Self Storage Finance in the Australian Market Place

The self storage industry in Australia has grown to be in reach of most of Australia’s population. The paradox of Australian demographics is that despite the country’s enormous land area (7,692,024 square kilometres) and a modest population of 23.5 million people, Australia is actually one of the most urbanised populations in the world. 89% of Australia’s population live in urban areas and is ranked 17th on the ladder. It is mostly only beaten by city or island states such as Singapore, Bermuda, Hong Kong and Cayman Islands.

It is little wonder then that self storage has emerged and prospered so well in Australia. Globally, the self storage idea owes its origins to the entrepreneurs in the U.S.A.. Canada quickly followed with Australia being the third to embrace the concept. In Australia self storage began in 1973, when Neville Kennard (my Father) developed the first spaces in the Sydney suburb of Moorebank. Fast forward forty years and Australia boasts over 1,000 storage centres, with several major operators and numerous significant second-tier operators. The major operators and investors can be proud of their sophistication and investment skills and compare well with global peers.

Australia has just 2 REIT’s with self storage assets and only one pure self storage REIT. One REIT, Abacus Property Group, has the second largest self storage asset investment portfolio with 49 properties values at $395 million. Australia’s first self storage REIT was only born in December 2013, National Storage began with assets valued at $278 million some of which are leased, some wholly owned and some in a Joint Venture with Chicago based Heitman LLC. Since listing National and related entities has acquired 9 new storage centres.

The largest owner of self storage assets in Australia is Kennards Self Storage (owned and operated by the Authors family). Kennards is a privately owned family company with 82 storage centres currently trading, of which the company wholly owns 66 of them; with a total value exceeding $900 million.

KSS Article

Australian Self Storage Finance Climate
In the wake of the GST, foreign Banks left Australia and non-traditional lenders almost disappeared. Self Storage funding was left with four domestic Banks, and until 2012 only three had an appreciation and appetite for self storage finance. In 2012, ANZ joined NAB, Westpac and Commonwealth Bank to participate in financing the self storage sector. The additional competition was a pleasing development for self storage owners, but just for lenders remains a small field or lending competition.

Going-Concern Funding Pictures
The Banks have illustrated they have a much stronger appetite to lend to proven mature self storage centres than new development. The Banks will consider the cash flow, asset quality value and borrower track record in their assessment of a loan. Loans are typically limited to 50-55% of the asset value, with a covenant limit of 60%.

Interest cover ratio (interest as a proportion of EBITDA) is often the more meaningful borrowing constraint. The I.C.R. often imposed by Banks is 2 times or 2.5 times (i.e. annual EBITDA must not be less than 2.5 times annual interest expense). In respect of loan security, going-concern lending will typically be non-recourse to the borrower. The asset is the only security the Bank has recourse against. Loan margins are refunded to the Bank Swap Rate (BBSY or BBSW). Margins are in addition to the Swap Rate reset monthly, if on a floating interest rate.

New Development Lending
Australian Banks have proven much more cautious about funding new self storage development in the last few years. The Banks wear some scars from losses of misguided development and lending provided pre-GFC. They are very concerned about a proponent’s track record and backing. Loan to value ratio does not exceed 50%, so there is significant equity required. ICR is provided a step-up structure to enable rent-up without immediately defaulting, so hurdles must be met at 1, 2 and 3 year milestones. In addition, Banks will require additional security often in the form of personal guarantees.

Margins over the Bank Swap Rate are typically 220BPS to 300BPS for new project lending. It is clear the Banks have tightened their new project lending requirements in a wise attempt to avoid the errors of some pre-GFC self storage lending. Margins will depend on asset quality, ICR and borrower capacity and reputation. Margins range from 150BPS to 250BPS.

