Vanke Group, a China-based real estate developer, is planning to build a self-storage facility in its high-end Vanke City Garden housing complex in the Minhang District of Shanghai. Many Chinese consumers are still unfamiliar with the self-storage concept, but local residents will soon have the opportunity to rent space to store personal or business items.

Customers will be charged monthly fees for various sizes of yellow storage cubicles. Each unit will have its own lock and be placed inside a secured warehouse, Vanke Group officials said.

The facility will offer 24-hour surveillance with only authorized customers granted entry using an electronic keycard. News reports said storage cubicles will range from about one cubic meter up to units large enough to store a three-person sofa.

Reaction from local residents has been mixed, according to the source, with some liking the convenience of having storage opportunities nearby. Others remain wary about security concerns, preferring to store items in their homes.

The Sauk County, Wis., Board of Supervisors approved a zoning change this week, paving the way for a proposed 300-unit self-storage facility in the town of Baraboo. The decision to change the zoning from agriculture to commercial was controversial because the Baraboo City Council opposes the project. The council does not have jurisdiction over the 29-acre parcel, even though city property borders the site on three sides.

Im just glad we can move on to the next step, developer Tim Moy said.

The city is against the self-storage project in part because the property sits on the main road leading into the south side of the city. Mayor Mike Palm told zoning officials last week he would prefer to see housing, office buildings or open space on the site. The mayor said he is not opposed to a self-storage business in Baraboo but believes the proposed development would negatively affect the character of the city.

A Google search showed there are at least two self-storage facilities in the vicinity of the proposed project and at least four self-storage businesses that have a Baraboo street address.

City officials have filed an appeal challenging a previous county decision classifying self-storage facilities the same as warehouses. The proposal to develop the property as self-storage is scheduled to be heard Aug. 23 by the countys Board of Adjustment.

The Rental Storage Association (RSA), an organization representing self-storage owners and operators in Japan, held its annual membership meeting on June 26. The event was hosted at the KKR Hotel in Tokyo and included a cocktail party.

The meeting opened with greetings from RSA Chairman Michinobu Tada, followed by comments from guest speaker Junichi Imamoto from the Ministry of Land, Infrastructure, Transport and Tourism. In addition, Yano Research Institute Ltd., the largest market-research company in Japan, presented a study of the local self-storage industry.

The meeting had 38 attendees, including 26 RSA members and 13 guests and media reporters.

The RSA officially registered with the Japanese government on Oct. 28, 2010. According to its website, it is the only self-storage association endorsed by Japan's Ministry of Land, Infrastructure, Transport and Tourism. More information is available in English and Japanese at www.rentalspace.org.

This spring the RSA entered a contractual partnership with Inside Self-Storage (ISS), a U.S. provider of industry resources and education for more than 20 years. The partnership includes collaboration on ISS magazine and the annual Inside Self-Storage World Expo, held each spring in Las Vegas. RSA representatives will attend the 2013 conference, April 3-5 at the Paris Hotel & Resort in Las Vegas. The event will also feature an education session discussing the nature of self-storage in Japan.

StorQuest, a self-storage operator with more than 35 facilities throughout Arizona, California, Colorado and Hawaii, is on a mission to raise $10,000 to fund cancer research. Every time a customer or potential customer interacts with the company via Facebook and Twitter, it will donate $1 to Kure It, a nonprofit dedicated to funding innovative kidney and other cancer research.

On Facebook, users must "like" StorQuest or comment on a post. On Twitter, they must follow the company or retweet a link. Every time they do, $1 will be added to the donation total.

StorQuest is the operating trade name of self-storage properties owned and operated by The William Warren Group Inc. WWG is a privately held real estate company that develops, acquires and operates income-producing real estate assets.

Kure It was created by Barry Hoeven, who was diagnosed with kidney cancer in 1998. In April 2007, Hoeven partnered with cancer center City of Hope to create the Kure It! Kidney Cancer Research Fund, which raised more than $400,000. Kure It Inc. was established in January 2010 as an independent, non-profit 501(c)(3) organization. Its goal is to be the leader in granting funds to cancer researchers investigating progressive treatments and cures.

Storage Express has acquired Keach & Grove Storage in Bedford, Ind., for an undisclosed amount. The 21,000-square-foot self-storage facility is near the center of town and is the storage operators second property in the area. Bedford is a small community of about 14,000 people, situated approximately 25 miles from the companys headquarters in Bloomington, Ind.

