Phase 2 - Real Estate 101 (How to or one big idea)

Podcast - How Does Self-Storage Work?

Marcia Cuenca
October 4, 2022
Podcast - How Does Self-Storage Work?
The four D’s of self-storage demand. These are the things that if they're happening in your life, they’re generally driving demand. And so those are death, dislocation, downsizing, and divorce."
- Kris Benson, Chief Investment Officer at Reliant Real Estate Management

We had the opportunity to sit with Kris Benson, Chief Investment Officer at Reliant Real Estate Management, for an in-depth look at the self-storage space. He dives into today's self-storage market and shares his process for evaluating self-storage properties.

About Reliant Real Estate Management

Reliant Real Estate Management, founded in 2010, is a vertically integrated commercial self-storage operator located in Roswell, GA. In 2021 Reliant was the 27th largest self-storage operator in the U.S. and as of January 2022 has 70 properties in their portfolio located across 8 states.


Learn more about Reliant Real Estate Management, click here
Learn more about National Association of REITs, click here
Kris Benson's LinkedIn, click here


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Adam Hooper (00:03) Hello and welcome, I’m RealCrowd CEO Adam Hooper, and this is the Real Estate Investing For Your Future podcast. Here we explore the latest in commercial real estate trends, insights, and investment strategies that passive investors can use to build real estate portfolios that last.

Disclaimer (00:21) All opinions expressed by Adam, Tyler and podcast guests are solely their own opinions and do not reflect the opinion of RealCrowd. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions to gain a better understanding of the risks associated with commercial real estate investing. Please consult your advisors.

Adam Hooper (00:42) Our guest today is Kris Benson, chief investment officer at reliant real estate management in today's conversation. Kris discusses, today's self-storage market. The factors that drive consumer demand for self-storage and the key factors he looks at when reviewing a self-storage property. We hope you enjoy today's episode with Kris.

Adam Hooper (01:06) Kris. Thank you so much for joining us today. We're excited to talk about self-storage, which is definitely a hot topic for our listener base. And we thank you for coming on the show to share your thoughts.

Kris Benson (01:18) Yeah, my pleasure. Appreciate the opportunity. I'm certainly biased, but I like sell storage.

Adam Hooper (01:23) Good. So why don't you tell us a little bit about how you got started in real estate. What you're doing with Reliant and how you ended up coming on board with the Reliant team.

Kris Benson (01:33) Yeah, happy to do it. So, my background actually, Adam was in sales. That was my first job out of school. Worked for a few business-to-business sales and then in a medical device arena. And when I was about 29, I decided that there was no way I could, I was doing great. It was as many of the people listening here. You're trading your time for money. And I was making money and checking boxes as far as moving up in my career. But the thing I realized really quickly was, I wasn't controlling my time and I still remember waking up in the morning and saying, I can't do these another 30 years. Just kind of the pit of the stomach feeling, you know what I mean. And, so we got into residential real estate as an opportunity to start to build some passive income. So, the idea was, initially we were going to build out a portfolio, large enough to replace my income or at least cover our expenses.

Kris Benson (02:33) And then work became a choice. Very quickly I realized I hated all things, residential. We had about 20 units and it wasn't necessarily the work, plumbing, electrical, that kind of thing. We had most of that outsource. It was the people; it was really soul sucking Adam If I'm being honest and I wish I could give credit to who said it. I either read it or heard it, I have no idea where it came from, but the quote was big deals and small deals are the same amount of work. You just make less money on small deals. And I said, oh, we just need to go bigger. So, we sold all the units we had. So, we had a little bit of capital and I'm making a very long story short, but we ended up developing a 64 unit apartment complex. And really for me, Adam, that was like the light bulb. Oh, this is how you make money in real estate at scale. And so, I did multifamily, personally for a number of years. We built and bought a few of our own facilities. And then I realized that there was opportunities like RealCrowd has with passive investment. And so started to place some capital with other sponsors who I knew were doing a better job than I was. And about five years ago, I was convinced that cap rates couldn't possibly compress any further in multi-family. Whoops, whoops on that one I was convinced that values possibly couldn't possibly be go up anymore. So, I was like, I gotta get into another asset class and started exploring some operators on the self-storage side of things and the original plan Adam was to just be a LP, right. Just to deploy some capital with them. And self-storage and mobile home parks were the two things I liked the most. I'm a data guy and we can kind of get into to why I like them. So, I met with a bunch of operators and Reliant, the founding partner is a guy by the name of Todd Allen and his partner, Lou Pollock. And I met them, and we formed a great relationship. I invested with them and about five years ago, we essentially created a partnership and, they needed some help on the capital raising side and the capital market side of the business. And I had had some experience doing that in my previous lives. And we've been on fire ever since. So, Reliant now is a vertically integrated self-storage operator. We're buying and managing our own properties, primarily across the Southeast. And, yeah, it's been a fun transition and journey for sure.

