Self-Storage has been one of the fastest growth industries to enter the American economy in the past 30 years. Its success can be attributed to a variety of factors, but one of the main reasons has been the industry's ability to evolve quickly as more of the public has been educated to the value of its use. As public awareness increased, storage demands increased, which in turn gave rise to the tremendous growth of both institutional and private self-storage development.

This nearly instantaneous growth in market competition sparked the need for specialty vendors and new technology to support the industry's continued expansion. The final evolutionary step is the search for the most cost-effective means to develop the most marketable facility while maintaining the highest return on investment. Since the self- storage product is storage space, the quest to develop the most economical, marketable facility centers on the design of its components. Nothing in the 30-year history of self-storage is more evident of this quest for success than the evolution of self-storage design.

The Evolution of Basic Design

The first- and second-generation self-storage facilities were those developed before 1970 and by the mid-1980s, respectively. The vast majority of these facilities had site plans that incorporated very poor land utilization, and unit mixes that were not based on local demand or placed for the best use by the customer. The storage buildings were a mixture of expensive commercial designs that incorporated components requiring extensive maintenance over time. In addition, the designs did not allow for the flexibility of changing the unit mix without very expensive building modifications.

In comparison, today's self-storage facilities have economic land coverage, maximizing land utilization and lowering the cost of the land vs. the facility's net rentable square footage. The vast majority have standardized their unit mixes based on the demands of the market, and have user-friendly positioning of unit sizes based on commercial and residential users. These same facilities have "master-planned" any remaining land to facilitate future phase expansion. Today's building designs are economically feasible, since they incorporate the most available local building products and the industry's most cost-effective building technologies. Current designs utilize "long-term, maintenance-free" design components, and have incorporated maximum flexibility for future unit-mix changes or other building modifications.

Driving Factors for Evolution

As you can see, there are major evolutionary design differences between those first- and second-generation facilities and today's self-storage properties. The main causes of this design evolution are centered around a constantly changing market, which has given evidence to three primary driving factors.

The first market-driven factor has been the ever-increasing cost of land. Caused by increased competition and the market's maturity of other real-estate development, the availability of economically feasible sites has greatly decreased. Thus, as the land increases in cost, the self-storage developer has been forced to maximize land coverage to decrease the cost of the land to his net-rentable square footage. As a result, cost-effective designs have become even more important--along with "maintenance-free" design-component considerations and building-design flexibility.

The second driving factor for evolution has been the increase in cost for building-design components. As many real-estate markets have "heated up," so has the demand for building materials and labor. Therefore, today's designs have been incorporating components that are both locally and nationally available to keep cost in line. For example, the cost of using concrete tilt panel walls may be prohibitive when prices for concrete are $90/cyd vs. other parts of the country where concrete is readily available at $52/cyd. In addition, building designs that allow for the use of specialty metal- building contractors vs. a commercial steel contractor could result in a savings of $3 to $4 per square foot.

The last driving factor has been the constantly changing jurisdictional requirements by local, state and federal government agencies. Zoning departments increasing setback distances, fire marshals increasing fire-lane widths, and new landscape ordinances increasing area percentages are just a few examples of jurisdictional changes that have greatly affected site coverage and increased land cost per net-rentable square foot in some markets. In addition to these factors are the building-code changes for fire separation, fire-code changes requiring fire sprinklers, and the zoning departments' requirement for buffering adjacent land.

Site Planning

In today's self-storage marketplace, the first key to having the most marketable and economically feasible facility is proper site planning. And the key to proper site planning is an understanding of the cost variables. Everyone in real estate has heard the old saying, "The three keys to success are location, location, location." For successful site planning, those three keys are the cost of the land, site coverage and the cost of site improvements. These three keys are the most important elements, not only to successful site planning, but also for the insurance of the facility's greatest economic potential.

As discussed, land prices will continue to increase and the availability of good sites will continue to decrease. As this market condition continues, most available sites cannot be used for any other purpose than that for which they were zoned--for one reason or another. Therefore, the good remaining retail sites may have an attractive price, but due to natural grades, existing easements, drainage, utility requirements and a host of other factors, the price for the land may be well beyond affordable for self-storage development. Understanding the normal cost of developing a self-storage property, along with the rents necessary to justify this expenditure of capital, is the key to determining what you can pay for the land along with any additional cost associated with its purchase.

With the impact of jurisdictional changes and normal zoning requirements, site planning to maximize site coverage will be the key to economic success. The more net-rentable square footage per land area (or increased site coverage), the less the cost of the land is to the development. The lower cost of the land over the facility's net-rentable square footage, the greater chance of site feasibility and the property's chances for the highest return on investment.

The last key to proper site planning is understanding the cost of site-work improvements. Site work normally includes grading, site concrete, paving, retaining walls, storm drainage, water and fire, sanitary sewer and landscaping. In regards to normal facility construction, site improvements have the greatest variable in cost, ranging from $4 to $10 per gross building square foot. Therefore, determining at least an estimate of what these costs are going to be is essential in determining, not only the site feasibility, but also the proper layout of the buildings.

Ensuring the Most Economical Site Designs

Knowing this, the question then becomes, "How does one ensure the most economical site plan?" If a new developer has limited experience in self-storage development, the best way is to hire an experienced design/builder, architect or civil engineer. However, it is advised that the new developer not leave everything to the professional. Do your own homework:

1. Review how other facilities in the market are site-planned.
2. Obtain all local zoning and landscaping ordinances.
3. Check with the local building inspections department and get approved building codes with any city amendments.
4. Visit with the fire marshal and obtain approved fire codes and any city amendments.
5. Check with local utility departments to determine the availability of utilities, and if there are any unique requirements or hidden costs.

Once fully studied by the developer, the gathered information should be reviewed with a hired professional to ensure site compliance. Once a preliminary site plan has been generated, it is recommended that it be walked through the jurisdiction's departments to determine if there are any further problems. It is also recommended that a follow-up letter be sent to each department outlining the things agreed upon during those meetings.

Site-Plan Considerations

There are a variety of site-plan considerations the developer and his design professional need to make. They should consider what will effect the final cost of the facility and how user-friendly it will be to the customer. These considerations set the stage for the facility's ultimate success. Those site-plan considerations, which have the greatest effect on the typical facility costs, are as follows:

1. Site Grading vs. Building Layouts: How the storage buildings are laid out on the site in regards to existing natural grades can greatly increase or decrease grading cost.

2. Site Grading vs. Building Types: When excessive natural grades exist, the choice of building types, such as "split-level" buildings, can greatly reduce grading cost while increasing net-rentable square footage on the site.

3. Site Grading vs. Retaining Walls: Always try to design site elevations that will eliminate or minimize the use of costly retaining walls. If there is no way to eliminate them, investigate the market's most economical types of retaining walls and utilize them.

4. Asphalt vs. Concrete Paving: Due to present demands, the cost of concrete has risen from 50 percent to 70 percent in most markets. Presently, the cost of concrete paving ranges from $2.25 to $3 per square foot vs. asphalt that has prices ranging from $1.40 to $1.65 per square foot. This variance between the two has given rise to the increased use of asphalt when concrete paving is clearly the best choice. Considerations should be made in using both--asphalt for the main drives and concrete paving for turning radiuses.

5. Storm Drainage: It is always more economical to design for surface drainage than underground drainage; however, sometimes underground drainage is the only option. When this occurs, ensure building and drive elevations are designed to eliminate as much underground storm-drainage piping as possible. Always investigate and discuss every cost-saving option with your design professional.

