00:00:00:02 - 00:00:12:05
Chris
What other type of repurpose can you do with a bowling alley other than something like storage? And that's where the instant value comes in, because we bought the building with land for almost less than $10 a square foot.
00:00:12:11 - 00:00:27:07
AJ
You know, really, you have this, margin of safety, of that lower cost. So it's like at some point you can buffer a lot of expenses because the value of your entry, your basis going into it is so low.
00:00:27:09 - 00:00:45:07
Chris
So building new will always be the benchmark of what we can build per square foot. But if we can acquire the land, the building construct and then be all in for less than we can build, do you make your money when you buy?
00:00:45:09 - 00:01:06:07
AJ
Welcome, everybody, to self-storage in Goma. And today Connor and I have some special guest with us today. We got a couple of, Louisiana boys that we met when we were down in New Orleans, and they were doing some pretty cool stuff, and so I asked them to, come on here to talk to you guys about it.
00:01:06:12 - 00:01:16:07
AJ
And, they had a project, but they converted a hospital and all sorts of stuff. So really fascinating deal they’re doing
00:01:16:07 - 00:01:30:15
Conner
That's incredible. I'm excited to dive into it. I don't know a ton about either of our guests today. Ronald. Chris, great to meet you guys. Thanks so much for being here. Joining us on the podcast today. Give us a rundown on, who you guys are, what you guys do.
00:01:30:20 - 00:01:49:16
Chris
Yeah, absolutely. Thanks, AJ. Thanks, you guys, for inviting us on this match and met you guys down in New Orleans. Love, love what you guys do love what you do in the space for promoting education and just knowledge to to to everyone that, is looking to learn a little bit about what self storage can do.
00:01:49:18 - 00:02:10:07
Chris
Background on me and Rondo, we known each other for a long time. We went to college together and just do a lot of real estate together. My background mainly came from, you know, was in corporate America for, many years, Hurricane Katrina, New Orleans. I'm from the New Orleans, Louisiana. After Katrina, I bought a lot of flooded and gutted houses and put it back together.
00:02:10:07 - 00:02:27:14
Chris
So that was my my start in real estate and partnered up with Ronald, who's got a very long history and, self-storage. I'll let him explain. But, we basically partnered partnered up in 2015, basically, we focus on the self-storage conversions.
00:02:27:16 - 00:02:38:12
Ronald
My background, history, I guess our family started, building many storage. And my dad started construction company and built many storages in 1969. Oh, gee. Yeah.
00:02:38:12 - 00:02:40:01
AJ
Oh, gee.
00:02:40:03 - 00:03:14:18
Ronald
I grew up in the business. Storage Wars was definitely something that was very common for us to grow up around. And and we, the story that is really neat that our parents taught us work ethic. We all love to go thirsty. And at Christmas. Well, I have six brothers and sisters. I'm the second youngest out of seven and, growing up in New Iberia, Louisiana, there wasn't a big pool of people to bid on the unit, so they would typically have like 3 or 4 different families that would come in on the units, and they would try to fix their rates on doing so much.
00:03:14:18 - 00:03:32:16
Ronald
So back then, my dad would always have somebody in the back of the crowd trying to drive the rates up, and if that didn't work, he would just buy the units back themselves because they would try to fix prices at $50 or more. So what we would do is here it was with, load up, all the units and trailers and bring them to a warehouse.
00:03:32:16 - 00:03:47:13
Ronald
We bought them. And at every holiday, Easter or Thanksgiving, we would, have big flea markets, big auctions, and, the money that we would raise from that would be the money that, we would and we were able to use to go to those people.
00:03:47:17 - 00:04:21:16
AJ
That's awesome. I mean, that's you're talking like when your dad started, that was that. That was before America even remotely knew what storage was. I mean, that is like pioneer of, industry kind of stuff for all of you. Listen to the podcast. That is like the origination. In fact, that's earlier that I think a lot of people would even peg when storage really even started, became a thing that it's like, you know, one of the original handful of probably people in the United States getting into it.
00:04:21:18 - 00:04:36:03
AJ
So that's that's really amazing. And what a history for you to grow up in it. Now talk to me about 2015 when you guys paired up. What what was the decision there to go into storage? What? Like what drove that?
