CubeSmart, a self-storage real estate investment trust (REIT) and third-party management firm, is seeking zoning approval to convert a former Macy’s building in Richmond Heights, Ohio, to a mixed-use development that will include self-storage and retail. As a vote between the four members of the board of zoning appeals resulted in a tie last week, the project’s fate will now be decided by the planning and zoning committee on Nov. 7, according to the source.

The property at 641 Richmond Road is in the Richmond Town Square, which has become largely vacant after the exit of Macy’s and other anchor stores. The storage portion of the building would comprise 130,100 square feet of climate-controlled space across part of the first floor and all of the second. CubeSmart would lease the remaining 30,800 square feet on the ground floor to a retailer, according to Phil Seyboldt, the city’s building commissioner.

Macy's closed the location in March 2015 and has been looking to sell the site since. Other retailers at the mall once included JC Penny Co. and Sears. The planning commission agreed in February to add several business uses, including self-storage, to the property’s zoning in an attempt to attract new companies to the shopping center.

The building is on the market for $2 million. CubeSmart would spend another $8 million renovating the space, Seyboldt said. The deal would also include 9 acres of parking lot. CubeSmart could also purchase an outparcel property and build a restaurant, said Mayor David Roche, who called the mixed-use project “viable.”

CubeSmart owns or manages 910 self-storage facilities across the United States. Its operating portfolio comprises more than 60.5 million square feet.

Given that self-storage facilities regularly serve customers who are in the midst of life-changing events, it shouldn’t be surprising that managers must occasionally deal with situations in which tenants die, get divorced or otherwise disappear. When any of these occur, you’re left to deal with the fallout. Let’s examine each scenario and how you should proceed.

Tenant Death

There have been recent updates to many self-storage statutes that have made it easier to give notice to a tenant in default. In many states, notices can be sent by a verified First-Class letter, and in some instances, by e-mail. There is one exception, however: You cannot presume service on someone you know to be dead. Once we know a tenant is deceased, things change. You need to look for a person who can act on his behalf.

In my career, I’ve seen many operators make the mistake of letting someone into a deceased’s storage unit simply because that person was a family member, had a death certificate or was the person’s power of attorney. They get fooled by an emotional person only to find out later that he wasn’t the proper representative of the estate. You may be surprised to learn that a death certificate only proves the tenant is dead, and the power of attorney dies with the tenant. Neither is an indicator of who should get into the unit. If you allow someone entry and property is removed, you face the risk of a claim from the estate’s representative for untold damages.

In some cases, a person will bring in a will indicating he’s been nominated to be the executor of the estate, and the facility operator relies on that. However, you don’t know if the document presented to you is the last will and testament or whether it was modified by a subsequent will or codicil; therefore, you can’t trust the will alone.

Every state has some form of probate court in place, and these types of situations are why those courts exist. Probate judges determine the right person to handle a deceased person’s estate and act as representative.

There are two types of representatives you’ll find in these matters: an executor/executrix or administrator/administratrix. In a tenant-death situation, you generally want to look for a document issued by a probate court that tells you who is the authorized representative. Most estates call these “Letters of Authority” or “Letters Testamentary.” With proper personal identification and a certified copy of the letter or order in your file, you may begin dealing with this person, including giving access to the unit or serving lien notices, if the unit is in default.

Increasingly, trustees also want access to storage units. This is because many people put their assets into revocable trusts to avoid the probate process after death. This is fine if the rental agreement is executed on behalf of the trust. If the deceased tenant forgot to put the rental agreement into the trust, you’ll want to consult with your attorney before allowing the trustee into the unit, even though all the property in the unit might be trust property.

In summary, when it comes to tenant death, there are two areas of concern: lien sales and unit access. In the case of the former, the key is whether you have knowledge that the tenant is deceased when you try to sell the contents of his unit. If you auction the unit and later discover he was deceased at the time of sale, but you had no way of knowing he died, you have no reason to be concerned. When it comes to unit access, if you allow entry without having documented proof that the person requesting it is the estate’s designated representative, you’re taking an extraordinary risk.

