Simple RE

Move the Conversation Forward

2008-08-05T08:59:29-07:00

I was focused on some important projects yesterday, so ignored my phone. By this morning I had 12 voice messages. Only 3 were worth listening to.

If you are going to leave a message with someone do yourself and them a favor and follow this simple mantra: move the conversation forward.

If you are initiating the dialog then be clear about why you are call and what you would like from the other person. I hate getting messages that say, "Hi Kenny, this is SoAndSo. When you get minute, give me a call back." Unless you are my wife or my child, why should I call you? I'm left to assume I have better things to do.

When returning someone's call and you get their voice mail (assuming you know why they called you in the first place) do your best to leave them the info they need in the voice message. In this way you are moving the conversation forward. If the topic is too complicated for a simple voice message and a synchronous conversation must actually happen to be effective, then suggest a couple of times that you would be available to have the necessary discussion. Again, you are moving the conversation forward.

Sure, this means you have to take two seconds and think about what you will say if you get the other person's voice mail box, but by moving the conversation forward you save yourself and the other person time and frustration. In my opinion, it is the professional and courteous thing to do.

Bonus Thought 1: Use Voice Mail instead of Email to respond to email messages. Typing a lengthy reply can be time consuming. In many cases you can get your thought across much more quickly with your voice. So instead of pecking away at your keyboard, pick up the phone.

Bonus Thought 2: Use Jott. It's a free service that will allow you to speak a message and have it converted to text and then emailed to the recipient of your choice. There are so many good uses for Jott that detailing them would be an entire other post. Give it a try if you haven't already, you won't be disappointed.

Not Getting Sucked In

2008-07-23T07:38:00-07:00

Like everyone else, I see things in my business that are broken and that I could fix. For example...

The security camera systems at our locations need to be inspected and upgraded where necessary.
I could make sure that the pricing and offers on my facility websites are up to date.
I could work to improve the design of a direct mail piece

Sometimes I have to ask myself, "Can action on this wait?" (That is a hard question to ask when so much of business rewards immediate response and proactivity.) Alternatively, I have to ask myself, "Will things will be ok without my intervention?", and delegate or just let stuff go.

It's not that solving these problems isn't important. Its just that part of my role as a leader is to think ahead, with the assistance of other smart people, and help us as a company prepare for the next big thing. This requires some breathing room. Some time to pick my head up and look above the tall grass and weeds that grow up and obscure longer-range vision.

Its a matter of choosing to do something more important and significant in the longer run. If no one does it we are doomed to mediocrity by virtue of stagnation. I also think it is fun.

Sometimes you have to have some discipline to keep yourself from getting sucked in.

Ideas from the CSSA Self Storage Owners Summit - Chuck Barbo

2008-07-22T21:26:00-07:00

Chuck Barbo, former Chairman of Shurgaurd Self Storage, discussed his management philosophy.

He believes in empowering the people closest to the customer. For example, he let his managers determine rental rates, discounts, etc.

This sounds like a fine strategy but you would absolutely need two things:

Adequate controls or monitoring so that you would know if a rogue or misguided manager was messing things up.
A fairly robust training program for your on-site staff. (On a personal note... I don't think my company, Crescendo Properties, is quite there yet, although we are getting much, much closer as we tighten up our operations.

Chuck discussed his success in building up a European presence with Shurgaurd. I imagine international development is still a huge opportunity as long as one is committed to staying in the market long enough to build awareness of the product and allow time for consumers to adopt it. In web 2.0 technologies (like blogs and wikis) we have begun to move from "what is it" to "what can I do with it" to "I have a problem identified and am looking for solutions". I suppose the same transition has to happen to self storage when it is first introduced to a new culture.

The last point he made was that he regretted the time and energy he spent developing stores in small markets like Pocatello, Idaho. Rental rates are low, but construction costs are more or less the same as major metropolitan areas with rent levels twice and three times as high. In my experience owning and operating properties, the geographic redlining outlined above is most relevant to development. An acquisition, if purchased at the right price, can be very profitable even if it is a secondary market.

Ideas from the CSSA Self Storage Owners Summit - Dave Grant

2008-07-21T05:48:00-07:00

Dave Grant, former CEO of Shurgaurd, drew the comparison between online self storage rentals and online hotel room reservations. He believes that self storage rentals will move more and more online much like hotel room reservations. I believe this forecast makes a lot of sense.

