By Nancy Torres

When you think about Latin American self-storage customers, one size doesn’t fit all. Those from outside the area often perceive the region as a whole, when in reality, Latin America encompasses 21 distinct countries spread across the Caribbean as well as Central, North and South America.

While it’s easy to fall into the trap of thinking that shared language equals shared values and behaviors, communication between people of different cultural backgrounds involves much more than overcoming the linguistic barrier. Hidden differences often cause a great deal of misunderstanding and friction.

This article examines some shared characteristics of Latin American self-storage customers and others that are more country-specific. Information was gathered through interviews with facility operators in Brazil, Chile, Colombia, Guatemala, El Salvador, Mexico and Panama. Understanding these similarities and differences can significantly impact a self-storage operator’s success in the region.

Shared Characteristics

Throughout Latin America, the main users of self-storage are males between the ages of 36 and 55. The male-to-female ratio is about 60/40. These customers belong to the middle-upper or upper class, which limits the consumer base to about 40 percent of the population.

Customers live in the metropolitan areas, sometimes for their entire lives. They don’t like to move farther than 15 kilometers away from a large city. Industry statistics show that only 3 percent of self-storage customers live more than 10 kilometers away from their facility.

Most Latin American customers don’t know what self-storage is. In fact, there are about 10 different terms for the product in Spanish alone. But whatever self-storage is called, one thing is true: “Personalismo” (face-to-face interaction) is an important part of establishing and maintaining good customer relations. That said, there’s less openness in providing personal information, which is mainly given on a need-to-know basis.

Finally, in this region, it’s not impolite or unusual for customers to ask for discounts. They like to bargain. They also trust referrals from family and close friends more than any kind of advertising.

Fluctuating Characteristics

The amount of commercial vs. residential storage found in each country will vary. It often depends on how each storage facility came into existence. If it’s part of a moving company, residential tenants will be as high as 90 percent. If it started as part of a warehousing company, commercial tenants will be as high as 80 percent. Facilities that were conceived from the beginning as self-storage generally have a 55/45 commercial/residential mix.

Security is a major issue in Latin America. The sense of life’s unpredictability and the role of “destino” (fate) is imbued in many cultures. But in countries that have experienced or currently suffer from civilian unrest and natural disasters, you’ll notice they not only use the traditional surveillance equipment (CCTV, gates and door alarms) at storage facilities, they also have armed guards. Customers need proof that their belongings are fully protected. This is true in the Andean countries, most of Central America and Mexico.

Especially in South America, where the culture follows a more European model, emphasis is placed on aesthetics as a way to indicate one’s place in society. This extends to venues where customers shop. Therefore, those storage facilities that invest in curb appeal are more successful.

In some countries, such a Chile and Panama, there’s a general emphasis on “being” rather than “doing.” As a self-storage operator, you must consider offering personalized service. For example, you could provide a “bellboy” (for lack of a better term) to pick up and move customer goods for a nominal fee.

Similarly, because of this emphasis on not “doing,” sales of retail products such as boxes, tape, ropes, etc., are minimal in some countries. Some facilities don’t even offer them.

These cultural differences are only a few of the challenges facing self-storage operators who wish to run a business in Latin America. Understanding that the populace views each country as distinct is a critical factor of success.

Nancy Torres is the Latin America business-development director for Janus International, a global manufacturer of self-storage doors and partitioning systems, for which she cultivates business in the region. With eight locations throughout Europe, Mexico and the United States, Janus is slated to open a manufacturing facility in Brazil in 2015. For more information, e-mail [email protected]; visit www.janusintl.com.

Milwaukee Storage Partners LLC, a Chicago-based development group, purchased a 124,247-square-foot warehouse in Milwaukee for $3 million, which it plans to convert to a self-storage facility next year. The seven-story building at 420 W. St. Paul Ave. is currently being leased to Iron Mountain Inc., a records-management firm. Renovations will begin once the lease expires in 2016, the source reported.

Owned by Ace Industrial Properties, the warehouse is across from the Milwaukee Intermodal Station, the main intercity bus and train station. It had been on the market for about a year, mainly marketed to apartment developers due to the residential boom in downtown Milwaukee, according to John Kuhn, a principal with Siegel-Gallagher Inc., the company that represented the seller. Kuhn listed the building with Bill Quinlivan, director of industrial properties for Siegel-Gallagher.

