Self-storage facilities hold the bygones and excesses of myriad lives. On Long Island they also hold the key for investors to make strong returns.
In recent months nine self-storage facilities have changed hands on Long Island through acquisitions by two larger firms. They include locations in Deer Park, Amityville and Lindenhurst purchased by Buffalo-based real estate investment trust Sovran Self Storage Inc., and acquisitions in Huntington Station, Islandia, Rockville Centre and Glen Cove by Storage Post, an Atlanta-based company with significant investor backing.
Additionally, Sovran signed contracts to manage and operate two self-storage spaces in Hicksville and Farmingdale with the intention of purchasing them in two years.
Smaller mom-and-pop facilities on Long Island also say they have been approached frequently this year to sell their properties.
Long Island "is a stable market . . . it's got the attributes that work for self-storage," said Diane Piegza, a spokeswoman for the publicly traded Sovran, which does business as Uncle Bob's Self Storage. "The population base, the income, the demographics."
Piegza and a spokesman with Storage Post both said they plan to pursue more acquisitions in the Long Island market. Both declined to name the businesses they purchased the properties from.
The local activity is indicative of a national pattern of consolidation among self-storage facilities as well-capitalized companies and real estate investment trusts scoop up the properties from smaller owners, industry analysts say. Underserved metropolitan areas such as New York City and surrounding neighborhoods -- where population density is high and space is scarce -- are especially attractive.
"Self-storage came through the recession a lot better off than other sectors," said Nick Malagisi, the national director of self-storage for Buffalo-based Sperry Van Ness International. "It didn't have losses other sectors had and rebounded a lot quicker . . . It's become an alternative for many investors."
The industry's low payroll to gross revenue ratio and limited legal liabilities also make it an enticing investment, said Jim Chiswell, head of Winchester, Va.-based self-storage consultancy Chiswell & Associates.
Dennis Forman, owner of Mr. D's Self Storage in Bohemia, said he gets offers from private investors and larger self-storage companies to buy his three facilities nearly every other month.
"I would qualify it almost as a Wall Street frenzy," said John Beyer, owner of Men on the Move, a moving and storage company based in Floral Park. "The REITS want the rate of return and security of investment that self-storage brings."
Beyer said he was approached by three REITS this year interested in buying his properties and has sold three of the four, because "the numbers made sense." He said he reinvested the money in buying two other self-storage facilities and is looking at a third.
TAX BREAKS HELP
Currently, the majority of self-storage ownership remains rooted in smaller privately held operations in the United States. Larger real estate investment trusts own about 11.9 percent of the overall industry, according to the Self Storage Association, an Alexandria, Va.-based industry trade group. But if the activity on Long Island is any indication, they're quickly scooping up more space, experts say.
Local officials have aided some recent self-storage deals. Sovran has been approved to receive tax breaks from the Nassau County Industrial Development Agency and the Town of Babylon IDA for renovating nearly all of its recently acquired properties.
Nassau IDA executive director Joseph J. Kearney said he recommended the approval because the Hicksville self-storage property Sovran took over would have otherwise been vacated. Three jobs will be retained as a result.
Robert Stricoff, the chief executive of the Babylon IDA -- which has given tax breaks to Sovran facilities in Lindenhurst, Amityville and Deer Park -- said small businesses use the facilities and those businesses in turn help the local economy.
SELF-STORAGE BY THE NUMBERS
New York metro area: 93 percent
National: 86 percent
Median rate for 100 sq. ft.
New York metro: $145
Source: Third-quarter 2013 statistics from Cushman & Wakefield