6. Detention/Retention Basins: If they are required in the storm-drainage plan, earthen basin with 3-to-1 slopes are by far the most economical; however, they require more land area. Analyze the increased cost of vertical concrete basins, which will also increase net-rentable square footage vs. the use of earthen basins, which will cause a net-rentable square footage loss but will have greatly reduced cost.

7. Fire Service: Once an investigation has been made by your design professional as to the location and number of fire hydrants required, determine if "looped "or "dead-end" fire-service lines are required. The looped system will double your cost. Also, check with the local fire marshal to determine if detector-check values with vaults are required. They will increase your cost by as much as $20,000 and will affect the building layout.

8. Sanitary Sewer and Domestic Water: The location of existing sewer and water improvements can greatly affect the cost of tapping into them as well as the layout of the storage buildings, especially if the local jurisdiction requires easements. This should be thoroughly investigated.

Site-plan considerations that ensure user-friendliness are just as--if not more--important than those pertaining to a facility's economic feasibility. These site-plan designs increase the facility's marketability and competitiveness. The most important of these to be considered are:

1. Wide Street Approaches: Always have at least a 25-foot or wider entry approach into the facility. Wide approaches assist large trucks, especially rental-truck entries by inexperienced drivers. They will also eliminate damage to improvements located around the entry approach.

2. Parking: Lay out parking spaces so they have minimal impact on ingress and egress traffic through the facility's security-gate system. Ensure they are as close to the office as possible and adjacent to sidewalks. Standard parking spaces are 9-by-18 feet. However, increasing the parking space width to 10 feet will be greatly appreciated by potential customers.

3. Entry-Control Systems: Always design the facility entry area around the entry-control gate system. Ensure that keypads are located to allow for the stacking of at least three cars where they will not interfere with traffic and parking back-outs.

4. "User-Friendly" Unit Placement: Locate larger units on fire lanes and/or the widest drives so they are more accessible to commercial customers. Try to segregate unit sizes, placing small and larger units in different areas. Don't place smaller units across from climate-control buildings since they will increase the amount of drive traffic for climate-control customers who have to use hallways and congregate around building entrances.

5. "User-Friendly" Hallways: Design hallway entrances with either 5-by-10-foot or 10-by-10-foot covered staging areas. Locate the larger units closest to the building entry while increasing the distance from the entry for units as they get smaller. Try never to have hallways more than 100 feet between building entries or elevators.

6. Increased Drive Widths: Be sure to use fire lanes, which are usually at least 30 feet in width, to maximize traffic flow through the facility. Drives with widths of at least 25 feet are preferable and will decrease building damage in the long run.

7. Turning Radiuses: Turning radiuses are most often determined by the fire department to have a 25-foot inside and a 50-foot outside radius. But in all cases, ensure that there is at least a 30-foot distance between the buildings and curb on all turning radiuses.

8. Site Amenities:  Locate trash dumpsters so they are convenient for customers while also providing straight-line access for service trucks in order to prevent damage. It is recommended that 6-inch, concrete-filled ballards be placed on all building corners to eliminate building repairs.

Summary

Over the next decade, the self-storage industry will evolve at a much greater pace than the preceding 30 years. As market competition continues to increase along with land and construction costs, there will never be a more important time for the successful quest of the most marketable and cost-effective facility design than in the near future. The key to success in this new decade will be the developer's understanding of the driving factors that have caused past evolution in self-storage design. This knowledge will set the stage for the developer and his design team to ensure their site planning incorporates the most economical improvements while maintaining the facility's maximum marketability and competitiveness.

Mike Parham is the owner and president of National Development Services Inc. (NDS) of Bulverde, Texas, which has designed and built more than 150 self-storage properties since 1980. The company's accomplishments include receipt of the "Facility of the Year" award in 1990, 1991, 1994 and 1996, and the "Design Excellence" award from Mini-Storage Institute in 1992. For more information, visit www.ndsinc.com.

Taking the self-storage concept one step further, the up-and-coming segment of the industry is mobile self-storage--storage that comes to the customer. Many users believe mobile storage offers the ultimate in convenience, an increasingly popular attribute in today's fast-paced world. But as those who have entered the mobile-storage business know, and those contemplating such a move will find out if they do their homework, breaking into the industry is not as simple as it might sound.

An Urban Enterprise

Because of the capital-intensive nature of mobile self-storage and the market size required to produce returns, the common mobile-storage model of today only works in large metropolitan areas, says Tim Riley, founder of Door To Door Storage Inc. Regions of fewer than 1.5 million population are probably not large enough markets, he says. Riley's company operates in four key West Coast regions: the greater Seattle area; the San Francisco Bay area including Marin County, the East Bay and the San Jose areas; Los Angeles and Orange counties; and greater San Diego.

Actually acquiring the money to get the ball rolling also presents challenges. "There's a difficulty to financing this business, whereas there's typically bank financing available for someone who wants to get into traditional self-storage," Riley says. "In our business, the capital costs typically require a sizable equity investment. Anybody looking at the business should plan on having a minimum of $2 million."

The shopping list for startups is extensive, Riley points out. First, there are the containers: A minimum of 2,000 is what you probably need to base your business model on. Warehouse space, trucks and forklifts also figure into the equation, not to mention a labor force qualified to operate the heavy machinery. Another major expense not encountered on the same scale by operators of traditional self- storage is that of implementing a computer system. "There are no off-the-shelf (software) systems," says Riley. "The three largest mobile-storage operators out there today have all developed proprietary software to run their own businesses."

And it doesn't appear likely that self-storage software producers will rush to accommodate the mobile-storage business, Riley adds. "If the market were bigger, someone might do it," he says. "But the complexity level of the systems we use is probably three to four times that of what a traditional mini-storage uses. It's everything a software developer hates: complex business processes and a small market. So there's not a lot of potential right now for a vendor to make money." What would likely happen first, says Riley, is one of the mobile-storage operators would license the use of its system. "One of us (operators) could market the software and the business processes that we've developed, if we were motivated to do so."

The Size of the Box

The size of container to use is a crucial consideration, with determining factors being the ceiling height of your warehouse space, how high you're looking to stack the containers (three or four high vs. two), and portability considerations. Many seem to think a box height of 7 feet is optimal, according to Rob Nist, marketing manager for Seattle-Tacoma Box Co., which designed and built the wooden vaults used by Door To Door.

"We've made all kinds of containers--probably 15 different models now," Nist says. "It's starting to settle into a 5-by-8-by-7-foot-tall model. With a door on the end, it's a pretty ideal container. It maximizes stability, gives people the ability to store their couches, and they can go four high in a warehouse if you have a 30-foot-clear building, which is really key to making a good profit. When we built the thing, we had it rated to stack four high."

An 8-foot-high container causes handling issues, however, such as difficulty securing and removing the covers, and residential-delivery problems caused by the box being too tall when on the back of a truck. And because the maximum allowable cargo weight (usually 2,000 pounds) nearly always fits within the smaller vaults, there's no competitive advantage to having an 8-foot container, Riley adds. "They're going to tip more when they're on the forklifts, and you can't get them under carports or into garages."

Another manufacturer, Kontane Inc. of Hickory, N.C., produces the HomePak mobile-storage container, which is also made of wood but features a metal roll-up door. Also in the works is a model with a swing-open metal door, which will enable the box height to be reduced while maintaining the same capacity.

