SmartStop Self Storage Inc., which operates 169 facilities in 21 states and Canada, has released its financial statement for the quarter that ended June 30, 2015. During the second quarter, the company increased same-store revenue 7.5 percent and net operating income (NOI) 15.9 percent compared to the same period in 2014.

Company officials attributed the favorable numbers, in part, to SmartStop’s self-administration and investment-management transaction last fall with Strategic Storage Holdings LLC and Strategic Storage Advisor LLC, which enabled it to become a self-managed entity. The financial report is also SmartStop’s first since announcing it is being acquired by self-storage real estate investment trust Extra Space Storage Inc. The Extra Space deal is expected to be finalized before the end of the year.

"We had a very exciting quarter, and we are happy to report that we have achieved our 14th consecutive quarter of year-over-year, same-store revenue and net operating income growth," said H. Michael Schwartz, CEO of SmartStop. “As previously announced, we have entered into a definitive merger agreement pursuant to which we will be acquired by Extra Space Storage Inc., and our stockholders will receive $13.75 per share in cash, representing a total purchase price of approximately $1.4 billion and a premium of approximately 27 percent over our most recently announced net asset value. Prior to consummating the merger, we will continue to provide investors with a regular cash distribution, and in short, we believe our operational results and the merger are a validation of our investment strategy."

Funds from operations (FFO) for the quarter grew 28 percent to $9.7 million year over year. Same-store average occupancy for the quarter increased to 89.3 percent compared to 87 percent during the same period in 2014.

Same-store annualized rent per occupied square foot was $11.36 for the second quarter, compared to $10.82 for the same period in 2014. Cash flow from operations increased 44 percent to $12.2 million year over year.

Formerly Strategic Storage Trust Inc., SmartStop Self Storage is a diversified real estate company that focuses on acquisition, advisory, asset-management and property-management services for self-storage properties. The company is also the sponsor, adviser and property manager for Strategic Storage Trust II Inc., a public, non-traded real estate investment trust (REIT) specializing in stabilized properties, and Strategic Storage Growth Trust Inc., a public, non-traded REIT focusing on self-storage acquisition and development.

The four publicly traded U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.—have declared dividends for the third quarter of 2015.

CubeSmart

The board of trustees for CubeSmart declared a dividend of $0.16 per common share for the period ending Sept. 30, which is equal to that of the previous quarter. It’s payable on Oct. 15 to common shareholders of record on Oct. 1.

The board also declared a quarterly dividend of $0.484375 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares payable on Oct. 15 to holders of record on Oct. 1.

CubeSmart recently released its second-quarter 2015 financial statement, reporting funds from operation (FFO) per share of $0.31 during the quarter, a 14.8 percent year-over-year increase. Same-store net operating income (NOI) at its 361 facilities grew 8.4 percent year over year. The company attributed this to 6.8 percent growth in revenue and a 3.3 percent increase in property operating expenses.

CubeSmart owns or manages 620 self-storage facilities across the United States. Its operating portfolio comprises more than 40.9 million square feet.

Extra Space

The board of directors for Extra Space announced a quarterly dividend of $0.59 per share on the company's common stock for the third quarter. The dividend is equal to the previous quarter and payable on Sept. 30 to stockholders of record at the close of business on Sept. 15.

The REIT recently reported same-store revenue increased 9.4 percent and NOI rose 12.1 percent compared to the same period in 2014. FFO was 72 cents per diluted share, resulting in 17.2 percent growth compared to the second quarter the previous year.

Headquartered in Salt Lake City, Extra Space owns or operates 1,147 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 770,000 units and 85.1 million square feet of rentable space.

Public Storage

Public Storage previously announced its quarterly dividend of $1.70 per common share, which is equal to that of the second quarter. The REIT also declared dividends with respect to its various series of preferred shares. All dividends are payable on Sept. 30 to stockholders of record on Sept. 15.