– See more at: http://www.kss.com.au/kblog/self-storage-finance-australia-market-place-4915#sthash.P7EvIErQ.dpuf

Sam Kennard5retouched
Sam Kennard
Managing Director – Kennards Self Storage

Sam has been leading the Family Business since late 2004. In that time Kennards Self Storage has grown from 16 locations to over 80. The company is an active and specialised developer of property, focussing on expanding the Kennards Self Storage portfolio in Australia and New Zealand. Today, Kennards Self Storage is the market leading Self Storage Brand and industry innovator and employs over 220 people in Australia and New Zealand. The company remains a privately owned and family run business.

The Big Picture

Let’s zoom out and use the PESTTG analysis. The PESTTG analysis is composed of Political, Economic, Societal, Technological, Mega Trends and Globalisation Driving Forces. They are dynamic and create and destroy opportunities constantly. The Driving Forces are connected and a change in one Driving Force will affect all the others. When looking at the PESTTG analysis you need to consider whether your mindset is in the central position focusing on the Organisation, or are you zooming out past the Market, past the Industry Critical Success Factors and into the Environment?

If you zoom out and look at the big picture, you can see the whole game. As with any game, if you can see the whole game, the likelihood of winning increases. Entrepreneurs do one more thing – they also zoom in, back to those small details that run the organisation, getting the details right using the Tools of Innovation.

Traditionally, most people in business are focused on their Organisation and they might ‘poke’ their heads up and look at the Market occasionally. Today when asked how their work is, everyone says, ‘busy’ – busy doing, busy fixing, busy, busy and busy. Entrepreneurs seem to stop and think and zoom. If you can zoom out and see the whole game, and your competitors can’t, who do you think will win? Remember business is only a game.

What you have to do is zoom out from your business ideas, zoom out from the Market, and take a look at the Environment. What are those Driving Forces that will act on your organisation or idea? What a PESTTG analysis is also doing is forcing you to stand back from your organisation, stand back from the market place and out into the Environment. Each Driving Force creates an Industry Critical Success Factor. Industry Critical Success Factors are those things that you need to meet or exceed in order to play the game. For example, a Critical Success Factor for a restaurant that sells alcohol is that it must be licensed in order to sell liquor to the public.

Political
The main political Driving Forces are focused on the rules and regulations in the
market place in which you are playing. Too many companies go into business without knowing all the rules. The main Critical Success Factor created by the political Driving Forces is your ability to comply with all the rules and regulations. So when you start to think about your business or organisation, ensure you can comply with all of the rules that govern your industry segment, and those rules that may come into effect.

The number-one competitor for any organisation is the government. A government representative can simply come along and say, ‘Hi, I’m from the government, we have decided that we are going to remove tariffs in your industry’ – which could have the unpleasant effect of wiping out your industry completely! If you want to play the game you must have an understanding of the government’s policy. Most government policy (and change of policy) is discussed prior for months and in some cases, years. A smart player will get ‘connected’ and move from a reactive position to be proactive and try to either
avoid or embrace the changes proposed by government a lot earlier than the competition.

To explain political Driving Forces more clearly we will look at a small restaurant.

The restaurant, which sells alcohol, has experienced, friendly and hard-working staff. However, they are not certified for the responsible serving of alcohol as prescribed by local government law. If a health inspector or a representative from the Liquor Licensing Commission were to come in and ask to see the licences and the bar staff did not have them, there is a good chance that, along with receiving a hefty fine, the restaurant won’t be selling any drinks that night, or for some time to come.

People are always puzzled when this happens, and business owners generally blame the government for not telling them the law. It is your responsibility to find out. Could you imagine playing a sport without knowing the rules – if you didn’t know the rules, you wouldn’t play and you certainly wouldn’t blame the referee for your ignorance of the rules. So find out the laws, ask your lawyer, ask your accountant to investigate them or go to your government’s business office and ask them.

Economic
Economic Driving Forces consist of gross domestic product (GDP), interest rates, disposable income, discretionary income and other key economic indicators. To understand the Economic Driving Forces you need to have an overall feel for the economy – is it up or is it down, flat or recovering, or is it about to burst? When the economy is doing well, you should try to compete on service or difference; when the economy is not doing that well you should probably compete on value, difference and then price. The Industry Critical
Success Factors created are concerned with the notion of Value, and more importantly, consumers’ notions of value. People, like Driving Forces are constantly changing, and so too is their notion of value. Now there are two sorts of Value.

