VENTURES: Can You Bank On Self Storage?
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SELF storage units have in recent years proved to be one of the more successful asset classes, says Steven Horton, a director of S A Self-Storage Investments (SASSI), the Cape Town-based company that is currently expanding quickly in this field.
“From 2004, when we launched our first self-storage facility at Edgemead in Cape Town’s Northern Suburbs, we have always made a certain number of the units available to investors - and they have always responded well.”
Phase one of 120 units at the Edgemead project sold out in three days and the second phase of 100 units in a week and a half. On the third phase SASSI kept all the units for themselves, and some 40% of the total are today still privately owned.
Horton says the appreciation rate has been highly satisfactory so far.
“At the launch we were charging R50 000 for a 45 cubic metre unit. Today that same unit sells for R87 000,” says Horton.
Surprisingly many of SASSI’s original investors have been expatriates. The local community, to whom SASSI always market themselves strongly, also responded well. On follow-up projects many financial institutions also become involved.
“Those who understand how self storage works appreciate quickly that in this type of development, although the basic unit is a no-frills facility, it is possible to charge rentals that are the equivalent of those charged for A-Grade office space. This is because the units are relatively small and because, too, SASSI is selling convenience and cubic metre space rather than square metre space,” Horton says.
As in all property development, location, aesthetic factors and good management are still the keys to success - coupled, in this case, to a high level of safety and convenience for customers.
“We ensure not only that our projects are well designed and constructed but that they are also in strategic high profile positions that are convenient for customers. Through Stor-Age, we ensure that every development is efficiently run and aim for a 90% plus usage rate.”
“From the start the aim was to develop a simple, easy to understand, transparent business model that would give investors of all sizes a chance to participate in this sector of the commercial property market. To be successful we realised, that we had to be able to generate strong cash yields and to make it possible for the investors to trade their investments easily and quickly if they so wished.”
Most of SASSI’s directors are chartered accountants or former investment bankers, many with expertise in property management and construction.
“Self-storage units are one of the latest responses to the needs of today’s more sophisticated societies - and the always-changing property market.”
“Not so long ago there was no such thing as a skyscraper, a shopping mall or even a decentralized business park. Today these are very much part of our lives.”
“It is much the same with self-storage units. These have become popular and profitable because they fulfil a very real need. Capitalism has resulted in many people acquiring goods at a faster rate than ever before but at the same time we are now in an age in which the available living and work areas are smaller. Therefore less space is available for one’s goods,” Horton says.
“Furthermore, our age is characterized by high mobility: people change and renovate their homes and change their jobs regularly. This, too, creates a demand for storage.”
“Much the same applies on the commercial front where businesses expand or contract almost overnight - again creating a demand for instant storage.”
The business model used by SASSI is similar to that of many hotels today - the developer is the single largest investor in every scheme and usually aims to hold onto his units in perpetuity.
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