Adam Hooper (05:03) So that's a pretty interesting path then. So, from an LP to an actual partner, right? That's pretty good, so they must have been doing something that you liked. And you say your bias towards self-storage. You know, again, as I said, I think there's a lot of interest in self-storage. We haven't done a ton of it. We haven't seen a ton of it on the marketplace, but there's certainly, an attraction to that as an asset class for a lot of investors that we speak with. So maybe walk us through what it is about self-storage. I guess generally that you like, and then also kind of where we're at right now in the current market cycle and some of these inflationary and any kind of interest rate pressures we're feeling. How you feel about self-storage looking forward.

Kris Benson (05:44) Yeah, let's take that question in two parts. Right? Part number one is I guess, the original thesis around why self-storage and how I looked at it.  and again looking at numbers. And I'm a big believer that essentially, if you go back and look at the data long enough, you can kind of see what's going to happen in a particular asset class. And so, there's a data set that I really like. And, I can certainly share this with you so that you guys can put it in the show notes, but it's the National Association of REIT they track all of the publicly traded REITS. Essentially for the last 28 years, they have data since 1994. And you can compare and contrast asset classes, right? So, you can look at how multifamily did versus apartment or versus retail versus office versus self-storage. So, self-storage in the last 28 years did just under 19% a year, which is incredible. And it's outperformed most of the major asset classes, certainly the core four like apartments, retail office.

Kris Benson (06:45) Historically returns are really strong. And then I'm also a believer that everything is going to crack. Right. There's gonna be cycles. And in a downturn, what happens to storage? Well, at the time this was pre COVID. Obviously the, the, the most recent cycle was the great recession, right? So, 2007, 8, 9, and storage lost less than 4% of its value there where apartments were closer to seven. Office was in the double dig digits. Retail was kind lost eight, 9% over that three-year period S and P 500, by the way, was down close to 22%. So, there's a reason people are seeking alternatives. But you had this asset class where historically did very well. And then even in a market downturn performed very well and then the third reason, and this is the thing that really stuck with me and is our thesis at Reliant. Which is the market is still very fragmented. So, there are five publicly traded REITs in the space, real estate investment trust. And they're the big boys. If someone's listening to this in their car and you look outside your window and you're on a major highway, pretty much off every exit ramp, you're gonna probably see one of these, extra space or cube smart or public storage. They own about 30% of the. When it comes to square footage and the rest is still very fragmented. So, the statistic I like best is about 55% of the square footage in the US is owned by operators who own less than five facilities. So, what that plays for all of you, private equity wants out there, that's a consolidation or roll up strategy, right? Where you have the opportunity to bring a portfolio. And at scale it's worth more than the some of the individual parts. So for me, why I really liked the asset class was that consolidation and roll up strategy. So that, that was really the kind of the three reasons why.

Adam Hooper (08:38) Yeah. And I think, a couple of those that you mentioned the recession, not proof but resistant, right? That storage tends to hold up fairly well through challenging market cycles. I guess that's maybe kind of to the second part of my question where we're at right now? Historically self-storage has held up fairly well through down markets. Right? I think as a society, we're not gonna be shedding, our dependence on acquiring stuff. And so that would bode well for storage as a sector going forward typically, right?

Kris Benson (09:14) Yeah. I mean the thing that we look at, we joke it's the four D’s of self-storage demand. These are the things that if they're happening in your life, they’re generally driving demand. And so those are death, dislocation, downsizing, and divorce. Right. So, if those are happening in your world, generally, that's when you're gonna consume self-storage. Does that make sense? So, in a recessionary period. Yeah. Those, those things all happen in 2021 COVID for the asset class was one of the best years in the history of self-storage. And for us as a company, one of the best years in the history of our company, because during the pandemic you had all of that. Unfortunately, a lot of people were passing away. People were moving everywhere. They were downsizing, because they didn't have to work in the town that they were working. So, they were moving all over the place. And you know if I worked in New York and said, Hey, I'm gonna go out, buy an RV and travel around for six months. They put all their stuff in storage. So, demand was off the charts at the end of 2020, and through 2021. Now it's coming back to earth now. But you know, it kind of speaks to that recession, resiliency that you mentioned, Adam.

Adam Hooper (10:29) Yeah. And we've talked on the show before off with COVID and everything that caused, some of the asset classes have had what I would consider fundamental shifts of how that space is used. have you guys seen anything through COVID that you feel is a longer-term shift that's here to stay or is that more of a business will return as usual within self-storage, right? I mean, it's incredibly complicated. What's done in the space, right? You store stuff.  have there been any, we're

Kris Benson (11:02) Doing God's work here, Adam this is basically brain surgery.

