Update 7/29/14 – A new self-storage lien law signed in May by Minnesota Gov. Mark Dayton will go into effect on Aug. 1. Senate Bill 2398 contains language and procedures specific to self-storage and removes the enforcement of liens from under the state’s warehouse lien laws. Among its provisions is the allowance of tenant-delinquency notices to be sent 10 days after default by Certified Mail or e-mail, as long as the tenant has provided written consent. The law also outlines the self-storage lien-sale timeline and publication requirements.

The national Self Storage Association (SSA), which chartered the Minnesota Self Storage Association last year, worked with local operators to formulate the measure. “The new law improves what was one of the most awkward default processes in the country,” SSA officials said in the association’s weekly e-mail newsletter. “Where new obligations are required on the part of the owner/operator, an addendum to existing leases will satisfy the new law.”

The bill was passed unanimously by the House and Senate.

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4/29/14 – The Minnesota Senate unanimously approved a bill last week that would change the administering of the lien-law process for self-storage operators. Senate Bill 2398 includes language similar to those enacted in other states, such as Indiana, Kentucky and Michigan.

The national Self Storage Association, which chartered the Minnesota Self Storage Association last year, has been working with local operators to formulate the new law. Prior to the bill, the enforcement of self-storage liens fell under the state’s warehouse lien laws.

The measure outlines new procedures specifically written for the self-storage industry and includes directives on informing tenants of their defaulted status. It would allow tenant-delinquency notices to be sent 10 days after the default by Certified Mail or e-mail, if a tenant offers written consent. It also stipulates the full amount a tenant owes must be included in the notification as well as a request for payment no less than 14 days after the tenant receives the notice.

The bill also outlines the lien-sale timeline and publication requirements. Operators can hold a lien sale 45 days after the tenant defaults on the rental. They must also publish information about the lien sale once a week for two consecutive weeks in a newspaper of general circulation or on a website that advertises self-storage lien sales or public notices. The sale cannot take place less than 15 days after the first publication.

The measure also addresses motor vehicles, including boats, and would enable operators to either sale the property or have them towed after delinquency exceeds 60 days.

SB 2398 is now being considered by the House.

By Jeffrey Turnbull

It used to be that self-storage developers would just go way out in the middle of nowhere, build a facility and it would lease up. That’s no longer the case. Our industry came of age some time ago, with a need for convenience and architecturally pleasing façades dominating new developments. We’re seeing well-designed, retail-themed storefronts near commercial and even residential locations. Finding these types of locations with the proper zoning is very difficult and often requires a site to be rezoned for the specific self-storage use.

You can successfully navigate the increasingly complex zoning landscape if you select a viable site, follow the rules, and educate your audience with a professional presentation. By following the four steps below, your self-storage development will perform better economically and give you a chance to succeed in future rezoning cases.

Before You Begin: The Site Assessment

It was once common to simply pass up potential sites that were not properly zoned for self-storage. Our industry has moved past this point, however, as customers demand conveniently located, high-quality and aesthetically pleasing facilities. You may already own a site (long-time family land that has become the center of a rapidly developing retail hub) or, more commonly, have under contract for purchase a prized site in a retail corridor (good traffic, demographics, visibility and access) that requires rezoning for a self-service storage use.

Note that I didn’t use the term “mini warehouses.” While this term is still commonly referred to in zoning classifications, it’s a misnomer, as it implies an “industrial” look and feel. You don’t want to convey that thought to planning and zoning officials.

Steps 1 and 2: Read the Rules and Do Your Homework

The first step in any rezoning is to do some research. Look at the current zoning of the site and local area and determine exactly what’s required for a self-storage development. This information can be found online in most municipalities. Many jurisdictions require the submission of a formal plan, a meeting with affected neighbors, a meeting with a development-review committee, and then a planning and zoning public hearing.

At the formal rezoning hearing, sometimes called a public hearing, a simple majority vote of the planning board may be all that’s necessary for approval, or it may require a majority vote and then a final hearing at city council or county commission. It’s important to know the rules of procedure for a successful self-storage rezoning.