Kontane not only produces the HomePak, but also helps potential entrepreneurs get started in the business. "What we see as the most critical factor for a startup is their marketing," says Dustin Deal, sales manager for Kontane. "We put together a marketing package with our HomePak brand name that would help them get started, so they don't have to start at square one and develop all their own advertising. We have a package that includes Yellow Pages ad layouts, newsprint ad layouts, full-color brochure clip logos and photos, things of that nature that will help them get started, along with our advice on what marketing has worked or has seemed to work. That's one step we take that we feel is beneficial."

Kontane also offers a computer-aided warehouse-design service. Though this feature is designed more for the company's customers in the moving and storage industry, it can also be of assistance to a new mobile-storage operator who is acquiring warehouse space. "We take the floor plan of their warehouse, along with where the columns are and what their ceiling height is, and we help them best lay out that warehouse so they can maximize their inside storage space," says Deal. "For a lot of the self-storage people who are acquiring a warehouse to do this, that is something they're very interested in because they've never really dealt with this type of storage before. You have to account for aisles for a forklift, where the dock doors are and all that, so it really helps them out a lot."

Long-Distance Market Covered

While customers needing mobile storage on a local scale turn to companies like Door To Door, there are also those in need of a similar service when executing a move between cities. Box Trotters, based in Conway, S.C., fills the mobile-storage niche for the long-distance market.

"For example, when a consumer is moving from Point A to Point B--let's say from Los Angeles to Atlanta--they often need storage at their destination for two or three months," says Henry Cox, president of Box Trotters. "For them, being able to place a container in storage at their destination without physically having to be there to coordinate all this activity in terms of unloading, reloading, etc., is important."

In the aforementioned example, if a customer needs a 20-foot container in Los Angeles, Box Trotters delivers it and gives them a specified length of time--usually a couple of days--to load it. The company then returns, picks up the container and ships it by intermodal stack train to Atlanta, where it is taken off the train and transported to a terminal for storage.

With gasoline prices reaching all-time highs in many regions over the past few months, another popular option for Box Trotters customers has been to ship their cars in the containers along with their household possessions. "We've had several customers call us after their move this year and tell us that they were able to get a plane ticket, and the cost savings balanced out to where, if they were moving 3,000 miles, it would cost them more in fuel to drive," Cox says. "Intermodal stack train per mile, compared to a truck, is much more economical from a fuel standpoint."

Box Trotters offers potential entrepreneurs an opportunity to get involved with the company as sales representatives, service agents and dealers. "For someone who is interested in providing this type of service, it could be as simple as setting up an affiliate website," says Cox. "In our business, the training and the knowledge goes much deeper than the typical drop-box storage model, because ours involves much more transportation. The easiest way is for them to get started is as a sales rep. We can set up a website, provide them with the Yellow Pages ads as well as a host of ways to market and sell their services. We start things off as a relationship with a sales rep, and this basically allows them to learn as they go."

After a sales rep has been on the job about a year, Box Trotters does a market study to analyze the transportation, as well as the demographics, of the local marketplace. At this point, a sales rep may have an interest in becoming a service agent, which requires an investment in assets beyond the sales promotion aspects of their business. This involves the would-be agent acquiring a truck and various types of trailers to deliver containers. Then the company arranges clearance for them to go into the rail terminals and receive , deliver and return the containers.

"There's not a lot of investment for the sales rep, but the service agent does have considerable investment," says Cox. "We want to make sure that our service agent is not just buying equipment. We want to make sure that they have a financial future there, and that we have continuity with their business model and with their business relationship. We basically encourage them to train for about a year, sell for about a year, and we'll just go from there with it."

Pricing Considerations

Operators who enter the mobile- storage business with the idea of pricing the service competitively with traditional self-storage are doomed to failure, says Riley. "You can't be a wimp on prices in this business," he says. "You've probably got to get a 30 percent to 40 percent price premium over traditional self- storage in your market to make money in this business because the costs are so much higher. You've got trucks, fuel, skilled labor such as truck and forklift drivers, and soft costs associated with things such as regulatory requirements and paperwork. It can come through rents, pickup and delivery fees--however you want to bake the cake. But it's got to net out to 30 percent to 40 percent."

Riley says when customers are educated about the advantages of mobile storage--including the fact that it eliminates the need for truck rental as well as for double loading and unloading--they willingly pay the higher rates. "Customers recognize the convenience," he says.

Premium prices are also justifiable, says Riley, because it's critical that new operators resist the temptation to skimp on equipment costs up front. "Some try to cut corners with trucks that carry less than five containers," he says. "They try to do it with little trailers, but the problem is you can't get the scale with the little trailers. You've got to get a truck that can carry five vaults.

"Also, get the piggyback forklifts. People sometimes don't like them because they cost $30,000 to 40,000 each, but without them you'll pay it in labor costs about three or four months into the business, so why not just get the right equipment up front and eliminate the extra costs? The payback period is so quick, why fight it?"

Taking the Plunge

Riley feels the mobile-storage business is still in what he calls its "research and development phase." "It's much like the mini-storage business was in the early- to mid-1970s where there was a lot of experimentation going on, with some hits and some real misses," he says.

Why has mobile storage taken longer to grow and mature than was expected when it first hit the scene in the mid-1990s? A major reason is awareness. There likely are many thousands of traditional self-storage customers who would opt for mobile storage, if only they knew about it. There are also millions of others who live in regions that are currently too small to be served by mobile-storage operators. However, progress on the first front has the potential to assist the second. As awareness of mobile-storage service grows in its current markets, economies of scale might allow it to become viable in smaller markets.

Nist, who deals with several mobile-storage companies, says there are two key things mobile-storage operators must have: "They have to have the right mentality. As odd as it sounds, this isn't the storage business. You have some of the same customers, but it is a very high level of service. If you can't commit to the service level, you're going to struggle."

The second attribute is a willingness to promote, Nist says. "Anyone who uses the service thinks it's the greatest thing ever. So companies that initially were quiet about what they were doing will probably talk more now because they realize that the more it's recognized in the marketplace, the greater the customer base will be."

Though he sees the mobile-storage business from a slightly different angle, Nist feels the industry is starting to build momentum. "We're seeing a lot of increased volume now," he says. "I think it's starting to really catch on." Illustrating his point through analogy, he adds, "Twenty years ago, everyone who wanted a pizza went to the pizza parlor. Today, you pick up the phone and they deliver to your door. People love service."

In the Charlotte, N.C., area alone, where my office is located, we have had more than a dozen robberies, as well as a recent homicide where an employee was found slain. The Texas Mini Storage Association just issued a warning to Austin facilities about a string of incidents in that area. More recently, in Missouri, three bodies concealed in 55-gallon drums were found at a storage facility. The scary part of this whole situation is that these are just a few incidents publicized by the media. There are probably many other crimes that have taken place, but people are apprehensive about discussing them.

Inside Jobs?

The owners of the facilities targeted in my area believe the criminals had worked from within. The intruders were very familiar with the security systems and layout of the facilities. In many cases, these intruders knew exactly which units to compromise and which to pass up.

Even a local investigator I had the opportunity to speak with said he believes this is the work of an organized gang of break-in artists. They are even preying on facilities that have extra security measures, such as surveillance, access control and the like. Disk locks were even cut in some cases and, as many of you know, this padlock is preferred in the industry specifically for its resistance against cutting. All of these signs indicate this to be the work of true professionals with a self-storage background, not just common thieves.

