Matthew Ricciardella  0:00  

To these two property types are at or near the top of the list. And as a result of that there is a tremendous amount of demand from sophisticated investors to get into the space because they are recession resilient. They did withstand the 2008 2009 10 storm and now they’ve proven to be resilient during COVID. So folks want yield they want predictable, safe free cash flow. And these two asset classes have proven to deliver just that.

Announcer  0:32  

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant We are here to learn from the experts.

J Darrin Gross  0:51  

Welcome to commercial real estate pro networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate, investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. 

Today, my guest is Matthew Ricciardella. Matthew is the founder of Crystal Spring, excuse me, Crystal View Capital and has over 18 years of experience in the real estate industry. Crystal View Capital is a private equity real estate firm that specializes in acquisition and management of self storage facilities and manufactured housing communities across the United States. Known for its in house acquisitions and management team and unique company culture. Crystal View Capital is vertically integrated, disciplined to its investment strategy and has a proven track record since a firm’s launch in 2014. And in just a minute, we’re gonna speak with Matt about self storage facilities in manufactured housing. 

But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you want to see how handsome our guests are, be sure to check out our YouTube channel. You can find us on youtube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest, Matt, welcome to CRE PN Radio.

Matthew Ricciardella  2:42  

Thanks, Darrin, thanks for having me today. I appreciate it.

J Darrin Gross  2:45  

You bet. I’m looking forward to our talk. Before we get going, if you could take just a minute and share with the listeners a little bit about your background.

Matthew Ricciardella  2:54  

I’d be happy to I I got started in commercial real estate back in 2005. I I started off by buying manufactured housing communities and self storage facilities for my own account started off with relatively little to no capital. So you know faced that challenge that first time investors always face and that’s how to raise equity and debt to buy your first deal or your first few deals. So kind of went out to the market found some off market opportunities in self storage and manufactured housing communities and was able to rock and raise some private capital put some deals together. And, you know, figured out how to manage these assets, created some value did well I sold some properties kept some others, which I still have to this day, which I actually bought back in 2008 that I still operate and thought that I was on to something I was doing quite well but had a limited amount of capital. So what I did is, I thought to myself, gosh, wouldn’t it be great to scale up so I launched crystal view capital fund one back in 2014. And that was a $10 million equity raise. And we did quite well with that actually investors receive back two and a half times their invested capital about a 45% internal rate of return. And then we launched fund to same strategy, which was manufactured housing and self storage across the United States. And that fund is now fully subscribed, we raised a little shy of 60 million in equity on that offering. And we’re tracking about a 30% return to our limited partners. And now we’ve just launched our third fund Darren which is a $95 million equity offering. And we’ve already raised about $38 million in two and a half months. That fun, same strategy is from one in two and we’re really excited about what the future holds?

J Darrin Gross  5:01  

Cool. So, in 2005, you had the foresight to get into manufactured housing and self storage, it’s your the first time and usually it seems like people have like, migrated to that from something like they started out maybe in single family and, and then felt like something was, you know, too competitive or not recognizing other opportunities in real estate? How did you land on manufactured housing, and self storage?

Matthew Ricciardella  5:30  

You know, I wish I could tell you, you know, I did a rigorous due diligence and research process, and I did to, to a small extent, but really, a lot of it was luck, I kind of looked at all the different commercial real estate asset classes and thought to myself, which one of these are most inefficiently priced? Which one of these? Do I have the highest probability to buy at at a fair to discounted acquisition price? And where can I create value through inefficient management, identify and identify that as a result, these two property types, and kind of went across the entire country, built relationships with owners bought most of these deals off market? And, and worked out for us? So that’s kind of how I you know, I got my segue into the space.

J Darrin Gross  6:27  

So you mentioned you were kind of operating on your own there for a little while before you started the fund. How many parks Did you acquire operate on your own before you decided to go the fund

Matthew Ricciardella  6:40  

route? Yeah, we I bought personally about four communities personally, before we launched the fund and three storage facilities. Personally before launching the fund. One community one mobile home park, one Self Storage, I still don’t To this day, both of which were acquired back in 2008 2009.

