A Case For Growth How Branding & Professional Management Drive Increased Occupancy & Revenue
SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only This is neither an offer to sell nor a solicitation of an offer to buy securities. Only a prospectus or private placement memorandum makes such an offer. This literature must be read in conjunction with a prospectus or private placement memorandum in order to fully understand all of the implications and risks of the offering of securities to which it relates. Please read the applicable prospectus or private placement memorandum in its entirety before investing for complete information and to learn more about the risks associated with an offering sponsored by SmartStop Asset Management, LLC or its affiliates.
Self Storage
Self storage facilities rent storage units to individuals and businesses on a short-term basis (often month-to-month) to store personal possessions or business records and inventory. Today’s Class A properties are professionally managed and offer value-added amenities including state-of-the-art security, climate control, elevator service, and moving and packing supplies.
About The Properties
The four properties in this case study were purchased by affiliates of SmartStop Asset Management, LLC.* They serve to illustrate our process and expertise in lease-up certificate of occupancy, development and redevelopment properties.
Arizona
California
Florida
Florida
* Self storage REITs are sponsored by SmartStop REIT Advisors, LLC, an affiliate of SmartStop Asset Management. See back cover page for additional details.
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SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
Acquisition Types Certificate of Occupancy Properties
A “Certificate of Occupancy ” (C of O) acquisition is a self storage site that is not yet operational and may be in various development stages, including planning, municipal approval, or under construction. Properties under this category are put under contract with a deposit from the buyer before the facility has finished construction at an agreedupon price. The property will then be purchased once the property has been built and the seller has obtained a Certificate of Occupancy from the city to operate. Once the property has been acquired, we will leaseup the property. These opportunities become available as these sellers are typically developers looking to achieve their return goals by building and quickly selling.
Physical Lease-Up
A “Physical Lease-up” facility is an operational self storage site that has yet to reach stabilization, which is typically 75% physical occupancy or greater. Often, existing management has reached a plateau or encountered competition and has been unable to boost occupancy. Other times developers prefer to build versus manage, have reached their return parameters, or have difficulties refinancing a maturing construction loan. These situations provide an opportunity for SmartStop to acquire properties well below physical occupancy stabilization. Through our management and marketing programs, we have successfully increased physical occupancy at lease-up properties in our focus markets.
Economic Lease-Up
An “Economic Lease-up” is an operational self storage site that has yet to reach economic occupancy of 75% or greater, with monthly revenues below the market. Economic Occupancy is the percentage of rent collected versus the maximum total possible rent that could be collected from the properties unit mix. Common examples of Economic Lease-up opportunities include offering excessive concessions to new and existing tenants, collecting rent that is under market, offering rates to new potential tenants below the market’s current rate, having units offline for friends, family or personal use, and not utilizing the ideal unit mix with the highest potential rent. Through our institutional property management, marketing programs and revenue management systems, we have successfully increased economic occupancy at properties in our focus markets.
SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
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Certificate of Occupancy Baseline Road, Phoenix, AZ SmartStop Self Storage REIT, Inc.
The Baseline property was acquired in May of 2016 for an approximate purchase price of $7.1 million.
Challenge
The property was acquired at certificate of occupancy (0% occupied) and was expected to take 36 to 48 months to gain occupancy and stabilize.
REVENUE
OCCUPANCY % Sq Ft
$290,600
94.0%
Solution
By focusing on reputation management and attaining customer reviews, the property stood out against the competition and built credibility for potential customers. These efforts boosted the property’s visibility and ranking on Google Maps by 141% in only three months. New exterior signage including banners and flags attracted drive-by traffic and called attention to special offers. Detailed analysis of pricing and competition played an important role in revenue management and, ultimately, in increasing the property’s net operating income.
Results
In approximately two years, almost half the expected time frame, the Baseline property was able to grow occupancy to above 90% and reach stabilization.
13.9%
$4,000 Q2 2016
Q3 2019
REVENUE INCREASE OCCUPANCY INCREASE
Q2 2016
Q3 2019
N/A - CofO DEAL
81%
Baseline Revenue & Occupancy % Sq Ft Q2 2016 - Q3 2019
Baseline property received certificate of occupancy on May 26, 2016. The past performance of SmartStop Asset Management, its affiliates or their real estate programs should not be relied upon as an indicator of future performance.
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SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
Physical Lease-Up Western Avenue, Garden Grove, CA SmartStop Self Storage REIT, Inc.
The Garden Grove property was acquired in March of 2017 for an approximate purchase price of $18.4 million.
Challenge
The property is a redeveloped industrial building converted to storage in an underserved portion of the city. The property was acquired at approximately 22% occupancy.
REVENUE
OCCUPANCY % Sq Ft
$117,700
89.9%
Solution
The property achieved increased online visibility through additional spend on geographically and demographically targeted online advertisements. The effectiveness of these ads is regularly evaluated, and adjustments are made to ensure maximum exposure. Participation in an online marketplace which provides potential customers with lists of local self storage facilities assisted with lead generation and provided incremental rentals. Pricing was evaluated, and the decision was made to limit concessions and discounts to new move-ins which immediately improved profitability.
