StorageTreasures.com, a website designed for self-storage auction hunters, has added WorthPoint.com, an online resource for antique collectors, appraisers, brokers and buyers, to its panel of expert contributors. WorthPoint provides market data on art, antiques and collectibles. The site also provides access to professional opinions and appraisals that help users value, preserve, buy and sell items. The company's Worthopedia helps antique collectors, appraiser, brokers and determine the value of their collectibles.

Determining the proper values of items can make the difference between a profitable storage-unit auction buy and an unprofitable unit, said LanceWatkins, president and founder of StorageTreasures.com. WorthPoint.com is a perfect fit for our members since it can help them learn about their unique items, assess their value, and help them sell their storage-locker finds at the right price. We're looking forward to seeing how they use it to build more profitable businesses."

StorageTreasures.com is a free storage-auction locator and self-storage facility finder covering the United States and Canada. The website offers auction schedules and site-specific guidelines for auction hunters and self-storage owners alike.

By Anita Byer and Martin Salcedo

Like owners of any other business, self-storage owners must take affirmative steps to protect the bottom line. Unfortunately, too many operators overlook perhaps the most important and effective step of allusing the rental agreement to limit their liability exposure.

Though its virtually impossible to completely insulate a business from liability, there are contractual provisions designed to eliminate, or at least limit, the exposures faced by self-storage operators. The challenge is to ensure provisions are drafted in a manner that comports with a facilitys particular situation and business practices, as well as any applicable laws. Though situational and jurisdictional variations typically undermine the effectiveness of boilerplate or one-size-fits-all templates, operators should consider incorporating some or all of the following protections in their rental agreements.

Limitation and Release of Liability

A limitation of liability clause is designed to contractually allocate each partys risk in reasonable proportion to the benefits derived from the contractual relationship. Without such a clause, a self-storage facility may suffer liabilities that far exceed revenue. The overall purpose of the clause is to clarify and establish that the property is being stored at the sole risk of the tenant.

Depending on the circumstances, different approaches can be taken when drafting a limitation of liability clause. For example, a clause may place a maximum limit on the value of property a tenant may store in a unit, or it may provide that the parties agree to a fixed value for the property, which can be based on weight, size or some other factor. Another option is to limit the liability of a self-storage facility to the amount of rent paid by the tenant.

In addition to limiting liability, a rental agreement should stipulate that the tenant has agreed to release the facility from liability in the event of loss or injury. A release provision must be drafted clearly and state the release of liability applies to the tenant and any person authorized to enter the premises by the tenant. To provide the broadest applicability, the release of liability should cover injuries or losses regardless of who or what is involved.

Its important to understand that the extent to which a party may contractually limit or be released from its liability may be restricted or otherwise governed by various state laws. Contractual provisions designed to release a party from the damages caused by its own negligence or exculpatory clauses illustrate this point.

Florida and Connecticut courts, for example, have held that although exculpatory clauses are disfavored, theyll be enforced if properly drafted. An exculpatory clause must clearly and unequivocally state that it releases a party from liability for its own negligence so an ordinary and knowledgeable party will know what he is contracting away. Though some courts state using the word negligence is not necessarily required, its advisable to do so.

For example, in enforcing an exculpatory clause in a personal-injury case, the Supreme Court of Connecticut relied on the fact that the agreement refers to the negligence of the defendants three times and uses capital letters to emphasize the term negligence. In New York, however, a state statute requires such a provision be treated differently by the courts when a contract involves real property. Pursuant to this statute, a contractual provision exempting a landlord from liability for the landlords negligence is deemed to be void as against public policy. So, even if the lease contained an exculpatory clause addressing the facilitys negligence, it would likely be deemed unenforceable in New York.

The lesson here is that since exculpatory clauses are disfavored, they must be tailored to apply to each specific situation and comply with any applicable laws. Thus, the use of templates or boilerplate language increases the likelihood that such a clause will be unenforceable.

Indemnification and Hold Harmless

An indemnification provision requires a tenant to compensate the self-storage facility for any damages or losses caused by the tenant in which the facility owner may be required to pay. For example, if a third-party is injured by a hazardous condition created by a tenant, or anyone authorized by the tenant to be on the premises, then the self-storage owner may be liable to that injured party. An indemnification provision would typically require a tenant to compensate the self-storage operator for whatever amount the facility is liable to the injured party.

A hold-harmless provision stipulates that a tenant agrees not to hold the facility owner responsible for any loss, injury or legal liability caused by the tenant, or anyone invited on the premises by the tenant, or which is otherwise related to the tenants occupancy. If, for example, a tenant is injured while using a dolly made available by the self-storage facility, then the hold-harmless provision would prevent the tenant from recovering against the facility.