J Darrin Gross  7:03  

And were those primarily local acquisitions? Or did you know

Matthew Ricciardella  7:07  

now the two that I still own today are ones in Wisconsin, and the storage facility is in Louisiana? So we kind of had a shotgun approach Darren, where we went across the entire country and said, Where am I going to find the best deal, and still do it to this day in that same fashion in that same manner, where we’re kind of agnostic to the market versus saying, Hey, we buy this asset class in North Carolina? And that’s all we do. And if you could show me how I could steal something in some other market? The answer’s no, because I boxed myself into this asset class in that market. That’s exactly what we didn’t want to do. So we’re open to looking anywhere, for the right opportunity in these two asset classes.

J Darrin Gross  7:54  

So let me ask you, since 2005, when you first started till now 2021. What have you seen is the biggest change in that that timespan as far as the I guess, the asset class and, and the opportunity,

Matthew Ricciardella  8:12  

biggest change is there’s been a complete 180. And that is, I guess the analogy I could give you is going from a redheaded stepchild to completely and utterly in vogue. When I started in the industries, capital was extremely hard to come by it was either seller financing or a local bank. Now you have agencies, Fannie Mae and Freddie Mac cmbs, life loans, literally knocking at your door lining up to finance your projects. Same thing on the investment side, you know, kind of when I got started and told people what I did, they kind of looked at you with a funny face, and why in the world would why would you want to do that? Now, you tell people what you do. And it seems like everyone has figured out, the secret’s out, these are high cash flowing vehicles, cash cows, from what they call them, little risk recession resilient. And as a result, large part of the investment community, including institutional investors have a huge appetite to get into both of these property types.

J Darrin Gross  9:22  

So in 2005, you described limited capital. did all that change kind of post? What are they called the big? I don’t even know what we call it anymore. The recession, the big risk, I mean, 2008. What the market when it went upside down, residential housing was in the tank, foreclosures, short sales, all that fun stuff. Was that kind of the turn where were, you know, institutional capital recognize the opportunity, or was it later?

Matthew Ricciardella  9:57  

You know, I think it was later you had some institutions that were getting involved. Post meltdown, let’s call it 2012 1314. But I think there was a tidal wave of interests, probably that began in 17 and 18. And now it’s just tremendous. And I think a lot of it was post COVID. Because here’s here is, in my opinion, what happened, if you look across the different four major food groups of commercial real estate, retail, industrial, multifamily, and office, look at the negative effects that COVID had on hospitality, office retail, I mean, just crushing and those asset types are in distress right now. So I think this smart investors looked at all of the different asset classes and said, which ones withstood the COVID storm, which ones continue to generate a free cash flow and ongoing income, despite the lock downs and what we went through. And I’ll tell you, these two property types are at or near the top of the list. And as a result of that, there is a tremendous amount of demand from sophisticated investors to get into the space because they are recession resilient, they did withstand the 2008 2009 10 storm, and now they’ve proven to be resilient during COVID. So folks want yield, they want predictable, safe, free cash flow. And these two asset classes have proven to deliver just that.

J Darrin Gross  11:37  

So you mentioned the returns that you were able to achieve, you know, with with the funds net, as more people migrate into it, and and you know, want to play in the space. Are you seeing that compress? returns?

Matthew Ricciardella  11:53  

Absolutely. Yeah, cap rates are compressing yields are compressing as a result, valuations are expanding and rising. And partly, it’s because of the increased demand for investors wanting to get into the space. And then also, it’s the ease of financing. As mentioned, not only is debt capital easy to source, but it’s also extremely cheap. I mean, we’re getting loans right now, Darren, at sub 3%, interest, interest only fixed for 10 years. I mean, that’s extremely attractive debt, and it does wonders for your cash flow.

