Throughout the global COVID-19 pandemic, the self-storage facilities across the country that were deemed an essential business by their states made necessary changes to their operations to adhere to CDC guidelines, as well as mandates from local, state, and federal governments, in order to keep their tenants and employees safe. Some began operating remotely, closing facility offices and establishing contactless leasing processes.
While these rigorous efforts were enacted to prevent the spread of the coronavirus, there were also several goodwill endeavors taken at the facility-level to ease the burdens of tenants and avoid potentially negative publicity.
For instance, some self-storage facilities halted rental rate increases for a few months and/or waived late fees for past-due tenants impacted by the pandemic. Others put a temporary hold on auctions, choosing to delay lien sales until after the dust settles.
Surely these strategies proved beneficial for self-storage tenants, but they cannot go on indefinitely. Accordingly, Lonnie Bickford, founder and president of StorageAuctions.com and owner/operator of Appletree Storage, with facilities in the Greater Baton Rouge area of Louisiana, thinks that it’s time for self-storage operators to return to their pre-pandemic standards.
Back To Business
As an owner/operator, Bickford states that he isn’t keen on blanket policies like some of the ones adopted by self-storage facilities at the beginning of the pandemic, especially ones that cut into profits. “It’s still a business, and the point of a business is to make money,” he says. “The notion of free rent, banks aren’t going to like that.”
Bickford is referring to blanket policies utilized throughout the pandemic that enabled managers to waive late fees and postpone auctions. Instead of waiving every late fee, he prefers to assess each scenario on a case-by-case basis before deciding to drop a late fee charge. He also declines to drop late fees for tenants who aren’t making payments, as those fees can be recouped from the auction proceeds. This approach has enabled Bickford’s properties to collect late fees from tenants who were not impacted by the coronavirus, as well as habitually late-paying tenants.
Due to time constraints, busy operators may not have the ability to listen to each tenant’s emotional explanation. However, Bickford states that it pays to use discretion as much as possible when waiving fees. And operators may need to get creative when handling these situations. As an example, he had one notoriously late-paying tenant who attempted to use the pandemic as yet another excuse for her inability to pay rent. Instead of being a pushover, Bickford told the tenant that he would waive all the fees she accumulated if she moved out of the unit she was renting by a certain date.
“If you want to stay, you have to pay,” he says, emphasizing that lenient managers may need to be reminded that exceptions should only be made on a case-by-case basis. “A lax stance hurts the bottom line. You run the risk of giving away the store.” Bickford adds that when considering payment plans for delinquent tenants, be sure to create ones that they will agree to uphold. He suggests having tenants sign any payment plan arrangements and keeping them on file for safekeeping.
In addition to being more selective about dropping late fees or other charges, Bickford advises owners/operators to take the time to create or revise policies that may help the facility operate more smoothly. As restrictions and mandates are lifted or reduced throughout the summer months, self-storage facilities may still experience the typical seasonal increase in rental activity.
In reality, there could be more movement and payment issues than normal due to the national emergency, which may have altered the financial situations of existing and new customers. “When the stimulus money runs out, that’s when we’ll see delinquency issues,” says Bickford, adding that self-storage facilities may see increases in occupancies. “Get ready in case we do see a surge.”
On The Auction Block
Although self-storage owners/operators may have temporarily stalled auctions, as either an act of kindness or to avoid negative reviews from delinquent tenants, Bickford states that this may not have been the best course of action for their businesses.
Unfortunately, in Bickford’s experience, approximately 85 percent of the units sold via lien sales were “picked over and abandoned.” In other words, before the unit ends up in auction status, the tenant had removed the valuable items they had stored within the units and left the “junk” behind.
In fact, there may be no better time than the present to proceed with auctions that meet the criteria of your state’s lien sale statute. As of April, Bickford noted that auction sales on StorageAuctions.com were selling for 150 to 160 percent of the normal bid. “There’s a limited supply of used stuff for sale now,” says Bickford, who adds that this has resulted in increased demand.
What’s more, the number of new bidders signing up for accounts on StorageAuctions.com hadn’t slowed down. “It’s been solid every day,” Bickford says. “A hundred new people at least per day have been signing up.”
Nevertheless, Bickford acknowledges that there could be a “mad scramble” to sell units in June and July. And a dramatic swell in supply would likely impact the number of bids as well as the winning bid amount.
“There’s going to be a flood of auctions,” says Bickford, adding that he expects plenty of previously hesitant owners/operators to shift to online auctions due to the circumstances.
Indeed, online self-storage auctions have been gaining in popularity over the past few years, but the social distancing requirements of the pandemic, on top of the potential liability of live auctions and the retirements of trusted auctioneers, may be responsible for turning online auctions from optional to standard practice.
Bickford says that some self-storage owners/operators have already made the decision that is was “time to go online” for various reasons. For starters, with COVID-19 on everyone’s mind, they don’t want extra people on their properties now. Besides the safety issues of on-site crowds, concerns about a site’s resources have also arisen. As an example, one operator, who recently signed up to sell units on StorageAuctions.com, actually witnessed a bidder stealing toilet paper from the facility’s bathroom during a live, on-site auction. The indiscreet bidder had placed two precious rolls under his shirt.
Whether you choose to conduct live or online auctions, Bickford has another piece of advice for self-storage owners/operators seeking to maximize their auction proceeds: Don’t compete with other auctions. Instead, Bickford suggests calling local operators or visiting websites to find out when they will be having auctions. Then, be sure to schedule yours for a different day. Moreover, if you have numerous units to auction, consider staggering them and selling them on different days.
Although the forecast remains unclear for the remainder of the year, Bickford believes that the numbers for 2020 won’t be too dissimilar from the past few years. In fact, for the first two months of the pandemic, his facilities were nearly in line with last year, with slightly less move-ins and less move-outs. And while Appletree Storage had put rental rate increases on hold for April and May, Bickford anticipates reinstalling regular increases either this month or next.
Obviously, there’s no telling when the effects of the COVID-19 pandemic will dissipate, but it may be high time for self-storage owners/operators to resume business as usual in an effort to minimize loss and recoup valuable storage space from non-paying tenants. Keep this in mind: An empty unit has more potential worth than a unit that’s renting in the red.
Reviews And Reputations
When it comes to auctioning off storage units, Bickford urges owners/operators to put their concern for their facility’s reputation aside. Though you may be worried about backlash on social media for selling tenants’ belongings, Bickford is adamant that former tenants are highly unlikely to post negative reviews out of fear of embarrassment for non-payment.
“They would not do that,” he says, noting that most non-paying tenants simply ghost a facility because they have already retrieved their valuables from the units they were renting.
While customers do read Google reviews, Bickford reminds owners/operators that they have the ability to explain the situations by replying to their comments. Moreover, self-storage owners/operators can delete negative comments that are posted to your facility websites or social media pages.
Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and Self-Storage Canada.