Is it Time for you to sell your Self Storage Facility?

Posted on Dec 30 2010 - 10:48am by Tony Gonzalez

Starting a business is generally one of the proudest moments of people’s lives. It is the chance to see a dream realized and become something more than just thoughts and ideas. It is also a great way to take control of the financial well-being of you and your family by becoming your own boss. The feeling of success when your business thrives is unparalleled.

However, there does come a time when one should sell their dream and get out of the business. The trick is in figuring out when is the best time for you to do that.

A quick search on the internet shows that there are number of companies willing to pay top dollar to get into or grow within the self storage industry. Recently an Austin-based company, Virtus, spent $50 million to acquire and renovate 20 facilities. That is just the beginning for them though. The company has announced intentions to spend upwards of acquiring self storage facilities in 2011.

 “In times of fiscal decline, the self-storage market has demonstrated resilience, while also posting solid gains throughout economic resurgence,” said Terrell Gates, CEO and founder.

A number of other companies have been busy buying up facilities across the nation and spending a lot of money in the process. SSTI, a California based REIT, recently purchased another facility in the Las Vegas area, a 540-unit one, for close to $7 million. A pair of facilities went for $6.5 and $6.75 million in Hawaii over the last few months. Two in Southern California recently sold for $26 million.

With buyers willing to spend that kind of money on a self storage unit, owners have to be wondering if it is time for them to get out of the business and sell to one of the larger corporations. The problem for many can be in figuring out how much their unit is really worth though.

As credit becomes more available once again and interest rates still pretty low, it is a perfect time for companies to make acquisitions. Unlike times in the past when buyers where more willing to overbid for properties, in light of the recent recession most are being a lot more responsible with their money. This does not mean that sellers are getting cheated. In fact most are saying that they feel the end price was more than fair.

A valuation analysis can help you not only see what your self storage facility could be worth, but will also give you a good picture of the financial health and stability of your company. Prospective buyers will be most interested in the capitalization rate which is essentially what a buyer can expect to see in cash flow coming into the business in respect to the price paid for it.

There has been some controversy over this practice since it is possible to manipulate expenses in a way that over inflates the rate. However, it remains one of the more reliable measures of a company’s current and future worth.


Sources Used:

Storage REIT Buys 540-Unit Downtown Facility.”; 29 December 2010.

Self-storage market tightens.”; 04 December 2010.

“Going to Market: Long-Range Planning Helps Self-Storage Sellers Build Value Prior to Sale.”; 16 December 2010.

“Virtus Real Estate Purchases 20 Self Storage Properties in 2010.”; 30 December 2010.

“Strategic Storage Trust buys 2 properties for $26 million.”; 20 December 2010.