The owner of a self-storage facility in Yuma, Ariz., is irate over ongoing road construction that has restricted access to his business.

Michael Perry, owner of AA Value Storage, told KYMA-TV his business has decreased by 90 percent since ground broke on the project several weeks ago. He calculates the loss thus far at $9,450.

The closure of Avenue 3E has made several businesses virtually inaccessible. Originally, two lanes were supposed to stay open in each direction, but  to save money on traffic control, city officials decided to close the street entirely.

Perry and other local business owners are pushing for the city to come up with an alternative route so drivers can still access their properties. Business leaders will meet Friday to come up with a proposal.

Source:  KYMA-TV,  Businesses Affected by Construction

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To many investors, self-storage seems like an easy venture―just build a facility and reap the rewards. Maybe 20 years ago that was true, but today the barriers to entry are higher, as well as the risks.

Even so, self-storage can be quite rewarding for the investor who does his homework and understands the business. Here are a few items every first-time developer should consider.
 
Market Analysis

Before you begin building a self-storage facility, get an independent third party to review the site and research the market. Selecting a solid property is critical to success, as the importance of location ranks high for self-storage as it does for all commercial real estate.

You need visibility, easy access and good traffic counts. (Avoid inexpensive land on side roads. Most customers are the result of drive-by traffic and local awareness. There’s too much competition, and you need to be seen.)

Feasibility professionals not only determine if the demand exists for self-storage in a particular market, but can assess project costs and ensure the financial projections make it viable. They will be valuable in creating a unit mix that meets your market’s demands. Don’t leave this up to your engineer or architect.

Hire a feasibility expert to do the study, but don’t sit back and wait. Do your own homework, as it relates to evaluating the competition. Call all the municipalities in the proposed market area and ask if any other self-storage projects are in the approval process. Determine all development costs for your project including permits, impact fees, fire codes and performance bonds.

Remember, you’re making a sizable investment. Comparing your results with those of a third party will give you peace of mind. Plus, most lenders will require a feasibility study anyway.
 
Getting Financed

Lenders are more conservative than ever before, so make sure you and your investors have the financial strength to get a loan commitment. Lenders are tough on seasoned self-storage operators and even tougher on first-time developers, so be prepared. Have your feasibility study and business plan ready. Take the offensive to cover all facets of your project and reduce the lenders’ concerns, and they’ll ask fewer questions.

Lenders will request tax returns and financial statements, and demand personal guarantees. Most will ask for business and personal deposits. Be sure all cash shortfalls during the lease-up period are provided for in your loan request or that you have the cash equivalent available.

Send your information to as many banks as you can, because you want options when lenders return with their term sheets; more than likely, some will pass on your proposed project. You may have the most success with local lenders who already know you and the project area. In addition, there are several self-storage finance brokers who can help you find lenders.

You’ll most likely seek financing during the due-diligence process of acquiring land. This means more investigation such as environmental and geotechnical reports, surveys, and an appraisal. Recently, more deals have been killed because of low appraisals. Loan-to-value ratios have decreased from 75 percent to a range of 50 percent to 65 percent for development, which requires greater investor equity. If possible, you want an appraisal from a firm with self-storage experience.
 
During Construction

Hire a general contractor to coordinate all of the construction vendors. He can pull together a project budget that includes site work, utilities, electrical, building materials, concrete, landscaping, paving, and fencing and security systems. The contractor should also include a contingency budget. He’ll make municipal and bank inspections go smoothly as well. It may sound easy to oversee the building process, but you had better have plenty of time and energy if you want to take this on yourself.

Having a general contractor to coordinate your building supplier along with the site work and preparation is crucial to reducing your building expenses. Unexpected delays can become a costly drag on the project, so keep things moving to avoid material-price increases and storage expenses if things are out of sync. The sooner you complete construction, the sooner you can open for business.
 
Lease-Up Period

It’s now time to bring on your most valuable asset for success in self-storage: the property manager. Today’s manager needs a combination of skills including sales, customer service and marketing. The manager usually works alone and needs decision-making authority that goes along with the responsibility of operating a facility.

Be sure you’re conservative in your rental assumptions. Allow more time than you think to rent up to stabilization―typically three to five years on projects of more than 25,000 square feet. Allow for promotional discounts, and don’t be too aggressive on future rents. This economy has made it tricky to garner projected revenue, so budget for a worst-case scenario. If you have that factored into your pro forma, you’ll rest easier.

