If you want your self-storage business to survive the coronavirus pandemic and resulting economic recession, you need a comprehensive plan. In his 150-page Self Storage Facility Operations Manual, industry expert Bob Copper provides critical guidance for owners and managers, covering day-to-day details. It’s designed to help industry professionals implement policies, procedures and best practices regarding:

• Office opening and closing
• Daily tasks
• Office setup
• Paperwork flow
• Management reports
• Rental/sales practices
• Tenant delinquency and lien sales
• Customer-service issues
• Retail sales and inventory
• Privacy rights
• Safety and emergency protocols
• Much more

Copper is the owner and partner-in-charge of consulting firm Self Storage 101. As a prominent industry author, speaker and trainer, he’s worked extensively with hundreds of self-storage owners, operators and managers to develop strategies for operational improvement, revenue growth and value enhancement. As a facility owner himself, he has a unique perspective that relates to working with other operators.

Additional books written by Copper focus on customer service, executive leadership, revenue management, sales and more. Visit the ISS Store for full product details and titles. Take charge of your self-storage operation today!

Self-storage businesses have benefited from many digital-marketing advances, but none are as critical to operational success as the company or facility website. For consumers, it’s an issue of trust. They’re far less likely to spend money with a company that doesn’t have a digital presence. A well-functioning website enhances the customer experience, creating a seamless, hassle-free process for renting a storage unit, paying rent and more.

If you’re operating self-storage without a website or using an outdated one, there’s good news: It doesn’t take much to get a new one up and running. Still, it has to drive business. Let’s examine key elements for ensuring website efficiency and tips to maintain and optimize your site for long-term performance.

A Modern Foundation

There are numerous platforms on which you can create a website such as Squarespace, Wix and Wordpress. Generally, though, these generic tools can be limited in features and scalability. In self-storage, it’s crucial to use a platform that can integrate with your facility-management software. This’ll allow you to offer online rentals and payments as well as benefit from automated inventory updates and other features that streamline operation.

Not long ago, you could get by without this kind of integration, but those days are gone. If your website doesn’t offer rental and payment capabilities, your competitors’ websites might. The longer you wait to upgrade, the harder it’ll be to measure up.

You also want to use a platform that allows your website to be mobile-friendly. It’s far more likely that your customers will discover your business using a mobile device than a desktop computer. Having a website that functions poorly on smartphones can drive away prospects, so always prioritize your mobile experience.

Here are a few other important considerations:

Domain name. This is critical. If you’re launching a new website, your domain should ideally include your facility name and the word “storage” to boost search engine optimization (SEO). If you have more than one facility, pick a name that includes a location keyword like the city, state or region in which you operate. If you’re in the process of updating an older website, it’s best to keep your established domain to help with SEO. You don’t want to change it at this point.

Theme. Think of your website theme as its “wrapper” or visual identity. It’s important to customers and should represent your company’s branding. The more cohesive the theme is between your website and physical property, the more credibility and trust you’ll gain with prospects and tenants.

When choosing colors, fonts and images to use on the website, it’s smart to use the same ones seen in your logo and general branding scheme. Just make sure the ones you choose are compliant with the American with Disabilities Act. For example, fonts should be easily legible. The easier it is for customers to read and navigate your website, the better.

Facility-location page. This is often overlooked, but your homepage is far less important than your facility-location page, which should feature unit pricing, availability and a call to rent. Ensure your location page(s) performs well on mobile and focus your SEO efforts here. Anytime you distribute links to your website, point them to your location page(s).

Maintenance and Optimization

Once you have the right foundation for your self-storage website, you need to maintain and enhance it, so it remains relevant. Here are a few suggestions to keep it functioning at an optimal level:

Content. In the world of SEO, content is king. If you have the capacity to write a blog, you should. Your SEO will be boosted by an established website with fresh, relevant content. If blogging isn’t possible, keep your Web pages regularly updated with pertinent material.

Link-building. Keeping your website fresh with keyword-rich copy is the first step to mastering SEO performance, but link-building (aka backlinking) really helps augment it. To draw visibility to your website, increase the number and quality of inbound links from other websites. This will require that you establish good relationships with reputable, outside partners.

Google My Business (GMB). Having a verified and optimized GMB listing plays an important role in your local SEO and is essential for any website. Make sure your business information (name, address, phone number, URL, hours, etc.) is accurate and matches what’s on your website. Overall, your listing needs to be as complete as possible.