Adam Hooper (11:06) Well coming from where you were before. Yeah, I know you, you were in some pretty complex medical sales stuff so maybe that's a bit of a return back to storing stuff.  But I mean, and have you seen any, what you think will be long term fundamental shifts to your asset class as a result of COVID or is it more of a getting back to maybe business as usual out of the health crisis.

Kris Benson (11:30) Yeah. That's a fair question. I think there were two things that we learned during the pandemic number one, which was transitory is that the tenant base became much stickier. So, their average tenure in the units was longer during the pandemic. Now some of those people stuck on right as, as we've, you know, we're recording this August 31st, I guess depends on where you live in the country. Is COVID over. I, I don't, I don't know how to, I guess, answer that question, but. You know, as we came through the pandemic tenants were stickier cuz they weren't leaving. But the thing that's longstanding that that was a, a huge shift. And if you weren't ahead of this, you lost a lot of that opportunity, which was touchless leasing. So the ability for a tenant to never go into an office to rent their unit, was huge. And, and if you didn't have that infrastructure to support it. People didn't want to be around people, but they still wanted access to their units or, or leasing, online. So that's a piece, I think, Adam, that, that will be of forever in, in self-storage. Right? Yeah. As, as. More technology takes hold in the asset class, you know, we're gonna have less people interaction. And, and we're always balancing that as an operator because payroll taxes and insurance are our biggest expenses.

Kris Benson (12:45) Right. So, you know, on the payroll side of things, if we have the opportunity to reduce hours in the store and supplement that with technology well, Increases net operating income, which arguably is increasing value. If, if all of the things are equal. So it's always a balance. But I would say if you said, Hey, Kris, what's the biggest shift since the pandemic? I would say the ability for touchless leasing,  where a tenant, you know, doesn't have to interact with the office staff if they don't want to.

Adam Hooper (13:12) And then when you look at the migration or, or movement of people as a result of that. Have you seen? I just, I don't know if you have this data or just anecdotally, I'm curious. Do you see more? Is there more demand where people are. Leaving their stuff behind and, and relocating, or is it they're getting to a new spot and then you're seeing more of demand in the place that they're locating to. Right. So, I guess, how did you see the demands shift from more of the, the urban markets that we're seeing more of an outbound migration versus some of these secondary markets, lifestyle cities, wherever that might be, where they're seeing more of an influx of people coming.

Kris Benson (13:51) Yeah. I really can't speak to the outbound because our primary markets, so we have 78 properties as of today and almost all, but four of them are here in the Southeast. Right. So, Florida, Georgia, North and South Carolina, Alabama, Tennessee. So, we got a lot of that influx, right? Yeah. So, people leaving the Northeast, California or wherever the case may be. We got a lot of that influx. I mean, if you look at the net population migration data on what's happened in the Southeast, in the last 10 years, it's pretty incredible. I mean, not just 2021, that shift has been going on for a while. So, I would say that for us, I can't speak to the outflow. We've been more the beneficiary of the influx of people yeah. Into our markets.  the other four properties we own are in Colorado where we've seen similar shifts, right. Colorado Springs in Brighton. And people are coming to those towns because they want the lifestyle as well as the ability to have a good work life balance.

Adam Hooper (14:51)  Yeah. So, when you're looking at markets. What are some of the factors that you like the most about markets that you're currently in, or when you're looking to expand into a new market? What are some of the drivers, or is it tied to population growth? Is it migration? What, what are some of the factors that you all look at?  Either in current markets that you like, or when you're looking for a new market to expand into

Kris Benson (15:14) Yeah, it helps. Right? I mean, we're looking at the same demographic drivers that probably every asset class that RealCrowd has interacted with is right. So, things like traffic count and population growth and job growth, those are all important things, right? If a market is stagnant or slowly declining, generally that's not a great thing for your tenant base. But you have to have some context into self-storage, and I'll give try to explain it as quickly as I can. Storage is a very micro market game. When we look at an addressable market, we used to look at kind of a one-, three- and five-mile radius around the, the facility itself, right? And said, okay, if I live in one of those concentric rings, this is my addressable market. Well, we've since even, you know, paired that down to drive times where we're looking at, you know, 3, 5, 10-minute drives, because remember it's a garage. Right? So, there aren't specific amenities. I mean it if it’s nice and it looks safe and smells good, you know, generally that's it. There aren't school districts or pools. So, like where apartments, someone may drive for those things that a particular market doesn't have. In storage, if it's not convenient to your work or your home, generally, you're not gonna choose that facility. Does that make sense?

