going condo by wanghonghx

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									                                                                                                                 condo-style storage

going condo
The Pros And Cons
Of Offering Ownership
By Poppy Behrens




I
    n February of 2002, when Mini-Storage
    Messenger first delved into condo-style
    storage, there were a few pioneering indi-
viduals exploring the concept of building self-
storage units that could be bought instead of
being leased. Finding people to interview for
that first article was tough, to say the least; it
was kind of like finding the proverbial needle
in a haystack!
    Without a doubt, that has changed over
the past five years. do an internet search               in addition, the philosophy of building to sell, says
today for condo storage or garage condos              Wright, eliminates a certain amount of risk. “the
and you’ll find a multitude of entrepreneurs          developer strictly focuses on the sale of each unit; and
who have ventured into condominium stor-              once one unit is sold, he moves on to selling the next
age for rVs and boats. Why have these                 one,” he explains. “in some cases, i have also seen
investments become so popular? the answer             the developer handle the finance portion of the sale.”
seems to have many facets.                               Jeff reynolds, co-owner and managing member
                                                      of colorado springs storage condominiums™ LLc,
What’s	Behind	The	Trend?                              believes that the condo concept is becoming popular
Like most specialty storage, condo storage            because the care, security, and amenities provided
is a very market specific endeavor. “in my            through condo storage is head and shoulders above
opinion, developing an rV condo site is driven        most leased-space storage facilities. Additionally, he        there     is   risk
by the ability to ‘flip’ the units as a real estate   perceives most rV owners as being astute enough to            involved for devel-
transaction,” says caesar Wright, president           recognize the waste that comes with paying monthly            opers, but in the
of Mako steel inc., based in carlsbad, calif.         rent compared to an investment in a unit they own.            right market, stor-
“With the recent increases in construction               Being committed to the highest quality of care             age condominiums
costs and land prices on a national level, a          and safety for its tenants’ property is a primary goal        can be a profitable
developer sees an opportunity to develop              for the developers of colorado springs storage                venture.
a site for around $35 per square foot, less           condominiums, which is protected by 24-hour cam-
the cost of the land, and has an opportunity          era surveillance, an on-site attendant, and a state-of-
to sell the units for plus or minus $80 per           the-art gated entry. As colorado springs’ only luxury
square foot.”                                         storage ownership facility, it also offers a clubhouse
    indeed, park place storage condominiums           with all the necessary comforts needed for business
based in Loretto, Minn., sets the starting price      or recreational use.
for its condo-style units at $54 per square              reynolds cites another plus for storage unit owner-
foot, depending on location. (the company             ship. “in most cases, these condo units will go up in
currently has five Minnesota locations and            value,” he says. “therefore, should the owners need
one in ohio.) those prices go as high as              to relocate or buy a bigger unit in the future, they are
$70 per square foot at its corcoran, Minn.,           money ahead.”
site, with office condo space in Burnsville
starting at $120 per square foot. in Billings,        A	Market-Specific	Niche
Mont., storage condos at ultimate space               ted deits is no stranger to the storage condo busi-
are priced at $82 per square foot for a               ness. As president of eucalyptus at Beaumont, a
700-square-foot unit, $76 per square foot for         private rV storage condominium project located in
a 00-square-foot unit, with its top of the line      Beaumont, calif., he has designed his project with the
1,450-square-foot ultra priced at $105,00—           serious rV or car enthusiast in mind. in many ways,
that just a tad over $73 per square foot.             he concurs with reynolds and Wright about why


suMMer/FALL 2007                                                                          rV & BoAt storAge todAY!                    27
       condo-style storage


condo storage has become popular. He             of the park. once developed, the park will        a place to store their motorhomes? it will
does, however, have some definite ideas          provide a wide array of active and passive        be a crisis in the making.”
of his own.                                      uses, including a 2.5 mile canyon and                 deits, whose typical customers drive
    “i can only speak for southern california,   lake, miles of walking and biking trails,         between 60 to 0 minutes to get to his
since that is my primary market,” says           a cultural terrace, orange county's larg-         facility, says that once rV owners get the
deits. “in short, there is an extreme short-     est sports park, a botanical garden, and          pink slip to move, the price for rV storage
age of rV storage in this area where raw         a tethered helium observation balloon             will skyrocket. “that is fueling a buying
land is nearly $2 million per acre. needless     that will be an icon for the great park.          frenzy in my project,” he explains, but at
to say, there are not many new rV sites          More than 3,885 of the 4,700 acres will           the same time, people just want the secu-
going in since you just can't make it pencil     be dedicated to open space, education,            rity of knowing their rV will have a place
out at those land prices. Additionally, there    and other public uses. in the meantime,           to live rather than having to hunt for new
is about to be a major hit on the rV stor-       however, part of the runway space has             storage every year or two.”
age market in just a few months.”                been leased to All star services as a 65-             According to deits, many storage
    the hit deits refers to is the ultimate      acre parking lot, which rV and storage            facilities are trying to accommodate rVs
development of the orange county great           industry experts say may be the largest           as an after-thought, therefore, the prop-
park, a 1,347 acre park on the site of the       motor home storage facility in the coun-          erty, spaces, and amenities are severely
former el toro Marine corps Air station          try. indeed, it has attracted rV owners           lacking compared to what the seasoned
in irvine, calif. After the base was closed      from as far as nevada, Wyoming, and               rVer is seeking. in addition, the cost to
in July of 1, the entire site was sold        germany.                                          rent an enclosed rV unit, if you can find
to the Lennar corporation for $64 mil-              “there will be more than 2,300 rVs            it, can run as high as $650 per month.
lion. As a condition of the sale, Lennar         looking for a new home,” says deits.              “that makes a purchase in my project
deeded 1,347 acres to the city of irvine         “these people have nowhere to go. All the         really pencil out well,” deits says. “the
for the orange county great park and             local rV storage facilities are full with wait-   economics, the emotions, and the limited
agreed to pay an additional $200 million         ing lists. can you imagine what will happen       supply are all playing into the rV condo-
for future development and maintenance           once there are that many rVers looking for        minium concept very well.”