When was the last time when you shopped online for a hotel room you:

found a prospective room online
Called the hotel and asked questions,
Went to the hotel to see a room
Then filled out some paperwork so that you could sleep in the room
Came back the next week to actually use the room

When it comes to hotel rooms, I just search online and find something that gets good reviews or is a brand I trust, check the rate, and make a reservation. I can see this happening more and more in storage, especially as operators get more internet savvy.

What would facilitate this transition? What can you do to get ahead of the curve and help potential customers move to a reservation over the internet after merely checking out your website? Here are some thoughts:

Add more pictures to my facility website
Add a virtual tour
No, wait. Skip the virtual tour and grab my camcorder and walk through the property. Add some fade-ins and fade-out transitions and a voice-over narration and BAM! its ready for the web. (Thank you YouTube for lowering everyones expectations for production quality).
Add a bunch of authentic testimonials and format them so that they look like the comments on travel sites.
Link from my site to the reviews on sites like Yahoo! Yellowpages, Citysearch, Superpages, and Yelp.com.
Even better would be to find a way to embed those reviews right into your facility website.
Prominently display a badge on the site showing a. it's secure b. Your membership in the Self Storage Association c. your membership in the California Self Storage Association d. your membership in the BBB and d. your membership in the local chamber of commerce.
Make as wild a guarantee of quality and satisfaction as possible to lower or eliminate the consumer's perceived risk of doing business with you.

What else would you do?

Ideas from the CSSA Self Storage Owners Summit - Kent Christensen

2008-07-19T00:11:30-07:00

If you operate self storage properties you need to read the next two sentences. You can increase the rental rate on existing customers 7% and it will have no impact on the number of move outs. You can raise rents as often as every 9 months (rather than every 12) and it will have no impact on the number of people who move out.

I learned this from Kent Christensen, CFO of Extra Space. They run statistical experiments on their customer base. For example, 25,000 customers get no rent increase and 25,000 in the same markets get a 5% rent increase, another 25,0000 get 6% etc. and then the statisticians compare the move out data among the control and experimental groups. It would be fun to have such a capability. Its also an interesting advantage to having a lot of scale. In the end, I'm thankful for him for sharing. It will have a huge impact on how we run our stores moving forward.

Evidently, he already disclosed all of this info in a public call with analysts. Makes me think dialing into future quarterly calls with the public REITS might not be a bad idea.

According to Kent, the softest markets from Extra Space's perspective are Atlanta, Florida, Philidelphia, and Southern New Jersey. The strongest markets are Boston, Chicago, Dallas, Houston, and Northern California.

All of the panelists commented on how development has slowed. Extra Space polls all of its stores monthly about new construction activity in its trade areas. In 2007 they were impacted by 48 new competitors. In 2008 they have only seen 36.

Getting Unstuck at 0 and 90

2008-07-06T22:45:16-07:00

It seems like when you want to do something significant at the level of 100 there are two sticky parts. The first is overcoming the inertia of doing nothing and actually getting started. That is the part where you go from 0 to 1.

The other big challenge is going from about 90 to 100. At this point there are a lot of hurdles to overcome to actually complete the project or get the level of execution to where you want it. If you have been wise and have made consistent progress, inertia will now be on your side. Also you will have the goal in sight. Having it so close at hand makes asking yourself and others to give a final burst of energy to push you to the 100 mark is more realistic. Lastly, by the time you get to 90 you know that its something worth doing or else you are an idiot for taking it so far. At 0 its all blue sky and speculation.

Getting from 90 to 100 is by far more work, but you have more going for you. Going from 0 to 1 is the biggest mental and habitual block because it requires actually getting started.

Is there something you have been wanting to do but haven't? Take the first step and go boldly from 0 to 1 and get inertia on your side.

Most people see this as fairly self-evident in their own life experience. What you may not have considered are the people in your life you are trying to persuade or influence into doing things you want them to do. This rule applies to them too. So for those of you in a leadership role the question becomes, what can I do to help those I lead get from 0 to 1? How do I help them move boldly to get inertia behind them so that it is a help not a hindrance? And (assuming the project proves worth pursuing) how do I help them keep up the inertia so that there is something to carry them when they get to 90 and are feeling weary?