22.8% $6,700 Apr. 2017 Sep. 2019
REVENUE INCREASE
Apr. 2017 Sep. 2019
N/A - CofO DEAL
OCCUPANCY INCREASE
Results
80%
The property was leased up to above 85% occupancy and near stabilization in approximately 20 months.
Garden Grove Revenue & Occupancy % Sq Ft April 2017 - September 2019
Garden Grove property received certificate of occupancy on March 16, 2017. The past performance of SmartStop Asset Management, its affiliates or their real estate programs should not be relied upon as an indicator of future performance. SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
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Economic Lease-Up NE Industrial Blvd, Jensen Beach, FL Strategic Storage Trust IV, Inc.
The Jensen Beach property was acquired in April of 2017 for an approximate purchase price of $4.9 million.
Challenge
The property was approximately 99% occupied upon acquisition, but had in-place and asking rates that were 45%-65% below market rates for that area.
REVENUE $61,100 $43,100
Solution
Efforts were focused on increasing visitors to the website. Through local search engine optimization, the website saw increased visits from potential customers in nearby neighborhoods and cities. A grassroots marketing campaign was implemented targeting surrounding apartment communities and homes with flyers and postcards offering promotions and specials. Internal rate increases were implemented at specific times throughout the year with a focus on tenants who were paying significantly below the new asking rates and on high-demand unit types.
Results
The property increased both in-place and asking rates upon acquisition and has continued to drive revenues since its acquisition in April of 2017.
May 2017 Sep. 2019
OCCUPANCY % Sq Ft
97.6%
90.0%
May 2017 Sep. 2019
REVENUE INCREASE
41.7%
OCCUPANCY INCREASE
- 7.6%
Jensen Beach Revenue & Occupancy % Sq Ft April 2017 - September 2019
Jensen Beach was acquired in April 2017. The past performance of SmartStop Asset Management, its affiliates or their real estate programs should not be relied upon as an indicator of future performance.
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SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
Physical Lease-Up US Highway 1, Fort Pierce, FL SmartStop Self Storage REIT, Inc.
The Fort Pierce property was acquired in July of 2014 for an approximate purchase price of $3.8 million.
Challenge
REVENUE
The property was foreclosed on in 2013 and was acquired from the bank at approximately 42% occupancy at acquisition.
OCCUPANCY % Sq Ft
91.7%
$268,000
Solution
Digital marketing campaigns were broadened to reach a larger geographic audience beyond the city of Fort Pierce. Unit specials were highlighted on the property’s website to draw attention to larger units that had greater vacancies. With initial rates well below market, pricing was evaluated on macro- and micro-levels for each unit type and size and pricing was adjusted based on supply and demand. The property is supported by a state-of-the-art website featuring a customer-friendly interface and fully integrated store operations and reservation management system.
Results
The property quickly leased up to a stabilized occupancy in less than 24 months and has steadily gained occupancy and increased revenues.
$56,000 Q3 2014
48.0% Q3 2019
Q3 2014
REVENUE INCREASE OCCUPANCY INCREASE
Q3 2019
378.5% 43.7%
Ft Pierce Revenue & Occupancy % Sq Ft Q3 2014 - Q3 2019
SmartStop N. US Hwy 1 (Ft Pierce) was acquired in July 2014 at 42.5% occupancy. The past performance of SmartStop Asset Management, its affiliates or their real estate programs should not be relied upon as an indicator of future performance. SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com | Broker-Dealer Use Only
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In June 2019, SmartStop Asset Management entered into a series of transactions with one of its affiliates in which SmartStop Self Storage REIT, Inc. acquired the self storage advisory, asset management, property management, and certain joint venture interests of SmartStop Asset Management. As a result of the transactions, SmartStop Self Storage REIT, Inc. is now a self-administered self storage REIT that, through its indirect wholly-owned subsidiary, SmartStop REIT Advisors, LLC, sponsors other self storage programs, including Strategic Storage Trust IV, Inc. and Strategic Storage Growth Trust II, Inc. SmartStop Asset Management continues to sponsor student and senior housing programs. Investing in the offerings we and SmartStop REIT Advisors, LLC sponsor involves a high degree of risk. You should purchase securities only if you can afford a complete loss of your investment. No public market currently exists for shares of common stock of any of the offerings we or SmartStop REIT Advisors, LLC sponsor and such shares may not be listed on a national securities exchange. Therefore, it may be difficult to sell such shares. If such shares are sold, it will likely be at a substantial discount. This is neither an offer to sell nor the solicitation of an offer to buy any security. No offering is made to New York residents except by a prospectus filed with the Department of Law of the State of New York. The Attorney General of the State of New York has not passed on nor endorsed the merits of these offerings. We cannot assure you that the programs we or SmartStop REIT Advisors, LLC sponsor will attain their investment objectives or that the value of the underlying assets will not fluctuate. There can be no assurance that the investment objectives will be realized. Any investment involves a risk of loss, including a loss of your entire investment. All operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot make assurances that the programs we and SmartStop REIT Advisors, LLC sponsor will be profitable or that growth in the value of any real estate properties will be realized. Adverse economic conditions will negatively affect the returns of the programs and their profitability.
SmartStop Asset Management | 10 Terrace Road, Ladera Ranch, CA 92694 | 877.327.3485 | SAM.com Broker-Dealer Use Only