#1 Physical Land Data: Topography? Wetlands? Flood plains? Easements? Environmental concerns? Shape? Acres? I get a call a week from developers saying they have a perfect property. But could only describe one and a half of these Land data points.
#2 Zoning Data: Zoned for self-storage? Yard Setbacks, Impervious land coverage? Design requirements? Maximum building height. Many towns have low building and pavement coverage, which will require you to have double the land. We recently had a project where the City had a $180,000 fee just to open a business in Town. Zoning can make or break a property.
#3 Competition Data: Location? Size? Quality? Rental rates? Occupancy? Year built? Pipeline facilities? Type of ownership? Rates & occupancy moving up or down? This info is often available online as a starting point, and then field confirmation is always required. Too often, I hear the site is perfect because there are only 2 competing facilities, but when we check, there are six.
#4 Self Storage Data: Easy access? Visible from the street? Main road with suitable traffic? Demand for new self-storage? It used to take 40 hours to figure this one out, but now with technology, we can get the basics in 1 hour.
#5 Fake Data: There has always been Fake Data, but now it is more prevalent, and now there are new kinds of Fake Data. 5 years ago, when sellers and their agents were preparing the offering memorandum, it projected a significant increase in occupancy, rental rate & fees. While that was partially true back then, it presently is not in many locations. One of my favorites is when no expenses are included for management and technology because the owner runs the facility. Occupancy must be checked in the field. Often, true occupancy is inflated due to the large discounts and large numbers of tenants not paying their rent. Rents & late clients must be checked in the field. This includes review of management reports and, if any concerns, reviewing individual leases and unit locks.
The best way to counter this Fake Data is to get several management reports (including income taxes for the last 2 years) and have a self-storage feasibility expert do an in-person review door by door. And then provide a full feasibility report that includes a P & L for the next 3 years. The offering is not going to tell you about minor or major repairs. Have you read the Offering Memorandum disclosure? It is clearly telling you to do your own research, and they are not responsible for errors or emissions.
The newest Fake News is fake rental rates. Many REIT’s, larger operators, and even some small operators have gone crazy with teaser rates. They offer unbelievably low rates, only to double them in 2 months and then double again in 8 more months. It sounds unethical, therefore hard to believe, but it is true. I have experienced this firsthand, more than a couple of times. I rented a unit a 10 x 10 climate control unit for $65. I asked how long the rate was good for, and she said she did not know. In 15 days, after moving in, I got a letter stating that my rent was going up by $135 starting in Month 3. At 10 months, my rent was increased to over $200/month.
We sold a couple of facilities to REITs, where we watched online rents drop between 100 and 150 percent and more.
The problem with this Fake News is threefold:
1) Since they are not letting customers know about the monumental rate hikes, it makes the industry look bad, and it appears this is going to lead to more regulatory oversight and new statutes for the industry.
2) It is very difficult to determine the current “effective rate” for the life of a customer. So, it takes more effort and expertise to prepare a feasibility or P & L with the real “effective rates”.
3) It was a monumental step forward when Radius Plus and others provided facility pipeline data. It saved a lot of time, but more importantly, pipeline facilities could be taken into consideration when analyzing a location. Now, given the economy and the realization that you can’t build a successful self-storage anywhere, some pipeline facilities that are never going to be built are now Fake News.
We recently reviewed a site with 6 pipeline facilities and personally checked each one. One had a coming soon sign for another use, and one was under construction for another use. Again, online data is a savings grace must be checked in the field. The removal of one pipeline facility can change a location from a D or C site to a B or an A site.
To Your Success,
Marc Goodin,
Ps If you’re looking for a property in a given area, you may find a gem by calling all the pipeline facilities.
As CEO of Storage Authority Franchising, Marc Goodin shares his passion, expertise, and unconventional wisdom with busy professionals to help them develop their own self-storage while they continue their careers. He owns 3 self-storage facilities that he designed, built, and manages. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales, and operations questions. His best-selling self-storage books are available at Amazon.
Marc Goodin
860-860-6764