00:04:36:05 - 00:04:54:20
Ronald
Well, Chris and I in college, when we met, we actually. I'll never forget we were freshman year. We're talking about what his family did. Business wise. Men were wearing the same fraternity. And I was telling him what my father did. And he's like, well, my grandfather owns a storage facility in New Orleans. And I said, yeah, we have all these in the library now.
00:04:54:21 - 00:05:19:05
Ronald
Like maybe we might do storage together one day. And then I finished up pre-med, decided not to go to medical school, but my father's construction company, and built my first mini storage whenever I was 24. Fast forward, we specialized in building pre engineered, crane buildings, offices, metal buildings for the oil film industry. So we built their facilities in South Louisiana.
00:05:19:05 - 00:05:46:02
Ronald
And when the BP spill hit, I went ahead and I knew that the Gulf of Mexico, Gulf of America now would not be doing I would not have much business along the Gulf Coast for my construction company if I stayed focused in oil fields. So I went ahead and got my contractor's license across the US and started following the olive oil companies to develop their facilities and all the shale play states around the U.S.
00:05:46:02 - 00:06:11:07
Ronald
So I was part of that boom from 2009 1011. Oh, and going from North Dakota, Oklahoma, West Texas, Wyoming, West Virginia, building their facilities. And in 2015, when that started slowing down, had done very well for myself and felt very blessed. But I knew that it was time to jump back in. To the real estate market.
00:06:11:09 - 00:06:28:02
Ronald
And storage was my first choice. And that's when Chris was getting into the residential market. Or was been in the residential market, in real estate in New Orleans. And, we teamed up together to start fulfilling what we talked about whenever we were 18 years old.
00:06:28:04 - 00:06:28:22
Conner
That's incredible.
00:06:28:23 - 00:06:52:10
Chris
Yeah, it was a good marriage because from as far as design build of anything metal building, I mean, Ronald's experience of construction is top notch, right? And coupled with my unique abilities from the real estate side, from more of the front end, mostly acquisition of how we acquire properties, what we look for and and going into markets and doing deep dives and basically uncovering buildings.
00:06:52:12 - 00:07:21:19
Chris
And we just felt, you know, where's Ronald multiple times is, I liked I prefer to build new, but I also knew the value that you could get from conversions when you look at things from replacement cost. Right. And some of our metrics are is if we could buy something at 30%, 20 or 30% of replacement cost and then construct and be at about 50% of that replacement cost, we're getting instant value right then and there of versus building new, right.
00:07:21:19 - 00:07:50:05
Chris
So building new all would be the benchmark of what we can build per square foot. But if we can acquire the land, the building, construct and then be all in for less than we can build, do you make your money when you buy? Right? That's kind of how we approached it. So a lot of our models where we would search building first and then kind of back into a market versus, you know, try to study a market first because there may be very limited conversion opportunities in a market, right.
00:07:50:07 - 00:09:18:13
Chris
So it's a little bit of a different approach. You know, how we implemented our strategies. But we've done everything from bowling alleys to again, this this latest one was a six story hospital conversion. We could we could touch more on that in a little bit. But you know big box retail at the end of dead malls to old furniture stores, to actually construction companies where we can find value in a certain roof height, that we were able to buy, which is kind of a nugget that you really can capture additional square footage for less purchase price.
00:09:18:15 - 00:09:21:09
AJ
Now walk us through that first deal.
00:09:21:11 - 00:09:44:13
Ronald
Our first deal was a bowling alley. We converted into a bowling alley into, climate control. We actually left the lanes and just filled in the gutters. So the hallway, the hallway system really looked cool. It was it was a neat conversion. It's a pain to get all of the the bowling alley equipment out of the building, but, we were able to capture a lot of value in that one.
00:09:44:17 - 00:09:45:17
Ronald
That was our first one.
00:09:45:22 - 00:09:49:07
AJ
How much that cost? Like, all in and how much like the building.
00:09:49:10 - 00:10:09:07
Ronald
Building with for 20, I think, construction was six. So we were in it for like a million, two maybe for a 33,000 square foot conversion. And, it wasn't that big, so it definitely wasn't big enough. So we ended up buying a building, an industrial park right down the road that had a lot more square footage of that.
