Update 6/7/18 – Eric Capitanich has been sentenced to three years of probation for being an accessory after the fact in his mother's suicide last year at Peabody Self Storage. He also received credit for time served during the prosecution of his case. The charges could’ve been filed as a misdemeanor or felony. Capitanich was charged with a felony and faced 16 months, or two or three years in prison, according to the source.

A Solano County Superior Court judge also ordered Capitanich to attend counseling under the direction of the probation department. In addition, he can’t possess “dangerous or deadly” weapons or ammunition. The firearm that was used in the suicide has been destroyed, the source reported.

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9/12/17 – Eric Capitanich appeared in court on Monday to waive his right to a preliminary hearing. During his Jan. 10 arraignment, Capitanich pleaded not guilty to the single felony charge, according to the source. His next court hearing is Sept. 25.

Since Diane Capitanich’s suicide, a police investigation has revealed she was suffering from severe health issues at the time of her death, the source reported.

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1/16/17 – Eric Capitanich, 43, has been arrested and charged with helping his mother commit suicide inside a unit at Peabody Self Storage in Vacaville, Calif. Capitanich called the police on Dec. 7 to report his mother, Diane Capitanich, had died from a single gunshot wound to the head, according to Lt. Matt Lydon. Investigators believe the 69-year-old woman’s body had been inside the unit for about two weeks, the source reported.

Police recovered handwritten notes from Capitanich and his mother from inside the unit at 201 Peabody Road, which expressed the woman’s wish to die and detailed how the suicide would be carried out. Investigators believe Capitanich wasn’t present at the time of the shooting but purchased the gun and taught his mother how to use it. Though Diane was the one who fired the gun, she may have used a device to assist her, Lydon told the source.

“We believe that he (Eric) believed he was carrying out his mother’s wishes,” Lydon said. “I’ve been doing this job for over two decades, and I’ve never seen anything remotely close to this type of case.”

California voters passed a right-to-die law in June, which stipulates that terminally ill adults with 6 months or less to live may obtain aid-in-dying drugs with a doctor’s prescription. It isn’t clear if Capitanich or his mother sought medical advice, according to Lydon.

Capitanich has been charged with one count of assisting a suicide and will be arraigned on Jan. 26. He faces up to three years in jail and a $10,000 fine.

Sources:
San Francisco Gate, Man Who Was Accessory To Mother's Suicide Sentenced To Probation
CBS Sacramento: Vacaville Man Charged With Helping Mother Commit Suicide in Storage Locker
The Reporter: Man Accused of Assisting in Mother's Suicide Waives Preliminary Hearing

When it comes to sounding the alarm about rising interest rates, I’m starting to feel like “The Boy Who Cried Wolf.” It was only a few years into the recent economic recovery that we started warning self-storage owners about rising rates, only to experience modest increases. But as the fable goes, eventually the wolf comes to eat the sheep, and the little shepherd boy is left to fend for himself.

Fortunately, our story doesn’t have to come to such an abrupt and perilous ending. In fact, while rates are most definitely increasing, they’re still attractive, historically speaking. The 10-year swap and Treasury rates have hit 3 percent for the first time in more than four years and continue to float at that level. As of May, the 10-year Treasury rates were up 25 basis points from April and nearly 75 points from the same time last year.

What takeaways can we pull from this data, and what do rising interest rates mean for self-storage loans?

The Interest-Rate Equation

Remember that indexes such as the 10-year Treasury and swap are only half of the equation when calculating your interest rate. Looking at the following graph, it’s fair to say that loan spreads (the other half of the equation) generally move inversely to the index. While the spread shown is that of AAA commercial mortgage-backed securities (CMBS), there’s a strong correlation between how individual loans “price” and the pricing of CMBS bonds in the market. The last time the 10-year Treasury hit 3 percent, in 2014, AAA CMBS spreads were 20 to 25 basis points higher than today.

The Three-Legged Stool

When a borrower asks how a loan is sized, I often refer to a three-legged-stool analogy. The legs are loan-to-value (LTV), debt-service coverage ratio (DSCR) and debt yield. In recent years, values have recovered nicely, and while LTV is still an important consideration, it hasn’t been as much of a focal point. Debt yield has consistently been the factor that has constrained proceeds available for borrowers.

In the last few months, we’ve observed the beginning of a shift toward the DSCR metric. An asset’s DSCR is calculated as net cash flow divided by debt-service payments, which rise with interest rates. An increasing number of loans are being constrained by DSCR. In other words, holding the numerator (net cash flow) constant, an increase in the denominator (debt-service payments) equates to a lower DSCR.

