What Does the Future of Self Storage Hold?
The Inside Self-Storage (ISS) World Expo in Las Vegas this year was a hit. The best and brightest in the self-storage industry were there, exchanging ideas and reflecting on the market.
Michael Mele, senior vice president investments, was in attendance. He came back to share his thoughts on the conference — as well as on the current and future state of the market.
Q: What are the greatest opportunities for self-storage owners right now?
A: Right now, the greatest opportunity is in buying undermanaged facilities, especially for more “mom and pop” type assets that haven’t maximized marketing to promote their facilities.
Q: What are the greatest challenges that self-storage owners face in realizing those opportunities?
A: Getting comfortable with overpaying today’s number for a facility. Traditional buyers may have a harder time grasping the underwriting that demonstrates how their investments will pay off later through returns — such as additional land included in the sales price for a facility that will yield returns in the form of facility expansion.
Q: How are owners making use of the resources that Marcus & Millichap and The Mele Group offer to maximize their property values and, when selling, get the best price?
A: For our group, we have a strategic analysis program, commonly called the SA program. We provide an analysis of their facility on a quarterly to yearly basis, so they’re up to date with their position in the market. Marcus & Millichap allows us to have access to a lot of market data as a $1 billion company. They also offer assistance through MMCC.
In a way, we work as the voice of reason — we provide sound advice for owners in a world where other brokerage firms continue to tell owners to always “sell, sell, sell.” We advise to sell, buy, or hold based on our client’s best interest, not on an “always sell” principle.
Q: What successes in the self-storage industry did you learn about that you intend to replicate?
A: The most important success is that of a long-term relationship on both the buying and selling side. It’s important to understand their assets — and those assets’ upsides — and their needs. We have clients whom we’ve worked with for over ten years. We have helped some of these clients to accumulate a portfolio and then resell — to the tune of over $40 million.
A local buyer bought a facility for $2.5 million and valued their property at $4.75 million through our SA analysis. We assisted one client in purchasing a portfolio that sold for double years later. We build those and other relationships over time.