00:10:09:07 - 00:10:38:07
Ronald
We converted non-alignment units to. And we had one commercial tenant there as well. The lease up wasn't bad. We did good on lease up. The rates weren't the best. Starting off, hurricane Laura came in and did a lot of damage to Lake Charles and we ended up we filled it up 100% and we got rates right. And we were able to to do a sale with a 1031 with that facility in the and the construction company in New Orleans that we had bought was in the Saint was part of that sale.
00:10:38:12 - 00:11:00:08
Ronald
That was it had three buildings on the side. It had two tall metal buildings that had even heights greater than 20ft or right at 20ft. So I was able to convert those into two storey interior build outs. And there was a three story office building on that property as well that we were able to convert. It was a concrete structure that we were able to convert to three storeys of, storage as well.
00:11:00:10 - 00:11:06:01
Ronald
So we took both of those, and filled them up and did a 1031 exchange with those two properties.
00:11:06:01 - 00:11:29:15
Chris
Yeah. AJ the instant value of of finding buildings, say, for instance, a bowling alley. Who's going to buy something like that? Yeah, right. Can you turn that into apartments or what other type of repurpose can you do with a bowling alley other than something like storage? And that's where the instant value comes in, because we we bought the building with land for a, you know, almost less than $10 a square foot.
00:11:29:21 - 00:11:30:05
Ronald
Yeah.
00:11:30:05 - 00:11:52:23
Chris
Try to build that new. Right. Yeah. Just can in the value we're able to create the office building that we mentioned was basically a, it was a construction company. So they had metal warehouses with, with over 20ft of height that they used to store all their equipment. So just by coming in, be able to pour mezzanine deck and create the second floor was able to double the square footage and get instant value there.
00:11:53:01 - 00:12:22:09
Chris
And we divested that portfolio was a three. It was a three property portfolio that went full cycle. We divested in 2022, in June, which we all know what happened in 2022. In the later part of the summer, the interest rates started going up and we were able to divest that portfolio at a very, very good cap rate right before all the movement plus our insurance went up from 30,000 and 90,002 weeks before the sale and we thought was, very justified re trading.
00:12:22:09 - 00:12:45:10
Chris
We expected it never did. And we end up moving on and we ended up 1031 exchange it into five different conversion opportunities from there. So we're coming off of of those of the hospital being one of them. One of them was old Burlington Coat Factory at the end of a dead mall. Another one was an old rumps to go, furniture building in Texas.
00:12:45:10 - 00:12:49:12
AJ
So how many facilities do you have right now and how much square footage do you have today?
00:12:49:18 - 00:12:56:22
Ronald
I think, between of my family stuff back home and Chris and I, I think it's around 12 total locations.
00:12:57:00 - 00:12:59:02
AJ
And how many of those are conversions?
00:12:59:02 - 00:13:21:22
Ronald
I would say out of those, every one that Chris and I have done together, a bigger version than seven of those. Plus I've done several conversions here. So nine of those would be conversions. And and I, you know, I still do a new construction storage for customers locally. So I'm very experienced with new construction. I'd much rather do that because it's a lot easier to fix your pricing.
00:13:21:23 - 00:13:30:06
Ronald
It's it's not necessarily faster because I say nine out of ten times. I'm able to get open a lot faster with the conversion than I am with, new construction.
00:13:30:06 - 00:13:37:07
AJ
Well, walk us through you guys. The pros and cons, then. From ground up to conversion, what are the pros and cons that you guys are looking at?
00:13:37:10 - 00:14:01:17
Chris
Well, you just hit on what Ron was is, you know, one of them is the, is the soft cycle, right, of, from acquisition all the way to, to to eventually getting a permit, having to go through all the engineering, you know, through that a lot can change, right, in that the time it takes when you underwrote the land and the bid on construction, by the time you get the permit, the suppliers aren't giving you yearlong bids.
00:14:01:17 - 00:14:04:18
Chris
Right. They say, here's your bid. It's good for three weeks.
00:14:04:20 - 00:14:28:08
Ronald
So we have three facilities in Corpus Christi. The first facility we got, it's got what's called Buttered Crust bakery, race bakery that was built in the 1930s. They moved in the 90s to, San Antonio. So the bakery was vacant. 73,000 square foot building, brick block building, flat roof. And it definitely wasn't in good shape. Roof had some issues.