Family First

2008-07-06T21:41:19-07:00

My last post was exactly 7 months ago. It was also 5 days before my fifth child was born. Since I typically blog after hours, having an infant in the house on top of my 4 other kids has put a cramp in my blogging muscle. I hope to be more consistent moving forward.

Commercial Real Estate Investing and Property Management Require Two Different Skill Sets

2007-12-06T21:28:23-08:00

Crescendo Properties has acquired 16 commercial properties valued at over $100 million over the last 5 years. We've also acquired or leased, and arranged for the debt and equity financing for several Splash and Dash Carwash development sites. We also manage our portfolio properties. From this experience I've discovered that real estate investment and property management require two completely different skill sets.

If you consider yourself an investor or developer and are able to you grow your portfolio to more than one or two properties you need to do some hard thinking before you plunge into doing your own property management.

Don't believe me? Consider this...

Successful investment requires an understanding of market cycles, financing, cash flow forecasting, due diligence, and contract negotiation.

Successful property management requires an understanding of operations, leases, facility maintenance, marketing, hiring, training, and bookkeeping.

Investment companies tend to be very lean with small staffs full of well educated and intelligent people that don't require a lot of managing.

Property management firms require professional managers because they have larger staffs with more hirearhy. By professional managers, I mean people who know how to give direction to their direct reports, give adjusting and affirming feedback, coach and develop direct reports, hire, discipline, and fire employees. They need to know how to train and coach.

What it really comes down to is this question. Are you willing to do the hard work of developing the second and different skill set within your company? If not, you are better off hiring a professional third-party management firm.

If you operate self storage properties and want to swap ideas shoot me an email and we'll talk.

Back Against The Wall

2007-12-03T06:45:00-08:00

Crescendo has one portfolio property that is struggling... a lot. Our back is against the wall with it, and that is a gut-wrenching place to be.

The one silver lining about being in a position like this is that you start looking at operational changes and marketing strategies from the perspective of not having anything to lose. In one sense, this is a powerful place to be mentally because it allows you to try things you wouldn't have tried before.

All of the activity, creativity, effort and freedom to try may lead to a breakthrough. A success with a strategy or tactic never tried before. (I can already think of a few things we are trying that have huge potential). Not only could that breakthrough be used to benefit the struggling property, but can be replicated and leveraged at other portfolio properties. What would you do if your back were against the wall? Maybe there's a breakthrough there, just waiting to happen.

All in Rates

2007-12-01T07:46:00-08:00

Heres a chart sent to me by Wells Fargo that shows this year's history of their break-even all-in rate on conduit loans. Since these represent "breakeven" levels, you need to add 25 - 35 basis points to get to what your rate as a borrower would have likely to been.

CMBS and Credit Spreads

2007-11-30T23:33:15-08:00

According to several lenders I've been in contact with spreads on CMBS or conduit loans are now in the 250 basis point range. This is up from a low of around 100 basis points earlier this year. Although I've talked about swap spreads here before, the most recent action has been with the movement in credit spreads. What I'm asking and everyone else is asking is, "Where are spreads (and rates) going and how fast are they going to get there?"

Here's my thinking:

There was an unusually high number of b-piece buyers in the market in Februrary and March of this year and spreads were getting unreasonably low at the same time that lenders were getting more aggressive with their terms and looser with their underwriting standards. As an example we closed an 80% LTV loan with 10 years interest-only at around 120 over the 10 year treasury in February of 2007. As long as the b-piece buyers were in the market buying the bonds the lenders were happy to push the risk envelope on their loans.
The sub-prime meltdown starts in May 2007 and many b-piece buyers get hurt. Many of these buyers were banks from around the globe who were trying to boost their yields and get outsized profits by purchasing the lower-rated CMBS. This is important to note because these buyers are not typically market participants. However, their added participation and aggressive buying caused credit spreads to sink to unreasonably low levels.
Once the bond buyers started getting hurt they pulled out and spreads widened. Conduit lenders are still taking losses because they can't profitably sell the b-pieces of their loans or they can't sell them at any price and are carrying the first-loss pieces on their books.
Many conduits stop originating, which means less competition for loans.
Underwriting standards tighten: less IO, higher debt coverage requirements, fewer earn-outs, lower LTV.
B-piece buyers are coming back into the market, but in smaller numbers.