Adam Hooper (16:32) That does. Yeah. And so, when we do just say, so when you look at the drive time, you said, what were the amounts of time you look again, is it five, 10 minutes within that?

Kris Benson (16:42) That, yeah, it depends on the market. If we're in more of a tertiary or rural market, maybe we extend that a little bit. It really depends on how much competition is in the space. Right? Right. That's what we're trying to ascertain is what is the supply? In that addressable market. And there are some metrics that asset or operators use, you'll hear a number called seven square feet per person.  which basically you take a population in, you know, a one, three and five mile radius and say, all right, if there's a hundred thousand people in a three mile radius, then you should. 700,000 square feet of storage and that's equilibrium. And if there's less than that, then the market is undersupplied. If there's more than that, then the market is oversupplied. If you look into the math on where that comes from. It's very wishy washy. I think it's just developed to make us all feel good. That we're gives you a number. We're using some sort. Yeah. We're like, oh look, this market's undersupplied. Yeah. So, what we try to do is just really tell a story around the market. All those demographic things are important. If you said, hey, Kris, you have to pick a market based on one metric. I would choose tell me the competitive sets occupancy.

Kris Benson (17:54) If there are 10, you know, in that drive time, if there are 10 competitive facilities and they're all at 95. Percent occupied. Well, demand's pretty high there. If, if everybody's, you know, at 70 and there's four facilities that are new coming out of the ground, you know, and they're gonna have to go through a lease period that feels like that market might be oversaturated  So, if it's our acquisitions team were on the call with me, what they would say is we're trying to understand the story of that addressable market and, and where we fit in it. And then

Adam Hooper (18:30) once you're looking, I mean, assume you've got this 10-minute drive time and you have a appropriate number of population within that 10 minute drive time. What are some of those maybe secondary  factors that are kind of go no go decisions, right? What's a flashing green light and what's an absolute red light? We're not gonna look at this as an opportunity.

Kris Benson (18:50) Yeah, let's start with the flashing red light. That's the easiest to answer generally it's rates and supply. So, we can see what the rental rates are that other operators are charging. Right. So, we're underwriting. We're not. If we're above market for a 10 by 10 climate-controlled unit, we're not gonna rent. Right. I mean, it's again, there we're not any better or worse than the garage down the street, you know, maybe our facility's cleaner and, and sometimes that matters. You know, if the competition is. Non-institutional quality, you know, they're, they're all mom and pop operators and we're a flagship in the market. Sometimes we can get a rent premium for that, but generally, we have to be within the realm of market rates. So, the flashing red for us is if rates are trending downward, meaning everybody is lowering rates to try to boost occupancy. That's usually a red flag. If you look at a 12 month window and see that everybody's lowering rents and occupancies going with it. that means generally you're oversupplied in the market and then the other thing that's a real, watch out for us is the new supply that's planned. Right? So, if in our addressable market, there are two planned developments coming along and everybody else is 80% full. Well, that's gonna put a lot of strain on all of the operators in the market because it's basic economics. You know, if there's too much supply price drops. And generally when new assets come to market, the prices are really cheap to get the, lease the leases, to get them full. And then once they stabilize an occupancy, Then you'll start to see those rates tick up.But for us, that's kind of the, the, the flashing red is if there's a bunch of new supply coming to town,  ,  we probably don't want to be there. U unless there's something else happening. That's really, you know, all the new supplies coming because you know, the population growth is off the charts or something along those lines. And that sometimes happens. So again, it's, you know, it's the story of the market that we really like to dig into.

Adam Hooper (21:00) And then what about the, we have to do this.

Kris Benson Yeah. I couple things there. For us, we are a value add shop Adam. So our play Eight times outta 10 is we're buying an existing asset and we're adding square footage to so we're adding additional square footage and units. And then we're trying to get that. Lease those units leased up. That's where our NOI growth is coming from. We, we focus very much on pure NOI growth because we can't control what cap rates are gonna be. Right. Six years from now. I have no idea what values are gonna be. You don't either Adam, but if you do tell me and we'll, we'll make a lot more money than we will in sell storage.

Adam Hooper (21:42)  I don't profess to be that's that's what's the beauty of being on this side of the microphone is I get to ask you those questions. I put you in the hot seat.