Tangible Value is where you compete on price and Intangible Value is where you compete on service. Tangible value is fairly easy to understand. Simply put, it’s, ‘I’ll give you $1.20 for a can of soft drink.’ ‘I’ll give you money for that product.’

However, it is the intangible aspect of value that organisations try to compete on that allows them to hit the sustainable level. A great example of this is evident in brands. What do you value in a brand? People tend to love or hate brands – they give them personalities. Brands give customers a level of certainty; their expectations are managed, and in some cases brands give consumers a true feeling of belonging. The best way to visualise this is to think of the people who hang out at beaches and surf almost every day – do you think they would wear anything other than a surf label and risk being made fun of by their peers? Of course not – it’s tribal, and they want to belong. It is not just limited to physical products either. People continually go back to the same hotels, accountants, lawyers and other professional services because of the great service they receive.

The intangible value of a clothing label is the brand – the reason they charge $200 for a pair of jeans, even though the manufacturing and delivery of the product wouldn’t cost much more than $20. It is much easier to compete on the tangible value of your product – you simply drop your prices. However, you may not last long as you can only drop your prices so low. You may not have the cash reserves needed for a price war that the giants of your industry may have.

Although harder, competing on the intangible value of your product will allow you a greater competitive advantage than dropping prices ever could. Competing on the intangibles can also foster customer loyalty. And if a customer is loyal, they will tell their friends about you. If, however, you want to make your organisation a force to be reckoned with, combine great service with both Product and Process innovation.

Societal
Societal Driving Forces are all about fads and fashions, what’s hot and what’s not, what’s in and what’s out. This isn’t only about what people are wearing. It is also where people are eating, what they are reading, what they are listening to on the radio, what they are watching on television.

The Industry Critical Success Factors of Societal Driving Forces are all about setting the trends, fashions or fads or keeping up. There is nothing wrong with either of these two strategies. Both have their advantages and disadvantages.

An example of Societal Driving Forces can be seen when you enter most of the larger fast food restaurants. Society is moving towards a healthier lifestyle, and the fast food restaurants know this. Some fast food restaurants set the trend by introducing healthier options through their franchises, with their marketing focuses on the dietary benefits of their products over their competitors. The competitive reaction to this has been to introduce healthier options to their menus too.

Technological
Technological Driving Forces are all about faster, lighter and stronger or a convergence of these. The Industry Critical Success Factors of the technological Driving Forces are similar to those of Societal Driving Forces – either set the trend or follow it.

Consider mobile telephones as an example. When they first came out in the 1980s they were bulky, unattractive things. Over time they became smaller and smaller. As they became smaller more people took up the ‘new’ product. This increased uptake reduced the cost of the mobile phones and made the market much larger. Today mobile phones have evolved to a very different item from their original counterpart – they are now small, lightweight, durable, and in many social circles, a fashion item or even a status symbol

Mega Trends
Mega Trends are those things which, at large, society is doing. These include living longer, having an improved quality of life, adopting new age medicines and health practices (the wellness movement) and being more aware of security, both personally and nationally.

There has been heavy investment in bio and nanotechnology, along with a higher level of personal and national investment in ‘security’. So you can see that the Driving Forces are all connected – the Mega Trends in health have had an impact on the Driving Forces in technology, the security Mega Trends have had an impact on the Driving Forces of society.

You should look at the effect that the Mega Trends will have on your idea or organisation, and whether there is an opportunity beckoning.

Globalisation
Globalisation is a topic that upsets some people, though it is nothing new. If we take a look at the great civilisations throughout history and remember the Egyptians or the Romans, it is clear that globalisation has been going on for thousands of years. The three most successful globalists were the English, the Spanish and of course the French.

