The “Journal of the National Centre for Sustainability,” a collection of graduate-student papers published by Swinburne University of Technology in Melbourne, Australia, has released a report examining the corollary effects of consumption and the proliferation of self-storage services in Australia. Written by Guy Arundel, “The Costs of Convenience: Unpacking the Self-Storage Industry” concludes that excessive buying by consumers and their inability to dispose of belongings has fueled self-storage growth.

“The relentless consumerism driving the growth in self-storage facilities appears to stem from, and be fueled by, the belief that more possessions leads to greater well-being and happiness,” Arundel wrote. “And when there is no more room to put everything, the rise of the easily accessible self-storage facility results.”

The paper examines self-storage history in the United States and its emergence in Australia as well as consumer behaviors and attitudes that create the need for self-storage. To Arundel, self-storage facilities “are representative of a social malaise we would do well to address” and symbolic of larger environmental issues related to a lack of recycling and reusing of goods.

The paper’s author believes the rate of consumption in Australia is environmentally unsustainable, and with less than 2.5 percent of Australian households using self-storage in 2012, the industry is poised for more growth.

“My findings point towards a seemingly ceaseless increase in demand for these storage services, with the implications including that they will continue to facilitate our propensity to consume, and perhaps inadvertently hoard, with direct and indirect negative environmental and other impacts,” Arundel wrote.

The nine-page PDF report is available for free download from the Australian Policy Online website.

Update 9/23/14 – Blue Llama Storage, which builds, owns and manages self-storage facilities throughout Texas, recently opened Dies Ranch Storage in Cedar Park, Texas, as the property’s management company. The facility was built by Vision 360 Development, a Dallas-based architect and interior-design studio, as an alternative to homes originally planned for the 7.5-acre site. Vision 360 had trouble getting the utility connections it needed for the residential development, according to “Space Wise,” a blog published by Extra Space Storage Inc.

The newly constructed property at 2501 Dies Ranch Road is near the intersection of Anderson Mill Road and Dies Ranch Road. It encompasses 90,000 square feet of storage space and features more than 500 drive-up, ground-level units. Property amenities include video cameras, security lighting, Wi-Fi, and a retail center that sells packing and moving supplies.

The project was protested by residents of two nearby subdivisions, Bella Vista and Twin Creeks, who petitioned against the self-storage facility and called it “inconsistent with the character” of the surrounding master-planned communities.

Owner Brian Birdwell, who is also managing partner of Vision 360, said he wanted to build a self-storage facility that was aesthetically pleasing to the area, according to a Blue Llama press release. The facility will serve the communities of Anderson Mill West, Bella Vista, Cedar Park, Twin Creeks and surrounding neighborhoods. A ribbon-cutting ceremony was scheduled for Tuesday.

Although Vision 360 is not actively pursuing additional self-storage projects, Birdwell indicated he might consider future developments, according to the “Space Wise” blog. “If another opportunity arises, we will keep it as an open option, but we are not looking to give up our day jobs,” Birdwell told the source.

Founded in 2001, Blue Llama is a privately owned company specializing in the development, acquisition and management of self-storage properties in Texas. It operates facilities in Austin, Boerne, Buda, San Antonio and Spring Ranch.

The unique nature of the self-storage industry makes it necessary to look into specialized insurance coverages. While standard business policies provide coverage for building, business personal property and general liability, a self-storage policy should include coverages that guard against risks specific to our business. Following are some key coverages, steps to mitigate claims, and advice on how to handle a claim if it occurs.

Customers Goods Legal Liability

Customers Goods Legal Liability (CGLL) is intended to help guard against claims related to self-storage tenants’ belongings. Owning a storage facility creates a relationship similar to that of a landlord and tenant rather than a warehouseman and depositor because the operator never takes possession of the customer’s goods. The main objective is to simply rent space.

However, there are certain situations that can create legal liability for the facility. For example, if a customer’s property is damaged because the operator failed to properly maintain the grounds or structures, the tenant may believe the business was negligent. If the facility is found responsible, it would give rise to a claim. A policy that includes CGLL insurance could provide coverage for this type of claim up to the limit. It could also provide necessary defense costs, even if a claim is found to be groundless, false or fraudulent.