Online reviews. Reviews also impact search rankings and drive website traffic. Well-written Google reviews boost your SEO.

Act Now

Don’t wait. The time to create or modernize your self-storage website is now. Actually, it was a few years ago, but it isn’t too late. Focusing on the areas outlined above will put you in position to capitalize on the digital age, poised for continued success and growth.

Lillian Wright is a product manager at Storable, a supplier of cloud-based access control, management software, marketing, payment processing, website development and other services for the self-storage industry. Prior to working in self-storage, she was a successful marketer in real estate, nonprofits and event planning. At Storable, she uses her varied skillset to help businesses thrive. For more information, visit https://www.storable.com.

Green Storage, which operates eight self-storage locations in Ontario, announced that its Newmarket facility is serving as the official headquarters for Voyago, a provider of non-emergency patient-transfer services. In addition to parking its vehicles at 122 Bales Drive E., Voyago has established its office and call center inside one of the facility’s business suites. It’s also storing medical supplies in a storage unit, according to a press release.

Voyago chose the Newmarket facility due to its location. At the start of each workday, its employees stock patient-transfer vehicles with medical supplies such as oxygen tanks and personal protective equipment. They then drive to local hospitals to pick up discharged patients and take them home. The family-owned company was purchased last year by Transdev, a private transportation provider in North America.

Green Storage operates facilities in Ajax, Aurora, Bolton, Hamilton, Keswick, Newmarket, Orillia and Toronto, Canada. In addition to self-storage, its facilities offer boardrooms, business suites, mailbox rentals, moving and packing supplies, parcel lockers, truck rentals, and vehicle storage.

Update 6/30/20 – Idaho and Mississippi have also passed legislation that will update their respective self-storage lien laws on July 1. Both measures include language that bring them in line with other recent updates across the nation that address lien-sale notifications, value limitations, unit-access restriction, late fees, online auctions and other provisions.

In Idaho, Gov. Brad Little signed Senate Bill 1264 (SB 1264) on March 16, providing the state’s first self-storage regulatory update in more than 30 years, according to a June 29 newsletter sent by the national Self Storage Association (SSA) to its members. The new law differentiates self-storage from warehousing and allows operators to place value limits on stored contents, deny unit access to delinquent tenants, hold lien sales online, and tow tenant-stored vehicles if delinquency exceeds 60 days. Operators will also be allowed to impose late fees of $20 or 20 percent of monthly rent, whichever is greater.

Lien-sale advertisements must still be published in a newspaper of general circulation within the self-storage operator’s local county, though Idaho lawmakers reduced that requirement to a single placement. Lien notifications can now be sent to tenants via methods other than Certified Mail, providing the alternative is spelled out in the rental agreement; though the law doesn’t list what those methods are.

SB 1264 was supported by the SSA and its local affiliate, the Idaho Self Storage Association, a nonprofit committed to strengthening and enhancing the self-storage industry in the state through education, networking opportunities and lobbying efforts.

In Mississippi, Gov. Tate Reeves signed House Bill 1138 (HB 1138) on June 25. It includes similar provisions as the Idaho law regarding value limits, unit access, late fees and vehicle towing. In addition, HB 1138 allows operators to send lien notifications via verified mail instead of Certified Mail. Email notices are permitted as long as the provision is accepted by the tenant in the rental agreement. Operators may now hold lien auctions online. Lien sales will be considered commercially reasonable as long as three independent bidders attend.

The SSA lobbied for the bill’s passage.

---

6/22/20 – Senate Bill (SB) 543, which updates the self-storage lien law in Tennessee and was signed by Governor Bill Lee last week, goes into effect on July 1. The new legislation changes the notification requirements for industry lien sales. In addition, facility operators will now be able to hold and advertise their auctions online, according to a press release issued by the Tennessee Self Storage Association.

Currently, self-storage operators must advertise lien sales through a newspaper of general circulation. Under the new law, auctions will be deemed commercially reasonable as long as at least three potential bidders participate in the sale. “Of course, newspaper advertising would still be permissible, but the new law removes the mandate of the old law that required the use of newspaper advertising,” TNSSA officials said.

The law also authorizes self-storage owners to contact county clerks to determine ownership and any lienholder for motor vehicles left inside a storage unit.

The update was introduced to the assembly in February 2019, along with companion House Bill 1073. SB 543 passed the house 94-1 on March 12 before passing the senate unanimously on June 4. Lee signed it into law on June 15.

