Fresh new thinking for a tired old industry – or how to profit from sector changing ideas
There are few businesses as unglamorous as the storage business. Especially self-storage where you take your precious goods to the edge of town, put them in a grotty building and pray no one (or no thing) gets at them. Fresh new thinking for a tired old industry – or how to profit from sector changing ideas
This was the impetus for entrepreneurs Don Bannister and Jonathan Wheler to transform a tired, dirty industry and create a growing company from it -- and for investors to profit from their expertise. Bannister and Wheler came from the shopping centre development and real estate industries where they learned about customer service and creating ‘the shopping experience.’ In just five years, they’ve built seven new dynamic self-storage facilities across Canada.
The newest, Spaces Self Storage (www.spacestoronto.com) at 356 Eastern Avenue, in which Newport Partners has an investment, in Toronto’s downtown port lands, is as revolutionary as the others. First, it looks more like a condo building or office than any storage facility you’ve seen. It’s as clean as it is airy. Its five floors are air conditioned and heated. There’s a retail store at the entrance where you can get boxes and other packing supplies. It’s open 24 hours a day. Each locker has its own security code. Everything is recorded on video. There’s a staff and yes, they’re both knowledgeable and friendly. You can even use their truck free of charge, and their offloading area is entirely enclosed in the building. So you’re not freezing to death offloading in the winter, and you feel safe at night too. But most of all, Eastern Avenue and the other operations are in new buildings in the heart of the city.
It’s a business and an investment opportunity that is benefiting from the demographics of Canada’s aging population. Bannister explained, “Many boomers have reached the age where they’re down-sizing. Or their kids have grown up and left home, so they’re ‘decluttering’ in order to sell their house. These same boomers also have parents who may be moving into an assisted living facility, and have furniture to store as a result.”
Canada’s large base of small to medium sized businesses is also a source of opportunity for the company; as they need to store financial records and even seasonal merchandise for owners of retail operations.”
If this all sounds pretty easy – transforming a service-averse sector into a highly service-friendly one – it isn’t. Said Wheler, “In many ways we really are a marketing organization disguised as a service company because we always start with the client experience. Our customers are asked to pay a little more to store with us than with others. But in their minds, the added cost is absolutely worth the added peace of mind.”
Wheler added, “We’re in a business that involves hundreds of decisions, from what neighbourhood to locate a new facility in, to how to train your service people to boost revenues. Every one of these decisions gives you a chance to cut corners. We are careful not to do that, while being just as careful to make a profit. We own our businesses for the long-term. But we spend money on areas where we can differentiate ourselves and get a return.”
That return on investment, coupled with the credentials of the management team, is what attracted Newport Partners to the Spaces Self Storage opportunity. The firm made a $4.1 million mezzanine debt investment in that is earning 15% per year for three years. “This is exactly the type of private investment opportunity we like,” said Newport Partners’ Managing Director, Stephen Hafner. “It’s well structured, with proven entrepreneurs who’ve done a great job on execution. It generates steady income and is non-correlated to public markets. It represents a small weighting in our pool of private income producing investments, making it a wonderful diversifier for a balanced portfolio.”
