Big Announcer (00:03):

This is the Self Storage Podcast with the original Self storage expert, Scott Meyers.

Scott Meyers (00:12):

Hello everyone and welcome back to the Self Storage Podcast. I am your host, Scott Meyers. Well, there's been an awful lot of chatter around with regards to the timing of the market as there always is with any investment. Self storage is no different than that, and so that's what we're going to be tackling at today. Storage Nation is now the right time to invest in self storage. So we're seeing inflation still rearing its ugly head. We've got interest rates that are fortunately coming down, but kind of holding station and recession chatter is still there. Many folks that think we're still heading into what could be the greatest recession. We've seen others think that we're even beyond it at this point. And so the answer isn't obvious for anyone, but it is important. So that's what we're going to be talking about today. And so for us, we haven't really slowed down too much.

(01:00):

As a matter of fact, we're picking things up in the beginning. Parts of a 2025, we had a strategy. Our strategy is always to move it fast, to be taking advantage of opportunities, but really that we found, what we found is as we look to 2024, most of the challenges that we were facing were as a result of not being able to go fast. And that wasn't really our fault. Everybody on our team is moving at breakneck speed when we can, but many, many road bumps and roadblocks were put in place by way of rising interest rates or banks just taking a little more time private equity, taking a little more time to say yes to our projects as well. And even sellers really not knowing exactly what they're going to do with their properties. And many times some deals just stalled and one or two had fallen off the desk as well.

(01:42):

And so as we continued to look to the balance of 2025, we were doing nothing but putting our foot to the floor and just stepping on the gas. But we've got some other folks that meant like many of you, but there are many investors, maybe some like you who feel like you're at a crossroads and not really knowing exactly what to do. We've seen investors everywhere that are just wondering, should I jump in now while interest rates are still relatively low, or should I wait for the economy to bottom out and hope to grab some better deals a little bit later? And that seems to be the biggest consensus. But the challenge is always how do you know you're at the bottom? And usually for most folks, it's too late. By the time we're midway through an upswing is when people begin to jump back in.

(02:22):

And by then they missed some of the fantastic deals. And we've all known whether it is what do we follow? This advice or what history has taught us in the past is that more millionaires have created more wealth was created during this exact time that we're seeing in a market right now, which is where I feel that we are bottomed out and we're seeing interest rates that are coming down and valuations are going to be on the uprising. So now is the time to be grabbing these properties, create value in them and to develop. We just closed last week on a four story class, a development project in downtown Austin, Texas. And it is going to be a killer property when it hits the market and at just the right time. And so we are in growth mode. We are in a development mode as well.

(03:03):

But it hasn't been easy because meanwhile, some of our capital is sitting on the sidelines and many folks who've been laid off or have changed jobs are rolling over their 401k funds into self-directed IRAs. And it's sitting there, that money is waiting for the right opportunity. And increasingly it's pointing towards self storage. However it is taking us a bit longer. Even the folks that have invested with us a lot in the past, they see the same projects coming through with roughly the same project level returns. They're seeing roughly the same timeframes, but for whatever reason, there's enough paranoia and fear in the marketplace generated by the media and other sources who really haven't been through an economic cycle in many instances that are influencing a whole lot of folks that are sitting on the sidelines. But this is nothing new. And once again, this is why our sector and self storage makes sense.

(03:46):

It's one of the most recession resistant asset classes out there, especially during the COVID-19 downturn performed extremely well. And now as inflation and market volatility shake up traditional investments, the smart money is moving back in. Banks are getting synge with loans, which means many storage owners can't refinance their properties and that's putting more facilities on the market often at a discount. And we've seen this before. This is the third economic cycle. I won't say that we're in a recession just yet, but we're heading into a place where there is going to be a slowdown. And we're seeing a lot of these projects that many of these owners purchased 'EM three, four or five years ago. Those loans are now coming due, they're ready for a rate reset or a refinance, and it rates a little higher than where folks originally took these loans. If they haven't created value, then they're forced to sell because they would either have to come to the closing table with a cash or if they haven't been able to create enough value to even pay off the loan, well then they're coming back to the closing table with the keys to the facility and handing it back to the bank as well.

(04:44):

But the good news is right now we are getting loans at 6% and they're still loans are at historical lows, especially for this period that we find ourselves in the market and deals that didn't pencil out just a few years ago now do. And that's creating a perfect storm for buyers who know what to look for. And we were just at the inside Self Storage World Expo two weeks ago, and that has been the sentiment. The doers were out, they were there networking, looking for of course, always the little angles and how we can operate better and do business better and just overall gain a few more of our best business practices that are shared at those events, which is the reason why we go. But what we saw predominantly was that there were a number of folks that were there genuinely excited and moving forward at the same speed, which is really breakneck speed.