The TNSSA lobbied for the bill’s passage. It was sponsored by Sen. Todd Gardenhire. The companion house bill was sponsored by Rep. Susan Lynn.

Serving Tennessee self-storage professionals for 13 years, TNSSA provides information on issues such as lien laws, property taxes and other concerns faced by facility operators. It also provides educational opportunities and access to industry publications. TNSSA has been affiliated with the national Self Storage Association since 2007.

Sources:
Idaho Legislature, Senate Bill 1264
Mississippi Legislature, House Bill 1138
SSA Magazine Weekly 6/29/20, Major Lien Law Changes in Mississippi, Tennessee, Idaho on July 1

How can we forget February 2020? The global economy was riding a long wave of expansion, the S&P 500 was at an all-time high, and unemployment was near a record low. With the exception of some market-specific supply concerns, the self-storage industry was healthy, and owners were approaching a decade with relatively few headwinds.

Little did we know that within a few weeks, the coronavirus would turn our economy and way of life upside down. As our industry now faces a whole new set of challenges, there’s never been a better time to automate our operations. Technology and an updated, two-silo approach to facility management creates business resilience, greater staff productivity and a better customer experience. I’ve seen the proof in my own facilities. Here’s how it works.  

Customer vs. Facility Management

Self-storage managers wear many hats; but they’re primarily responsible for two workstreams:

• Customer management: Tasks that require direct interaction with new and existing tenants such as inquiries, reservations, rentals, payments, collections, account updates, gate codes, etc.
• Facility management: Any hands-on work at the property such as unit overlocking, auction prep, building repairs and maintenance, landscaping, cleaning and sanitation, etc.

Automation meets several needs in the customer-management category. Tools like kiosks, video cameras, live chat, online rentals and other technology make it possible for a single remote manager to support five to 10 self-storage properties, depending on their size.

If you break all your operational tasks into these two silos and channel all customer-management tasks to a remote manager, your onsite manager now has the capacity to focus on things like fixing latches and gates, sweeping out vacant units, sanitizing surfaces, picking up trash, replacing light bulbs, etc., which are critical in maintaining curb appeal and a superior customer experience. Like the customer manager whose focus has been streamlined, the facility manager now also has bandwidth to handle more than one property.

The Importance of Integration

The key to linking these two workstreams is cloud-based management software, which ties together all aspects of the business. Integrating the call center, kiosk and website into a single platform allows for the seamless exchange of data across the entire customer interface. For example, if a customer rents a unit on the website, that information is updated in real time at the call center and kiosk to avoid any confusion over available units.

By creating and assigning tasks within the software, a remote customer manager can direct onsite needs to a facility manager. For example, let’s say a customer has a broken door spring and calls customer service. The customer manager can immediately create a task within the software and assign it to the facility manager. As soon the repair is done, the facility manager updates the task in his smartphone or tablet as complete, which prompts the customer manager to send notification to the tenant via email, phone or text.

In summary, the high-level way to think about automated management is:

• Bifurcate your operation into separate silos (customer vs. facility management).
• Supplement each silo with technology that creates scale and depth of expertise.
• Link the silos in a seamless, integrated software platform.

Resilience and Scale

There’s a common misconception in our industry that automated self-storage facilities run by themselves and require vast technological prowess. This isn’t the case. Automation is simply an approach to operation that combines multiple solutions into a single platform. By leveraging the power of technology, management staff can specialize in the work silos that best align with their aptitude, resulting in higher productivity and better outcomes.

Whether you have one facility or 1,000, automation will make your self-storage business more resilient, scalable and successful. To know the truth of this, we need look no further than our current operating environment stemming from the spread of the coronavirus. A threat to human health and safety has forced us to rethink our operational systems and processes. We should use this challenging but unique moment to shift our management paradigm. The operational model of one manager per property is rife with shortcomings. I encourage you to think about the technology necessary to guide your business through the challenges of COVID-19 or any other unforeseen obstacles.

Seth Bent founded Red Dot Storage, which operates 185 facilities in 17 states, in 2013. He oversaw the development of the company’s unmanned operating model, including proprietary hardware, software, a call center and more. He stepped down as CEO in 2019, but remains a board member. Earlier this year, he launched StoreLine Self Storage, an automated self-storage management platform, and Storage Exchange, an acquisitions and capital-deployment solution for established buyers and investors, with the goal of creating an operator-centric transaction platform.

