A self-storage expansion in Nice, Calif., progressed last week as the Lake County Planning Commission approved the project's use permit.

Pat Stansberry, owner of Nice Self Storage, would like to create storage space for up to 45 boats and RVs. The proposed expansion consists of a 140-by-160-foot area west of existing buildings, a 280-by-26-foot area south of existing storage buildings and a 100-by-30-foot area north of the current office.

The project planner told the commission the parking spaces will be one foot above the 100-year flood elevation and away from nearby seasonal wetlands. However, commissioners insisted the facility devise and implement a vehicle evacuation plan in case flood waters from nearby Clear Lake exceed the one-foot barrier. Project planners and Stansberry agreed, and Stansberry said he will include a flood provision in the contracts of all boat and RV tenants, stipulating they must move their vehicles or consent to facility employees moving their vehicles if rising water occurs.

Nice, with a population of about 2,500, is located 130 miles north of San Francisco.

The Tyler, Texas, vicinity has experienced a rash of self-storage break-ins in the past two months, and local sheriffs are launching an investigation to find and catch the thieves.

Five self-storage facilities, including Ace Self Storage in Tyler, have reported 16 break-ins since the beginning of the year. Over the Christmas holiday, Ace Self Storage alone reported 11 break-ins. The other facilities are located in nearby towns Chapel Hill, Flint and Whitehouse.

Thieves seem to be circumventing fences, gates and locks by stealing a code to first get access to unit area. Then they compromise locks by jamming objects into the locks to keep them from fully latching, Lt. Tony Dana of the Smith County Sheriff's Office told the source.

Ace Self Storage's vehicle gate operates between 7:30 a.m. and 7:30 p.m. The facility has installed and begun using eight infrared cameras, but to this point thieves have managed to avoid being caught on video.
Televisions and computers have been the most common stolen items.

PS Canada Company ULC will acquire a four-property self-storage portfolio and business from APEX Self Storage Ltd. and its affiliates.

The facilities are primarily located in the Greater Vancouver area. The transaction is subject to due diligence reviews and is expected to close in March.

PS Canada Company ULC is a privately held company that owns and operates 52 self-storage facilities across Canada under the Public Storage name.

State troopers in Michigan are investigating a string of burglaries at two self-storage facilities and a few privately owned outbuildings in Manistee and surrounding counties.

Items were stolen from Parkdale Mini Storage and Storage Inn in the past month. Several of the stolen items have been recovered. However, investigators believe not all larcenies have been reported.

By Noel Cain

So you have decided its time to refinance your self-storage property. Maybe your construction loan is maturing, or perhaps you just want to take advantage of the currently favorable interest-rate environment. Most financial experts agree that 2011 looks to be much more active for commercial real estate lenders than the past few years. Not to mention a number of new sources including commercial mortgage backed securities and Small Business Administration lenders have jumped into the self-storage finance arena.

While you might know that lenders will underwrite an assets cash flow and its ability to cover expenses and debt service, you may not be aware that lenders will spend just as much or more time focusing on your personal ability to cover liabilitiesbusiness or otherwise. Lenders call this underwriting the global cash flow. Not only is it important to get your property financials in order, you need to pay attention to and organize your personal finances.

Lets examine in closer detail this concept of global cash flow and what you can do to be prepared when dealing with lenders.

What Is It?

Global cash flow is a borrowers net cash flow from all sources of income, less all expenses and interest, both personal and business. Lenders include income from employment, dividends, businesses and real estate. As part of their due diligence, they will likely require both a personal financial statement and multiple years of tax returns to document all sources of income. Expenses will include all business as well as personal operating costs, including personal debt such as home mortgages, credit cards and auto loans. To document the expense side of the global cash flow, lenders will again use tax returns to capture all business expenses, and will also run a credit report to capture any business and personal debts.

The Impact of Other Real Estate Holdings

Much of the global cash flow underwriting process will be spent understanding your other real estate holdings and their financial implications. Lenders will require a schedule of real estate owned, which will summarize holdings and their net income. You should anticipate this schedule to include detailed cash flows and a summary of debt terms for of all the properties in your portfolio, including those for which you may be a limited partner. The lender will underwrite each property focusing on the ability of its cash flow to cover its respective debt service. The goal of this analysis is to determine what your total cash obligations are outside of the subject loan.

To the extent there are properties in your portfolio that do not cover their own debt service, lenders will want to know if there is a loan structure in place (i.e., interest reserves, etc.) to cover those deficits. In the absence of such structure, they will focus on how you propose to cover that shortfall and how long it can be supported. In some cases, excess cash from other properties may be a reasonable explanation; however, if the investor groups are differentwhich limits disbursementsthen cash from other sources will need to be available.

What Lenders Seek

In conducting this extensive analysis, lenders are looking to determine that a positive global cash flow exists, typically with an income to expense ratio of 1.25 to 1. They are also analyzing all of your current recourse obligations to determine the extent of your contingent liabilities.

This analysis will include an in-depth review of your net worth and liquidity to determine your ability to repay your other liabilities and what capacity is left to service the prospective loan. This presents you and your partners with a decision outside the simple who is willing and has the wherewithal to sign the required personal recourse guarantee. There is also now the question of who has the borrowing capacity.

Many times in this market, the lender will simplify the process by requiring all the propertys owners to sign recourse in an effort to ensure they will be repaid. But before you put your name on the dotted line, keep in mind that with many loans being modified and extended in todays credit crunch, more than likely, recourse will come into play. As an owner, youll need to believe in the property and the ultimate ability to refinance it.

Lender Types

What types of lenders look at global cash flow? The quick answer is all types. In todays credit environment, even non-recourse lenders want to ensure the borrower has the wherewithal to pay on all of his obligations and other liabilities will not bring down its freshly minted loan on your property. In addition, its important that a borrower have some liquidity, even after the proposed transaction is completed, to ensure there are funds available in the event an unforeseen occurrence resulting in a capital call.

Preparing for an Upcoming Financing

As for all transactions, its best to start by getting all of the required documentation in order. To that end, you should prepare an updated and accurate personal financial statement. If you need a guide, the SBA has a personal financial form on its website that most banks will accept. Gather the past three years of tax returns, for personal income and all businesses, including but not limited to real estate investments. Finally, make sure you have a current profit-and-loss statement for the property you are financing as well as any other properties you may own.

In the interim, do not take on any additional liabilities prior to your refinance; this would include buying a new car, house, etc. Its important to have some free cash available for the refinance, so its best to limit any large discretionary transactions that will require cash until after you close on the loan. Again, lenders will want to see you have some liquid funds on hand, not to mention a refinance will cost several thousand dollars, some of which will be required in the process of the transaction prior to closing.

Lastly, start the process early. A typical financing transaction takes longer to complete in this market, and borrowers should leave ample time (more than 90 days) from start to finish.

The bottom line is borrowers should put themselves in their lenders shoes and anticipate what the concerns will be on their global cash flow. One of the keys to obtaining financing in todays market is preparation and expectation. A borrower who understands what his lender will be looking for can analyze his situation and prepare a loan package that clearly tells the story and preemptively addresses any concerns the lender may have. When in doubt, remember the six Ps of success: proper prior preparation prevents poor performance.

Noel Cain is a vice president at The BSC Group, where he provides mortgage brokerage, financial consulting, and loan-workout solutions to self-storage real estate owners nationwide. To reach him, call 847.778.4661 or e-mail ncain@thebscgroup.com .