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Monday, Jul 4, 2022

Buried Treasure

Barry Hoeven has spent his life in the self-storage business. Hoeven, 64, is chairman of U.S. Storage Centers Inc., which has about 80 storage facilities in 12 states, including greater Valley locations in Lancaster, Palmdale and Simi Valley. The Irvine company has about 5.5 million rentable square feet in its portfolio. He founded U.S. Storage Centers in 1985, opening his first location a year later in Cerritos. Hoeven has seen it all in his 45 years in the business, from his time with the industry’s 800 pound gorilla, Public Storage Inc., to finding some strange – even scary – stuff inside a unit. Question: Got to ask this first – what’s the strangest thing you’ve ever found in a storage container? Answer: We’ve had all kinds of things. We’ve had dynamite, bullets, rifles. Unfortunately bodies, ashes too. Those are all the weird things. Bodies? That only happened once. It was a few years ago. I think this lady’s boyfriend killed her and ended up putting her in one of our units in Inglewood. From what I understand, the smell was pretty bad. They ended up finding the guy in Mexico. It was pretty gruesome. What was the fallout after something like that? The cops did come, open the unit and found the body. I wasn’t there, so I don’t know exactly what it happened. But I imagine it was a crime scene area taped off for a day or so. But that’s clearly not the norm. That’s the only murder that I can think of and we have about 50,000 units. That’s a very small percentage. Most of what we find is old household items. Old couches, mattresses, stuff like that. What about auctions and that TV show “Storage Wars?” Ever have one film at one of your facilities? Yes, many times. It’s interesting because it brings a lot of attention to the property. If we would normally have 20 people going to the property to attend an auction, if it’s being filmed, it may bring 100 people. It increases the activity of the auction process a lot. So I take it that’s a good thing? One thing people don’t understand is that if a tenant leaves us $500 in delinquent rent, and the auction goes for $2,000, we don’t make a profit. The balance of the sale after rent and fees goes back to the tenant. We’d rather just have them pay us or leave when they can’t pay. How was business through the recession? It wasn’t too bad for us. Our peak revenue in the recession was July 2008 and the bottom was July 2009. Our gross revenue only dropped 4 percent from the best to the worst. What do you attribute that stability to? For every economic circumstance, there is a need for self storage. If you use it as your third garage, that’s one thing. But a person that just got foreclosed on and starts renting needs storage now. Somebody always seems to need it. When did you get into the business? I worked for Public Storage from 1980 to 1985. I was a vice president of commercial properties. So I was the first non-storage person for the company. I was the first guy that worked on business parks, which led to its spinoff company, now PS Business Parks. Then I formed my company after that. Why did you leave? That got my feet wet in storage, and I realized that storage centers got the same rents as business parks, but at half the costs. It was already a pretty big company at that time, but I felt I could replicate the self-storage piece of it myself. Maybe not to grow it to a big public company, but enough to provide for my family. It has been a great business. What was it like back then? They were not very architecturally attractive buildings. They were just cinderblock with a fence around it. You would build the facility and lease it rapidly. There wasn’t a lot of competition. But no landscaping or any of that. It was also difficult to finance in the early 1980s because it wasn’t really a proven class. How has the business changed over the years? Operations have changed dramatically. Accounting is now all computerized. And 80 percent of our leads came from Yellow Pages; now 80 percent come from the Internet. Our market area used to be a one to three mile ring. Now, it may go out to five or even 10 miles because people can compare properties. Security used to be the onsite manager. Now you have motion sensors and all kinds of security. What about land? Land was certainly cheaper to where you could do single story projects. But now you have to do three or four stories to make the economics work. But a 10 by 10 is still a 10 by 10. The basic business is still the same – a unit with a roll-up door. I see U.S. Storage Centers is in the Antelope Valley and other outlying areas. The land is a lot cheaper and there are fewer barriers to entry. But is there demand? Well, you’re not going to lease up as quickly. It’s a market you have to be very watchful of because of the economics. They’re not as favorable. But the tradeoff is that it’s a lot easier to do. What’s the overall market like in the L.A. area? I think there’s a lot of demand, particularly in the downtown areas. There just hasn’t been a lot of storage built in those markets due to zoning constraints. If you can find an infill location for a reasonable price, that would make sense. It’s just tough to find them. There are public hearings and a year or more process. Plus, it’s very expensive land. It’s a lot tougher for the one-off guy. How do you continue to grow when there are institutional players like Public Storage out there? They definitely dominate the portfolio side of the business. So if someone is trying to sell five or 10 properties, you’re not going to beat the public (real estate investment trusts.) We focus on the one-off mom-and-pops. Maybe someone who wants some liquidity in the estate or something. You were recently inducted into the Self Storage Association’s Hall of Fame. What’s that all about? The Hall of Fame started maybe seven or 10 years ago to recognize pioneers in the industry or people that have achieved certain excellence in the area. So what got you in? I don’t know. It’s a good question. I think it’s that I have been in the business a long time. I have also been very active in charity and given back. What type of charities? I actually have a charity of my own called Kure it. It funds cancer research. I have cancer and we’ve raised over $3 million for cancer research in the last seven years or so. I have kind of rallied the troops in the self-storage industry and try to make it an industry that gives back to the community. What kind of cancer do you have? I was diagnosed with kidney cancer in 1998 and it metastasized in 2004. Once that happened, I went on the Internet and found out no one was raising money for my type of cancer. It really helped me focus on something other than just the next self-storage deal. It has made me take a long look at my life and what I have achieved. I’m not going to be taking my self-storage properties with me when I go, but I can make a difference in other people’s lives. So what happened with the cancer? It has continued to metastasize. It’s slowly progressing. It started in one kidney. They took out my left kidney. It moved to my lung and they took part of my lung out. It went to my other kidney and they took part of that out. It went to my adrenal glands and they took those out. It’s got its ups and downs. I’ve had a lot of surgeries. It’s not easy. I don’t really focus on the cancer. I just focus on the day-to-day gift I have. I’m trying to get into a trial for an experimental drug. There isn’t a cure, so I’m just trying to stall.

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