By Rick Freeland

Developing a self-storage facility is an intensive undertaking. Your main goal is to obtain as much rentable square footage from your property as possible. To accomplish this, you'll need to maximize site coverage. If this is the ideal, then why worry about landscaping?

In most cases, you won't have a choice. Certain landscaping is required by local, state and sometimes federal regulations. But you'll also want to consider installing supplemental landscaping that can benefit you in various ways.

Required by Regulation

From the feds to your local jurisdiction, it seems everyone has a say in how a property is developed. Regulations on landscaping might include:

• Buffers for state waters: States require you to leave 25 feet of undisturbed vegetative buffer next to streams, wetlands or other waters that cross your property as protection from sediment infiltration during construction. Some jurisdictions tack on another 25 feet for even more protection.
• Zoning buffers: You may need to leave undisturbed buffers between your development and areas zoned for residential use. If natural vegetation within the buffer area is sparse, you'll more than likely have to enhance it with native or naturalized plants.
• Landscape strips: Most regulations require that 10 feet or wider dedicated landscape strips at front, side and rear setbacks be planted in a mixture of trees and shrubs.
• Parking-lot plantings: Regulations sometimes require that planting islands and other landscape areas be provided within parking lots.
• Erosion control: This includes temporary and/or permanent grassing and planting of constructed slopes and graded areas as protection against erosion.
• Tree replacement and protection: This means replacing trees removed during development by planting new trees onsite, through offsite mitigation or by paying a fee.

Supplemental Landscaping

Once you've met your regulatory obligations, additional landscaping should provide substantial benefits. How can your project benefit through a thoughtful landscape design?

Aesthetics. How your community perceives your project will depend in part on how it looks. Use plants that complement your architecture. A simple, uncluttered planting scheme of three to five plant types is enough. Concentrate on your site's entrance experience by installing plantings at the base of any monument signage, along with color beds at your driveway entrance. Think all-season interest with a mixture of small deciduous and evergreen trees and shrubs as well as perennials. Use accent plants or container gardens at your office entrance to welcome visitors with style.

Storm-water detention and water quality. Using bio-retention ponds, grassed swales, rain gardens or constructed wetlands planted with filtering vegetation in tandem with more conventional storm-water controls can save you money in infrastructure.

Environmental awareness. Low-maintenance natives grow well together to predictable sizes. They also don’t need much water except during establishment, don't require chemical fertilizers or commercial biocides, and are adapted to local conditions and bugs. Their leaves act as soil builders, weed suppressors and natural fertilizers.

Using suitable plants makes for less work, so you spend less on landscaping crews. Also, consider planting species that attract pollinators such as butterflies, hummingbirds and native bees. Avoid invasive species, such as nandina and Bradford pear.

Maintenance. Planting species native to your area where possible and using the right plants in the right place will cut down on the need for pruning, fertilization and watering, and substantially reduce your maintenance costs. If planting natives, you'll just need to supply water during the establishment period. This can be done economically using a drip-irrigation system outfitted with a smart controller.

Further Considerations

Plants aren't the only component of landscaping. As you're planning your self-storage facility, put some thought into what type of hardscape components you'll need. Elements that balance your architecture may be the best solution:

• Walkways: Pedestrian circulation can be as simple as walks constructed using utilitarian color-stained concrete, enhanced using clay pavers with the color integrated into the clay, or even built from natural stone.
• Planting beds: Create raised beds using stacked rock planters or interlocking block. Whatever material you use should match or complement the architecture of your most visible building—more than likely your office.
• Signage: Monument signs look great faced with the same material you use in your office façade. Consider creating a signage theme, coordinating color, material and font types among the other signs serving the project.
• Entrances: A welcoming entry experience can go a long way toward making your customers feel at home. Provide a wide, winding walkway lined with small ornamental trees, shrubs and perennials. Install a wide stoop or porch before your office door. Complete the invitation by framing your door with lush planters and accenting windows with boxes filled to overflowing with seasonal plants.

