Update 12/13/17 – Public Storage has announced the winners of its “Holiday Stories” video contest. Of the three consumer and two employee submissions the company chose for final voting, the winning consumer entry was from a father and son in El Paso, Texas. The top employee video came from the facility-management team in Annapolis, Md. Winners were declared based on viewing totals through Dec. 12.

Though most of the videos highlight Christmas or other winter holidays, the father-and-son video celebrates National Park Week, during which U.S. national parks waive their usual admission fee. The 33-second video shows them sledding down a sand dune at White Sands National Monument in New Mexico. It garnered more than 1,470 views.

The second most-viewed consumer video features an original song by “Elise” in Denton, Texas. The woman performs and dances while wearing a reindeer costume. The No. 3 video, from “Lauren” in Chapmansboro, Tenn., recounts the first Christmas she and her husband experienced as a married couple.

The employee contest was a close one, with the two finalists having received 676 and 658 views. The top-place video features two managers explaining why customers should store at Public Storage while they pop in and out of moving boxes. The other entry, an original parody of “Jingle Bells,” was submitted by employees near Tacoma, Wash.

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11/20/17 – Self-storage real estate investment trust (REIT) Public Storage Inc. has launched a “Holiday Stories” video contest in which employees and the general public can vie separately to win a $250 cash prize. Submissions, limited to two minutes, should focus on the creator’s favorite holiday regardless of the season. Videos should be creative, with subject matter open to holiday recipes, a story about a special memento, singing and dancing, and more, according to a press release.

Entries must be uploaded to the “Holiday Stories Contest” section of the Public Storage Facebook page or through the company’s mobile-friendly contest page on Dec. 4. Employee and consumer submissions will be judged separately. Finalists will be posted to the REIT’s YouTube channel on Dec. 6, with the videos receiving the most views through Dec. 12 declared the winners, the release stated.

Last month, Public Storage held a “Sing to Win” music-video contest in which company employees, customers and fans created original submissions focused on self-storage, moving, and related products and tasks.

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.

Source:
Public Storage, Public Storage Launches Holiday Stories Video Contest

Phoenix-based U-Haul International Inc., which operates more than 1,300 self-storage locations across North America, intends to build a “Smart Mobility Center” on 24 acres in Tallahassee, Fla. The mixed-use development would include up to 85,000 square feet of research and incubator space, as much as 150,000 square feet of self-storage, 23,000 square feet for bicycle sales and service, and a 23,000-square-foot Ford Chariot rideshare facility for commuter shuttles, according to the source. It would also feature a “smart-mobility showroom” to “showcase products and prototypes that deploy smart technologies and advancements in mobility,” according to project documents. The center is also expected to include alternative-fuel stations and electric-vehicle charging stations.

City commissioners last week approved U-Haul’s request to create a Planned Unit Development (PUD) on the property near Capital Circle N.W. and Tennessee Street. The PUD changes the zoning from a “high-intensity urban activity center” to allow for self-storage and warehouse uses. U-Haul is expected to close on the $6 million land purchase this week, the source reported.

Although U-Haul hasn’t commented publicly, the project may signal the company’s new approach for fitting within the shared economy.

Established in 1945, U-Haul owns more than 44 million square feet of storage space. The company’s corporate sustainability initiatives, which support infill development to help local communities lower their carbon footprint, has led to dozens of conversion projects in recent years.

SpareFoot, an online marketplace for self-storage consumers, is partnering with PODS Enterprises LLC, a national provider of portable-storage containers, to provide its users with more storage options. The addition to the SpareFoot website will allow consumers to compare units based on price, features and more. Online-only deals will also be offered, according to the “SpareFoot Storage Beat.” PODS is the third portable-storage company to join the site, after UPack and Zippy Shell.

“The addition of PODS has inspired us to create a portable-storage-specific search option for U.S. self-storage and moving consumers,” said SpareFoot CEO Chuck Gordon. “We continue to see growing demand across the board for products and services related to moving and storage, and we’re pleased to continually broaden our offerings in those areas.”