Still a little confused? Let’s look at what they did. They globalised – or colonised – the world. At the beginning they had boats, then they progressed to trains, then planes and today we have electrons. Globalisation is all about speed, making and changing things faster. Today we can surf the internet for a couple of minutes and learn what is for sale at a fish market anywhere in the world, and how much it will cost to purchase it.

We can then organise for it to be delivered to us wherever we choose – all in real-time, and we can be enjoying our somewhat less fresh fish from anywhere in the world within 24 hours. Where previously a nation used to rely on its armies and armaments to globalize, in recent decades it has been a nation’s economy, and its ability to lower trade barriers that have allowed certain countries to rise to power. Trade barriers are being lowered, and they are starting to trade with the rest of the world.

To determine the Industry Critical Success Factors of globalisation you need to have a look at your industry, and determine if you are in a segment or niche that is going to be impacted by a gate opening in a trade agreement with another country. If this is the case, keep in mind that a massive international competitor can enter the market and offload their products for a fraction of the cost that you can. If you are a small enterprise the biggest impact of globalisation is seen by the presence of the internet. The speed at which you can get information has changed the way that many industries operate.

The slightest change in any one of the Driving Forces can literally kill your organisation or make it irrelevant, or alternatively, can create a wonderful opportunity for those people who are alert and are looking outside their organisation. It is very much a butterfly effect, where a small change somewhere on the other side of the world can have an enormous effect on your idea or organisation.

If you are always aware of this situation, you have a greater chance of surviving and thriving in the market place. You need to figure out the Industry Critical Success Factors for your idea or opportunity.

You need to develop your own ‘radar’ to determine the trends influencing your ideas, to find out what’s going on, who’s doing what and when, as well as the other various effects of the Driving Forces. The more attuned you are to your environment, the greater your level of success will be in any current and future ventures. You can develop your radar by keeping abreast of local, national and international media publications and broadcasts. Also by subscribing to industry newsletters and expanding your personal and business networks.

Another activity to remember is keeping your radar in tune. Too many organisations don’t spend enough time staying in tune. Would you take a raincoat to work every day because you watched a weather report six months ago that said it was going to rain?

Of course not. Like the weather, the Driving Forces are continually changing, and you have to make sure that you are keeping in tune with them.

So what? – What are the Industry Critical Success Factors for the Driving Forces that will affect your idea or organisation today

marcuspowe
Dr Marcus Powe
Marcus is the Entrepreneur in Residence at Melbourne’s RMIT University and has been awarded Australia’s Best Entrepreneurial Educator. He has worked with 1500 organisation, including The Cancer Council, Australia Industry Group, Red Cross and The Pharmacy Guild, and specialises in growth for profit and non-profit organisations in turbulent market places.

Landing Pages 101

A Landing Page, sometimes called a destination page, is the web page that visitors arrive at after they click the link on a search engine results page. A landing page can be the first page of a website that was advertised on the search engine results page, or from one of the natural results from the search query.

The best landing pages are like full-page ads that set the mood to gain new customers. Their focus is on getting every visitor to start down the sales funnel. Besides being utilized for your Google AdWords and banner ad placements, this strategy can also applied to social media campaigns.

Someone looking for self storage who clicks on your social-shared link is motivated to find the perfect place to store. This is your opportunity to convince them to share contact information and consider making a booking.

There are two types of landing pages, transactional and reference pages. Transactional pages are landing pages that encourage a visitor to complete a transaction of some kind, such as filling out a form, interacting with objects on the page, or having some type of reaction occur.

A reference landing page provides a visitor who has clicked on a link with information of some type. This information can include text, images, graphics, sounds, links, or other elements. The goal of these two types of landing pages is the same, to make the visitor a conversion, meaning a potential or new client.

darren-p-vowles
Darren Vowles
Reach Local

KNOW NOW AND MAKE RECORDS MANAGEMENT DECISIONS FASTER WITH O’NEIL SOFTWARE’S oneilMobile™

Irvine, CA – If you are a record centre customer, the more you know about your business, the more effectively you can respond to opportunities, or concerns. But often, just knowing isn’t enough. When you know is equally as important as what you know.