If you’ve ever visited a car lot, you may have had some apprehension or even irritation because you thought someone was going to try to put the “hard sell” on you. Some customers may feel the same way about contacting or visiting your self-storage facility. Your job as the manager is to put the company’s best foot forward, put prospects at ease and close the sale.

No matter what brings a person through your door, you’re not likely to get very far in your sales presentation without creating some kind of rapport. It all starts with relationship-building.

Meet and Greet

When a customer enters my store, I stand up. I want him to see me for who I am. In the past, I would meet him halfway across the sales floor and offer a warm smile and a handshake. The coronavirus has altered that practice; but I still stand and greet the customer, and smile, even if I’m wearing a mask.

First impressions matter. Your goal isn’t just to make a great impression, it’s to build the foundation for a new relationship. Your customer needs to see you as trustworthy or he’ll be out the door.

Seek to Know

Next, I inquire about the customer’s need for visiting, so I know how I can help. I ask what he’ll be storing. If it’s electronics, books or photographs, I suggest a climate-controlled unit. If he needs a place to store garden tools or a vehicle, I mention our drive-up units. Listen to the prospect’s needs and find an offering to match.

I recently got a call from a gentleman who’d visited our website and was interested in a 10-by-10. When I asked what he’d be storing, he mentioned a few tools and some parts to a car he’s restoring. He didn’t have room in his garage, and he thought a storage unit would help him keep his project on track. I asked polite questions to learn more. I was sincere. And with this information, I was able to offer him the best solution. The bonus was that while I was gathering these details, I was building a relationship with my customer. Build a relationship, and you’ll earn trust and loyalty.

Offer a Tour

Once I understand my customer’s needs, I offer a property tour (with proper social distancing, of course) and discuss our amenities. I point out how our gate works, our hours of operation, the best route to his unit, where to park when loading and unloading, how to access the building, the location of push carts and the elevator. I also point out security cameras and other important facility features.

During the tour, I explain when rent is due and when late fees occur. (I visit these topics again when presenting the lease.) I show him his exact unit or one just like it to confirm it’s the right size for his needs. Again, I’m proving that I’m on his side and have his best interests in mind.

Get a Commitment

To cement your new relationship, offer the tenant tips on how to store his items. For example, I might say, “Since you’ll be storing objects from your tool shed, let me offer a few solutions.” Here’s one that’ll help you sell ancillary items: “Our boxes are heavy-duty and come with handles, which’ll make it a lot easier to carry your books and kitchen items.”

The goal is to get the customer to commit to the rental. Here are some more helpful phrases you can use tighten the bond and move him closer to signing the agreement:

• Let’s go back to the office and I’ll walk you through the paperwork.
• Will you be paying with Visa or MasterCard?
• Let’s put you on autopay so you never incur any late charges.
• Here are some options to fulfill our insurance requirements.
• You’ll need a lock for your unit. Let me show you my selection.
• You mentioned you’ll be storing a mattress. Our mattress covers are the best because…

When it comes to selling your self-storage offerings, it’s important to build a relationship with the customer first. Let him know you’re glad he called or stopped by. Treat him like an extension of your family. Once you have his trust, you can bust out your skills and proceed to closing the deal.

Kevin Lanning has been a facility manager for StorageMart since 2014. Founded in 1999 and based in Columbia, Mo., the company operates more than 200 self-storage properties across Canada, the United Kingdom and the United States. Kevin lives in Omaha, Neb., with his wife, Krystal. His outside interests include photography and woodworking. For more information, visit www.storage-mart.com.

Self-storage facility design continues to be shaped, as it always has been, by two opposing forces: the need of a developer to attract business and the desire of a community to resist change.

From a developer’s perspective, self-storage needs to expand into wider markets and be located for customer convenience. He also needs people to recognize the facility for what it is and feel comfortable doing business there. From the community’s perspective, while there’s a yearning to increase tax revenue, change can be difficult and spur conflict. Some people don’t want to see the look and feel of their neighborhood alter, and any new development can prompt fear. Some welcome it, others resist.

Municipal planners are sometimes caught between residents and developers, causing them to impose conditions on projects that appease residents while still allowing development to occur. It’s these increased demands that force architects to come up with innovative approaches to self-storage design.

Fighting Public Perception

Developers still battle preconceived notions of what self-storage is and looks like. Our reputation precedes us. Right or wrong, people have an image of the product that’s been generated by earlier iterations of design. The earliest facilities were metal sheds behind gas stations, and this impression still lingers in people's minds.

