You didnt have to raise rents, lower expenses or even increase your occupancyyet you made a lot of money over the last three years or so. In fact, it may have been so easy you didnt know it happened. While you were busy tending to other things, the real estate market became incredibly hot, and interest rates hit lows not before seen in your business lifetime.

A Typical Facility
Class	A
Size	40,000 SF
Occupancy	88%
Rent	$8.52/SF
Expenses	33%
Loan to Value	75%
NOI	$200,000

Let your eye be drawn to Table 1, which represents what has happened to a typical storage facility over the last few years. Being very clever, you will note the increase in value and equity this happy circumstance created. Of course, the equity is the number that interests you most, as it represents the net value of your ownership. Notice a whopping 71 percent increase. Its especially nice because you didnt have to do anything different to earn it.

Table 1
	2001	2004	Percent Increase
Cap Rate	10.0	8.5
Value	$2,000,000	$2,353,000	17.7%
Loan	$1,500,000	$1,500,000
Equity	$800,000	$853,000	70.6%
NOI	$200,000	$200,000
Debt Service (25 Years)	$144,000 @ 8.5%	$110,000 @ 5.5%
Cash Flow	$56,000	$90,000	60.7%

Why Did It Happen?

Why did this extraordinary increase in value and equity occur? The really short story is interest rates went down, and real estate investors were willing to pay more for property that would reap better returns than they could get at the bank, in stocks or in bonds. The cap rate generally represents the total return an investor is willing to accept when he buys a real estate asset. When cap rates drop, prices go up. Its just simple math. (For more details on how cap rates work, read Cap RatesA Mystery Unveiled, in the November 2004 issue of Inside Self-Storage.) It has also helped that, for the first time, self-storage was considered a full-fledged, certified real estate product by major buyers and lenders.

What If You Refinanced?

The good news never seems to end. Not only were things even better if you refinanced, you had a very pleasant choice to make. First, if you didnt want to increase your loan amount, your cash flow would have gone up 61 percent (as you can see from our example). That is sure easier than raising rents. However, if you maximized the loan, you could have taken out $265,000 in casha little more than half of your original equityand still increased your cash flow by $2,000. Oh, the wonders of financial leverage!

So Whats the Bad News?

Interest rates have started to climb, and Mr. Greenspan seems committed to continuing their upward movement while his hand is on the lever. At the moment, there are still many eager buyers around. But as interest rates rise, they simply wont be able to pay as much for the same dollar of income, and facility prices will fall. There are also persistent rumors about overbuilding, though theres probably quite a bit of truth to them. In the long run (maybe not so long), the law of gravity still applies: What goes up must come down. The bad news is the mathematical phenomenon that helped increase values works the same wayand in the same magnitudein reverse.

What Can You Do?

If you plan to keep your facility forever, refinance now. If you arent absolutely sure you want keep it for at least five more years, consider selling. If your facility is not state-of-the-art or in a very good location, you have competition coming on board, your rates and occupancy are not increasing, or you have personal issues that might require you to let go of your business, now is the time to get serious about selling. Dont let your valuation go into reverse. Remember, you had no control when it went up, and you wont have any control when it goes down. Dont be caught napping.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

When self-storage operators become complacent in their operations, it has a negative impact on their business. Everything is going well, and then occupancies start to decline. When asked what went wrong, most of these operators claim they dont know. This is a common result of getting too comfortable at a certain plateau of successof putting the operation on cruise control, so to speak. Sometimes, when youre just cruising along, the competition passes you by.

The storage industry has undergone great change over the past couple of decades, but none to match the amount of transformation weve witnessed in the past few years. Increased competition has forced operators to step up their business strategies and focus more on sales. Unfortunately, their sales programs are often overlooked.

While most operators use an informal sales presentation or even the services of a mystery-shopping company to enhance their efforts, this often isnt enough to set them apart from competitors. What they lack is continual tracking and improvement coupled with consistent staff training and discipline. This is what will put employees at the top of their game and allow them to positively impact a facilitys bottom line.

Prospects want to be educated on how to use self-storage and what to look for when choosing a facility. Product knowledge is service if presented effectively in the sales presentation. Even though convenience often ranks at the top of the list of customers criteria, perceived trust runs a close second. Trust is established when a staff member convinces a prospect your business is the best choice. If your facilitys value is properly built during the presentation, trust will supersede convenience every time.

Getting Somewhere

It shocks me how frequently I hear operators say something like, Im 96 percent occupied, so I dont really need to spend any more time, money or energy building my business. Many of them are the low-price providers in their market. Not only do they leave a lot of income on the table, they fail to maximize the value of their real estate investments. They have developed the attitude that they have arrived, and yet theyre going nowhere.

A better sales presentation means more sales. More sales mean more profit. Dont put on the brakes! Success is a journey, not a destination. You only reach higher levels by seizing every opportunity that comes your way. For example, establish a practice of implementing consistent rate increases for new and existing customers. Even if occupancy slightly declines as a result, it will be offset by higher revenue. You can even become the price leader in your market by continually improving your facility value and operational effectiveness.

People Too

Effecting continual improvement in your sales process means consistent development of your sales staff as well. You might consider hosting workshops to provide self-storage training and provide employees with valuable sales tools. Of course, any instruction must be reinforced with regular follow-up, so make sure you have a system in place to measure the results of your teams efforts.