Tenant Divorce

People who rent from you may get divorced during their tenancy. Some operators will put both spouses on the rental agreement as co-occupants. Others will list one spouse as the occupant and the other as having “authorized access.” In my opinion, both are substantial mistakes. You should have only one named occupant per contract so you don’t end up with two tenants fighting to keep the other out or ordering you to cut and replace locks. When you put yourself in that position, you end up the loser. You’ll find yourself subject to a claim from one spouse saying you didn’t follow his or her instructions.

This is also true of authorized access. You may think it’s relatively harmless, but I’ve seen operators receive letters from divorce attorneys stating that because their client is named as having authorized access, the storage operator has a duty to let that spouse into the unit to claim his or her property before it becomes lost or compromised by the other “evil” spouse. These letters come with heavy-handed threats of damages and litigation if you don’t comply.

I’ve also seen attorneys or litigants to divorces provide operators with copies of restraining orders, which very clearly indicate the other spouse may not dispose of, damage, etc., any marital property while the divorce is in motion. They use these orders to convince you that you have an obligation to deny the other spouse access to the unit. You should have these orders reviewed by your attorney, but generally, they don’t apply to you.

In a situation in which both spouses wish to be listed as the tenant, simply explain that only one occupant is allowed per unit, and each spouse may have access by knowing the gate code and receiving a copy of the lock key from the spouse who is renting.

Tenant Disappearance

Customers can also disappear or become substantially disabled during their tenancy, unable to manage their own affairs. One myth worth addressing is that being imprisoned somehow gives a person an excuse for non-performance under a rental agreement. However, being incarcerated doesn’t exempt tenants from their legal obligations, such as fulfilling their self-storage rental agreement.

Does disappearance or substantial disability impede the default? Possibly. If you become aware that a tenant has disappeared, unless there’s a court proceeding to determine the person is missing and presumed dead, you generally aren’t obligated to stop lien-sale or other default procedures.

In situations involving substantial disabilities, while you may not be obligated to change course because someone has been declared legally incompetent, look for the appointment of a guardian. Sometimes, there can be two—one for the person and another for the estate. Ask for guardianship orders, which vary by state and should be reviewed with your attorney, to understand whom you should be dealing with moving forward. Because these situations are infrequent, you need to ensure you understand the changes necessary to proceed appropriately.

Life changes happen everywhere. For a self-storage operator, the most important thing is to be smart and not assume you can proceed straight to default when rent isn’t paid. These situations require additional documentation before proceeding and could put your business at unnecessary risk.

This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Jeffrey Greenberger is a partner in the Cincinnati law firm of Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he focuses primarily on representing the owners and operators of commercial real estate, including self-storage. His website, selfstoragelegal.com, contains legal opinions and insights as well as an article archive. To reach him, call 513.698.9350; e-mail jeff@grbrlaw.com.

Update 10/26/17 – Stor-Age has closed its funding round, raising R1.275 billion of equity to use in its acquisition of Storage King. Shares sold at R11.50 each, with the capitalization reaching the maximum allowed, according to a press release. The deal is expected to close on Oct. 31.

“The strong demand for our stock resulted in us increasing the size of the capital raise from the initially indicated R900 million, up to the maximum allowable value of R1.275 billion,” Lucas said. “At these levels, there was significant excess demand for our stock, indicating a strong vote of confidence in our performance since listing and our current growth strategy.”

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9/7/17 – Stor-Age Property REIT, which operates the Stor-Age Self Storage brand in South Africa, has agreed to acquire U.K.-based Storage King for approximately £77.13 million. The deal, expected to close next month, is part of the real estate investment trust’s initiative to pursue international expansion opportunities. The Storage King portfolio includes 13 owned facilities and 12 properties under licensing and management agreements, primarily in Southeast England. It comprises about 577,000 gross leasable square feet, according to a Store-Age press release.

As part of the transaction, Stor-Age is expected to refinance £25 million in Storage King debt, which will effectively lower the purchase price to £53 million for 97.3 percent of issued shares, with the remainder allocated for purchase by Storage King management, the release stated. “Specialist and experienced” members of the Storage King management team will remain in place with a 2.7 percent co-investment stake.

"Storage King offers established critical mass through a high-quality portfolio, proven local expertise and a track record in self-storage with consistent earnings growth, especially over the past three years,” said Stor-Age CEO Gavin Lucas. “This provides us with a strong and scalable platform, with in-place management, for future growth and expansion."

