Fernando Angelucci  0:00  

What we find is that the majority of self storage is in, you know, more of these exurbs slash rural communities. And that’s for a reason. You know, typically, self storage is not the highest and best use of land. So especially when you’re going into areas where land is very expensive, like primary markets, it’s difficult to really out compete someone that wants to put maybe multifamily or, you know, commercial industrial onto some of these lots. With that being said, that’s where it’s some of the strategies come in, you know, we build in a lot of primary markets just because we want to focus on areas where there’s significant job growth or significant population growth. So we have to get creative and find lots that may not be as attractive to say, a multifamily investor or a retail investor, so that we could still participate in these booming areas without having to pay an arm and a leg for that dirt.

Announcer  1:04  

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J Darrin Gross  1:23  

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. 

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Today, my guest is Fernando Angelucci. In the past four years, Fernando has built a real estate portfolio of over $200 million and self storage assets across the country. And just a minute, we’re going to speak with Fernando Angelucci about investing in self storage. 

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With that, I want to welcome my guest, Fernando Angelucci. Welcome to CRE PN Radio.

Fernando Angelucci  3:10  

Thanks for having me Darrin.

J Darrin Gross  3:12  

I’m looking forward to our conversation. But before we get started, if you could take just a minute and share with our listeners a little bit about your background.

Fernando Angelucci  3:21  

Yeah, so I’m the son of two immigrants, was raised with the old school, you know, American Dream mentality, go to school, get good grades, go get a job at a fortune 50 company and retire with a pension and 40 45 years. When I was 16, I read Rich Dad Poor Dad. And that kind of spun my entire world for a loop. That’s when I decided I wanted to go into real estate investing and be a business owner. And then from there started off how most commercial investors start, you know, starting small single family homes and small multifamily. And eventually I got to the point where I was getting tired of the way that tenants were treating our properties and not treating us as the landlord so decided to get out of that and go into an asset class that no one’s actually living in my investment. So self storage. And with that, we started buying our our self storage facilities late 2018. And then here we are mid 2023. We’ve just crossed over 220 million in storage transactions. And that’s broken down into really four categories. You have the purchasing of existing Mom and Pop self storage facilities that are typically smaller, they’re typically in secondary and tertiary markets. And then we aggregate those and put them into larger portfolios of 10 to 20 facilities and sell those off. On the opposite side of the spectrum we build ground up Class A facilities These are typically very large, you know, whereas a mom and pop maybe 20,000 or 30,000 net rentable square feet, these are closer to, you know, 80 to 120,000 net rentable square feet, multistory state of the art, climate control, what have you. And then in the middle because of the pandemic, and the supply chain shortages, the pricing volatility of materials, we ended up going with a third strategy, which is buying existing big box retail stores, and converting those into climate control self storage. And then of course, because of our marketing edge in our fourth avenues, we, we get self storage facilities under contract that are good deals, but they’re either not in markets that we invest in, or are too small for our portfolio. And we sell those off via wholesale or assignment of contract mechanism to other self storage investors that are getting started.

J Darrin Gross  5:57  

It’s impressive to have the four different kind of strategies there. I don’t know if I’ve talked to anybody, and most of them have a one or two of those kind of things, but good for you to have kind of a bigger view and to recognize the opportunities. And to have a strategy and, and kind of stay in your lane kind of thing. I like that. So you mentioned it sounds like if I understood, right, the ground up construction is that really kind of your long term buy or build and hold as that. Did I understand that?