Sale and Disposal Liability

Sale and Disposal Liability (SDL) coverage provides protection against the wrongful seizure, sale, use or destruction of another party’s goods. At some point, almost every self-storage operator will be faced with the unenviable task of evicting a tenant, reclaiming the space, and removing or disposing of the tenant’s property. SDL coverage helps to protect the facility against claims arising from the negligent sale, removal, disposal or disposition of a customer’s property.

The coverage also provides for legal costs. Most states have specific statutes governing the sale and disposal process, but if the procedures aren’t followed exactly (even if there’s only a small error), the facility owner is vulnerable to a potential lawsuit. Due to the incredible diversity of goods stored and the wide range of value of the property, the penalty for conversion can be extremely high. To minimize claims:

• Be aware of your state lien laws.
• Contact a specialized attorney about preparing written procedures that outline the exact steps for disposing of a delinquent tenant’s property.
• Always double check the spelling of names and addresses.
• Don’t make any changes to information on the rental agreement, even if it’s just to correct an obvious misspelling, without getting a signed change-of-address card from the tenant.
• Remember to document, in photographs and writing, every step of the inventory and auction process. In a lawsuit, you’ll have to show proof that the disposal of the delinquent tenant’s goods conformed to the state statutes.
• If there’s any reason to question the sale of a tenant’s goods, don’t hold the sale! Many owners prefer to let tenants to retrieve their property at no charge rather than go through the potential liability of an auction.

Handling a Claim

The above mentioned exposures are industry-specific, so make sure you have an insurance policy that includes CGLL and SLD coverage. Bear in mind that self-storage operators are also vulnerable to claims that can occur at most other businesses. Hopefully, you never need to file a claim, but it’s important to know what to do, just in case. Below are some suggestions for handling an incident that results in an insurance claim.

Even before there are any issues, you should have a basic understanding of the insurance policy in place. It also helps to have a good working relationship with an insurance agent. Insurance policies are a type of contract in which there are promises made. The insured must pay a premium in exchange for the insurer (insurance company) to provide certain coverages. The insurance policy is all about transferring risk.

It’s not the storage owner’s job to settle a claim before reporting it to the insurance company. Attempting to settle a claim without reporting it could create a breach in contract. If a loss occurs, report the claim to the insurance company without delay.

When a claim occurs, remain calm and take the necessary steps to ensure everyone is safe and secure. Call 911 if necessary. Once the facility and staff are safe, contact the agent who handles your facility insurance. Even if you don’t think an incident will turn into a claim, report it as an “incident only” in the event a claim does manifest.

To avoid an uncovered claim, submit all information as soon as practical. You’ll need to provide the following to the insurance agent or claims department:

• Contact information
• Legal entity name
• Incident location
• Incident and/or police report
• A detailed description of the incident

Next, make temporary repairs and take any other necessary steps to protect the facility from further damage. Save all receipts, as these will need to be submitted to the insurance carrier. Finally, get a timeline of when the adjuster will be in touch and review your deductibles.

Keep in mind the person who takes your information probably isn’t the one who’ll determine if or how the claim will be paid. The claims adjuster will determine coverage. The truth is, insurance isn’t black and white, and it’s nearly impossible to list all the circumstances that may cause a claim. It’s the insurance company’s ultimate responsibility to determine if the loss is covered.

Having the right insurance policy in place won’t prevent bad things from happening at your self-storage facility, but it’ll help to minimize your loss in the event you need to file a claim. Including industry-specific coverages in your policy and being prepared to handle incidents as they occur will help you better manage your overall risk.

Randy Tipton is the owner of Universal Insurance, which has created and provided specialized insurance coverages to the self-storage industry for more than 20 years. She is a seasoned industry professional with more than 30 years of experience in insurance underwriting, marketing and management. Randy attends self-storage tradeshows, holds insurance seminars and speaks with facility owners nationwide. Viewed as a leading industry insurance expert, she is often called on for advice regarding coverage options. For more information, call 800.844.2101; e-mail [email protected]; visit www.universalinsuranceltd.com.