O’Neil Software, Inc., a provider of technology solutions for commercial and corporate records management for over 30 years, recently introduced their oneilMobile, an Android application designed for smartphones and tablets. It allows record centre customers to immediately search for and view the status of web orders and look up data on individual items stored in facilities utilizing O’Neil Software’s RS-SQL® Version 4.07 system. oneilMobile requires Android 4.03 (ICS MR1) or higher.

When the application launches, by default it automatically searches for all orders placed in the last 72 hours and notifies users if none are found. The default can be changed once additional searches have been created and saved. Using oneilMobile, users can search fields such as Saved Search, Tracking #, Batch #, Order Status, Ordered By, Ordered Date, Requestor, Service Priority, Account and Saved Searches. It’s as simple as tapping the field, typing in the criteria and then pressing the Search button. Under some fields, several preset options are available. Users can also create a search with multiple fields, then save the search for use again in the future. Once the search is complete, basic information regarding web orders displays on the screen. A simple swipe up and down, or left or right enables users to view the order and web order details, if desired. Users can also sort orders that they’ve loaded. By default, orders with higher tracking numbers will be displayed first. oneilMobile also allows users to look up individual items either by typing the item code, or scanning the item’s barcode, then tapping the Search button. Item information is displayed including contents, description and contained items.

David Holt, O’Neil’s Chief Executive Officer (CEO) notes: “This useful, but simple application for smartphones and tablets is an early demonstration of O’Neil’s commitment to these ubiquitous platforms as interfaces for collecting and transmitting records management information. Records center staff and customers will find the oneilMobile technology and the functionality it will provide for years to come a worthy successor to O’Neil’s award-winning RSMobile®.”

About O’Neil Software
O’Neil is also known as the industry pioneer for barcode tracking, portable printers, wireless handhelds and web technology. The company provides worldwide coverage, with offices in California, Florida, United Kingdom and Australia. For more information, visit their website at www.oneilsoft.com.

Chris Spisto, 949-458-1234
marketing@oneilsoft.com

Packing your Storage Space

  • Place those items that you need to access often in the front of the unit.
  • Leave a small space around the perimeter of your storage unit to aid circulation.
  • Look Up!, Utilise all of the space available to you, including the height.
  • Stack the lighter boxes on top of the heavier boxes.
  • Don’t over-pack cartons or they will be too hard to lift.
  • If tables won’t disassemble, place a mat or protective plastic on the ground and lay the tabletop face down on the floor with the legs pointing up.
  • Cover stuffed furniture with cardboard, blankets or plastic covers to protect against dust.
  • Don’t place heavy or sharp objects on top of upholstered furniture.
  • Never lay paintings or mirrors flat. Ensure they are wrapped or placed in proper picture/mirror cartons.
  • To ensure safe storage: Do not store anything combustible (i.e. paint thinner, gasoline, solvents, paint, etc.).
  • Do not store any living things (including plants), or perishable goods (especially foodstuffs).
  • Empty petrol from mowers, whipper-snippers, etc.
  • Ensure gas bottles are empty and BBQ or cooking surfaces are clean.

 

1.5 metre by 1.5 metre unit

Suitable for a large room of belongings.

1.5 metre  by 3 metre unit

Suitable for 2-3 rooms worth of belongings.

Could store the entire contents of a small one bedroom apartment.

3 metre by 3 metre unit

Would store all the contents of a small home or two bedroom apartment.

This is one of the most commonly used self storage unit sizes.

 

6 Metre by 6 meter sized space

Would hold all the contents of a larger family home.

Used for commercial storage of tools, equipment or products.

Ideal for large archival record storage.

Allows for easy access to goods in storage.

Pros & Cons Of Domestic Storage Deals

Domestic storage can be useful for a whole range of things however as with anything there is always some sort of downside that has to be taken into consideration. This downside can be anything from the cost and size to the flexibility and access times, but if you’re struggling to find the positives then there are plenty of those as well.