We have even found recent cases of criminals using the same tools that managers and owners use to compromise unit locks. These are tools that should only be in the hands of bonded trade professionals. Think about it for a moment: If you are out on your property where all eyes can see you and you are cutting, grinding or even picking a unit's padlock, you have just shown your tenants how to gain access.

The only requirement to possessing these tools in our industry is that you be a manager or owner of a storage facility. These same tools have leaked into other industries where as well. Please, don't misunderstand: I am not implying these individuals aren't trustworthy. I am simply saying that we have lost track somewhere. In the past, there were more regulations and control over tools of this kind. They weren't nearly as accessible as they are today.

What Can You Do?

A vast majority of both the newly built and retrofitted older facilities are taking their security measures to the next level. Many facility operators have grown tired of the illegal activities and theft occurring on their properties. Instead of being reliant on one particular security device, they are focusing on every possible aspect.

In addition to an increase in video surveillance and card-access systems, I personally have seen a dramatic increase in the use of cylinder lock and latch systems, especially the master-keyed versions. Facilities operating with these systems have reported little to no crime. They not only weed out the customers with illegal intentions, but also bring high security back to where it belongs. These systems, along with all of the other key elements of your facility's security system, should be evaluated. Seek the advice of experts in every part of your property's system and build a program that ties all of the elements together. Your customers not only deserve it, but they are counting on you to provide them with a safe, secure place to store their belongings.

We can overcome the rising crime rate of this industry through communication and increased security, and by taking some simple, inexpensive steps:

1. Screen your employees carefully. Check references.
2. If your facility has experienced a theft or any other crime-related incident, don't keep it to yourself. Warn others.
3. Create an Incident Report form and use it to document and report questionable activities within the facility so that both your employees and the police are aware of any suspicious acts.
4. Ask local law enforcement about different services they provide or if they patrol your area. (Some facilities have even asked private security patrol services.)

The only customers that won't appreciate your efforts will probably be the ones causing the problems. The remainder of your customer base will not only appreciate your efforts, but they will also feel more confident in the security of their property.

Chris Shope is the national sales manager for Lock America Inc. (dba L.A.I. Group) based in Garden Grove, Calif. L.A.I. Group manufactures a complete line of security locks and hardware for self-storage and other industries. For more information, Mr. Shope can be reached at the company's Southeast office at (704) 824-8363; e-mail [email protected].

The construction process is similar to any other type of project management. The better prepared and informed the players are, the more likely they are to reach the final goal of a cost-effective solution that reflects the initial concept. Experience and research have revealed three components that, when provided for in the construction process, will yield a successful project:

• A clearly defined scope of work;
• A clearly defined schedule of values; and
• A clearly defined line of communication.

A Clearly Defined Scope of Work

Pre-planning is not limited to blueprints; however, construction plans are the most effective means of delivering the owner's program to the builder, local municipalities and product vendors who will be involved in the project. Poor plans can create a domino effect that leads to delays, extra costs and even a final product that doesn't reflect what the owner wants.

A fatal mistake made by many inexperienced developers is to skimp on the architectural package. This neglect of the design package has a large impact on the overall project. Figure 1 demonstrates the most common areas for extra costs and claims in the construction industry as a whole.

A complete architectural design package defines the exact scope of work expected from your builder that will yield the final product you expect. Think of contract documents in construction as an instruction manual for insuring that your vision of the facility is what gets built. They are the translation of your ideas into a universally accepted format for construction. The plans and specs are the conduit by which your facility will be built and are an important part of your business plan for success as a self-storage facility owner. How do you achieve the goal of quality construction documents?

1. Commit the funds. Architectural fees for self-storage average nationally between 2.75 percent and 4.25 percent of the overall construction costs (exclusive of land value).

2. Pick the right architect. Has he worked in the self-storage industry before? Talk to past clients and check references. Was he prompt in responding to problems? Did he incur extra costs due to shortcomings in the contract documents? Talk to the contractors who built those projects and ask about the quality and completeness of the plans and specs.

3. Instruct the architect as to your intent. Define your program and its requirements by defining what you are trying to build. Try to provide a complete description of the physical attributes of the facility. Include services to be provided, any special construction issues, amenities of the facility, aesthetic expectations and any specific ideas you have with respect to the final product.

4. Create an exit plan. If you need to walk away from the project for any reason, you need to be able to do so amicably and without undue costs. In order to achieve this, I ask the architects I work with to divide their fee into the following categories:

• Code research
• Schematic drawings
• Civil package
• Architectural and engineering drawings
• Permitting
• Site visitation and conflict resolution (usually on an hourly rate).

5. Participate in the process. Define milestones in the design process and conduct a thorough review. If you need assistance in plan interpretation, bring in help. A qualified general contractor or construction manager can often identify shortcomings in the contract plans and specs that would later turn into change orders and extra costs to you. It is important to conduct this review often enough so your designer doesn't get off on a tangent that produces the need for corrections and the re-drawing of plan sheets. A good architect should welcome this review process, as he will want to get it right the first time. Redrawing does not make money for an architectural firm.

6. Question everything. Code interpretation is difficult at best. Looking at issues from all angles allows for different interpretations. This is specifically important when dealing with a design professional without self-storage experience. Many codes are not applicable to self-storage, but are applied because no one knew to question the interpretation or do the research. There are several standard variance requests in many municipalities that are routinely required to build self-storage.

7. Contract the work. There are several pre-written contract documents that can be used for agreements with your architect and contractor that protect everyone involved. The Architect Institute of America (AIA) has been using and supplying these contract documents for many years. They have been tried and tested in the courts and, in many legal opinions, are excellent documents to define the scope of work, methods of payment, timeframe and general conditions of the project. To get a listing or more information regarding the available documents, call the AIA at (800) 365-2724.

A Clearly Defined Schedule of Values

A schedule of values is the tool utilized by the design and construction industries to breakdown the construction estimate into understandable separate items of work. The numbering system used is called the Construction Standard Index (CSI). These are globally accepted in construction and will be consistent from coast to coast. The CSI-formatted schedule of values allows for a better understanding of the costs to be incurred and allows for a more thorough bid review. Ask your potential contractors (or your architects) to supply a breakdown in the format of your choosing to assist you in the selection process. For a listing of the minimal recommended CSI breakdown for a self-storage facility, visit www.ellisconstruction.com.

There are several distinct advantages to requiring this schedule of values from potential contractors. The developer can use this schedule of values to look for potential cost savings and/or overruns in the estimate. For instance, if your foundation costs are coming in twice as high as projects previously built, you may need to re-evaluate the design. Short items should also raise a flag, since an item of work that is under bid can also lead to delays or even costs to you before the project is over. It's important to realize that the lowest bid is not always the most cost-effective. Often a bid that is substantially lower than the competition will indicate that things were missed in the estimates that still need to be performed. A contractor that runs out of money on a project can be much more costly to a project than a bid that is initially higher but complete in the scope of work.

This schedule of values is most effective for the project in a construction-management aspect. Use the schedule to determine moneys due for monthly draw requests. If your schedule of values indicates that your contractor is 80 percent complete in item 04-200 unit masonry, for example, then it is easy to verify by onsite inspection whether this is accurate. Without the breakdown, many items might get overpaid in advance, and your ability to manage the project is decreased.

