When the staff of Inside Self-Storage contacted me about an article for this issue, I was asked if I would be interested in addressing the topic, Selecting a General Contractor. My answer was, yes and no.

If youre going to build a self-storage site, yes, you will need a general contractor (GC). However, this role seems to be ever-changing in our particular industry. More and more, I see facility owners acting as their own GC or construction manager, or putting together some other form of design-build team. The end goal, of course, is to save time and money.

I have been involved in some very successful design-build projects, and I have seen some disasters. What makes the difference? I hate to sound cliché, but the simple answer is cliché: Coordination and planning on the front end. Therefore, a more fitting topic for this issue is Coordinating a Design-Build Team, with emphasis on the word team.

Whats Your Problem?

In construction, there are always going to be problemsyou can count on it. The difference between good and bad contractors, subcontractors and suppliers is how they respond to them. The obvious challenge is to eliminate as many of these potential obstacles in the beginning as possible, which is not always easy to do.

There are some issues that seem to show up in construction projects again and again. This article gives me the opportunity to discuss some reoccurring problems that cost all of us time and money. More important, these are some items you can add to your checklist when coordinating with your design-build team.

In the Beginning

To understand todays construction environment, we must first take a quick look at the traditional role of the general contractor. In the beginning, all that was created came from the architect. He and his engineering team would put together the bid documents. These consisted of a very large, very detailed set of plans along with a thick specification book. Every material to be used was specified in detail, including application, testing and warranties. Plans, elevations and details were drawn for every aspect of the projectsite work, concrete, steel, finishes, mechanical, plumbing, electrical, etc. Usually, approximately half of the specification book was boiler plate. This section dealt with insurance requirements, billing procedures, change orders, arbitration of disputes, etc.

Why all of the fuss? It was an open-bid environment; these documents would be distributed to anyone and everyone who might be interested in submitting a bid for a project. Suppliers and subcontractors would submit their bids to the participating GCs. These contractors added up all of these bids, put together a total project price, and submitted their bids to the architect. The GC who had made a mistake or left something out had the low bid and was awarded a contract (insert sarcasm here).

The bid documents then became the contract documents. These were considered part of the contract between the owner and the contractor, the contractor and his subs, the subs and their suppliers. It was the architects job to ensure these plans and specifications were strictly adhered to throughout the project. The architect was in total control from start to finish; everyone, including the GC, answered to him. While this can be a lengthy and costly process, it was designed to relieve the burden of liability from the ownerhence, the detailed plans, specifications and rigid structure of hierarchy.

Take Me to Your Leader

The design-build and construction-management processes can be set up in a variety of ways. In most, the GC takes on the leadership responsibilities. He will select and coordinate the architectural and engineering team. He will hand select subcontractors and suppliers to submit pricing, and even participate in the selection of materials and the design of the project.

Plans and specifications for this process can be less detailed than what would be required for the open-bid situation. The entire team takes on more responsibility and ownership. However, the owner takes on more of the liability and risk to ensure he is getting what he paid for. He will also have to take a more active role in job-site visits, scheduling, billings, etc. This can save time and money. The question is how much of his time and resources can the owner commit?

The key is a lot of homework, and even more planning. The amount of time spent on coordination before a shovel of dirt is ever turned will determine the level of success of any building project. The following is a short list of issues that seem to come up time and again. These are a good start for a project checklist.

First Things First

How local building officials rate the occupancy of your buildings is going to determine everything from the number of parking spaces to the location of firewalls and fire-sprinkler requirements. From the very beginning, it is crucial your architect and/or engineer work with these building officials to show them these are not occupied buildings. The tendency is to rate self-storage buildings the same as a retail building or office complex. But these are storage buildings; they are not occupied by the number of people or for the periods of time as other types of buildings.

Often times, zoning or other factors may affect the occupancy rating, and building officials simply will not budge. However, it is most certainly worth pursuing to get them to reconsider your occupancy. If an apartment, office or retail area is involved, firewalls can be used as occupancy separations. This will allow for the occupied areas to be rated separately from the storage areas.

Its My Party

Every subcontractor on your project thinks his part of the work is vastly more important than all of the others and everything must revolve around his schedule and requirements. Without proper coordination, one subcontractor can dominate a project, and his work can get in the way of or adversely affect everyone else. I have seen trades create chaos and cause changes to the work of others, which, in the end, costs the owner money.

Earth to Owner

When laying out a storage facility, the goal is to get as many square feet as possible on a piece of property. Many times, the slope of the property is not taken into consideration, and the buildings are situated against the natural drainage pattern. It is much less costly to rearrange the buildings than it is to rearrange the shape of the earth. Simply evaluate the cost of the dirt work compared to the resulting increase or decrease in rentable square feet.

Phased Out

When building a project in phases, always consider if there are some things that can be done now that will save time and money on the next phase. More important, consider what you might be doing that is going to cause problems later. Dont paint yourself into a proverbial corner. For example, ask your electrical and security subcontractors what new innovations may be coming in the near future, or what upgrades you may want to consider that you can run the underground conduit for now. Or you may want to grade, compact and secure the entire site to allow for boat and RV storage until such time you are ready for the next phase.

Set in Stone

Most metal-building suppliers will provide certified concrete and footing design along with their steel shop drawings. If an outside engineer who is not familiar with storage buildingsespecially stick framedsystemsdesigns the concrete based on conventional steel construction, you can end up with a lot of concrete.

If your building supplier does provide concrete and footing design, verify that local requirements or a local inspector does not require something above and beyond what is required by the governing code. If your engineer is providing concrete and footing design, be sure he is familiar with standard details for sheeting notches and recesses for the roll-up doors.

The Reinvented Wheel

Involve your building supplier during the planning stages. Building suppliers will provide complete, certified steel shop drawings as a part of their packages. These drawings can be included with the architects and engineers drawings to be submitted for permit. If your architect or engineer comes up with his own building-framing design, materials and layout, and a building permit is issued per these plans, the building supplier either has to revise his system to conform to this design or the suppliers drawings will have to be resubmitted for approval. It is always less expensive to go with the suppliers standard materials and details.

Its Not a Leak

Metal-roof panels will condensate. During freeze-thaw cycles, in humid environments and during a rain, condensate will form on the bottom side of metal-roof panels. A simple (and inexpensive), vinyl-faced fiberglass blanket under the roof panel will eliminate this problem.

Your Ducts in a Row

A common conflict developers run into is having to adjust soffit-system heights for airhandling units and duct. To save time, many mechanical contractors will build the ductwork off site. Often times, purlin depth, soffit framing, electrical conduit or sprinkler systems are not accounted for when the size of the duct is determined. Or the size and location of the air-handling units vs. the height of the soffit is not taken into consideration. Yes, it is a problem to lower the soffit after the system is on site. Also consider where you are going to locate the air-conditioning condensing units.

The Labyrinth

I was recently involved in a project where the fire-sprinkler system was not clearly laid out prior to construction, and the fire-sprinkler subcontractor was given free reign. I received a call from the owner, informing me the buildings were too short. I quickly referred to the plans and confirmed the building heights were correct. I asked why the height was a problem, and the owner said he could bump his head on the sprinkler pipes. When I arrived at the job, I found a complicated maze of sprinkler pipes crossing the buildings in every direction. These pipes penetrated almost every unit partition, and large holes had even been cut through the hallway and door-filler panels. There was nothing I could do at that point, and the next call from the owner was to ask, Where am I supposed to run the AC ducts with these sprinkler pipes everywhere?

Simple, complete plans and coordination with the sprinkler, mechanical and building subcontractors prior to construction could have eliminated this problem.