A well-designed landscape can increase your project’s aesthetic value, create positive feelings within your community and provide a desirable working environment for employees. Landscapes that build on a perfect blend of plants and hardscape elements can enhance your facility's look and feel.

Planned commercial landscapes have been shown to produce high occupancy rates and increased rentals at storage facilities. A study by professor Joel Goldstein from the School of Urban and Public Affairs at the University of Texas at Arlington shows that landscape amenities result in the highest correlation with occupancy rates of any other architectural and urban-design variables. Landscapes can also add 14 percent to the resale of commercial buildings and speed sales by as much as six weeks. Purposefully designed landscapes also help retain valuable employees.

The Overall View

Whether required by regulatory authority or added for other purposes, a well-thought-out landscape design can contribute much. But there's a hidden benefit to landscaping that most developers overlook—marketing.

Any of the above techniques and other green-building practices you use can contribute extensively to how your community perceives your self-storage project. During the permitting process, media exposure regarding these efforts can help disarm project opponents and cement your position as a conscientious developer. These same tactics can help you fully lease your facility once it opens for business. Do it right, and landscaping can add value to your project for years to come.

Rick Freeland is a Georgia-based landscape architect with more than 30 years of experience in merging human places with natural spaces. His projects have included veterans' memorial parks, sports complexes, historical gardens, residential communities and commercial developments, including self-storage facilities. Learn more at www.rickfreelandla.com.

Over the last several years, self-storage assets have enjoyed high values and low capitalization (cap) rates, thanks to the dramatic increase in capital flow of equity and debt as well as the self-storage industry’s garnered respect from Wall Street, private-equity firms and other major investors. Compared to other real estate classes, storage facilities have higher returns and lower perceived risk. The lower operating costs and breakeven occupancy rates have led investors to think this is a less risky investment.

However, the tide is beginning to turn, and as self-storage valuations soften, the operation of a property becomes critically important. As interest and cap rates begin to increase, it’s vital that owners review the performance of their investments. It’s time to sharpen your ax and focus on what makes these facilities so valuable.

You need to regularly assess your operating expenses and market competition to ensure the value of your property—and its cash flow—aren’t being undermined by subtle, yet devastating increases in costs, new competition or rental-rate decline. Below is a short list items to examine.

Operating Expenses

Benjamin Franklin once said, “A penny saved is a penny earned.” The same holds true in the real estate business, except that we can expect an even greater return when we strive to save on operating expenses.

We know that 90 percent or more of a property’s value is created by the net operating income (NOI). However, as the market starts to turn and values begin to soften, it’s important to understand the magnitude of what each dollar of NOI means to facility value.

Let’s take a storage facility with annual revenue of $600,000 and annual expenses of $250,000. This facility has an NOI of $350,000, which will then be capitalized at a rate of return acceptable to an investor to arrive at the value. With cap rates in the 7 percent to 9 percent range, this facility’s value would be between $3.8 million and $5 million. Reducing the operating expenses by 8 percent (roughly $20,000 a year) would increase the value by $220,000 to $285,000. This means that for every dollar you add to the NOI, you’d receive $11 to $14 in property value.

With most self-storage expenses occurring in the categories of real estate taxes, payroll, insurance and advertising, it’s understandable how yearly escalations in these items can deteriorate facility value. Interestingly, you don’t have to sell your facility to get an immediate gain out of these saved expenses. The value will be reflected in the amount you can borrow on the property. Generally, you can borrow 75 percent of the increase in value when you refinance, so you can have your cake and eat it, too!

In the world of real estate appraisal, they consider this the income approach. It considers the earning capacity of the facility less the vacancy and owner’s expenses. It’s axiomatic that if the NOI increases, the facility value will be dramatically increased. By reducing the annual expenses, you not only increase the value by a multiple of the market cap rate, you increase the dollar amount you may borrow when refinancing (not to mention that you have an additional layer of protection from rising cap and interest rates).

Real Estate Taxes

The uncontrollable expense of real estate taxes may be the elephant in the room today. With so many historically high sales of self-storage properties over the last few years, local taxing authorities may have the sales comps to meaningfully reassess your property at a much higher value. The lower you can keep your taxes, the more realistic a buyer or lender will be in evaluating the tax increase a buyer might face.