This is a general overview of key areas to be aware of as you move forward with a self-storage project. Land development involves a lot of “hurry up and wait.” All aspects of land approvals invariably take longer than expected, as does the financing process, the mobilization of the construction team, and even the lease-up period.

Budget everything on the conservative side—from time to money—and have lots of patience. With this as your foundation, along with a great site in a pocket of opportunity, you too can find success in self-storage.
 
John E. Barry is a self-storage broker and owner with Investment Real Estate LLC in York, Pa., which, along with Investment Real Estate Construction, provides feasibility studies, brokerage and construction services for self-storage operators in the mid-Atlantic and northeast states. For more information, call 717.779.0804; visit www.irellc.com.

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Westy Self Storage is hosting a donation drive to collect needed items to assist with the cleanup of the oil spill along the Gulf Coast. All 16 Westy locations in the tri-state area are accepting donations.

In addition to collection, Westy will also provide temporary storage for the collected items. The New Jersey Warehousemen and Movers Association has volunteered to transport the donated materials to the Suncoast Seabird Sanctuary, a wild bird hospital and sanctuary. Suncoast will coordinate the distribution of the items along the affected coastal areas.

Desired donations include towels, bottled water, powder detergent, paper towels, toilet paper and heavy-duty trash bags. Donations can be dropped off every day during office hours.

An April 20 explosion on the drilling rig Deepwater Horizon killed 11 employees, and has spilled millions of gallons of oil into the Gulf of Mexico.
 
Source:  ConnecticutPlus.com,  Westy Self Storage Initiates Gulf Oil Spill Cleanup Efforts 

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The U-Haul Co. of Idaho, a provider of self-storage and moving services, is offering 30 days of free self-storage to Billings, Mont., residents whose homes or businesses were damaged by Sunday’s tornado.

“This tornado has caused tremendous damage to the Billings community that we serve,” said Phil Danley, president of the U-Haul Co. of Idaho. “I hope this effort will provide assistance to families that truly need a helping hand if their homes or businesses were affected by this tornado.”

The U-Haul Co. of Western Arizona is also offering 30 days of free storage to Northern Arizona residents who have been evacuated or need to move their belongings away from areas affected by wildfires.

In addition to storage, U-Haul also offers the Take a Box, Leave a Box program, which enables customers to return their reusable boxes and allows others to take them as needed for free. U-Haul encourages anyone who has any type of reusable box to drop it off at the nearest U-Haul location. 

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The Arizona Self Storage Association’s (AZSA) 12th annual conference and tradeshow, held last month at the Marriott Buttes Hotel in Tempe, Ariz., attracted 53 exhibiting companies and nearly 350 self-storage managers, owners and operators, according to a press release.

"On behalf of the Arizona Self Storage Association, I thank everyone who made this year’s conference a success," said Martin Lorch, AZSA president. “We hope the attendees found the presentations to be both informative and beneficial to their businesses’ future success. Above all, we look forward to receiving feedback from the attendees so we can begin planning for another sensational conference in 2011.”

This year’s conference featured a special guest speaker, Self Storage Association President Michael Scanlon, who delivered a national perspective on the state of the industry. A video of Scanlon’s presentation can be found at www.azselfstorage.com.  

In addition, the results of the annual Arizona Market Study were compiled and presented by R. Christian Sonne of Cushman & Wakefield. Reflective of the state's economy, the study revealed a year-over-year decline in self-storage occupancies. The complete report includes updates on operating expenses, rental rates and more. AZSA members may download the report from the “members only” section of the AZSA website.

Founded in1996, the AZSA was created to strengthen the self-storage industry in Arizona, promote professional standards and quality, and present a unified voice on issues affecting the industry in the state and in its communities. The association has more than 500 facility and vendor members.

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Steve Yapp, owner of a Ventura, Calif.-based PODS moving and storage franchise, recently hosted a five-year anniversary party to raise money for five local charities. The party, which drew more than 500 guests, represented a collaborative effort between Yapp, three chambers of commerce (Camarillo, Oxnard and Ventura) and dozens of local businesses.

Five local charities benefited from the proceeds which totaled more than $6,000. The charities are Aspiranet, Camarillo Boys & Girls Club, Turning Point Foundation, Casa Pacifica Center for Children and Families and FOOD Share.

“Working with chambers of commerce that support our business community and giving back to organizations that support our citizens is the right thing to do,” Yapp said. “Thanks to the support of the local community, PODS’ first five years in Ventura have been very successful.”

Yapp has donated more than $75,000 in goods and services to dozens of local non-profit organizations since opening in 2005. 