A mystery-shopping service is an excellent means of tracking sales success. A mystery shopper will call or visit the facility, record conversations with employees, evaluate performance and provide feedback. Use of a shopper will help you pinpoint problem areas in your presentation and create an atmosphere of consistent vigilance for employees. This is a great way to break their bad habits and show them the direction you want them to go.

Regardless which measurement method you employ, the important thing is to help your staff make consistent, positive adjustments to their sales skills. Sometimes role-playing, in which employees take turns being the customer and the sales rep, is a helpful tool in finessing their presentation. Providing concrete, obtainable goals is also advantageous.

The self-storage industry is becoming increasingly competitive. If you adopt a policy of continual improvement, your operation will grow to new heights. You can gain an edge by becoming the storage expert in the eyes of customers. All it takes is a consistent and concerted effort to improve the sales performance of your staff.

Brad North is the founder of Advantage Business Consulting, which specializes in onsite sales, marketing, feasibility and operational training for the self-storage industry. He has produced two live videos and a workbook titled Maximizing Your Sales and Marketing Program, which can help managers improve their sales and marketing efforts. Mr. North also launched A TelePro, a mystery-shopping service that assists in educating, evaluating and improving the phone-sales performance of self-storage professionals. For more information, call 513.229.0400; visit www.advantagebusinessconsulting.com.

Jacks store always did well. There were down times, like during the dot-com bust; but four years out of five, for the 40 years Jack ran the business, it was in the black.

When Jack hit age 65, he wanted to retire. His wife wanted to sell the house and move into a condo closer to the beach and their kids, living down South. The business had made money over the past few years, but barely. Profits had covered the couples living expenses but given them only a small savings. A large chain had offered to buy the store 10 years ago when returns were good, but lately interested buyers had dwindled. The few offers coming in only covered a few years retirement. It looked like Jack would have to keep operating a couple more years or take a loss (including his condo).

Phil, on the other hand, ran a nursery. His business, like Jacks, experienced ups and downs and some years of marginal profit. But his profession, being focused as it was on growth, gave him a unique perspective on moneywhich may have saved his retirement. Just as he grew many varieties of flowers and plants, he believed he should grow his money in diverse ways. During each year the business experienced profit, Phil invested half of it. He didnt understand the stock market, but a good friend had referred him to a financial advisor. Over the years, he invested in mutual funds.

A Team of Experts

Why mutual funds? Why not a portfolio of stocks and bonds Phil could buy and sell over time? He and his wife, a schoolteacher, were rarely available to make quick decisions regarding the rise and fall of the market, especially during business hours. Instead, the advisor recommended mutual funds, which are managed by groups of experts on a clients behalf.

This financial team stays on top of the performance of the stock and money markets, as well as the opening and closing of new financial markets around the world. It also keeps track of which companies are doing what, their future plans, and changes in company leadership. Investing in mutual funds puts professionals at your fingertips. The role of the advisor is to inform you which funds have been doing well, when theres a major change in a funds management team, or when a new fund becomes available.

So Phil bought a portfolio of two or three mutual funds and watched his investments grow. Each time his business did well, some money was invested in those funds, all of which behaved slightly different. One gave a slow, safe, but steady income. Another was more variable, but though it fluctuated with the market, its overall value grew nicely.

Phil could have closed his business, even declared it bankrupt, and still retired comfortably. Since he didnt have to take from the business to cover his immediate living expenses, he was able to allow his nephew to buy into the company. If the business remained profitable, the nephew would eventually buy Phil out.

When it comes to your retirement, dont be a Jack. Sometimes the business aint enough! Mutual funds can allow you to retire the way you want to, with money left over.

Pieter Kark was educated in England and Massachusetts and has worked as a teacher for nearly 40 years. He has written extensively on medical, scientific and ethical matters and currently writes creative nonfiction. Last winter, he closed his neurology practice to move to San Jose, Calif., and collaborate on a book about healthcare with his wife. He is also a licensed Avatar Master (www.avatarepc.com). Mr. Kark can be reached at [email protected].

Ken Yap is a registered representative at World Group Securities and an associate at World Financial Group. He shows self-storage business owners and professionals how to potentially pay less taxes, plan for retirement with tax-deductible dollars, transfer ownerships, and protect the future of their companies. For more information, call 408.977.3408; e-mail [email protected].

This column addresses something of a controversial issue in self-storage: master-key lock systems. While Im not in favor of these systems, the choice to use them is every operators prerogative. I only suggest you carefully weigh the pros and cons.

With a master-key system, an operator purchases locks for his entire facility, installing them on all the doors or giving them to tenants at the time of rental. Customers are not permitted to use their own locks, and the operator maintains a master key that unlocks all units. There are other types of systems in which the master key only disables or overlocks tenants locks. They are not part of the following discussion.

Two Types of Risk

There are fundamental risks involved in using a master-key system. First, you create a bailment over your tenants property. In some states, a bailment can represent a deviation from the requirements of the local self-storage statute. In all states, it implies what is called an ordinary duty of care, meaning you have an obligation to protect tenants goods. This is not the case when you have no master key or regular access to units.

If you choose to employ a master-key system, the best way to avoid creating a bailment is to include a clause in your lease that disclaims it; however, this may not be effective in a court of law. You can compare this to a valet-parking service. Even though there is language on the back of the valet ticket that says the operator is not liable for damage to your car, you would certainly expect the company to pay for damage that occurred if its employees did not demonstrate ordinary care for your vehicle, i.e., speeding down the parking lot and causing an accident.