Stor-Age began to position itself for the acquisition as far back as 2014 and used the intended exit last month of Storage King’s private-equity shareholder, Cabot Square Capital Advisors Ltd., as its opportunity to move forward, Lucas said.

The Storage King properties mark the REIT’s first assets outside of South Africa. “Self-storage is a growth sector globally, not only in emerging markets, but also in the first world. The U.K. self-storage market is a significant growth opportunity. It offers a more robust macro environment but with a relative undersupply of self-storage compared to the [United States] and Australia, and a language, culture and regulatory system familiar to us in South Africa,” Gavin said. “Even approaching Brexit, self-storage remains an attractive investment in the U.K. due to the proven resilience of the sector.”

In addition to its U.K. operation, Storage King owns its brand-name rights throughout Europe and has a pipeline in place for “third-party acquisition opportunities,” the release stated. Its 13 owned locations had an average occupancy of 78 percent at the time of the purchase agreement.

Lucas emphasized Stor-Age remains committed to the South Africa market and will continue to focus primarily on local business opportunities. In terms of value, two-thirds of the company’s portfolio will remain South African, “but with added growth potential for group earnings and a rand hedge for a significant portion thereof,” he said.

Because Stor-Age is publicly traded on the Johannesburg Stock Exchange, adding a sizable portion of business trading in British pounds could potentially be viewed favorably by investors as a move toward stabilization and protection against depreciation of the South African rand.

Headquartered in Cape Town and established in 2006 by the Lucas family, Stor-Age operates a 44-property portfolio, primarily in four South African metropolitan areas, that comprises approximately 300,000 square meters. It’s the operator appointed by Stor-Age Property Fund Managers Pty. Ltd. to manage and market the property portfolio owned by Stor-Age Property Holdings Pty. Ltd., and was listed on the Johannesburg Stock Exchange in November 2015.

A multi-story, mixed-use property that will include a CubeSmart-branded self-storage facility, a restaurant and retail is planned as part of the Ravaudage Complex in Winter Park, Fla. An unidentified buyer acquired the 1.48-acre property from Sydgan Corp. for $3.55 million with the intent to build 97,000 square feet of space. The restaurant and retail components will be on the ground floor, and construction is expected to begin immediately, according to a press release from the Argus Self Storage Sales Network (ASSSN), a national network of real estate brokers, which helped broker the deal.

The 73-acre Ravaudage Complex is expected to include hotel, medical, multi-family, office and retail uses, and “could be the largest urban-infill project proposed along Florida’s new commuter-rail system,” the release stated.

Sydgan was represented in the deal by Josh Koerner, associate, and Frost Weaver, chair, of Weaver Realty Group LLC, a Jacksonville, Fla.-based brokerage and property-management firm. Both are Florida affiliates for ASSSN.

CubeSmart is a self-storage real estate investment trust and third-party management firm. It owns or manages 910 self-storage facilities across the United States. Its operating portfolio comprises more than 60.5 million square feet.

Based in Winter Park, Fla., Sydgan is a property-management and development company that offers single-family, multi-family, retail, industrial and commercial properties for lease.  It is committed to making Winter Park a more beautiful place to live and work, according to its website.

ASSSN is a Denver-based network of real estate brokers who specialize in storage properties. Formed in 1994, the company has 36 broker affiliates covering nearly 40 markets.

The Carroll Cos., which operates five self-storage facilities in the Carolinas, has opened a new Bee Safe Storage and Wine Cellar in Simpsonville, S.C. The company will host a ribbon-cutting ceremony on Nov. 1 at 4 p.m., according to a press release.

The property at 306 Harrison Bridge Road features a brick façade, large windows, video cameras, a covered loading area, and climate- and humidity-controlled units. The wine cellar contains a generator back-up and redundant-cooling system. Customer amenities include package acceptance, free use of the facility’s moving truck, and a retail store that sells moving and packing supplies.

Carroll has several self-storage facilities under development in the Carolinas, but recently announced it was scaling back due to oversupply in some markets. The pivot includes pulling the plug on a 4-acre project at the corner of Tarrant Road and Wendover Avenue in Greensboro, N.C. The company will continue to move forward on five projects planned for the Triad area of Greensboro, High Point and Winston-Salem, N.C.

