THE SELF STORAGE INDUSTRY

The self storage industry was born in the 1960s to accommodate seasonal tourism and migrant worker storage needs.  Early developers, including Public Storage, built these projects thinking that over time a better use would come along and make the storage buildings obsolete.  Instead the industry exploded and evolved into a low cost alternative for business and personal storage.

Today the market remains extremely fragmented with the top four operators controlling only about 20% of the total space.  Approximately 70% of the facilities are owned and operated by a single owner.  Some owners elect to hire a professional self storage management company to run the day to day operations, but many live on site and manage the facility themselves.  Many of these owners are now reaching the end of their depreciation schedule and are opting for full retirement and selling the asset.

ADVANTAGES OF OWNING A SELF STORAGE FACILITY AS AN INVESTMENT

     A typical mature self storage property has approximately 600 tenants who pay an average of $80 per month on a month to month lease.  This chemistry provides income stability.  If a dozen tenants were to move out in one day, cash flow would hardly be affected.  Facilities average approximately 50 move ins and outs each month.

        Once a tenant decides to vacate, the manager broom sweeps the unit and re-rents it.  Tenant turnover cost is non-existent. 

      Most tenants are on a month to month contract.  Less than 5% will prepay beyond a couple of months.  Month to month contracts allow for rent increases when a particular size fills.  The rental income is constantly being pushed forward.

      Self storage has a very low failure rate.  When was the last time you saw a storage facility boarded up unlike that bank building down the street or the half-full strip center across town?

   It is estimated that less than 10% of the population have ever used storage.  Storage will become a need for many more people over time.

     The need for storage arises out changes in peoples lives.  Changes occur in both good and bad economic times making the storage industry recession resistant.

    There are many quality management companies that will operate the investment.  Each month you will receive a month end report and a check in the mail.

   Most importantly, self storage properties can achieve higher CAP rates (return on your investment) than other properties because:  1)  the product type is still misunderstood by most investors leaving the purchases to large operators who have higher return requirements for their Board of Directors; thus they pay less for the properties, 2)  many properties are run by non-aggressive owners who sacrifice income for a high occupancy number.  Post closing CAP rates can move 2% in a year in some cases, and 3)  month to month contracts allow for constant rent growth.

IDENTIFYING A SELF STORAGE FACILITY

You will be provided with an investment package that will include the following:

        Photos of the property

        An executive summary that will explore the community (micro and macro), traffic counts, income levels, home values, owners vs. renters, and the physical aspects of the property.  It will include both the pros and cons, and risks and opportunities associated with the investment.

        Area map and location map.

        A complete unit mix showing the number of spaces in each size category and a determination of whether the mix is a fit given the demographics surrounding the facility.

        A competition map and a comprehensive study of each competitor including their sizes, rates, operating hours etc.

        An investment concept showing anticipated income growth and expenses over a four year period with all the assumptions used to derive the Net Operating Income,

        A complete set of demographics in a 1,3 and 5 mile radius.

This information will be provided by an experienced team of self storage owners and managers.