Shocking, Isnt It?

Where are you going to locate the electrical- service panels? Remind your electrician the conduit will remain exposed. It does not take much effort to run conduit in a straight and orderly fashion rather than crisscrossed inside the hallways and units. Keep the exposed conduit out of the hallways whenever possible.

Have your electrician and security-system installer coordinate all of the underground work required. You would be surprised how many times new concrete gets cut to install underground conduit or other underground lines.

To Name a Few

These are just some current issues that come to mind. Most, if not all, of these problems can be avoided by planning and communication on the front end of a project. Have all of your subcontractors and suppliers communicate with each other to coordinate their work. Get all of this information on a set of plans. Remember, these plans are your contract, so get it in writing.

As you see, planning and coordination is not always as simple as it sounds, especially in construction. If you do not communicate, to quote Rabbi Bob Cohen, all that you are doing is nothing.

L. Bruce McCardle is the Eastern division manager for Mako Steel Inc., a supplier and installer of storage buildings from coast to coast. Mako focuses on building relationships, with more than 80 percent of its business coming from repeat customers or their referrals. Mr. McCardle enjoys working with first-time facility builders from design through grand opening. He has been involved in almost every aspect of the metal-building and construction industry for more than 20 years. Look for his presentation at the upcoming ISS expo in New Orleans. He can be contacted at 888.795.7594.

The discovery of hazardous materials in a self-storage unit can happen to even the most cautious storage operator. You might come into work one day and discover gas has spilled onto your property from a nearby construction site. Perhaps you find an abandoned unit filled with old tires and cans of oil or, even worse, toxic chemicals. Your local health department requires you to hire a certified remediation contractor to clean up the contamination; but since the tenant cannot be found, you get to foot the entire bill.

Cases like these are typical, and self-storage facilities grow more attractive to criminals and freeloaders alike. Reports of people dumping tires, oil, gasoline and even biohazardous chemicals in rented storage units seem to accumulate. So how can you protect your facility from becoming a toxic-waste dump? Prevention is the best approach, but there isnt one specific way to keep tenants from storing and dumping such materials. There are measures you can take to reduce your risk, and insurance-coverage options are available should you fall victim to pollution from a covered cause of loss.

The Cost of Clean-Up

When a tenant leaves behind hazardous chemicals, even the smallest cleanup and disposal jobs can cost thousands of dollars. Check your insurance policy to see what type of clean-up and disposal coverages you have or may want to consider purchasing. Most policies have a built-in limit for pollutant clean-up that covers up to certain amounts per occurrence.

Keep in mind coverage only pays for covered causes of loss such as fire, vandalism, theft and windstorms to name a few (an actual list of covered causes can be found in your insurance policy). For example, if you have a fire on your property and the aftermath leaves behind chemical wastes that must be extracted from the ground, your pollutant clean-up coverage would most likely cover the costs as long as it happened on the property during your policy period.

Pollutant clean-up does not cover the expenses to legally remove hazardous contents left in a unit by a tenant such as tires, oil, gasoline, meth labs or biohazardous chemicals. Hazardous-contents removal is an optional coverage that will reimburse you up to certain limits for expenses you pay to remove such contents dumped by a tenant. Please note this optional coverage does not cover any fines or legal fees the storage owner may have to pay.

It is important to evaluate the surrounding neighborhood of your storage facilityparticularly its crime ratewhen considering this coverage. Storage owners who set up shop in industrial or high-crime areas may want to consider purchasing a higher limit. Storage facilities in less-populated areas with a low crime rate may not need higher limits or any coverage at all.

Stop the Problem Before It Starts

Sometimes people store prohibited items simply because they do not know better. Make prospective tenants aware of the types of materials considered hazardous and why they are not allowed to be stored at your facility. They may not realize items such as tires and cleaning materials become a fire hazard when stored at warm temperatures.

Make it clear that storing hazardous or toxic materials in units is not allowed, and reinforce the policy by including it in the lease agreement. Remind existing tenants of this policy by posting signs in the rental office and around the facility. The goal is to educate uninformed tenants as well as scare off potential dumpers. The more difficult you make it for people to abuse your units, they more likely they will go elsewhere.

To avoid purposeful dumping or criminal activity, request positive identification from every tenant, including a drivers license and Social Security number. Authorities can find most people with these two items, so do not accept anything less. In addition, do not accept a P.O. box as the sole contact address. Insist on a physical address where the tenant can be located if necessary. Some say this may deter people from renting units, but more important, it will decrease your risk of renting to a dumper or someone looking to engage in illegal activity.

Once you have the prospective tenants contact information, quickly verify its veracity. Mail a welcome letter to the address and make courtesy phone calls to the given numbers. If any of the contact information is inconsistent, confront the tenant immediately and have it corrected before allowing him access to his unit. Most likely, an incorrect phone number will be nothing more than a simple mistake, but it is better to be safe than sorry.

If someone is looking to store hazardous materials at your facility, he may bring it in a truck or van, as most of these items cannot fit in smaller vehicles. Make your tenants aware all vehicles may be searched on entry to the facility. This way, you can deter someone from bringing in prohibited materials and stop the problem before it starts. Enforce the search policy whenever you have suspicious-looking vehicles entering your property, such as unmarked covered trucks or vans, especially if they tend to back up into the unit on every visit.

There is no guaranteed system for preventing a self-storage unit from becoming a haven for hazardous materials. You can reduce the chances of your facilitys exposure to toxic dumping by taking preventive measures, enforcing policies and having appropriate insurance to assist with costs should you fall victim.

Universal Insurance Facilities Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, call 800.844.2101; fax 480.970.6240; e-mail [email protected]; visit www.vpico.com/universal .

Self-storage construction has evolved considerably over the past decades. Since the infancy of the industry in the late 1960s and early 1970s, the use of building materials has changed, especially for exterior facades and roof systems.

Originally, exterior walls were predominantly plain concrete-masonry units (CMU) with reinforcement. Roof systems comprised bar joists, steel deck and built-up roofing. Interior partitions consisted of plywood or gypsum board on wood-stud framing. Interior doorsif anywere solid- or hollow-core wood swing doors. Exterior doors were generally overhead sectional units on tracks. These doors were very high maintenance and would limit stacking heights. Normally, there was not much concern in regard to curb appeal. In fact, there were blatant attempts to add bright and sometimes garish colors to the outside to get attention from passerby.

In the early to mid 1980s, the industry began to explode. During this period, self-storage owners and developers began looking for building materials that were more efficient and economical. The somewhat-new pre-engineered/pre-fabricated metal-building industry fit this demand. Thus, the all-metal self-storage building was born.

Present-Day Buildings

Today, typical interior areas of a self-storage building consist of coldrolled Cee columns on a 5-by-10-foot grid system with Zee purlins at 5 feet O.C. (on center). Local codes, roof snow loads and lateral wind loads determine the size and gauge of these components, which is why the buildings are called pre-engineered. The sizes, gauges, lengths, etc., are manufactured by a fabrication plantthus the term pre-fabricated.

The framing materials can either be primed red or gray oxide, or can be galvanized-coated. Most full-service building suppliers and contractors offer both coatings. Roofing materials are predominantly metal and preferably standing-seam or standing rib with concealed fasteners. The gauge of roof deck is 26, 24 or 22, with 22 being the heaviest. Close to 100 percent of this type of roof material is Galvalume-coated and, on some occasions, this finish is over-coated with a long-lasting architectural color.