Earlier this year, the operator announced it plans to create a property-management firm to handle the day-to-day operation of its growing self-storage business. The sites are currently managed by CubeSmart, a self-storage real estate investment trust and management company.

Based in Greensboro, Carroll Cos. is a real estate development firm founded by Roy E. Carroll II more than 30 years ago. The developer has built or has under construction more than 15,000 apartment homes with an asset value of more than $1.4 billion, according to its website. The company has more than $500 million invested in development projects in the Carolinas, Tennessee and Texas.

Self-storage properties are constantly changing hands, and Inside Self-Storage is regularly notified of these market transactions. Many are covered in detail on the ISS website and available for viewing on the “Investing and Real Estate” topics page. Following are additional acquisitions and sales that weren’t covered.

All American Self Storage in Jackson, Tenn., was sold to an out-of-state buyer. The 8.5-acre property at 1654 N. Parkway comprises 58,825 square feet of storage space in 16 single-story buildings. The sellers, Brian and Korrie Hood, were represented in the transaction by James Ashley Compton, national director of The Colliers International Self Storage Group.

Bisbee Storage in Bisbee, Ariz., was sold for $248,000 to a Minnesota-based buyer. The property sits on just over an acre and contains 90 traditional and boat/RV-storage units. The seller was represented in the transaction by Jeff Gorden, vice president, and Kyle Topper, associate, of Eagle Commercial Realty Services, both broker affiliates for the Argus Self Storage Sales Network.

Cambridge Valley Self Storage in Cambridge, N.Y., was sold for $910,000 to a private investor. The 4.5-acre property at State Route 22 includes five buildings containing 95 drive-up units, a warehouse/shop area, and a 610-square-foot office. The sale also included land and approvals for an additional 49,500 square feet of storage. The seller was represented in the transaction by Investment Real Estate LLC (IRE).

Hartland Self Storage in Hartland, Wis., was sold to a private investor. The 4.3-acre property at 470 E. Industrial Drive comprises 59,680 square feet of storage space in 337 units. The buyer and the seller, also a private investor, were represented in the transaction by Michael Mele and Sean M. Delaney, investment specialists for real estate firm Marcus & Millichap (M&M). They were assisted by Todd Lindblom, regional manager for M&M.

Lawhorne Storage in Sylvester, Ga., was sold to an out-of-state buyer. Opened in 1983 and expanded in 2010, the 6-acre property at 101 Thompson St. includes eight buildings comprising more than 26,000 rentable square feet of space in 261 units, a manager’s residence, and two management offices. It also has room for expansion. The seller was represented in the transaction by Michael Morrison, an associate broker for Midcoast Properties Inc.

Mac-Andy Boat & RV Storage in Novato, Calif., was sold for $5.8 million to a local RV-rental and storage operator. The 5.82-acre property at 310 Deer Island Lane contains one multi-level building as well as open vehicle-storage parking. It comprises 166,399 net rentable square feet of space in more than 242 parking stalls. The sellers, Charles and Michael McCabe, were represented in the transaction by Bobby Loeffler, president, and Tyler Skelly, national director, of The Loeffler Self-Storage Group (LSSG).

The four-property Mini Storage Depot portfolio in Indiana was sold to a St. Louis-based investment and management firm. It includes three locations in Elkhart, Ind., and one in Fort Wayne, Ind., comprising 230,000 rentable square feet of storage space in 1,873 units. The buyer and the seller, an Indiana-based real estate company, were represented in the transaction by Jesse Luke, managing partner of the Self-Storage Advisory Group at EquiCap Commercial.

Private Storage in Orlando, Fla., was sold to an investment firm. The property at 4601 S. Orange Blossom Trail was managed by self-storage real estate investment trust Extra Space Storage Inc. and branded under its name. It comprises 51,375 rentable square feet of storage space in 443 drive-up units as well as vehicle-parking spaces. The buyer and the seller, a private investor, were represented in the transaction by Luke Elliot and Mele of M&M.

Shasta Economy Storage in Redding, Calif., was sold for $1.7 million to Tops Industries Inc., a local company that operates grocery stores. The 3.21-acre property at 4531 Caterpillar Road contains five single-story buildings comprising 30,934 net rentable square feet of space in 298 units. The sale also included 3.79 acres for expansion. The buyer and the seller, Marian Beith, were represented in the transaction by Loeffler and Skelly.