The combination of the more conservative underwriting and the improved liquidity afforded by b-piece buyers indicates to me that spreads are going to come back down. I'm targeting credit spreads under 200 bps by the second quarter of 2008. Eventually I think we'll be down around 160, but I'm very uncertain about the timing.

Brad Anderson, a CMBS originator at Wells Fargo and all around good guy, pointed me to the recent purchase of AAA rated bonds by Wells Fargo. This is another indicator that tells me that spreads are going to come down. It seems that Wells thinks the yields are high and the bonds are cheap. They are betting that the bond prices will go up on tighter spreads in the future.

So, what is a property buyer to do? IMHO, I believe that one should look at the many portfolio products that lenders are coming out with before jumping into a CMBS deal. This means more work on the part of the borrower because your favorite CMBS loan correspondent may not quote you anything but the on-balance-sheet program that his/her home institution is offering. Also, as many have commented, life insurance companies may be a good alternative for fixed rate, non-recourse financing.

Consumption Vs. Production

2007-11-30T14:19:55-08:00

It's easy to consume.
Read email. Watch a movie. Channel surf. Sit in a meeting and listen to other peoples' ideas but don't really participate. Dial into a conference call, turn on the speakerphone with your end muted (the modern equivalent of the cloak of invisibility) while you surf the web or read email instead of really engaging in what is happening and adding to the dialogue, ideas, or content.

It's much harder to produce.
Successful people, influential people, interesting people, produce things for others to consume. They are producing breakthrough ideas and acting on them to get results. They participate in meetings and add to the content. If the meeting is poorly run and a waste of time, as so many are, they are doing something to make sure things are better next time.

Please don't get me wrong; there is a productive activity that is neither producing nor consuming.

Its called preparing. The problem is that often consuming looks a lot like preparing. People waste a lot of time fooling themselves that they are doing the one when really they are doing the other. (This happens all the time with attendees at conferences and trade shows.)

After days, weeks, or months of consuming, will you be any closer to your goals? I'd rather be a producer, wouldn't you?

Quick CMBS Update

2007-10-08T22:02:26-07:00

This was sent to me today from Brad Anderson of Wells Fargo:

"The market saw significant tightening in CMBS AAA’s. The tightening was all due to secondary market trading, not new CMBS issuance. The tightening related to a positive September jobs report coupled with a major revision of the August report which also drove the 10-year U.S. Treasury up seven basis points. Some feel that the credit spread rally was exaggerated, since spreads have tightened considerably over the last few weeks. However, we should have price guidance on a TOP pool this week to get a better sense of pricing for new issuance. While good economic news has had a positive impact on CMBS credit spreads, it has had a negative effect on bond yields. It seems like all-in interest rates have maintained equilibrium over the past couple months due to what has become an inverse relationship between CMBS spreads and the U.S. Treasury index."

The bad news is that the all-in rate hasn't improved. The good news is that as more CMBS pools are priced, lenders have a better sense of breakeven and spreads will stabilize. With stable spreads borrowers have a sense of what their financing cost is likely to be over a 3 - 6 month period and the real estate markets will be better able to factor in the cost of capital when valuing deals.

Customers, Leg Lamps, and a Note From Your Stuff

2007-10-03T00:17:00-07:00

In a previous post I talked about an idea we hatched to reach out to our current customer base for referrals. We wanted something that was interesting and would stand out from the regular statements that we send them. The campaign also has to be motivating enough and easy enough to act on that our customers will actually do something.

Maybe I'm over analyzing, but storage isn't the easiest thing to make word of mouth worthy. How many times has your local storage facility come up in a conversations with friends? Probably not very often unless you are in the business. Storage is not new or cool. My guess is that if you were using storage because you have too much stuff, you may have even been a little embarrassed to admit you were paying for a place to keep your overflow.

So here's what we did to get storage out of the closet (pun intended), and make it fun.

Each customer received the following mailer written as though their stuff that is in storage is sending them a postcard:

Front

Back

Click for Larger Image (Note the web address: www.notefromstuff.com)

These were mailed to each of our existing customers. The web address will be more prominent on future versions. The idea behind the micro-website was to allow people to share the referral card/offer with more people more easily, i.e. electronically. My guess is most people are not noticing the URL.