Kris Benson (21:48) Yeah. What I would tell you is nobody knows, right? So it's right. It's a fools errand to try to predict what the future's gonna look like. But what I can say is all of the things being equal. If we can grow net operating income, we’re it's gonna turn out. Okay. And so, that's what we, when you say what's the flashing green for us, it's really opportunities where we have a fantastic expansion opportunity and there's low hanging fruit potentially around a mom and pop type operator, right. Someone who maybe has some deferred maintenance, the property is, has not been kept up to snuff. And there's an expansion opportunity for us.  and it's in a market where the competitive set doesn't have a lot of new development. Or, and, or the competitors are mom and pop operators that usually gives us a really unique position. Like, let, let me just use one example. We have a pretty sophisticated, we're not the most sophisticated, but digital marketing. Right? So if you Google sell storage in a town, we're in generally, you know, we're gonna pop up on Google. Well, mom and pop operators generally have websites, but they're not, they don't have a sophisticated digital marketing strategy. Right. So if we go into a market like that, we instantaneously, you know, Instantaneous is too strong word. Within a few months, we can rank really high on our organic SEO search. Right. And you know, maybe we do some Google paid ads where some of the, that competitive set is not doing that. So, you know, in those types of markets just allows us to, you know, be an institution, a big fish in a small pond.

Adam Hooper (23:27)  And now when you look at that value add, and I'm just thinking back through. Various, times of, of storing stuff throughout my life. You've got a, when you look at like a multifamily, right? I mean, there's, there's fairly standardized process there and I'm just thinking mainly to like construction type. Right. You've got everything from stick built to. Very, steel construction, aluminum walls to cinder block to now we're seeing, multi-story tilt up construction in urban markets. Like there's such a, there's such a broad category of just even construction type. Right? I mean, how, how do you guys focus on a certain type of unit? Is there strategies there based on the kind of property, is that an indicator of quality? Like how do you think about just the, the. Vast different construction types within the storage industry. Cause like you said, a lot of it is those smaller, you know, local mom and pops that aren't standardized and even construction methodologies. Right. I guess, how do you make sense of that? Given such a variance there?

Kris Benson (24:35) Well, I think it's, and I hate to give you the answer of it depends, but what I would say is we're opportunistic and is very market specific.  so, you know, each market potentially has a different type of demand as well. Right? I mean, if we're in south Florida, you know, generally everything's climate control, cuz it's very humid. And if you put stuff in an outdoor unit, you're gonna have mold and mildew and those types of things. Right. So, if we're doing an. generally, it's what the land will allow, right. Or the municipality based on their zoning regulations and what we think the market has demand for, so I don't want to say it, you know, I, I would say the best way we look at it is opportunistically. We'll look at anything and then try to make an informed decision on all right. Where is our best bang for the buck? Sometimes that expansion Adam is not storage. Sometimes it's covered boat in RV parking, right? We have a facility in Melbourne, Florida. You know, we opened almost 200,000 square feet of, of covered parking and it was full in six months. And, you know, it's because, you know, during COVID everybody bought boats in RVs and then they have to have somewhere to park 'em because their HOAs aren't gonna let, 'em put 'em in their neighborhoods.

Kris Benson (25:47) So, it's very opportunistic. I know that's not a great answer for everyone, but that's kind of the, I don't wanna say secret sauce. That's making it. You know, too sexy, but it's the idea that we look at a market and say, all right, what can we do first? And does that fit in where we believe the demand is going? And then we try to make a good decision that way.

Adam Hooper (26:09) Yeah. And maybe that's what I was getting to, right. The variability of those different ways, right? I mean, you look at a multifamily project and you could only. Do so much to add value within a unit, right? You can renovate the common areas, do a gym, do you know a dog park or whatever that might be. You can put new, new countertops. Right. But that's fairly programmatic, I guess. And it just seems like there's so much variance within the storage market.  things like you said, right. Doing covered RV and boat storage, climate control, all these other, you know, again, looking at maybe going at multiple stories, it just seems like there's so much variance in what you can do to add that value, the creativity there. Is that a challenge to kind of keep focus on those or does that, is that more of the opportunity that you guys see?

Kris Benson (26:56)  So, I think that's the fun part, right? It's not always the. And, and that's the, you know, the challenge in getting it done and, and kind of having a vision come to fruition. You're right. We can't. You know, granite countertops, hardwood floors, and stainless steel appliances and charge more rent. Right. That, that model doesn't work in storage.  So it's really about and this, I I'll give all the credit to Todd Allen. Who's the, the managing partner and founder of Reliant or one of the co-founders, you know, that's his sweet spot. He loves to go look at a facility and say, well, what if we did this?  and, and then acquisitions and construction are building around that. Well, now the city won't let us do that. So we gotta try this. All right. Well, let's tweak that and we'll go here and do that. And so, you know, it's a constant kind of push and pull to maximize our best bang for our buck on our spend and where we can get the most NOI growth. Cuz again, Adam, if you boil down everything we do, it's really. How do we grow net operating income? Right, right. That's what our operations is focused on. That's what construction is focused on acquisitions. And, and obviously on the investment side, that's what our investors should be focused on as well.