A condensation blanket is very popular in storage units to curb moisture from forming on the bottom of the roof deck and dripping on stored goods. This material is usually a thinner metal-building insulation (MBI) and, in most cases, is a 2-inch, vinyl-faced fiberglass blanket. If the storage building is climatized, temperature or thermal transfer control is another big consideration.

Presently, in many jurisdictions, an owner may choose the thickness of insulation he wants. Wall insulation can be 3.5-inch (R-11) or 4-inch (R-13). Roof insulation is usually 4-inch (R-13) or 6-inch (R-19). It should be noted here that many jurisdictions require minimums, such as Floridas energy codes that require a 6-inch minimum. Many areas in northern states with harsher weather conditions require even thicker insulation, normally accomplished with two layers of fiberglass one vinyl-faced and one unfaced. The new International Building Code, rapidly being adopted by most states, requires 6-inch R-19 with few exceptions.

Unit partitions are a form of rolled, corrugated metal sheets, either 29- or 26-gauge, and are finished with Galvalume. These metal partitions are attached to the Cee columns with tek screws. The metal partitions serve at least two purposes, providing a bigger bang for the buck. First, they divide each unit for security. Second, they serve a structural purpose. These partitions are very strong and, when attached properly, act as shear walls in the buildings to resist lateral wind loads.

Storage building exteriors come in many varieties. Due to demands by local planning and zoning boards and neighborhood committees, as well as to blend with the architectural theme of an area, the exterior look may require a mixture of two or more materials. The pre-engineered steel building can easily be adapted to receive a brick veneer or EIFS (exterior insulation and finish system), architectural CMU infill, other siding products or a combination of many. Because of stricter design criteria, other architectural materials are slowly replacing the typical metal siding that has been seen in past years.

The exteriors are also made up of steel rollup doors made expressly for the self-storage industry. Planning and zoning departments are making efforts to disallow these doors to face the main road. Instead, a decorative façade is used where required, or areas the size of doors are painted a different color to denote them.

As storage building sizes increase, more stories are added due to land costs, and more elaborate designs are created, many other building systems can be used in addition to these basic materials. There is hot-rolled steel framing with post and beam; poured in-place, reinforced concrete framing; pre-stressed concrete components and others. Any of these systems can be used with a variety of façades.

It should be noted that typical building components will vary in each geographical area. Coastal areas such as Florida and the Gulf Coast tend to use more reinforced CMUs, with cells poured with concrete grout to create mass and withstand up-lift caused by high winds over semi-flat roofs. In the northern tier of states, components are used to create pitched roofs to shed snow loads. In many of these varieties, cold-rolled steel interiors are used, or the ever-more-popular prefabricated, light-gauge, steel-truss system. In the future, you may not be able to say there are basic materials for self-storage construction, because so many varieties of materials are being used.

Heath Mulkey and Joe Trepke are part of Compass Building Systems Inc., a full-service materials supplier and contractor exclusively serving the self-storage industry in the Eastern United States. Compass is unique in that inhouse employees erect the majority of its work. A much smaller portion of the labor is performed by dedicated firm subcontractors under the companys control. This creates a single point of responsibility for a complete self-storage building. For more information, call 800.243.8438; visit www.compassbuildingsystems.com.

 

This month, I gathered a roundtable of experts to discuss the state of selfstorage in the Western United States. Lets hear what local experts have to say about their respective cities and regions. Our panel of brokers includes: Richard Arnold, Arnold/Forcum & Associates, Portland, Ore.; John Battle and Clifford Crowe, Lee & Associates, Carlsbad, Calif.; Larry Hayes, Hayes & Associates, Missoula, Mont.; and Joan Lucas, Joan Lucas Real Estate Services, Denver. Because of the unique economic times in which we find ourselves, I have contributed comments on the national market as well.

Why should investors in other real estate types think about investing in self-storage?

Arnold:

Besides the lower maintenance costs and the ability to put their eggs in many baskets, investors should consider self-storage for the greater return they can achieve than from most other types of real estate. Buyers are currently purchasing other real estate showing returns of 7.5 percent to 9 percent, whereas buyers acquiring self-storage properties are showing debt-free returns of 9.5 percent to 10.5 percent.

Battle:

Self-storage as a real estate investment vs. other property types offers many advantages: low maintenance, virtually no roll-over expense, no long-term tenancy, and no barriers to entry, especially in many areas of the West.

Crowe:

Those self-storage facilities that have sold in Southern California are yielding to the purchaser approximately 1 percent or more yield than office, retail or industrial products, and 2 percent to 3 percent more yield than apartment investments.

Lucas:

Its the good news/bad news story. Potential investors should think about getting into self storage because it is an industry that seems to be relatively (but not totally) recession-proof; it provides great returns on investment with lower overhead, repair and maintenance than other types of real estate. Two people can manage a property that is 45,000 square feet. When a customer moves out, the manager sweeps out the unit, closes the door and waits for the next guy to come along. And lenders still have money available for this type of product. The bad news is there are very few good, well priced properties on the market. Hence, those properties that are on the market are often priced at aggressive cap rates.

Hayes:

Self-storage is still providing a better return on investment than most other real estate investments. In our area, it is providing a 2 percent to 3 percent better return than apartments or NNN (triple-net) properties.

A percentage point or two may not sound like much, but it is a 10 percent or 20 percent increase in cash flow!

What kind of returns can an investor reasonably expect before and after debt service?

Battle:

Returns in California before debt service range from 8 percent to 9.5 percent, depending on location, age and competition. After debt service, the cash-on-cash returns vary widely, depending on whether the financing on the property was placed within the last six to 12 months. If that is the case, the returns would be in excess of 10 percent.

Crowe:

You can expect an 8.5 percent to 9.5 percent capitalization rate (annual return before tax) and 10 percent to 12 percent cashon- cash return, assuming 25 percent down and 6 percent financing. While these returns are great in California today, Im encouraging some of my buyers to look out of state, where they can get higher cap rates and higher returns.

Hayes:

Depending on the quality of the facility, an investor can expect between 9.5 percent and 11 percent. A facility with a 10 percent return based on cash, leveraged 75 percent over 20 years with 6 percent interest, would give a return in the 14 percent range.

Lucas:

Lets say a property is sold for $1.4 million. It kicks off $140,000 in net operating income (NOI) per year. The investor will usually put down about 25 percent of the loan amount, leaving a balance in the amount of $1,050,000. His NOI the first year is $140,000, and he puts $350,000 into the deal, so his cash-on-cash return for the first year (before debt service) is 40 percent. How cool is that? However, then we calculate return after debt service. Lets assume the buyer gets a $1,050,000 loan at 6.75 percent, with a 20-year amortization and a five-year balloon. His annual approximate debt service would be $96,000 (before taxes) per year. Therefore, if the site was netting $140,000, his after-debtservice cash would be $44,000. Cash-on-cash return is then 12.6 percent.

These low interest rates may make cash on- cash returns astonishingly high for those of us with long memories in the real estate business. It was only about four years ago we had a negative spread of NOI return to debt service constantly creating negative financing leverage.

What impact is the change in the capital gains tax rate going to have on the market?

Arnold:

The lowering of the rate should make all investments more attractive.

Battle:

It should make the decision to sell easier, since it wont be nearly as costly to sell if one does not do a 1031 tax-free exchange.

Crowe:

Historically, a capital gains tax cut has meant a stronger market, more new issues and economic growth for a long time. More product should come on the market due to less tax. In California, owners have not had a good alternative for improving their investment and, therefore, have held on to what they own. The lower capital gains rate may influence more owners to sell.