The same principle could apply in self-storage under a master-key system. Though your lease language denies responsibility, you may be assuming a duty to ensure the safety, security and well-being of tenants stored property. For example, if your facility experiences an infestation of some sort of pest, you may be expected to inspect all units for intrusion. To not act could be construed as a failure to demonstrate ordinary care. Obviously, if you do not retain a master key, you are never expected to enter a tenants unit unless there is a dangerous condition that forces you to do so.

The second risk in retaining a master key is it opens you to liability for losses claimed by tenants, who might occasionally declare they are missing stored items. If there is no sign of forced entry or vandalism, they may look to you or your employees as suspects of alleged theftand the total of the loss can be quite extensive if you dont place limits on what can be stored in your rental agreement. While some of these claims will be false, operating a master-key system invites the possibility of criminal activity on behalf of dishonest employees.

One solution to diffuse the potential for litigation involving wrongful entry is to install individual door alarms on each unit. Records maintained by the computer database would show who accessed the unit and when. Of course, if you have entered a unit during the period when the theft allegedly occurred, these records can act as a proverbial smoking gun. Further, records of access must be retained for a long time, as claims often arent made until a tenant moves out. Seven years is the recommended length of time to keep these files.

On the Positive Side

There are also advantages to a master-key system. Many operators believe publicizing the use of such a system discourages tenants from storing inappropriate or illegal goods for fear of being caught. In addition, a master-key system makes it easier for officials to investigate potential dangers, such as fire or chemical odors. Grinding or drilling a lock could cause a spark, which can be fatal in the presence of flammable substances. Having a master key in this instance would reduce the risk of fire or explosion.

A master-key system also provides a marketing advantage for those operators who wish to accept deliveries on behalf of their tenants. Commercial customers, such as pharmaceutical reps, often find it advantageous to store at a facility that has access for the delivery of packages, mail or business equipment. In this situation, the tenant generally gives the operator authorization to enter his unit for such purposes or to investigate potential damage to inventory. Some operators have explored the option of a waiver that would relinquish them of any associated liability.

Finally, operators like that a master key-system allows them to perform routine facility maintenance as needed, reducing tenant complaints about problems with their units. For example, if a tenant calls the answering service and says his door is not functioning properly or theres a leak in his roof, an operator generally finds it preferable to open the unit with his key rather than cut the lock and replace it or wait for the tenant to visit.

One final note: Among the questions some insurance carriers ask an operator when preparing a quote for a self-storage policy is whether you use a master-key system. In some circumstances, it is considered a liability and may cause an increase in your rates. This could also affect a policy renewal, so make sure you consult your provider before switching to a master-key system.

In the end, the choice to use a master-key system is a business decision, not a legal one. The question is whether you are prepared to accept the additional risks and potential liability exposure in exchange for the convenience and customer-service benefits. If you are, then a master-key system may be an option for you.

Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to

Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151.

1. Evaluate your environment.
2. Form must follow function.
3. Build it right.

Rule 1: Evaluate Your Environment

Every state has building regulations to address major environmental factors: wind load, snow load, seismic activity, flood plains, etc. When building a storage site with maintenance in mind, you also need to consider smaller ecological issues, such as trees that shed leaves and twigs on roofs, anticipated rain volume, debris that could blow onto a site from adjacent properties, frost depth, options for snow removal (salt or no salt), humidity, temperature ranges, and a host of other factors. View the facilitys surroundings, assessing how these items can affect operation of your business.

Moisture is the No. 1 enemy of frugal maintenance, whether in the form of rainwater that leaks into units and electrical fixtures, ground swells that crack the asphalt and concrete, or freezing and expansive soils along building foundations. Controlling water-related damage is the most important factor in minimizing the expenses of facility upkeep. What can be done? Lets start at the top.

Roofs.

The pitch of the roof needs to be adequate to shed the volume of water likely to fall on the surface at any given time1/4 inch per linear foot is the minimum. Dont plan for average rainfall; anticipate storms and high winds. In buildings with metal roofs, rolled step-downs are less likely to leak than vertical ones. Vertical step-downs require rake trim, flashings and angles that must be screwed, taped, caulked and sealed. Rolled step-downs provide a continuous flow to the roof line.

Using a good sealant on roof fastenings and penetrations is critical. There are many options, but butyl rubber caulk is tried and true. Dont use neoprene washers, as they deteriorate in ultraviolet light. EDPM rubber washers and high-quality screws are essential to extending the life of the roof.

Hire only contractors experienced with the type of roof being installed. Excess torque on screws with washers can strip holes in eave struts or purlins and stress or crack the washer seal, which is an open invitation to water. Confirm the quantity and placement of clips and screws being used with the installer. If panels are insufficiently fastened, they can move and deflect, especially in windy weather.

Never leave debris of any kind on a roof, particularly metal roofs. The construction crew should sweep the roof clean after construction to remove any small fragments. Metal bits left on metal roofing (yes, even galvanized) will eventually rust.

Gutters and Downspouts.