Since indemnification and hold-harmless provisions have been described as different sides of the same coin, its not uncommon for them to be combined into a single, contractual provision. Accordingly, they should be drafted with care and in a manner thats consistent with applicable laws.

Insurance Mandate

Including a requirement that tenants insure their property accomplishes two goals. First, it provides a tenant with a primary source of compensation in the event of a loss. Second, it places the burden on the tenant to see that hes adequately protected in the event of a loss.

An insurance clause within a rental agreement may stipulate tenants are required to obtain sufficient insurance to cover the value of all property stored at the facility. To the extent a tenant fails or is unable to insure his property, the tenant would be deemed to have self-insured, thereby making the tenant solely responsible for the loss. To increase the likelihood of protection in cases involving high-value property, a rental agreement may require a tenant to show proof of insurance if the value of the tenants stored property exceeds a specific amount.

To maximize the protection afforded by an insurance clause, the tenant must agree to waive any subrogation rights, thereby preventing the tenants insurance company from coming after the self-storage owner to recover amounts paid out for the tenants loss. Whenever a tenant obtains insurance, self-storage facilities should require and confirm that the tenant obtained a waiver of subrogation agreement from the insurance company.

Disclaim Existence of Bailment

Bailment is the temporary placement of control over, or possession of, personal property by one person (the bailor) into the hands of another (the bailee) for a designated purpose upon which the parties have agreed. Under the law of bailment, the bailee owes a duty of care to the bailor with regards to the property, and depending on the type of bailment, the duty of care owed to the bailee can be quite strict.

To avoid being held to a potentially strict standard of care, self-storage owners should disclaim the existence of a bailment in their rental agreement. Since a bailment is a consensual transaction requiring mutual agreement by the parties, which can be created either expressly or impliedly, a rental agreement should expressly stated that no bailment is created under the agreement.

Additionally, since a general requirement of bailment is that the bailee obtains the right to exclusive use and possession of the property, a rental agreement should state the self-storage facility does not take care, custody or control of the tenants property. In a typical situation, a tenant should have exclusive control over his property, and provided the tenant is not in breach of the agreement, laws or rules, the facility is not concerned with the kind of property stored by the tenant.

Disclaim Warehouseman Status

A warehouseman, or warehouse, is an individual whos regularly engaged in the business of receiving and storing goods of others in exchange for compensation. As with bailment, carrying the distinction of warehouseman establishes a standard of care thats owed to the owner of the property.

To avoid being held to such a standard of care, a rental agreement should expressly state the self-storage facility is not a warehouse or a warehouseman engaged in the business of storing goods for hire. A self-storage facility should also refrain from acting in a manner that would be consistent with that of a warehouseman, such as issuing documents of title for the personal property.

In addition to the foregoing clauses, there are various other contractual provisions which are designed to limit the liability exposure faced by a self-storage facility, including clauses which:

• Prohibit the storage of heirlooms or other property with sentimental value
• Restrict the types of property or uses of storage space to exclude inherently dangerous items or activities
• Disclaim warranties
• Clearly establish a facilitys rights in the event of a default
• Incorporate a facilitys rules and regulations into the rental agreement, including any modifications
• Waive the right to a jury trial in the event of a lawsuit

When a lawsuit results from a tenants loss of property or bodily injury, a court will typically start with the rental agreement when determining each partys respective rights and obligations. Thus, its important to draft the rental agreement so it provides the maximum protections allowable under applicable law.

However, since contractual provisions that limit a partys liability are often the primary focus of litigation, courts will examine them closely before enforcing them against a tenant. Accordingly, its best for a self-storage owner to retain an experienced attorney whos licensed in a particular jurisdiction to draft or review his rental agreement.

Anita Byer is president and CEO, and Martin Salcedo is general counsel and self-storage risk management group member of Setnor Byer Insurance & Risk. Headquartered in Plantation, Fla., the company is an independent insurance agency dedicated to developing comprehensive insurance and risk-management solutions for clients throughout the United States. For more information, call 888.253.8498; visit www.setnorbyer.com.

Self Service Storage in Chattanooga, Tenn., recently sold for $1 million. Built in 1973, the self-storage facility has 65,130 square feet of rentable space. The site features 396 storage units, including 56 that are climate controlled.

Units range in size from 5-by-10 feet to 20-by-40 feet. Site amenities include perimeter fencing, video surveillance, a managers office, roll-up and swing doors, and a two-bedroom apartment.

Located approximately four miles from a new Volkswagen manufacturing complex, the self-storage property reportedly has excellent visibility from signage placed at an on-ramp for Highway 153. The highway is a main thoroughfare running North and South through Chattanooga with a average traffic count of 64,366 cars per day. Self Service Storage is also visible to westbound traffic on nearby Bonny Oaks Drive, which has an average daily traffic count of 20,551 vehicles.