Cap-Rate Movement

Conventional wisdom dictates that capitalization (cap) rates tend to move directionally with interest rates. It makes sense that as the cost of capital rises, so must the yield expectation. Are increased interest rates met with a corresponding rise in cap rates? Not necessarily, but there are arguments for both viewpoints.

Several experts point to a healthy spread between cap rates and Treasury rates as providing a buffer from rising interest rates going forward. That’s not to say a dramatic rise in interest rates won’t eventually push cap rates higher, but there’s a cushion. For this reason, experts maintain that cap rates will largely remain flat or experience only modest increases this year.

While this may hold true in 2018, there’s an important takeaway: As the cost of debt goes up, would-be buyers’ expectations will begin to shift, possibly before sellers’ expectations do. Effectively, buyers and sellers may fall out of equilibrium as sellers resist the urge to reprice given higher debt costs. But in time, cap rates will have to shift upward to preserve any yield spread on these investment opportunities.

Leverage

Given the points above, now probably isn’t the best time to overextend your project (and this is coming from a mortgage broker who makes more money if borrower uses more). Make no mistake, the lending environment is still healthy and loan volume has been strong, but consider where we are in the cycle. These are interesting times, and rising interest rates coupled with even slight increases in cap rates could result in an equity shortfall when a borrower next decides to refinance.

Interest rates may be on the rise after years of unprecedented lows, but the federal government’s recent action still falls in the realm of gradual increases. Instead of trying to perfectly time the best-case, low-interest-rate scenario, consider the “bird in the hand” approach. Compared to rates in the early 2000s and before, interest rates of 5 percent are still attractive.

The Federal Open Market Committee made good on its promise to increase the federal funds target rate three times in 2017. Thus far this year, it increased rates by a quarter point, and all signs point to at least another pair of quarter-point hikes. There’s a new federal reserve chairman, and he seems intent on following a similar protocol as his predecessor. Interest rates are on the rise and commercial real estate debt is more expensive than it was a year ago. Meanwhile, operating fundamentals remain strong and the debt markets are still quite healthy.

No one has a crystal ball, but given what I’ve outlined about today’s market conditions, the best advice I can offer is to consider your options and make a plan. That may inspire you to action or affirm your current debt product is a winner. Compare your existing interest rate with current commercial real estate rates and your expectations going forward. The interest rate on new debt may be higher, lower or in line with what you have in place.

However, consider this: If your loan is scheduled to mature in the next few years, it’s likely we’ll be in a higher interest-rate climate than today. Enlist the help of a financial advisor or mortgage banker to help you strategize around your goals and the loan products available to you.

Adam Karnes is the senior credit analyst for Chicago-based The BSC Group, where he specializes in the packaging of debt and equity financing requests for all commercial property types nationwide, with an emphasis on self-storage assets. He can be reached at 312.878.7561 or [email protected]. For more information, visit www.thebscgroup.com. 

There’s a lot to love about managing a self-storage facility, from the diversity of daily tasks to bonus opportunities to community interaction. But a lot can also go wrong under a manager’s watch including delinquent accounts, difficult customers, crime and more. Employees may also feel pressure under sales and marketing goals. Let us know what your biggest job-related fear is in this new Inside Self-Storage poll.

Argus Self Storage Sales Network, a Denver-based network of real estate brokers who specialize in storage properties, recently completed four property sales in Georgia that provide evidence of a shift in Southeast-area investing from primary to secondary and tertiary markets, according to a company press release. The four facilities comprise 115,000 rentable square feet and sold for a combined $5.5 million. Three of the properties are in tertiary rural markets, with the fourth in a small secondary market within the Atlanta Metropolitan Statistical Area, the release stated.

“Now is a great time for owners in smaller markets to sell quality product,” said Mike Patterson, the Argus affiliate for Georgia who brokered the transactions. Patterson added that small to mid-sized facilities in secondary and tertiary markets are drawing strong interest from individual investors with Small Business Administration funding and private-equity backing.

Of the four deals, the strongest was for Patterson Storage (no relation to the broker) in Jackson, Ga., a small town about 50 miles south of Atlanta. The 49,000-square-foot facility on 5 acres closed at a 7.25 percent capitalization (cap) rate, according to the release. The other properties were a 29,000-square-foot facility in Danielsville, Ga., a 26,000-square-foot asset in Rockmart, Ga., and an 11,000-square-foot facility in Carrollton, Ga. Those closed at cap rates of 9.5 percent to 11 percent. All four were stabilized facilities with good occupancy numbers, the release stated.

