Tracing The Roots Of Three Major Self-Storage Operations
In 1928, Todd Amsdell’s distant relatives started a construction company that survived the Great Depression of the 1930s as well as many subsequent economic recessions. Along the way, the Amsdell Companies’ principals left an indelible mark on an industry that didn’t exist until well into the 20th century.
The Amsdell Companies, headquartered in Cleveland, have evolved over the past 90 years into a successful real estate enterprise that is now a top 20 self-storage operator.
Todd Amsdell, president and CEO of Amsdell Companies/Compass Self Storage, took the reins from his father, Bob, and uncle, Barry, in2007. Previously, Barry Amsdell was the president of a construction company and Bob Amsdell was a lawyer.
Amsdell discloses that his father and uncle believe they invented the modern self-storage industry when they bought a railway building in Pennsylvania in the early 1970s.
“They thought they had invented self-storage in that they saw an old railroad building with a lot of doors and looked like an elevated self-storage building,” Amsdell says. “They saw an opportunity to buy that property and, when they got farther down the line and started to look at the partitions, that’s when they realized they had stumbled onto something that was a new property type.”
The Amsdell brothers built their first mini-storage building in Sharon, Pa., catering to businesses seeking to warehouse inventory in commercial bays. Many inventions happen by accident, and the Amsdells’ newest business venture was no different.
Their first tenants were Little Debbie and Lance Cracker; however, few other businesses beat a path to the mini-storage center. But residential customers began to trickle in, and eventually they represented 90 percent of the storage tenants.
“That got them thinking that the business maybe wasn’t commercial mini-storage,” Amsdell says, “maybe it was more self-storage that we all call it now.”
Birth Of The REITs
Whether Bob and Barry Amsdell invented self-storage is an argument for another day, however, what is undeniable is the brothers’ substantial impact on the industry.
Two of the major self-storage real estate investment trusts (REITs) can trace their roots to the Amsdell Companies.
The brothers were attracted to real estate because of the generous tax breaks that existed before the laws were changed with the Tax Reform Act of 1986. The financial landscape during the 1980s was littered with limited partnerships because they were touted as safe tax havens.
“They believed in the land banking idea; so you could buy it, put up mini-storage, and, when the land became more valuable, tear it down and put something up that was of value,” Amsdell says. “They believed in the tax implications that it offered, so they went about putting together hundreds of partnerships to build mini-storage projects.”
They developed facilities in Cleveland, Buffalo, Florida, and several other areas around the country. “Things went along pretty well until the tax laws changed in 1986 and the dynamics of partnerships started to change and the operating environment started to get more difficult,” Amsdell relates.
In Buffalo, the land banking concept gave way to profits as storage became a viable enterprise. Bob Amsdell and Bob Attea, a Sovran Self Storage partner, had worked together in a large Cleveland real estate company, according to Amsdell. They continued working together to assemble partners and investors in New York, and eventually Sovran soared to new heights.
“Those changes facilitated the need for the next big change, which was to take the company public,” says Amsdell. “As developers and construction company, it was not the best vehicle for us because it’s difficult for public companies to build and develop, so Bob and Barry sold out their ownership in Sovran.”
When Sovran went public in 1995, the REIT changed the name of its stores to Uncle Bob’s. The Amsdells took possession of some of Sovran’s former centers along with the brand name the company previously used: U-Store-It.
The Amsdells leveraged several partnerships in the 1990s to grow Cleveland-based U-Store-It into a public company in 2004. The REIT’s portfolio expanded from 154 properties to over 400 facilities.
According to CubeSmart reports, Robert Amsdell was chairman of the board from 2004 until 2007, Barry Amsdell served as trustee, and Todd Amsdell was chief operating officer and president of U-Store-It Development.
Following considerable internal turmoil, according to published reports at the time, the Amsdells became dissatisfied with U-Store-It’s performance and left the company in 2007. The new CEO, Dean Jernigan, opted to relocate the REIT to the Philadelphia area and change the name to CubeSmart.