Hayes:

Historically, because the after-tax dollars are greater, reduced capital gains have been a positive incentive to sell.

Lucas:

I think it will stimulate more 1031s.

I agree there are no negatives to the reductions in the capital gains rate; however, the time limitations on the law provide a little uncertainty for the future and may force some owners to sell sooner than later.

Is financing readily available?

Arnold:

Yes. Decent properties and strong borrowers can readily obtain 10-year fixed loans at or below 7 percent.

Battle:

There is an ample supply of capital for financing of ground-up development and investment sales.

Crowe:

Yes! In the mid-5 percent to low-6 percent range.

Hayes:

In our area, money has been available to strong buyers.

Lucas:

Yes, there are several banks and lenders in Colorado that are making good loans right now. Its often difficult to find a lender who will do small loansthat is, $500,000 up to $1 million. But I have seen deals made in this price range.

We are going to look back on these days and say, Why didnt we borrow more and buy more real estate? It is so obvious we may be missing part of the uniqueness of these times in history.

Considering the potential returns, are buyers being too picky?

Arnold:

I dont believe so. There is a lot of demand for any good, well-managed selfstorage property.

Battle:

The problem is not that buyers are being too picky but the lack of product to buy, at any price. Most of the deals that hit the general market are snatched up within a matter of days. There is a pent-up demand for self-storage facilities throughout the West.

Crowe:

In the California market, there are plenty of buyers. Since they cannot find product, they seem to have adjusted to what the market is and are prepared to step up to the table for it. Any prudent buyer is going to do his due diligence, make sure everything is as represented, and make sure he can meet his expectations.

Hayes:

Buyers are not picky, theyre spoiled. They are probably remembering the good old days.

Lucas:

How can you ever be too picky when it comes to your own financial situation? We have all seen a dramatic loss in our worth in the last several years. I encourage everyone to be cautious.

You cant play in this world of wonderful interest rates unless you have a property.

Are sellers just too greedy, or are there anygreater fools?

Arnold:

I dont believe real sellers, as contrasted with those who say Everythings for sale for the right price, are too greedy. Some are ill-informed. I have found few owners who discuss selling their properties who have any idea what is going on in the market. If they want to sell, they pay attention to the information we provide. If they will only sell for a stipulated figure, they probably arent sellers.

Battle:

The biggest objection to selling owners make is, What do I do with the money? They are enjoying excellent cash flow that is very difficult to replace with a bigger or better project. Unless they are really motivated to sell for reasons such as estate planning, partnership problems, etc., they will not sell.

Crowe:

The peak in the market sales price (maximized returns), is mostly determined only in hindsight. But if I were to pick a time to sell and maximize my return in California for self-storage facilities, I would say now would be a good time.

Hayes:

I dont think many sellers realize what an ideal time it is to sell. When interest rates return to historically higher levels, self-storage properties are going to require larger down payments, provide lower cash returns and bring lower prices.

Lucas:

Unfortunately, I know some sellers who are just pricing themselves right out of the market due to their inexperience and lack of knowledge on what it takes to put a deal together. And they dont want to listen and learn. The bottom line is they arent really sellers. They sit there with a facility priced too high, on which they get a lot of inquiries, but never get a deal put together. As brokers, we dont want to work with them because we know a deal cant be made. It is a waste of everyones time, and can hurt the long-term salability of the property.

The irony is that the best time to sell is the same as the best time to buy. A great mentor of mine always said, Make your own deal, not the other guys. His advice sure keeps you from passing on a good deal by hoping to take future profit away from the buyer. He has to have something too!

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In January 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to the buying and selling of self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

Thinking about establishing self-storage facilities in the United Kingdom or Europe? Naturally, you want them situated in urban areas for the best possible return on investment. With the shortage of land, it is often advantageous to consider converting an existing building.

If you are building a new single-story facility in an open area, stop reading now. This article is not for you.

KeepSafe Self-Storage Ltd.’s first facility was a two-story building in an urban location. It started life in the early 1900s as a fish-smoking factory and later became a battery-testing depot. It was seriously vandalized and stood empty for five years. Seven days after Keepsafe completed the purchase, the first self-storage customer moved in. The facility now operates at approximately 90 percent occupancy in a more competitive market than when it opened.

Since that first facility, my experience has taught me a lot about self-storage. Although this article is based on my experiences in the U.K. self-storage industry, there are principles that apply to any city where there is a high building density, tight planning controls and high development costs.

What’s Your Target Return?

Before purchasing a building to convert to storage, decide your target return on investment. Armed with this number, embark on the research and do the math based on realistic assumptions. You can now evaluate your proposition objectively.

Once you have chosen your building, investigate your nearest competitor. Remember, if it opened some time before you, its capital base to enter the industry is likely to be lower. But even if your market becomes over-supplied—if your profit per pound, euro or dollar invested is greater—you can afford to drop your prices and still remain in business.

Environmental Risk

Environmental risks apply more to conversions than to a new-build facility on a virgin site. There will undoubtedly be a whole legacy of risks stemming from an older building, which may have been used for a number of different activities before it becomes your pride and joy. Make sure you understand exactly what previous owners did in the building and what are the real pollutants that may be present.

This is a scary area, and the banks get very twitchy about these issues. The only way to evaluate environmental risks is through a physical environmental site investigation. The investigation makes it possible to quantify cleanup costs. If you do this before you commit to the purchase, you should be able to negotiate it into the price you pay.

Planning Issues

One advantage of choosing an older building for self-storage is you can find an existing building with a type of zoning that enables you to start without going through the bureaucratic wrangles of your local planning department. This can save you many months.

Not all planning authorities understand self-storage.My favorite planning authority insisted we provide racks for all customers that bicycle to the facility, carrying all the belongings they are going to store. This requirement is not very useful in a 65,000-square-foot, edge-of-city facility with no public transport. I should not complain, as this was neither an onerous nor expensive condition to satisfy; but it is certainly demonstrative of the lack of understanding of self-storage.

How Quickly Can You Open Your Doors?

Time is of the essence. From the moment you commit funds to the moment you have your first paying customers, the cost of your funds—whether in interest to the bank or a future return to investors—is compounding rapidly. The quicker you can open for business the better.

Clearly, the condition of your building will determine how much refurbishment needs to be done. If you get your project preplanning right, a lot can happen quickly after committing funds. Contrast that with a new build where the upfront costs run for a considerable time before payback starts. With an existing building, the original owners are the ones who have absorbed the costs of the walls, roof, etc.

Phasing the Development

The cost of land in high-population cities means buildings must be multilevel; therefore, you have to get your roof on before you can let customers in. I prefer someone else to pay for that. In an older building, you can build out the ground floor while your contractors are working on the upper levels. You have to contain the dust and noise to ensure staff and customer safety is not compromised, but it can be done. The real merit of this approach is your early customers are paying for your later stages of development.

Think 3D

The key sensitivities in self-storage are the rent per square foot, the rent up rate and the amount of available rentable space. You have got to shoehorn as much as you can into your multilevel urban facility. Very often, you can split a floor; but look carefully at ceiling heights to allow for the thickness of the mezzanine floor itself and the fire-protection system. And remember to check out the floor loadings.

It is always necessary to remember customer access requirements, so consider adding extra lifts for access to larger floor areas. If cost is a concern, consider using rolling walkways for smaller areas. Also, in a multilevel building, the floor above is supported by structural beams that hang down, and customers may need to pass under them. These beams can always be cut.