“PODS is deeply committed to the many communities we serve across the United States and proud when our franchise owners reach out and support local charitable causes,” said Christine Pierce, chief marketing officer of PODS.
 
Founded in 1998, PODS currently provides moving and storage services to a population of more than 240 million consumers, in 48 U.S. states, Canada and Australia.

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SpareFoot Inc., a provider of an online self-storage finder, will use its $2 million investment to grow the company, said CEO Chuck Gordon.

The company fulfilled its $2 million equity offering, according to an SEC filing. In September, the companys only other SEC filing on record indicated the company raised about $330,000 from four equity investors.

"The biggest challenge for a business like SpareFoot is driving consumers to the website," Gordon said. "The nice thing is we know exactly what we need, which is traffic. Now it's just a matter of going and getting it."

SpareFoot currently has 11 full-time employees. More jobs in marketing will be added, and additional funds will be invested in an online advertising initiative.

The Austin-based company has eight investors. Principals named in the filing include co-founders Charles Gordon, CEO, and Mario Feghali, chief operating officer. Also named are directors Kip McClanahan of Silverton Partners, an early-stage venture-capital firm focused on Austin-based companies, and John Price, CEO of San Francisco-based Vast.com, an online search platform for autos, travel and real estate.

Founded in 2008, SpareFoot compares itself with Expedia.com, making it possible for self-storage customers to find and compare the best U.S. deal on self-storage via the Web. SpareFoot has 5,000 storage listings nationwide. The company generates revenue from transaction fees paid by those who list their space.

Source:  Statesman.com,  SpareFoot Collects $2 Million for Growth

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Westy Self Storage at 65 Danbury Road in Wilton, Conn., is hosting a charity drive to benefit four local nonprofit organizations: Friends of Ambler Farm, Dress for Success of Mid-Fairfield County, Jefferson Elementary School, and Family & Children’s Agency.

The Four for Four Charity Donation Drive runs through July 9. Westy Self Storage is a drop-off site for all four organizations. Each is seeking items specific to the services it provides:

• The Friends of Ambler Farm, which celebrates the city’s agrarian roots through preservation and education, requests gardening and kitchen supplies.
• Dress for Success of Mid-Fairfield County helps disadvantaged women by providing professional attire, career development tools and support. The organization is seeking women’s professional attire in excellent condition.
• Jefferson Elementary School, which supports the development of students, needs non-perishable food items and backpacks.
• Family & Children’s Agency, a family service agency that meets the needs of more than 10,000 people in and near Fairfield County, needs clothing for teens and children.

“We’re very proud to continue our Four for Four Donation Drive,” said Joe Schweitzer, district director of Westy Self Storage. “We’re grateful for the contributions of so many of our neighbors in helping us serve the community.”

Donations can be made Monday through Friday from 8 a.m. to 6 p.m., Saturday from 9 a.m. to 6 p.m., and Sundays from 11 a.m. to 4 p.m. Storage will also be provided for the donations and Westy trucks will deliver them.
 
Source:  Wilton Bulletin,  Westy Kicks Off Charity Drive

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If you’re a business owner, you may have wondered whether your company needs to provide life insurance to cover the loss of a key person should he die unexpectedly. Consider the example of a 15-employee equipment-parts distribution business. Of six regional salespeople, only one, Jack, was responsible for 40 percent of new business each year. When Jack unexpectedly died, the company’s revenue dropped 25 percent the following year.

Jack was clearly a key person for the business, one whose loss had a severe negative financial impact on the company. Many businesses rely on people like Jack—employees whose value to the company would be difficult or expensive to replace. For almost every small- to mid-size business, the key people include the owners.

Insuring a key person can spell the difference between the failure and survival of a business. Take another example: Tom and Art were partners. When Art died, his wife Betsy took over his share of the business. Because the company didn’t have key-person insurance, Tom could not buy out Betsy. Their constant disagreements created an unpleasant working atmosphere, and they lost almost half of their employees and clients. Eventually, Tom let Betsy buy him out at a far lower value than he would have received at the time of Art’s death had they both been covered.

Understanding Key-Person Life Insurance

Key-person life insurance can help a company survive by minimizing the organizational loss and fiscal strain that follows the death of a key employee and helping to ensure:

Business loans or investments can be repaid. When a key person dies, especially an owner, a lender may have the right to call in the loan. Life-insurance proceeds can help pay off that loan.

Credit can be maintained. With the death of a key person, lenders may become reluctant to lend new money to the business or refinance outstanding loans. Life insurance can help the business maintain its credit rating by allowing it to pay its bills in a timely manner in spite of the death. It also demonstrates to the lender that the firm is well-managed.