Stor-House Self Storage in Richland, Wash., was sold for $5.65 million to a local buyer. Built in 2004, the 3.7-acre property at 3869 Kennedy Road comprises 49,795 rentable square feet of space in 308 units. The buyer and the seller, a local investor, were represented in the transaction by Chris Secreto, vice president of investments for M&M.

The two-property Ten Oaks Self Storage portfolio in Boerne and Helotes, Texas, was sold. Together, the facilities comprise 186,859 rentable square feet of space in 1,223 units. The 7.5-acre facility at 131 Old San Antonio Road in Boerne contains 756 units, while the Helotes facility at 16304 Bandera Road offers 467 units. The Boerne-based seller was represented in the transaction by John Arnold, Bill Bellomy and Michael Johnson of Bellomy & Co.

A US Storage Centers facility in Hallandale Beach, Fla., was sold for $13.54 million to CLC HBFL I LLC, which is managed by New York-based investment bank CSG Partners. Built in 1978, the 8.4-acre property at 450 Ansin Blvd. comprises 136,591 square feet of storage space. Ladder Capital Finance provided a $13.54 million loan to the buyer, according to a source. The seller was Westport Hallandale, an affiliate of Irvine, Calif.-based Westport Properties Inc., which operates the US Storage Centers brand.

Wells Branch Self Storage in Austin, Texas, was sold to California-based Wells Branch Mini U Storage LLC. Built in 1997, the facility at 1763 Wells Branch Parkway comprises 64,412 square feet of space in 587 units. The buyer and the seller, a family trust based in New Jersey, were represented in the transaction by Dave Knobler, first vice president of investments, and Charles LeClaire, executive managing director of investments, for M&M.

Argus is a Denver-based network of real estate brokers who specialize in storage properties. Formed in 1994, the company has 36 broker affiliates covering nearly 40 markets.

With offices in Atlanta, Houston, and Austin, Texas, Bellomy & Co. focuses on the sale of self-storage, industrial, office and retail properties nationwide.

Since its inception in 1998, IRE has provided brokerage, construction, development and management services to self-storage owners and investors.

Colliers is a global commercial real estate services firm employing more than 16,000 professionals who operate out of 554 offices in 66 countries. The company offers a variety of services for investors, business owners and developers.

LSSG specializes in self-storage real estate in California and Nevada, having closed more than 80 transactions in those states.

Founded in 1971, M&M is a commercial-property investment firm with more than 1,500 investment professionals in offices throughout Canada and the United States.

Midcoast Properties offers brokerage services to self-storage owners and investors in the Carolinas and Georgia.

Headquartered in Saint Charles, Ill., EquiCap is a boutique brokerage firm specializing in the self-storage industry. Its primary focus is in the midwest and mid-south markets.

Self-storage real estate investment trust Public Storage Inc. launched a “Sing to Win” music-video contest on Sept. 22 in which company employees, customers and fans created original submissions focused self-storage, moving, and related products and tasks. Winners were announced this week, with two of them receiving a $250 prize.  

Public Storage received 11 employee submissions and two from outside the company prior to the Oct. 16 deadline. Videos from three staff finalists and the two created by “fans” were posted to the REIT’s YouTube channel, where they can be viewed by the public. A post about the contest is also available on the REIT’s blog.

The employee finalists were from Public Storage facilities in Charlotte, N.C.; Groveport, Ohio; and Houston. They featured original lyrics referencing customer service, units, boxes and bubble wrap. The videos range from 38 seconds to two minutes. “From dabbing to rapping, our employees took company pride and teambuilding to a whole new level,” company officials said in a press release.

The winner in the employee category was a Public storage team from Columbus, Ohio, who received more than 2,300 views with their video, “We Can Help You With That.” The on-screen talent performed a rap song about assisting a distraught customer. “It’s been a whole team effort and a great team-building experience,” said Justin, the district manager who stars in the opening scene.

The winner in the customer/fan category was Corbin, a guitar teacher and performer from New Hope, Minn. His classic-rock tribute, “This Is My Public Storage Song,” was submitted only hours before the deadline and garnered nearly 1,000 views, the release stated. “Spontaneity seems to be a good quality in music and video,” Corbin said.