Formed in 1994, Argus has 36 broker affiliates covering nearly 40 markets.

Extra Space Storage Inc., a publicly traded self-storage real estate investment trust (REIT) and third-party management firm, recently surpassed 6.7 megawatts of capacity at 58 Extra Space properties across nine states, with the help of solar-power partner Safari Energy. Safari delivered 1.4 megawatts of capacity to REIT facilities through projects completed during the first four months of the year and is projected to complete a further 5 megawatts before the end of the year, according to a press release.

“Extra Space Storage has been a terrific partner over the course of dozens of solar-power projects, working with Safari Energy to unlock new revenue from existing properties,” said Matt Rudey, CEO of Safari Energy. “We’re best known for our work with leading commercial real estate owners, and self-storage is one of the many markets where Safari Energy has been successful in helping our clients capture incremental returns.”

“We are pleased that through our solar initiative we have been able to be good corporate citizens, while also creating value for our shareholders,” added Tim Arthurs, senior vice president of facilities for Extra Space. “Safari Energy has been a valuable and reliable partner for several years, and we look forward to additional future projects together.”

In 2011, Extra Space became a partner of the Environmental Protection Agency’s Energy Star program, with a goal of improving energy efficiency and fighting climate change through a strategic, corporate energy-management program. The company installed solar panels on 21 of its New Jersey facilities that summer as part of a nationwide agreement with 1st Light Energy, a company that specializes in commercial and residential solar-energy systems.

In 2014, the REIT partnered with Locus Energy, a provider of solar-panel monitoring and data analytics, to help manage the 150 solar-panel systems installed at Extra Space properties at the time. Twelve Extra Space facilities in Maryland earned LEED (Leadership in Energy & Environmental Design) Gold Certification in 2015.

Safari Energy specializes in solar-power deployment for large commercial customers. The company has completed more than 200 solar-energy projects since its founding in 2008. It’s part of the PPL Corp. group of companies.

Headquartered in Salt Lake City, Extra Space owns or operates 1,523 self-storage properties in 39 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 1.05 million units and 115 million square feet of rentable space.

Source:
Solar Power World, Safari Energy Delivers 6.7 MW of Solar Power to 58 Extra Space Storage Sites

Guardian Self Storage, which operates two facilities in Lihue, Hawaii, is making progress on its conversion of the former Nāwiliwili Bulk Sugar Facility on Niumalu Road, which it purchased in 2016. During the first phase, approximately one-third of the four-story building was transformed to 60,000 square feet of storage. The next two phases will add more storage and possibly micro-apartments, according to the source.

Built in 1949 at a cost of $1 million, the site became vacant in 2010 after sugar-cane producer Gay & Robinson Inc. ceased operation. Although the building was in disrepair, its foundation was solid, according to Guardian co-owner Thomas Lambert. The renovation included painting the building as well as stripping and replacing the siding.

Much of the structure’s former attributes were left intact, such as catwalks at the top of the building. Unfinished sections show dark splotches of molasses in the concrete walls despite power-washing, Lambert said.

“Sometimes you can still smell it when you’re up in the rafters,” said Lambert, who opened Guardian’s original location in the Puhi Industrial Park in Lihue in 2006.

Sugar-cane production is a large part of Lihue’s history. The warehouse functioned as the only export facility for sugar cane enterprises from 1950 to 2010, the source reported. The building held sugar until Guardian’s acquisition.

Before opening its Lihue facility, Guardian had a waiting list of more than 100 people. In addition to meeting a need for storage, the company is preserving community history, company officials said.

“Sugar plantations were huge at one time,” said Fran Kalb, manager of the Puhi location. “To take something and revitalize it and repurpose it to storage, but in a new form that serves us today in the world we live in now, is exciting. It has a function again after sitting for so long.”

Source:
Kaua’i Midweek, Guarding Kauai’s Great Story

 

On Demand Technologies Inc. has launched Zapt, an online platform that helps consumers and businesses coordinate, schedule and purchase moving, relocation and delivery services. The platform links customers with vetted, professional providers. While the service is primarily targeted at consumers, Zapt for Business offers logistics solutions to home-staging companies, realtors, retailers, self-storage operators and senior-living planners.

Self-storage operators could conceivably use the platform to offer “on-demand” services to their tenants, such as the moving belongings to or from the storage property or delivering items upon request, based on information in a company press release. The offering would be similar to that provided by the many valet-style startups that have entered the storage marketplace in recent years.