Cons
Storage & Transport Costs
If you want to use storage units as a long-term solution they can prove to be a more expensive option. Transport costs and the continual storage outlay can start to build up. If you are using storage rooms as a one-off while you move house or decorate then it’s a good option, however if you’re using it to store your old junk or furniture then it may be time to have a clear out.

Size
People often find that when they try to find a storage unit they are too big or too small. If this is the case then you face the difficult decision of whether to cut back on what you store or to pay for additional space that you don’t need. If you know someone else who needs some storage space then you could always share the bigger unit, if not you may need to find a way to store your items in a smaller space. For a guide on how much space you may need click here.

Flexibility & Access Times
When you store things in your attic or garage you take it for granted that you can access them whenever you need. While you may not often need or use these things, it is inevitable than once you have moved them into storage you will need to use something at some point. You may find that the access periods for your storage unit are not as flexible as you like, unless you seek out a facility that offers 24 hour access.

Pros
Helpful For House Moves
Domestic storage packages can be a godsend for any large house move, providing you with a place to store some of your things prior to your move. This helps you to reduce the amount you need to move on the day and in turn keeps your day on schedule and trouble-free. So if you know that you’ve got a limited window in which to move it may be worth your while finding a self storage unit in advance.

Convenient For Decorating
Self storage units are also a great way of keeping you sane while you decorate or have professional builders in. Not only can they help to keep your items out of harm’s way, they can also help you get things done more quickly. So if you want to get a move on with your bedroom update then why not move everything into a storage room so that you have the space you need to manoeuvre. Anything less will leave your things piled up in hallways and generally in the way.

Security
If you have expensive or sentimental items that you want to take extra care of while you’re away then you may want to move them into a domestic storage site. Secure storage sites generally offer an excellent level of security and can stop you from worrying about your precious items for the long or short-term. Small storage lockers are ideal for keeping small pieces of jewellery or photos safe and can give you the peace of mind to sleep easy at night.

Ella Andrews
Ella Andrews is blogger and freelance writer, who is very passionate about home relocation and self storage projects. She’s been writing about similar topics for a long time, but is also constantly searching for new sources of inspiration.

Member Q & A – Total Storage Solutions NZ

Alison and Trevor Gatland are no strangers to adventure and upheaval having relocated from Victoria to New Zealand in October 2013 to take over a small established self storage business. After a wide search they settled on the picturesque Kerikeri located in the Bay of Islands. A beautiful location with a warm climate, close to great fishing spots and popular with holiday makers and retirees, they weren’t able to overlook it.

1. What is your background and how did you become involved in self storage?
We come from a service industry background as a Plumber and Secretary and wanted to invest money in a steady business with low input from ourselves to allow for freedom of movement.

2. How was your facility established?
Original owners had Total Storage Solutions purpose-built 10 years ago as part of a partnership endeavour.

3. How do you advertise your business and what do you find most effective?
Local newspaper, local and Northland telephone directory, yellow pages online, website. Yellow pages online works best for us.

4. What opportunities do you see in the industry?
Growth as more of the young population continues to travel overseas for work experience. Aging population is more transient as they look to retire from an overcrowded city to a small attractive town.

5. What do you see as the challenges for the industry?
Prediction of growth patterns.

6. What are the points of difference in your particular market?
Commercial leases are expensive, so some businesses store their merchandise in the bigger units thus allowing them to keep their overheads down.

7. Where do you see your business in the future?
Continuing to provide peace of mind for people in the midst of a stressful transition.

8. What’s the strangest thing you’ve encountered in your self storage career?
A wine company paying for a unit their employee was using as an office even though said employee had moved on two years ago (this came to light when we took over the storage facility).

9. What’s your best tip for new entrants to the industry?
Keep up to the minute track of people moving in and out so you can advise when a unit is becoming available and react swiftly with any late payers.

10. What is the best part about what you do?
Fairly relaxed and mobile business lifestyle.

Total Storage Solutions
Trevor and Alison Gatland