Specifically, AIA forms G702 and G703 are the preferred documents for draw requests. These documents, when used together, provide for accurate billing and payment procedures utilizing your schedule of values, retainage practices and previous billings to insure you pay the right amount against the contracted sum.

A Clearly Defined Line of Communication

Construction management is the marshaling and allocation of the resources required to build the intent of the contract documents. These resources include labor, materials, equipment, architectural and engineering services, time and money. Managing construction involves organizing a wide variety of skilled workers and specialists and leading them in the implementation of the plan, monitoring progress against baseline objectives, and making adjustments to insure that the goals originally set forth are achieved--not an easy task.

But as is true in any field, the better informed the team members are, the more apt they are to succeed. It is imperative that the proper communication conduits are determined and then utilized so that all players in the project are "in the know" as to what is expected of them, when it is expected, and how they are to accomplish it.

Verbal communication doesn't work adequately for construction, especially when it is provided at field level. It is not fair to a tradesman standing five inches deep in concrete to remember that an owner told him to tell the superintendent to tell the project manager that the paint for the office walls should be tan. Issues that are important enough to be stated in the field are important enough to write down.

That is why, over the years, there have been a series of communication tools adopted by the industry to clarify issues, stipulate intent and outline costs. Your architect and contractor should be familiar with most of them. The terms differ as you cross the country, but the intent and content remain the same:

Request for information is a standard term typically representing communication between the contractor and the architect. Information regarding plan interpretation, differing site conditions and general information required for construction is addressed in this format. As an owner, you should request that you are copied on all this correspondence in order to stay informed and understand the ongoing issues that could effect your project.

Request for pricing is originated by you or your architect when you need to know what an addition to the project will cost prior to beginning the work.

Cost proposalis the reply to that request from your contractor. You can insist that these cost proposals are also broken down into a schedule of values.

Change orders are issued after these cost proposals are agreed upon and authorized for construction, and will become a legal contract document. For this reason, the AIA is an excellent source for documents. It is also important to realize that change orders can save you money in some instances. Credit or no-cost change orders are common in construction and, in some instances, are necessary to keep a project on budget. Creative construction management or value engineering can help identify these issues.

Along with understanding and using the proper method of communication, it is important to make sure you are communicating with the right people. Always define prior to the project who will be the representative and main contact for the contractor, architectural firm and owner. Make sure these people are available, prompt, authorized to make the necessary decisions, and qualified to perform their assigned tasks. For instance, the architects draftsman is not qualified to make design decisions that relate to structural issues, code requirements or life-safety issues. Figure 2 shows management categories of cost growth and reflects what effects decision-making can have on your project costs.

Construction is a complicated process that can often lead to disputes. Following the three rules outlined above does not guarantee your projects will be problem-free, but it will reduce the number of problems you have, and will greatly enhance your ability to address and resolve those issues when they arise. This simple concept of properly planning your project, organizing your costs and informing participants is critical.

Bret Ellis is the president of Ellis Construction Inc., based in New Orleans. Ellis Construction is a full-service general contractor serving the Southeastern United States. The firm offers design consultation, project management and general contracting services. For more information, visit www.ellisconstruction.com.

The Internet offers great potential for sales. Unfortunately, there are more questions than answers surrounding the actual possibilities of that arena. If we learn how to sell using the Internet, we may have tapped into the "mother lode" of marketing tools. This column offers a perspective on using this valuable mechanism to sell products and services pertinent to the records- management and self-storage industries.

The Nature of the Internet

I have been using the Internet since before Al Gore invented it, since even before Netscape offered a better way to navigate it with a graphical user interface. The Internet has been around for several years, developed by the government and academia for the primary purpose of sharing information and research. Businesses and the general public have finally tapped into it and are using it with a vengeance.

Since the beginning, the Internet has been essentially informational in nature. Computers and file servers all over the world hold content on every subject imaginable. If you want information on any topic, you can find more than you need on the World Wide Web. As a matter of fact, that is one of its biggest drawbacks: There is a plethora of information out there and much of it is inaccurate. How do we find our way through this maze of "stuff"? There is no question that information abounds, and it represents the first "wave," or function, of the Internet.

The Second Wave

If information typifies the first wave, then data collection represents the second wave. Website owners want information from you. Data-collection websites range from those of airlines that use the Internet for ticketing and reservations, to the local zoo collecting new-membership information. Privacy has become crucial in this wave, with security and other ethical questions at the heart of the issue.

If someone gives you information over the Internet, he wants two things from you: 1) assurance that only you will use the information and only for the purpose he gave it to you for; and 2) something of value in return. In the case of an airline reservation, a user logs on to a private and secured website, and the airline assures that his information is only for its use. What he gets in return is an immediate confirmation of his flight, lower fares and increased frequent-flyer points. Each individual has to determine the "value" of providing his information in this manner. In this example, the lower fares and double frequent-flyer points make it worthwhile. But each person has to determine if the payoff is of sufficient value for him to disclose private information.

The key question for you, as a business owner, is, "How do I get people to give me the information I need in order to sell them something?"

Regarding Value

Remember that "value" may be perceived differently by each individual. What you believe to be of value may be worthless to someone else. In sales, "value" refers to what is important to the prospect or customer. If I want information from the customer, I must learn what is valuable to him, what will entice him to give me the information I need.

So, the second wave in the development and usage of the Internet is data collection. Why is this important to those of us who sell products and services? In selling records-management, for example, we must determine if the "suspect" is indeed a prospect. We do this by estimating his need for our services. Once we know he has a need, the sale is easy.

The Third Wave

The third wave of Internet development is referred to as e-commerce. This implies that we transact business over the Internet. We sell something and the customer buys it. So we have migrated from information, to data collection to e-commerce over a very short period of time--in fact, just a few years. The future belongs to those who can figure out how to sell economically over the Internet.

An Internet Marketing Model

1. Select several hundred "suspects." This can be done entirely by using the Internet. If you visit a site called Prospecting for Data (www.tmisnet.com/ ~strads/search/), you'll find numerous search engines that give you free information about suspects, for example, all corporate lawyers by zip code. You can get the name, address, phone number, fax number, e-mail address, website and other key information for members of this population simply by selecting the right search engine. Some search engines will give only e-mail addresses or websites, while others can perform reverse search logic (phone-number look-up, etc.).

2. Copy the selected suspects into a Microsoft Word, Excel or Access file. I will not go into detail about this method since it is purely a Windows function and uses relatively simple "drag-and-drop" and "cut-and-paste" technology.

3. Fax the suspects an introduction message. Why fax? Fax gets more attention than either e-mail or direct mail. Only overnight mail gets more attention. Invite them to log on to your website for their "free gift." Remember the question is always, "What is valuable to this group of suspects?" The gift could be as simple as a coffee mug, or something like a free car wash or a ticket to the symphony or zoo. Our premise assumes you must give something of value to get information in return.

4. When they log on to your website, it should be secured and contain a form to gather the data.

5. Collected data is then automatically dropped into the database by the system.

6. The data then generates three results: a) a proposal letter outlining the suspect's savings delivered via fax and e-mail; b) a free gift letter to the suspect; and c) an e-mail to you to follow-up the proposal.

All of these steps can be done automatically using a combination of technologies: fax, e-mail, the Internet, snail-mail and telephone. What do you need to do this?