The property will be renovated with upgraded amenities, including improved lighting, security and access-control features, company officials said. The facilitys self-storage units range in size from 5-by-10 to 10-by-25 feet.

Company officials said Storage Express was the first operator in the Bedford area to offer climate-controlled units as well as the latest technology in tenant security.

Storage Express owns and operates 73 self-storage properties in Illinois, Indiana, Kentucky, Tennessee and Ohio. The company has opened five locations in Indiana and Illinois in the last 12 months and has another under construction.

By Lewis Pollack

The following words of advice are for those of you whove passed that dark Circuit City or the closed Winn Dixie every day on the way to your office and mused about the possibilities of stealing it for a song and converting it into a self-storage facility. As one of those intrepid souls, along with my partners whove chosen to follow the muse, I welcome you, pilgrim!

In this article, I will not unravel the secrets of the universe, but I will attempt to offer my opinions on retrofit selection. I will not address issues which would be common to any other asset class or type of storage development or straight purchase such as financing. The goal is to focus your attention on how to steer clear of making some avoidable stumbles and think about retrofitting in a more critical way than you might now.

Site Selection

Without exception, a commercial zone 2 (C-2) location is the most desirable in a market area. It will typically have a large and destination-bound traffic count and great visibility. Experience has taught us that facilities in C-2 rent up faster than those in light industrial 1 (I-1). Go figure!

It used to be a fairly hard and fast rule that self-storage properties were not going to be permitted in any C-2 area. However, many jurisdictions are now willing to swallow hard and allow a class-A storage product in a C-2 area to mitigate the problems of vacant and vandalized buildings in whats typically a heavily trafficked retail-shopping corridor. While this window of opportunity exists, search in C-2.

You should also eliminate any potential site that cannot accommodate a minimum of 50,000 net rentable feet. This isnt a hard and fast rule but a sweet spot for cost-efficient management.

While a single-story building is preferable, many older, dark retail boxes seem to contain no more than 40,000 square feet. Oddly enough, with a clear span of 19 feet at the low eave, a smaller building might be an appropriate candidate for an interior mezzanine level, which can essentially double the net rentable square feet. Bring your tape measure!

Extra Land

Many retrofits are within existing shopping plazas and are self-contained buildings that must, by the restrictions of the footprint and design, be climate-controlled. However, its always prudent to enhance a climate-controlled facility with a goodly number of drive-up conventional storage units, for several reasons. First, conventional units typically rent up more quickly than climate-controlled ones, thereby minimizing the shortfall inherent in leaseup. Also, such an addition will also advertise the facility in the most graphic way, offering terrific visibility.

Traffic Counts and Visibility

While its always better to see a high traffic count, in the case of a retrofit, it seems that many older potential sites are on secondary streets with few vehicles passing by. Whatever the reason (and because a newly renovated facility in a shopping center is typically far back from the main road), look for a site with great traffic counts. This would be in the range of 35,000 vehicles per day.

Many jurisdictions have severe restrictions on what we most want: visibility, read as big signage and no bushes or trees to obscure visual recognition. Dont be surprised if current code restricts signage to a small unlit pedestal sign and camouflages the building from public view by a hedge row and trees designed for this purpose. This penchant for obscurity will be a hurdle for you.

Due Diligence

Despite your reluctance to pull out the checkbook, youd better be prepared to commit to at least $35,000 to determine the feasibility of your retrofit. Always keep in mind that while these upfront expenditures mount, theyll dictate whether your multi-million-dollar bet can be retrofitted to self-storage at the pro forma budget you devise. Most will also be necessary for both engineering and plans, and for bank financing should you need it.

Physical Integrity of the Site

Congratulations! Im assuming youve placed your dream conversion under contract and the clock has begun ticking for due diligence. You should prepare your budget to withstand problems from any of the following components, all of which Ive encountered at one time or another and are not uncommon when looking at an older building with an eye to converting the pumpkin into a coach.

The slab. The as built plans you inherit (if there are any) may indicate your dream retro has a solid 6-inch concrete slab. After all, it was permitted and inspected during original construction. Dont believe it! Have core samples taken by a structural engineer to ensure the slab will support storage use or a mezzanine, if thats in your plan.

Soils analysis. Another possible issue is the underlying soil composition. There are many areas of the Southeast with horrible soils that will need expensive added fill brought in.

