Bonus: My Self Storage Business Plan
By Scott Meyers
Published 14th December 2010
Remember, this is the same business plan that I use to attract lenders and private investors to fund my deals:
Self Storage Gaining Noteriety in the Press
By Scott Meyers
Published 8th December 2010
Self Storage, what I consider to be the red headed step child to the real estate industry, is getting some pretty heavy press recently, and along with that press, Hollywood is getting in to the act. Two new shows are airing this winter on cable, both with storage as the central theme.
Auction Hunters follows two of the best storage auction prospectors in the business, Clinton “Ton” Jones and Allen Haff, in their quest to win auctions, acquire treasure and sell it for profit.
Storage Wars follows the adventures of auctioneers Dan and Laura Dotson as they sell the contents of storage lockers seized for non-payment of rental fees. The auctions are fast-paced and competitive. Some of the valuable items hidden in the seized property are astounding, but the professional buyers rarely know exactly what they are buying when they place their bids.
Yes, neither of them document the adventures of the owners of these facilities. Neither show really emphasizes the need to own your own storage facility, but one thing is for sure: the industry will benefit from this higher level of storage auction awareness. Why?
Every time someone abandons their unit in one of your facilities, you have to hold an auction. Whether you do a silent auction, a live auction, or other type of sale, you benefit more when more people are attending and bidding on the abandoned property. And what do they do with their new winnings? Well, if you run your auction right, they put their lock on the unit and start paying rent. Wouldn’t it be great to lose very little time in regaining your lost cash like that? More bidders means more opportunity to make this happen.
Check out the shows if you get a chance. They’re well done and pretty interesting.
Buy versus Build
By Scott Meyers
Published 8th December 2010
A great article from Extra Space Storage:
During the booming 1980s and 1990s and up until 2006, the most common path into the self storage business has been to build, however, the tides are beginning to change and from a financial standpoint, buying has become the safer bet.
There are several reasons why buying is an attractive route into the industry. It is a quick way to get into the business faster. By bypassing the development process, you can take over an existing operation fairly quickly. You will also be provided with records that show the financial track record of the business that will likely indicate the future success of the facility. Also, financing an existing company with a proven track record of net operating income is much easier than construction financing which is highly speculative.
During the era of excess, also known as the 1980s, housing growth was high, people were embracing consumerism and as a result storage space was in high demand. And when demand goes up, so does supply. Self storage facilities began being built at a rapid pace, peaking in 2006, but then tapering off. For 2010, less that 200 storage facilities are being built as numbers continue to decline.
If you decide to buy a storage business be prudent and do your homework. You may be buying someone else’s problems that are possibly too expensive to fix. Have a licensed inspector perform an inspection of the facility and be sure to verify all income and expense reports to determine the true net operating income.
Be savvy and choose a business with an ideal location along a freeway, thoroughfare or even close to a large, dense neighborhood. Buying a storage facility in a location with a high rate of development would earn a pat on the back from any real estate agent. An added consideration to buying is the option to expand and construct additional buildings once the money flow is solid enough. It combines the benefit of owning a financially successful property with the ability to create value through development.
Buying versus building equals very little risk. The real estate market is weak so investors are looking for higher returns on their investments. Class-A properties have held their values and are trading at about 8 percent. B and C facilities are not doing as well and are trading between 9 percent and 11 percent. It is true they bring in more offers, but fewer of the offers are qualified as they often involve first time buyers who face skeptical lenders.
In recent years, all four of the publicly traded real estate investment trusts (REITs) – Public Storage Inc., Extra Space Storage Inc., Sovran Self Storage Inc., and U-Store-It Trust – halted development in recent years.
New Funding Resource: BSC Group
By Scott Meyers
Published 2nd December 2010
The BSC Group, LLC and Quadrant Financial, Inc. (Quadrant) announced today that they have formed an alliance to deliver SBA & USDA B&I loans to the Self?Storage Industry. This powerful alliance has resulted in the creation of a unique and specialized platform designed to provide borrowers with access to the combined expertise of two premier industry professionals in a one?stop shop. The BSC Group is a nationally recognized financial & loan advisory firm with extensive experience working with self?storage. Quadrant Financial is an active, nationwide SBA Preferred Lender with specialization in the superior delivery of real estate financing through government sponsored loan programs. The BSC/Quadrant collaboration offers borrowers immediate access to both self?storage and SBA experts.
Quadrant President George Vredeveld commented “We are thrilled about the recent enhancements to the SBA program which allow for financing of self?storage and we quickly decided that we wanted to immediately add self-storage to our diversified product mix. Because we emphasize superior and rapid delivery coupled with common sense underwriting, we recognized the importance of aligning with self?storage experts and The BSC Group turned out to be the perfect fit. Their team is well?known and well?respected in the industry.”
Shawn Hill, Principal at the BSC Group, went on to say “SBA is the buzz of the self?storage industry right now. The opportunities are exciting and endless. Many lenders have expressed interest in jumping into this niche but the fact that 95% of SBA lenders close very few deals on an annual basis makes it important to find a lender that is an active, national SBA preferred lender with a real estate focus, is willing to be a leader in the Self?Storage asset class, and has a stream?lined process with a history of doing a high volume of transactions. Quadrant brings these attributes to the table. As a result, this alliance leverages our respective areas of specialization.”
The BSC Group
Based in Chicago, The BSC Group, LLC (www.thebscgroup.com) offers financial and loan advisory, mortgage brokerage and workout solutions to commercial real estate property owners and investors, with a special emphasis on the self-storage market. Through its capital source network, The BSC Group provides clients with access to debt and equity financing for commercial real estate investments nationwide. Its advisory solutions include helping clients establish realistic expectations of what the market can deliver, guidance on leveraging current property investments, and recommendations for financing packages that meet specific capital requirements.
Quadrant Financial, Inc.
Quadrant Financial, Inc. (www.quadrant?financial.com) is a subsidiary of First Chatham Bank (Savannah, GA) which lends nationally and is actively offering SBA 7a, SBA 504, USDA, and Conventional small business loans through a series of loan origination offices in many major U.S. markets. Quadrant is the 28th largest Small Business Administration (SBA) 7a lender in the country. The company’s primary focus is on the superior delivery of small business and government sponsored loan products. This singular focus on one core line of business has allowed Quadrant to become a premier business lender throughout the United States.
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