With PODS, a portable-storage unit is delivered to a home or business. Once packed, the unit is picked up and stored until delivery is requested. The company also offers labor referrals.

“We’re pleased to work closely with our partners at SpareFoot to give consumers more options when it comes to moving and storage,” said Matt Tillotson, director of partnerships for PODS.

SpareFoot.com helps consumers find and reserve self-storage units, with comparison shopping tools that show real-time availability and exclusive deals. With a network of more than 12,000 storage facilities ranging from mom-and-pop operations to real estate investment trusts, the company reaches prospective storage renters though partnerships with brands including SelfStorage.com and Penske Truck Rental.

Founded in 1998, PODS provides residential and commercial services in 46 U.S. states, Australia, Canada and the United Kingdom. To date, the network has completed more than 700,000 long-distance moves, exceeded 3 million deliveries, and has more than 190,000 containers in service.

U.K. self-storage operator Big Yellow Group PLC has submitted plans with the city to expand its facility in Leeds, England. The company intends to add 28 storage units to the property at 1 Gelderd Place, according to the source.

The combined total space would comprise 5,276 square feet on a 23,680-square-foot plot. The units will be built on a tarmacked area north of the site that’s currently rented to two car dealerships. The units would be constructed with white, trapezoidal cladding, which is common for industrial buildings of this type, according to the application. They’ll feature roll-up doors in the company’s signature yellow.

Big Yellow also recently acquired a 2-acre parcel within the 13-acre Segro Park Bracknell development in Bracknell, England, with plans to build a new self-storage facility. The land was purchased from real estate investment trust Segro PLC, which is developing a 90,000-square-foot warehouse inside the park, according to a press release.

Big Yellow Group operates 92 self-storage locations in the U.K. under the Big Yellow Self Storage and Armadillo Self Storage brand names, with most concentrated in Greater London. Its total portfolio comprises 5.4 million square feet.

When Storage Vault set out to build its second Scottish self-storage property, the company first examined the needs of its customer base. Already in tune with its commercial tenants, the operator looked for ways to serve them even better. What it discovered would take the growing company down a new path: mixed-use development.

“We found that business customers normally need to compromise with regular storage and their office, wasting valuable time traveling between the two every day,” says Fraser Sutherland, property and marketing manager. “By creating a multi-use site, we’re able to attract businesses of all sizes to not only store with us, but to make ourselves their base—in turn, driving more traffic our way.”  

Location 

An outdated industrial building in Cambuslang, which is just minutes from the center of Glasgow, Scotland, proved to be the ideal location for the project, which would combine storage with office and studio space. The property is next to the M74 highway, the second busiest road in West Scotland. It clocks some 20 million passing vehicles annually, resulting in great exposure for the storage business.

“The site offered a great opportunity to regenerate an old industrial area. The close connection to the city center also gives our customers brilliant access across Glasgow,” says Anthony McAteer, managing director.   

Challenges 

Although the location was ideal, the site needed a ton of work to make it operable. Large-scale groundwork was undertaken to prepare the property for drive-up self-storage and studio space.

Next up was a redesign of the property’s power, heat and broadband capabilities. “We moved to a system that runs entirely off of biomass, heating our storage and our offices, and brought the fastest broadband available on site, which was unheard of in this area,” says Brian Gifford, finance and property director. “We also found that new builds have their own difficulties compared with conversions, and that each require a different planning strategy and it truly varies from project to project.”   

Opening 

The first phase opened in October 2016, with 20,000 square feet of drive-up self-storage and 10,000 square feet each of studio and office space. A second phase is under development and will add 40,000 square feet of rentable space.

“The drive-up accessibility is attractive to domestic customers, as they only need to unload once, from their car to their unit. The studio space allows industrial businesses to locate themselves on site, right next to their storage, saving them travel expenses and time,” Sutherland says.

The office spaces begin at 150 square feet and are fully furnished. Conference facilities, meeting rooms, a communal kitchen and lounge are also included in the month-to-month lease.