J Darrin Gross  12:33  

Yeah, it is a kind of a funny thing, how that really changes the marketplace and money. So available like that. So let me ask you, not totally familiar with but the the mobile home, Park and kind of the historical stigma, but I’ve also kind of come to understand that some of the municipalities and that they don’t want them? Are you seeing any growth in the market?

Matthew Ricciardella  13:06  

I’m very limited, very limited, there’s little to no new development in the space. And that’s what makes it appealing and attractive. And in that you’ve got limited or shrinking supply, because a lot of parks come offline every year they’re converted into, you know, some other use, whether that be retail, and you’re not seeing that as much anymore, but could be condos could be multifamily. Now, relatively no new development coming online, but ever increasing demand from renters that want to get into affordable housing. And this is the lowest rung of affordable housing out there. So even cheaper than apartments, classy apartments, so you’re seeing more people downsizing, wanting to get and retiring, that want to go into manufactured housing community. And also if you think about it from a COVID perspective, you’re seeing this phenomenon of D urbanization, with people leaving these major metropolitan areas and going into secondary and tertiary markets. Well, guess where mobile home communities are relatively located exactly in those markets. And guess what else compared to multifamily where you have common areas or compare it to, you know, Senior Living where you have common areas, you’re insulated in your own home, you know, insulated from potential, you know, COVID you know, kind of contraceptive So, you’re, it’s helping from that angle as well.

J Darrin Gross  14:41  

Yeah. It seems like the ideal as far as the limited supply and you know, how to control demand, that’s, that’s where you want to, I mean, if there is a place you want to be that’s, that’s, I guess, a place you want to be a seller especially. So tell me a little bit about Self Storage. How does it operate compared to the mobile home? parks? Well,

Matthew Ricciardella  15:09  

let’s talk about supply and demand. Since we’re on that topic, you know, it’s not that way in self storage, I wish it were. But it’s relatively simple to build storage facilities. Some municipalities aren’t allowing it because they’re already oversaturated in that marketplace. But a lot of markets out there, you know, you’re in Portland, I know your market is oversaturated, Denver, Dallas, Nashville, Tennessee, those markets are over supplied. So as a result, operators are having to offer concessions, free months rent, moving specials, things of that sort. But there are other markets which we operate in, where there is limited supply. And we’re able to continually increase our rents, increase our cash flow, and as a result, increase our Property Valuation. So I think the big thing when you compare these two property types and how they operate differently, the storage, you got to be really cognizant of the supply in the market that you’re entering into. from a management side, the operations are very similar. You know, we have an in house asset management team, which manages all of our fund portfolio properties. So we oversee everything in house here from Las Vegas. So we’ve developed proprietary systems to manage all of our assets. And they are, there’s nuances to each. But we’ve developed a strategy and a procedure to operate both asset classes effectively.

J Darrin Gross  16:42  

Do you find that the the markets are similar? As far as the you know, we talked about the metro areas not being or not inviting or wanting the mobile home parks and the oversaturation are you finding that the successful markets tend to be more of those tertiary markets for both the mobile home parks and the Self Storage?

Matthew Ricciardella  17:06  

For the storage? Yes, for the manufactured housing, you know, if you could own in a major Metro and have a large community with good size lots, that would be my preference, right, as an example of you could be in Metro Dallas market, and have a newer park with larger lots. That’s a fantastic market to be in, you know, so and because there’s no new supply. On the storage side, there’s plenty of new supply coming to market. So I would say, I’d rather be in the major Metro markets for manufactured housing, and I’d rather be in the secondary and the tertiary markets for storage. That’s not to say that, you know, the major markets, you won’t do well, for storage, you just have to know what you’re doing. And that’s not to say the secondary and tertiary markets won’t do do do well, for manufactured housing, because we’ve proven to do well in all of those different markets between both asset classes.

