Update 6/22/17 – The Sterling Group received support on Tuesday in its quest to expand its newly acquired facility. The plan commission is recommending the Goshen City Council approve the operator’s request to rezone a 2.06-acre parcel at 2980 W. Wilden Ave.

The company plans to build 300 new storage units as well as a new property entrance. The existing ingress will be converted to exit-only, according to Rhonda Yoder, planning and zoning administrator. The expansion will include controlled access, perimeter fencing, lighting and video cameras, according to the source.

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2/13/17 – Real estate firm The Sterling Group has acquired Wilden Avenue Mini Storage in Goshen, Ind., for $1.5 million. The facility will be rebranded as Mini Storage Depot and operated by Sterling’s third-party management division, Sterling Management Ltd.

The property at 2704 W. Wilden Ave. is just off U.S. Route 33. It comprises approximately 37,000 square feet of storage space in 328 climate-controlled and drive-up units, and offers 24-hour gate access.

Founded in 1976, The Sterling Group acquires, constructs, develops and manages self-storage and multi-family properties in 16 states throughout the Midwest and Southeast. The company has been active in the storage industry since 1986, currently operating 13 facilities in Indiana and Michigan.

Sterling Management has more than 30 years of experience overseeing a portfolio of U.S. multi-family communities and self-storage facilities.

 

Phoenix-based U-Haul International Inc., which operates more than 1,300 self-storage locations across North America, is converting a former Tyson cold-storage and meat-processing plant in Buffalo, N.Y., to self-storage. Once complete, it’ll be the operator’s largest storage facility in the region, according to a source.

U-Haul Moving & Storage at Larkin District at 665 Perry St. opened with a temporary showroom on April 19, according to a company press release. The site offers moving and packing supplies, trailer and truck rentals, towing equipment, bike racks, and U-Box portable-storage containers. Professional hitch installation will be offered soon.

Renovations are underway to add more than 1,200 indoor and outdoor self-storage units to the property, which includes an existing 165,181-square-foot building. The facility will feature access-controlled entry, an interior loading bay and climate control. The units are expected to be available by the end of summer, the release stated.

U-Haul plans to hire 20 or more employees once the facility is fully operational, said Todd Schnitzer, president of the U-Haul Co. of Western New York and a local resident. "With the revitalization going on downtown, we wanted to give people the opportunity for convenience. The conversion of existing buildings into mixed-use and residential property downtown is growing, and people are moving back into the area."

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.

Real estate firm Altis Cardinal LLC is developing a four-story, mixed-use building that will include self-storage and retail space on the former site of the Mosley Motel in St. Petersburg, Fla. A ground-breaking was held last week for the project at 401 34th St. N., at the edge of the Kenwood Historic District. Mayor Rick Kriseman and city council member Amy Foster, who represents the area, attended the event, according to the source.

Slated to be complete in March, the project will include 7,500 square feet of retail space on the ground floor, with three levels of self-storage above. The $55 million self-storage component is part of Altis’ $75 million redevelopment plan for the area. The company purchased the foreclosed property in 2016. Before its demolition, the hotel was home to hundreds of people who were living in squalid conditions, the source reported.

In total, Altis has purchased 12 acres of property between N. 31st and 34th Streets, and N. 3rd and 5th Avenues. It’s also converting a six-story office building into loft apartments, and adding two four-story buildings containing 122 apartments to the existing housing site.

"We wanted to aggregate as much property as we could in that area, because we thought it had a lot of unrealized potential," said Frank Guerra, principal. He also noted that Kenwood is a "very successful historic district."

Known for its attractive bungalows and brick streets, Kenwood has an active neighborhood association, according to the source. Association president Brenda Gordon said she’s pleased with the area’s redevelopment, calling it a welcome change from the “great no-man’s land” of parking lots and vacant commercial buildings.

Guerra and business partner AJ Suarez founded Altis in 2009. The Miami-based company focuses on acquisitions, third-party development and management, and real estate consulting.

 

The self-storage industry is growing rapidly, and new investors are popping up every day. Many of them are starting fresh, with no experience in the industry. They’re looking for an easy investment to put more cash in their pockets. One way to make a purchase worthwhile is to invest in an underperforming property, turn it around and realize a great profit.

There are many benefits to this investment strategy, particularly for industry newcomers. First and foremost, buying a “fixer-upper” is cheaper than buying a well-performing property. This is especially helpful because the recent market has shown a historically low capitalization-rate environment, and finding a stabilized property to buy and run efficiently is difficult.