00:14:28:08 - 00:14:48:13
Ronald
There are a lot of pigeons in it. I mean, there was a lot of work through cleanup wise, but it was already gutted when we got whenever we looked at it. So when we started digging into it, it was a conversion that was in the process of getting designed and permitted by somebody else. But they made some bad investments and some multifamily portfolios and had to liquidate.
00:14:48:13 - 00:15:09:12
Ronald
So, it went to auction. When I started digging into it, I was able to find out who the previous owner was that was going to convert into mini storage, reached out to them through some vendors that I'm close with that we've been dealing with for over 30 plus years, gotten the guy's cell phone number, reached out to him, was able to buy his set of permitted plans.
00:15:09:14 - 00:15:32:04
Ronald
The week before that we bought and closed on the building. So I went straight into construction with their permit a week after purchase, and we were open in six months, and that would have been a 4 to 6 month design phase and at least 6 to 8 months of construction. If the demo wouldn't have been done, if not longer.
00:15:32:04 - 00:15:51:19
Ronald
So we we saved about 8 to 10 months, in my opinion, on that project by doing what we did, if it would have been new construction, it would have been roughly nine months to a year. Project that size of a facility, it takes up a whole city block. So between that and design, you were looking at 18 months roughly, and we got it done in six.
00:15:51:21 - 00:16:03:07
Conner
But you guys kind of touched on some of the the pros. Obviously that timeline is a huge one. What are some big pitfalls people need to be looking out for on conversions? I feel like there's so many unknowns when you're going into an old building.
00:16:03:09 - 00:16:36:13
Ronald
One thing I would say would we've been fortunate on looking into it just because we have the experience and the knowledge. But even with that hospital, you know, it was built a long time ago, so that doesn't mean that their stairwells were designed to current code. That was the first thing I checked on in the building, because if that would not have been to current code, not the right depth or height than the treads of whatnot, we could have had a major cost because it was all concrete construction to go with six storeys on on three different stairwells for that building.
00:16:36:14 - 00:17:09:15
Ronald
But the hospital conversion, we knew we had to replace all sprinkler systems, all electrical, all mechanical. We really just had the bones of the concrete building itself. That was good. Everything else had to replace, so that was a little bit easier. Some of the other ones that have Interior Builder out, and you're having to relocate electrical panels from areas of buildings to consolidate all into one area so that you could not have a cluster of different wiring and different locations of electrical rooms and running back with all your, you know, your sensors.
00:17:09:18 - 00:17:26:01
Ronald
There's a lot of little odds and ends as best. This is a huge one. The hospital was already gutted when we purchased it. If it would not have been gutted, I would not have bought it. Yeah, because in the age of it advanced, this would have been a huge remediation course that the project would not have been able to afford.
00:17:26:07 - 00:17:45:02
AJ
So how do you avoid those pitfalls when you're underwriting a deal? There's this huge delta in between the known and unknown cost. How do you limit that down and how do you limit that risk? What are your guys's process or thinking that if I'm looking at a conversion, how do we make sure that we don't get in over our.
00:17:45:02 - 00:18:04:20
Ronald
Heads the Ada compliance side of IT sprinkler systems, if they're outdated and have a lot of rust on the inside of them, as best as those items are being. But then the structural, the structure itself when it comes to steel buildings and structures, renovation projects we've done, so many really know what we're looking at when we walk into a stack frame building.
00:18:04:20 - 00:18:23:12
Ronald
If we walk into a, wall constructed building with steel framing, with mezzanine decks, or with a pre engineered metal building or a block building, we've, we've done so many of all of them that, I guess just the level of knowledge that we've gained from making mistakes in the past that you never make a second time.
00:18:23:14 - 00:18:44:12
Ronald
That's the best way to put it. And also having a team of, subcontractors and superintendents that are very knowledgeable and all work for the common goal of the investment. We're not trying to drive the construction cost of the project, because a lot of these projects have ownership in the project as well as in the construction companies.
00:18:44:12 - 00:18:56:08
Ronald
So we're all working together as a team to keep the cost down so that the construction company can keep making money. But for the investment to be successful, there's so we can continue to do more of them.
00:18:56:10 - 00:19:16:19
Chris
Rather hit a unique point of the zoning. Right. Because because you're changing the use of the building, there's no get around not bringing it up to current codes. Right. So if you're saying what's the pitfall when you're looking at a building, those are the things that don't jump out to you until you actually go put in your permit.