If debris is likely to blow onto the roof, use covered gutters or establish a program for regular gutter maintenance. The number of downspouts must be sufficient to accommodate the volume of water. Clogged gutters and inadequate downspouts create pooling water, increasing the potential for leaks. Its essential that the gutter-to-downspout attachment is cut out fully, without obstruction, so debris doesnt collect at the junction. All joints should be screwed and caulked, as they are the most likely candidates for leaks over time. Make sure the joints are not above light fixtures. To prevent erosion of landscaping or asphalt, downspouts should empty into a splash guard.

Insulation.

Ceiling insulation must be properly sealed against moisture at the edge of the roof. There are products available to accomplish this, but a knowledgeable construction crew can fold the insulations exterior cover under the roof before screwing it into place, providing an adequate moisture barrier. If moisture comes in contact with insulation, it creates a wicking effect, drawing even more water. This water will pool in the insulation above a unit.

Block.

Block columns absorb moisture, which will cause efflorescence (salt stains) and, in serious cases, seepage into units. Block also deteriorates from salt used in snow removal. To prevent these problems, block must be sealed and painted with a material specifically designed to fill the pin holes that are naturally a part of its composition. It must also be sufficiently covered and sealed at the roof line.

Foundations. Different materials expand and contract at different rates in response to heat and cold. Because a driveway and building will respond to temperatures differently, spaces can be created between them, leaving an entry point for water. To lengthen the life of drives and floors, use pliable sealants to prevent moisture from getting into cracks and beneath structures. Each and every juncture should be sealed to the extent possible.

Rule 2: Form Must Follow Function

Its fine to make things look nice, but dont sacrifice function for aesthetics. To avoid unnecessary building maintenance and keep safety a priority, design your facility with practical use in mind.

Drives.

For example, the fire marshal may only require a drive width of 20 feet; but if one customer is parked and unpacking, and another is trying to get around him in a moving truck, youve got potential damage on your hands. Strategically placed bollards can help, but a wider drive is the better solution. Wide drives also reduce stress on the asphalt from sharp turning radiuses. If large trucks will access the property, use concrete at turning points, as its more durable over the long term. Concrete pads should also be used under dumpsters.

All driveways must be sloped to shed water away from buildings without creating torrents (the necessary grade can be determined by your civil engineer). If drives are flush with unit doors, water will flow freely into units every time it rains or snow melts. Brick lugs around buildings, particularly in front of doors, prevent water from flowing inside. Landscaping should always stop below finished floor elevations and drain away from buildings as well.

Electrical.

Calculate the minimum lighting youll need for the facility, including fixture intensity and placement. This will save on construction costs and operating expenses. As lights determine a good portion of the electrical installation, keep other needs in mind. For example, installing restricted-access electrical outlets every 400 feet will greatly enhance employees ability to handle facility cleaning and maintenance. (Creating water access on every floor will help in this area, too.)

Avoid using wall-mounted lights, as they are easily smashed when tenants move their larger items through hallways. Overhead lighting provides better illumination, costs less to operate and is less likely to be damaged. Make sure ballasts will accommodate long-life fixtures to cut down on replacement.

Modest illumination is usually sufficient for drivesits not necessary to use 150- watt bulbs at 50-foot intervals, and high-wattage bulbs use more electricity and burn out faster. The trend in most municipalities is to require dark-sky lighting, meaning outdoor lights can only shine downward. If theres any chance the facility will be expanded in the future, consider installing dark-sky lighting even if it isnt currently required. Otherwise, you could face an expensive retrofit.

Rule 3: Build It Right

Choose all building components and systems based on your particular site, not just the quality of the product. Your contractor should provide a warranty on the construction of your buildings. In addition, make sure you get warranties for all your individual products, as these are generally for longer periods. For example, the contractor may provide a one-year warranty on general construction, but there may be a five- or 10-year warranty on your HVAC system, and a 20- or 30-year warrant on your roof. (Factory-produced Galvalume carries a 20-year warranty, but it may not extend to product rolled on site. Check with the manufacturer.)

Your contractor should also give you specifications regarding maintenance and replacement parts for all of your primary systems. Never substitute less-expensive parts without first checking with the contractor or manufacturer. For instance, fluorescent light ballasts are made to handle a particular kind of bulb and wattage. Using the wrong one will significantly shorten the life of the ballast. In the end, this costs much more than what you could save by purchasing discount replacement bulbs.

Finally, plan and budget for ongoing maintenance. Examine every facet of the site that may require upkeep, and establish a regular schedule. When left to chance, maintenance is often left undone, and theres more to it than meets the eye. To preserve a facilitys integrity, preparations must be made from day one of construction. You can build preservation into your site, maximizing its usefulness and longevity.

Donna May is president of Cross Metal Buildings, a member of The Parham Cos., which provides high-quality commercial, agricultural and self-storage buildings throughout the South and specializes in assisting first-time builders. May is the former president of Joshua Management Co. and a commercial real estate broker. She has been a partner in 11 startup storage projects totaling more than 703,500 square feet. For information, call 210.477.1260; e-mail [email protected]; visit www.crossmetalbuildings.com.

A metal roof system can be through-fastened or standing seam, referring to the method used to attach it to a building. With a through-fastened roof, fasteners are installed through the metal panels, holding them to the structural supports and the laps. With a standing-seam roof, concealed clips and roll-locked seams are used to secure the panels.

