Closing the Right Deal with The Help of Self-Storage Brokerage

You might say that builders, vendors, operators, management companies, you name it — everyone in self-storage has been riding a wave of success since the last couple of economic downturns. While it’s encouraging to see everyone making money, growing their businesses, and living the American dream — there are still caveats to entering into and engaging within this industry. As with any industry, regardless of the overall success of it, you can enter into good and not-so-great deals. The key is to work with a self-storage brokerage that will help you close the right deal for you.  

With this new level of attention on the industry, a plethora of new entrants (and existing operators) went to work on building storage on every piece of land they could get their hands on. Although it’s not great for some buyers who are in those positions of overpaying, it provides a ton of opportunity when this next economic downturn comes, because there are many people who can’t afford their sites anymore. There are going to be private equity (PE) firms that overpaid for assets and now have to sell because they’re underwater. This creates a new buyer market for other people in the business and shakes out people who probably, maybe, should have made better decisions the first go-around.

That is why it is always a strong decision to engage a broker when taking on a new project — whether building, buying, or selling. The right broker will have their fingers on the pulse of the market, and they can help you make intelligent and informed decisions about your business. 

Knowing the Players in Self-Storage 

Whether you are in the storage business domestically or abroad, the larger players in the storage industry are the private equity groups, family offices, and the big real estate investment trusts (REITs). Private equity is an alternative investment class and consists of capital that is not listed on a public market. Private equity is composed of funds and investors that directly invest in private companies or that engage in buyouts of public companies. For simplicity’s sake, there are a lot of private equity groups in the storage arena that have gone out into the world to raise lots of money for the specific purpose of buying up storage facilities.

A family office is a privately held company that handles investment management and wealth management for a wealthy family, generally one with over $100 million in investable assets, with the goal being to effectively grow and transfer wealth across generations. Both private equity and family offices have made a large splash in the storage industry over the past decade, buying up billions of dollars worth of self-storage facilities. These groups are the main competitors, from a buying standpoint to the REITs.

The big REITs are the companies you have probably seen on every corner in America are Public Storage, Extra Space, CubeSmart, Life Storage, and the like. These are all publicly traded companies that have very expansive holdings in the storage industry throughout the country and are also the largest management companies in the United States. When it comes to selling your facility, there will most likely be one of these three types of buyers.

What This Means for You

At the end of the day, any buyer is looking for value to create in a deal, whether through value creation or simply the appreciation of the asset over time. Yes, some may have different pricing expectations (e.g., whether they’re going to pay a 5.50 percent or a 7.00 percent cap rate) and expectations about the overall stability of a project, but they want to know, when they purchase a facility or a portfolio, what they can do to increase the value of those assets.

Some buyers want stabilized cash flow and are completely fine clipping off a 5 percent return annually, whereas others want the stabilized mom-and-pop site with the massive expansion piece in a growing tertiary market. Others want to buy dirt and build for themselves or acquire a site at certificate of occupancy (a new build), and some even love buying lease-up deals. 

No matter what stage your facility is at in its life cycle, there is a buyer for your property – there is a deal that is right for you. 

What You Can Do to Close the Right Deal When Selling 

In addition to leveraging an experienced self-storage brokerage partner, there are several things you can do when looking to sell a current facility in order to pursue other things.  

First and foremost, make your facility presentable. Clean up your facility, both physically and operationally. Physically, remove any trash, debris, extra doors, broken-down cars, and other items that may look the facility unpresentable. Think about showing your facility like showing your house to a prospective buyer: you want it to look perfect! In addition to putting some lipstick on the pig (lighting, landscaping, touch-up painting), fix any deferred maintenance issues on site: falling gutters, broken doors, and so on. The reason is that buyers may use those items to come back to you in order to negotiate your asking price down, so you might as well fix them while you have say and control over the price point for those repairs.

Operationally, you’ll need to have three years of financial statements and tax returns. Make sure your finances are well organized and easily accessible. Take this time to double and triple check for accuracy (both income and expenses), and that your software management reports align with your bank deposits. Also include receipts and notes for any out-of-the-ordinary expenses (e.g., capital expenditures and large purchases for your business). In addition to the financial aspects of your business, ensure that your leases are up to date with your customers and reflect your current customer base and that your facility is following all local guidelines and regulations.

With a site ready for sale and an understanding of the buyer pool at large, it’s time for an experienced self-storage brokerage firm like, Lindsey Self Storage Group, to go to work for you. The right self-storage broker will line up the right match for owners and their properties – ultimately helping you close the right deal for you. To learn more about how to make the right buying or selling deal, check out my latest book!