Fernando Angelucci  6:35  

That’s correct. So when we’re buying these Mom and Pop facilities, typically they’re a little bit older, they’re anywhere between 15 to 30 years old, they have a lot of maintenance that is required. And the older they get, the more the maintenance costs per year is. So what we realized is we wanted to build a homogenous portfolio that we would be able to eventually sell off to one of the larger real estate investment trusts that are publicly traded. recently in the news, you know, public storage of the largest self storage company in the nation made a bid to buy live storage, which was rejected. And then live storage and Extra Space Storage combined to now make the number one largest Self Storage operating company here in the US. So that’s kind of the trend that we’re seeing here in the United States is this aggregation. Just because the market is still relatively new, the industry is still relatively new compared to say, multifamily or single family. So you have this fragmentation, where the breakdown is pretty, pretty interesting. 18 to 20%, of all of the facilities in the United States are owned by the sixth largest publicly traded REITs. The next 9% are owned by the top 100 largest operators, I’m a part of that subset of investors. And then 70 plus percent of all the self storage facilities in the nation are owned by Mom and Pop operators that are usually on two or fewer self storage facilities. So there’s this great opportunity right now that we saw, you know, the multifamily space, this basically happened 2030 years ago, we had see this opportunity to aggregate these larger portfolios and sell them off. So our goal is in the next, you know, 10 years to have a 10 figure exit, build up a portfolio of 90 to 115 of these Class A assets, roughly eight to 9 million net rentable square feet, and then sell them off to one of the larger publicly traded companies.

J Darrin Gross  8:49  

No, I love it, you got to plan. That’s, that’s impressive. It’s fascinating to me, so that the 70% are held by the mom and pops. And you said that that comprises of investors that only owned two or less properties, correct? Correct. That’s right. So that nine is the nine or just the 30%. And mean anybody that’s got more than two? Is that how that

Fernando Angelucci  9:19  

Somewhat so 

J Darrin Gross  9:21  

REITs? Obviously, I’m assuming they have unlimited or or I don’t know what what I was kind of curious on the on the breakdown on the on the numbers there.

Fernando Angelucci  9:29  

Yeah, so the Self Storage Association and the inside Self Storage Association, they both release a top 100 operators list every year. So when you look at that top 100 operators list those are the ones that are really doing all the deals in the in the industry. So just because you’re not in the top 100 Operator list doesn’t mean that you have, you know two or fewer? There are plenty here that are not really counted that are they have more than two, but they’re not in the top 100 list. But the majority of the, the volume is comprised of basically those top 106 operators, if you will. So top six publicly traded REITs, they own 80%. The next 100 largest operators own 9% of the market, and then the remaining go to these kind of mom and pop operators. So, you know, roughly depending on which studies you look at, there’s anywhere between 60 to 70,000 self storage facilities in the entire United States.

J Darrin Gross  10:46  

And as far as the the, I guess, the the population centers, where were investments going on? Do you find that the majority of the, the top 100 And the REITs? Are those more in Metro? Are they you know, primary and secondary markets? Or do they get into the tertiary markets?

Fernando Angelucci  11:13  

Yeah, so it depends on the strategy. There are a few operators in that top 100 list that they only focus on secondary and tertiary markets, what we find is that the majority of self storage is in, you know, more of these exurbs slash rural communities. And that’s for a reason, you know, typically, self storage is not the highest and best use of land. So especially when you’re going into areas where land is very expensive, like primary markets, it’s difficult to really out compete, someone that wants to put maybe multifamily or commercial industrial onto some of these lots. With that being said, that’s where it’s some of the strategies come in, you know, we build in a lot of primary markets, just because we want to focus on areas where there’s significant job growth or significant population growth. So we have to get creative and find lots that may not be as attractive to say, a multifamily investor or a retail investor. So that we can still participate in these booming areas without having to pay an arm and a leg for that dirt

J Darrin Gross  12:30  

Got it, so as far as like the key metrics, is population growth, or is that the primary one that you look for? Or is it also saturation of the market? With Self Storage in place?