The second step is to look at how the area around your site is currently developed. Are there nonconforming uses that may help you win a rezoning of your site? Perhaps your property has unique characteristics such as size, shape and topography that might prevent the development of the uses originally envisioned by the planning and zoning staff.

Look at the history of the site and area as well. Was it always a commercial or retail use, or was it farmland? Has the area had a tradition of allowing commercial uses? Does the existing area-zoning plan favor commercial development? In other words, if the existing area-zoning plan calls for retail or commercial development, your self-storage rezoning case is much stronger than if it calls for a residential development, for example.

Step 3: The Preliminary Rezoning Meeting

The third step is to schedule a preliminary face-to-face meeting with the planning and zoning staff. This first meeting is very important and should convey that your self-storage development will be high-quality and aesthetically pleasing. Your goal is to find out what’s important to the planning and zoning staff so they’ll support your rezoning, and what’s important to the board, which normally has authority to approve your request. Educate the staff as to exactly what a modern self- storage store really looks like. This helps you overcome traditional objections.

For example, additional buffer yards with heavy landscaping, special low-impact LED lighting, and all-brick exteriors may be very important in your community. You just have to listen to what the planning staff tells you at this point, and then try to incorporate it into your design.

Even if you don’t have a complete warm and fuzzy feeling after your preliminary meeting, as long as the staff was at least amenable to considering the proposed use, proceed to the formal request. If, however, you received a significant amount of pushback, you might want to pass on the site. A hostile reaction means your site may have struck a nerve deep within the planning and zoning department. It might be a historic neighborhood, future light-rail corridor or a high-end residential area. Any of these will require an extraordinary effort to overcome.

It just might be too expensive and restrictive for an economically viable self-storage development. It’s prudent to walk away from these types of sites. Pick a battle you at least have a chance of winning.

Step 4: The Formal Rezoning

The final step is to present your case for rezoning at the formal public hearing. Along the way, you may have had several additional meetings with the planning and zoning staff, a development review-type of meeting and even a neighborhood-area meeting. It depends on the exact rules of your municipality. These meetings will help shape your final presentation to the planning and zoning board.

You may be able to just go it alone, but the more complex the case and the more sensitive the area, the more you may need a team of experienced professionals to accomplish a successful rezoning. Your team may include a land planner, civil engineer, architect and, perhaps, a real estate attorney. Of course, you, as the developer, are the most important individual on the team.

You may be a first-time developer or a seasoned veteran, but always use some type of static display that illustrates what you want to build. Show a full-color site-plan storyboard with building layouts, adequate parking, traffic flow, storm-water detention and, of course, heavy landscaping and buffer yards. Show the look of the proposed buildings with architectural features and brick exteriors. Highlight the positives of self-storage, such as the minimal traffic impact, a quiet use—especially with climate-controlled and higher-end storage developments—and the minimal detriment to adjoining property owners. Explain that the traditional negatives—industrial look, light pollution and crime—are unfounded.

Your entire team of professionals should attend the formal hearing and be ready to answer any questions the board may have. Keep your presentation short, highlight the storyboards with your site plan and renderings, and sit quietly and patiently as the board deliberates your planned rezoning. The zoning code may allow the board to simply approve your request or may require a final hearing at a city or county meeting. Normally, this is a similar presentation on the developer’s part. Again, this depends on the local zoning code.

Do your research, and listen to the experts you’ve hired and the planning and zoning staff. If you present your case in a professional manner, more often than not, you’ll win the rezoning you need to move forward with your self-storage development.

Jeffrey B. Turnbull is the president of Kodiak Mini Storage LLC. He has been involved in the self-storage business as a developer, owner and operator for more than 18 years, and currently owns three stores in the Charlotte, N.C., market. He’s a licensed attorney in North Carolina, a licensed real estate broker in North and South Carolina, and a past president of the North Carolina Self Storage Association. He's also a frequent contributor to “Inside Self-Storage” and a speaker on various industry issues. He can be reached at [email protected].

Steve Mitnick, owner of STORExpress, a Pennsylvania-based self-storage operation, recently opened 448 Studios Artspace and Bandrooms, a mixed-use facility in Etna, Pa. The two-story building comprises 40 spaces designed specifically for use by artists and musicians. Facility amenities include free WiFi, natural skylights, modern ventilation systems, a community lounge and chalkboard walls, according to the company’s website.