• A computer equipped with a modem
• Microsoft Office and Internet Explorer programs
• Internet connectivity through an Internet service provider
• An e-mail address
• A secure website
• A data-collection tool (form)
• A modicum of training and education.

Regular columnist Cary F. McGovern is a certified records manager and the principal of File Managers Inc., a records-management consulting firm specializing implementation assistance and training for new, commercial records-center start-ups, as well as marketing support for existing records centers. For more information, visit www.fileman.com. 

FileMan Records Management is developing a model for selling records-management services on the Internet. The company will soon be piloting several versions of its method. If you are interested in becoming a FileMan Pilot participant, e-mail [email protected] or call toll-free: (877) FILE-MAN.

By Harley Rolfe

Me? Scared of the dark? At times. Most people's hearts race a bit when they go into unknown or strange territory. And "most people" includes those who are looking to rent a self-storage unit for the first time. Not many customers are repeats. Most are rookies, and they are wary of their own amateur status. That unease is an available hook for savvy marketers. A first step in breaking down a prospect's caution is to create familiarity. A known name--a brand name--helps disarm them.

First Thought?

When operators begin to feel the pinch of competition and thoughts of marketing begin to swirl, the first thing that many want to do is establish a brand name. That's not where I would start, but it can be done without much additional knowledge or change. One problem is that the name they want to establish is the one they now have, which may not be the best choice. Most existing names were conceived under commodity circumstances. But with more market stress, you may be dealing with a name that may not work as well in the new market conditions.

What's in a Name?

Perhaps a reference to the genesis of brands might help. You know of their use in Western films to identify cattle on the range. Back then, brands were used to identify which cows belonged to whom--quickly and from horseback. They needed to be indelible and impervious to modification. While things have calmed down since those Wild West days, many of the qualities of good brand design carry forward.

Can you think of a successful product that doesn't have a strong, well-known brand name? That's the primary way we identify a product. Sometimes the brand name is the most valuable part of a company's offering. Chevrolet the brand goes on and on, while individual models come and go under that Chevy banner. Think also to the hospitality industry where names like Holiday Inn, Hilton, etc., endure by offering franchisees instant recognition among prospective guests. So strong is that influence that finance sources often will not finance a new lodging facility without an affiliation. A good brand name may be so desired that it can be rented out and used to give instant recognition to other product lines. Often, heavy-duty lawsuits are filed to protect the owner's rights to a certain name. (Be sure to register yours in your state.)

Your name should be transferable. Some day you will sell your facility--the new owner doesn't want to inherit your surname, nor does he want to undergo the cost of establishing a new title. He will pay you for an established name that he can use. And well he should, because you have labored to have that name ingrained in everyone's mind and reinforced with a good reputation. It's part of the going business value and is one reason why an operating business is dearer than the sum of its physical parts.

Keep in mind that familiar things are more valuable than those that are not. A Sunkist orange is more valuable than a no-name orange. That increased value either takes the form of being preferred or commanding a price premium, sometimes both. Your brand name has a high-energy job. It will convey a core message succinctly. To do so, it must use all the tricks of the copywriter's trade--graphics and the selection of arresting words. The ingredients are pretty straightforward:

1. Graphics or logo: You've heard it before: One picture is worth a thousand words. It is the quickest route to something memorable. It illustrates the essence of your offering. It is also the least precise. While the logo is the centerpiece of the brand, it must be supplemented to convey a meaningful message. This is the "music" of our message.

2. Slogan: With a few choice words, we put "lyrics" to that music. It translates the graphic into a meaning that is specifically useful to you. A stand-alone graphic is usually not significant to a viewer until it's linked to your offering. The viewer must be led to the relevance of the graphic.

3. Name: You cannot communicate via the logo alone. The logo needs the name to convey the identity of the offering. When a prospect uses the name, he is really thinking about the logo, made appealing to him by the slogan.

You can just invent a name--like "Kodak," for example. Drug companies do it every time they come out with a new compound. The advantage is uniqueness and absolute proprietary rights. Also, it only means what the company wants it to--no baggage. The disadvantage is the necessity--through media--to give it meaning and to popularize it.

A clever name is good as long as it isn't maudlin or silly. It should entertain and make the name memorable. There is liberal use of double entendres, for example, "We bring good things to life," by General Electric, or "A cut above," the slogan of a beauty shop in my home area.

The brand name and its supporting cast (logo and slogan) should convey a theme benefit of the facility. Terms such as "mini-storage" and "self-storage" are descriptive but don't carry a benefit. The name "U-Save Storage" contains a benefit and uses a price appeal, while "Westside Storage" offers information. (With any luck, the operator is the only one on the "West side.")

As critical as a good brand name is, there are many who try to design one on their own. Don't. Find a good graphic artist who understands the subtle techniques needed to do it well. Case in point: A familiar word (those in your reading vocabulary) actually operates as a graphic. When it is misspelled, for example, you detect instantly there is something wrong with it. You aren't processing the individual letters, but have registered the whole word as one piece. That word has gained the status of a graphic in your mind. It is this characteristic that permits you to read fast. By stylizing the letters of the word, however, you can make it "yours." In so doing, you merge the graphic and name into one entity. This sort of thing is what graphic artists are able to do. You must be mindful of the message and the mood you are trying to convey. The artist cannot and should not invent your message, but he can usually execute it better than you can.

The creation of a brand name is not a casual enterprise. It uses a combination of art and science, and it must be featured in every venue possible. When done well, it is a symphony with several dynamic parts causing the viewer to regard your business as an old friend--despite the fact he may not actually know you from Adam. Brand names are powerful. We shouldn't--and don't usually--take them lightly.

Missed some previous issues? Check the web at www.hardnosed.com.

Harley Rolfe is a semi-retired marketing specialist whose career includes executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book, Hard-Nosed Marketing for Self-Storage.

Early in 1998, Eau Claire, Wis.-based Quayle Computer Concepts entered the national market of self-storage management software with a Windows-based program called the Storage/Warehouse Asset Management Program, or SWAMP. The path to success was neither short nor easy, with the program having undergone four major updates through 13 builds. But today, the company enjoys its place among the ranks of competitive software providers within the industry.

Getting Up and Running

In 1977, in a father-and-son partnership, Calvin and Gordon Quayle began the construction of CQrt Self-Storage, with Calvin managing the facility while Gordon finished school to become a computer programmer. Being naturally frugal, Calvin first used manual billing and record-keeping methods to run the business, then later graduated to the use of a Burroughs B-20 computer to automate his company functions.

He reviewed professional software and found it both expensive and incompatible with his operating system. However, using a word processor and spreadsheet, he was soon creating computerized invoices, late notices, letters and envelopes, as well as occupancy and income records. Over the years, Gordon would write macros on the spreadsheets to speed the process, making functions more accurate and easier to use. By this time, Calvin had graduated to a Compaq computer and a Windows operating system.

Gordon created Quayle Computer Concepts and developed a management program for a local insurance company. He realized many of the problems he had addressed with that project could also be applied to the record-keeping needs of self-storage, spurring the rise of the SWAMP program. During the next two years, Calvin utilized the program in his business and made suggestions for improvement while Gordon added features.

Eventually, the two felt the program was suitable for presentation to the industry, and it was offered to self-storage owners in the Eau Claire, Wis., area. Four managers purchased the program and added their own suggestions for further changes. Version 1.0 of the program underwent five updates before Gordon reached completion of version 2.0, which was offered to the public for the first time at the Inside Self-Storage Expo in Las Vegas, February 1998.