Preventive Maintenance

Periodic inspection and maintenance of your roofing system is the key to maximizing its service life and preventing early failure. Depending on your location, inspections should be conducted between two and four times per year and after any major storm. Important inspection points include:

Supporting Structures:

Look for water stains on the building exterior, which may suggest problems with flashings or walls. Check the underside of the roof assembly for water stains on insulation, ceilings, piping, ducts and structural members to identify potential leaks. Also check the underside of the deck if exposed. Noting problem areas on a diagram will help you identify corresponding defective areas on the roof.

Fastener Condition:

Check for missing, loose or deteriorated neoprene fasteners. Expansion and contraction of the metal panels due to temperature changes or wind-induced movement can enlarge the fastener holes. In through-fastened systems, this movement often causes the holes to become slotted, compromising the roofs watertight seal.

Sealant Condition:

Sealant exposed at terminations and flashings will eventually crack or shrink and need replacement. Unanticipated component movement, especially in older systems, can also result in sealant failure.

Corrosion of Panels:

Contaminant exhaust, ponding water and condensation drainage from HVAC units can corrode metal panels. Debris accumulating on the roof, especially metal shavings, can accelerate corrosion and should be removed regularly. Note: Be especially careful when walking over a metal roof that has been coated, as corrosion can sometimes hide beneath the coating, creating a safety hazard.

Interior Gutters:

Gutters installed where two sloping roof sections come together are referred to as interior gutters (as opposed to gutters on the exterior perimeter of a building). Unless interior gutters are constructed of stainless steel with welded seams or fully lined with heat-welded thermoplastic membranes, leaks can be a continuing headache. Differential movement of two roof sections tends to break soldered or caulked seams. Again, accumulation of debris can cause problems by plugging drains and causing the gutter to overflow. Undersized gutters or an inadequate number of drains can also contribute to overflow.

Wind Damage:

Look for damaged or missing metal flashings at the roof perimeter. After major storms, walk the perimeter areas to ensure roof panels are secure, checking for deformed or uplifted panels. Failure of fasteners or concealed clips can cause roof sections to float even though seams still appear to be intact.

Roof Penetrations: Rooftop penetrations will be a source of leaks if not properly flashed. Improper flashing installation may be the result of using unskilled contractors or taking budget short-cuts. Drainage and structural movement must be considered when flashing is installed.

Damage to Panels:

Foot traffic can damage the watertight integrity of laps and seals at fastener locations. In some cases, it can even crack the light-gauge metal, allowing moisture infiltration. Workers should avoid the raised portion of the panels and walk on the flat surfaces, preferably close to or over structural members. If there is significant roof traffic, consider installing a walkway system. Elevated metal walkway assemblies are available to eliminate panel deflection.

Deflection:

Another issue of which to be aware is the practice of attaching equipment to the purlins below the roof. If design loads are not taken into account, the purlins can deflect, causing the roof panels to redirect. This will result in broken seals at seams and laps as well as ponding water. If design loads are significantly exceeded, catastrophic structural failure could occur.

Roof Replacement

If your roof is at the end of its service life or repairs are no longer cost-effective, its time to decide between a new roof and a retrofit application. You are faced with the task of identifying possible solutions from scores of manufacturers that provide metal roofing, single-ply coating and spray-on foam systems. Here are some questions to help you narrow the options:

• For what is the building used? How does its current or projected use impact the roof system?
• What was the cause of original roof systems failure?
• What is the extent and nature of previous roof repairs?
• What are the building code and insurance requirements of a new system?
• Is additional insulation required or desirable?
• Is a vapor barrier required?
• What weight/structural limitations apply?
• What are the buildings service-life expectations or requirements? For example, if the building will be demolished or replaced in five years, it doesnt make sense to install a 20-year roof system.
• Will new rooftop units or other penetrations be added, and how will that affect the requirements for roof traffic?
• Is resistance to chemical emissions or contaminants a requirement of the new system?
• Is the existing drainage system adequate?
• What budget or scheduling constraints affect the project?

Re-Roofing Options

Coatings or Liquid-Applied Systems.

Coating systems will address surface corrosion and improve the appearance of the roof. The reflectivity of a white coating can help reduce thermal heat gain, resulting in lower interior temperatures. If the existing roof is sound, there is minimal panel movement (or the movement can be controlled), and loose fasteners can be tightened or replaced, a liquid-applied system can correct leaks at laps and fasteners.

There is a variety of coating systems with different properties and costs. The most common systems use elastomeric coatings. The application process starts with a thorough cleaning. Rusted panels are treated with a primer and damaged panels are replaced. Special flashing materials, such as self-adhering tapes and reinforcing fabrics, are applied at laps and flashings, and exposed fasteners are sealed. The coating is then applied in a number of coats to achieve the required thickness. Many coating manufacturers offer limited warranties up to 10 years, depending on system details and coating thickness.

Polyurethane Foam Re-Cover.

This system is not typically used over architectural roof systems. Sprayed Polyurethane Foam (SPUF) can be applied over an existing system if the roof is of sufficient gauge and otherwise meets the manufacturers requirements. Since the SPUF system is somewhat rigid, it doesnt accommodate movement very well, but it has the distinct advantage of adding significant R-value.

This virtually eliminates damage from expansion and contraction of the roofing surface, since the metal panels are insulated from daily temperature changes. In addition, its not necessary to apply reinforcing fabric over the laps and fasteners.