The Generation Game

I recently attended a conference where a lot was spoken about first- and third-generation storage centers. I am not sure I agree with the concept, unless “first-generation” means “more expensive.” It is quite possible to refurbish an older building in a city location, dress it up with a quantity of crinkly tin, add all the latest access control and security systems, and have a building that is almost indistinguishable from a purpose-built facility.

For the larger operators that want a cookiecutter approach, uniformity of development perhaps gives more cost predictability and helps build a brand. But building new usually costs more. Clearly, older buildings will have higher maintenance costs and might not be in the best locations, but this should be compensated by the lower purchase cost.

Currently, self-storage is a local business in Europe. This approach, driven by the irregular layout of cities and the historic nature of their development, will continue to present opportunities for some time to come.

Rod Edge is the managing director of KeepSafe Self-Storage, which operates seven facilities in the United Kingdom. He has been involved in the U.K. self-storage industry since 1987 as an employee, consultant and owner. Mr. Edge has been involved in the development of more than 30 buildings, including one new build. For more information, e-mail [email protected]; visit www.keepsafe.ltd.uk.  

Zoning laws come into play in almost every real estate development project. Zoning laws and regulations are those that govern how a property can be used and developed. Local governments adopt zoning regulations to set development standards for properties within their jurisdictions. Development standards ensure that land is used for the common good and development can be guided by an orderly process. Generally, zoning is divided into categories: residential, commercial, industrial, agricultural and recreational. The desirability of locating a self-storage project on a highly visible site has raised many new zoning issues.

Permitted vs. Conditional Use

A permitted use allows land use by right. No public hearings are required and, hence, a project can proceed straight to building permit with no public input. Be sure to meet all requirements of the zoning ordinance, such as setbacks, landscape requirements, building-coverage limitations and floor-area ratio (a ratio of land to gross building area). When a land use is permitted by the governing agency, politics dont enter the process. Compliance with the development standards is all that is required.

A Conditional Use

The majority of cities have placed self-storage in the zoning category of a conditionally permitted use. Eight out of 10 projects will fall into this category. When a land use is categorized as conditional, it is permitted subject to circumstances the governing agency may impose on the project to mitigate any potential impact.

Generally, a conditional use requires the filing of an application and a set of design drawings with the governing agency for approval. Initially, the design drawings are evaluated by the planning staff and a report is written and forwarded to the Planning Commission. The Planning Commission will hold a public hearing, take public input, hear the applicants presentation and then vote the project up or down. Politics can and do play a major role in obtaining a conditional use permit. Architecture, aesthetics, hours of operation, landscape and overall design also play a large role.

As homeowners associations, neighborhood groups and various political groups have learned how much clout they can bring to bear on local politics, the zoning process can be complex. In this situation, it is always a good idea to meet with these groups prior to any public hearing. The public will assume the worst in the absence of a carefully thought-out presentation by the project sponsor. Many neighborhood groups that started out negative on a particular selfstorage projecteven to the extent of circulating petitions against itcan be turned around when presented a well-executed design.

During the processing of a recent conditionaluse application, a petition with 90 signatures opposing the project surfaced before the Planning Commission hearing. But a Saturdaymorning presentation to the homeowners association turned the opposition into supporters.

Originally, when asked if they had seen the design drawing for the project, the group replied, No, we dont need to see it. All selfstorages are ugly. When presented with project renderings and an explanation of how the project had been designed to protect them, the negative response turned positive. The Planning Commission hearing was made considerably easier when those homeowners showed up to support the project enthusiastically. Even though the city was not in favor of the project given its high-profile location, 80-plus neighboring homeowners vocal support won the day. The project was approved unanimously.

Design Review

The design review is somewhat simpler in that the question of land use has already been answered. Design review is a process whereby the local jurisdiction will assess the design of a particular facility. Normally, it occurs when the land-use category (in this case, self-storage) is a permitted one, but the jurisdiction wants a say in the facility design. Usually, projects undergoing design review will be evaluated for architectural compatibility with surrounding properties, landscaping, project colors and overall aesthetics.

Zone Change

A change in zoning is referred to as rezoning. It often involves changing a parcel of land from one land-use classification to another (i.e., from residential to commercial). Zone changes usually involve public hearings that give the community and governmental agency a chance to voice their opinions.

Zone changes can be difficult. Again, it pays to meet with the surrounding neighborhoods before any public hearing. A rezoning application for self-storage should emphasize the positive attributes of the land use:

• Self-storage generates low traffic and low crime.
• Facilities are closed at night, with limited access.
• Self-storage projects often bring enhanced security.
• Facilities frequently have noise-reducing qualities, such as acoustical buffering from major boulevards, highways, etc.

Politics will play a role in any zone-change application. Competing interests of surrounding properties can also play a role. Generally, a rezone can be more difficult than a conditional use permit. From the publics vantage point, an applicant filing a rezone application is trying to change the rules others have to follow.

The subject of self-storage as land use is commonly misunderstood. All too often, a governing agency will lump self-storage in an industrial category usually reserved for manufacturing or warehousing; but the operational characteristics of the industry differ significantly from those categories. Self-storage has fewer employees, less traffic, less noise and, hence, much less impact. So, the first order of business is convincing the local planning department self-storage is not an industrial land use and, in fact, can be compatible in most zones.

A quick note: Rezoning should not be confused with a variance, which is a request to deviate from current zoning requirements. A variance is not a change in the zoning law but a waiver of a particular requirement.

Persistence

In 20-plus years of processing conditional-use applications, the three rules I have learned are:

1) Never take no for an answer.
2) Do your homework.
3) Never take no for an answer.

Many highly successful self-storage projects would not have been built if a developer had stopped with the first negative reaction from a city planner. As self-storage had made its way from bare-bones boxes in industrial zones to sophisticated architectural edifices on the major boulevards, the zoning process has grown in complexity. The customers are out on the major roads and your self-storage project should be, too. When it comes to zoning, thorough homework, good design, effective communication and persistence is the recipe for success.

Bruce Jordan is president of San Clemente, Calif.-based Jordan Architects Inc., a fullservice architectural firm specializing in the design and entitlement of self-storage projects. For more information, call 949.388.8090 or e-mail [email protected].

Atlanta-based door manufacturer DBCI has a simple but noble mission: provide the best customer service possible. How? Supply customers in the self-storage and commercial markets a quality product at a competitive price, with unequaled service and response. To do this, some dramatic and exciting changes have taken place in the company over the past 18 months, including the addition of new management as well as a new sales team, building and website. DBCI also built a fresh business philosophy around four core values: integrity, customer service, employee development and the creation of partnerships.

Founded in 1989, DBCI is a major manufacturer of roll-up curtain doors and self-storage components with plants in Arizona, Georgia and Texas. The company was purchased by Houston-based NCI Building Systems in 1995. Since then, it has expanded with a distribution center for commercial products in Los Angeles and the recent purchase of Able Garage Door, manufacturer of residential and commercial sectional doors. Able, based in Houston, has distribution centers in California, Georgia and Oklahoma, as well as an additional Texas center in Dallas.

Over the years, the companys innovative products have made it a recognized market leader. DBCI was the first door manufacturer to make use of the siliconized-polyester paint finish that carries a 25-year warranty on film integrity and up to a 25-year warranty against chalking and fading. The company was also one of the first manufacturers to use a spring-tension adjuster in the self-storage door market.

Times Are Changing

In 2002, the company reaffirmed its commitment to customer satisfaction with the implementation of many changes. These began with the appointment of Jimmy Dee Anderson as president in January of that year. Andersons prior association with the company as an employee of NCI and, later, a DBCI customer, allowed him to assess the organizations business position. The challenge? to concentrate on processes, eliminate wasted steps and streamline the overall system. Modifications had to benefit not only customers, but the companys products and people.