In its recent financial statement, the company announced that revenue for same-store facilities increased 6.8 percent, or $31 million, in the second quarter, as compared to the same period in 2014. Cost of operations for the same-store facilities increased 1.1 percent, or $1.4 million, year over year. FFO was $2.15 per diluted common share, compared to $1.99 for the same period the previous year. NOI increased $44.8 million, including $29.6 million for same-store facilities.

Based in Glendale, Calif., Public Storage has interests in 2,262 self-storage facilities in 38 states, with approximately 147 million net rentable square feet. Operating under the Shurgard brand name, the company also has 216 facilities in seven European countries, with approximately 11 million net rentable square feet.

Sovran Self Storage

Sovran, which operates the Uncle Bob’s Self Storage brand, previously announced a quarterly dividend of $0.85 cents per common stock, up from $0.75 the previous quarter. The dividend was paid on July 27 to shareholders of record on July 17. The annualized dividend was $3.40 per share, which, based on the REIT’s June 30 closing share price, equated to an annual rate of approximately 3.9 percent.

In its second-quarter financial report, Sovran announced that total revenue increased 12.8 percent year over year, while operating costs increased 9.9 percent, resulting in an NOI increase of 14.2 percent. Same-store NOI increased 7.8 percent year over year. FFO for the second quarter was $1.22 per fully diluted common share, compared to $1 for the same period the previous year.

Sovran, which operates facilities under the brand Uncle Bob's Self Storage, operates more than 500 facilities in 25 states, with a large presence in Texas.

Real estate developers Michael and Thomas Kinzler received a positive recommendation last week from the planning commission in Morris, Ill., regarding their proposal to convert the former Beatty Lumber Yard to a self-storage facility. The Kinzlers requested a zoning-text amendment to the Morris Municipal Code to build indoor and outdoor storage at 900 Wauponsee St., according to building and zoning officer Bill Cheshareck.

The property is north of the railroad tracks on the west side of Wauponsee Street. The commission voted to support the amendment, but had conditions in regard to site layout and the proposed outdoor storage, the source reported.

In a memo, city planner Mike Hoffman, vice president and principal of Teska Associates Inc., wrote that since self-storage facilities don’t generate sales-tax revenue, they shouldn’t receive prime locations, such as frontage along U.S. Route 6 or U.S. Route 47. However, he said storage businesses are a needed service in the community and don’t generate significant traffic. “Rather than introduce a new category of ‘indoor and outdoor storage,’ as listed in the request, we would recommended continuing to call such facilities by the self-storage category in the existing code,” he wrote.

The board also recommended any outdoor storage be screened from adjacent residential areas and meet the standards noted in the zoning ordinance. Any storage developments will also need site-plan approval as outlined in the ordinance.

Two members of the public were present at the Aug. 26 hearing, including Roger West, who’s recently purchased a property and is interested in converting it to self-storage, Cheshareck told the source. No one opposed the project. Committee member Jim Jennings, who’s in the self-storage business, abstained from voting to avoid a conflict of interest, the source reported.

The zoning amendment will be discussed at the Sept. 8 city-council meeting.

Public Storage Inc., a self-storage real estate investment trust (REIT), opened a new facility this week in Miami. Under development for more than two years, the newly constructed property at 8477 S.W. 40th St. includes six stories and 922 units. The energy-efficient facility uses a climate-control system that conserves electricity by pulling in less outside air for cooling, according to a company press release. The design is expected to dramatically lower the building’s energy consumption, the release stated.

The facility is on a six-lane, east-west thoroughfare known as Bird Road, near Florida International University and the University of Miami. It’s in a commercial corridor that’s well-known for its restaurants and retail, the release stated. It’s also close to single and multi-family residences, and a few blocks from the 275-acre Tropical Park.

Earlier this month, Public Storage opened a new facility in Denver in the Stapleton Business Center, part of Denver’s largest neighborhood.

Based in Glendale, Calif., Public Storage has interests in 2,262 self-storage facilities in 38 states, with approximately 147 million net rentable square feet. Operating under the Shurgard brand name, the company also has 216 facilities in seven European countries, with approximately 11 million net rentable square feet.