The city’s apartment boom is what partially attracted the buyer, said Kurt Van Dyke, senior vice president of real estate firm DTZ Barry, the buyer’s representative in the transaction. “Part of the appeal is all of the new apartments going up in Milwaukee,” he said, adding that the storage company also liked the building’s visibility from the interstate.

Milwaukee Storage Partners has developed similar self-storage projects in the market, Van Dyke said. It will seek a national management company to operate the facility, which will include temperature-controlled units and a retail store that sells moving and packing supplies.

America’s Capital Partners (ACP), a Florida-based real estate investment company, recently acquired a property in Miami, Fla., on which it intends to launch a self-storage business. The parcel at 2645 N.E. 186th Terrace will be home to the first Got Room storage facility, which will comprise 120,000 square feet in 975 units. Construction is scheduled to begin this fall, according to a press release.

The property is near the Aventura Mall. The multi-story facility will feature climate-controlled units ranging from 5-by-5 to 10-by-30 feet. “The central location of this property at the intersection of Miami Gardens Drive and West Dixie Highway provides good visibility and lends itself to a storage facility,” said Sergio Socolsky, CEO. “We have had tremendous success with storage facilities as part of our portfolio and look forward to launching a new brand with Got Room.”

ACP is a fully integrated private real estate investment company headquartered in Coral Gables, Fla., with regional offices in Atlanta; Charlotte, N.C.; and Tampa, Fla. In the last 15 years, the company has acquired, leased and managed more than 18 million square feet of office space in major markets along the East Coast with an aggregate asset value of more than $4 billion dollars, according to the release.

Alan Mruvka, founder of E! Entertainment Television and the new StorageBlue self-storage brand, has launched a Web-based television channel on YouTube that will feature a variety of shows related to self-storage, celebrities, do-it-yourself home projects and flea markets. StorageBlueTV recently debuted with six episodes of “Storage Pirates of New Jersey,” which chronicles the bidding wars that ensue during lien sales at Mruvka’s four New Jersey self-storage facilities. StorageBlue LLC was launched in April.

“Storage Pirates” is a reality-based show that features veteran bidders from around New Jersey, according to a press release. "It's ‘Storage Wars’ meets ‘The Jersey Shore,’ with the personal competition of ‘Real Housewives’ thrown in," said Mruvka, who plans to premiere a new episode of the show once per week. "It's very real and very funny." The episodes run about five to six minutes each.

“Flea Market Treasure Hunters,” a show that will follow StorageBlue hosts attending flea markets across the nation in search of “unsold treasures,” will debut in July, according to the release. Other future programming includes “Celebrity Closets: StorageBlue,” which will take viewers inside celebrity closets, and “Red Carpet Storage,” which will feature celebrities being asked offbeat questions about personal storage.

Mruvka believes YouTube channels will “become the next generation of online television,” according to the release. Now in its 31st year, E! is owned by Comcast and valued at more than $12 billion, according to an earlier release.

Mruvka has more than 30 years of experience in the real estate and entertainment industries and previously helped build the American Self Storage brand, company officials said.

StorageBlue’s current portfolio serves the New Jersey communities of Hoboken, Jersey City, Newark and Union City. The company recently refinanced its portfolio by securing a $31.25 million loan to help fund its plans for national expansion.

Rochester Self Storage in Rochester, N.Y., is hosting a grand re-opening ceremony on July 11 to celebrate the completion of its recent property renovations. Open to the public, the event at 14 Railroad St. will take place 9 a.m. to 1 p.m. and include facility tours, food, giveaways and activities for kids.

The four-story, 69,000-square foot facility contains 265 storage units and commercial warehouse space. Upgrades included a change to the entrance off of Railroad Street, the main artery that leads to Rochester’s Public Market, a farmer’s market offering beverages, food and general merchandise. The storage building was renovated to better match the historic Market District community, and additional storage units and security features were added.

The facility also features covered dock-high or grade-level entry doors with an indoor staging area and two elevators, according to a press release.

Rochester Self Storage is managed by Storage Asset Management Inc., a York, Pa., company that oversees more than 45 self-storage properties and three UPS Stores along the East Coast.

Richland Self Storage in Aiken, S.C., hosted a community barbecue on July 3 to celebrate Independence Day and raise funds for Wreaths Across America (WAA), a nonprofit organization that places wreaths on the graves of fallen servicemen. The storage operator donated money to the cause and encouraged its customers to contribute.