Lighting audit. New federal energy-efficiency standards in lighting took effect in July. Its likely your building has older, inefficient bulbs and ballasts. Lighting audits are usually provided free of charge by companies that specialize in this. At the end of the process, you should receive a written proposal for bringing the lighting up to current code. Fold this into your pro forma as a capital-expenditure improvement. Estimated cost would be $40,000 to $60,000 for a typical 50,000-square-foot building. In the event your state is deregulated, there may even be rebates available.

HVAC. Determine the age of the HVAC systems. Older buildings have units that most likely require recharging with R-22 refrigerant gas. Since production of R-22 has been banned, the cost of recharging older units using whats left of the diminishing stock of R-22 has skyrocketed. Recharging an obsolete HVAC unit can easily cost more than replacing the unit with a new energy-efficient one. We always include replacement of existing non-compliant units, even if theyre in working order.

Roof. On older buildings, such as your dream facility, a potentially big-ticket item will be the repair or replacement of a failing roof. Before making any repairs, or even when having it inspected, be certain to read any existing warranty. It could very well be the roof is still under warranty. Merely reading the procedure on making a claim on an older roof could save you a bundle should you move forward. Ignoring the exact instructions for making a warranty claim, or even having the roof inspected by a non-approved contractor, could cost you the warranty, so follow instructions to the letter.

Asbestos. It may be that your older bargain building was constructed with asbestos insulation or flooring. In a recent project, we discovered this when we cut a hole in the concrete roof. The job was red-tagged for three weeks while we spent $50,000 to remediate the problem. This is probably something we couldnt have avoided. Nevertheless, it put us back almost a month. So, while one cannot predict every contingency, a line item that over predicts issues such as asbestos remediation is an excellent idea. Be certain to add a month to the construction schedule, exclusive of weather delays.

Water leaks. Many old buildings have pipes under the building that are very old and deteriorating. Have a qualified engineer test for leaks. We recently spent more than $10,000 to jackhammer inside a facility to get to a leaking pipe.

Environmental (Phase 1) testing: Yes! Yes! Of course, I know this is common to all classes of development and a financing requirement. But with an older building, and before you do much else, a clean Phase 1 is a necessity. If the report comes back ambiguous, dont hesitate to go to a Phase 2. Dont spend a lot of money on anything else until the property has a clean environmental report.

Other Considerations

There are some elements that are common to all commercial redevelopment. However, with storage, theyre simply more critical. Here are a few to consider.

Title insurance and survey. It may seem obvious, but older properties must be vetted for encroachments, setbacks, easements and zoning compliance. Current use or lot coverage can mask a variety of these issues, which could seriously impact your site plan and unit mix.

Timing considerations. From the day you actually target a site location to the point at which a building permit is issued should take about six months. From building permit to grand opening might take an additional four to seven months, depending on the complexity and scope of your dream facility. Youll probably want a spring opening. Try working backward from the proposed opening date to pick a target date for commencing construction.

Financial risk. Ive tried to confine this discussion to some of the hurdles you might encounter on the way to a building permit. Really, the elephant in the room is financing, as many of you will need. To secure a loan, youll need a complete set of plans, pro forma and more.

From the bank side of the transaction, an independent appraisal must support the values being proposed in the pro forma. As you grizzled veterans of appraisal wars can attest, some of the fiercest battles weve fought have been with independent appraisers over valuation. But this is a topic for another evening around the campfire with a bottle of Maalox at hand.

I would like to close with, In conclusion However, I hope this is just the beginning of a very profitable and interesting venture for you. Do not be deterred. The rewards are well worth the effort.

Lewis Pollack is a self-storage owner and managing principal of StoreSmart Development LLC, which operates facilities in six states under HAT Management LLC. A long-time corporate executive and entrepreneur, Pollack has been involved in the development and management of self-storage for more than 25 years. For more information, call 561.212.5350; e-mail [email protected]; visit www.storesmart.org.

Storage Pros Management LLC has acquired seven self-storage facilities in Michigan for $19.5 million, increasing the number of Michigan properties under its management to 37. The properties were purchased in two separate transactions and will be rebranded as Storage Pros Self Storage. The company said it will infuse $850,000 in capital improvements to modernize the facilities.

Combined, the seven acquisitions represent more than 450,000 square feet of storage space, bringing the companys national total to more than 3 million square feet and more than 26,000 storage units and parking spaces.

We are pleased to be able to continue to execute our opportunistic acquisitions program, targeting high-yield investments in our core markets, said CEO David Levenfeld. In a marketplace with abundant capital, our focus is on uncovering value-add investment opportunities to provide both substantial cash flow and attractive capital appreciation over time.