Self-storage management company Storage Investment Management Inc. (SIMI) held its annual manager’s conference and awards recognition dinner on Sept. 18 at the Ethan Allen Hotel in Danbury, Conn. The setting was central for the more than 30 self-storage facilities SIMI manages throughout the Northeast.

The conference portion focused on roundtable presentations covering marketing, company procedures and policies, best practices, leadership skills, and other topics.

During the recognition dinner, SIMI honored top-performing managers with a variety of awards. Recognition categories included “Highest Volume of Merchandise Sales,” “Best Budget Income Variance” and “Most Improved Facility.” The 2014 manager of the year was Jess Dean, manager of Planet Self Storage in Clinton, N.J. The No. 1 ranked “power rating” went to Matt Guiod, manager of Framingham Self Storage in Framingham, Mass. SIMI also recognized seven employees for their extended length of service ranging from five to 20 years.

Headquartered in New York, SIMI is led by principals Charlie Fritts, president, and David Inman, chief operating officer, who have a combined 75 years of self-storage industry experience. The company manages facilities in Connecticut, Maine, Massachusetts, New Jersey, New York, Pennsylvania and Rhode Island.

2014 SIMI executive team and sales managers. 

By Magen Smith

Have you heard the saying, “Revenue is vanity, profit is sanity, cash is reality”? Nearly all self-storage business owners have, but most aren’t entirely sure what it means, and that’s OK. Let’s break this down and you’ll be wiser than most of your competition.

Revenue Is Vanity

Revenue is the top line on your income statement. For a storage business, it’s normally the cumulative amount of rent, inventory sales and truck rentals. Rental income is usually the largest number in the revenue section, since that’s your main business. Seeing a large monthly rental income number and a high occupancy rate can make you feel like your storage business is a success, since you’re mostly full and the hard work of marketing and breaking even is over. But don’t let vanity block your view. Here are some factors to consider:

• Are you charging enough rent for your units?
• Are you actually collecting that revenue or is it all in accounts receivables?
• Are you selling inventory at a price high enough to turn a profit?

Without an understanding of profit and cash, you can’t answer those questions.

Profit Is Sanity

Profit is what’s left after you’ve paid all your expenses, otherwise known as “net income.” You need a positive profit number to stay sane—and in business—but profit can be deceiving. Some storage owners assume all net profit will translate into cash in their bank account, but that’s rarely the case. The big four factors that will affect your profit and cash differently are depreciation, principal loan payments, income stuck in accounts receivable, and bill payments stuck in accounts payable. Let’s look at each.

• Depreciation: When you build a new facility or buy an existing one, part of the cost is paid in cash, and the other is financed. Each month, net income is reduced for depreciation expense on the total cost of the building. This expense reduces your profit but has nothing to do with cash.
• Principal loan payments: When you pay your monthly loans, the interest portion reduces net income, but the principal reduces the balance of the loan on the balance sheet. You paid cash for the whole loan, but only one part reduced your net income.
• Accounts receivable/accounts payable: If your books are on the accrual basis, you book the receivables and payables before money moves. That means you can have income or expenses on the income statement, but cash hasn’t moved yet.

Cash Is Reality

If you can’t pay your loans or payroll next month, do you care how much revenue is on your balance sheet? Probably not. Cash is king because it moves your business forward. To properly run your facility and achieve your goals, you have to be able to predict where cash will be next week, month and year.

It’s important to understand your cash by reviewing the cash-flow reconciliation report. You need to know how your business turns net income into cash and, more important, how much of it becomes cash. Once you have a handle on how cash flows through your business, you can make budgets and forecasts to help set your managers’ goals. Here are some things to consider:

• Do you need to increase inventory sales or is renting units more profitable?
• Do you need to raise your rental rates?
• Is having your tenants on credit-card billing a lucrative business strategy since they’ll tend to stay longer?

You can’t answer any of these questions until you understand your financial statements and the impact your decisions have on your cash. Revenue will boost your ego, and profit indicates your business is growing, but only cash will pay the reality of next month’s bills.

Magen Smith is a former self-storage manager turned CPA who started her firm to help customers understand the financial side of their business and empower them to make smart decisions. Through SelfStorageCPA.com, she focuses her energy on the day-to-day accounting of self-storage businesses to give owners peace of mind. Services include monthly management-use-only financials, simplifying the bill-paying function, revenue management and strategy. For more information, e-mail [email protected].

