After Public Storage bought Shurgard Storage Centers in 2006, a handful of Shurgard employees decided to set out on their own. They had amassed years of experience and knew the market well.
More than eight years later, the business founded by those former Shurgard employees—West Coast Self-Storage—has grown to 28 locations in Washington, Oregon and California. Most are managed for independent operators, but the company has developed eight facilities on its own and continues to build. The company also owns another facility that it bought.
“We are like a three-legged stool,” said John Eisenbarth, vice president of operations and co-founder of West Coast Self-Storage. “We are a management company, we are a development company and we are an acquisition company.”
On the development side, we are aggressively going to turn over lots of rocks before we find the one gold nugget.
— John Eisenbarth, vice president of operators at West Coast Self-Storage
This month, the company opened a 58,000-square-foot facility in Redmond, WA, and is gearing up to open a facility in Lake Oswego, OR. Another facility will start construction soon and should open toward the end of 2015.
The other principals of West Coast Self-Storage are Jim McNamee, Mike Spaulding and Steve Tangney.
Eisenbarth oversees operations of the company’s owned and management facilities. The Storage Facilitator spoke with him about how West Coast Self-Storage is navigating the current development cycle and competitive environment. Here is an edited transcript.
Your company has grown through development during the last few years when self-storage construction was mostly at a standstill. How and why did you take this approach?
The best thing to do is develop when no one else is developing. We had to find private capital instead of going to banks. At the time, we were getting good pieces of land in great trade areas for a good price. Having access to private capital and having the market conditions as they were allowed us to do that.
Is it harder to find land now?
We are still able to close, but there are a lot more people sitting at the table when we buy a piece of land, and not just storage folks. Over the past two years, a lot of people are getting in the game. The buying market is getting more competitive.
Does that make you any less interested in development? How does the shifting environment shift your strategy?
We are still going to be developers. We are also looking at existing facilities for possible acquisitions. The key will be to find one that has some opportunity and upside to grow the revenues. An example would be a facility that is undermanaged or one that we could add features and amenities, allowing us to get a lift on the current revenue.
On the development side, we are aggressively going to turn over lots of rocks before we find the one gold nugget. Our focus is on strategic trade areas. We are looking at them every day, knowing we are going to turn over a bunch just to find one. Anybody getting into it today is starting fresh. We have been doing it for many years before West Coast and aggressively over the past eight years, and we haven’t stopped.
West Coast Self-Storage has had a lot of success in third-party management. What sets you apart from other third-party management companies?
Some of the bigger REITs make decisions globally and centralized for their stores. We make decisions in the trenches—by size, by category and by customer—for a specific trade area that a store is in versus looking at a region or a big territory and making one decision for all. We look at the store market, region and industry overall, but also take a very granular view of a specific market or trade area.
How does a granular approach come into play in terms of something like revenue management?
We use technology, but there is also a human side of things. Take rate increases, for example. A public company will give a rent increase at X percent across the board. With us, we will look at every single customer line-by-line and unit-by-unit. That way, you maximize your rate increase opportunity. Someone paying well below the board rate should get a greater increase than someone currently paying closer to the board rate. If you do it more globally, you will miss at the top and bottom. We feel our hands-on approach allows us to maximize the revenues, giving the investor the highest return on their investment.
What about branding?
Unlike REITs that want to brand facilities with their identity, with us you can name your facility West Coast Self-Storage if you like or you can name it XYZ Storage, and we will build your brand.
We have the utmost respect for the public companies and other management companies. The difference with West Coast is we are very hands-on with our management style. We have a fun and uncommon culture, incredible team members, extensive training and years of experience in the industry, and allow our owners to keep their independence if they prefer.
When you compete directly against a storage REIT, is it because you built near the REIT or the REIT built or bought near where you already had a location?
It will go back and forth. Over the past eight years, it has been us going into markets they are already in since we are new. We have been building and developing on the West Coast, and they have not been active here. Now, with some of the REITs shifting to development again, they will come in after us and we will be competing in the same trade areas to get there first. I am confident with our real estate team, strategy and experience that we will be successful in securing the better location.