One measure of success in this regard was the reduced number of customer complaints. A specific aim was to make internal processes more accountable, efficient and user-friendly for consumers. The companys new vision was embraced by its 300 forward looking employees.

Founding and Reaching Goals

With a firm understanding of the companys central values, the management team implemented short- and long-term goals. Many of the short-term goals are already in effect. They include implementing product changes, finalizing geographic growth plans and rebuilding the sales force. As part of its mission to provide premium service, DBCI adopted a CAD-based estimating program to produce more accurate quotes for new projects. The program also allows quicker turnaround from contract to delivery.

Long-term objectives for the company include helping employees maximize their potential, expanding the product line, geographic growth and network-building. To achieve the goal of creating partnerships with industry leaders, DBCI initiated the Presidents Advisory Council, designed to join suppliers, customers, owners, architects and others in discussing changes in the self-storage marketplace. The council, an idea NCI implemented several years ago, acts as a forum for discussion about industry needs and provides a place where relationships can be built and bolstered. New members will be invited annually, and quarterly meetings will be held at diverse venues.

Ahead in the Race

How does DBCI maintain its competitive advantage in the self-storage market?

• Purchasing Power

The company is one of the largest users of prepainted steel coil.

Diversity

DBCI owns the coating facilities where products are painted and slit. The NCI family has more than 30 facilities and more than 5,000 employees nationwide.

Financial Strength

NCI is a public company, traded on the New York Stock Exchange, with annual exceeding $1 billion.

Quality

All these benefits combined allow DBCI to bring more value to its customers. A research and development department was initiated in early 2002 with the sole purpose of making the companys products better, safer and less expensive. Customers can expect to see some exciting products and product modifications by the end of the year.

DBCI has been the leading supplier of doors to the self-storage market for some time, and we believe we still are today, Anderson says. Our products are very good. We have improved customer service and response. We have tremendous buying power and, most of all, we really care about the industry, the customers and our people. As long as we maintain these qualities, we will always be a force in the industry. While the self-storage industry is sound, it may not continue to see the same growth of prior years. According to Anderson, the companies willing to adapt are those that will be most successful.

In its evolution, DBCI is committed to providing quality products and service. Customers can rely on full-time field technicians for outside support and installation as well as multiple manufacturing locations for convenient product support. There is no greater compliment than to hear customers comment on how easy it has been to do business with DBCI, Anderson says. Those comments are definitely on the rise.

For more information, call 800.542.0501; e-mail [email protected]; visit www.dbci.com.

The best stories are those that have you anticipating an ending as you weave through the plot; yet when it comes, it is not at all what you expected. In fact, the ending is much stranger than you could have ever imagined. The unforeseen twist leaves you in thought, trying to recall small details and pieces of the puzzle, analyzing possible flaws.

While this recipe may make a good book or movie, for the self-storage developer, small, unforeseen design details can create a lifetime of second-guessing his misguided plot for success. Although it might have been possible in the past to build a self-storage facility in any populated or growing community and find triumph, the build it and they will come philosophy is now a catastrophe waiting to happen. Self-storage success is about careful and meticulous planning and preparation. While many have succeeded in the past and others are carving out great futures, nothing in the industry should be taken for granted.

The industry is constantly changing and redefining itself. Ask any veteran, and you will find it is not as simple or superficial as it appears at first glance. Sure the lure of a retail business that generates such high revenue with few employees is great. To most outsiders, self-storage seems to run itself an avenue to a carefree lifestyle of wealth and leisure. While many people make a more-than-comfortable living in this industry, no one should be misled to believe it is done without solid planning and hard work.

An Experienced Team

In the old days, finding a good location was about identifying a market without a self-storage facility. Today, a successful location is more about finding a market that is not saturated. A sad but true trend is facilities achieving stabilization by taking market share from one another. Now more than ever, developers must base their decisions on competition.

The best way to discourage others from entering your market is to eliminate avenues of competitive marketing during development. This is achieved by obtaining the most experienced, knowledgeable design team as early in the planning stages as possible.

Poor site layout, building utilization and unit mix are just a few signs of a developer who is inexperienced in the industry. A common mistake made by first-timers in self-storage is to contract the architect or engineer who designed his last strip mall or commercial building. This will usually result in wasted time and delays, and revision of blueprints well after initial review and project commencement. Consequently, a difficult task many experienced vendors and contractors face is having to tactfully tell the developer he has a poorly thought-out plan. Many will forego this confrontation and allow the developer to wander in darkness. But there are far too many experienced architects to start a project in this manner.

On reviewing many project plans, it becomes obvious a more efficient layout would allow the same amount of storage on a much smaller portion of the property. You do not need six acres of land for 30,000 square feet of storage, yet some developers will say, I dont really care if we can get another 20,000 square feetI only want to build the 30,000. Its like ordering the value meal at a fast-food restaurant just to get the cheeseburger. Do not build more storage than you want or need, but be resourceful. Get experienced help. Make the site layout efficient, and consider your alternatives.

Maximizing Space

An efficient layout gives the developer the option to sell a portion of the land as an out-parcel or set it aside for future expansion. If this can be determined at an early stage, the property seller may agree to subdivide prior to purchase. A very real possibility is subdividing and selling the smaller out-parcel at a much greater price per square foot than the original purchase. In many cases, this can be achieved by selling an out-parcel with prime road frontage, yet retaining enough of the same to market the facility with little or no negative impact. Many sites have overcome financial feasibility problems by using this method.

Building in phases poses many advantages. Other than the obvious benefits of minimizing the initial capital expenditure, it is the most accurate way of meeting the market demands in respect to unit mix and climate control. It allows developers to adjust to what is currently renting, and allows project expansions to react to market changes. If there is market demand and the zoning permits, the vacant property could be used to generate revenue from uncovered boat and RV parking with minimal development cost. Furthermore, other developers considering the possibility of building in the same market might be deterred by the projects ability to expand.

Civil engineers experienced in self-storage will know how to make use of various techniques and tricks of the trade to maximize site efficiency. This will involve factors and considerations such as property setbacks with respect to buildings, drives and tree buffers. In many instances, perimeter buildings will be used to maximize efficiency and eliminate fencing. They can also provide a more aesthetically pleasing appearance to the community.

Other considerations may involve using smaller drives and one-way traffic flow. Smaller drives usually require larger drives be placed at the ends of the buildings to accommodate the turning radius of moving trucks and trailers. The engineer will ensure drives meet the approval of local building and fire officials.

Furthermore, considerations will be made in the handling and retention of storm water. Other possibilities in design could include placing the slabs on grade to avoid costly building and drive step-downs. The engineer should also be taking into account the unit mix, percentage of climate control and how this will allow the use of different building types.

Building Types

An experienced architect can use many building types and configurations to maximize a property. Outside the normal methods of layout for conventional and perimeter self-storage, other types can be incorporated into the design to maximize the site efficiency. Common ones used in self-storage are enclosed, multistory, enveloped and split-level.

The enclosed building is simple to define: a storage building made up of four or more exterior walls that enclose a given storage area. The exterior walls encompass the interior storage area with a few exterior doors allowing access to hallways and storage units. These unitsalmost always climate-controlled with insulated exterior walls and roofmake very efficient use of land due to the flexibility in size and dimension.