Mitnick purchased the property two years ago and decided to open a facility dedicated to mixed use after offering band-practice rooms at a STORExpress location on Pittsburgh’s South Side.

“Steve was going to do office spaces, but I thought we should try band rooms. So we did them on the first floor, and they were doing really well,” said Jen Gindele, facility manager. “Then something sparked in him when one of our band-room tenants was also very artsy. She sparked the interest, and it took off from there.”

The studio concept has been a hit with local artists. The facility houses 37 tenants, leaving just 10 spaces unoccupied, according to the source. Studio space ranges from 100 to 325 square feet, with rents between $170 and $350 per month. Tenants have 24-hour access.

“I’ve been hired to paint pieces for the San Francisco 49ers along with several other artists, and this is the ideal space to work in,” said tenant Tom Mosser. “It’s the best studio situation I’ve ever had.”

“There’s a wonderful community atmosphere,” added Melissa Kuntz, also an artist tenant. “Of all the studios I’ve worked in, this is the best one. I like that everyone here has a career, and they’re working, too.”

In addition to painters, tenants include glass workers, jewelry makers and a personal trainer, according to the source.

Founded in 1998, STORExpress operates seven self-storage facilities serving Pittsburgh and Western Pennsylvania.

SpareFoot, an online marketplace for self-storage consumers, has partnered with the Automated Housing Referral Network (AHRN), an online military-housing resource, to assist current and former military personnel in finding storage space. AHRN is working with various service providers to expand its scope of services related to permanent change of station (PCS) orders, relocation and career transitions for its members.

AHRN will work with MilitaryStorage.com, a website powered by SpareFoot that enables members of the armed forces to locate self-storage facilities that offer military discounts. SpareFoot operates the website in partnership with the National Military Family Association (NMFA). The company launched the site earlier this year, and for every reservation made through the website that results in a move-in, SpareFoot donates $1 to the NMFA.

AHRN has also partnered with the military-networking website RallyPoint.com and uShip.com, an online marketplace for moving and shipping resources serving the military-relocation, freight, household-goods and vehicle-shipping markets. Together, uShip and MilitaryStorage.com enable military members to select a moving company or self-storage facility based on user reviews, pricing, location and timing, AHRN officials said in a press release.

“We are excited to partner with organizations that share the same dedication to serving the military community and providing quality services to military members and their families,” said Paul Giese, product manager for AHRN.com. “These complimentary services provide AHRN.com members with access to resources beneficial during a PCS/relocation and/or career transition, in addition to housing information provided through AHRN.com since 2004. These organizations are committed to assisting military families throughout their military career, from initial entry to exiting the service, including all the moves in between, which aligns with the AHRN.com mission.”

The RallyPoint website is used by military personnel during PCS relocations and career transitions and shares the same audience with AHRN.com, officials said. The partnership will “enable members of both websites to obtain access to trusted resources for success in three key areas of military life: career, housing and connections,” according to the release.

"We're excited to work with AHRN.com because our organizations both strive to serve the military community,” said Yinon Weiss, RallyPoint CEO. “RallyPoint’s reach mixed with the PCS resources offered by AHRN.com should help service members enjoy more fluid transitions. We look forward to working with AHRN.com to improve a piece of military life that has left so many unsatisfied in the past.”

Founded in 2004, AHRN.com connects the military community with available housing at more than 500 military installations. The website has assisted more than 1.4 million military members across all service branches find housing, company officials said.

Founded in 2008, SpareFoot helps consumers find and reserve self-storage units, with comparison shopping tools that show real-time availability and exclusive deals. With a network of more than 7,000 storage facilities ranging from mom-and-pop operations to real estate investment trusts, the company reaches prospective storage renters though partnerships with brands including SelfStorage.com, Apartments.com and Penske Truck Rental.

The U-Haul Co. of Iowa has purchased and renovated 16^th Avenue Storage in Cedar Rapids, Iowa, a self-storage business consisting of 11 single-story buildings and a two-story office and apartment on 5.4 acres of land. The facility at 1550 16th Ave. SW contains  61,530 square feet of storage space and 45 RV-parking spaces. It will be rebranded as U-Haul Moving and Storage of Cedar Rapids.