To learn how to challenge and minimize your real estate taxes, contact your local tax authority. Most municipalities will have a process that’s relatively easy to follow. There are also many experienced property-tax consultants willing to provide you with guidance and help you protest your taxes for a contingency fee of typically 20 percent to 30 percent of the realized savings.

Competition

As the next wave of self-storage properties opens, it’s critical to keep tabs on new and existing competitors in your markets. Regularly conducting a rental-rate survey will keep you abreast of what competitors are charging as well as their specials and rental concessions.

Consumers have many resources to help them find the best deal. Not all storage properties are created equal, but most customers are price-sensitive when shopping for a unit. Ensuring that your property remains visible and competitive will help protect against occupancy declines that can occur when new supply enters the market.

Revenue

Regularly review each tenant’s rental rate. The real estate investment trusts and other large self-storage operators have proven that revenue management is effective and adds facility value. Ensuring your tenants are at or above the market rate will help maximize your revenue, even as the market gets more competitive. Don’t be afraid to push rents on customers in unit sizes that have high occupancy and rental velocity.

Self-storage is still a high-quality investment, but property values are softening, so be diligent about reviewing facility performance. You need to keep a close watch on operating expenses and continue to be active with local governments on issues such as real estate taxes, sales tax and overbuilding. The fact that doing this will most likely create more cash flow and value is just a bonus.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. It also offers panel discussions in which brokers from around the country share their insights on self-storage market fundamentals and economic trends in their regions. To access recordings, visit www.argus-selfstorage.com/presentations.html. For more information, call 800.55.STORE; e-mail [email protected].

A Wednesday storm ripped the roof off a self-storage facility in Hinckley, Ill., sending building particles scattered and leaving the units vulnerable. The 11:30 p.m. gale demolished one of the two buildings at Hinckley Self Storage at 15331 Route 30. The structure contained 20 occupied units ranging in size, according to owner Gary Lambes Jr. The second building wasn’t damaged.

The roof flew over the adjacent Hinckley Floral Inc. shop and settled on Somanauk Road. The debris blocked the facility’s entryway and parking lot as well as Lambes’ custom stairway business, Step 1. Lambes guarded the units’ contents during the night until tenants could retrieve their items the next morning, he said.

Adam McClanahan had just moved an all-terrain vehicle and snowmobile into the unit on Wednesday, the source reported. He returned to the facility the next day to haul away his items and retrieve his $100 deposit. “I was totally amazed at how bad it was,” McClanahan said. “It was a shame. We’d just put all our stuff in there yesterday. I was a little nervous. I’m not going to lie. It’s a tragedy.”

Henry Meier was forced to dig through debris to find his items, he said. “I was pretty devastated. It’s not just my stuff in here. I share it with a couple of other people, and their stuff is damaged.” Meier also helped another tenant remove belongings from a unit.

An estimate on the property damage was unknown, but Lambes met with his insurance agent on Thursday morning. “I’ve got concerns for people in here recovering their goods when what’s left of the building is very unstable,” he said, adding the tenants signed a rental agreement that included a clause about self-insuring their belongings.

Additional damage at the site included a broken window and dents to the flower shop, holes in the Step 1 building, a downed tree and lost fencing. DeKalb County Sheriff Roger Scott reported the region suffered fallen debris, trees, wires and stop signs.

Updated 5/19/17 – Murphy Brothers also recently received the “Westchester County 2017 Earth Day Award” for the development of their facility. The company “demonstrated a commitment to sustainability by developing a state-of-the-art, green facility for Mamaroneck Self Storage that included solar shingles, heat-recovery ventilators, a high-efficiency variable refrigerant flow cooling and heating system, and energy-efficient windows,” according to a press release.

The award was presented to the Murphys and Martelli by Kevin Plunkett, deputy executive of Westchester County, during an Earth Day celebration on May 13. The event at Kensico Dam Plaza featured live music and entertainment, environmental exhibits, giveaways, and an outdoor market with ready-to-eat foods and earth-friendly products.