By Hugh D. Odom

Self-storage owners across North America are constantly being asked to make choices regarding a new or existing cell-tower lease. The problem is they’re making mistakes based on bad information, lack of representation or a combination of both. Following are four common errors facility owners make in regard to a cell-tower agreement—and advice for avoiding them.

Mistake 1: Looking for ‘Market Rent’

The most common mistake self-storage operators make when asked to enter a new cell-tower lease or extend or modify an existing one is attempting to track down the elusive “market rent” figures in determining how much rent to charge. There’s no such thing as market rent when it comes to these types of leases. If a storage owner attempts to use comparable cell-tower rents, he’ll be using information that’ll only cause him to perpetuate under-valued rents that have been paid by cell-tower companies over the last 30 years.

Storage operators need to understand the value of a cell-tower lease isn’t based on what others have agreed to in the past but on the utility of their individual cell-tower site. Be less concerned about what others are getting paid and more about the value of your own property. This’ll be the key in determining how much rent should be collected now and into the future.

Mistake 2: Having a Short-Term Vision Instead of a Long-Term Strategy

A cell-tower company will try get a property owner to agree to a rent amount with a nominal rent escalator that hopefully keeps up with inflation. In doing this, it has achieved its goal, as it will have fixed the expense of leasing your land no matter how valuable the cell-tower site becomes.

Focus on structuring a lease that will allow you to capture a portion of the value the cell-tower company derives from your land. View this lease as a utility transaction, not a real estate transaction. This can be difficult due to unfamiliarity with the telecom industry and an attempt at trying to forecast how a cell-tower company will derive revenue in the future. Many may think this refers only to subtenant rents, but a cell-tower site may greatly increase in value without another wireless carrier even using the site.

In addition, before you move forward with any lease or revision, take a step back and make sure you understand the short and long-term impact on your total property, not just the area being used for the cell tower. The allure of easy money can lead to unintended consequences that can cost you greatly if you aren’t familiar with how the cell-tower company will try to enforce the lease.

Mistake 3: Selling a Lease for the Wrong Reasons

There are third-party companies contacting property owners these days to try and buy their cell-tower leases. These transactions are typically crafted as a simple one-time payment for a lease in exchange for a long-term or perpetual right to use your property.

These companies will try to entice you with the promise that they can add additional tenants to the existing cell tower on your property. Simply stated, they can’t. A third-party company asking to purchase your lease can’t add a single tenant to your tower. If a wireless carrier wants to lease space, it will have to contact the tower company, not you, and especially not a third-party company that only buys leases. Ask any lease-buyout company how it plans to add a tenant to the tower and back up any claim it makes with hard data.

Mistake 4: Believing the ‘Relocation Proclamation’

The ‘relocation proclamation’ is a nice way of saying threat is being used to get self-storage owners to enter agreements with terms that not only severely undervalue their sites but are commonly structured in ways that can negatively impact the value of an owner's property. How can you tell if a cell-tower company really has the power to relocate its equipment?

First, understand the capital the company has invested in your site. This not only includes the actual tower structure but any funds for access roads, utility support and permitting costs, which are becoming more expensive. The more a cell-tower company has vested in a site, the better it is for you.

Second, changing technology is often a reason given by cell-tower companies as to why it may need to relocate. This can actually be beneficial to self-storage owners. To relocate a tower, the company needs an alternative location that can serve the wireless network of all of the tower’s tenants. This is no easy task and, more important, not something a wireless carrier likes to do. Even moving a quarter of a mile from the current site can be problematic. Ultimately, tower relocation comes down to how much it will cost the cell-tower company to leave a site.

Understanding the true value of any tower site is the first step in getting the best possible agreement. Know the value of your property to the cell-tower company and avoid the four errors outlined above to get the most out of an existing or potential lease.

Hugh D. Odom is the president of Vertical Consultants, a telecommunications-consulting firm currently working with approximately 2,500 self-storage facilities across North America. The company achieved a 343 percent average immediate increase in rents for clients in 2014. Mr. Odom has more than 20 years of legal and telecom experience, including representing AT&T as an attorney for more than 10 years. For more information, call 877.456.7552; visit www.vertical-consultants.com.