The Hampshire Cos., a private real estate investment firm and self-storage operator, has partnered with Circle Squared Alternative Investments, a company that specializes in linking investors with non-traditional investment products. The two businesses “will develop specific alternative-investment opportunities for portfolios of high-net-worth investors,” according to a press release.

In its 90-year history, Hampshire has invested in a diverse portfolio valued at $2.5 billion, including 259 properties in 28 states. The company acquires, develops, leases, repositions, manages, finances and disposes of real estate. It has assets in the self-storage, industrial, office and retail sectors as well as eight discretionary funds under management with more than $1 billion in equity, according to the release.

“In working closely with Hampshire, we've developed the same shared business principles and beliefs that illiquid alternatives are true alternative investments,” said Jeff Sica, founder and chief investment officer of Circle Squared. “Our strategic partnership will focus on creating and structuring funds and direct real estate investment opportunities for high-net-worth investors. This strategy deploys the longstanding experience of a successful real estate investor with our astute understanding of how to apply alternative investing within a portfolio.”

“Hampshire is excited to be working with Circle Squared because of their dedicated commitment to and interest in alternative investments,” added Jon F. Hanson, chairman and founder of Hampshire. “This partnership follows perfectly in line with our strategy to provide investors with tailored real estate investments for their portfolio.”

Circle Squared specializes in providing independent financial advisers with access to “alternative investments previously available only to institutions and ultra-high net-worth investors,” company officials said. Its suite of investment products includes entertainment and media, natural resources, private credit, private equity, private placement offerings, and real estate.

Based in Morristown, N.J., The Hampshire Cos. is a privately held, fully integrated real estate firm. Its current diversified portfolio of 259 properties totals more than 25 million square feet.

Inside Self-Storage (ISS) has released a slideshow focusing on key data from its 2014 Top-Operators List, an annual compilation ranking the industry's leading players by square footage. “Who’s Moving Up in Self-Storage? Notable Numbers From the 2014 Top-Operators List” offers an in-depth review of the numbers behind the ranking, including notable growth and decline in portfolio square footage, and number of facilities among this year's top 100 participants. It highlights which companies are growing, who's scaling back operations, and also includes new up-and-comers in the storage industry.

The ISS Top-Operators List appears on the ISS website and in the October 2014 print edition of ISS magazine. The list includes the portfolio sizes of real estate investment trusts, multi-facility operators and management companies. It also contains vital information and data on each of the 100 companies in the ranking.

Slideshows for the 2013 and 2014 Top-Operators Lists are available for free download at www.insideselfstorage.com, in the ISS Resource Center under “Slideshows.”

For more than 25 years, ISS has provided informational resources for the self-storage industry. Its educational offerings include ISS magazine, the annual ISS Expo, an extensive website, the ISS Store, and Self-Storage Talk, the industry’s largest online community.

By James R. Kirby

No self-storage operator really enjoys thinking about his facility roof. He just expects it to keep tenants’ goods dry and perform for a long time. However, the roof is an extremely important asset.

How does the roofing industry suggest you think about this vital building component? Whether you’re building a new roof or sustaining an existing one, there are four tenets to consider: good design, quality materials, proper installation and regular maintenance.

Good Design

Good design starts with knowledgeable and experienced roofing professionals. Contractors, manufacturers and consultants understand roof systems and are great sources of information. A high-quality system is designed with a number of key components and features.

First, a roof system should drain quickly. Water shouldn’t pond at drains, mechanical units, skylights or in the field of the roof. While roofs keep water out, they’re not intended to hold it for any period of time. Getting water off a roof quickly is best leak prevention.

Roofs should also be resistant to fire, wind and impact (e.g., hail). In fact, these are mandated code requirements.

• Most roof systems provide Class A fire resistance, which is the highest. (There are also Class B and C ratings.)
• Location and building height are key factors for wind resistance. Corners and perimeters are the first line of defense against wind damage.
• Impact resistance varies based on roof materials and composition. Inclusion of a rigid cover board directly under the membrane provides improved resistance for membrane roofs. Metal roofs are inherently impact-resistant, although aesthetics may be compromised from blows. Granulated coatings and higher density improve spray foam’s impact resistance.