Fernando Angelucci  12:45  

Yeah, it’s it’s all the above so really depends on our strategy. If we’re going to be building, then we’re looking for large population growth, large, large drop growth, we’re looking for areas where the saturation is low. The interesting thing about self storage is that it is a hyper localized business. So unlike say, multifamily building, where you may be able to pull a tenant from 20 miles away, or for them to you know, cross from one side of Chicago to the other side of Chicago for a better rent. Typically, self storage, you’re finding 60 to 90% of your tenant base within a five to 15 minute drive time of your facility, which depending on the density of the area that you’re developing, and can be as little as one mile radius from your facility to typically the highest LC is three to five miles. So that’s on the ground upside, that those are very important. You know, we’re also looking for visibility. A lot of customers when surveyed say the reason they chose our self storage facilities be because they saw it on their commute to and from work. So visibility is extremely important, you know, traffic counts via vehicles per day. Very important as well, we typically like to be at least 20,000 cars in front of our facility, if not more per day on the curb cut. But there’s multiple ways to make money and self storage. So let’s look at the other one of our silos, which is buying the mom and pop facilities. We don’t necessarily need all those metrics, you know, in we’ve bought facilities that we’ve doubled or tripled our money on in locations that was losing population, year over year at a pretty significant pace. And that’s just because we saw the ability to do extensive value add with, you know, minimal to little effort. So for example, you go into a into a market and there’s no professional operators, none of these publicly traded operators that are constantly doing competitor analysis to see what the occupant occupancy is he with the story rates are. So you can find these opportunities to arbitrage where you find a existing self storage facility whose rents are 50% below market rates and very easily you can double the value of that facility by purchasing it and then sending out a rent increase to just below the next highest priced facility. So we’ve done that a few times, we just did it on one that we bought in small town in Indiana, where we found that the rents were 69% below the competitors. And this is this is very typical of, you know, one of these Mom and Pop operated facilities where, you know, typically the avatar is someone that is, you know, on their first or second retirement, and they ended up buying a self storage facility because they wanted something to do, they treat it more as a hobby than as a, you know, a professionally run business. They become friends with their tenants, they don’t charge late fees, they don’t raise rents on anybody, you know, whatever your rate was, when you walked in the door 10 years ago, that’s the same rate that you have today, when in reality, with inflation. And with the demand for storage, we’ve had some of the highest year over year growth over the last three years. I mean, 2021, for example, was a record year where rents in parts of the country were going up six to six and a half percent a month. So we had some of our facilities that in one year, our rents increased to 8%. And that’s just to keep up with what the competitors were charging. We’re typically on those types of assets, those Mom and Pop style class, you know, be classy facilities, we’re not trying to be the most expensive facility in the market, but we want to be just below those guys. Right, maybe in second or third place. That way allows us to drive revenue without pushing our current customer base away to our competitors.

J Darrin Gross  17:11  

Yeah, I love the concept there of you know, room to grow. But but you don’t have to be the leader. And don’t try and push people out. Because I’m curious, when that strategy when you acquire a an existing facility, and you find the opportunity to increase rents. Does it does it create a mass exodus? Or is it there’s just a, you know, a handful that that feel the done kind of thing?

Fernando Angelucci  17:39  

Yeah, it really depends. What we’ve learned over our last five years of doing this is typically want to give something for that increase in, in rents. So you know, making the renting process and the payment process easier, we typically will do cap x items on every one of these was to buy just because they are much older two or three decades old. So fencing the facility, painting it replacing the doors, replacing the springs replacing the roods re asphalting or adding asphalt if it’s gravel. So when the tendency that there is some type of improvement usually doesn’t lead to a mass exodus. And then the key as well, is making sure that that pricing increase is not egregious, and you’re still the best value in the market. So So for example, we’ve had facilities where we have increased the rents by you know, two acts, and it caused a an exodus because the facility was 100% full, which you’d never want in a self storage facility always want to be floating between kind of 89 to 93% occupancy that allows you to push rents and really drive noi. So when you’re at 100%, full, you know, those below market renters are taking up spaces of those in the market at one a unit but don’t, they’re just no available units. So sometimes those Exodus is are what is needed. Other times we’ve raised rents. And when we raise those rents, we were still the lowest priced facility in the market, just because we’re when we bought it, the rents were so egregiously low, that even if they wanted to leave, there’s nowhere else they can go that’d be cheaper than us. So if they do leave, it’s more out of principle than anything else, as opposed to having a better alternative. But in the end of the day, you know, this is a business then we choose which tenants we want, which ones we don’t so for example for us, what we find is that tenants that pay with cash or pay with money orders have typically are late more often and accrue more late fees and that becomes a spiral so we will incentivize people to pay with cheque or with a credit card or debit card, do some type of auto payment system. And we allow that will make it very easy to sign up. And then if people still don’t want to take advantage of it, then we start putting somewhat of a penalty on those that pay cash and with money orders, not only because it costs us more time, and a manpower to have to go grab that money go deposit it out of bank, but it also causes more risk for our managers, because now they’re carrying cash or cash equivalents that now they can be a target for someone that maybe doesn’t have the best of things in mind. So what we’ll do is instead of, you know, I say a penalty, but in reality, we’re giving a discount to those that pay with a credit card or debit card. So for example, your rent when we come in is, you know, let’s say the standard rent is 100 bucks, so we raise everybody up to 100 bucks, but if you’re willing to pay with a credit card or debit card, you get a $5 discount. So now you’re paying 95. So you can look at it I either way, it’s either a discount for those that use the credit and debit, or it’s a penalty for those that want to use cash and, and money order. So those are the things that we you know, when we’re trying to choose our tenant base, we want to run these things like a professional company, we want to make sure that everything’s running smoothly, and that eventually when we go to sell, it’s an easy asset to take over. So our goal is always to sell off these assets, almost as an armchair investment. You know, we do all the hard work, we do all the heavy lift, we do all the capex items, we get rid of all the bad customers, we get good customers in that are trained on how to, you know, work with us properly. And then we hand it off to someone where they can just run on it remotely, basically.