Mitchell Fretwell, a U.S. Navy veteran who was at the facility helping his daughter, Sherise, move into her storage unit, told the source he was “glad” to see local businesses stepping up. “I’m a Vietnam vet, so I understand that we need to help our veterans as much as we can.”

A golf tournament held earlier in the week also raised funds for WAA. Hosted at Houndslake Country Club, the event was organized by Tony Venetz Sr. in honor of his son, Anthony Venetz Jr., a Green Beret who died in 2011 from a non-combat-related incident in Afghanistan, the source reported.

Peter Palmere, facility manager for Richland Self Storage, presented Venetz with a check during the holiday event, choosing to support the cause on a local level so wreaths might be displayed in Aiken cemeteries, Palmere told the source. “We want to recognize people who have sacrificed for our future. That’s what we’re about, and that’s what we want this organization and local people to know,” he said.

The donation “meant a lot to the organization,” Venetz told the source. “It’s important to give our veterans the respect they deserve, and there’s no better time to do that than right now.”

Founded in 2007, WAA supports and coordinates wreath-laying ceremonies nationwide. In 2014, its national network of volunteers laid more than 700,000 memorial wreaths at 1,000 locations in the United States and beyond.

Opened in 2014, Richland Self Storage is owned by Brad Brodie and Dr. Nini Patheja. The facility offers traditional and climate-controlled storage.

Stor-It Self Storage owners Scott and Todd Vanacore recently acquired a 9-acre property in Palm Coast, Fla., for $625,000. The brothers intend to develop a six-building self-storage facility comprising 180,000 square feet of storage space including covered spots for boats and RVs. Land clearing at the northwest corner of State Road 100 and Belle Terre Parkway is scheduled to commence within 60 days, with construction expected to take nine to 12 months, according to the source.

The project will be the first Stor-It location in Flagler County, Fla. The Vanacores also have a development underway in Volusia County, Fla., on the site of a former Ford dealership, the source reported.

Stor-It currently operates two self-storage facilities in Ormond Beach, Fla., where the Vanacores also own Vanacore Homes, a Central Florida homebuilder. Stor-It facilities offer climate control, gated access, moving supplies, package acceptance, pest control, and security that includes resident managers and video cameras, according to the company website.

A customer at Cordata Self Storage in Bellingham, Wash., was arrested last week after allegedly pointing a BB gun at another tenant during a dispute over facility-gate entry. Jeffrey James Hansen, 39, reportedly tailgated through the property’s access gate behind a vehicle being driven by an unidentified, 51-year-old man. When the older gentleman confronted him about failing to enter his own access code at the gate, Hansen allegedly threatened him with a Walther CP99 compact air pistol, Lt. Bob Vander Yacht told the source.

The older tenant used his gate code to enter the property at 200 W. Kellogg Road at 9:56 p.m. on July 1, according to Vander Yacht. While the gate was open, Hansen supposedly entered the facility in his truck without entering his code. When the man chastised him, Hansen told the older customer to get back and pointed the BB gun at him, according to the source.

The older man “put his hands in the air, closed his eyes and anticipated the gun was going to be discharged,” Vander Yacht said, adding that the victim didn’t realize the weapon was a BB gun.

Police found Hansen driving his vehicle shortly after 10 p.m. and arrested him on suspicion of harassment and unlawful carrying or handling of a weapon capable of producing bodily harm, according to the source. Hansen was booked into Whatcom County, Wash., Jail last Thursday.

By Bill Alter

It isn’t easy to be a buyer of self-storage facilities these days. This exuberant market makes it especially difficult to purchase a property that’ll be profitable to operate and relatively simple to exit. The task becomes even more challenging when there are multiple offers on the facility you’d like to buy. To succeed in these situations, you must establish yourself as the seller's best choice. (Sometimes it’s even more important to be the listing broker's best choice. How to accomplish that feat will be addressed later in this article.)

Sellers choose the buyer with whom to negotiate and to whom to ultimately sell their property based on price and several other criteria. The best way for you to establish credibility is to have a track record of closed transactions. It’s powerfully persuasive to have a previous seller tell the current one how great it was to work with you. It assures the new seller that you’ll close his sale if everything about the property proves to be as represented.

