Retail News Blog

Kenneth M. Fox, Cohen Financial

(415) 591-3111

Due to Wall Street exiting, the financing arena for commercial real estate has created a huge void to be filled by banks and life insurance companies. Since capital is at a premium, lenders have become significantly more selective with the sponsors they elect to do business with and more conservative on their underwriting of commercial real estate. In today’s lending environment, leverage on self-storage is typically in the 65% to 70% range with a 20 to 25 year amortization schedule and a debt service coverage ratio of between 1.20x to 1.30x on a trailing 12 month basis. We are having tremendous success with larger owner operators with significant experience and financial wherewithal with our life company and strong banking relationships on a national basis.

James Elmore, Tavernier Capital Partners, LLC

(561) 998-8300

 As the credit crunch continues to impact self-storage lending, one of the biggest risks right now facing a self-storage owner is the ability to refinance. Great rates with unbeatable terms are now a thing of the past and self-storage owners have got to reposition themselves in this new financial environment. Owners must be fully aware of impending maturities and now more than ever allow themselves plenty of time to find financing for their facilities that are coming due. As lenders continue to preserve the cash they have, seeking loan options sooner rather than later is crucial and will allow an owner to fully assess all financing alternatives and possibilities. With the conduit market being no-existent, borrower’s should begin with their local banking relationships and extend their search to include regional commercial banks and life insurance companies. These lender’s criteria seem to get more stringent as the months pass with quality and leverage being heavily scrutinized. Even your favorite local bank might not be in the market when it comes to refinancing your current loan. The best advice I can give is to start early and identify as many lenders as possible up front that will give you a couple of different options and provide backstops in case potential deals fall through the cracks.

Shane Weeks, Capmark Finance Inc.

(205) 991-6700

 The conduits are gone. Regional and local banks, credit unions and life companies are where the money is at. Also underwriting has tightened and they are looking closely at the sponsor. Only a handful of lenders are doing non recourse loans. Regarding financing in the upcoming year – you can still get recourse financing at 65%. 3, 5 & 7 year terms and 25-30 amortization are available.

Chuck Mills, CEM Capital

(949) 724-1404

With the single-family market struggling, how do you think this will affect the self-storage industry?

 The self-storage industry in difficult economic times historically has increased in revenue and occupancy. In 2009, we have seen the same monthly trends; but to increase revenue and occupancy we must improve every skill; customer service, phone etiquette, collections, marketing and maintenance of the properties. Along with improved skills; we have to offer specials that attract the struggling families. The current specials for the new tenants range from 3 months 1/2 off to rent one get a second unit for free for 6 months. All current tenants can pay for three months and get the 4th month free. If any tenant asks for a discount we give 10% no questions asked and with a smile on our face. The managers must be in continual training on customer service, collections, reporting and most importantly cleanliness of the property. Everything counts to gain the tenant in a struggling market. Limited dollars means more price shopping and good customer service comparison for the single family looking for storage.

Daniel “Skip” Elefante, Platinum Storage Group

(949) 770-2232

 The difficulties with the single family market translates to difficulty in the self-storage market with respect to the ability of self-storage owners to obtain financing for their project whether it is to take out an existing construction loan coming due, obtain a loan in order to acquire an existing facility, or procure a construction loan. The popular wisdom and the media have been playing on the historical assumption that when people lose their homes they automatically move into a small apartment and store their excess belongings in a storage facility. The driver in this case has more to do with that individual losing his/her job and thus their home. If that is the case, it becomes difficult to find the funds to pay rent on a storage facility as well. The entire process, in my opinion, is driven by job losses that translate into home foreclosures that result in banks not having funds to loan to self-storage operators. Until we can restore the job markets I do not see the banks recovering and being able or willing to return to the business of lending to self-storage owner/operators.

Kenneth E. Nitzberg, Devon Self Storage

(510) 450-9204