A replacement can be recruited and trained. Months may pass before a qualified candidate can be found. Then, it may take time to train him to the point where the replacement is as competent as the predecessor. There may also be a recruiter’s fee to pay. The life-insurance proceeds buy time for the business.

The business is indemnified for lost sales and profit if a key person dies. Insurance proceeds can help offset the future loss in revenue that will probably occur, at least temporarily, when a key person dies.

Stock can be repurchased. If the business is a corporation, any common stock owned by the key employee can be repurchased with the insurance proceeds. This enables a partner to buy out a deceased partner’s share.

Who Needs It?

With key-person life insurance, the business owns the policy, pays the premiums and is the beneficiary. Many businesses buy permanent or cash-value life insurance, although term policies can also be used. As with any insurance, premiums vary based on the age, physical condition and health history of the insured.

Does your company need key-person life insurance? That depends on your company’s structure and business-continuation plan, as well as the amount of potential financial hardship without a key person. Not all businesses need it. In large companies, there may be less likelihood that a single individual or small group is indispensable to a company’s continued success. In one-person firms, however, the business will almost certainly not survive without the principal, no matter how much money is available.

Some partnerships will most likely have a greater need for key-person coverage during the early years. As the partners’ pensions, profit-sharing and net worth grow, insurance may become less necessary for the survival of the practice. For businesses primarily concerned about outstanding loans, many lenders offer and even require credit insurance. In such cases, key-person life insurance might be redundant.

For most small- to mid-size businesses, however, key-person life insurance should be considered. To determine whether your business needs this coverage, think about what would happen if an owner or key employee were no longer a part of your business. How much would you lose in revenue, goodwill or expertise? How much would it cost to replace those lost assets?

How Much Insurance Do You Need?

There are a number of valuation techniques you can use to determine how much key-person life insurance is appropriate. Two of the more popular techniques are described below. No one method is best, and a business owner may want to use a combination of methods.

Method 1: Multiple of salary valuation. The key employee’s value is estimated based on a multiple of current compensation. Frequently, a multiple of three to five times his salary is used. If the key person’s salary is $75,000, the amount of insurance might be $375,000 ($75,000 times five).

Method 2: Replacement cost.  First, determine how much additional salary is being paid to the executive above the compensation for the routine duties of the position. For example, if his salary is $80,000, but the routine part of the job amounts to approximately $25,000, the additional skills are then worth about $55,000.

Second, estimate how many years it would take to find and train a replacement to handle these extra duties. Assume it’s two years and add in the recruiter’s fee—generally about 25 percent. Then add the above factors: the recruiter’s fee and additional skills ($13,750 plus $55,000). Finally, multiply the above factor ($68,750 times two years equals $137,500), which equals the amount of life insurance you should have.

There are other valuation techniques, and your insurance professional can help you determine the best method. Because it’s simple and sensible, some business owners consider simply insuring one year’s profit.

Buying key-person life insurance may be a relatively small expense—one you hope you’ll never have to collect. But failure to invest in a key-person policy, and then having a key person die, can mean enormous expense. Your company can absorb small expenses, but big expenses can absorb your company.

Minh Tran is director of storage acquisitions for The Jenkins Organization Inc., a Texas-based commercial real estate and development company. To reach him, call 832.859.2425; e-mail [email protected]; visit www.jenkinsorg.com.

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In May, PhoneSmart self-storage call center broke a personal record for the most self-storage reservations made in one month. The off-site sales force brought in 3,165 reservations, representing an estimated $2,278,000 in revenue for its clients―an estimation based on PhoneSmart’s average conversion rate of 90 percent and an assumed $800 value per self-storage rental.
 
Director Tron Jordheim said the company hit nowhere near its record for the number of calls per store or number of calls per month in May, so he attributes the reservations record to  a customer-centric approach to sales; employee training, monitoring and coaching; and strong consumer demand for self-storage.
 
In addition, May was PhoneSmart’s best month for average reservations per store, according to a press release. On June 1, the company broke a record for the most calls taken on a single day. PhoneSmart predicted the uncharacteristically busy month on May 11, when it speculated on the traffic peak that would occur on Memorial Day and “Crazy Tuesday,” the day after.
 
PhoneSmart is a call center offering unit reservations, lead generation and sales-training seminars to the self-storage industry. Established more than 10 years ago, the company serves approximately 800 self-storage facilities in the United States and Canada. It has generated more than 600,000 self-storage leads.

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