By Leeann Fleming

Have you ever driven by a rundown building and thought it had the potential to be a great self-storage facility? Or maybe you’ve noticed an empty retail space in a high-traffic area and wondered if it could be transformed into a beautiful storage site.

Due to land constraints in many communities, it’s become increasingly popular for self-storage developers and owners to convert vacant buildings to their desired use. If demand and economic conditions are appropriate in a particular market, the conversion of an existing building can be the right solution for someone who’s looking to build his next storage project.

Location is always an important factor for a successful self-storage development, and many vacant structures are in infill areas on the cusp of transformation. These former retail, industrial and warehouse buildings often have adequate traffic counts, exposure along highways or main streets, and favorable demographics. If you’re considering a conversion project, here’s advice on assessing potential sites and designing the facility for success.

Site Assessment

Once you’ve decided to move forward with a conversion rather than build a new facility, it’s critical to conduct a feasibility study to determine if this type of development is applicable to and appropriate for the market and existing structure. The common denominators for a successful development are local analysis and rational decision-making, which hinges on the recognition of market conditions. You also need to carefully asses the condition of the building in question and confirm the location is strong in current and future demographics.

The feasibility study should determine if a conversion to storage makes financial sense or warrants additional due diligence. This type of project often costs less than ground-up development because many of the structural necessities, such as elevators, HVAC systems, lighting and sprinkler systems, are already in place.

While the process will vary by project, most conversions take about four to six months. This is usually a shorter time period than that of new construction because much of the infrastructure already exists.

Facility Design

Design is usually the one of the most exhilarating parts of the conversion process. It offers you the opportunity to move your vision to reality—your space, your style. It’s imperative to build a safe and secure facility that’s welcoming, clean and comforting. Perception, first impressions and convenience are also important aspects, as self-storage is now seen as a retail service.

The flow and feel of the facility is the most critical design characteristic. Unit mix should be driven by area demographics and density, not the “most squares” that will fit in the space. When designing your layout, keep these guidelines in mind:

• Larger units should be closer to the access point.
• The maximum walking distance for tenants should be 180 feet, with no more than two turns.
• Avoid putting large units back-to-back in open areas.
• Unit walls perpendicular to the hallway should be installed first.
• Maximize efficiency as much as practicable.
• Avoid single-loaded perimeter hallways whenever possible.
• Consider automatic doors at a minimum of 4 feet wide at the main access points.
• Add carts near entryways to assist tenants with their move.

Also pay great attention to the design of your front office. The space should be a minimum of 500 square feet, inviting and furnished with finishes that reflect your brand. Here are some things to consider:

• Add a seating area.
• Offer free Wi-Fi.
• Have a designated area stocked with beverages and snacks.
• Consider adding meeting-room space that can be rented to tenants and other community members.
• Include a spacious restroom.
• Install flat-panel TV screens that display live security footage and a site map.

To differentiate your facility from competition, you may want to consider incorporating additional amenities that will generate revenue. These include climate control, stackable lockers, wine storage, and relocatable storage units for vacant parking areas or easements where traditional storage structures can’t be built.

As with any self-storage project, conversion or otherwise, you must comply with the Americans With Disabilities Act (ADA). All facilities must allot a specific number of units as ADA-accessible. Properties with less than 200 units should dedicate 5 percent of their total units. Those with more than 200 must designate 10 units plus another 2 percent of the total. It’s best to disperse these among classes of unit types.

To be compliant, the units will need to be outfitted with the appropriate door, latch and handle pulls as well as signage. There are also ADA guidelines for accessibility routes, bathrooms, drinking fountains (if applicable), elevators, entrances, parking and stairs.

In the real estate market, things are always changing. One quadrant of a market grows while another remains stagnant. Retail areas shift. Former non-residential areas become residential. Regardless of local macro trends, demand and use can change due to economic, functional and physical forces in a marketplace. The next time you see an empty building, forget what it used to be and think about what it could be. You just might find your next storage project.