I like the campaign because we can track our results. I'm not sure if this campaign will be effective, but the only way to know is to test it and measure it and we are now on our way to doing that. We know if it generates actual new customers because to redeem the offer they will have the card or an email generated from our micro-site. Traffic to the micro-site is also easily tracked. We are also using a tracking number on the card so that all of the calls generated by the mailed piece, the micro-site, or the follow-up pieces are automatically logged as being a result of this campaign.

Here's the piece that will piggy-back in the envelopes that carry our customer's bills for the next several months as a follow up.

Front (these are 1/4 the size of the original mailer, maybe smaller)

Back

Kinda like a ticket - each section is micro-perforated so it can be torn off and shared.
We should have put the www.notefromstuff.com URL on these too! Live and learn.

I'd love it if you leave a comment to tell me what you think.

Swaps - How They Affect Conduit Loan Pricing

2007-09-19T21:45:06-07:00

If you've financed property with a conduit loan, you have heard the people at your originator of choice talk about swaps, swap spreads, and that they can impact the interest rate you will pay on your loan. I wanted to know more about swaps and now that I have some answers, I thought I'd share with you. The information here is pulled from two sources: an email interview I had yesterday with Damon Reed of Capmark Finance (Capmark bought GMAC Commercial Mortgage over a year ago), and from the Bridger Funding website.

Damon Reed explains the pricing process: "In the past, lenders would determine what breakeven pricing was and then add on [their] profitability to the spread along with any other add on’s (I/O, forward rate lock, etc.) “break-even” would move as deals sold in the market and as swap rates moved up or down. Generally, as swaps increase, your spread increases on a one for one basis. Today, some lenders are quoting deals over swaps [rather than over treasuries] due to the volatile market."

Background on Swaps From the Bridger Funding Website: (See the source here)
Swaps -- also known as interest rate swaps -- are an important determinant in the pricing of most fixed-income instruments, including Commercial Mortgage Backed Securities (CMBS). Swaps are a security that most financial institutions utilize to manage interest rate risk. Interest rate risk reflects the potential impact that movements in general interest rates (e.g., U.S. Government Treasury Securities) will have on the value of fixed-income securities. For instance, as interest rates increase, the price (value) of fixed-rate bonds tends to decrease (at higher amounts for longer term bonds).

Swaps are agreements that reflect the notional exchange of fixed-rate interest payments for floating-rate interest payments. This allows an institution to hold a floating rate security, for instance, but effectively receive a fixed-rate of interest for the like term. Although there may be a cost to hold the hedge in place, the "insurance" premium is worth it to most institutions. While the physical exchange of interest payments doesn't necessarily take place, the market price of a swap contract fluctuates in such a manner as to emulate the exchange of payments. The market for swaps is very deep and liquid, and exists because different investors have different views of the direction of interest rates -- not to mention different exposures to rising or falling rates.

The swap yield, or rate, is the fixed-rate of interest paid (or received) in an interest rate swap contract. This yield is equal to the like-term U.S. Treasury Security yield plus a "risk premium", which is referred to as the "swap spread". Think of the swap spread as a generic risk premium that the market prices in to fixed-income securities to compensate for general interest rate risk. CMBS bonds, like most asset-backed bonds, are priced not just over like-term Treasury Securities, but swap spreads as well (in addition to asset-specific credit spreads to account for perceived risk of the subject asset class).

If swaps are an important determinant of CMBS value, why aren't they used more often as a benchmark in quoting CMBS conduit loans?
While larger CMBS conduit loans are often priced over swaps, the traditional practice of the industry has been to index their loan spreads only over the like-term U.S. Treasury Yield (with an increasing caveat explained in the loan application that allows for adjustments to the interest rate based upon swap spreads). The Treasury yield remains the most popular loan pricing index because it is a very relevant determinant of CMBS bond yields, and tend to be more volatile than swap spreads or CMBS-specific credit spreads. In addition, Treasury yields are better understood by many property investors, who find that it’s easier to locate the current Treasury yield in newspapers and web sites (although a few sites, like BridgerFunding.com, also display swap spreads.) Find swap spreads here.

