Reviewing how much debt and cash flow a self-storage owner has is important. Cash flow is the primary determinant of value and, by corollary, it determines how much borrowing capacity the property can support. At the BSC Group, we analyze the operating performance of the property and typically rely on standard accounting reports such as Quick Books, with P&L operating statements. SiteLink Web EditionTMprovides much of the necessary detailed supporting documentation that is needed to assess the operating performance of a property. The SiteLink Web EditionTM reports I depend upon the most include the occupied history, occupancy statistics, and management summary reports. I like those in particular because they allow me to understand how efficiently the property is operating and how it has performed over time. It also allows me to quickly combine those reports with the property operating statements to determine the viability of the loan request that the borrower is going to make.
Other self-storage software may have similar reports, but I believe SiteLink Web EditionTM has set the industry standard for reporting. I've been using these reports for over 12 years, because SiteLink reports contain much of the useful information I need to conduct my analysis. When working with clients we want to be certain we are delivering the greatest certainty of execution possible. This means we need to identify the strengths and weaknesses of the deal, and then mitigate any perceived weaknesses in advance. Essentially our job is to tell the lender the story (history) of the property, which is supported by the operating reports from SiteLink Web EditionTM as well as the operating performance contained in accounting reports (P&L). The reporting allows me to identify the weaknesses of the transaction and then work with the borrower to tell the story in a more positive manner that the lender will embrace.
Over recent years, self-storage has become a property type that lenders have increasingly embraced; and as such lenders are more familiar than ever with the nuances and current trends of self-storage. Oftentimes lenders will ask for detailed information about the history of the property, and SiteLink provides an easy way to obtain that information for the lender and in a format they are used to seeing. It also speaks to the sophistication of the operator when the lender can see that the borrower is able to produce information quickly and reliably.
It often takes unsophisticated owners several days to generate the detailed reports and information a lender wants. SiteLink Web EditionTM integrates with more than 20 accounting software packages including QuickBooks and Great Plains. Account names and numbers can be edited to allow for seamless importing of journal entries .The program offers both cash and accrual basis, and the Accounts Receivable and Aged Receivable reports let you drill down on a customer by customer basis to reconcile your numbers. These detailed and organized reports that can quickly be produced are what a lender wants to see. If a borrower is disorganized, a lender will detect the disorganization. However, if the borrower can produce a document in five minutes to send to the lender, it speaks to the sophistication level of the owner.
Lenders today generally require the borrowers to report quarterly, and meeting those requirements can be onerous if a borrower isn't organized. In my experience, often borrowers that are using other software packages may need to produce several reports to generate the level of detail that is contained within one report in SiteLink Web Edition such as the Occupancy Statistic or Management Summary report.
SiteLink provides much of the information that a mortgage broker needs to provide to the lending community to assess a transaction. However at The BSC Group, we also make recommendations to the borrower on how to improve their operation. For example, SiteLink Web Edition's revenue management module will make suggestions for implementing rent increases if the owner is not appropriately pushing rents often enough, or if the rents in place are below market. In this situation we will suggest that the owner increase rents, which should increase property value and borrowing capacity over time. I can also tell what units are selling if there is core vacancy at the property by looking at the occupied history and statistics report, and make suggestions about altering the unit mix to better meet the market demand. If a borrower's ability to provide information and reporting is abysmal, I will often recommend they make a change to SiteLink Web EditionTM.
Lender reaction is positive when they analyze SiteLink reports. The REITs have their proprietary reports, but SiteLink brings institutional reporting and software to the smaller, mid-size and larger operator that doesn't have anything proprietary. Since SiteLink is constantly innovating and enhancing their software, it offers features like modern revenue management that larger operator's use - which benefits the smaller operators to bring their operation to a more institutional level. Lenders appreciate that from any size self-storage operation.
Overall, SiteLink Web EditionTM is a win-win for the owner or operator, the mortgage broker/advisor and the lender, because the financial reporting seamlessly tells the whole story in great detail.
This article has been reprinted with permission from SiteLink
The BSC Group has been voted Best of Business - Finance for six years running by the readers of Inside Self-Storage.