Today, Life Storage (formerly Sovran) and CubeSmart are among the top five operators in the self-storage industry.
A New Brand Emerges
The Amsdells’ non-compete contracts eventually expired, and they started their third company brand: Compass Self Storage. This time around they had no outside investors outside of the family.
“The blessing in disguise was when CubeSmart left Cleveland for Philadelphia; we were able to retain the team we had back in the day and still have today,” Amsdell notes. “The key positions are still occupied by most of those people.”
Compass has grown into a top-20 storage operator with 77 properties and the goal of acquiring or building one new facility each month.
Over the years, the Amsdell Companies have been active in several billion dollars’ worth of real estate ventures with a primary focus on self-storage. During the past 35 years, Amsdell has owned and operated more than 500 storage centers under various trade names in some 27 states. The Amsdell team has extensive experience in acquisitions, construction, and property management.
The company has been ranked on the Inc. 5000 list for two consecutive years. The Inc. 5000 recognizes the nation’s fastest growing private companies.
In addition to the Compass brand, Amsdell owns three business parks in Cleveland, including the office building that houses the company’s headquarters, and another business park in Fort Lauderdale, Fla.
Compass Points West
Compass Self Storage currently operates in 14 states, but the Ohio-based operator has its sights pointed westward.
“When we were growing the U-Store-It brand, we had an enormous presence in California, and Texas wasn’t too far behind,” Amsdell says. “We’re in Texas today, but we’re not in California. We always had a great operating history in Arizona and today we’re not in Arizona. We would love to get back into those two states, but we also would like to fill in as we’re coming across the Midwest. We are especially interested in markets that touch an ocean—the population centers.”
“We realized if we were going to be a player in Pittsburgh, we were going to have to develop in Pittsburgh, so we did,” Amsdell says. “That’s one of the benefits of having the abilities to develop, redevelop, expand, and buy stores that need to be fixed up. Most of the acquisitions that we’ve been able to participate in the last couple years are properties that needed TLC, or expansion, or redevelopment.”
Amsdell believes one of the company’s strengths is having an experienced team with the ability to identify well located properties that are under-managed or under-developed. The team may find an older property that never had climate-controlled units, used lifts instead of elevators, or needed an additional 30,000 square feet to help make a facility more profitable.
“That’s where we have done well because we are entrepreneurs, having our own construction company and having development capabilities in-house,” Amsdell says. “We’re able to find those great locations and get into new markets that open the door for other acquisitions.”
Prospective sellers might not identify Amsdell as a potential buyer until the company has a presence in their market and learn about the brand. “As we’re able to expand and our story is better understood in those markets, it gives us the opportunity to make deals that you won’t have unless you’re operating in those markets,” he says.
Amsdell understands that in some markets the company needs to have the ability to develop to enter or grow your presence. Acquisitions only allow the ability to buy what is for sale.
The foundation of the Amsdell enterprises over three-plus decades has been operating the businesses within a family culture.
“It was and is Bob, Barry, and Todd’s vision to stay true to their roots as a family owned company,” says Ed Hainrihar, vice president of operations. “Even when we were at U-Store-It and the company had grown to 200 to 300 stores, it was still family driven in terms of the culture.”
As members of this family culture, employees are encouraged to take an ownership approach to their jobs. “The district managers operate under the philosophy of thinking like an owner,” says Hainrihar, who has been affiliated with the company since 1998. “That was always Bob and Todd’s culture that we drove into our district managers as we hired them. Think of this like it’s your franchise and you’re running this as if you’re the owner. We hired managers with the same mindset.”
Part of that ownership entails thinking beyond the job description, offering ideas, and pointing out recurring problems. “That’s a good philosophy, but you have to have a way for that philosophy to breathe and influence the organization,” Hainrihar says.