The platform offers customers flat-rate pricing, notifications and tracking, as well as live-agent support. Users can select the exact date and time they wish to have their task completed. Those who experience a delay can reschedule without penalty, the release stated.

“Unlike many Uber for X startups in the on-demand space, Zapt has taken a unique hybrid approach by combining a completely tech-enabled digital customer experience, with hyper-local operations and 24/7 live customer service,” said Bill Catania, CEO. “We had thousands of conversations with consumers, and they expressed the need for more human contact than traditional ‘app-only’ solutions that are in the marketplace today. We have removed the hassle from the entire booking process and given control back to the consumer.”

The commercial business module is executed through “specialized, standalone client apps, as well as with a completely embedded solution within its client’s digital ecosystem and workflow,” officials said in the release.

Zapt is available in Baton Rouge, La.; Central New Jersey; Charlotte and Raleigh, N.C.; and Orlando, Fla., with additional markets expected to be added throughout the year. Subsidiary On Demand Logistics Services has operated Move 24/7, a similar platform service in Des Moines, Iowa, since 2016.

Source:
Digital Journal, Introducing Zapt: A New Solution That Empowers Consumers and Businesses to Have Anything Moved or Delivered, Anytime
Zapt, Website

Executives from self-storage real estate investment trusts (REITs) Extra Space Storage Inc., Life Storage Inc., National Storage Affiliates Trust (NSAT) and Public Storage Inc. will give company presentations during REITWeek 2018, the investor forum for the National Association of Real Estate Investment Trusts (NAREIT). Jernigan Capital Inc., a merchant bank and self-storage advisory firm that trades as a REIT, will also present. REITWeek will take place June 5-7 at the New York Hilton Midtown hotel in New York City.

Executives from the self-storage firms will join management teams from more than 100 industry REITs as they outline their company strategies in formal investor presentations. REITWeek is attended by pre-qualified investment managers, analysts, bankers and other industry professionals, according to NAREIT.

Four of the REITs will present for 30 minutes on June 5, with Public Storage speaking on June 6 at 4:30 p.m. Jernigan Capital will be first to speak at 8 a.m. on Tuesday, followed by NSAT at 9:30 a.m., Extra Space at 10:15 a.m. and Life Storage at 2:15 p.m.

The presentations by Life Storage, NSAT and Public Storage will be available online via live, listen-only webcasts on REITStream.com. Extra Space and Jernigan Capital aren’t listed among the scheduled webcasts.

In addition to the live webcast, the Life Storage presentation will be available from the investor-relations page of LifeStorage.com. An audio archive of the webcast will be available for 90 days.

The conference will also include lunch general sessions during the first two days of the event. On June 5, the topic will be an update on the capital markets, while the June 6 lunch will be a discussion between Steven Wechsler, president and CEO of NAREIT, and Samuel Zell, chairman of Equity Group Investments. Both will be viewable via live webcast.

NAREIT describes itself as “the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets.” REITWeek is designed to bring a large concentration of REIT management teams into one location, enabling them to share insights and their latest company developments. More information can be found at REIT.com.

Headquartered in Salt Lake City, Extra Space owns or operates 1,523 self-storage properties in 39 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 1.05 million units and 115 million square feet of rentable space.

Jernigan Capital is a REIT listed on the New York Stock Exchange. The company provides financing to private developers, operators and owners of self-storage facilities. It offers financing for acquisition, ground-up construction, major redevelopment or refinancing. The firm is externally managed by JCap Advisors LLC.

Based in Buffalo, N.Y., Life Storage operates more than 700 self-storage facilities in 28 states under the Life Storage and Uncle Bob’s brands. Its portfolio of owned and managed facilities comprises more than 50 million square feet.

Headquartered in Greenwood, Colo., NSAT is a self-administered and -managed REIT focused on the acquisition, operation and ownership of self-storage properties within the top 100 U.S. Metropolitan Statistical Areas throughout the United States. The company has ownership interest in 541 storage facilities in 29 states. Its portfolio comprises approximately 34 million net rentable square feet. It's owned by its affiliate operators, who are contributing their interests in their self-storage assets over the next few years as their current mortgage debt matures.

Based in Glendale, Calif., Public Storage has interests in 2,392 self-storage facilities in 38 states, with approximately 159 million net rentable square feet. Operating under the Shurgard brand name, the company also has 223 facilities in seven European countries, with approximately 12 million net rentable square feet.