J Darrin Gross  21:49  

Yeah, I love the concept of the the EZ pay kind of thing where it’s not you’re not chasing anybody in hand, or at least reduce any kind of need to chase anybody for? Or payment. That’s that’s where the lot. Right? So So tell me, you talked a little bit about some of the operations you put in place? How do you go about your capital? Structure? Are you syndicating the partners? Do you use your own money? Do you have a fund? What are you doing?

Fernando Angelucci  22:24  

Yeah, all of the above. So we’ve bought stuff with our own money. You know, we’ve bought stuff putting debt on it and have used a downpayment. We’ve also brought in joint venture partners. So say someone that is trying to bridge over from a different asset class like single family homes or multifamily. And they want to get into into self storage, what I usually tell people say go out and find a self storage facility and then give me a call. And I’ll walk you through the process, and I can come in, and as kind of an advisor, I can help with the downpayment, I can help raise the capital, I can help you do the operations, etc. So we’ll do joint ventures that way. And then the majority of of our projects are syndications. Either a single asset syndications or portfolio syndications. And then we’ll we’ll do a fund every once in a while, I’m more privy to the specific assets indications in the fund model, just because the investors see every one of the assets that’s going into the vehicle, as opposed to say, a blind fund where you say, well, we’ll buy self storage that looks like this and operates like this. And at the end of the day, the investors lose a little bit of the control on the underwriting piece. So we’re more of a fan of, you know, hey, we’ve identified these seven assets, we’re going to take all seven down, if one of them doesn’t work out, then we’re going to go down to six, we’re not going to replace it with one because once your money is in, you know exactly what we’re buying.

J Darrin Gross  23:56  

Got it. And as far as your funds, are you also then getting debt. Are you financing the difference? Are you raising 100% of the the capital needed to take it down?

Fernando Angelucci  24:10  

Yeah, we do use leverage. Storage has been one of those asset classes that historically has done very well for banks. So they really like to lend on it for us. If you look at the last two major recessions, let’s you know, there’s the global financial crisis. Oh 709. During that time, the s&p dropped 20 222%. The multifamily space and the red residential space were completely hammered. I knew a lot of investors that were close to me that completely lost their shirts. But during that time, self storage only dropped about three and a half to 3.8% in value. So banks realize this and then when you fast forward to the pandemic, if you look at there was a study done by Trep, which is A commercial mortgage backed securities research firm, have the 1700 CMBS loans that were made to self storage investors in the first three quarters after the pandemic shut everything down. Only three of those were more than 30 days delinquent. That’s a 0.17% delinquency rate. During that same time, multifamily was defaulting at a rate of 1,800%, higher or 18 times the default rate of self storage. So banks see this. Now, if you look at some other data that was provided by in tech solutions, as well as Wells Fargo securities, what they found is that not only did it self storage had the lowest default rate, but in the rare occurrence that there was a default, it also had the lowest loss to the bank, for default of any other asset class. So because of that, we’re offered, you know, pretty competitive debt terms from these banks, and not only the banks, but you know, some middle market lenders as well. Such as CMBS. Insurance companies love to lend on these things, pension funds, things like that. So we’re typically depending on the type of project, we’re typically going to be in the on the low end, 55% leverage, and to the high end about 80%, depending on how much equity we’re walking into, either from the existing facility, or from the land that we’re purchasing to build self storage itself.