As self-storage created a foothold in the marketplace, it often captured attention with vibrant, flashy colors. To convey the idea of security, buildings were festooned with images of keys, locks, safes, etc. And no element says “self-storage” more than a row of roll-up doors, whether they be outside a building or behind glass. Sometimes these projects were designed with finesse, but often the results were clumsy and tacky. So, again, some people are opposed to new storage projects before they even see the proposed design.

National operators use architectural elements, details and colors that promote and unify their brand. Some communities are resistant to these designs, as they seem too much like fast-food franchises. Residents want buildings that respond to local needs, tailored to a specific site. Buildings today also have less of a need to be spotted from miles away, thanks to online searches for “self-storage near me.”

Making the Transition

Self-storage has largely moved out of industrial areas into commercial ones, and it continues to expand into places previously reserved for retail and residential. In all kinds of areas, it fills a need. But when storage is introduced into a residential area, the community will likely want it to blend into its surroundings.

A self-storage facility isn’t likely to be allowed into a single-family residential area, but there are zones at the edges of these districts where multi-family projects are allowed to ease the transition to dense urban centers. In some cases, commercial developments are permitted. So, while a traditional self-storage project would face difficulties in getting approved, one that, at first glance, could be mistaken for a multi-family condominium would have an easier time.

Crisping It Up

Self-storage architects today are using building design to overcome obstacles imposed by local use restrictions and preconceptions. By making structures compatible with their surroundings, they drastically minimize the chance that appearance will be a detriment to project approval. Still, as customers and the market become more amenable to self-storage, designs have needed to become more sophisticated.

Modern design is now the go-to style for many new projects. With crisp lines and clean surfaces, this design style conveys neatness and freshness. Instead of actual rows of storage doors, doors are abstracted into basic shapes. At first glance, this approach still broadcasts what the facility is without violating local restrictions.

The color palettes for new facilities have moved away from bright, attention-getting colors. Taking cues from current retail and restaurant designs, self-storage projects now incorporate warmer colors, natural materials and higher-end metal panels.

In business corridors where office buildings line both sides of the street, self-storage can match the look of low-rise offices. Again, the industry’s common building elements can be displayed in a more subtle way. For example, oversized vertical elements with two-story recessed areas look, from a distance, like oversized storage doors.

Rising to the Occasion

Often, the only zoning that allows for self-storage is industrial, which might be on the outskirts of town. Though far from the city center, when on a major roadway, these locations are sometimes the first things visitors see when they enter an area. As a “community gateway,” self-storage buildings in these circumstances require high-quality design. Top-of-the-line materials, commercial storefront windows, dramatic nighttime lighting and custom details are all used, even while blocking views to storage doors.

Modern design isn’t universally accepted, however. When a community has a favored architectural style or distinctly traditional look, a sleek approach would stick out like a sore thumb. A good strategy when building adjacent to residential communities is to adopt that local style. Since the buildings don’t stand out, developers have fewer hurdles to overcome.

When developing in older neighborhoods filled with historic structures, again, newer designs would be out of place. Self-storage projects may be required to use materials that are in-keeping with the neighborhood, such as limestone and masonry, and to match building existing building heights and setbacks.

Self-storage design continues to evolve, and each site faces its own set of constraints. In response, projects will continue to adapt with a variety of architectural options and an overall more refined look. Gone are the days of cookie-cutter buildings. This is a new generation of storage!

David Wytmar is president of Groundwork Ltd., a Chicago-based architectural, planning and engineering firm that’s served the self-storage industry for 25 years. He’s a licensed architect and building-science practitioner with LEED (Leadership in Energy and Environmental Design) accreditation. He has expertise in architectural design, production and coordination, from feasibility study through contract administration. For more information, visit  www.selfstoragearchitects.com.

While government restrictions and health advisories relating to the coronavirus pandemic have paused or slowed many of “non-essential” activities, self-storage owners with near-term loan maturities have no choice but to prepare for refinance. The possibility of a technical loan default, exorbitant default fees, damage to credit history and foreclosure proceedings should never be taken lightly.

That said, the lending landscape has changed during COVID-19, and documentation requirements have increased to deal with new areas of heightened focus. But before we get into loan preparation in this new environment, let’s discuss the current lending options and lender appetites, as they’ve also materially changed.