Adam Hooper (28:10) And so when you've acquired the property, you've owned it for a couple years. You've gone through this value, add strategy. And I guess maybe preface that with, let us know what does. If, what is the timeline of that value-add strategy, maybe. How does that compare to like a multifamily value add property? And then how are you looking to the exit? How do you know when the right time is, or what are you looking for when it's the time to exit a property?

Kris Benson (28:33) Yeah, let me, let me touch based on the first part of that question, as far as, you know, the timing of the value adds. So, you know, generally we're underwriting. Market specific. And certainly, in the last year, it's been much longer, than in most cases what we underwrote. It depends on the municipality, but somewhere in the 14-to-16-month range to get something permitted and built. Now, remember these are facilities that they're already zoned. For self-storage, we're just adding more of it. and, and in some, especially the smaller markets, the tertiary markets that that might be, you know, a process of a day but in some other larger secondary markets, you know, that process can be pretty tedious. So, I would say generally timing for expansion is, you know, year to 18 months to get the construction completed. And then generally another 18 months of lease up. We've had some that have leased up much quicker than that.  we've had some that have taken a little bit longer than that.  and so that's always the balance. Usually, if everything goes to proforma, our original model, which it almost never does. Both to the good and the bad. Sometimes it's better, sometimes it's worse.  but you know, if it goes to the model generally, somewhere in year three ish, we're hoping to reach both physical and usually economic stabilization on the occupancy side. And at that point, Adam, that's where in the last call it five years where we've seen excessive cap rate compression, that’s where we've said, okay.

Kris Benson (30:07) You know, is it time to trade? And to your question of how we evaluate when we trade or when we sell or have a liquidity event, you know, generally it's two things. It's, it's what is our return on equity? And, and that's the equity we've created, right? So, you know, you put a hundred thousand dollars into and it's worth a hundred thousand dollars. And then three years later, it's worth 200 grand. Well, your cash-on-cash return. Isn't based on a hundred grand originally in the deal it's on the 200 that your property is currently worth. And (30:40) so, you know, we have some scenarios which is a blessing and a curse we're able to build value very quickly, but then our return on equity in the deal becomes pits or, you know, not what it should be. And we feel like there's a better opportunity if we, you know, have a liquidity event, take that capital out and go redeploy it. Let, let me give you just a quick example, Adam, cuz it it's, it speaks to it perfectly. So our first fund we launched in 2019,  and it was projected to be a six year. And we raised 50 million of equity, had 11 properties in it. And the plan was, you know, about eight of those properties had value add. So we would go out, do our value, add strategy, get that NOI up. And then, you know, look for liquidity bid. Well, in year two, we got an offer for those 11 properties that basically we had projected in year. and so, we're looking at saying, okay, we'll take that off the table for our investors and sounds good. Hopefully use those dollars to reinvest in the future and, and look that's, you know, 20, 21 was crazy. Yeah.  but those are the kind of things we're always kind of balancing against to say, is it time to recycle that capital?

Adam Hooper (31:52) Yep. That makes. So I guess as we think about from the investor lens, you mentioned some resources, obviously tracking the NA re index and seeing self-storage within there are there any other key data points or, metrics or sources that you all look at that investors who are interested in self-storage should be paying attention to and maybe some resources we can put those all in the show notes for people listening.

Kris Benson (32:24) it depends on what you’re, looking at, cuz remember some of the national data, it may tell a story around the macroeconomic climate of storage but that doesn't mean there aren't specific opportunities. Right? So, if the rental rates in Atlanta, Georgia are all going down, cuz we're oversupplied. Well, that doesn't mean everything in Atlanta. There are no opportunities. Right, right. Because remember it's that micro market micro.  you know, from a, a learning about the asset class, there's a great resource. It's called the self-storage. Almanac comes out every year, by self-storage, or mini co, which is a, an industry publication. They've been putting it out for 25 years and it's a great, you know, snapshot of the industry what's happening.  and some of the data around the, the shifts, in different markets.