Indicators of Underperformance

Identifying a property with profit potential can be challenging, but there are a few key indicators. These “diamonds in the rough” have a common set of characteristics that tell you they’re worth the investment:

Web presence. If the facility lacks a modern website, or doesn’t have a website at all, it’s likely underperforming. Operators of these properties often don’t know the importance of a Web presence and are spending money on other things, which means there’s lots of room to improve.

Ancillary income. A facility that doesn’t have any add-on profit centers such as retail sales, tenant insurance or truck rentals can also a candidate. These are easy ways to make additional income. If the facility isn’t using them, there’s a lot of room for financial enhancement.

Low occupancy. If the facility has a lot of vacant units, it isn’t maximizing its revenue. A new investor could put strategies in place to reach higher occupancy and gain more profit, thus raising the net operating income (NOI).

Capital expenditures. Some facilities are outdated and need a few repairs such as a new roof, upgraded security or even a fresh coat of paint. These are small investments that greatly improve a facility’s appearance and help to raise occupancy and NOI.

Financials. Some owners spend money in the wrong areas, such as personal expenses or travel, and fail to allocate funds to important items like the marketing budget. Some also give a lot of freebies or discounts, or neglect the collection of fees. A new investor can re-categorize expenses to create a greater return on investment. Ideally, a storage facility should be running at a 60 percent to 70 percent margin, with expenses at 30 percent to 40 percent of income. If this ratio is off, a new investor can strategize how to mitigate expenses.

Property Characteristics

In addition to indicators of underperformance, you must look at the property characteristics to gauge potential. First, look at the facility’s size. The smaller the facility, the more difficult it will be to turn a profit. A lower square footage means lower rentable income. A site that’s too small can be hard to run efficiently. For example, a 25,000-square-foot property and a 70,000-square-foot property will both need a full-time manager, but the larger facility will have an easier time offsetting the manager’s salary with revenue. This means it’ll have a higher NOI.

Next, determine if the property has expansion potential. The cost to construct storage buildings is usually low compared to other real estate, which makes it easy to invest a small amount in a new structure. Often, an investor can even double his investment.

Profit Strategies

Once you’ve identified and purchased a property with indicators of low performance and the right physical characteristics, the next step is to put tools and procedures in place to generate more income. Here are a few ideas:

• Self-serve kiosks: This technology is growing and has the potential to revolutionize industry staffing. It allows operators to minimize—sometimes even eliminate—payroll costs, especially if you manage multiple facilities through a single, centralized location. It also provides greater customer convenience, which could lead to more rentals.
• Third-party management: Hiring a company to oversee the site can also improve profit. These firms take advantage of economies of scale to operate and market facilities. Many also have call centers and collections support. Some even have analytics resources to gauge and improve performance.
• Ancillary products: As previously discussed, add-on profit generators such as truck rentals and retail sales can significantly grow facility income.
• Internet: Online reservations and a strong Web presence can be another investment with great impact.

Finding an Exit

Probably one of the most important ways to set a property on the path to success is to have an exit strategy from day one. It’s important to know exactly what you want to get out of your investment so you can work toward that outcome. Many people just stumble into self-storage and don’t have a plan. But with a good exit strategy, you can plan how to implement processes and manage costs for what you want in the end.

An underperforming property can be a great opportunity for someone looking to break into the industry. By making just a few improvements, you can turn the facility around and more than double the income. While you should use caution when considering these “diamonds in the rough,” you can rest easy knowing these suggestions are tried and true strategies that have worked for several owners in the past.

Noel Cain is managing partner of the Debt & Equity Group at SkyView Advisors. He works with clients to provide financing and loan-workout services that fit each self-storage owner’s goals. In addition to closing more than $100 million in debt and equity, he has significant experience in underwriting, development and cash-flow modeling, as well as due diligence and site analysis. To reach him, call 414.306.6999; e-mail ncain@skyviewadvisors.com; visit www.skyviewadvisors.com.

U.K. self-storage operator Safestore Holdings PLC has released its financial statement for the first half of its 2017 fiscal year, which ended April 30. The report indicates Safestore experienced growth in revenue, rental rates and occupancy at its self-storage facilities in France and the United Kingdom.

Total revenue for the period was up 12.4 percent to £62.6 million, with “like-for-like” growth for the group up 3.7 percent, using constant exchange rate, in both operating regions. Same-store revenue in the U.K. grew 3.9 percent, while the company’s Paris business increased 2.9 percent compared to the same period in 2016.