Lending Options

Commercial mortgage-backed securities (CMBS). As of early June, a reputable CMBS “money center bank” has re-emerged in the debt marketplace and is providing much needed liquidity in the self-storage industry. This is important because CMBS offers non-recourse loans for which only the property serves as collateral, not the owner’s personal assets. CMBS also offers “cash-out” financing, which allows owners to monetize their investment and the imbedded value they’ve created without the need to sell their property and deal with the related tax consequences.

Still, the CMBS market isn’t widely open for business. Also, some unscrupulous CMBS lenders are using the current market volatility to their advantage, continuing with the deceptive lending practice of “re-trades.” A knowledgeable mortgage professional can help you identify and avoid these lenders with poor reputations.

Insurance companies. For the most part, these lenders have rolled back their activity, except when offering the most conservative loan terms. They’re generally in a “wait and see” mode, which they have a tenancy to do during periods of economic uncertainty.

Local and regional banks. These are another lending source for self-storage owners. They provide Small Business Administration loans, which are partially guaranteed by the government, as well as balance-sheet commercial loans. However, at this point, only a portion of these lenders are still active, as some locals have been forced to focus on asset management due to loan defaults relating to hotels and poor performing retail properties.

It’s important to know that nearly all local and regional banks are requiring full or partial recourse, in which your personal assets—including your home, personal investments and savings accounts—serve as collateral for the loan in addition to your self-storage property. And personal recourse simply doesn’t work for some borrowers or institutional sponsors that manage properties on behalf of private or public investors.

Debt funds and specialty finance companies. In general, these lenders have been the most negatively impacted by COVID-19. The evaporation of CDO (collateralized debt obligation) securitizations—which up until the pandemic provided many of these lenders with significant liquidity—has crippled their ability to actively lend. In addition, they’ve been hammered with heavy margin calls by their line or repossession lenders. Consequently, many debt funds and specialty finance companies are conserving cash and not lending to ensure they can make future margin calls and, in some cases, simply survive.

The Good News

The silver lining for self-storage owners is, relative to other types of commercial real estate, this industry is experiencing fairly high demand by active lenders who recognize:

• Storage businesses have been rather unscathed by COVID-19. The basic demand generators continue, and the pandemic has even produced new forms of demand, including the need for space to accommodate newly established home offices or young workers who’ve moved back home with their parents after losing jobs in the retail or hospitality sectors.
• Self-storage rental payments are collateralized by storage-unit contents as well as the renter’s credit background.
• The storage industry hasn’t experienced the same level of government intervention as multi-family property owners who must allow renters to suspend their monthly payments if they were impacted by COVID-19 and related orders.

Keep in mind that active lenders are still nervous about the economy and are offering less leverage to self-storage owners than before. I suggest you hire an experienced mortgage professional to negotiate on your behalf in relation to:

• Newly created six- to 12-month debt service
• Real estate tax and insurance reserves (regardless of property performance)
• New cash-out limitations, interest-only period reductions and lower loan-to-value requirements

Remember that loan terms are the single most effective way for a commercial real estate owner to maximize his after-debt-service cash flow and return on equity.

Documentation Requirements

There are some new documentation requirements. To start, your lender will ask for evidence to understand whether your rent collection has been materially impacted by COVID-19. One document most will ask for is an aged-receivables report, which wasn’t commonly requested until recently. If your self-storage property has always had some portion of tenants who pay late, even before the pandemic, it’ll be important to mention that in your report.

Some lenders may want to take an additional bad-debt vacancy deduction for delinquent tenants. Generally, there’s a substantial difference between tenants who pay late and those who never pay and must be written off as bad debt. You’ll want to speak to your accountant and property managers to understand the true percentage of bad debt and make your case to the lender. You want to avoid the “knee-jerk” underwriting adjustments lenders are currently making to cash flow, as it directly impacts your loan terms.

Finally, you need to consider the impact of your commercial tenants on revenue. Even if your facility only rents to a few office or retail clients, the lender will likely ask which are open for business, whether they were closed during the pandemic, and if any have asked for rent relief. You must answer these (and all) questions from your lender honestly to avoid later triggering a “bad-boy carveout” relating to fraud in the event of a future loan default. It’s important to manage your commercial tenants and be proactive in coming to a resolution if any have been severely impacted by the pandemic. Another way “dirty laundry” is being aired is by lenders requiring most, if not all, tenant estoppels.

While you can’t control every outcome during a self-storage loan refinance, careful preparation will increase your lender’s underwritten cash flow. This will ultimately help you achieve the best possible loan terms and ensure a successful closing.