Like the enclosed building, the multistory building should only be used in an area where there is adequate demand for climate control. If there is a good market for climate control and zoning permits, multistory buildings provide the most efficient use of land. While they cost more per square foot to construct, the savings in smaller parcels of land help justify the expense, as does the revenue generated by the high percentage of climate control. This efficient use of land isand will continue to be the growing trend as land prices continue to rise. Multistory buildings can also be designed to accommodate conventional storage on ground levels. This is accomplished by what is referred to as an enveloped building.

The enveloped building technique encloses climate-controlled units inside the surrounding perimeter of conventional ones, with the two separated by an insulated wall. This provides for efficient heating and cooling by making use of the thousands of cubic feet of air and stored goods in the perimeter conventional storage. This is one of the most common and efficient building types found in self-storage.

Another method of building and site development includes the split-level building. The term split-level refers to a building that allows multiple floors to be accessible by corresponding exterior ground elevations. The site must usually have a significant amount of grade to accommodate this type of building. In this respect, the split-level building plays a vital part in making a site with steep grades able to accommodate a high-yield facility.

Like multistory buildings, split-levels cost more to construct, mainly due to the significant cost associated with the required retaining walls. For this reason, they are usually used to accommodate climate-control. However, in most instances, they also contain a percentage of nonclimate-controlled units in the same way enveloped buildings do. It also stands to reason that the wider the building, the less impact the cost of the retaining wall has on the overall price per square foot. For this reason, the splitlevel is usually only economically feasible in building widths of 60 feet or more.

All of these methods and building types should be considered by the civil engineer and architect to create an efficient site plan and layout. Keep in mind all of the building types can be used separately or together, even in the same building structure, to achieve the desired result.

Feasibility

The fact that the developer, architect and civil engineer all must work closely together to produce an efficient site and building plan is understood. However, valuable time will be wasted if the unit mix and climate-control percentage has not been determined. Both are important factors directly relating to the building and site configuration.

It makes sense that if a site plan relies on the building plan and the building plan on the unit mix, there must be information available to establish the preliminary mix. Building plans often give no indication of what unit mix the market will support. While it might be possible to supply generic, stereotypical information, if no market information is available, it is often useless to do a site plan.

There are a few numbers one could use to see if a site has any feasibility (these should only be used to determine if the site is worth further investigation): The site should yield a minimum of 45 percent total rentable square feet of the gross area of usable land. Usable land is the total area of land not including set backs, buffers, retention ponds or other construction-restricted areas. Obviously, multistory projects will yield at least twice the amount of rentable square feet.

While this may be used as a benchmark, keep in mind a site may be very inefficient at 80 percent, based upon building types, layout and unit mix. Any climate-controlled areas accessed by hallways will yield approximately 74 percent to 78 percent rentable square feet. With this information, it may be possible for an experienced person to give you a rough idea how many square feet of rentable storage could be developed. Now the focus shifts to whether there is a market and, if so, how much revenue the unit mix will produce.

No first-time developer should make the mistake of failing to get a study from one of the many feasibility experts in the industry. However, in the infancy of exploring various sites, this could be expensive. It is possible to do a preliminary evaluation yourself. Following are a few methods one might use to gather information.

Most projects serve an area with a 5-mile radius. This can be greater or smaller depending on natural barriers and traffic flows that affect the convenience and accessibility of the project. After determining an assumed radius of the market, you can search the Yellow Pages and websites to determine if and where any competition exists. This will allow you to do a market survey of storage facilities.

While many facilities may be reluctant to help, try to find out their square footage and occupancy, which sizes rent and which do not, and what type of customer makes up the market. Place a call to the Department of Transportation and obtain traffic counts for the roads that will provide visibility and access. Take a few hours and drive around, paying attention to traffic flow, neighborhoods, apartments, condos, colleges, local lifestyle and businesses. Above all, learn the area around the potential site.

Next, obtain some demographics on the area. These can be purchased for little or no money from companies that serve the industry or on the Internet through sites such as www.claritas.com/demographics.htm. The anticipated demand can be determined by multiplying the population figures in projected market radius by the demand factor, usually 3 to 4.5 square feet per person. Subtracting the existing storage facilities square footage will provide some determination of demand.

Create a list and rank each project on a scale of 1 to 10 in each category: demand, competition, visibility, accessibility, household income, traffic count and storage rates. Let the list include any other factors you feel will affect the projects success. On the bottom of this page, try your best to break the market into various housing categories:

1) single-family
2) multifamily
3) military
4) college and university
5) commercial

The last step of this process involves narrowing potential sites and carefully picking a qualified feasibility expert to review the top choices. Follow his lead from this point. He should help you make the final choice and provide a unit mix that can be developed by experienced architectural and civil-engineering firms. The success of the project is ensured through the use of experienced professionals. Like the feasibility expert, architect and civil engineer, the other industry vendors will bring valuable expertise to the project.

These are not original ideas but a collection of concepts and techniques learned from previous designs and, in most cases, actual experiences in the self-storage industry. As with any project, improvements to manufacturing processes and materials unique to self-storage come into play, augmenting the design ability of the individuals involved. A general medical practitioner knows the anatomy of the human body, but must sometimes yield to the knowledge and experience of a specialist. Likewise, specialists within the self-storage industry will benefit in the life and vitality of your development.

Bert Brown is director of marketing for Janus International Corp., which manufactures a complete line of storage-facility components, ranging from roll-up sheet doors to self-supporting hallway systems. For more information, call 770.562.2850; visit www.janusintl.com.

Todays escalation of property values has created a higher demand for available land. The scarcity of affordable commercial- or industrial-zoned property with premier frontage exposures has driven many storage facilities into the multistory market. In the past, many storage facilities were either tucked into oddball parcels or parcels with poor access. These were available below the standard market rate because they had marginal exposure or were difficult to develop for any number of reasons. For example, the pattern of developing less-expensive land in industrial zones works well for a storage-type of use.

Even though weaving through the entitlement process on a larger, industrial zoned parcel may be less cumbersome, the inconvenience of the off the beaten path project may not be desirable to a majority of users. Industrial-zoned parcels are often more difficult for retail tenants to find. Finally, female users make up approximately 70 percent of the industrys clientele. Their choice is typically a cleaner, brighter facility in safe surroundings that is convenient to access.

Commercial-zoned parcels with more desirable exposure have a tendency to be smaller than industrial-zoned ones, and current real estate values and land costs have increased as they relate to storage projects. This keeps project developers vying for key locations. Prime real estate that benefits from the luxury of self advertising with direct freeway, highway or major boulevard exposure comes at a premium. These are just a few of the major contributing factors to multistory building.

The obvious advantage to building a storage facility with multiple stories is the increased coverage of total building area vs. total site area. The multistory concept allows the maximum utilization of a site. However, care must be taken during the zoning-research phase to ensure the allowable lot coverage or floor-toarea ratios do not exceed the jurisdictions zoning or development criteria.

Exposure and Signage

In most cities, signage standards are restrictive with regard to freestanding pole signs, billboards and large monument signs. One of the great advantages of a multistory facility is the built-in signage palette created on the upper walls of the building. The signage can be displayed on the upper floors for greatest exposure. These built-in signage areas overcome the need for special signage considerations or variances, which can be costly and may add delays to the development of the project.

Climate Control

Climate-controlled units can rent out at a premium and are normally earmarked for the storage of temperature-sensitive materials, (i.e., wine storage, important documents, antiques, etc.). They can be efficiently located on the interior and upper levels of a multistory facility. There is no need to use insulated doors and no concern for heat or cooling loss when the entire floor is climate-controlled with no exterior doors.

