Key Operating Metrics at Acquisition and 18 Months Later
|Annualized at March 2016 Acquisition||Annualized 18 Months Later – August 2017||Percent Improvement|
|Rental Revenue Per Occupied Square Foot||$0.75||$0.99||32%|
|Late Fee Revenue||$14,648||$26,287||79%|
|Admin Fee Revenue||$2,112||$5,424||157%|
|Tenant Protection Revenue||$7,440||$66,959||800%|
|Net Operating Income||$381,220||$585,189||51%|
The property is a 561 unit self storage facility in Placerville, CA. As you can see from the picture above, it is a first generation self storage facility. Built in 1986 it is nothing fancy or out of the ordinary. The property was acquired by Crescendo Properties in March 2016.
How We Did It
We used our Magic Revenue Finder process to systematically analyze revenue growth opportunities. You can get your copy of the Magic Revenue Finder here.
We addressed problems with the physical facility and increased the inventory available to rent by 82 units.
During the due diligence period, we identified 78 units designated unrentable and 18 units designated complimentary. We invested approximately $100,000 to make 67 units rentable. We recovered 15 additional units by decreasing the number of complimentary units. These changes increased the inventory available to rent by 82 units.
We Improved Marketing and Curb Appeal to Increase Occupancy
We improved the property’s online local listings. We successfully encouraged our customers to leave online reviews so that local online shoppers would see the exceptional customer service we were delivering. We engaged a call center to make sure any missed incoming calls were handled professionally. We painted the property, made necessary exterior repairs, and refreshed the roll-up doors with Everbright. Due to these efforts occupancy increased during the period from 84% to 93%.
We Implemented an Effective Rate Management Program
We implemented a program of asking rate and in-place tenant rate management, increasing the revenue per occupied square foot from $0.75/Occupied SF to $0.99/Occupied SF, a 32% increase in 18 months.
We Implemented a Tenant Protection Program
There were 268 units paying for tenant property protection when the property was purchased. 18 months later 378 tenants are paying for tenant property protection. The on-site staff regularly enroll more than 85% of the new customers in the tenant property protection program with an average selling price over $16 per unit. The net effect is an increase of $59,519 in annual revenue.
We Increased Late Fees to the California Legal Limit
The prior management company had not been careful to charge the maximum late fee allowed by California law. We carefully examined what we could legally charge for a late fee and benchmarked our other fees against the public self storage companies operating in California. The new late fee structure resulted in an increase in annual late and lien fees from $14,648 annually to $26,287 annually.
We Increased the Administrative Fee and Increased Revenue by $3,312 Per Year
By improving the property marketing and the sales skills of the on-site staff we increased the administrative fee progressively, settling at $30.00. This netted the property an additional $3,312.64 per year without harming occupancy.
Dramatic Improvement in NOI Lead to Cash Out Refinance
Because we increased the Net Operating Income so dramatically, the ownership of Placerville Self Storage refinanced the property and pulled out 71% of their initial equity. With the improved property performance and the new lower cash basis in the property, the cash-on-cash return increased to 34% per year.