Gregory J. Porter is the founder of Summit Real Estate Advisors, a New York-based mortgage broker. He’s a 20-year lending veteran with commercial mortgage-back securities lenders such as Deutsche Bank and JP Morgan, where he was a senior underwriter. He also served as the chief underwriter for Barclays PLC, with a $100 million signature authority. To reach him, call 917.701.5145; email [email protected].

At its core, self-storage is a simple business. However, when you examine the operational layers, there are many exposures and risks. Gone are the days when owners could fully protect themselves with typical insurance coverages like customer goods legal liability and wrongful sale liability. There are many other perils that can expose your business to lawsuits and financial harm. Below are eight commercial coverages to consider adding to your policy.

1. Cyber Liability

As corporate data breaches continue to rise and cyber thieves become smarter with more capabilities, you must always be prepared to face a cyber threat. Do you have a plan if a breach happens at your company? Would you be ready to handle a six-figure expense? It’s a highly sensitive issue. People feel violated and worry about how the incident may affect their lives, such as their credit history, privacy, etc.

As a self-storage owner, it’s critical that you’re able to deliver recovery assistance to maintain your reputation and trust with customers. Credit monitoring, public relations, regulatory fines, and legal and defense costs add up rapidly, and without the proper insurance coverage, the impact could be devastating.

Data-breach and cyber endorsements as an add-on to your existing package policy don’t fully address all facets of a cyber-threat claim. An experienced insurance agent will recommend a cyber-liability policy that more appropriately protects your business at a reasonable cost.

2. Employment Practices Liability

Employment-related claims are an exposure to which all businesses are vulnerable. This is true whether you hire trusted managers, a third-party management firm or independent contractors. Furthermore, staff turnover isn’t a telling factor in analyzing the exposure for a potential claim.

Employment-practices claims come in all shapes and forms. The most common relate to harassment and discrimination, especially in light of the #MeToo movement. There are other facets that come into play here, too, and without proper coverage, you could be left confused and paying a hefty price for “self-insuring” any incidents.

Though it’s great to have employment practices liability insurance (EPLI) endorsed onto your portfolio package policy, the following situations are typically not covered by endorsement:

• Wage-and-hour claims
• Third-party claims
• Claims related to the American With Disabilities Act (ADA)
• Defense costs outside the limit of liability
• Breach of contract

Most endorsement coverages are sub-limited and restricted as to the breadth of coverage. Instead, a comprehensive, standalone EPLI policy should be secured to ensure you’re fully protected with limited exclusions. In addition, having an insurance broker who’s able to decipher policy limitations and negotiate terms and conditions is critical, considering the vast differences between policy verbiage from one carrier to the next.

3. Pollution Liability

In self-storage, there are many unknowns in relation to items stored by tenants. Pollution-liability coverage is essential to protect your company against unforeseen lawsuits arising out of damage caused by hazardous materials.

On a standard package policy, pollution removal can be covered (as a property coverage), which will help with costs to employ a contractor and dispose of hazardous waste. However, this must be triggered by a covered cause of loss first, such as a fire. It must not be confused with the liability coverage needed to defend against a lawsuit related to damages associated with such a situation.

Not only will a pollution policy assist with legal costs at the time of a claim, it may help with claims that trickle in after the fact, for example, when a related illness or damage is discovered at a later date. Pollution liability as a standard commercial general-liability exclusion is critical to safeguard your business.

4. Directors and Officers Liability

If you’re in a collaboration or joint ownership with another entity or thinking about joining forces for your next development or acquisition, it’s important to secure directors and officers liability insurance right away, or to review your existing policy for coverages and limitations that may apply. Otherwise, depending on how your business is structured, you’re likely exposing executives, officers and members to risk.

It’s important to have a policy specifically crafted for your needs. The following are a few examples of common scenarios that could arise:

• Accusation of breach of partnership terms and agreement
• Misrepresentations used to entice an investor to enter into contract
• Breach of fiduciary duties
• Mismanagement or misconduct
• Failure to deliver on contract agreement conditions

The question is, how well do you really know the people or group with which you’re doing business? Making smart decisions and approaching a knowledgeable insurance broker to assist with a risk review is worth the time and investment to safeguard your enterprise from a potentially devastating legal matter.