                                                                                                   Balancing	The	Decision
                                                                                                   so what are some of the deciding factors
                                                                                                   when it comes down to building for sale
 FEMA Takes A Loss                                  “As you can imagine, a public auction of       for building to lease? “our decision to go
 On Sales Of Trailers                            so many vehicles could devastate the market       with condo storage rather than rentals
     In order to deal with the aftermath of for travel trailers,” said Michael A. Molino,          was based on national trends as well as
 Hurricane Katrina, The Federal Emergency president of the Recreational Vehicle Dealers            the local market,” says reynolds. “though
 Management Agency (FEMA) bought Association, in a letter to FEMA.                                 there are condo projects underway in
 145,000 trailers and mobile homes—a move           The unused units were part of a $900           colorado springs, my partners and i felt
 that some believe                                                      million      purchase.     there was room for growth here.”
 may be one of the                                                      Unfortunately, FEMA            reynolds admits that, “While the tradi-
 agency’s costliest                                                     realized after pur-        tional leased rV storage is a better busi-
 mistakes, especially                                                   chasing the trailers       ness model for the developer, we could
 given that thousands                                                   that, under agency         no longer ignore the reality that recre-
 of them are stored                                                     rules, those homes         ational vehicle owners are now demand-
 and rusting in more                                                    could not be used in       ing a better product that fits within their
 than a dozen loca-                                                     flood zones. In addi-      financial and investment mindset.”
 tions nationwide.                                                      tion, after Katrina,           danny olmstead, consultant and
     While FEMA spent                                                   many communities           broker for own Your own storage in
 $2.7 billion for the                                                   refused to allow large     Manteca, calif., says the owner of his
 purchases, most of                                                     encampments          of    project is also an rV dealer, so it was a
                         Photo courtesy of FEMA
 which were bought                                                      trailers. This left the    natural fit, especially with the city restrict-
 through no-bid contracts, it is now selling off agency saddled with the surplus that has          ing the parking of rVs and no facilities for
 approximately 41,000 of the trailers, netting been criticized by many. While FEMA oaid an         storage in the area. on the other hand,
 40 cents on each dollar spent by taxpayers. average of $18,620 for each of the trailers, as       for dan ryan of Bear caves storage, a
 More than 8,000 of the trailers have never of March 2007 it received an average of only           condo project located in redding, calif.,
 been used.                                      $7,367 for the 2,665 it had managed to sell.      the deciding factor was location.
                                                                                                       “in my family, we all have big diesel-
                                                                                                   pushers, so building something like this

28      rV & BoAt storAge todAY!                                                                                   suMMer/FALL 2007
                                                                                                                Condo-Style Storage


made sense,” Ryan says, noting that, in the     offer, the cost for condo developers is             what you are doing,” he says. “That has
beginning, building a traditional RV storage    higher than that of traditional RV storage          been a struggle since we first put pen to
facility seemed like a good idea. However       builders. “So, obviously the margins are            paper a few years back.”
because their location is not one with high-    smaller,” he says.                                      Olmstead offers this advice: “With
visibility, they knew from the get go that          Ariel Valli, president of Valli Architectural   condo storage, you really have to induce
would equate to more money spent on             Group based in Aliso Viejo, Calif., has a           the renter to buy,” he says. “They will ask,
advertising and marketing. “I think you can     different perspective on it. “The downside          ‘Why should I buy it?’” Therefore, devel-
build an RV condo anywhere, and people          to the developer is the longer timeframes           opers need to plan ahead and take the
will pick up on it and go there.”               needed for entitlements and construction,”          selling price into consideration. “Ask your-
                                                he says. “The condo mapping process                 self, ‘What price point do I need to be at
Is There A Downside?                            is time consuming.” Hence, standard RV              in order for it to make sense for someone
Sound too good to be true? While build-         rental projects are designed, approved,             to buy a condo unit?’”
ing storage condos for recreational vehi-       and constructed much more quickly.                      Deits admits that one of the biggest
cles definitely has a bright side, it does          “For me, I like to use the analogy that I       questions he had was what do if the
have some areas of concern. “In my              am diving into a pool head first and I have         project didn’t sell. “Thankfully, I don't
mind, the downside for the developer is         no idea how deep it is," says Deits. “That          have that problem,” he says. “However,
pretty clear: no residual income,” says         is exactly how I felt in the beginning. The         that’s the question the bankers ask—and
Reynolds. “While we are planning to offer       biggest downside was simply not know-               anyone doing something like this should
some units for lease, the major interest        ing what was ahead or if something like             also ask themselves the exact same
from customers has been in ownership.           this was even possible.”                            question; so you’d better have a good
Most of them understand that if they can            Now, two years later with most of his           answer—and plan B in place.”
afford it, they are getting the better end of   project sold out, Deits has a little more
the deal if they buy rather than lease.”        time to reflect on the challenges. “The             Poppy Behrens is the Executive Editor of Mini-
   Reynolds also notes that with all of         most difficult part is selling the concept to       Storage Messenger, Self-Storage Now!, Mobile Self-
the site and unit amenities these facilities    the cities and getting them to understand           Storage Magazine, and RV and Boat Storage Today.




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