Key Operating Metrics at Acquisition and Nine Months Later
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Background
The property is a 799 unit self storage facility in Spokane, WA. The property was built in two phases with the first phase (approximately 20% of the units) constructed in 1983 and the second phase built in 1996. The property is all first-generation, single story, drive up architecture. The property was acquired by Crescendo Properties in December 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 Eliminated Unnecessary Discounts
The property was built in multiple phases and the former owners were discounting the units in the first (oldest) phase of the property by 10%-20% depending on the size. We immediately created $55,200 in additional annual revenue when we increased the rental rates of these units to match the rents charged for the same size units in the remainder of the property. We were confident this would increase revenue with very little impact on occupancy because the older buildings, although less attractive, had storage units that were functionally the same.
Further, the property and market occupancy levels predicted our success. The property was running at a very high occupancy in the affected unit types. The local market also had limited availability. Therefore, affected customers who wanted to shop for an alternative rather than pay the higher rent would have found similar asking rents at competing properties and a limited number of available units.
We Made 21 Complimentary Units Revenue Producing
We took an objective look at the uses of the complimentary units that were on the rent roll at the time of acquisition. Some were being used for company purposes like tool storage, company file storage, and the back stocked inventory of boxes and moving supplies we sell to our customers. These units were cleaned and consolidated to use the minimum amount of space possible. The majority of the complimentary units were occupied by others. We evaluated whether continuing to donate rental space was in line with the way the new ownership wanted to contribute to the community. Based on the above process, five complimentary units were preserved. 21 occupants were given a 60-day notice that the rent on the storage unit would be increased from free to a fair market rent.
We Implemented an Effective Rate Management Program
We implemented a program of asking and in-place tenant rate management, increasing the revenue per occupied square foot from $0.85/Occupied SF to $0.93/Occupied SF, a 9% increase in nine months.
We Implemented a Tenant Protection Program
The former owner of the property did not offer an insurance or warranty program to protect their tenants stored property. In just nine months, 55% of our customers have purchased tenant property protection adding over $84,000 in gross annual revenue.
More than 85% of new customers choose to purchase the tenant property protection warranty. Thus, the 55% overall purchase rate will grow over time as occupied units with no tenant property protection turn over and new customers choose to purchase.
We Eliminated the Security Deposit and Replaced with Administrative Fee
By eliminating the security deposit, we were able to increase the administrative fee to $25 per move in without increasing the up-front cost to the customer. This resulted in nearly $10,000 more in annual revenue and eliminated the administrative headache of tracking and refunding security deposits.
By Benchmarking Late Fees to National Competitors We Increased Late Fee Revenue
Late fee revenue is up 68% annually with 46 fewer occupied units. We know that customers don’t choose to rent based on a comparison of late fees, so the change has not affected our move-in velocity. We also know that our late fees, although higher than the former ownership, are in-line with the national, publicly traded self storage operators.
The Path Ahead – Looking Beyond Nine Months
Like our Spokane clients, you will love the quick wins we can produce for you.
In addition to quick wins you need a long-term management plan. When you hire us, we’ll collaborate with you to create short-term wins and a long-term strategic plan for your property. The plan will include:
- Specific ways to continue to grow rental and other revenue.
- Specific ways to eliminate or reduce expenses.
- Detailed preventative maintenance schedules.
- A capital improvement plan.
We’d love to take our systematic approach to growing net operating income and apply it to your property. If you want to explore working together, take a look at the areas we serve and contact us.