J Darrin Gross  26:39  

Gotcha. What’s a range of a size of deal that you, you target? I mean, we’ve talked about everything from mom and pop to the development but this kind of a door dollar sized? You can put that to?

Fernando Angelucci  26:58  

Absolutely. So we typically don’t you use doors in our industry, because the size of the unit can be vary so widely. So you can have a five by five unit. And you can have a 10 by 30 unit. So what we like to use is net rentable square feet. So when I first started, I was doing basically everything. I think the very first bill that I bought was just shy of 17,000 rentable square feet, we bought that for a million dollars, that was roughly 139 units. But now that’s a little bit too small for us just because of the economies of scale, and the management requirements. So if we’re going to be buying existing facilities, we want them to end up being a little over 60,000 net rentable square feet. And we’re willing to buy them as low as 30,000 net rentable square feet existing as long as they come with land so that we can build and double that size to get us up to 60 65,000 net rentable. But when we’re building them, we’re typically building anywhere between 70 to 100,000, net rentable square feet. And so that would put you at, you know, my typical ground of development. I’m usually all in at about $125 a foot, so you know, call it 12 to $16 million build cost, with a terminal value anywhere in the 18 to $25 million range.

J Darrin Gross  28:37  

Nonsense, you’ve got what we say 220,000 or 200 million in Portfolio size. That’s, that’s impressive. Yeah, we finished. does that entail?

Fernando Angelucci  28:52  

Yeah, it was quite a bit. So we’ve recently sold off quite a few of them. Right before interest rates started going up, cap rates were phenomenal. And I honestly thought that we’ll never get to this point again. So everything I had built up in that initial four years, we sold almost all of it off. But that entails that was roughly 46 transactions, that we had 46 properties that got us up to that 220 million or so in in deal size, but we’ve sold off a majority of them and now we’re we’re rebuilding a more homogenous portfolio where everything kind of looks the exact same we have three templates that we use from our architect to build so every one of our buildings are basically the same size, same look same feel. There may be some differences if you know the topography causes us to have to move some detention ponds or we might have to make the building a little bit skinnier or a little bit fatter, more square like to to get it to fit on the lot

J Darrin Gross  29:59  

Good of you to recognize the state of the market and get out on top. That’s, that’s great.

Fernando Angelucci  30:06  

I’ve always been a big fan of studying macroeconomics. And what I’ve realized is, in the last 10 years, we’ve had this unprecedented 0% Money policy, which I mean, we’re basically in an easy money society. And that’s why you saw these asset bubbles forming almost in everything, it was almost like an everything bubble, if you will. So as as the Fed has ratcheted that back and started raising interest rates to where they should be here, I honestly think that they should be slightly higher than where they are, just to curtail where we are on the inflation side of the world, you start to see a lot of those valuations dropping. So we saw the signals, you know, six to 12 months prior to the Fed starting to ratchet that back. And, you know, we were in a time of economic uncertainty, you had the pandemic, so the government was spending trillions and trillions of dollars on aid and things just to get people by, and that money caused a a bubble. So we realize that’s not going to last forever, we’re gonna get past this thing. So best to exit out now take our money, and then start over again, with maybe a higher class of product, it’s very difficult to buy Class A facilities just because of the premium that is given to the builder. So we just figured, hey, why don’t we build these ourselves, but to build these things, it cost quite a bit of money. And you know, you’re you’re talking about per month, we’re spending anywhere between 50 to $100,000 in mortgage costs. So you need a lot of dry powder to be able to, to be able to do that we currently have 140 million in the pipeline that we’re building in the southeast at the moment, primarily Florida, but we have a few in the Carolinas and in Georgia as well. So we just figured this would be a good time, even if we’re a little bit early, you know, this is a good time to get out and and make sure that we take some chips off the table, then start all over again.