“We strived for quality offices at our site and found that businesses are jumping at getting their own space as the area is well-connected but previously didn’t have many offices of this quality,” Gifford says.   

Future Growth 

So what’s ahead for Storage Vault? The operator has seven developments in the pipeline, including projects in Edinburgh and Glasgow, Scotland. One of the ventures will combine self-storage with a drive-through Starbucks, a first of its kind in the city. The businesses would be built near the M74 highway on a property at Polmadie Road. Project approval is expected shortly, Sutherland says.

Using the Cambuslang facility as a guide, the company is open to meeting the needs of the customers in each individual market, no matter what they might be. “We can only improve on site to site from what we have learned at Cambuslang,” McAteer says.  

Founded in 2015, Storage Vault opened its first storage facility in Paisley, Scotland. It draws on 15 years of experience in commercial property to deliver a safe, secure and easy self-storage service. For more information, e-mail paisley@storagevault.com, visit www.storagevault.com.

Update 12/12/17 – The St. Louis County Planning Commission wasn’t ready to vote on the self-storage project proposed by Lemay Storage during its Dec. 11 executive meeting. The development was one of four proposals set aside by planners. The project remains controversial, with about 70 residents attending a public hearing on Oct. 16 to oppose the plan, according to the source. No one spoke in favor of it during the hearing.

Property values continue to be among the chief concerns cited by homeowners in the Bristol Ridge and Providence Pointe subdivisions. A portion of a 1.4-acre wooded area would be cleared to make room for the storage buildings. Some yards back up to the “park-like setting,” and residents believe their view would be compromised even if the project included buffering due to grading, according to attorney Colleen Ruiz, who spoke on behalf of residents during the public hearing. The decks of Bristol Ridge homes, for example, would look down onto the storage property even if it was surrounded by trees, Ruiz said.

Vince Keady, an attorney representing Lemay Storage, countered that the self-storage facility would be a visual improvement over the used-car lot. “It’s been my experience that when you add a new development like this and take away a dilapidated building, it’s not going to hurt property values.”

The facility wouldn’t include any outdoor storage, and lighting would point only toward the storage property, Keady told planners. In addition, office hours would be limited to 8 a.m. to 5 p.m., though tenants would have 24-hour, gated, keycode access to all 699 units.

It’s not clear if the planning commission will vote on the matter during its January meeting.

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10/16/17 – Self-storage developer Lemay Storage LLC intends to build a 92,400-square-foot facility in Oakville, Mo., but several residents oppose the effort. The 4.4-acre property at 5419 Lemay Ferry Road would require a zoning change from residential to commercial for the project to move forward. The St. Louis County, Mo., Planning Commission is scheduled to discuss the proposal tonight during a public hearing, according to the source.

The plan calls for five structures, with three storage buildings ranging from 20,000 to 36,000 square feet. Two office buildings, one a two-story structure comprising 3,200 square feet and the other at 1,200 square feet, are also part of the design, the source reported.

The facility would be built on the corner of Lemay Ferry Road and Old Lemay Ferry Road, which is currently occupied by Moore’s Used Autos and Midwest Autohaus. The project would also require building onto a heavily wooded portion of the lot, which backs up to the Bristol Ridge Subdivision.

Residents who face Old Lemay Ferry Road would see the facility from their backyards and decks, according to Ron Garascia, a former real estate banker who lives in the neighborhood and is leading the opposition. “Who wants to come out of your subdivision and, all of a sudden, smack dab in front you have storage units?” he told the source.

Garascia believes the facility would lower property values and argued it’s unnecessary because there are six other storage facilities within a one-mile radius. The lot is across the street from a fire station, shopping center and tavern.

Representatives from Lemay Storage, which was formed in August, spoke with councilmember Ernie Trakas several months ago about its plans. The design was “pretty well-landscaped and keeping with an attractive design,” Trakas told the source, adding that it would still be necessary to listen to resident feedback.