The facility also offers U-Haul truck and trailer rentals as well as towing equipment.

 “The building was in disrepair and close to being functionally obsolete,” said Randy Dickson, marketing company president of The U-Haul Co. of Iowa. “We are glad to be able to save this facility, refurbish it and offer a superior product to our customers."”

The acquisition was driven by U-Haul’s corporate sustainability initiatives, which supports infill development to help local communities lower their carbon footprint, according to a company press release. U-Haul’s adaptive reuse of existing buildings eliminates the amount of energy and resources required for new-construction materials and helps local cities diminish their unwanted inventory of unused buildings, U-Haul officials said.

Established in 1945, U-Haul International Inc. has more than 40 million square feet of storage space at more than 1,000 owned and managed facilities throughout North America.

By Pearl Pugh

We’ve all heard the familiar phrase “quality over quantity,” but rarely do we associate this with our self-storage customers. After all, reaching peak occupancy is our No. 1 goal as facility operators, and we should be focused on closing every sale possible, no matter what we have to do to get there. Or should we?

What good is a high occupancy rate if the delinquency rate is high as well? Or if revenue hasn’t increased? These two questions have lingered in my mind for years as I’ve watched storage owners and management companies scramble for—and even demand—higher occupancy rates, no matter the cost.

On the flip side, I’ve also witnessed storage companies avoid this pitfall, find success and flourish. When we put quality over quantity, it becomes evident to customers and, as a result, attracts more long-term, loyal tenants.

A Tale of Two Businesses

A few years ago, I was working for a storage company where occupancy rate was not a top priority. Instead, we focused on overall income, curb appeal, customer retention, return business and clever marketing. In lieu of renting to customers who would never pay more than the move-in special and end up costing time and money to auction, I had more time to collect past-due rents and maintain a truly lovely facility. Not surprisingly, the company remains very successful. Its occupancy grew organically without having to sacrifice quality in the process.

In contrast, I later worked for a storage company where the top priority was occupancy rate. Nothing else seemed to matter, and it showed. Trees and shrubs were allowed to overgrow the keypad area so customers complained. Mechanical doors went unserviced for so long that some tenants vacated. When I inquired about these issues, I was told the landscaping and maintenance dollars were reallocated to advertising because the occupancy rate was a concern. That company struggled to stay afloat and is now no longer in business.

Occupancy as an Indicator

While this may be an extreme case of misdirected efforts, the practice of getting to full occupancy any way possible is a common one in our industry. Clearly, occupancy is what we are after; no one wants empty spaces. But my point is this cannot be forced. Occupancy must be pruned and maintained. Occupancy growth is the result of doing everything else right. If occupancy is failing, it’s an indication that an underlying issue is present. Think of occupancy rate as the thermometer by which we check the temperature of a facility.

Not every customer is good for business. This is the reason you’ll sometimes see a “We reserve the right to refuse service to anyone” sign in many restaurants and other establishments. It’s an unfortunate part of society that some people cannot be trusted, but it also shouldn’t be ignored. Unsavory characters can be a top driving force in losing prospective customers who would otherwise be self-storage tenants.

A great way to pre-screen customers is by offering specials that are spread over a two- or three-month period rather than promoting a $1 move-in special. While a $1 move-in might get you rentals, it may also lure tenants who are more work and expense than they’re worth. In contrast, someone who plans ahead enough to calculate his expenses is already one step in the right direction as far as renting a storage unit is concerned. This is the type of tenant who brings a little peace of mind because he truly does plan on paying you on a regular basis.

Another way to avoid problem tenants is to trust your instincts. If someone seems like he is up to no good, acts a bit sketchy, chain smokes, reeks of alcohol or drugs, or is excessively loud and obnoxious, etc., it might be a good idea to pass on his business. If you wouldn’t trust to store your belongings next to this person, chances are your tenants won’t either.

The quality of occupancy at a self-storage facility should matter far more than the percentage rate. In the end, better tenants equal better business.