J Darrin Gross  32:16  

Yeah, so always a better strategy to take, take chips off and to find out, you wrote the cycle and all the way down the bottom, and he got to give keys back. That’s right, we better strategy. The current state of the the Self Storage market? Can you speak a little bit to what the demand is in these markets? You’re you’re going into is it? Is it mean? Is there any resistance? Or is there any political pushback on we don’t want any more self storage or? Yeah, so

Fernando Angelucci  32:54  

when we select markets again, because it’s such a hyper localized business, we’re very careful about selecting pro growth pro build municipalities These are typically markets that are you see the JR Hortons of the world come in and build in 1000s of homes. And they just don’t have the rest of the infrastructure to, to service those many homes or that many people. So that’s when you start seeing retail popping up and commercial and industrial self storage. So what we typically like to do is follow those home builders build just outside of their purview, knowing that self storage has a much larger, longer lease up time. You know, we usually are estimating anywhere between two and a half to 5% to lease up per month. So we will like to usually build on just on the edge of where everything else is being built up so that we have good land costs, but by the time we stabilize, we’re completely infill. I mean, we’re surrounded by housing and retail etc. So the key thing for us when we go and make sure that we don’t have pushback is to number one, work with the Economic Development Committee of that municipality. See if they’ll give us the green light, tell us who we need to talk to. And then we’ll talk to the zoning board if we need to get anything rezoned. We’ll talk to the permanent department to see how they feel about the project and if we get any hints or inkling of them making it a difficult process, we just say hey, there’s there’s better deals out there. We’ll just gonna cut this one loose and work on another location that really wants us The interesting thing about these municipalities is sometimes you have to educate them on what this generation of storage looks like. A lot of them think it’s the old school you know, gravel driveways with metal, corrugated metal walls and roof that’s not what we build what we build there. They’re usually three storeys concrete and steel. They look like beautiful office buildings. That’s That’s usually how we get past that.

J Darrin Gross  35:03  

That piece. Now, little education goes a long way. That’s good. Hey, Fernando, if we could, I’d like to shift gears here for a minute. By day, I’m an insurance broker, and work with my clients to assess risk and determine what to do with the risk. And there are three strategies we typically consider, we first look to see if there’s a way we can avoid the risk. When that’s not an option, we look to see if there’s a way we can minimize the risk. And if we cannot avoid nor minimize the risk, we look to see if we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests, if they can look at their own situation, could be their, their clients or investors, interest rates. You know, the Fed, whatever it is that you identify in and in your situation is the biggest risk. And again, for clarification, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you Fernando Angelucci, what is the BIGGEST RISK?