How can swap spreads affect your mortgage interest rate?
Sustained increases in swap spreads usually result in lenders’ raising their loan spreads (and/or inserting language in the loan application that adjusts the interest rate for future changes in swap spreads). In addition, if your loan’s interest rate has not been locked, an increase in swap spreads could have a material impact on the value of your loan. Accordingly, in rare circumstances the lender may work with you to adjust the interest rate when it is locked to offset some of the decline in value. The impact of changing swap spreads affects all mortgage players equally.

What factors tend to cause swap spreads to increase?
Typically, interest rate swap spreads will rise with Treasury yields. This is especially the case when the market starts to perceive that higher Treasury yields may last for a while. As interest rates start to rise, the value of fixed-rate bonds decreases, which tends to increase interest rate swap spreads. In other words, the generic risk premium expands in the face of expectations for rising rates. In addition, swap spread movements can be exacerbated by the aggregate impact of asset-backed security hedging, which often becomes acute with quick jumps in interest rates.

As Mr. Reed said when he referred me to the Bridger information, "This will give you some color on swaps, but again it doesn’t help you in today’s market because we are just guessing where break-even is today. Until all the stacks of a CMBS sells in the market, spreads will continue to be a guessing game. I expect this to flush out next month as most of the supply will be gone."

In the interest of full disclosure - I've done many deals with Damon, and a few with other originators. I have a sense of what kind of service is standard in the market. Damon and his team go well beyond "standard"; they have executed far better than any lender I've worked with. That's why I went to him to help me with this post. That's why I'm plugging him and his team. And that's why we keep doing deals with him even though we are in California and he is in Birmingham, Alabama. If you are looking to do a CMBS/Conduit loan I suggest you give them a shot at your business.

6 Nuggets from the Self Storage Association Conference

2007-09-15T19:12:24-07:00

A few things I learned at the Self Storage Association conference recently held in Las Vegas:

Operations

Ask customers when they are at the counter how many stores they called or visited before they came to rent with you. According to Ken Nitzberg from Devon Self Storage, 53% of his customers don't shop around. It's a strong signal that the customer is not price sensitive.This allows you to "spot price", i.e. offer a higher price and/or give fewer concessions than you normally would.

Dan Hobin at G5 Search Marketing has a very innovative approach to lowering your customer acquisition cost. He has put together a solution that not only gets you marketing online in a meaningful way with little hassle, but has a great way to track the effectiveness of your spending. I haven't tried it out yet, but he got lots of raves at the conference from some of the larger operators. We plan on giving his service a try with a number of our portfolio properties.

Devon Storage Group is able to get an 89% penetration rate selling insurance to cover their tenant's stored goods. If I understood Ken's comments correctly, they achieve the high penetration because they require every tenant to purchase insurance or show proof that they have their own coverage. Sounds like it might be a bit difficult to execute if you are in a soft market. However, it's probably worth trying; by my estimate that is $400 - $800 to the bottom line each month because there is really no incremental cost to the add-on sale.

Jefferson Shreve, president of Storage Express made me wonder why we don't at least attempt to rent the space over the phone. I mean actually close the deal. Most operators talk about trying to convert phone inquiries to store visits and store visits to signed rental agreements. Storage Express operates nearly 70 locations with no on-site staff. They close every deal over the phone or online.

Finance

Conduit Lenders are starving (no surprise). However the conduits that are quoting deals are offering spreads of about 200 basis points over the ten-year treasury yield. That is a big spread, but the all-in rate is still less than 6.5%. Not as good as we were seeing 6 months ago, but still very low relative to historic rates.

LIBOR typically trades within a quarter point of the Fed Funds Rate. The primary reason it is much more volatile is because there is no Federal Reserve intervening in Great Britain.

Meetings

2007-09-12T23:35:43-07:00

I know that this isn't really on-target with the commercial real estate focus of this blog, but its on my mind so I thought I would share.

Here are seven good reasons to have them:

To build personal relationships
To give public recognition
To make a presentation that requires visuals or group interaction (preferably both)
To inspire the group in a way that a memo or email never will
To collaborate, discuss, debate, and decide
To brainstorm
To give candid, personal feedback on someone's performance

Here's some ways to make meetings a frustration

No one takes charge and keeps things on track
Meet only to give and receive reports that could just as effectively been communicated in an email or memo.
Discuss, at length, items that pertain to only a portion of the assembled group (the group within the group need their own meeting)
Start late and go over the allotted time
Stifle discussion or conflict - if you are having a "discussion" but most are not talking and the others are only agreeing, there is a problem.

