company needed to maintain any type of archived library of surveillance recording, it had to switch tapes on a daily basis. This meant staff had to come in every day to switch the tapes or they would record over the previous day's events.

Also, if they wanted to review a tape, they had to use the existing system or buy an identical head-end system. If they used the existing system, they could not record simultaneously. If they bought an additional system for reviewing purposes, they had to assume the additional cost. Consider also that the VCR would need regular maintenance, such as head cleaning and the eventual replacement of all moving parts. Don't forget the quality of the video degraded every time you copied the tape or reviewed it. In the end, a VCR system was a high-maintenance recording medium.

Welcome to the digital age. With the systems available, a person can record a tremendous amount of information on a hard drive--in some cases, upward from 30 days worth of data for 16 cameras. A person can also be recording all his cameras simultaneously while reviewing the past day's events.

Most digital systems also allow the user to gain access to the system remotely via the Internet, a modem-to-modem connection or a LAN/WAN (local or wide area network). This type of access offers many of the same advantages of phone-line transmission, but with additional features such as the ability to view live or recorded video.

Searching for a file is also much easier on a digital system. In the past, a user would have to spend hours going through tapes (provided he was looking at the right day). However, digital recorders allow users to search from such criteria as time, date, alarm event, camera, etc. Digital recording has truly revolutionized the CCTV industry, and it is believed by many that digital recording will eliminate traditional analog recording systems very soon.

As with any new technology, a word of caution is necessary. There are many digital systems available, and it is very easy to choose one that does not fit your needs either because it is too powerful--in which case you are paying for features you will never use--or it is not powerful enough, which means you will have to pay for a new system shortly. A digital system is a major decision, one that should be properly researched. Make sure you deal with a supplier that will be there to support you and guide you to the proper system.

Conclusion

As you can see, the CCTV industry has come a very long way in a short period of time. The new cameras combined with the new transmission and recording mediums available can make purchasing a surveillance system confusing if not overwhelming. Relax; anything you decide to buy will be better than anything you purchased two years ago. You just can't go wrong at this time. However, use caution. Do your research and buy from a company with a good reputation that will be there to support you as you venture into the hi-tech world of CCTV.

Jon Mitchell is the marketing director for Crest Electronics Inc., which manufactures a complete line of video-security products, including cameras, monitors, digital-video recorders, lenses, and all other video-security products and accessories. For more information, call 800.50.CREST or visit www.crestelectronics.com.