The application process is similar to that of coatings. Damaged panels must be replaced. Surface corrosion must be treated or primed to ensure good adhesion of the foam. The foam is then spray-applied, generally in several passes, to the desired thickness (at least 1 inch). Finally, a coating is required to protect the SPUF from ultraviolet damage. If desired, granules can be set in the coating before it dries to improve resistance to foot traffic and provide additional traction.

Single-Ply Re-Cover.

Single-ply systems are frequently used to recover metal roofs. You begin by replacing damaged roof panels, then insulation is cut to size and installed on the flat-panel areas to match the height of the raised panel ribs. A second layer of rigid board insulation (preferably a moisture-resistant insulation such as polyisocyanurate) is mechanically attached over the entire roof surface. The insulation provides additional R-value and a stable substrate.

Finally, a single-ply roofing system is fully adhered or mechanically attached. Manufacturers offer specifications for installing their systems over metal roofing. As most systems consist of light-gauge metal panels, its imperative the correct type and frequency of fasteners is used. Factory Mutual Global, a commercial-property insurance and risk-management company, recommends that roof fasteners actually engage the underlying structural members. If aesthetics are an issue, some manufacturers offer a ribbed system that is similar in appearance to architectural metal roofs.

Metal Re-Cover.

A new metal roof can be installed over an existing low-slope, metal roof. In this case, the existing building must be sufficient to withstand the added weight. Corroded panels and fasteners from the existing system do not generally require replacement, though its a good idea to install fiberglass blanket insulation between the two systems. This option can provide an excellent new roof while minimizing the labor associated with removal or repair of the existing one. Disruption of building operations is also reduced. Systems with roll-locked seams are preferred, as they create fewer problems associated with exposed fasteners and neoprene gaskets.

Replacement With a New Metal System.

In some cases, its necessary to replace the existing roof with an entirely new system. Perhaps the existing structural supports are corroded, many new roof penetrations are needed, or other conditions exist that make it expensive or undesirable to leave the existing roof in place.

Choosing a Contractor

When deciding which re-roofing option is best for you, there are many factors to consider. One of the most important is the selection of a roofing contractor. The following questions may help you choose:

• Has the contractor spent time on your roof, examining and verifying existing conditions?
• Has the contractor asked questions to understand how a roofing project might impact your business?
• Does the contractor have the training, knowledge and experience to make recommendations appropriate for the existing structure?
• Does the contractors crew have the supervision, training, skills and knowledge to safely and effectively complete the project?
• Does the contractor have a safety plan that identifies potential risks to you, your employees and your facility, and includes countermeasures to reduce them?
• Will the contractor leave your facility and grounds in the same condition in which they were found?
• Does the contractor have a clearly defined process for making sure the project goes smoothly, i.e., holding preconstruction meetings, addressing issues, identifying potential risks, developing a schedule, identifying staging/access areas, and establishing a clear line of communication?
• Is the contractor responsible and trustworthy? Will he be there in the future to assist with the long-term care of your roof?

These are questions only you and your company can answer. If you already have a relationship with a roofing contractor you trust, you are well on your way to roofing peace of mind.

Greg Thirnbeck is the vice president of contract administration for D. C. Taylor Co., a Cedar Rapids, Iowa-based company with more than 50 years of commercial and industrial roofing experience. Mr. Thirnbeck is responsible for reviewing contract terms and conditions and assisting with risk-management issues. In addition, he helps national clients make informed roofing-related decisions, including preventive maintenance to roof-management programs. He is a Registered Roof Consultant and a member of the Roof Consultants Institute, National Roofing Legal Resource Center and Grain Elevator and Processing Association. D.C. Taylor delivers expert roofing and OmegaSTARR roof-retention services to keep facilities protected and secure. It has more than 60 service and roofing crews and five service areas: Atlanta; Cedar Rapids, Iowa; Chicago; Concord, Calif.; and Phoenix. The company has been ranked among the nations largest industrial roofing contractors for more than 20 years. For more information, visit www.dctaylorco.com.

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Roof Maintenance Made Easy

By Teresa Sedmak, President, Everbrite Inc.

Your roof gets more abuse from the elements than any other part of your facility. Preventive maintenance will help you save money by giving your roof a longer service life. Here are some simple maintenance tips:

• Regularly clean all debris from the surface of the roof. This includes refuse that has gathered behind HVAC units, pipes and pitch pans, and any other roof penetrations.
• Replace broken or bent gutters, metal trim or downspouts. This will not only enhance the look of the facility but increase the life of the roof.
• Excess debris has a tendency to hold water, and broken gutters can also trap water. Do not allow water to pool on your roof under any circumstances. Not only does it increase the weight load on the roof, it contributes to deterioration and other problems, such as leaks.

Xtra Space Self Storage in Montgomeryville, Pa., learned this lesson. Opened in 1989, the site offered standard drive-up storage. In 1999, when the market was flooded with new shopping centers, homes and pharmaceutical companies, owner David McDowell noticed greater demand for smaller units and climate control. The following year, he contacted an industry building supplier to see what could be done to upgrade his business. They worked together to make key improvements:

• The antiquated screw-down roof was replaced with an insulated standing-seam roof.
• Insulated divider walls were added between exterior and interior units to allow for the addition of 5,000 feet of climate control.
• Dummy doors were added to outside walls to attract the attention of the estimated 35,000 cars that pass the facility every day.