Industry Feedback

According to the Quayles, response to the program has been positive, with several managers inquiring as to why the program is so inexpensive, weighing in at hundreds of dollars less than some other popular management packages. But its inceptors insist no program should be too costly. They point out the SWAMP program does not feature some of the bells and whistles that add complexity and cost to some of the other available programs, though it is comprehensive.

Targeted especially for owner-operated facilities that do not want or need security-gate interface, elaborate password protection and audit trails, the SWAMP program efficiently handles all other management features, including templates for recording tenant information and payments, late fees, deposits and other miscellaneous information. It also generates invoices, envelopes or labels, as well as a wide range of reports, such as income, expense, occupancy, units available or locked out, and late and current tenants. Automatic rate increase and updating of tenant rates is also available, accommodating either anniversary or specified billing and automatic prorating of the first payment.

Since the unveiling of SWAMP version 2.0, more than 30 improvements have been made to the program to eliminate bugs and add features requested by users. Among these are greater control and flexibility in assessing late fees and the automation of rent increases. When Gordon presented the program at a meeting of the Texas Mini Storage Association in Dallas, May 1998, the question was asked, "Does it use the TMSA lease?" Though the response at the time was negative, that has since changed, demonstrating just one example of Quayle's responsiveness to customer requests. The company is now offering SWAMP version 2.3.

Keeping Good on a Promise

According to Gordon, computer software should fulfill its promise of making life easier and assist professionals in managing their office functions. "Our motto is 'Making Computers Work for You,'" he says. "One of us has managed storage units for more than 20 years, and the other has been programming computers for nearly that long. It was a natural merger to combine our experience and create a software product specifically designed for the smaller operation at a reasonable price."

Both father and son are committed to serving the self-storage industry as a whole, but particularly their loyal clientele. "We keep our overhead low, and we listen to our customers," says Gordon. "We will continue to add the features our customers want. We are committed to make a software product that truly makes good on its promises. What more could you ask?" For more information, visit www.quayles.com

By Jim Chiswell

This past summer provided me many unique opportunities. My consulting work, along with some personal travel, gave me the chance to criss-cross America's Heartland, mostly by car. The highways of Pennsylvania, Ohio, Indiana, Illinois and Missouri helped me to record more than 4,000 miles in my Bonneville.

My point in explaining this journey is not to give you a travel log or to rant about high gasoline prices, but to give you a framework for the following observation. In virtually every community I drove through, I saw established self-storage facilities as well as those under development. These facilities are not just in urban and suburban areas but, more importantly, across the rural landscape of America.

Signs for facilities names such as "The Cubby Hole," "A Little Extra Space," "Space R Us" and "Extra Shed" jumped out at me as I drove. Many facilities were just a single building perhaps 30 by 150 or 200 feet. Most had no office on site. Many were not fenced or paved. However, most appeared to be near full capacity. Following a trend that's being repeated hundreds of times in communities all over the United States, entrepreneurs are building facilities. Most of these micro-projects are not being counted in the mysterious number of "total facilities nationwide," which seems so difficult to establish. It was exciting to see all these facilities.

I mention this because I believe these owners may be more critical to our industry than ever before. The manner in which these new owners conduct their business is crucial in an era when the self-storage industry is seeing increased legislative initiatives and customer litigation.

It is important for all of us to embrace these new owners. We need to seek an affordable way to involve them in the activities of our state and national associations. As established owners, we need to reach out and share our expertise. Being a mentor could provide untold benefits for new owners as well as the industry as a whole.

If you are a new owner of one of these smaller facilities, do not hesitate to call on another owner near you. Make sure your occupancy agreement complies with your state's current standards for dealing with customers. Make sure your late-fee policy does not leave you open to possible future complications. Make sure your lien sales are conducted in compliance with your state's lien law so that "wrongful-sale" litigation can be avoided.

I'm excited to see how our industry is touching every community. The importance of self-storage to both our residential and commercial customers is undeniable. I am proud to be a part of this industry and trust that you are, too. Working together, we can continue to expand market opportunities while limiting our collective exposure to overzealous legislators and litigation.

Holiday Planning

It is not too early to begin planning your facility decorations for the year-end holiday season. Yes, that's right: holiday decorating! What a perfect opportunity to deck your buildings, fence line and trees with attention-grabbing lights. This is an opportunity, for just a few extra dollars on your electric bill and the one-time cost of decorations, to make the local community take notice of your facility.

Over the years I have seen very few projects dress up for the holidays. Sure, some creative managers have done a wonderful job of making their offices look festive, but the exterior generally continues in a "same-old, same-old" way. I just can't understand this, especially when we are constantly seeking new, creative methods to market our businesses year round. In addition to creating increased visibility for your rental prospects, holiday decorating will cause your existing customers to share in the holiday spirit you create. Your office should also tastefully reflect the joy of the season.

You don't have to be part of a specific religious persuasion to enjoy a holiday display of lights or a festive atmosphere at your facility, but don't force employees to execute your preconceived decorating strategy. Involve them from the beginning of the planning and implementation of your holiday decorating. Have fun and don't be afraid to go a little over the top in your display. Perhaps residents will actually slow down a little as they drive past to look at your handiwork. And don't forget to include that all-important sign: "Happy Holidays From Everyone at 'Your Name' Self Storage."

Electronic Signatures

At the end of June, President Clinton signed into law the "Electronic Signatures in Global and National Commerce Act." In short, this legislation gives formal legal status to an electronic signature on a contract or other legal document. This should clear the way for self-storage owners who are aggressively using the Internet to obtain a signed occupancy agreement from a customer. It may also provide an avenue for the sending of delinquent notices via the Internet, but that is a future opportunity that may present itself. If you are interested in complete details on the law, you can search http://thomas.loc.gov and under "Senate Bill 761 (S. 761)."

Grandpa Jim

On a personal note, I would like to close this column with a special thank you. On May 19th, at 7:28 a.m., Courtney Elizabeth Johnson joined the Chiswell family. Her parents--our oldest daughter, Christie, and her husband, John--have given my wife, Jackie, and I one of the greatest gifts in the world: a grandchild. Now I can point to Courtney as the reason why her grandpa acts so crazy at times! She has already brought joy to so many people. I just wanted to say "thank you" to Courtney, and her Mom and Dad, for helping me refocus on life's priorities.

Jim Chiswell is the president of Chiswell & Associates Ltd., which has provided a full range of consulting services to the self-storage industry since 1990. Mr. Chiswell can be reached at his office in Buffalo, N.Y., at (716) 634-2428; e-mail [email protected]; www.Jimdot.com.

The need for capital still thrives, and the good news is that the capital itself still exists. There are specific kinds of debt and preferred places to access the debt markets. The search is a little more difficult than it was just a few short months ago. If you are seeking a refinance, two giants still have market presence: Heller Financial and General Electric Credit Corp.

The majority of capital sources for permanent financing, including the two just mentioned, look to mortgage brokers to procure a majority of their permanent loan business. There are two key characteristics of the self-storage industry that make it restrictive for capital sources to invest in direct-marketing campaigns: The average transaction is smaller than other property types, and the ownership concentration is very broad.

Construction and development loans are still best made by local banks, and are often referred to as "relationship" loans. These are transactions handled by your local banker, who is best equipped to administer and analyze local transactions. Expect to pay an interest rate 2 percent to 4 percent above the "prime rate" or 300 basis points over LIBOR (London InterBank Offered Rate). These loans, typically three years in term, are designed for getting the borrower through the construction and lease-up period.