Most roofs need a quality insulation layer with high R-value, which is a measure of thermal resistance used in the building and construction industry and mandated by codes.

• Rigid board insulation (e.g., polyisocyanurate or mineral wool) should be installed in multiple layers with staggered joints.
• Thermal bridges—such as metal fasteners through all layers of insulation—reduce thermal resistance but may be necessary for wind resistance.
• Multiple layers, staggered joints and no thermal bridges allow the insulation to provide the maximum amount of thermal resistance.
• Metal roofs commonly use batt insulation with thermal spacers at panel-attachment locations to prevent compression of the batts.
• Spray-foam insulation doesn’t have joints and adheres to the surface on which it’s sprayed.

Some roofs should include vapor retarders and/or air barriers to prevent energy loss and potential damage from wetting. Location, construction types and building use are key factors when determining the need for these items.

A roof also needs a solid deck to support the components and keep it from deflecting and deforming from rooftop loads, such as rain, snow or maintenance personnel.

Quality Materials

There isn’t a “best” roof. If there were “one best roof,” there would be far fewer roof-system choices.

Quality low-slope roofs can be asphaltic-based—built-up or modified—single-ply consisting of ethylene propylene diene monomer, thermoplastic polyolefin or polyvinyl chloride, and have structural metal panels or spray-polyurethane foam. Quality steep-slope roofs can be made of asphalt shingles, clay or concrete tiles, slates, wood shakes and shingles, and architectural metal panels and metal shingles.

Quality materials come from reputable manufacturers who stand behind their goods, and there are varying types of similar products. For example, a manufacturer might sell three thicknesses of the “same” single-ply membrane, or the “same” asphaltic-based membrane with and without granule surfacing.

Roofs shouldn’t be viewed as mix-and-match components but as complete systems. Fire, wind and impact resistance are determined by testing, and tests developed by ASTM International, FM Global and Underwriters Laboratories are commonly used to classify roof systems. Component substitution may invalidate a roof’s classification. Chapter 15 of the International Building Code and Chapter 9 of the International Residential Code provide minimum requirements for roofs on commercial, industrial and residential structures.

Proper Installation

Experienced and knowledgeable roofing contractors are important for a successful installation. Most manufacturers have authorized contractors who understand the nuances of installation for specific products. Following manufacturer recommendations for construction details is critical to long-term success and implementation of the warranty. If a designer provided a set of details for installation, an authorized contractor should follow them and be able to determine if there are conflicts between the manufacturer recommendation and design drawings.

Most states require a permit for re-roofing, and all states require one for new construction. Pulling a permit means the roof should be installed per code, but it doesn’t mean the building department will inspect the roof during installation. Often this is a resource issue for building departments. Using a roof consultant for quality assurance during design and installation can be beneficial.

Regular Maintenance

Roof maintenance is the responsibility of the building owner. A manufacturer can provide a long-term material warranty, and a contractor can provide a one- or two-year workmanship warranty; however, without regular biennial maintenance, warranties may be voided and long-term performance is often compromised.

A building owner is smart to establish a long-term service contract with the installing roof contractor. Regular maintenance often means finding and repairing small problems before they become large, expensive ones.

A building owner also controls who steps onto the roof. Non-roofing trades may unintentionally damage an existing roof or use it as a platform for work. Managing access limits unnecessary foot traffic and potential damage.

Is the lowest bid for roof replacement or a new build always the right choice? Considering life-cycle costs (annual cost of ownership) instead of initial costs often provides the most successful and cost-effective roof over its life.

Your roof system is a valuable asset and shouldn’t be taken for granted. Consider the four tenets of roofing with long-term emphasis on biennial maintenance.

James R. Kirby, AIA, is vice president of sustainability for the Center for Environmental Innovation in Roofing. The organization developed RoofPoint, a voluntary, consensus-based, green-rating system that provides building owners and designers with a means to select nonresidential roof systems based on energy and environmental benefits. RoofPoint offers a document that can be used during the design, procurement, installation and maintenance phases to help ensure a long-term performing roof system. For more information, visit www.roofpoint.org and www.roofingcenter.org.