The entire construction process took about three weeks, and only a few tenants were temporarily inconvenienced with having to move their goods. The climate-controlled units are now 97 percent occupied and, according to McDowell, the facility has enjoyed a 30 percent increase in revenue. The renovation allowed Xtra Space to evolve with the market, meeting consumer demand and remaining competitive.

Mr. Storage

Not far away, Mr. Storage of Philadelphia faced a similar scenario. The local market had softened, yielding lower occupancies and making competition fierce. The facilitys owners watched as other developers cloned their business plan, adding important upgrades.

The only way to swim with the sharks was to sharpen the product, says Michael Doyle, vice president of operations. When we found out there was going to be a 50,000-square-foot climate-controlled facility a block away, we realized we didnt have any choice but to renovate. Confined by a small site, we had to convert. The solution was to insulate a section of the building, adding 35 climate-control units.

Site renovation doesnt have to be expensive, but it should be well-planned with the unique attributes of the facility in mind. Upgrades are an easy way to add value to a property without starting from scratch. As the self-storage product (and its customers) becomes more sophisticated, the traditional older facility will not survive without improvements. Renovating may be the smartest thing youve done since opening.

Kevin Ford leads the renovation division of Miller Building Systems Inc., which designs, supplies and installs a full line of pre-engineered metal buildings. The company has specialized in East Coast construction since 1976. For more information, call 800.323.6464; e-mail [email protected]; visit www.millerbldgs.com.

I was raised

in a well-oiled household in which policies were administered with authority and observed with diligence. Shoes were not worn in the house. Feet did not rest on the furniture. Under-beds were kept vacant. Chores were efficiently executedand reviewed. Rooms were scrutinized daily for cleanliness and organization. We sulked in the shadow of constant censure, but we did our best to comply. Such was life in the House of Anal Retentive!

Now, weve all heard the expression, The apple doesnt fall far from the tree. How many of us have vowed, at one point or another, not to become our parents? We make the assertion in an effort to comfort ourselves, repeating it in our minds like a mantra. But eventually, we catch ourselves engaged in one of our parents maddening habits, and the thin mask of denial disintegrates like papyrus in vinegar.

For me, the epiphany came one afternoon while straightening papers in my husbands office (an inclination he finds most distasteful). Was this me aligning the stapler with the tape dispenser? Was I actually stacking envelopes according to size and lining them with the edge of the desk? And why was it grating on me to see scraps of paper stuffed in the cup with the writing utensils? It was official: I had fallen from the Tree of Adulthood and landed firmly on the Land of Inevitableslightly bruised, but still shiny as ever.

After some reflection, Ive decided Im OK with it. While my need to have things just so incites the rolling of many an eye from friends, family and co-workers, there are worse things than being scrupulous, organized and industrious. These traits can even come in handy.

Take, for example, self-storage and the issue of facility maintenance. As the following articles avow, a kempt, attractive, smoothly operating storage site attracts more business and keeps customers for longer periods. The challenge is developing and implementing a plan for upkeep and encouraging employees to adhere to it. Enforcing guidelines is always tricky territory. (I suggest avoiding such harsh tactics as withholding dessert and limiting TV time.) A positive approach is to create checklists for daily, weekly, monthly and annual tasks that staff will find easy to follow. And it doesnt hurt to have a manager with a touch of OCD!

In fact, anyone disinterested in preserving the physical integrity and long-term success of the business should be reconsidered. If they wont maintain your buildings and grounds, how can you entrust them with sustaining profitable relationships with customers and the surrounding business community? With maintenance, there is always more than appearances on the line.

As a brief aside, an important holiday passed on June 19th, and Id like to say Happy Fathers Day to my dad, the meticulous tree, and all the other patriarchs out there. For all my protestations and complaints, Ive only ever wanted to be the apple of my fathers eye.

You should consider pursuing that same estimable post for your facility. That is, be the apple of your communitys eye. Its easily achieved: Keep a well-maintained, aesthetic property. Take pride in your buildings, doors, roofs, grounds, etc. Be the fussy fruit, and shine away.

Best wishes,
 
Teri L. Lanza
Editorial Director
[email protected]

How many times have you said, I give up. I dont understand these charges on my credit-card service statement. If youre like the typical business owner, more times than you care to remember. In fact, many merchants have stopped trying to understand what theyre really being charged. Dont give up! Theres a wealth of information in your statement if you know how to interpret it. It can give you insight to fraud, compliance, cost and performance. You can also figure out if youre being charged according to the conditions of your contract or if additional fees are being applied.

Your credit-card statement can be received by mail or electronically. Depending on the size of the account, it can be sent to you daily, weekly or monthly. Though every service providers report will look different, it will include five key areas you should monitor:

1. Plan summary
2. Transaction activity
3. Downgrades
4. Fees
5. Net settlement

The Plan Summary

On the first page of your statement, youll find your business name and billing address, the name and contact information of your merchant-service provider, your merchant ID number (MID), and the dates of business activity the statement is reporting. Next is the Plan Summary, presented as columns arranged from left to right. The summary will usually include the credit-card type, transaction count, total dollars billed, credit item count, credit amount, and a few other key figures. (There is no typical orderit varies from provider to provider.)