Occupancy across the company’s portfolio was 69.8 percent at the end of the period, an increase of 1.1 percent. Same-store occupancy was 71.9 percent, an increase of 1.1 percent. U.K. occupancy was 68.1 percent, up 1.1 percent from a year ago. Rental rates across the U.K. portfolio increased 0.3 percent year over year, with same-store facilities increasing 1.7 percent. In France, occupancy across the entire portfolio was 77.3 percent, down 2.1 percent from a year ago, while rental rates increased 2.2 percent.

“Safestore has performed well in the first half of the year and continues to build on the strong earnings and dividend growth achieved over the last four years,” said Frederic Vecchioli, CEO. “Notwithstanding the uncertain macro-economic backdrop, the group continues to generate a record number of inquiries across its entire platform. In addition to solid growth in our existing business, our recently acquired Space Maker business and the five new stores opened during the last 12 months are trading well. I am delighted to announce the addition of another site in Paris, at Combs-la-Ville, which opened earlier this month.

“As we enter our peak trading period, we continue to see good levels of interest in self-storage in the U.K. and increasing momentum in Paris,” Vecchioli continued. “We are well-placed to meet this demand with our 1.7 million square feet of currently unlet, fully invested space.”

Safestore operates 134 self-storage facilities, including 109 facilities it owns in the U.K. and 25 in France. Its wholly owned properties comprise more than 5.6 million square feet of storage space, while its entire portfolio serves approximately 55,000 customers.

Update 6/20/17 – City Line Capital has acquired Fort Knox Self Storage in Winston-Salem, N.C. The transaction was in partnership with CSG RE and marks the fifth storage facility City Line has purchased since its February launch. The property at 2550 Peters Creek Parkway comprises 68,562 rentable square feet in 625 units, according to a press release.

The facility features a mix of climate-controlled and traditional units, along with surface parking spaces. It was 91 percent occupied at the time of purchase. It’ll be rebranded under a new name and operated by third-party management firm Storage Asset Management, the release stated.

“We are excited to enter the Winston-Salem market and look forward to continuing our growth in the Carolinas,” Schontz said. “We plan to make several physical enhancements to the facility and look forward to continuing to deliver top-notch self-storage service to the tenants of this high-quality facility.”

In addition to permanent residents, the facility serves the student population from the area’s surrounding colleges and universities, including the University of North Carolina School of Arts, Wake Forest University and Winston-Salem University.

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6/5/17 – City Line Capital LLC, a newly formed real estate investment firm specializing in self-storage assets, has acquired its first four properties. The company closed in March on a facility in Colorado Springs, Colo., and has added assets in Louisiana, Pennsylvania and Texas in the last 30 days, according to a press release. Together, the sites comprise approximately 175,000 square feet in 1,600 units. They’ll all be operated by third-party management firms.

Among the purchases was Central Self Storage in the New Orleans suburb of Harvey, La., which was purchased from Pegasus Group. The facility at 2520 Destrehan Ave. comprises 57,464 square feet in 497 units. Built in 1985, the asset was fully renovated in 2013, according to a press release from JLL Capital Markets, the commercial real estate and finance firm that represented the seller in the transaction.

The Harvey property, about 10 miles south of New Orleans, includes one single-story building and a pair of two-story structures. The renovation converted 130 traditional units to climate-controlled spaces. Other improvements included a remodel of the management office, door replacements, the installation of an elevator and repainting, the JLL release stated. The property also features electronic access control, a 24-hour kiosk and fencing. Access to the facility is off Lapalco Boulevard, a four-lane thoroughfare with an estimated daily traffic count of 49,000 vehicles.

Pegasus was represented in the deal by JLL Managing Directors Steve Mellon and Brian Somoza as well as Greg Riera, senior vice president.

City Line has six other self-storage properties under purchase contracts totaling another 500,000 square feet, the release stated. The company was launched in February to acquire and manage self-storage assets across the United States. The group has said it intends to acquire $200 million in self-storage property this year.

“We look forward to building upon this success as we accelerate our level of growth to become recognized as one of the most active investors in this asset class,” said Alex Meshechok, managing partner of City Line and managing director of partner firm CSG RE.

JLL is a full-service global provider of capital solutions for real estate investors and occupiers. Last year, the firm completed about $136 billion in finance transactions and sales acquisitions. The firm’s capital-markets team closed more than 1,400 deals in 2016, with a production volume of more than $56 billion.

Based in Walnut Creek, Calif., and founded in 1988, Pegasus Group is a real estate investment and management company specializing in self-storage. It owns and operates 49 self-storage facilities in 10 states under the Central Self-Storage brand.