J Darrin Gross  18:05  

Right? So you said, all of your management, you guys are in house, is that? Is it asset management? Or do you do also have in house property management? Both? Okay,

Matthew Ricciardella  18:19  

we’re an in house assets slash property manager. So we kind of oversee the asset creation, the value creation process from A to Z, all in house. So that goes from acquiring the property, implementing a value creation plan, executing upon that plan, prepping the asset for sale, and then ultimately exiting at some point in the future.

J Darrin Gross  18:43  

Gotcha. So with manufactured housing, you don’t own the homes necessarily on the ground? And the I guess the streets, basically, and what are some value add strategies and that kind of a scenario?

Matthew Ricciardella  19:02  

Yeah, so it’s a good question. And, and to reiterate, yes, we own the infrastructure, we own the underlying land, there are some homes and communities that we do own. But for the most part, they’re all tenant owned homes. But there’s several, we call them levers to pull to create value. One of them is sometimes we buy a property rents are materially below market, we simply bring them to a market level, that could create a lot of value. Other times we buy homes, we bring them to baking sites and and sell them which is increasing our occupancy, increasing the rent roll. Other times we’ll identify an expense that’s too high and it’s bloated as an example. We’ll look at water and sewer expenses, and sometimes the landlord will pay those costs. What we do is we’ll sub meter past that Spence through to the residents. And that cost savings falls all to the bottom line. And that increase in noi is going to have a direct translation when you apply a cap rate to property value.

J Darrin Gross  20:12  

Oh, I love all those. Same here fairly easy as opposed to kitchen bath and capital improvement intensive. That’s, that’s, that’s ideal.

Matthew Ricciardella  20:25  

Yeah, absolutely, we look for the low hanging fruit, we have a little saying here, we like to step over one foot hurdles, rather than jump over seven footers.

J Darrin Gross  20:35  

And I like that. I like that. So Park size, what’s an average Park size that you guys plan

Matthew Ricciardella  20:44  

for us, the larger the better due to our size, as mentioned and fun three, we’ve raised thus far about $30 million of equity. And we’ve we’ve had no issues with raising equity capital because of our track record, and because of how our property types are performing and in the market presently. But a park size typically is 150 spaces and larger for us, is what we’re looking for. And now in the Self Storage side, it’s typically 40,000 square feet and higher.

J Darrin Gross  21:17  

Gotcha. So let me ask you this. So that the manufactured housing? Is it? Do you consider the affordable housing that essentially the I mean, kind of the the threshold? Is that kind of where the entry point is? Yeah, not

Matthew Ricciardella  21:33  

only is it affordable housing, it’s the lowest form of affordable housing, there is a market.

J Darrin Gross  21:41  

So as the economy goes, I mean, obviously, it’s been the most resistant asset class as far as foreclosures, etc. Do you have any sense of or concerns? Or is there any kind of a forward look or a thought on inflationary concerns? I know, you know, I was watching the panel the other day talking about, you know, all this money that’s been printed and circulated and stuff and very low concerns about inflation. But But, you know, there’s a lot of wage, talk about increasing minimum wage, blah, blah, blah. Is there anything in that that that, you know, you look at differently than perhaps somebody that’s looking at a multifamily property? Or is there any, any thought to that?

Matthew Ricciardella  22:31  

Yeah, I mean, look, I think you bring up a good point, with all this printing that’s going on, you hear chatter, that it’s not going to create inflation, I don’t see how it’s possible to pump trillions of dollars into a system, and over the long term, not experience inflation. So I think, you know, may not be this year, but at some point within the next 10 years, and we’ve already experienced tremendous inflation of asset values since COVID, I think that trend is going to continue, if you look at the price of a gallon of milk, maybe that hasn’t experienced as much inflation. But I think across the board, inflation is going to rise. And I think the benefit for us in what we do is look at our lease terms, you know, compare what we do to let’s call it retail or office where you have 510 15 or 20 year leases or even last mile distribution facilities, which are leased to Amazon, those leases are locked in for 10 year leases with, you know, 3% bumps on them. Our leases are month, a month, or at the most year to year and what that does, it allows us to re adjust for inflation. So we could we could offset inflationary pressures by increasing our rents accordingly. So we’ve got a great hedge against inflation due to the timelines or the span of our leases. So that alone is going to be a tremendous benefit for us. Not only that, again, asset values are going to continue to rise. So what’s in our portfolio today, if you factor in, let’s say, four or 5%, inflation over the next 10 years, even if we don’t increase noi, think about how much those assets are going to increase in value just as a result of inflation. So I think I think we’ll do well, I hope we don’t, don’t get me wrong, I hope this country doesn’t enter into a hyperinflationary phase. But if that were to happen, I think we’d be a beneficiary.