“The Amsdells tell you team comes first. A lot of people say that but they live it,” CFO Dave Horton says. “There really is a deep caring for employees and it shows up in loyalty and performance at the store level and all throughout the organization. I think it makes a difference in the marketplace. Yes, I work for the family, but I feel like a partner. Because you feel like a partner, you’re more engaged and put forth your opinions and thoughts.”
Both personal and business growth are important components in Amsdell’s success. “There is typically an improving quality to the portfolio and creating opportunities for people in the organization to grow with you,” Horton says. “Typically, we see a nice bump after we buy things and fix things up. The original developer has done a good job on picking the location and laying out the asset, but being able to either add on to it or fix the office, those kinds of things really make a difference in the customer experience.”
Horton views part of the family culture as possessing the patience to maintain a long-term outlook in the business and its property acquisitions. “We can look at investments over the long-term horizon and not worry about an exit strategy or a quick turnaround,” Horton says. “We’re more worried about buying the right asset to hold for a long time.”
That patience can be traced to Bob Amsdell, who has a reputation for perseverance in his business approach.
“We had always wanted to get into Shaker Heights, Ohio, and they always said since the early 70s that no self-storage would ever be in Shaker Heights,” Hainrihar says. “Fast forward to a few years ago, we were able to crack that and Bob was presenting in front of the city council and we were able to get that project approved against all odds.”
Hainrihar adds that the project won community accolades and several awards, including Mini-Storage Messenger’s Facility of the Year.
Brothers Guide Compass Direction
Bob and Barry Amsdell still remain active in the company these days, providing advice and direction. Barry is a board member and Bob is board chair.
“They have a great ability to pull back to take a 60,000-foot view, but they also have a good ability to get down to the micro level when necessary,” Hainrihar observes. “They have the ability to think globally but also the details matter and how you communicate that is the key to success.”
He recalls as a 30-something taking a drive in Barry’s car to a property under development. The owners were deciding on signage to direct traffic flow and communicate with customers.
“He was good at asking the right questions,” Hainrihar recalls. “That was his management style. He would lead you so that you would recognize what needed to be done. You’re a better champion of what you’re doing if you understand it and believe it.”
Todd Amsdell, who joined the company in 1990, is a fourth generation family member working in the business, although he was not always convinced that self-storage was in his blood.
“I remember walking the sites in Sharon, Pa., and the Cleveland area, but I was also going to school at the time. I wasn’t quite sure self-storage was meant for me, but quickly realized the opportunities doing due diligence trips and fell in love with the business and the people,” Amsdell says.
He has seen self-storage mature as an asset class and he foresees a positive future for the industry. “I’m bullish on the fact that we’re still accumulating things and we haven’t learned to live virtually. There is still a need for storage of those things,” Amsdell says.
He has seen properties grow from 30,000 square feet up to 125,000 square feet and larger. “That makes sense in some markets but what also might make sense is smaller properties that are unmanned, well located, and convenient for customers with technology being much more a part of the customer experience. Kiosks and other electronic mediums will help customers not only find locations but walk them through rentals. That probably means self-storage centers don’t need to keep growing in size to be profitable.”
While storage facilities have grown in mass and technology has changed the way operators do business, one thing has stayed basically the same: the product. Operators still lease space in 10-by-10 cubicles. Service and management are the difference-makers.
“At the root of what we do, the service side is the key to working for self-storage,” Amsdell says. “Self-storage is a retail product that has a heavy dependency on good operations and good management. We do a good job with that and we can do it better than our competitors.”
A family culture combined with an entrepreneurial drive and a stable and loyal team have propelled three self-storage operations to the top of the industry.
“The real story starts with my father and uncle, who grew up poor, came together in a family company, and created a couple portfolios of properties, all from an industry that didn’t exist 10 minutes before they saw that rail site in Pennsylvania,” Amsdell says. “It’s always been a team effort, but great teams are helped by great leaders.”
David Lucas is a freelance writer based in Phoenix, Arizona. He is a regular contributor to all of MiniCo’s publications.