Based in Philadelphia, City Line was launched by former brokers Matt Hardiman, Rick Schontz and Matt Weckesser in partnership with CSG RE, the real estate acquisition arm of New York investment bank CSG Partners LLC. The company’s acquisition criteria include assets in primary and secondary markets of at least 40,000 square feet, though smaller properties may be considered if they offer expansion opportunities, according to the company website.

Attic Self Storage, an English operator with two facilities in the Greater London Area, is partnering with two local art schools to launch Market Road Gallery, a bookable, outdoor, interactive art space at the storage operator’s King’s Cross location. The collaborative effort includes University of Arts London (UAL) and Central Saint Martins, a public tertiary art school and UAL constituent college. Launched last week, the project is the first of its kind in the United Kingdom, according to the source.

The project involves use of a 213-foot “canvas” on the back wall of the storage property at 270-276 York Way, where it connects with Market Road. Artists can reserve one of seven available spaces on the wall by clicking “Let Me Paint” at marketroadgallery.org. The first artists to reserve space will also have access to free painting materials, the source reported.

Once the spaces are painted, community members can vote on whether each piece should remain on the wall or be painted over. They can submit suggestions or feedback through the website’s “Let Me Speak” button.

“This project has emerged through learning from 15 years [of] groundbreaking research, working with local authorities and crime-prevention units across the world to assess the impact of street art in the built environment. It is designed to bring communities into dialogue and to enable as yet undiscovered voices to be clearly heard, singularly and collectively,” said Lorraine Gamman, a UAL professor and director of the university’s Design Against Crime Research Centre.

The reception area of the King’s Cross Attic Self Storage facility also contains an exhibit featuring 50 pieces created by artists of Artbox London, a nonprofit supporting people with learning disabilities. The operator hosted an exhibit in April, and then decided to keep the art on display permanently.

Founded in 2006, Attic Self Storage operates a second facility in Bow, a district in London’s East End.

Update 7/31/17 – Jernigan Capital has co-invested in a third self-storage project with Structure Development, committing $8 million toward a proposed multi-story facility in Jacksonville, Fla. The asset would comprise 68,700 square feet in 749 climate-controlled units on Edison Avenue, about a half-mile from downtown. Construction is expected to begin during the fourth quarter and be complete in about a year, according to a press release.

The property is less than a mile from Brooklyn Station, a new retail and dining area, and is close to several recently developed upscale apartment complexes. It’s visible from Interstates 10 and 95.

Jernigan Capital also announced that three of its earlier self-storage co-investments have opened for business. Two of the assets are also in Florida, with one in Pittsburgh, Pa. A project in Ocoee, Fla., added 287 units to its existing site, while another Jacksonville project was a 787-unit multi-story facility. The latter is through Storage Partners LLC, a joint venture with real estate investment firm Heitman Capital Management LLC and an unidentified institutional investor. The Pittsburgh project is a 584-unit new development in which Jernigan Capital has a $5.3 million investment.

In all three cases, either Jernigan Capital or the joint venture holds a 49.9 percent profits interest, which is the typical structure in the lender’s transactions, according to company officials.

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6/19/17 – Jernigan Capital has made a fourth co-investment with Phillips Development & Realty. The bank has committed $10.3 million toward a proposed 73,500-square-foot self-storage facility in St. Petersburg, Fla. The multi-story facility would comprise 811 climate-controlled units and be part of a mixed-use development featuring 310 apartment units and a restaurant, according to a press release.

The ground-up project is slated for 30th Avenue S., between 34th Street S. and Interstate 275. Construction is expected to begin during the third quarter and be complete by the end of September 2018. Phillips Development will serve as developer.

The 9-acre property is at the north entrance to the growing Skyway Marina District. It’ll also serve the Tierra Verde and St. Petersburg Beach markets due to its proximity to the freeway, the release stated.

“This closing sets us in a forward direction,” Donald Phillips, managing director of Phillips Development, told the source. “The facility we have planned is just the start of something much larger, something we hope will add even greater character to the already influential neighborhood.”

The storage building will include an art mural across the entire length of the structure facing I-275. “This addition to the St. Petersburg art scene will be one of the largest in history and will set the tone for the district’s long-term plan,” Phillips Development officials said in a statement. The mural’s design will be unveiled this summer.

The building site was originally home to the Suncoast Resort Hotel and was earmarked for a Home Depot development before the home-improvement retail chain cancelled its plans in 2008. Phillips Development acquired the property in February for $4.2 million, according to the source.

