An interesting part of investing in self-storage is managing an asset through the various stages of its lifecycle. Great success may be achieved in purchasing value-add facilities—properties where the operations are significantly lacking. This can be a daunting task for a new buyer but are a lot of fun after you do it a couple times and reap significant rewards throughout the project lifecycle.

The lifecycle of a storage facility consists of four phases: acquisition, turnaround, stabilization, and disposition. Each phase has key tasks, that if executed correctly, will set you up for success during the next phase. Patience is key because as much as we’d all like to skip steps, doing so will come at a cost.

During the acquisition process, conduct feasibility on the facility and local market. If the market is promising based on your specific criteria, then the process may be moved forward by engaging in contract negotiations to purchase the facility. Once under contract, engage in thorough due diligence by examining the site conditions, operations, and financials as well as build the business plan for the facility. Decisions to be made during this process are site improvements, expansion potential and what to build, revenue targets, hold time, and capital stack, the level of funding for the project, how and when. This is the shortest of all phases and generally takes a few months.

Once you’ve acquired the property, the next phase is the turnaround. The first 90 days of owning a property are typically the most time intensive, and if completed right, allow a quick execution of an operational overhaul so that the property is on a gliding path to success. The first 90 days entail immediate transition of utilities, evaluating vendor contracts, rate adjustments, initial improvements to the physical condition of the facility, and ensuring legal compliance. During this time, expect turnover and friction at the property due to new policies, increased rates, and changes in management. Evaluate street rates for a property by increasing rates if a particular unit type has strong occupancy or lowering the rate should a unit type require movement towards higher occupancy. Once street rates are adjusted, look at the economic occupancy of the facility, occupancy of each unit type and then determine if rates need to be increased for existing customers. We look at market rates during this process; however, we are never afraid to lead the market if our demand is there. Initial improvements are key to a business plan for an operational value-add facility. Often these improvements are key to the customer experience at the facility as well as to ensure rentable units.

When a facility has been set on a glide path after 90 days of the initial turnover, focus on rebuilding the occupancy and rates at a facility. This is the stabilization phase. Our definition of a stabilized facility is 80 percent occupancy. During this time, efforts focus on marketing to get the right customers in the door at higher rates, as well as incremental price increases to continue closing the economic occupancy gap. Through this stable phase, constantly evaluate ROI for marketing and amenities offered at a facility. Streamline staffing costs and assign team members with additional responsibilities. In addition, ensure funding for the facility is at the most attractive interest rate. Lower your expense ratios and strengthen DSCR for a property. This is the time to also execute any additional revenue stream options as well as execute a potential facility expansion should the site and demand numbers allow. This is typically executed when a specific occupancy or revenue goal has been reached at the existing facility.

Throughout owning a facility, do not take your eye off the disposition of the asset. Ideally you want to start preparing for disposition of a property one year prior to your intended sale. Don’t be afraid to engage a broker who can evaluate your property financials and the overall facility condition to provide feedback on next steps to sell your property and at what price point. This is also the time to consider completing any outstanding capital expenditures or rate increases. Internally, ensure all paperwork and financials are in order by obtaining a trailing 12-month Profit and Loss Statement and Balance Sheet, ensure bank statements are separated from other properties you own and expenses are clearly identified. In addition to the financials, get all contacts and leases together in one place and be ready to pop open the hood on the facility to a potential buyer. When offers are made on the property, consider other factors besides only the highest offer. Ensure the buyer can obtain financing and determine the likelihood they can follow through on their commitment by reviewing past transactions. Consider timing of the transaction, see if the seller is open to any creative financing options such as seller financing that may also protect your financial position in the long run.

Managing the lifecycle of the asset is vitally important to maximizing performance and positioning to sell for the highest price. The lifecycle starts with the acquisition of the facility, and moves through a turnaround phase to stabilization. If you focus on the right things through each phase, when you get to the disposition, you’ll be sure to maximize the price you can sell for.

Scott Lewis is the co-founder and Chief Executive Officer of Spartan Investment Group, LLC (SIG). To date SIG operates over 5500 storage units, 200 RV pads, has completed $11M in development projects, has $115M more underway, and has raised over $42M in private equity.
As the CEO, Scott is responsible for the strategic direction of the company and ensuring it aligns with SIG’s mission to Improve Lives Through Real Estate. In addition to Spartan, Scott is also in the US Army Reserves and a combat Vet. Scott graduated from Michigan State University with degrees in Chemistry and Marketing, from Catholic University with a MS in Management, and from Georgetown University with a Certificate in Project Management.

Jackie Gibson is the Director of Asset Management for Spartan Investment Group, LLC. In this role, Jackie is leveraging her 10+ years of logistics, procurement, project management, and engagement experience to increase quality, profitability, and efficiency for SIG’s projects. Jackie graduated from Mercyhurst University with a bachelor’s degree in Hotel Restaurant and Institutional Management.


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