(05:31):

I wouldn't hesitate to say that this is the biggest land grab I've ever seen in my self-storage investing lifetime. And we are going to be moving forward as quickly as possible not only this year, but for the balance of it and into 2026. So again, the only challenge to that is if you want to go fast, you got to put your foot on the gas and the fuel for any investing business that isn't moving forward at speed is the capital and the lending landscape is changing. Banks are tightening their LTV ratios, their loan to value ratios, and they're raising their coverage requirements in terms of a debt service coverage ratio as well. And that means more distressed properties are about to hit the market as the banks are leaning in and pressing on some of those covenants with some of these loans that really weren't supposed to be coming due that now are hitting the market.

(06:14):

But at the same time, insurance companies, hedge funds and family offices are aggressively backing and so the money is flowing. Why is that? Well, because they see the resilience and the upside potential that we've always seen in the self-storage sector, especially during a downturn. Developers who once hit the pause button on projects are back in action, and that includes ourselves. And so our investors looking to syndicate deals and tap into the influx of passive capital. And it is competitive, but it's also full of opportunity. And if you know how to navigate it, those that are moving forward and getting off of the sidelines are going to be the winners. As we head back into a market where more wealth is going to be created in self storage than we've seen in a long time. As I was talking with some of the brokers and some of our hedge fund managers two weeks ago at the shows, what we compare and in this market to is back in 2012, we're at roughly the same interest rates, the same portion of the same section of the curve in terms of the bottom.

(07:09):

And when we came out of this from 2012 to 2016, that is when more wealth has ever been created in our industry and it's been tracked and we were the benefactors of that as well. And we're seeing that market happening again, and we're seeing that opportunity as it exists right now at the time this podcast is airing. Alright, Scott, so what does all that mean? It sounds like you're excited and you're moving fast. Well, yeah. In our own business, we've ramped up both acquisitions and development. We're focusing on facilities with an upside potential as always the value add, those that are distressed and it could be a distress from a property standpoint, physical as well as economic, hopefully both that are underperforming or they're ripe for value add improvements for expansion and adding on additional square footage or additional income streams. We're also syndicating many of these deals just about all of these deals are syndicated and we're combining traditional financing with our passive investor capital.

(07:56):

It's a powerful model that has always allowed us to scale fast and take full advantage of the favorable conditions in any market. And this is no different as we head into the balance of this year. So folks, we don't need to belabor this point any longer or stretch this into an hour long podcast because here's the bottom line. Every market creates opportunity, but only for those that are ready to act. Whether you're buying your first facility or adding your 10th, now could be the smartest time to invest in self storage. And I absolutely believe it is, and we feel it absolutely is the best time to invest in self storage home. That is the market sentiment. That's what we're hearing at the inside self storage shows. The SSA show at our own self storage academy in our mastermind, we held them back to back a week ago here in Indianapolis.

(08:35):

And positive energy in the room was incredible. And it wasn't out of a blind optimism, it was because all factors in the market point to this being the best time to get involved in the business. And so the proof is in the pudding. We have a number of folks that are in our mentoring programs that went to our last academy just a couple of months ago, and we've got about 60% of those folks already that just joined our community that already have properties either under contract or in an LOI status right now in negotiating it for a purchase agreement. We've got a number of families this whole event, our self surge academy, more so than ever was filled with families that are getting into the business. Sometimes it's just a mom and pop. Many times it was a father and son, we saw a dad with a couple of kids creating a legacy business.

(09:17):

And there really isn't a better legacy business. I mean, it is a very, not an easy business. I'll never say that that is, but it is a very simple, predictable business model that we have mastered and we have created the best processes and systems in the industry to be able to replicate and to rinse and repeat over and over and over again for any individual, for any mom and pop, for any family, to be able to take this and turn it into a legacy business that could be passed on. If anybody knows of any other business that is better to do that, then sign me up because we've never seen one, and this has been an incredible business for our family. And then to be able to share that and help people to achieve their dreams, their goals, and as we call it around here, the moonshot through these simple metal boxes on concrete slabs, this business model that has created so much wealth for so many people that we've been teaching over the past 18 years, this isn't a commercial for our academy or our mastermind or anything else other than we just get excited about the fact that we get to, we have the opportunity to be able to change people's lives through this industry and just passing on what we've learned over the years.

(10:16):

And so if that's you and you're still sitting on the sidelines waiting to invest passively or actively, now is the time to draw a line in the sand and say, now's the time I'm going to move forward and I'm going to be the one in my family to make that change. I'm going to be the one who's going to do something so that all the people around me that are watching can see that I did this and I did it through self storage. So if that is you and that is the case, go to self storage investing.com. Whereas you guessed it, it is all about just that investing in self storage and all the tools and the resources and opportunities that we would love to be able to share with you to help you achieve whatever goal it is. Or even just to begin to look down the path of what it might look like for you or somebody in your family to get involved in self storage. Because there is no other industry that I've seen out there that beats this one. So with that Storage Nation, it has been a pleasure sharing, once again, tips and insights from the market and the timing of it that hopefully you will take and run with and implement and turn into an action item. And we look forward to sharing up more of this then as you begin your journey on the next self storage podcast. Thanks everyone. Take care.

Big Announcer (11:18):

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