This year, the county recognized local governments, individuals, schools, businesses and other organizations for initiatives and notable accomplishments in solid-waste reduction, recycling and environmental conservation, the release stated.

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4/16/17 – Murphy Brothers Contracting Inc. has received The Best of BOMA Westchester County's Signature Award in the "Reposition/Repurpose” category for the development of Mamaroneck Self Storage in Mamaroneck, N.Y. Company owners Chris and Sean Murphy will be honored at a May 11 dinner hosted by the Building Owners and Managers Association (BOMA) of Westchester County. The event will take place at the Abigail Kirsch at Tappan Hill Mansion in Tarrytown, N.Y., according to a press release.

"While all building awards are special, we are deeply honored to have Mamaroneck Self Storage recognized by BOMA of Westchester,” said Chris Murphy.

Opened in 2015, Mamaroneck Self Storage features numerous green initiatives, including DOW Powerhouse Solar Shingles, which are a combination of roof shingles and a solar-panel system. Designed by Kim Martelli, owner of KTM Architect, the 40,000-square-foot facility also includes heat-recovery ventilators, a high-efficiency variable refrigerant flow cooling and heating system, and energy-efficient windows.

Murphy Brothers plans to build another 60,000 square feet of space on the self-storage site, with yet more eco-friendly inclusions. "We're big believers in green construction. We're hoping to make phase two even more energy-efficient,” Sean Murphy said.

Murphy Brothers also received a 2016 Home Building Industry Award for "Best Green Commercial Project” from the Home Builders & Remodelers Association of Connecticut Inc.

BOMA of Winchester County is a division of BOMA International, a federation of 93 U.S. associations, 11 regional associations in Canada and 13 international affiliates. Founded in 1907, it represents the owners and managers of commercial properties. Founded in 1979 and headquartered in Mamaroneck, Murphy Brothers Contracting constructs and renovates custom homes and builds commercial projects in the Westchester Hudson Valley region and Fairfield County. It also owns Murphy Brothers Millworks.

Storage Asset Management (SAM), a property-management and consulting firm, has hired Jim Ferguson as project manager/analyst and Jesse Livingston as district manager. Ferguson will supervise projects, analyze operational data and streamline processes for SAM and its managed facilities. Livingston will oversee the company’s properties in Indiana, Michigan and Wisconsin.

Ferguson was employed for seven years in account management, marketing and sales at SiteLink, a provider of cloud-based facility-management software and payment-processing services for the self-storage industry. Prior to that, he worked at Guilford, a provider of performance textiles, where he designed car interiors. Ferguson earned a Bachelor of Arts in textile technology and design from North Carolina State University.

Livingston has numerous years of management experience overseeing employees in multiple states. He earned a Master of Science in organizational leadership from Southern New Hampshire University. He also holds a graduate certificate in human resource management.

“We are very excited to have Jim and Jesse onboard to continue to expand our company with more resources, knowledge and experience,” said Alyssa Quill, managing partner and vice president.

Founded in 2010 and based in York, Pa., SAM oversees more than 50 self-storage facilities as well as three UPS Stores in 18 states, primarily along the East Coast.

 

Strategic Storage Growth Trust Inc. (SSGT) and Strategic Storage Trust II Inc. (SST II), both public, non-traded, self-storage real estate investment trusts (REITs) sponsored by SmartStop Asset Management LLC, have released their financial statements for the quarter that ended March 31. In general, the entities showed gains in revenue, net operating income (NOI) and occupancy.

SSGT increased same-store revenue 20.1 percent, with NOI growing 38.9 percent, compared to the same period in 2016. Same-store occupancy was 93.2 percent as of March 31, up from 84.1 percent the previous year. The REIT also reported growth in same-store annualized rent per occupied square foot, showing an increase of 8.1 percent ($11.51) year over year. It reported a net loss of $1.09 million.

During the quarter, SSGT closed on two self-storage acquisitions in Elk Grove Village, Ill., and Garden Grove, Calif., for $28.5 million. Combined, the assets comprise 177,000 net rentable square feet in 1,760 units.