Kris Benson (33:14) So that's a great read it's long that comes out every year. You can download it I think they'll probably charge you.  but you can download, the self storage Almanac. I mean, look for, for your investors that are on this podcast, I assume most are seeking passive investment opportunities. Where they're looking for sponsors to deploy capital with, and this is my own personal philosophy. And, and it's been this way since I first invested with reliant and, and what I do outside of reliant. I start with the team. I really wanna understand who the people are in the deal.  Because ultimately that's who you're investing in, you know? Yes. You, if you deploy capital with reliant, it's getting deployed into cell storage, but ultimately it's the people at reliant that will determine the outcome of that,  investment. So I spend a lot of time on the team and then the other thing I like is track record, right? Understanding. What have you done historically? And although it's not perfect, a perfect indicator of what's going to happen in the future. It's the best thing I got. Right. Because it's really hard to predict the future. So if you've got great people, who've done something really well, historically, generally, that's probably gonna turn out okay. In the future and there's gonna be bumps. That's the thing is that's where you want to have great people. When things go south and they will. What, who are the people behind the organization and are they acting in your best interest? So, you know, I mean, that would be my, if, as people look to self-storage, yes. Understand the markets, understand what the business plan is by the operator, but really dig into the people in the track record cuz I think that's gonna be your best bang for the buck as far as the due diligence.

Adam Hooper (35:25) Yeah. And that's great feedback and that was going to be one of my next questions is given your path to where you are, again, investing as an LP first, right? What were those things that you were looking for? And that's a hundred percent online with what we always say you pick the jock, not the horse, right? It's manager, manager, manager making sure that you're comfortable and can build the trust with those sponsors. And that's something that we've always encouraged is that direct relationship and communication between the investor and the manager. And I think for investors that maybe aren't as experienced, or this is their first time looking at somebody, these asset classes, there can be an intimidation factor of, oh God, do I really want to ask this question? Am I just going to annoy them? Why do they talk to me kind of a thing. Most of the managers that we work with welcome those questions and they love talking to investors. Right? From your path of LP now to operator. Any advice or encouragement for investors that are listening that have questions but are just not comfortable asking.

Kris Benson (36:31) Yeah. My first piece of advice would ask them, don't go into something that you don't understand. What's the why behind it? Why is this going to work and why is it not going to work? And if you have a sponsor that pushes back on you run away if you're pushing into things and a sponsor is pushing back. That is a big red flag. The other advice I would say that surprisingly very little people do is just do a Google search on the principles of the company. You'd be amazed at what you'll find,  that is just out there on the public record. And, you know, if it's a sizable chunk of capital, maybe you come out and visit the team and, and understand who those people are. I know that's not feasible for everybody all the time, but whatever you can do to get comfortable.  and, and, you know, to your point around investing in the jockey, not the horse, the thing I love is I like to be one person away from my. right. So the idea, if, if I buy a share of Amazon stock, Jeff Bezos will not take my phone call no.

Adam Hooper (37:26) I thought you had some connection.

Kris Benson (37:29) No, definitely do not. So, but Reliant you can talk with our investor relations team. And if they say, if an investor's like, Hey I'd like to talk with the principles of Reliant. Okay. You know, we'll, we'll talk to you now. It's, it's not scalable. We can't talk to everybody all the time.  we have 1800 investors in our platform and, and we are trying to run a business, but, but I will say. You know, generally you're one or two people away from how is the, how are the decisions being made for your capital and, you know, ultimately those are gonna drive the outcomes.

Adam Hooper (38:06) That's perfect. well, I know we've gotta wrap up here.  as we ask these kinds of final questions. Again, keeping kind of in mind, the investor's outlook here, when you're looking at self-storage and we touched on a little bit of this. What are some of the areas about the industry or about the environment that we're going into that has you maybe a little bit worried or concerned or things you're keeping up at night about where self-storage is going?

Kris Benson (38:34) Yeah that's a great question. Let, let me start big and I'll kind of get to the small, so macro, right? If I think macro. The big fear is disruptive, right? If I'm a taxi driver and Uber shows up, that's, you know, that's a, that's a game changer and, and there are some of those models out there right now. Valet storage is essentially the kind of the category where store things are picked up at your house, and then they are whisked off to an industrial warehouse somewhere. And then if you want 'em back, they're delivered.  and. In big metroplexes it, it can work and, and that model's still being tested. Nobody's really, solved for it yet. But in smaller markets, it it's expensive and they haven't quite figured it out. That may be a disruptor, right. That might be a shift. I don't think consumerism is gonna change. Americans are just gonna decide all of a sudden, Hey, I don't need this stuff.  at least. In a timeframe that your investors listening are gonna care, maybe generationally that shifts.  so macroeconomically, that's, that's kind of what I think about on the, you know, current environment where we are today, rising interest rates are a concern, right? Generally, for people not familiar, if, if interest rates are rising capitalization rates or cap rates are also following and when cap rates rise, it means, it just means that there's less (40:00) money chasing deals. And so prices go down. Right. It's again, supply demand. If there's a lot of money chasing deals, then the prices are gonna go up just like we've seen in the, the single family residential market in the last year. Well, now people have stopped buying houses and prices are adjusting. Same thing happens at commercial self-storage.