Card type refers to MasterCard, Visa, American Express, Discover, JCB or others. Those listed on your statement reflect the types you accepted during the given period. If you see a card listed that you dont accept at your facility, or you dont see a card type you know you accepted from a customer, contact your service provider immediately.

Transaction count refers to the number of items you billed for each card type. If a number looks off, again, contact your service providerfor example, your statement says you processed 1,000 Visa transactions, but you believe it to be closer to 100. The discrepancy could be due to any number of reasons, including system error, a mismatch between the calendar month and reporting cycle, unusual patterns of activity, or fraud.

Total dollars billed represents the total amount billed on each card type. Credit item count represents the number of items for which credit was awarded. Credit amount represents the amount of credit issued on each card type. You need to pay very close attention to the credit item count and amount, as these numbers can be a tip off to potential fraud. You should have a sound grasp of what your typical monthly item and dollar amounts are for the sake of comparison.

Transaction Activity

Following the plan summary, there will generally be a section that outlines transaction activity. In most cases, it is based on daily activity, but it might vary depending on how often you batch your transactions. For example, some companies process multiple batch settlements in a single day, while others combine batches over weekends or holidays. This can lead to a lot of confusion when you attempt to reconcile your credit-card statement against a bank statement. To add to the confusion, the credit-card statement cycle might not adhere to a calendar month or to the same cycle as your bank.

Downgrades

When it comes to credit-card statements, the area of greatest misunderstanding is the downgrade or additional charges area. Ironically, its also the area that provides the most information regarding system policy, practice and procedure, and potential sources of fraud.

Technically, a downgrade is a nonqualified transaction. Downgrades or additional charges are applied to any transaction that lacks any of the requirements necessary to obtain the best, or qualified, rate. These qualifications are outlined in your contract with the service provider. For the typical self-storage operator, the contract is executed as a retail relationship. This means the best processing rate is given only under very specific circumstances:

• The card must be present.
• The card must be electronically swiped.
• The card must be a consumer card.
• The presenter of the card must be the authorized cardholder.
• The transaction must be settled (batched) within a 24- to 48-hour period of the authorization.

If the self-storage operator uses the same MID for retail and recurrent billing practices and the account is based on a retail relationship, every transaction generated from the recurrent-billing function will be downgraded. The operator will pay a significant surchargewhich might be equal to or greater than the stated best rateon each transaction. This puts him out of compliance with his contract, reduces his protection from charge-backs and reversals, and opens him up to fines from the credit associations.

Some of the primary reasons for downgrades include:

• Accepting the wrong type of credit card, i.e., business vs. consumer
• Using the wrong operation platform, i.e., retail, Internet or MOTO (mail order/telephone order)
• Failure to adhere to policy, procedure or practice, i.e., swiping vs. keying card numbers

As a merchant, you cant control the type of card your customer presents. However, by paying attention to the types of cards your customers use before you negotiate the contract with your service provider, you can make sure youre covered for the cards you most frequently accept.

Its important to understand which operating platform is best for you as well. For example, if the majority your transactions are recurrent, it would be best to opt for a MOTO platform into your contract. Or you can choose to have multiple MIDs, which will allow you to use more than one platform type.

Finally, pay careful attention to the three Ps (policy, practice and procedure), or you could face steep charges. For example, if your contract stipulates that you should batch your transactions within a certain time frame, you must do so, or you will be considered late, and your transactions will be downgraded. The solution is to implement an auto-batch function or enforce strict policies at your facility that dictate when batching should be done.

While downgrades sound like a nightmare, monitoring them can give you insight to potential fraud activity. This is a complex issue and should be addressed by a competent expert; however, you can keep an eye out for red flags by tracking the type and percentage of downgrades on your statement. Changes in an established pattern may suggest fraud and should be carefully investigated.

Fees

The next part of your statement will address additional fees. There are more than 60 fee categories that can be applied to an individual statement. Examples include monthly statement fees, penny costs for authorization, settlement and batch fees, equipment fees, wireless fees, charge-back fees, extended guaranty fees and many others. Its important you understand what each fee represents, how and why it is being applied, and if the fees you are being charged are consistent with the conditions of your contract and industry standards. Again, these charges can be substantial, possibly even equal to or greater than the stated best rate.

The Net Settlement

Your net settlement is the amount of money you actually receive after all charges are removed. This figure allows you to calculate your actual effective rate, which is critical, because it tells you what youre really paying to provide credit-card service to your customers.

To calculate your effective rate, divide the total dollars billed by the total dollars received in your account. Some would argue the effective rate should be calculated by dividing the net dollars billed by the total dollars received. This modification takes into account reversed transactions. The important point is you are using this calculation as a comparisonto your expected charges and other offers of merchant service.

Finally, at the end of your statement, there is normally a summary box that lists total charges deducted from gross sales, yielding the net deposit to your account. By monitoring the five key areas of your credit-card statement, youll give yourself a much better chance of obtaining and maintaining a fair and equitable relationship with your service provider, and reduce the odds of fraud and compliance violations.

Ross Federgreen is a co-founder of CSRSI, which provides an integrated approach to the analysis, design, implementation, deployment and management of electronic transaction services and systems. Since 1999, the company has helped more than 350 public and private institutions reduce the cost of acquiring money and minimize the liability exposure related to payment transactions and customer data. For more information, call 866.462.7774, ext. 1; e-mail [email protected]; visit www.csrsi.com.