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We acquired $50m worth of storage last year.

We've found just ONE deal in the past 3 months ($1.8m).

We continue to underwrite and analyze and reach out to owners and brokers but nothing is making sense.

We're either idiots or smart - and we have no idea which.
Nothing is less exciting to me than self storage right now and I'm super frustrated.

Prices just haven't moved enough for many acquisitions to make sense so we're sitting on our hands, focusing on operations and management.
Our customer service needed a lot of work. Our revenue management wasn't great. Our property improvement was behind on a lot of capex. We've spun up a construction division to expand on current properties.

A lot of great things happening in the business right now.
Less houses are selling so less storage is being rented on a monthly basis.

New rentals are down 20-30% across our portfolio and move outs have remained the same so occupancy is dropping.

We've dropped street rates at about 40 of our 59 stores. Some by as much as 50%.
We acquired almost everything over the past 18 months at 45-55% loan-to-cost so we don't have a leverage problem. We also fixed our debt.

But it is still stressful as hell owning 1.75 million square feet of commercial real estate as rates go up so quickly and everything changes.
NOI and revenue are still up 15-25% year over year at almost all of our stores and we're in good shape.

We have one store we acquired about 10 mos ago that is still at 55% occ and breaking even on a monthly basis.

This one is not going well. Luckily it is v small (sub $2m).
We had a portfolio we acquired 12 months ago appraise for $2.5 million more than we paid for it but we didn't execute the cash-out refi because debt priced at 7.35% so we went pencils down the day before closing.
We don't have any maturities we're worried about over the next 24 months and we have two fairly large refinances set to close in the next few weeks at reasonable rates.

One being a big cash-out refinance on a $25 million deal which we're very excited about.
More and more deals we're seeing listed from brokers are at 50-70% occupancy.

Acquired by groups over the past few years who were unable to lease them up.

We are reluctant to take them on because we've had trouble leasing in a few markets ourselves.

And pricing isn't close.
I'm not smart enough to pretend like I know what will happen with rates so take this with a grain of salt.

But I think greater than 50% chance there is complete carnage in the real estate market over the next 24 months and we see a lot of operators totally wiped out.
The low fee no fee syndicators on Twitter will get hammered.

Because when you stop doing deals the big fees and promotes stop coming in.

And I know for a fact a lot of self storage operators can't support their payroll with their management fees alone.
We can. Our fees are high enough to cover payroll and pay good people to lease our units and take care of our properties.

The LPs who beat up their sponsors on fees are not going to be happy with the end result.
For now we sit and wait.

I'll play golf, work hard in the business, do some hunting, get outside away from my computer, do a little travel.

And wait.
For those wondering why there aren't mass bankruptcies and losses everywhere already...

Banks move slow. Losing a property in real estate is a slow motion train wreck over 9-18 months.

You try to list. Then you try to refinance. Each of these takes 3-5 months.
And simply put most operators out there holding on to real estate don't have a lot of leverage and don't float debt or have maturities sneaking up on them.

All of them could care less. They aren't sellers so they don't care where the market is right now.
But the folks who have short term debt (3-5 years) and went in with a lot of leverage (70%+) on self storage deals or any other asset class will be in trouble.

And I think the folks going full steam ahead on development deals right now are clinically insane.
Getting rich in real estate is one thing.

Staying rich is another.

I hope I have what it takes!

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Insightful thread thanks for this one. Question: what do you think is the driver of depressed occupancy rates? Does this typically happen with self-storage in down markets or how cyclical is it? Curious your thoughts