Sources:
Call Newspapers: Oakville Residents Opposing Proposed Storage Facility; Public Hearing Slated Monday
Call Newspapers: Planning Panel to Consider South County Projects

Proguard Self Storage, which operates five facilities throughout the Houston area, has broken ground on a new location in West Houston. The six-story property will comprise 268,593 square feet of storage space in 1,753 climate-controlled units. It’s slated to be complete in November 2018, according to the source.

Houston-based architecture firm Edgecomb & Associates Inc. is designing the project. E.E. Reed Construction LP is the builder. It’s the fourth Proguard facility E.E. Reed has constructed since 2011.

Proguard opened its fifth property in 2016 in the city’s Midtown/Montrose neighborhood. The five-story building includes 1,100 climate-controlled units in a range of sizes.

Founded in 1991, Proguard operates facilities in the Bear Creek/Copperfield, Bellaire/Meyerland, Medical Center, Memorial Heights/Washington, Midtown/Montrose and Museum District areas of Houston.

Investment-management firm Harrison Street Real Estate Capital LLC (HSRE), which has extensive interests in “needs-based” real estate, including self-storage, has acquired a two-property portfolio in the Nashville market from Mallory Station Self Storage for nearly $38 million. Together, the facilities comprise more than 147,500 rentable square feet. Both are expected to be renamed as US Storage Centers, the operating brand of Westport Properties Inc., according to a press release from Colliers International, the real estate firm that helped broker the deal.

The property at 7102 Bakers Bridge Ave. in Cool Springs, Tenn., comprises 71,338 square feet. It sold for nearly $21.5 million. The facility at 6346 Nolensville Pike in Nolensville, Tenn., comprises 76,168 square feet. It sold for about $16.5 million. The purchase prices “easily eclipsed the previous known price per square foot paid for self-storage in Tennessee by more than 120 percent,” the release stated.

“This transaction is reflective of the evolution that has occurred in recent years propelling self-storage facilities from a relatively undesirable asset class into one of the most sought after commercial real estate investments,” said Ashley Compton, national director for the Colliers Self Storage Group, who represented the seller in the transaction and procured the buyer. “The sale of the Mallory Station properties establishes a new high-water mark for institutional-quality self-storage in the Southeast.”

Colliers International 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. These include consulting, market research, real estate intermediation for sale and rent, project management, property management, and valuation.

HSRE is a real estate private-equity firm with more than $12.5 billion in assets under management through commingled funds and public-securities products. The funds focus exclusively on the education, healthcare and self-storage segments of the real estate market. Affiliate Harrison Street Securities LLC manages publicly traded real estate securities on behalf of institutional clients and high-net-worth individuals.

Founded in 1985 and based in Irvine, Calif., Westport Properties is a real estate investment company that acquires, develops and operates self-storage facilities as well as provides third-party management services. Its portfolio comprises 8 million rentable square feet in 15 states.

In my business, I spend a lot of time thinking and talking about the value of self-storage properties. My daily conversations are usually focused around interest rates, capitalization (cap) rates, new supply, time on market, loan-to-value ratio, basis points, net operating income (NOI) and a lot of other topics that rarely interest an owner, unless he decides to buy or sell a property. That’s because most owners are busy running their business and aren’t likely to sell anytime soon.

However, it’s helpful to understand the current real estate market, as it impacts your ability to run a successful operation. For example, you need to know what creates value in today’s market. Is it better to spend $10,000 on landscaping or $15,000 to add more 10-by-10 units? Here are some market factors and valuation methods that will help you make these decisions with confidence as well as some suggestions to improve facility value.

A Different Kind of Market

Before discussing valuation, you need to understand that the market is divided today. Many professionals feel things are slowing down, values are falling, mass overbuilding is on the horizon and the industry overrun. The rest feel we’re simply seeing a normalization. It’s true we’re past the all-time high in valuations for this real estate cycle and some markets are seeing overbuilding. However, overall, the market continues to perform well and above the returns of other real estate asset classes.