5. Hired and Non-Owned Auto Liability

If you have employees, it’s wise to have hired and non-owned auto coverage. This is a line of liability protection if bodily injury or property damage occur as a result of an employee getting into an accident in his personal vehicle during work hours. There are several situations where this may come into play, and it doesn’t matter if driving one’s vehicle is a direct job requirement. The following could put a storage business at risk:

• Making bank deposits
• Offsite meetings of any kind
• Employees who work from home
• An employee visiting or overseeing duties at another owned site
• Outside sales and marketing efforts
• Mystery shopping a competitor
• Picking up or dropping off a package or mail from the post office
• Picking up breakfast or lunch for a staff meeting

Simply running a personal errand on a lunch break could cause an issue with insurance if the employee says he was on his way to or from work when the accident occurred. That would be enough information for the driver’s personal insurance to deny liability and subrogate against your company’s commercial auto insurance.

6. Roof Replacement Costs

Something that requires special attention is the roof-restricting endorsement property underwriters tend to add to commercial insurance policies. Due to the catastrophic nature of wind and hail claims, insurance companies are attempting to avoid paying for costly roof repair or replacement. It’s becoming common for them to add roof-restricting endorsements to their policies, especially in regions prone to wind and hail. It’s important to review the coverage forms on your policy with an agent who can look out for a cosmetic-damage limitation and an ACV (actual cash value) roof clause.

With a cosmetic-damage limitation, for the policy to cover the loss, a structural engineer’s report would be required to prove the roof was actually disengaged. The policy won’t pay if the damage is considered solely cosmetic. Not only would this leave an owner and his investment unprotected, it could cause a major delay in claim-handling.

The ACV clause states the roof replacement would be depreciated for wind claims. Let’s use this alarming example: The industry typically assumes a 40-year life for metal roofs. Therefore, a 10-year-old roof could be depreciated by 25 percent, and a $500,000 roof claim could result in $125,000 out of pocket. There are many factors involved in the calculation including the gauge of the roof, whether it’s galvanized or painted-ribbed, etc., but the gap in coverage could be significant.

Though the insurance industry is moving toward adding these coverage restrictions as common practice, there are still many underwriters allowing for full replacement cost on roofs. Providing information on roof maintenance will arm your agent with the power to negotiate the removal of these restricting forms. A knowledgeable agent will shop the market and explain the options available.

7. Extended Business Income

There are many hazards that could cause a significant loss of income to your self-storage business, so examine your coverage for loss of income. Most industry insurance policies include it, but it’s critical to review the form in detail with your agent to understand the time the insurance company will allow for reimbursement. Many policies include 12 months. When you consider the amount of time it takes to rebuild a facility and rent up to the level of pre-loss occupancy, one year is usually insufficient.

Some policies allow an increased timeframe to recoup lost income. An increased period of restoration will allow more time for reconstruction. More important, an increased period of indemnity provides an extended period to rent up after restoration is complete. It takes a self-storage operation much longer to regain occupancy than most businesses. Adding this coverage could protect your investment for a nominal additional premium.

8. Ordinance or Law Coverage

Insurance policies intend to make their customer whole after a loss. Replacement-cost coverage means the insurance company will repair or replace the damaged property with “like-kind and quality” materials. If a town, city, state or federal code states that upgraded materials or specifications are required to rebuild, a standard policy won’t pay for those; so, it’s important to consider adding ordinance or law coverage.

The older the self-storage facility, the more likely there will be code changes when rebuilding. One example of increased cost-of-construction requirements is ADA compliance. As of March 14, 2012, Title III of the ADA requires specific standards for new or renovated properties. If your facility has substantial damage from a covered cause of loss, your insurance policy could pay for the required updates to be ADA-compliant—if you have sufficient ordinance or law coverage. Typically, your insurance company will offer increased limit options to consider.

The Take-Away

From a risk-management perspective, self-storage is much more involved than it first appears. Under the surface of this ever-changing business are facets that require close examination. The above coverages will play a critical role in your satisfaction throughout a claims situation and should be carefully re-assessed from time to time as your company evolves. An experienced self-storage insurance agent will present these coverages to you as affordable options to protect your investment.

Jessica Lamoureux and Lauren Nicholson are principals for Storage Insurance Brokers, an independent insurance agency providing comprehensive coverages for self-storage owners nationwide. It’s a division of World Insurance Associates LLC, which is licensed in all 50 states and has 27 offices nationwide. For more information, call 860.955.9944; e-mail [email protected]; visit www.storageinsurancebrokers.com.