Sources:
NAREIT, REITWeek: 2018 Investor Conference
REITStream.com, REITWeek 2018
Markets Insider, Life Storage Inc. to Participate at REITWeek 2018

Update 6/6/18 – The conversion of the former E.C. Pigments mill is expected to be complete next month. A new roof is in place, and fresh doors and windows have been added on the first floor. Some of the interior is complete as well, according to the source. The renovated space will contain 125 units. It’ll be managed by self-storage real estate investment trust Extra Space Storage and branded under its name, according to the source.

Another company is now aiming to bring more storage to the area. The owners of Tower Mill Outlets are looking to add self-storage to their property at 657 Quarry St. The building occupies a full block, containing office space and retail shops.

“We are planning a small project at the rear of the mill,” said Tower Mill trustee Paul Hartel. “A lot of our tenants are keen for a place to store things. We thought this would help them out.”

Although company officials discussed a variety of options for the space, storage made the most sense, Hartel said. “We feel it would be a good use of that space. I think the dynamics of the city are ripe for more storage.”

The city’s conservation commission is expected to consider the Tower Mill project this week. If approved, the storage units could be available by the end of the year.

“We’ve owned the mill for 10 years. We love Fall River, and we love this project,” Hartel said. “We are in great shape there. We spent a lot of money over the years upgrading the facility. We are bursting at the seams and we are looking to grow.”

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7/27/16 – After a short delay due to demolition work, real estate developer Dennis Wood has started construction to convert his Fall River granite mill to self-storage. Initial preparation for the development required more work than anticipated, which will delay the opening of the 127,000-square-foot facility until next spring, Wood told the source.

“We are putting a new roof on it now. If everything goes right, we’ll have a 250-kilowatt solar array on the roof,” Wood said, adding that the solar system should be enough to handle the electricity needs of the facility and provide a surplus he can sell to the grid.

When complete, the facility will include 1,225 climate-controlled units.

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3/21/16 – Real estate developer Dennis Wood has purchased a former mill in Fall River, Mass., which he plans to convert to self-storage. Wood purchased the property at 749 Quequechan St. for $930,000. Construction will begin in June, and the facility is slated to open in the fall, according to the source.

“I’m always looking for sites. I saw this building directly across from a Super Walmart,” he told the source. “You have a lot of apartment users and people with small residences, who have limited storage. We think there will be a good market for this.”

The existing three-story granite building comprises 178,000 square feet of space. Following the retrofit, it will offer 130,000 square feet of climate-controlled self-storage, Woods said. The facility will have an elevator and covered loading dock.

The mill formerly housed E.C. Pigments USA Inc. until it closed three years ago. Originally founded as Roma Color, the company moved into the building 40 years ago to produce organic pigments for ink, paints and plastics, according to the source.

Wood, who lives in Haskill, Okla., is a developer and real estate manager. He owns properties around the country, including a self-storage facility in Victorville, Calif., also near a Super Walmart.

“It was a very successful project. Anything near a Super Walmart really does well because of the traffic they bring in,” Wood said.

Sources:
The Herald News, Pair of Storage Facilities Planned for Flint Neighborhood
Fall River, Developers Buy Two Fall River Mills
The Herald News, Construction Starting on New Self-Storage Facility Near Fall River Walmart

Real estate developer Poverni Sheikh Group LLC (PSG) has submitted plans to build a five-story self-storage facility with ground-floor retail in the Stonestreet Corridor of Rockville, Md. The property at 204 N. Stonestreet Ave. currently houses several structures including one used by a roofing and sheet-metal contractor. It’s unclear if the buildings would be demolished or incorporated into the new facility.

The plans include constructing a 55-foot-tall building with a cellar. It would comprise 102,347 square feet and include 650 storage units as well as 2,000 square feet for retail on the ground floor. The developer also plans to add a 5-foot-wide sidewalk, landscaping and benches. The façade would provide space to showcase the work of local artists to enhance the aesthetics of the area, according to the application.

“The development of the self-storage facility with ground-floor retail uses provides the first transitional use in this area, which will begin to bridge the gap from strictly industrial uses to a use which is compatible with a wider array of less intensive uses, including retail uses, office buildings and residential uses,” the application stated.

Although city officials have been working to revitalize the Stonestreet Corridor into a “main street” destination for pedestrians and cyclists, there has been little progress, officials said. The city launched a study a year ago to generate ideas to refresh the area.

Based in Baltimore, PSG specializes in the adaptive reuse of historic and distressed structures, according to the company website. It also provides brokerage, construction, development and property-management services. Its real estate portfolio includes mixed-use, multi-family and office properties.

Source:
Bethesda Magazine, Developer Pitches Rockville Self-Storage Facility Project as Kicking Off Stonestreet Transformation