Permanent Financing

When you know there is capital available but not always accessible, what should you consider? There is often a need to find a specialist who can communicate with the lenders and drive the best deal possible. These professionals are called loan brokers. There are mortgage banking and brokerage shops throughout the country that make it their job to understand which capital sources or lenders are in the market and the programs offered.

In many cases, the financing fees you pay will be the same regardless if you go direct to the lender or if you go through a broker. Many times, capital forces allow the broker to earn financing fees that would normally be charged by the lender. Loan brokers have various relationships with the capital sources. If the broker is an exclusive correspondent, he is the "middle man" between the lender and borrower. Borrowers may not have access to the lender except through the exclusive correspondent. You may still need to shop the deal, however, because a broker with exclusive correspondence is primarily representing one funding source.

There are brokers who have correspondent relationships with capital sources that are not exclusive. With correspondent relationships, the broker has incentives based on loan volume. There may be instances where there is both a lender's financing fee as well as a broker's fee, but the lender has the best overall deal.

Why a Broker?

Why would anyone choose to use a broker? As a borrower, you may not be familiar with loan underwriting (the process by which a lender determines the amount you can borrow) and perhaps more importantly, the interest rate. Proper packaging and underwriting can make a difference of as much as 2 percent in the annual rate, or five years amortization. On the typical $3 million self-storage loan, the difference in monthly payments of $2,920 (five years difference in amortization, and a conservative interest-rate savings of .5 percent) over the life of the loan, is a cash savings of a whopping $350,418.

There are a few things to consider. First, do you have the time to seek the lender best qualified to make the transaction? How much is your time worth to spend looking for financing? Sure, you check the obvious places, but what if your best deal is with a boutique lender? How do you find one?

Second, how do you know for certain who you're dealing with? I recall several transactions where the lender was a sham--they never had a real program and were just looking for processing and application fees. I also clearly remember a lender I thought could not possibly be for real and, sure enough, they funded two of my transactions.

Third, a good reason to use a broker is he is often the best-qualified source of "packaging" your loan for underwriting. A good broker will make sure you have a loan request that is tailored to the lender's needs, providing the information he needs to develop an interest in your deal. Keep in mind that overloading your loan officer is as bad as not providing him with enough information. Is your request clear? Are the expenses properly shown? What about capital improvements? What about the interest expense? What about vacancy and credit loss? How do you determine loan to value?

Lastly, there are the finer details of the transactions. Financiers today manage interest rates with hedges, caps, locks and a myriad of other terminology that to the borrower may be "junk jargon." Many a borrower has sold a cap and made money, or benefited from a hedge when rates rocketed upward. Do you know when to take a fixed-rate loan over a float? Do you know that some loan documentation for conduit loans may require you to pay for loan expenses like appraisals after the loan has closed? Did you know that some standard language allows the lender to change the terms of the loan at the time of securitization?

There are several reasons it is wise to retain professional help. Keep in mind that the best loan broker will know your property intimately, know the market and determine who the best-targeted lender will be. The broker is also able to work with and resolve issues introduced by third-party report providers such as appraisers, engineers and environmental specialists. Finally, the properly qualified loan broker will have placed many self-storage loans and will have been in the industry for a long period of time. The best brokers will even know how to operate self-storage facilities and be able to trade "war stories" with you.

R.K. Kliebenstein has worked in the self- storage industry since 1986. In that time, he has held positions in finance, acquisition and management. He is currently launching his own company, Coast-To-Coast Storage, offering his expertise to self-storage owners and operators in consulting, marketing plans, feasibility studies, loan brokering and acquisition/disposition. For more information, Mr. Kliebenstein may be reached at (561) 367-9241.

Neal Gussis is a senior vice president at Beacon Realty Capital Inc., a financial-services firm that arranges debt for self-storage and other commercial real-estate owners. Mr. Gussis has funded more than 250 self-storage transactions. He can be reached at (312) 207-8240.

Self-storage professionals are genuine and sincere. They are business facilitators who care enough to provide help where it's needed, especially when life takes its unexpected turns. Wayne and Jamie Jacobs of Novi, Mich., are self-storage managers who often step into their tenants' daily lives to make life's transitions easier, whether anticipated or not. Both were nominated by Tom Berlin, vice-president of American Self-Storage, for this year's Inside Self Storage Best Community Service award because of their dedication to helping people, love of community and personable marketing techniques.

A few needed basics--trucks, moving supplies and general assistance--sound simple to provide. But it's like the old saying goes, "A little goes a long way." Any one of us can help people, but "it's something that's got to come from within, and everybody's got it inside of themselves to help people," says Wayne.

Beginnings and Then Some

About five years ago, Wayne and Jamie answered an advertisement for a self-storage position in a local Indiana newspaper. "The self-storage business not only gave us both a job and a place to live, it allows us to expand our horizons," says Wayne. "If we didn't make the move into the self-storage business, we wouldn't be able to do all of the charity work we do."

Wayne's love for helping others was obvious even as a young boy living in a small northern Minnesota farming community. He signed up for Boy Scouts because he was dedicated and committed to improving others' lives and the community. Later, he got involved in the sales and service industry. His first job was with a cable company, which is how he met his wife, Jaime. But the job didn't allow the Jacobs to fully commit themselves to community efforts. "I'd make sure and do my job just right, but the previous companies I worked for didn't allow time to help people, so that negative worked, I think, for my persistence," says Wayne.

The Jacobs wanted to make arranging a move or finding a storage space convenient for people. "We offer one stop for everything, and since moving is so stressful anyway, we offer trucks, storage units and supplies to make things less so," says Jaime. The Jacobs' desire to help people has been fulfilling for them, but also for their beneficiaries. One of their most rewarding experiences has been helping a family of fire victims who didn't have a home because it was set ablaze after it was burglarized. The Jacobs gave the family a unit for a few months free of charge as their way of helping out.

Now That's Dedication

Both Wayne and Jaime are heavily involved in professional community organizations. Wayne is on the board of directors of the Novi Goodfellow, an organization making sure underprivileged children don't go without having a Christmas. The board also provides businesses with holiday poinsettias. At Christmas, Wayne dresses up as Santa. "I become Santa Claus. I let my beard grow long, and I go to a salon to have it dyed white, so it looks natural," says Wayne. Soon the Jacobs will create Santa Enterprises, which will do more to provide for needy children and underprivileged families.

Both are co-coordinators for a Toys-for-Tots campaign in which they identify donation locations, pick up donations from drop-off locations, and sort and distribute toys to children. Jamie serves on the board of the Novi Chamber of Commerce and likewise serves as Chair of the Ambassadors Committee and Silent Auction Committee. Both are members of the annual Charity Dinner Dance Auction Committee and serve on the annual Golf Outing Committee. In addition, the couple volunteered at the chamber's refreshment booth at the Novi Blue's Fest.

Outside of her professional commitments, Jamie is going to real-estate school. When the Jacobs are commitment-free, they enjoy spending time with their two children. Wayne likes to play video games and work around the house, and Jaime creates scrapbooks, collecting family and event memorabilia.

Inside Self-Storage would like to extend congratulations to Wayne and Jamie Jacobs for their outstanding job in promoting excellence in community service and the self-storage industry.