The BSC Group LLC, a commercial real estate financing advisor and provider of debt and equity capital solutions for self-storage owners, arranged $15.125 million in financing for the deal.

The capital markets are extremely competitive at present, and through a combination of commerical mortgage-backed security and balance sheet executions, we were able to provide the client with very compelling debt solutions to enhance their value-add investment objective," said Devin Huber, a principal with the firm.

Our ability to secure long-term, fixed-rate financing in the mid-4s provides incomparable long-term value to investors, adds Levenfeld.

Storage Pros manages 58 facilities throughout Massachusetts, Michigan, Mississippi, Rhode Island and Tennessee. Founded in 2007, the company offers property-management services to private equity funds, lending institutions and individual investors.

Amsdell Storage Ventures VII LLC recently acquired five self-storage properties in the Memphis, Tenn., metro area. The facilities, which comprise more than 330,000 net rentable square feet and more than 2,600 units, will operate under the name Compass Self Storage LLC. Two of the properties are in Tennessee, with three others just across the Mississippi border from Memphis. No financial terms were disclosed.

The entrance into the Memphis market comes on the heels of Amsdells foray into the Cincinnati market last month with the purchase of five additional self-storage facilities. Amsdell has actively been acquiring properties to expand the Compass Self Storage brand beyond its Florida, Michigan, Ohio and Pennsylvania locations.

The new property addresses are:

• 7097 Commerce Drive, Olive Branch, Miss.
• 7911 Hacks Cross Road, Olive Branch, Miss.
• 2274 Highway 51, Nesbit, Miss.
• 8036 U.S. Highway 70, Bartlett, Tenn.
• 4175 Winchester Road, Memphis, Tenn.

The facilities offer drive-up access and indoor storage in addition to a full line of boxes and packing supplies.

We are thrilled to expand and grow into the greater Memphis market. We look forward to providing quality self-storage and moving solutions to our customers, said Todd Amsdell, president. We are proud to continue to expand the Compass brand to this and additional markets.

Marcus & Millichap Real Estate Investment Services represented the seller, Memphis Storage LLC.

Self-storage acquisitions were steady in 2011 but have increased in 2012. Sellers are motivated to sell while interest rates are low, raising property values and fueling investor demand, said Anne Williams, an associate in Marcus & Millichaps Memphis office. Charles Chico LeClaire, a senior vice president of investments in Marcus & Millichaps Denver office, also helped broker the sale.

Headquartered in Cleveland, the Amsdell Cos. draw its roots from the family-owned construction company founded in 1928. The company, which owns and operates self-storage properties in Florida, Kentucky, Michigan, Mississippi, Ohio, Pennsylvania and Tennessee, has since been active in several billions of dollars worth of real estate ventures with a primary focus in self-storage.

Marcus & Millichap is a commercial property investment services firm prominent in the self-storage industry. The company has more than 1,000 investment professionals in offices nationwide and closed more than 5,000 transactions last year.

Solano Storage Center, a 75,965-square-foot self-storage facility in Fairfield, Calif., sold on June 14 for $7.7 million. The buyer was a joint venture between Orange, Calif.-based RHW Capital Management Group LLC and Los Angeles-based Woodbridge Capital Partners LLC. The seller was Channel Properties.

The property at 340 Travis Blvd. includes 600 self-storage units and a seven-unit, 7,840-square-foot retail center on 3.44 acres. The storage facility was 81 percent physically occupied at the time of sale. The retail center was 100 percent leased.

The partnership was formed to acquire self-storage assets and manage ongoing projects, said James Hanrahan, managing partner of acquisitions for RHW, which provides third-party management services. Hanrahan was joined in the purchase by Wall Street veteran William Lappas, who founded Woodbridge in 2002 and serves as its managing director. Ryan Rogers and Christopher Weber, additional managing partners of RHW, were also partners in the deal.

"The nature of the Solano deal having both retail and storage made it more difficult for other acquisition groups to purchase the property. Because our equity sources are private, we were able to have more flexibility in putting this deal together," Lappas said. The joint venture has already acquired a number of properties and is looking to purchase many more in the next few months, he added. "We can also help ownership groups that want to buy select partners out yet still have others that stay involved."

The seller was represented in the transaction by Tom de Jong of Colliers International. Headquartered in San Jose, Calif., de Jong is the North California broker affiliate of the Argus Self Storage Sales Network.

Woodbridge is a private equity firm and the general partner to The Axios Fund LP. The company provides equity and debt for private companies. It is also involved in asset management, hedge funds and venture capital.