Maximizing the Opportunity for High Efficiency

Generally speaking, there are two types of storage projects: single-story drive-up facilities or multistory facilities. Multistory projects require additional components to make them function properly. These items include corridors, stairs, elevators, cargo lifts, cart storage and even ramps. The key to a successful project is to incorporate these components into the project as efficiently as possible. During the early planning stage these elements must be incorporated into the design of the project, so the facility is user-friendly while meeting its peak operating potential.

The balance of the project is also an important item to keep in mind when planning a multistory facility. When a project goes multistory, the concept of maximizing the number of driveup units helps create a marketable unit mix. On irregular shaped parcels, the thinking outside of the box approach often applies to achieving the final solution for a successful project.

Two-Story Elevator vs. Two-Story Ramp

The trend for typical two-story storage buildings is to discount the second floor rental units anywhere from 5 percent to 10 percent due to the inconvenience of long travel distances and elevator travel to and from the unit. In contrast, the two-story drive-up ramp is an innovative concept that allows drive-up loading on the second floor.

The two-story ramped version negates the need to discount any second-story rental units because the architectural design affords groundlevel access to the entire second floor. Tenants can access the first and second levels without the inconvenience of loading and unloading their goods by means of an elevator. Eliminating elevators from the project is a direct cost benefit to the project developers bottom line. The ramped project complies with the Americans With Disabilities Act. It also creates a more efficient unit-mix layout, allocating less building area for corridors and vertical circulation.

Balance and Variety

Even if the building rises multiple stories, it is extremely important to maintain a good balance and a wide variety of unit sizes. The units on upper floors should be focused around the elevators and the loading areas surrounding them. It is essential that the spaces directly adjacent to the elevators are spacious. The elevators should have a holding capacity, and the elevator lobby should be aesthetically pleasing. On a four-story project, three-quarters of tenants use elevators to access their units. There will definitely be a heavy concentration of users shuffling in and out of the elevators on these multistory projects, so convenience and appearance are key.

A User-Friendly, Secure Environment

One of the key aspects of successful multistory facilities is a user-friendly environment. Some of the features incorporated into todays facilities are well-lit hallways with bright-white reflective wall panels; long, straight hallway configurations for good visual control; music systems in the hallways; and generous drive aisles.

Most facilities have state-of-the-art security and access-control systems, which may have security sensors on each door. Multistory facilities have a built-in security featureall upper floors load internally from hallways, which allows less opportunity for direct access to storage units from the outside.

In Conclusion

A higher-priced real estate environment and a demand for the greatest exposure have created a need for multistory facilities. Todays more sophisticated approach to self-storage projects surpasses that of sandwiching rows of single-story buildings onto a particular site. But for these facilities to pencil out on the financial pro forma, they must be as efficient as possible.

Each governmental jurisdiction has its own set of development criteria, and it is extremely important to conduct careful research at the onset of the project. This is why careful, creative planning and more efficiently designed layouts are an absolute necessity to be competitive in the marketplace.

Bruce Jordan is president of San Clemente, Calif.-based Jordan Architects Inc., a full-service architectural firm specializing in the design and entitlement of self-storage projects. For more information, call 949.388.8090 or e-mail [email protected].

This summer, Buchanan Street Partners made a splash with its annual charity fundraiser in support of several childrens causes. On June 6, members of the 40-person firm dove into the chilly waters of Big Bear Lake at 6 a.m. to kickoff an Ironman-triathlon relay dubbed From the Mountains to the Sea.

Event History

Buchanan Street Partners, a Newport Beach, Calif.-based real estate investment bank, began its philanthropic program three years ago when it formed the Buchanan Street Foundation. The companys sports minded staff wanted a way to promote awareness and raise funds for childrens charities in each of the three communities where the company has offices.

We have struck upon an excellent balance of making a significant contribution to the local community while offering our employees an important team-building experience, says President Robert Brunswick. Im very proud of what these dedicated people have accomplished.

Each year, the charity event has grown in terms of strenuous athletic activity and fundraising. In its inaugural year, employees participated in a 150-mile septathlon relay from Santa Barbara to Laguna Beach. In 2002, the firm took part in a 33-mile relay-rowing event aboard a lifeguarddory boat from Catalina Island to Laguna Beach, inspired by Brunswicks days as a lifeguard in the destination town. The Ironman triathlon was a challenging and novel way to continue the tradition. Every year, we undertake a challenging activity that pushes the limits of our people to demonstrate our companys support for childrens charities, says event chairwoman Kristin Olson.

Buchanan Street employees raise funds through a grassroots campaign, collecting donations from clients, members of the financial community, friends and families, as well as a substantial contribution from the firms employees. This years fundraising was nearly triple that of the first year, despite current economic conditions.

The Big Day

Brunswick was the first in the water, along with Executive Vice President Chris MacDonald and several others, to begin a grueling 2.4 mile swim. While the swimming leg was designed as a relay eventlike the 112-mile bike ride and 26.2-mile marathon run to followfive of the six swimmers finished the entire distance. Thomas Heydorff, 22, a new addition to the firm and a collegiate water-polo player, finished firstwhile recovering from a bout of pneumonia no less! All told, each firm member competed in at least one portion of the event.

Once finished with the swim, the athletes biked down the steep curves leading out of the San Bernardino mountains. Cyclist Josh Greer of Buchanan Storage Capital had ambitions of finishing the entire 112-mile biking distance, but took a spill 20 miles into the ride to avoid a swerving driver on the tight mountain roads. He went on to complete another 10 miles before seeking much-needed medical treatment for road rash.

The cycling leg concluded in Huntington Beach, where the distance runners took over to bring the race home. Jed Gates of Buchanan Streets San Francisco office completed half of the 26.2 mile distance in his first marathon. The entire firm joined to run the last mile together, led to the finish line by Olson. Representatives of the charities cheered the group on as it crossed the finish line, including several children who benefit from the programs Buchanan supports.

The company later hosted a reception at the Hotel Laguna where Brunswick presented a $153,000 check to United Way, the organization responsible for distributing funds to the various charities. Success by 6, an initiative that promotes healthy development and school readiness among young children, is one of the recipients. Others include Santa Anas Olive Crest, TrinityKids Care in Los Angeles, and the Edgewood Center for Children and Families in San Francisco, the oldest childrens charity in the Western United States.

Maria Wilcox, president of United Way for Orange County, has high regard for the partnership with Buchanan Street. We are honored and pleased Buchanan Street Partners has again joined forces with Orange Countys United Way to address critically needed programs in the community. Their commitment of time and money helps make a real difference in the lives of many children, she says.

Brunswick and Olson expressed their appreciation to participants for the hard work and financial contributions that made the fundraiser a success. Santa Barbara-based Adventours Outdoor Excursions was also acknowledged for its role in organizing the 12-hour triathlon.

Finally, Brunswick made a special proclamation at the closing ceremonies. Injured biker Greer, fresh from the emergency room, was brought forward and introduced to the cheering crowd. Josh is an outstanding athlete, but this is the third time he has sustained a mishap at one of our events, said Brunswick. Josh, you are hereby granted a lifetime exemption from future Buchanan Street-sponsored athletic activities.

Buchanan Street Partners is a West Coast-based real estate investment bank that provides capital for owners and developers. The firm makes principal investments in a discretionary capacity through The Buchanan Funds, and arranges conventional and structured debt solutions through its long-standing capital-markets relationships. Its subsidiary, Buchanan Storage Capital, is a provider of capital to self-storage owners. The group arranges construction, bridge and permanent financings, mezzanine debt and equity. The company is headquartered in Newport Beach, Calif., with offices in Los Angeles and San Francisco. For more information, visit www.buchananstreet.com or www.buchananstoragecapital.com.