One clear difference in today’s market is the growth of mid-sized operators—those with more than 10 self-storage properties. These operators have grown from a just a handful a decade ago to more than 100-plus nationwide. They’re capitalizing on the economies of scale and strong market fundamentals the larger operators enjoy today.

The mid-sized operators are loving the immeasurable flow of capital into the self-storage sector, but also tend to overpay for assets and overbuild markets. This is because many are aiming to achieve the scale necessary to attract a real estate investment trust (REIT) as a buyer. With the REITs pulling back and exercising discipline, it’s left many of these groups with an unsure exit under current market conditions. However, they continue to grow and outbid many of self-storage household names.

Valuation Methods

Valuation is more an art than a science. While mechanical number manipulations are an important part of the process, there’s a large measure of real estate judgment and experience in developing a precise value range. True market valuation takes an in-depth look, noting not only value based on income but from a cost and sales-comparable basis.

The cost method compares the cost of replacing the facility in the market in which it’s located. The sales-comp method compares the value achieved in the marketplace with similar facilities in recent sales. Without reconciling the value from each of these methods, you can’t be sure you’ve identified the right property value. It’s a complicated process that requires the expertise of an active self-storage professional.

Over the years, real estate professionals and investors found they needed a shorthand method for comparing property values in a market, thus cap rates came into general use. Essentially, these tell you what you should expect to earn as a percentage if you purchased a property using all cash. For example, at a 7 percent cap rate, a property should yield an unleveraged 7 percent cash-on-cash return.

When the NOI is divided by the cap rate, you arrive at a property value. This method is essentially a way to develop a price based on an income stream. The net result is the lower the cap rate, the higher the value; and the higher the cap rate, the lower the value.

Let’s look at an example to illustrate the difference in valuation between two cap rates. Let’s say we have a typical self-storage property with an NOI of $250,000. Now let’s apply a 6.5 percent cap rate and an 8 percent cap rate, which is the range for most facilities in today’s market. To find the estimated value at these two rates, divide the NOI by .065 and .08. You get an approximate value range of $3,125,000 to $3,846,000.

Creating Value

We’re now past the point in the real estate cycle where we’re exclusively valuing properties on year-one projections or “pro forma.” It’s more important than ever to understand the local market and what’s creating value.

I’m seeing operators increase revenue by adjusting their unit mix to provide sizes that will rent at a higher value or greater velocity. Don’t be afraid to reduce your gross potential and convert units to sizes that are in greater demand. This will lead to higher revenue, more cash flow and an increase in value.

For example, if you have 150 vacant 4-by-5 units and no availability in your 5-by-10s, you’re missing potential profit. If you’re able to convert two 4-by-5 units into a single 4-by-10, you’ll rent it to the same customer who’s looking for a 5-by-10. The new unit size will help you gain a new customer—rather than turning him away—and create new revenue. It’s also worth noting that when you’re underwriting a property, you need to have a firm grasp on your operating expenses and ancillary sales.

Extracting Value

The selling process doesn’t create property value. The value is there all along, created by cash flow and market sentiment. Today, we’re experiencing a wide range of value due to the various views in the investment market and the large of amount of equity looking for a home in the self-storage sector. The range is 10 percent to 20 percent in some cases. Since most buyers and sellers are sophisticated and their lenders are ever more detailed, trying to find a “greater fool” who’ll pay a substantial premium isn’t only unproductive, it can have a serious negative impact on a property’s marketability.

The prices of self-storage assets are still within 10 percent of the peak of the market, and the uncertainties of our industry never less settled. If you’re at or near one of those “personal crossroads,” it’s time to think about your facility value and changes you can make to ensure you maximize its potential.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. It also offers panel discussions in which brokers from around the country share their insights on self-storage market fundamentals and economic trends in their regions. To access recordings, visit www.argus-selfstorage.com/presentations.html. For more information, call 800.55.STORE; e-mail bvestal@argus-realestate.com.