During our first Navigating Uncertain Times webinar on March 27, Storable CEO Chuck Gordon was joined by Kerry Richard, SVP of Operations for Simply Self Storage, Bill Roberts, Director of Operations for StayLock Storage, and Brad Minsely, Co-Founder of 10 Federal. Together the panel discussed how they are navigating their operations through the COVID-19 outbreak and current economic downturn. If you missed out you can watch that seminar here.
We had the audience submit questions for our panel to answer after the webinar concluded. There were a lot of questions, naturally, so we grouped together similar questions that we felt were most relevant at this time.
Our next panel discussion is this Friday, April 10, and they’ll answer even more questions from operators in the industry. If you’d like to submit a question for our panel you can do so with this form.
Q: What are your predictions for how collections and delinquencies will look in the coming months?
Bill Roberts: “We expect delinquencies to increase. How much will depend on when the economy gets working again, how long that takes, and unemployment and bonus checks.”
Kerry Richard: “I think it is too early to tell. I do believe we will see a higher level of delinquencies as our customers have a harder time paying. I think we have to wait and see how the Government plans help customers/businesses and how soon the virus gets under control. Too many variables right now.”
Brad Minsely: Hard to say, but here are some statistics we find meaningful. In the 2008-2010 recession unemployment increased from about 4.5% to 10.1%. In reviewing the annual reports for PSA and CUBE during those periods, both experienced very similar results with respect to Same Store Revenue Growth over those periods… from 2008 to 2009 both saw a 4.0% decrease in Same Store Revenue. From 2009 to 2010 their Same Store Revenue was flat and thereafter it was positive. So, the question becomes, will this period be worse than 2008-2010? And how does the precipitous drop in unemployment affect performance versus the +18 months it took back in 2008-2010 to reach 10% unemployment… my guess is this period will be worse, but I don’t think you will see a collapse in rent payments.”
Q: How are you handling overlocks and access to units for delinquent tenants?
Bill Roberts: “To this point, we have continued to limit access for delinquent customers.”
Kerry Richard: “We are following all state and local mandates.”
Brad Minsely: “We are using our DaVinci Lock system which allows for the renter to remove their overlock on their own. DaVinci’s are also used on securing vacant units and the method is the same there as well where the new renter can remove the lock on their own.”
Q: How are you handling tenant ID capture for online move-ins?
Bill Roberts: “Customers email or text a photo of their ID. Just as they had been doing before the crises.”
Kerry Richard: “Currently working through that with the customer via electronically collecting it or have them drop it off on site.”
Brad Minsely: “We do not require capturing any IDs for online move ins… we have been operating that way for five years without any issues.”
Q: Can you speak to the challenges you’ve faced in transitioning tenants to electronic payments and how you’ve overcome them?
Bill Roberts: “No challenges. The crisis has given customers additional incentive to use this form of payment. We always encourage tenants to use autopay or pay online but we’ve seen an increase in the number of tenants paying this way. We do make it easy for them by including links to our pay online portal in the emails and SMSs we normally send.”
Kerry Richard: “We have not seen a large challenge. Most customers are very open to paying online, especially now.”
Brad Minsely: “We experience this when we acquire facilities and a lot depends on the starting point… worst case, if a facility is 100% cash / check and has been around for a long time with a tenant base that is older then we see up to a 10% drop in occupancy as those tenants fail to transition… most of the time the attrition rate is less than 5%.”
Q: Are you asking vendors for a discount on services at this time like janitorial, landscaping, etc?
Bill Roberts: “No.”
Kerry Richard: “We have not yet but we are currently working through our landscaping contracts. We do not have janitorial contracts except at the Home Office.”
Brad Minsely: “Not at this time.”
Q: How are you all evaluating properties in this current environment for those that are in acquisition mode?
Bill Roberts: “We are moving forward with a property we recently put under contract. Will not pursue new acquisitions until the economy gets back to work and then we will re-evaluate.”
Kerry Richard: “We have put acquisitions on hold for now until we see the market stabilize somewhat. What we are hearing in the market is that all transactions that had non-refundable earnest money up are moving forward to close. However, we are not hearing the same thing in regards to transactions that were not non-refundable. We have heard that buyers have walked away from some of those transactions and we would anticipate that would continue. This is worth monitoring as it could change daily.”
Brad Minsely: “We are closing what we have in the pipeline however we are going to pause thereafter for 60 days and will reevaluate at that time… I will be interested to see what delinquencies are looking like as well as the debt markets, etc… if things get bad enough, then our acquisition criteria may shift from acquiring ‘value add’ opportunities to ‘distressed’ opportunities.”