By Jim Chiswell
Many of us have followed the unexpected purchase of Affordable Self Storage in Boise by the Idaho States Land Board. ISS reported that legislative efforts to require the facility be divested failed to pass in the Senate recently. Im philosophically opposed to the concept of any governmental entity getting into competition with the private sector in any part of the economy. That being said, there may be a silver lining in this cloud.
The Land Board publically reported that since its acquisition in 2010, the self-storage business has become one of their best investments in two years and generated an annual return of around 8 percent. Can you imagine a government entity admitting the success of operating a self-storage business? If this continues in the years ahead, having a public governmental entity constantly admitting that a self-storage business is their top-performing asset could have very interesting investment implications for the entire industry.
I have a great friend whose company manages a large self-storage facility for a universitys endowment fund. For years, that business has produced one of the highest returns of any investment in its portfolio. Part of that is obviously attributed to the excellent third-party management company it employs, but also its an attribute of our great industry. When you add these insights to the off-the-charts performance in 2011 of the self-storage real estate investment trusts, we have a great deal to crow about when folks look closely at our industry.
If there has ever been a time to sit down with your banker to give him a progress report it is now. Whether or not youre going to be in the market for refinancing or expansion funding in the immediate future, its still a great time to remind your lending institution what an outstanding credit risk you represent, probably with the highest debt-service coverage ratio of most real estate loans on their books. If things are going well for youoccupancies are up, rates are increasing and expenses are under controlits really OK to take a victory lap.
Jim Chiswell is an industry veteran and owner of Chiswell & Associates LLC. Since 1990, his firm has provided feasibility studies, acquisition due diligence, mentoring and customized manager training for the self-storage industry. He has served for a number of years on the Inside Self-Storage Editorial Advisory Board, is a moderator on the SelfStorageTalk.com interactive online community and is faculty member of the Self-Storage Training Institute. He can be reached at [email protected] or www.selfstorageconsulting.com.