A $30 Million private equity fund is out to get mom and pop with advanced technology. The MG Self-Storage Fund is buying inefficient and poorly managed self-storage facilities from "mom-and-pop" operators and converting them to remotely-managed unmanned facilities, greatly improving the overall renting experience as well as NOI and investor returns in the process. Properties that have been on the platform for a minimum of six months have increased net operating income by an average of 18 percent, which when coupled with debt leverage, equates to a 52 percent increase in the value of equity invested.
Sales
The fund's sponsors convert the facilities through the use of a proprietary self-serve kiosk, a robust website, and a 24-hour call center, eliminating the need for an on-site property manager. The leasing-enabled website allows prospective renters to select a unit, enter payment information, electronically sign the lease and move into the unit all on their own. The website allows tenants to lease a unit 24 hours a day, whereas a typical unmanned competitor's facility can only rent during business hours.
A leasing-enabled kiosk performs all the same functions as the website and doubles as a pay station and information terminal for customers. Further, it establishes an “office” where renters begin their onsite journey.
Each unmanned facility also features a model unit, since after price, the next most common question from customers is, “What size unit do I need?” Since the on-site manager’s office is no longer needed, it is readily converted into a model unit with smaller unit sizes marked on the floor using colored tape. Placing this near the kiosk allows customers to visualize the space they’ll need.
The call center is the most critical sales channel, since seventy percent of the leases originate here. After answering the prospective renter’s questions, units are rented over the phone, or the customer can complete the lease at the kiosk or website.
Lastly, it's critical to have an online presence through a Google My Business listing and Google AdWords, since none of the above measures are relevant if the customer doesn't know that the facility exists in the first place.
Operation
For payments, the facilities only accept electronic—no cash or checks. They also use a patented overlock system, developed by the fund's sponsor, which allows the renter to remove it after paying their late rent.
The fund employs part-time maintenance techs who invest an average of 10 to 20 hours per facility per month, far better than the 160 hours per month for a full-time manager. A maintenance tech mows, blows, cleans, overlocks units, takes auction photos and handles other routine tasks. They’re experimenting with 360-degree cameras and virtual-reality headsets that will allow the maintenance director to be “present” with the tech to do things such as walk-throughs or troubleshooting a gate.
Through a partnership with U-HAUL, the largest truck rental company in the US, renters can rent moving trucks at select self-storage facilities. The process is completed entirely on the renter's smart phone from pickup to return without the need for an onsite employee.
Monitoring
They're also making the facilities safer through the use of intelligent monitoring systems which have AI-enabled cameras that analyze images and automatically identify abnormal conditions, such as if a door or gate is stuck open, sending out an alarm signal to the call center. Plus, the cameras can see thermally, so they can recognize if a climate-controlled building’s temperature is outside of its target range or if there’s water on the floor, indicating a leak. Smart self-storage facilities are equipped with an advanced server monitoring system to actively monitor each facility's network-enabled equipment to ensure that it works 24/7.
Challenges
Introducing advanced technology to self-storage has not come without its challenges, which can be divided into two categories. The first is defined as “the incident of failure rate” and the second is simplicity.
With unmanned operations, there is no one on site to deal with things that fail or break; hence, the goal is to get the frequency of something not working as close to zero as possible. There are a lot of amazing whiz-bang technologies out there, but if they’re not extremely reliable, they aren’t a good fit for unmanned sites.
Also, at an unmanned facility, there is no one on site to explain how anything works to the renters. Every process must be as simple as possible so anyone without prior self-storage experience can jump right in and execute.
Most tenants are remarkably comfortable with the facility's technology, as it is very similar to interfaces they’re already accustomed to, such as a website, kiosk or combination lock. It’s all familiar to them thanks to online shopping, Redbox and ATMs.
The MG Self Storage Fund’s automated platform has vastly improved the self-storage consumer’s experience, allowing renters to lease and access a unit 24/7, all while lowering operating costs and giving a solid return to their investors.