Pearl Pugh is facility manager at San Jacinto Storage in San Jacinto, Calif. Since 2001, she has worked for multiple companies as a relief manager, assistant manager, facility manager, district learning specialist, senior store manager and district manager in training. In her spare time, Pearl is an avid crocheter.

Chicago-based The Lock Up, which operates 30 self-storage facilities in eight states, was recently featured on “NewsWatch,” a 30-minute consumer-oriented television show that airs weekly on ION Network and monthly on FYI Network and the History Channel. Hosted by Susan Bridges, the show regularly features popular technology products and services, as well as travel destinations, health and medical tips, and entertainment interviews.

The Lock Up was reviewed as part of the show’s monthly “Biz Report,” which looks at small- and mid-sized companies that are making waves in their industry. Mallory Sofastaii, a host of “NewsWatch” and a business expert, said the company is “leading the charge” in the self-storage field, setting itself apart via its “eagerness to embrace modern technology.”

Sofastaii specifically called out the company’s new mobile application, available for free on iOS and Android devices, which enables tenants to keep track of their unit numbers and gate-access codes, pay their monthly bill, get directions to their unit, call their facility and more. “It’s a perfect example of a traditional industry using modern technology to create a more accessible and seamless experience for the end user,” Sofastaii said.

Based in Washington, D.C., “NewsWatch” was launched in 1990. It airs on more than 55 broadcast stations. Each edition of NewsWatch is aired more than 240 times, reaching more than 100 million households nationwide, according to the show’s website.

The Lock Up operates 30 facilities comprising more than 1.6 million square feet throughout Connecticut, Florida, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey and New York.

Storage Etc., which operates more than 20 self-storage facilities in California, Colorado and Utah, recently purchased a three-property portfolio from AMS Group LLC for $16.4 million. The American Mini Storage facilities in Diamond Bar and Rosemead, Calif., plus the AMS Mini Storage facility in North Pomona, Calif., consist of 155,005 rentable square feet of storage space, 1,424 units and 72 RV-parking spaces. The properties will be rebranded as Storage Etc.

The family-owned and -operated portfolio was approximately 80 percent occupied at the time of sale, according to Marc Boorstein, principal with MJ Partners Real Estate Services, which brokered the deal. “The single-story facilities allow for value-added improvements within densely populated, infill trade areas,” said Boorstein, who represented both buyer and seller in the transaction in conjunction with Fred Cordova of real estate firm Kennedy Wilson.

Based in Covina, Calif., AMS Group also operates Archive Management Solutions, which offers records storage in Covina, and has its own construction division.

Founded in 1999 and headquartered in Los Angeles, Storage Etc. is a real estate development, investment and management company focused on purchasing, constructing and operating self-storage and other real estate in the Southwest. The company has built or acquired more than $100 million in self-storage assets for investors, owners and its own portfolio.

Headquartered in Chicago, MJ Partners is a full-service real estate brokerage and investment banking company specializing in commercial real estate, mortgage banking and consulting services. The company's clients include major financial institutions, private equity funds, REITs, opportunity funds, insurance companies, pension-fund advisors, corporations, private developers and entrepreneurial businesses.

HFF (Holliday Fenoglio Fowler LP), a provider of commercial real estate and capital-markets services to self-storage and other commercial sectors, has hired Richard Schontz as a managing director in its Philadelphia office. Schontz will focus on self-storage investment sales transactions nationwide and be a member of the firm’s National Self-Storage Group, company officials said in a press release.

Schontz joins HFF from commercial property investment firm Marcus & Millichap Real Estate Investment Services, where he was a senior associate and director within its National Self Storage Group. While in this role, he closed more than 2 million square feet of self-storage transactions in nine states and ranked in the firm’s top three agents in the self-storage group and the Philadelphia office, officials said.

Schontz is a member of the Pennsylvania Self Storage Association and national Self Storage Association.

“HFF is thrilled to have Richard as part of our team,” said Mark Thomson, senior managing director of HFF Philadelphia. “He has a keen understanding of the national self-storage market and brings with him deep relationships with many of the self-storage investors and owners in the U.S.”

HFF and HFF Securities LP are owned by HFF Inc. HFF operates out of 22 offices nationwide and is a provider of commercial real estate and capital-markets services to the U.S. commercial real estate industry, including self-storage.