“Our strong performance during the first quarter demonstrates the execution of our strategy: acquiring quality assets with good lease-up potential and delivering growth through institutional management,” said H. Michael Schwartz, chairman and CEO of both REITs.

SST II increased total revenue by about $11.5 million, a 184 percent bump compared to the first quarter last year. Same-store revenue grew 15.6 percent, while NOI showed a 32.2 percent increase year over year. Modified funds from operations grew $2.1 million, or 130 percent, though the company reported a net loss attributable to common shareholders of $5.19 million.

Same-store occupancy was 92.3 percent as of March 31, up from 84.2 percent the previous year. The REIT also reported growth in same-store annualized rent per occupied square foot, showing an increase of 5.5 percent ($13.29) year over year.

SST II closed on a self-storage property in Aurora, Colo., for $10.1 million. The facility comprises 53,400 rentable square feet in 400 units. In February, the REIT also agreed to merge with Strategic Storage Toronto Properties REIT Inc., another affiliate of SmartStop Asset Management. The deal includes the acquisition of five Toronto storage assets, along with the assumption of loans and other debt. SST II paid $7.3 million in cash and issued 483,197 class-A shares to Strategic Storage Toronto Properties REIT. The self-storage properties comprise 460,400 rentable square feet in 4,010 units.

“Our first-quarter same-store results show the execution of our strategy: acquiring quality assets in strong markets and recognizing greater revenues as the properties stabilize,” Schwartz said. “Our approach continues in 2017, with the acquisitions made in the past 12 months improving the operating results of the entire portfolio.”

SSGT focuses on the acquisition, development, redevelopment and lease-up of self-storage properties. Its portfolio currently consists of 18 storage facilities in eight states comprising approximately 1.4 million net rentable square feet in 11,900 storage units.

The SST II portfolio includes 83 self-storage facilities in Canada and the United States. It comprises approximately 51,300 self-storage units and about 6 million rentable square feet of storage space.

Both REITs are sponsored by SmartStop Asset Management, a diversified real estate company with a managed portfolio of 107 self-storage facilities in Canada and the United States. Its managed properties comprise approximately 7.8 million rentable square feet.

Update 5/19/17 – The Troy City Council denied the rezoning request from E-Z Mini Storage on May 8 with a 5-2 vote. More than 20 residents spoke in opposition to the proposal, reiterating earlier concerns that the mixed-use self-storage project didn’t fit the community. The application would have needed a supermajority of five votes in favor of the plan because at least 20 percent of property owners within 100 feet of the target site submitted a valid protest petition on May 5, according to the source.

Though Savidant praised the self-storage operator for doing “a very good job breaking up the massing of the building” by using architectural elements and a wall to separate the three-story structure from homes, as well as offering a private park for public use on the property, council members sided with residents.

“Looking at this, it looks out of place,” councilmember Ethan Baker said during the meeting. “Nobody spoke in support of the project. No one has ever said, ‘We need more storage facilities.’ I don’t think the project caters to the neighborhood needs.”

Councilmember Ed Pennington agreed, suggesting “housing would be a better fit.”

Councilmember Dave Henderson and Mayor Dane Slater supported the rezoning.

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3/8/17 – Residents are pressuring Troy, Mich., officials to deny a rezoning application for a mixed-use development that would include self-storage, office space and retail near single-family homes. E-Z Mini Storage is seeking to build a three-story structure on 1.8 acres west of Livernois Road and south of Long Lake Road. The $5 million facility would be “state-of-the-art,” according to Steve Nolan, who represented the developer in a Feb. 14 public hearing.

During the meeting, project opponents cited security issues, traffic congestion, market saturation, privacy loss and building height as reasons to deny the venture, the source reported. “Would you want a three-story building next to your home? It’s out of place,” said resident Phil Ohman.

Despite the protests, the Troy Planning Commission voted 7-1 to recommend the city council approve the conditional rezoning from single-family residential to a neighborhood-node zoning, which is how the land is designated in the city’s master plan. Commissioner Philip Sanzica was absent from the meeting, while commissioner Michael Hutson voted against the project due to its height. “This is the only three-story [building]. It’s not compatible,” Hutson said.