Stacey Gorman, from Marcus & Millichap Real Estate Investment Services, represented both the buyer and seller in the transaction. Marcus & Millichap specializes in commercial real estate investments. The company has more than 1,000 investment professionals in offices nationwide and closed more than 5,000 transactions last year.

Quick, a show of hands: Who here owns a car? Good. Now, who owns a self-storage property? OK, good. Now, whose self-storage facility is worth more than their car? Everyone, just as I suspected.

Here's the conundrum: Most of you perform regular maintenance on your car, for example, getting a tune-up, changing the oil, rotating the tires. And yet many of you fail to see any value or importance in having your self-storage facility regularly checked via a thorough operational audit. Are you more interested in maintaining the value of your car than your self-storage property? That doesnt make any sense.

If you own a self-storage facility, doesnt it seem reasonable and responsible to ensure it's running as effectively and efficiently as possible? Dont you believe its important to make sure that what is likely one of your most valuable assets is properly managed? Why are you so willing to take a chance with such a valuable venture?

Conducting a regular and thorough operational audit of assets is one of the most important responsibilities of a self-storage owner. To leave the operation of those facilities to chance and trust everything is OK without a regular review is a risky proposition. At the very least, it could lead to missed opportunities and lost asset value. At the very worst, it could lead to a complete disaster. So why do so many operators take that risk?

Lack of Concern and Knowledge

Simply put, some self-storage operators just dont see the need for an audit or dont care. Some really dont want to know and are satisfied with the status quo. They accept there are likely some problematic issues or even some minor theft, but they dont want to make any changes that could mean more work for themselves.

An audit might turn up a theft issue that could lead to manager turnover, and that prospect scares them. Or it could reveal operational deficiencies that are better left alone and not shared with the rest of the investors.

Some owners just dont know how to conduct an operational audit and have decided not to take advantage of the plethora of training resources available in the industry. Resources range from books and DVDs to webinars and association workshops, yet many are either too lazy to take the time or too cheap to spend the money to learn.

Getting Started

For those of you who do see the need for conducting an operational audit and review of your self-storage facility, here are some basic guidelines:

• Audits should be conducted at least annually, but twice a year is ideal.
• Audits should be conducted whenever theres manager turnover. This ensures the new manager doesnt unfairly inherit operational or theft issues.
• Audits should be conducted at random and without any advance notice.
• Audits can be conducted internally by ownership or upper management or by outside vendors. Most sophisticated operators use both resources to ensure compliance and consistency.

If you employ a third-party management company, you can expect regular audits of your facility several times a year. At least one of these should be completed by an outside vendor. Theres nothing wrong with expecting or insisting your management company has someone audit its work from time to time. Ask your management company for copies of every audit, including the one thats outsourced.

A full operational audit should take from half to a full day, depending on the facility size. Every review should include:

• A reconciliation of the cash and petty-cash drawers
• A complete space audit
• A list of deferred maintenance issues
• A review of payment and deposit records
• A review of lease and vacate files
• A review of all discounts and rent credits
• A review any deleted payments
• A review any waived fees
• A review of the non-standard rates report
• A reconciliation of moving and packing supply totals
• An inspection of onsite managers apartment
• An inspection of any rental trucks
• A review of the facility's curb appeal and property condition

In addition, a third-party vendor might include commentary regarding the onsite managers, their demeanor and customer-service attitudes, a mystery-phone shop and property photos. It also may include commentary on various operational reports and an executive summary with conclusions, along with marketing and operational recommendations. The vendor's job is to provide an unbiased picture of the state of your self-storage asset, including reporting any suspected or proven theft issues.

Applying the Findings

Its important to understand the value of an operational audit and learn to use the information provided to improve the operation of your facility. The audit should also be used as a training tool for onsite managers. Expectations and accountability should be clearly explained within the parameters of the audit process.

Theres little value in an operational audit if the information is not used to make improvements, track performance or hold management responsible for their part in creating asset value.

If you're a facility owner and conducting regular operational audits isnt part of your routine, its time you started. If you dont see the importance of auditing, youre fooling yourself and likely missing out on revenue and value-increase opportunities.

If you dont know how to audit your storage facility, learn. There are far too many good resources in the industry, so theres no excuse to not learn how to better protect your most valuable asset. If you dont want to learn, hire a third-party company. Its unbiased and professional review will be one of the best investments youll ever make in your facility. If you believe hiring out for an audit is too expensive, to what are you comparing that? Loss of value? Loss of operational efficiency? Exposure to theft? Potential for important details to fall through the cracks? Keep in mind an independent third party is going to notice things you no longer do.

Whether you conduct a self-audit or have a professional perform one for you, failing to audit your self-storage facility is irresponsible and should be unacceptable. Get going!