J Darrin Gross  24:33  

And I think there’s definitely a benefit to having, you know, assets as opposed to be sitting in cash if you’re, you know, experienced a lot of inflation. So that’s, that’s definitely true. And it’s it is kind of a weird cycle when you think about just the the trillions of dollars that have been put into the market and, and, you know, I guess it’s kind of more of a function of the interest rates, just the availability of the capital, it’s really, you know, make crank, crank and the demand and and pushing that

Matthew Ricciardella  25:00  

up. And well, I think that that is going to be the negative. That’s the downside, I think because you know, rates are going to have to rise to offset this inflation. And now the cost of capital is going to rise. So the borrowing costs are going to go up so that that is going to be one drawback, I believe from inflation for us. Right.

J Darrin Gross  25:22  

So you’ve got the main factor in housing, parks, you’ve got the Self Storage, parks, you’ve got your your funds, are the funds. Are they segregated between the assets? Or is it you? Those are the two assets and wherever you find an asset, that’s where you, that’s where you That’s

Matthew Ricciardella  25:43  

right. That’s right. So our investors are going to be diversified across both asset classes, and across various geographies throughout the country. So there is a good amount of diversification there because of that.

J Darrin Gross  25:58  

Got it. And you said, fund one was 10 million. Did that go full cycle you return everything back to investors are

Matthew Ricciardella  26:09  

we actually have one last property that’s under contract that’s scheduled to close next month. And when that occurs, I’m proud to say it will be a complete full cycle.

J Darrin Gross  26:18  

Oh, that’s great. Congrats. And can you find the most of your investors? Once they’ve they’ve received their capital back? They look to reinvest. Give me more kind of, yeah,

Matthew Ricciardella  26:30  

absolutely. Most of most of our investors are fun, one fun two investors who have reinvested in basically reinvested all of the distributions that we’ve given them in the first two funds right back in and guess who else is included in that category? Me. I’m, I’m a large LP in all of our funds. And I continue to reinvest all of my distributions. And the reason I do it is Darren two reasons. Number one, I like to have a great alignment of interest with my partners for on one hand, and on the other hand, I do it for selfish reasons, because quite frankly, I don’t know where I’m going to get a better return. And where I’m going to mitigate my risk better than what we’re doing here.

J Darrin Gross  27:15  

Not that’s so true. I, I love the the synergy of sorts as you you have success, and the you know, because it would have kind of come to learn is that people when you’re trying to raise money that the first couple times, or maybe more of a challenge, but as soon as you have success, in return that capital people are like, hey, wait, when’s the next deal? You know, kind of thing and

Matthew Ricciardella  27:38  

exactly what you build up, you build up an investor’s trust over time. You know, when you go and launch a new fun, there’s, there’s not really many questions, they already know, our level of integrity, they know our ability as operators and our ability to execute on the business plan.

J Darrin Gross  27:57  

No, that’s great. Let me ask you, you know, we’ve talked about some of the markets that you guys look at. Are there any, you know, KPIs that you look for? I mean, you know, for the longest time, I mean, pre COVID it was always about jobs and population and in laws and stuff, but but COVID seems to have changed a little bit. You know, that that sounds because of everybody doing like, what we’re doing the zoom and and that I don’t know, is that affected your your view of things are changed at all, or is there there are some different things that you look for now, when you when you look at a market.