Training Self Storage Employees

2007-09-12T22:22:18-07:00

Three factors have pushed us to train our employees more effectively.

The self storage business is becoming increasingly more competitive.

We are buying properties with a value-add strategy and that means we need excellent execution at the operational level.

Our portfolio is spread out geographically which means we need managers who can be effective without a lot of continual hand holding because it is difficult to visit all of our locations as often as we would if they were all concentrated in one metro area.

Although we don't have it down yet, here are some of the things we are learning as we have been training our employees to be more effective converting phone inquiries to store visits and rentals.

Training in a teleconference environment is difficult, but it is better than nothing. You have no idea who is engaged and who is falling asleep.

It is more effective to follow up any teleconference training with some written materials that outline everything covered while on the phone. It is likely that the people working behind the counter at a storage facility were not good students when they were school age. They are probably not taking notes, and if they are they may have messed them up.

Record the teleconference/webinar and let the participants watch or listen to it again. If you are interesting and dynamic enough in your training that they listen to you again you should take it as a compliment.

Follow up relentlessly with activities that reinforce the learning and force the participants to apply their newly acquired knowledge.

We have our on-site managers review and critique their own "secret shopper" calls. In addition, they listen to the calls of their colleagues and vote for the best one. We are starting to record live calls so that our employees can listen to themselves interact with real live prospects, not mystery shoppers.

Make the follow-up learning/application activities as fun as possible.

If you can't make it fun, at least make it so obviously relevant to their job performance that the participants want to engage in the activities. So far we've made it a contest with a prize awarded by the voting of their peers and a second "editors choice" award decided by me so that I can point out calls that have an excellent section that can be used to illustrate one of the sales strategies covered in the training. We need to get more creative in this regard.

Once you train your staff and begin monitoring how well they perform the new behaviors, you will quickly realize that some are catching on much much more quickly than others, others improve slowly, and a small group makes almost no improvement at all.

The ones catching on the fastest need more attention and coaching, not less. Eventually they can help the middling group.

The ones who are making no progress probably have an attitude problem. If you care about the behavior enough that you are taking the time to train and monitor, then you should consider replacing these people or changing their role.

Your employees with positive attitudes will be grateful that you are helping them do their job better and you will improve their commitment and loyalty to your company.

Training allows you to hold your employees to a higher level of accountability because you are taking away excuses for poor performance.

Training is also a tool to help build camaraderie among employees who rarely interact, because through the training they have some shared history.

It's not all about the phone, they need training on how to handle email inquiries as well.

I wish we started sooner.

What's Coming Up

2007-09-10T22:30:35-07:00

Sorry for going radio-silent on everyone. I was on vacation for a week and then I spent 3 days in Las Vegas visiting portfolio properties, having a marketing pow-wow with my property management staff, and attending the Self Storage Association conference and trade show.

Here's what's on the docket for the next few posts:

What I learned at the conference in Vegas
Talking a little about Swaps. What they are and how they affect spreads on CMBS loans.
Talking about what I've learned trying to train employees
Of course I'll talk about the loan assumption I've been posting about recently

My two oldest daughters play soccer, and I'm the coach. I ran my rear end off this evening, so I'm pooped. I'll start with these topics in the next day or two. Goodnight.

Assumption Update

2007-08-28T17:52:59-07:00

Let me first say that the head of the Transactions Group at Key Bank, Peggy S., is a gem. Since getting involved with our file she has been extremely responsive and is a very reasonable person. I sincerely enjoy working with her.

She clarified with me today that they don't have an issue with our Buyer assuming the loan. They are happy to recommend him. They only have an issue with him self-managing the property.

So, here's the learning point. When dealing with a Conduit Loan/CMBS loan, the Special Servicer is looking for an experienced third party management company or a self-managing buyer who has experience operating the same type of property, preferably in the same market area. It doesn't really matter if they have other relevant experience if it doesn't fit into their narrowly defined box.

They are willing to reconsider their position in 18-24 months after the buyer has some experience with the property. She commented that if the DSCR stays strong and the property continues to perform well, a request to self-manage at that time would likely be approved.

As you can tell, my tone is a lot less frustrated today. I have renewed hope that we will get this deal done.