Bob Copper is partner in charge at Self Storage 101, an industry consulting firm that assists facility owner/operators and managers in developing more effective and profitable operational systems. It also aids in conducting performance reviews and providing the necessary tools to perform at higher levels in a competitive industry. To reach Bob, call 866.269.1311; e-mail [email protected].

Access Self Storage in Winston-Salem, N.C., recently sold for $2.2 million. The facility had a capitalization rate of 1.8 percent due to economic occupancy of 42 percent, according to Marcus & Millichap Real Estate Investment Services, which brokered the sale. The self-storage property was bank-owned and offered at below replacement cost.

Built in 2008 on 3.84 acres, the self-storage facility features 530 units, with all but seven being climate-controlled. Onsite amenities include wide hallways, electronic gates with keypad access, intercoms, security cameras, music piped through the hallways, and a spacious apartment above the management office. The site features high visibility with a generous amount of road frontage.

Marcus & Millichaps Stacey Gorman and Don Gilchrist represented the seller in the transaction. The unnamed buyer was from New York and represented by an outside broker.

Marcus & Millichap specializes in commercial real estate investments. The company has more than 1,000 investment professionals in offices nationwide and closed more than 5,000 transactions last year.

ABCD Econo Storage, a 31,800-square-foot self-storage facility in Brooksville, Fla., recently sold for $710,000. Built in 2005, the facility features 28,295 square feet of rentable space and sits on 2.4 acres.

ABCD Econo Storage offers 178 self-storage units, including 66 that are climate-controlled. Site amenities include drive-up units, security cameras, computerized gate access, roll-up doors and a managers office.

Associate Adam Wides and Michael A. Mele, a first vice president of investments and senior director of Marcus & Millichaps National Self-Storage Group in Tampa, Fla., marketed the property on behalf of the seller, a financial institution based in Alabama. Mele and Wides also represented the buyer, a private investor.

Marcus & Millichap specializes in commercial real estate investments. The company has more than 1,000 investment professionals in offices nationwide and closed more than 5,000 transactions last year.

Superior Self Storage in Thunder Bay, Ontario, Canada, received a $200,000 loan to expand its operations and support new jobs.

A portion of the $200,000 loan came from the Northern Ontario Heritage Fund Corp.s (NOHFC) Enterprises North Job Creation Program. It will enable the Canadian self-storage operator to support six jobs and offer more services such as climate-controlled storage units for local agricultural produce growers. The loan was also funded by local credit unions.

The NOHFC offers seven funding programs to help municipalities, entrepreneurs and businesses build, expand and grow. The Enterprises North Job Creation Program provides financial assistance to the private sector to create permanent jobs in Northern Ontario.

Amherst, N.Y.-based real estate investment trust (REIT) Sovran Self Storage Inc., which operates the Uncle Bob's Self Storage brand, announced a quarterly dividend of $.45 per share of common stock for the second quarter of 2012 that ended June 30.

The annualized Sovran dividend is $1.80 per share, which, based on Monday's opening share price, equates to an annual rate of approximately 3.6 percent. The dividend will be paid on July 26 to shareholders of record on July 12.

Sovran operates 446 self-storage facilities in 25 states under the Uncle Bob's name. The company is actively acquiring additional facilities.

Dillon Gage Metals, a dealer of precious metals such as silver, gold and platinum, opened a self-storage facility in Mississauga, Canada, in June designed especially for the storage of precious metals.

The facility will operate under the name International Depository Services of Canada (IDS). While there are several custody services available in Canada servicing a limited portion of the industry, IDS will be Canadas only depository that services all market segments, including national mints, banks, precious metals dealers, brokerage houses, refineries, mining operations and individual investors. IDS was developed to provide customers with a facility within which to transact business with counter-parties.

We believe the demand for metals storage and distribution will continue to increase in North America and globally this decade, as many new investors and funds buy physical gold, silver and platinum, says Terry Hanlon, president of Dillon Gage Metals. IDS of Canada offers the bullion and certified coin markets a vault and secure warehouse space and provides a wide range of services, including segregated custody accounts and international shipping capabilities.

Additionally, IDS offers:   

Fully insured, segregated storage of precious metals

Distribution and fulfillment services for commercial accounts

International shipments of precious metals

Individual product inspections

Itemized inventory and collateral holdings reports

Customs clearance assistance

Collateral custody accounts serving lenders and borrowers

Precious metals held at IDS are insured and held off of IDS balance sheet, meaning that their title is not subject to any claims beyond those of the owner.

The company chose Mississauga for its facility because its a suburb of Toronto, which is considered a strategic metals hub in Canada, Hanlon notes. Toronto is also one of the world's top gold-mining nations and a major silver and platinum producer.

Founded in 1976 and based in Dallas, Dillon Gage Metals offers bullion trading, online trading of physical metal and futures, jewelry trading and liquidation, refining services, and rare coins and estate liquidations.