The 109,800-square-foot property would contain 700 storage units, 600 square feet of office space for small businesses and 2,700 square feet of retail space. Businesses wouldn’t be allowed to operate out of the storage business, which would attract four to five cars per hour, Nolan said.

A retail tenant hasn’t yet been named, but the area would be separate from the storage facility, the source reported. “We’re very picky [about] who our [retail] tenants are,” said Bill Bowman, who also represented the developer during the hearing.

The site also includes a 7,863-square-foot unregulated wetland, according to Ben Carlisle, senior associate of Carlisle/Wortman Associates Inc. and the city’s planning consultant. The developer plans to build a rain garden circled by a 5-foot-wide sidewalk near the rear of the property, the source reported.

A petition protesting the rezoning has been submitted to the city, but the petitioners’ names have yet to be verified by the city clerk, said Troy City Planner R. Brent Savidant. The appeal will be submitted to the city council, which has final approval on rezoning requests. A second public hearing has yet to be set, the source reported.

 

Dominion Self-Storage has opened a new facility in Queen Creek, Ariz., its second in the state. The property at 18729 E. Business Park Drive sits on just over 4 acres of land. It comprises 73,000 square feet of storage space in 528 climate-controlled and drive-up units. The site also offers vehicle-parking spaces, according to a press release.

“The town of Queen Creek is the perfect location for our second storage center. The last few years of dynamic economic expansion in the East Valley has incited incredible growth in the area. It’s really buzzing with activity,” said Mike Stenehjem, vice president. “We are excited to be a part of this amazing community.”

Dominion opened its first location at 295 East Ocotillo Road in Chandler, Ariz., in 2015. Both sites are managed by 180 Self-Storage LLC, a Phoenix-based property-management and consulting firm run by principals Jeff Helgeson and Tim Jones.

Both facilities are owned by Fountain Hills, Ariz.-based Dominion Chandler Self-Storage LLC, an affiliate of the Dominion Group of Cos., which offers investment opportunities in real estate related syndications in Arizona and Texas. Affiliated companies of the Dominion Group include Dominion Real Estate Partners LLC, Dominion Real Estate Partners Investments LLC and Dominion Self-Storage Projects.

Global Self Storage Inc., a self-storage real estate investment trust (REIT), has released its financial statement for the quarter that ended on March 31, 2017. During the first quarter, the company increased combined-store revenue 53 percent to $1.75 million, with net operating income (NOI) growing 64.4 percent to $1.06 million, compared to the same period in 2016. Net leasable space for its entire portfolio grew 55.5 percent year over year to 755,000 square feet.

Same-store revenue increased 9.9 percent to $1.26 million, while NOI grew 17.8 percent to $762,000, compared to the same period in 2016. Same-store average overall occupancy was 89.3 percent as of March 31, up from 88.1 percent the previous year. Excluding the vacancy from the 44,260-square-foot expansion to the company’s Bolingbrook, Ill., facility, occupancy would have been 93.1 percent, according to a press release.

Funds from operations (FFO) was approximately $435,000, or $0.06 per common share. Adjusted FFO totaled about $441,000, or $0.06 per common share, during the first quarter. The company incurred a net loss of $14,266 during the quarter.

On March 1, the REIT declared a quarterly dividend of $0.065 per common share, which is equal to last quarter.

“We believe these results reaffirm our strategy of focusing on secondary and tertiary cities in target markets that aren’t as impacted by new development activity as compared to primary markets and urban centers,” said Mark C. Winmill, president and CEO. “This geographic focus has not only shaped our strategy from the beginning, but has also set us apart from our competitors, enabling us to capitalize on undermanaged, but well-located and attractive self storage facilities often with expansion potential.”

Founded in 1983, Global Self Storage focuses on the acquisition, development, operation, ownership and redevelopment of storage facilities in the United States. Through its wholly owned subsidiaries, it currently owns and operates 11 properties in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania and South Carolina. The company changed its name from Self Storage Group Inc. in January 2016.