Kris Benson (40:18) So, you know, I think we'll see what happens with the fed.  obviously, you know, Jala is saying we're going to continue raising rates until we've fixed inflation.  there will obviously be some political pressures that play into that as well. But I think interest rates are probably the, the risk we look at now and, and say, okay, how does this play into our model? And, and this is where Adam for us, the NOI growth is even more important, right? If the cost of our capital is higher and we're putting debt on all of our properties, generally 65% loan to value. If we're putting debt on our properties. Well, now it's more expensive to get that debt, which affects the returns for our investors and for reliant. So I think that's the thing we think about right now.  do the inflationary pressures.  which I think storage is actually uniquely positioned to handle   our leases are 30 days so we can adjust prices quickly.

Adam Hooper (41:15)  Yeah. So you say that that's, the multifamily is typically the asset class that most people turn to in terms of the kind of inflationary hedge. And, and you can capture that inflation annually with these lease rates, but I mean, Hotels nightly rates, right? SU super flexible there. And you're talking monthly rent. So your ability to almost real time price with those pressures, right? I mean, that's gotta be a huge buffer or hedge against these inflationary pressures to be able to capture that in these monthly lease. Adjustments, right?

Kris Benson (41:49) Yeah. To a point. Right.  but at some point your competition becomes the dumpster, right? It can't inflationary, pushes and pushes, but there's a point where people can't afford to do it anymore. So. Yes, we have the, the structure to, to adjust, but you're starting to see that in the multifamily space now where rents are starting soften a little bit, because I think we're starting to hit the cap on what people can afford, right. And so, you know, that, that affects us as well.  but yeah, we're uniquely positioned versus, you know, let's say office where, you know, sometimes those leases are 5, 7, 10 years, and if you're. If your rental rate, isn't capturing the rental rate escalators, aren't capturing your inflation. You know, you can be stuck in a contract. That's not so beneficial for you.  as an operator or investor. So that is one unique option for us.  but you know, time will tell I everything is cyclical, right? And there's gonna be some ups and downs along the way. And, ultimately I think you try to find the thing that will. Push you through any economic environment. And for us, that's always been, let's just grow in a Y in long term. That's gonna be, that's gonna turn out. Okay.

Adam Hooper (43:04) Perfect. And then the flip side of the what's keeping up at night question is what has he most optimistic about the future of self-storage?

Kris Benson (43:12) Yeah, I think for us in particular, we're, we're a top 20 operator, right? So we're the 17th largest self-storage operator in the. what, what we see is that that consolidation play there. Aren't too many operators,  in, in,  at our scale that can bring a portfolio of our size, right? So there's, there's a unique opportunity, I think for reliant there moving forward.  I think in the asset class, Adam, What I don't believe is going to change is people have figured out, maybe I don't wanna live in, you know, Manhattan or, or, you know, LA,  and there's some pretty awesome spots to live around the country that are tax advantage and have better weather. And we've been the beneficiary of that. If I think about it, I think we see. L, you know, people more transitory.  so migration generally is good for storage as an asset class. And then, you know, the other thing that's happening.  we're seeing, you know,  people move in together as prices rise, right?

Kris Benson (44:20) So you have, now you have a roommate and when you don't have room for your stuff, it ends up generally in storage. And so, you know, some of these short term pressures for us, we believe are gonna be, you know, good for the asset class.  again, parlay against, you know, maybe a rising interest rate environment. So. We feel like the asset class is strong and then where reliance positioned, you know, allows us to be positioned well for a potential, roll up in the future.

Adam Hooper (44:48) Very good. Well, Kris, I think that's a good spot to end it. This has been a fascinating conversation and thank you again for, for sharing your thoughts today. wanting our listeners, know how they can learn more about what you and Reliant

Kris Benson (45:00) Yeah, for sure.  probably the easiest way is through our website, So, the abbreviation of management, that's probably the best place to learn more about us team track record our current investment opportunities. We post a bunch of stuff. If you search me Kris Benson, it's Kris with a K on LinkedIn.  we also post a bunch of stuff there as well.  and if, yeah, if we can provide any more information or someone's looking for investment opportunities, let us know and happy to explore it.

Adam Hooper (45:30) Perfect. And we'll have links in the show notes to all those things that we talked about today. So, Kris again, really appreciate it. Thanks for coming on the show.

Kris Benson (45:38) My pleasure. Thanks Adam. Have a good rest of the day.

Adam Hooper (45:40)  All right, listeners. That's all we've got for today. I hope you found that enjoyable.  if you have any questions or comments as always send us a note to and with that, we'll catch you on the next one.

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