Leeann Fleming is the marketing manager for Janus International Group LLC, which provides self-storage doors, hallway components, portable storage and mezzanine systems. Headquartered in Temple, Ga., Janus has eight U.S. locations as well as manufacturing facilities in Brazil, Mexico and the United Kingdom. It’s owned by Saw Mill Capital Partners LP, a New York-based private equity investment fund managed by Saw Mill Capital LLC. For more information, call 770.562.2850; visit www.janusintl.com.

Update 8/28/15 – SDSS was named the “Best Storage Facility” by “Union Tribune” readers in this year’s poll, beating out nine other nominees. It’s the third consecutive year the company has made the list since the storage category was added in 2013. SDSS finished in second place the last two years.

Voting took place on the newspaper’s website from May 31 through June 29. Participants could vote once per day in 174 categories. The winners were announced on August 23.

“We could not be more grateful for the support from our tenants, friends and community members,” Aston said. “We dedicate our time to make sure our tenants have the most positive experience with us. Customer service is our highest priority. We strive to provide clean, affordable units, and to take good care of our people. Thank you to everyone who voted for us and for this tremendous honor. You inspire us to continue to better serve you.”

The newspaper poll began in 2009 as a way for community members to recognize favorite personalities and businesses, according to an SDSS press release. San Diegans vote on everything from the best bar and restaurant to best beach and golf course, as well as favorite hairstylist, radio personality and bartender.

“San Diego Self Storage competes with nationally recognized storage facilities. We are proud of our ties to the San Diego community and our support of local, charitable organizations. We truly care about our hometown and hope that by remaining locally owned and operated, we express our deep commitment to San Diego,” Aston said.

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10/6/14 – For the second consecutive year, San Diego Self Storage (SDSS) was among the top two self-storage operators selected by readers of the “San Diego Union-Tribune” in the newspaper’s annual “San Diego’s Best” poll. SDSS is listed second behind S.D. Storage, which operates two locations in the city. SDSS was also recently named the top self-storage operator in San Diego County by the “San Diego Business Journal,” company officials said in a press release.

“San Diego Self Storage is once again honored to be the recipient of this prestigious award, in which San Diegans recognize the quality service [SDSS] provides the general public on an ongoing basis,” said J. Terry Aston, managing partner. “Our corporate philosophy embraces the notion that self-storage is not only a necessity for those in transition but also an integral service that we provide to our active military service men and women who are deployed into remote locations throughout the world to defend our country, as well as elderly citizens who wish to downsize. We’re tremendously grateful to the San Diego community for their support throughout the 42 years that we have been in operation.”

Aston said the company’s dedication to philanthropic causes has helped it connect with customers and the local community.

Rounding out the top five in the “Union-Tribune” reader poll were A-1 Self Storage at No. 3, Public Storage Inc. at No. 4 and Morena Storage at No. 5. S.D. Storage is operated by Stor’em Self Storage, which has 13 locations in California and Utah.

Founded in 1972, SSDS has a network of 18 self-storage facilities in San Diego County and additional Southern California facilities in Los Angeles, Orange and Riverside counties. It also has a presence in Northern California. The company is locally owned and operated.

Inside Self-Storage (ISS) has published a new online image gallery, "Darlings of Design Gallery 2015: A Visual Showcase of Superior Self-Storage Exteriors.” The free presentation provides viewers with a visual tour of self-storage exteriors including new building techniques and materials, architecture elements, innovative site layout, and other design components for properties of all sizes. Provided by owners, developers and management companies, the images showcase examples of today’s superior site exteriors.

The gallery can be viewed at www.insideselfstorage.com/galleries. Past design galleries, as well as galleries on other storage topics, can be viewed through the same page. ISS will publish a follow-up image gallery highlighting facility interiors, focusing on management offices and retail centers, in October.

For nearly 25 years, ISS has provided informational resources for the self-storage industry. Its educational offerings include ISS magazine, the annual ISS Expo, an extensive website, the ISS Store, and Self-Storage Talk, the industry’s largest online community.