Absent a recommendation—for example, this is your first deal—a seller will evaluate your offer based on other standards, including:

• The format and attention to detail in the offer you present. Short, sweet and to the point—addressing every key deal point, but not too detailed—is the way to go.
• The length of the requested inspection period, and the list of due-diligence materials and financial records that’ll be requested from the seller.
• The amount of the earnest deposit offered. Large deposits can trigger a seller’s interest in your offer because it indicates you’re serious about the deal.
• What happens to the earnest money after the inspection period is concluded. Will it be increased? Will some become non-refundable?
• The specificity of your finance contingency, if any, and what happens to the earnest deposit at the expiration of the finance contingency. Let the seller know you seek realistic and readily available loan terms.
• How long it will the deal take to actually close escrow. Consider that you need 30 days for inspections, 30 more for the loan and 15 days to close.
• Additional documents, such as references from other lenders, letters of credit, proof of sources of funds, and perhaps even a commitment letter from a lender for the property in which you’re seeking to buy.
• Whether you’re professionally represented. A seasoned self-storage broker will work with buyers (a lazy one may not), so ensure you have the most experienced broker on your side to provide guidance.

To be a successful buyer, you must understand these criteria and be prepared to address each one with the seller to the best of your ability. A seller wants to know the buyer can and will close the deal. Tell him your due diligence will consist of a series of investigations in search of reasons that support the purchase rather than a search for reasons why you shouldn’t make it.

The Investigation Period

Now that you have the seller's attention, it’s important to maintain focus on getting your offer accepted, a contract drafted and signed, and escrow opened. Until the contract is signed, you have nothing. I can't tell you how many times a transaction appears to be progressing only to have another more aggressive buyer swoop in at the last minute and steal the deal. This is a high-stakes business, and there are no holds barred in the competitive acquisition process.

After the opening of escrow, the due-diligence clock begins ticking. During this period (usually at least 30 days) you’ll:

• Audit the financial records of the business to verify the current occupancy and income are as represented.
• Investigate to determine what direction the business is headed. You’ll need to decide if the operation is getting better, declining or holding steady.
• Carefully conduct a property analysis to determine how competitors’ rental rates compare to those of your desired property and, if possible, how occupancy rates compare as well. You and your broker should research the market for new properties that are under construction, planned or being contemplated. This’ll take a lot of time, but it’ll be invaluable in your analysis of actual and potential competition.
• Compare the quality of competitors' managers, marketing programs, online effectiveness and amenities with those offered or being considered for your desired property.

These investigations will help you understand how much you can reasonably expect to increase your return on investment once you own the property and begin operating it. An experienced storage broker can assist in all of the above.

Now What?

Being a commercial real estate buyer means you must have a detailed and strong acquisition strategy, operational asset-management strategy and a few strategic disposition strategies. Often, a new buyer enters a new product type or market, successfully purchases a property, and then asks, “Now what?”

Prior to the acquisition, and even before writing an offer on the property, a buyer should have a strong operational asset-management strategy. At a minimum, this should involve knowing the answers to the following questions:

• Will you manage the property yourself, or will you hire a third-party management company to oversee day-to-day operation?
• What type of software will be used for access, accounting and operation?
• How many and what kind of employees will be needed? These include full- and part-time managers, maintenance and landscaping staff, security, etc.
• Which services will be conducted in-house and which will be contracted with third parties? These can include advertising, landscaping, maintenance, marketing and security.

In addition, you’ll need to closely monitor your in-place financing. Buyers sometimes think that making payments is all that’s required with debt and neglect the operational requirements of financing. You need to watch your debt-service payments, debt-to-income ratios, required documentation submittals to lenders, and balloon-payment requirements and due dates. You also need to supervise your improvement holdback and release requirements; you shouldn’t want the lender to control holdbacks any longer than legally necessary.

Finally, as a buyer, you should always be cognizant of macro-market conditions or anything else that might trigger the execution of your exit strategy. Constantly perform a hold vs. sell analysis. Being a buyer means always planning and fine-tuning your acquisition, asset-management and disposition strategies.

Bill Alter has been a self-storage facility sales specialist with Rein & Grossoehme Commercial Real Estate since 1986. He has been responsible for the sale of 140 facilities totaling more than 7,500,000 square feet and more than $300 million. To reach him, call 602.315.0771; e-mail [email protected].