Fernando Angelucci  36:18  

So I would answer that with actually there being three things that we look at in our business. So the first being compressed cap rates, the second being oversaturation of given markets, and the third being reconnaissance competition are basically competitors, they have unlimited capital. So let’s let’s dissect each one of those press cap rates, has been an issue in the storage space for the last 10 to 15 years. That’s partially because of just the easy money policies that we’ve been in for last 10 years, and that capital needing a home that has yield, but then also the fact that self storage used to be kind of this ugly asset. And if you weren’t getting a 15% cap rate, day one, you know, what were you doing, then all of a sudden fortune and Money Magazine start talking about it as an attractive alternative asset, and that cause this floodgate of institutional capital come in compressing all the cap rates. So because of that, it creates a very competitive acquisition environment. And it also creates an environment in which middlemen can strip a lot of upside, aka brokers, right. So one of the ways that we decided to mitigate that was to shift our business from retail, aka buying on market to off market acquisition strategies, where we’re the only one at the table. And then to switch from acquiring stabilized assets to only buying value add or building self storage, where we can force a ton of appreciation. So that was one of the ways that we were able to mitigate the compressed cap rate environment. Now, recently, with interest rates, increasing at such a high velocity, we’ve had this mismatch between sellers and buyers, or sellers still think their facilities are worth what they were in 2021. And buyers looking ahead and and saying, hey, well, you know, my debt service coverage ratios are not gonna allow me to Buy at your price. So one of the ways that we’ve gotten around this is by saying, basically getting creative. If you want the price from March 2021, I want you to carry the financing at rates and terms similar to what was available to me in March 2021. So that’s one of the ways that we get around the compressed cap rates. A lot of people don’t realize that the price is only half of the equation, the financing around. That asset is also a huge component that basically no one ever looks at, I’m willing to buy your property at twice the going rate if you give me a 0% 30 year loan, because then I’m still paying the same amount I would have if I bought it at the going market rate with the going market capital or financing structures. So that’s how we overcome compressed cap rates. The second piece is the problem of oversaturation. Because of this rush of institutional capital, you see these land grabs occurring where larger operators are trying to basically stick a flag in a market. The other piece of this is that you’re seeing a lot of investors switch asset classes because of the construction costs, you know, storage produces roughly the same rent per square foot that multifamily gets. However, to build a Class A multifamily facility you’re at 400 $450 a foot were to build a Class A self storage facility that gets similar rents. You’re at 100 In 20, to 150 bucks per foot. So you have this, this transfer of capital and investing pressure coming from different asset classes. And that’s causing a drop year over year and in the sort of supply index numbers. So the one way to mitigate this is the importance of underwriting and getting third party feasibility studies to make sure that you’re not wearing rose colored glasses, and to truly deep dive into hyper specific markets where you’re looking at all of the competition and a five mile radius and seeing if this area is saturated, versus the five mile plot down the road. And then the last piece, of course, is is the REIT competition, they have basically unlimited capital that is needed deployed, they’ve raised a lot of equity, a very cheap cost, they’ve raised a lot of debt that is long term at very cheap costs. And typically, they have a longer investment timeline than some of the smaller counterparts, you know, when they’re investing in 30 year horizons, I’m usually investing on five to 10 year horizons. So that means that they can usually stick it out and drop flags in a market that right now doesn’t make sense. And they’re willing to lose money on because when the population moves in, they can take and be the first ones to take advantage of that. So there’s a few ways to get around this, you know, the first is to avoid, you know, downtown primary markets, you know, don’t build in downtown Miami. And as opposed to doing that, go to secondary or tertiary markets, or go to the, you know, the suburbs, or the exurbs of some of these primary markets, or even some of the rural areas around these primary markets like we are. So that’s one piece. And then the second piece of the competition is if you can’t beat them, join them. So that’s one of the strategies that we employ, in which these REITs they do not have the bandwidth, nor do they want to waste the manpower on negotiating one deal. But if you do all that legwork, and you bring them a 20 property portfolio, now it makes sense for them to use all that manpower to underwrite and see the feasibility of that. So there’s the, this, this aggregation that is occurring right now in our industry that’s causing a lot of opportunity for those that are willing to play along bet that feeding chain, if you will.

J Darrin Gross  42:27  

That’s, that’s a lot of good. Good risk talk there. And then strategy, I love the fact you’ve thought about all that and have a way to mitigate and or, you know, play in the space and then continue to, to grow or, or, you know, play with the cards that are dealt kind of thing. I think that’s that’s an important you know, aspect for any long term investor, the investors, I know that it really, you know, been able to pivot in any market and see the opportunity for what it is, and not try and make it something more or you know, what it was yesterday, but to deal with what it is today, and to play with it. So that’s great. Hey, Fernanda, where can listeners go? If they’d like to learn more connect with you?

Fernando Angelucci  43:18  

Yeah, so it’s interesting when people ask me this, like, kind of give two answers. So the first answer is if you’re more of a passive person, you don’t like to take massive action, you can go to our website, which is s s s e.com. You can find us on all the social media channels where we put out a bunch of free education, on how to do self storage, how to find self storage, underwriting, etc. You can follow me on social media, which is at the storage stud is my handle. And if you’re more of a massive action taker, you want to really get running on this. What I usually offer for those people is my personal cell phone number. So this is my real cell phone number. It’s Area code 630-408-8090. shoot me a text, give me a call if you have a deal you want to talk about or want to figure out a way to get into the industry.

J Darrin Gross  44:11  

Awesome. Well, Fernando Angelucci I can’t say thanks enough for taking the time to talk today. I’ve learned a lot enjoyed it. And I look forward to doing it again soon.

Fernando Angelucci  44:23  

Likewise, thanks Darrin.

J Darrin Gross  44:24  

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. Till next time. Thanks for listening to commercial real estate pro networks. CRE PN Radio.

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