While the current credit crisis has significantly limited self-storage sales transaction volume in 2008, consolidation amongst private and public operators will certainly continue. The highly fragmented nature of the industry, coupled with the benefits of economies-of-scale, continues to point towards acquisition-driven strategies over the long term.

Institutional capital will continue to be attracted to the low employee count required to operate properties, but dynamic management is still necessary to achieve desired investment returns—especially given the relatively management-intensive nature of self-storage. Investors may have holding periods ranging from as little as three to seven years, placing added significance on the performance of individual property managers throughout the duration of the investment. As a result, the relationship between an owner and property manager can play a major role in the execution of a successful disposition strategy.

Understanding The Issues

Self-storage owners allocate time and capital attempting to add value to a single asset or portfolio. Part of this time and capital is directed towards the property managers, who play an integral role in enhancing revenues and maximizing value. Investors deciding to sell an asset must choose between immediately informing property managers of their intent-to-sell or taking a need-to-know approach. Owners fear either option may have negative ramifications. Owners immediately informing managers of their intent-to-sell are concerned that managers may lose enthusiasm or resign during the sale. Alternatively, owners may instead initially attempt to conceal the intent-to-sell, running the risk of alienating the manager later in the sale process.

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