Matthew Ricciardella  28:39  

Um, when I look at a geography, I don’t think COVID has a material impact on us making that investment decision, I will say this, we’ve we actually outperformed during COVID, our properties across specially during, on our storage side, our occupancies actually rose. And the way that happened was that we actually built online portals where investors or I’m sorry, we’re storage, tenants can move into our units without making face to face contact with managers. We also had online portals for our manufactured housing and our storage tenants to pay their rent directly. So by being set up for COVID, we were able to actually outperform now, in terms of our investment decision, I don’t think COVID has had an impact on that certainly hasn’t had an impact on our geography. If that’s if that’s the question.

J Darrin Gross  29:39  

I just think of there’s if there’s anything that it’s effective, but sounds like it’s pretty much hasn’t been an issue for you guys. That’s no

Matthew Ricciardella  29:47  

Knock on wood. We’re not out of the woods yet. And none of us are, you know, don’t want to rest on our laurels. But up up to this point. We haven’t. We haven’t been materially negatively effective. COVID. So,

J Darrin Gross  30:01  

Got it. Hey, Matt, if we could like to shift gears here for a second by day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically consider. First, we look to see, can we avoid the risk, that’s not a possibility, we look to see if there’s a way we can minimize the risk. And if we cannot avoid nor minimize the risk, then we look to see if we can transfer the risk. And that’s what an insurance policy is a risk transfer vehicle. And I like to ask my guests, if they can look at their own situation can be their clients, their investors, the market tenants, however you want to define it. But if you can take a look at your situation, and identify what you consider to be the biggest risk. And for clarification, I’m not looking for an insurance related answer necessarily. But if you’re willing, I’d like to ask you, man record Ella, what is the BIGGEST RISK?

Matthew Ricciardella  31:15  

Well, I think it’s a great question, obviously. And I think there’s a lot of answers to that question. But I’ve, I’ve thought about this, obviously, in depth. I think, for me personally, in what we do, by far, the largest risk is overpaying for an asset. You could take a good investment and make it a poor one, by paying the wrong price. Or vice versa, you could take a mediocre investment and make it a wonderful one by paying the right price. So we focus diligently on not overpaying. And the way we do that. There’s a term actually I think, Charlie Munger had this term, which is Warren Buffett’s partner. And he said that risk is inextricably bound up in the price that you pay for an asset. And I think that rings true for me in a major way, the way we mitigate that risk to answer the other part of your question, Dan, is, by and large, we don’t compete with the rest of the buyer pool that’s out there. way we do that is we buy most of our properties off market. So we create a bond in a relationship with a seller where we’re dealing direct with them without a broker. And that’s how we put probably 80 to 90% of our deals together. Right now, as I mentioned, the two asset classes are white hot. Because of that. There’s bidding wars, there’s auctions, you have to compete in those auctions, and you offer the highest price and you win. But question I have is, Are you really a winner? Or are you a loser? I mean, you paid more than everyone else out there. So we like to focus on finding our deals without competing. And I think that’s how we lay off the risk. So as you would use the term in the insurance world where we mitigate our risk to a large extent.

J Darrin Gross  33:14  

Makes a lot of sense. Matt, where can listeners go if they’d like to learn more connect with you?

Matthew Ricciardella  33:21  

Yeah, so if you want to learn more about making an investment into the third offering, you can visit our website at www.CrystalViewCapital.com or you can email us at invest@Crystalviewcapital.com or you can email me directly at MattR@Crystalviewcapital. com.

J Darrin Gross  33:46  

Great. Hey, man, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. learned a lot. And I hope we can do it again soon.

Matthew Ricciardella  33:56  

It’s been my pleasure. Thanks for having me. Darrin. Let’s do it again.

J Darrin Gross  34:00  

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to commercial real estate pro networks. CRE PN Radio

Announcer  34:19  

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