Jernigan Capital has closed 15 self-storage investments since Jan. 1 with a total commitment of $175.1 million. The St. Petersburg facility will also be managed by CubeSmart.

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5/23/17 – Jernigan Capital has made a third co-investment with Phillips Development & Realty. The bank has committed $9.2 million toward a proposed 70,888-square-foot self-storage facility in Tampa, Fla. The target building site is on Falkenburg Road at the Selmon Expressway. Construction is expected to start during the third quarter, with completion expected by June 2018, according to a press release. Phillips Development will serve as developer.

The property is in an area experiencing “significant” population growth, the release stated. It’s less than a mile from Bass Pro Shop, Top Golf and the Westfield Brandon Shopping Centre.

Jernigan Capital has closed 14 self-storage investments since Jan. 1 with a total commitment of $164.8 million. The Falkenburg facility will also be managed by CubeSmart.

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5/4/17 – Jernigan Capital has invested $20.6 million in two more multi-story development projects in Florida and Georgia. Both are in the proposal stage. Together, they comprise 154,000 net rentable square feet in more than 1,600 units, according to a press release. Both are expected to break ground in July, with completion anticipated before the end of the third quarter of 2018.

Of the $20.6 million, $8.1 million was invested in a property at Ulmerton Road and 90th Street in Largo, Fla. The asset will comprise 71,000 net rentable square feet in 684 units. It’s expected to be complete during the second quarter of 2018. The project is a co-investment with Tampa, Fla.-based developer Phillips Development & Realty. This is the second co-investment project between the two companies, the release stated.

The second project is in Atlanta. Jernigan Capital invested $12.5 million in a property at 2033 Monroe Drive near Interstate 85. It’s in an area with “high-end” retail and multi-family residences, according to the release. The facility will comprise 83,000 net rentable square feet in 941 units. The project is a co-investment with local developer RRB Development LLC. This will be the fifth project on which the companies have co-invested.

Jernigan Capital has invested $155.6 million this year in 13 self-storage development projects. Each of the facilities will be managed by CubeSmart, a publicly traded self-storage real estate investment trust and third-party management firm.

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4/26/17 – Jernigan Capital Inc., a merchant bank and advisory firm serving the self-storage industry, has invested $29.5 million in three multi-story development projects in Colorado and Kentucky. All are in the proposal stage. Together, they comprise 200,000 net rentable square feet in more than 2,100 units, according to a press release. Each is expected to break ground this year with completion scheduled for the second quarter of 2018.

Of the $29.5 million, $11.2 million was invested in a property at S. Wadsworth Boulevard, near U.S. 285, in Denver. Construction is expected to begin this month on the 75,000-square-foot, 795-unit facility. The project is a co-investment with locally based developer Pamlico Investments, which also has offices in Charlotte, N.C. This is the fourth co-investment project between the two companies, the release stated.

Construction on a second Denver project, with a $9.8 million investment, is expected to begin in July. The facility will comprise 59,000 net rentable square feet in 688 units. The project is a co-investment with Structure Development LLC in Orlando, Fla., which will serve as developer. This will be the second project on which the companies have co-invested.

The third project will be a 66,000-square-foot facility at 2801 N. Hurstbourne Parkway in Louisville, Ky. Jernigan Capital has invested $8.5 million in the asset, which will contain 642 units. Construction is expected to begin this week. This will be the bank’s second co-investment project with Memphis, Tenn.-based developer Storage Development Partners.

These investments come on the heels of $61.7 million in co-investments Jernigan Capital announced last month for five self-storage developments proposed in the Southeast. The company has made more than $135 million in self-storage development investments this year.

Jernigan Capital is a commercial real estate finance company that provides financing to private developers, operators and owners of self-storage facilities. It offers financing for acquisition, ground-up construction, major redevelopment or refinancing. The firm intends to be taxed as a real estate investment trust and is externally managed by JCap Advisors LLC.

Police have arrested a man who allegedly flooded the interior of an Access Self Storage facility in Oakland, N.J. Security footage shows Matthew Guarriello, 21, turning on the bathroom sink at the property at 21 Raritan Road and rerouting the water onto the floor. The flood caused more than $5,000 in property damage, according to the source.

Guarriello, a resident of Franklin Lakes, N.J., surrendered at police headquarters after being contacted by Oakland Police Officer Stephen Broek, who was investigating the case. Guarriello has been charged with criminal mischief.

Founded in 1976, Access Self Storage owns or manages 17 self storage facilities in New Jersey and New York. The portfolio contains more than 12,000 storage units.