Based in Glendale, Calif., the REIT has interests in 2,358 self-storage facilities in 38 states, with approximately 156 million net rentable square feet. Operating under the Shurgard brand name, the company also has 220 facilities in seven European countries, with approximately 12 million net rentable square feet.

Self-storage construction spending hit an all-time high eight months into the year, topping $2.27 billion through August. With four months left to tally, that figure is already more than the $1.9 billion spent in all of 2016, representing an 89 percent increase year over year, according to figures from the U.S. Census Bureau.

While the highest monthly construction-spending total over the past 13 years was $199 million in December 2016, that sum has been eclipsed every month this year, beginning with $226 million in January and reaching $349 million in August, according to an interactive chart of Census Bureau data published by SpareFoot, an online marketplace for self-storage consumers. Prior to 2016, the highest spending total for any individual month since 2004 was $150 million in September 2009.

Though the development boom has raised concerns about oversupply in some markets, the surge can largely be attributed to lagging demand from the Great Recession, according to R. Christian Sonne, executive vice president of the Self-Storage Valuation Group of CBRE Group Inc., a commercial real estate services and investment firm. The annual “refresh rate” for self-storage should be about 1 percent of total supply, or 500 new projects per year, according to CBRE. “The concern of new supply has been exaggerated in my view,” Sonne told the source. “This refresh rate has only recently occurred. This suggests there was some pent-up demand and new construction is now making up for it.”

CBRE and the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage, recently released reports examining U.S. self-storage development and supply in 35 markets. The firms estimate supply and demand nationwide is generally at equilibrium this year, despite the surge in development activity. Part of the reason is the time it takes for projects to move through planning, financing, construction and eventually lease-up, while others never come to fruition, SpareFoot reported.

As a result, facility vacancies are expected to hover around 10 percent through the end of the year, according to Marcus & Millichap, a commercial property-investment firm specializing in self-storage. While some new facilities are reaching stabilization within 12 to 14 months, others are experiencing much slower lease-up rates due to new supply, said Ryan Clark, director of investment sales for SkyView Advisors, a self-storage investment-sales and advisory firm.

Developers are expected to take a more cautious approach moving forward. “It’s not that I think that 2018 is going to be any sort of a disaster year, but I do think that 2017 probably does mark the high watermark,” said Todd Amsdell, president and CEO of the Amsdell Cos., which operates the Compass Self Storage brand. “We are not really anticipating being any less active next year; what changes for us is the type of deals we end up getting involved in and the markets we are getting into.”

Developers are also likely to be affected by a slowdown in activity by self-storage real estate investment trusts (REITs), according to SpareFoot. “I think that without the REITs’ involvement, it is much more difficult for developers to find financing sources or people willing to lend them money to get these developments off the ground and moving forward,” Amsdell told the source. “I think there will be a drop-off and less properties getting built as we move into 2018 and certainly by the end of 2019.”

CubeSmart, a self-storage real estate investment trust and third-party management firm, acquired Four Seasons Self Storage in Oakland Park, Fla., for $14.5 million. The seller was Warehouse Thirteen LLC, a Fort Lauderdale, Fla.-based firm led by Layne Lott, according to the source.

The four-story facility at 5061 N.E. 13th Ave. comprises 97,140 total square feet, of which 63,430 square feet is leasable. Built in 2012, it includes 542 climate-controlled units, gated entry, individual unit alarms and a drive-in loading area.

Warehouse Thirteen purchased the vacant property in 2007 for $2.4 million, and broke ground on the storage development four years later, the source reported. Lott secured a $4.65 million construction loan from Branch Banking and Trust Co.

The seller was represented in the transaction by Steve Mellon, Brian Somoza and Denny St. Romain, managing directors for JLL Capital Markets, a commercial real estate and finance firm.

CubeSmart owns or manages 910 self-storage facilities across the United States. Its operating portfolio comprises more than 60.5 million square feet.

JLL is a full-service global provider of capital solutions for real estate investors and occupiers. The firm completed $145 billion in investment sale and debt and equity transactions globally in 2016. The firm’s Capital Markets team comprises more than 2,000 specialists globally.