00:19:16:20 - 00:19:36:18
Chris
A lot of times you don't put in your permit until after you've made the purchase decision, right? So you have to know those things upfront. What are the current codes? And if you're doing a conversion, usually that building was built a long time ago and is not up to current code. You have to know what those are and actually project those cost ahead of time, you know?
00:19:36:18 - 00:19:54:22
Chris
And a lot of times, like Ronald said, a lot of times he's through his experience with these buildings. He's almost a lot of time educate the engineers. I could remember one instance where we were talking about floor load, right, and floor load. You have to have a certain load on the floor for weight wise to get around the permit.
00:19:54:22 - 00:20:13:03
Chris
You could probably explain this better than me, but he's intuitive enough to know. Well, we have hallways, right? We have stairwells, right. But you can't take a blanket load on the full floor. You just have to take it for the unit itself. Right. So that really is a big factor in the load calculations.
00:20:13:05 - 00:20:31:13
Ronald
And working with engineers to make sure that they they all agree with the calculations that we're running, you know, so that's all of course that has to be stamped no matter what. I for instance, when we were buying a building in Waco, it was a printing company. The building was sectioned off. It was added on four different times.
00:20:31:13 - 00:21:03:10
Ronald
So it's over that building, I think it was, around 69 or 71,000 square foot, block building. But there were four different structures. All had three hour block firewalls. Separating them in roughly 20,000ft. Sections are a little bit smaller. So her code was like in a in a downtown city area, you can go with certain square footage is up to 24,000 square foot with a fire barrier at 12,000ft² between the two storage buildings.
00:21:03:12 - 00:21:23:21
Ronald
But if you're up against any other buildings greater than that 24,000ft, then you would have to have a three hour fire wall so that the building, what that wall could. If one side of it caught fire, the other side could break away from it and not fall with it and take it down. And, it took me working with the head of the state fire Marshal's office in Louisiana.
00:21:24:01 - 00:21:44:15
Ronald
That was in an agreement with me on this code to work with the head of the permit office in Waco, Texas, and fire marshal to explain to them why the building design was adequate to not have to put sprinklers in it and to utilize the firewalls that were in place.
00:21:44:15 - 00:21:46:15
Chris
Which is a huge cost savings. Right?
00:21:46:18 - 00:22:02:09
Ronald
You had savings and it took some back and forth for probably about a month and a half, but I was finally able to get across that hurdle. If not, no, that was a risk that we were willing to take. And if we would have had to put sprinklers in it, we had already bought the building and we would have done it.
00:22:02:11 - 00:22:04:11
Ronald
Yeah. But we were able to get around them.
00:22:04:14 - 00:22:28:07
AJ
You know, really, you have this, margin of safety, of that lower cost. So it's like at some point you can buffer a lot of expenses because the value of your entry, your basis going into it, right, is so low because, you know, for a lot of people listening to the podcast, essentially what we're talking about here is commercial real estate derives value from the income it produces.
00:22:28:09 - 00:22:48:05
AJ
Well, when you have a use of a bowling alley that no longer functions and can't be used for that, all of a sudden other people trying to buy it, they're like, we have no use for that. We can't figure out how to use it. So now it's like this. This isn't even an income generating asset. We don't even know how to make it an income generating asset.
00:22:48:10 - 00:23:26:20
AJ
So its value is way below even like they were mentioning replacement cost or anything else like that. Because there's no income and there can't be income derived. Right. Well, when what they're doing is they're going in, they remove everything they put storage in and there and then that square footage is being utilized creating revenue and income. And that income, right, is then all of a sudden a lot and lots of cases, even more than the bowling alleys net income was so you're the spread between nonproductive cash flowing square footage, two really good productive square foot cash flowing.
00:23:26:21 - 00:23:48:10
AJ
That is a huge value spread right there. So you're buying it at something that is far below, I think, a lot of Benjamin Graham and his, cigar butts and how he was buying things and companies that essentially you could scrap in the scrap was worth more than what they're buying it for. So it made sense. So that is the case here.
00:23:48:11 - 00:24:10:17
AJ
Now, that is very contingent, though on buying it at the right cost, meaning that you don't that doesn't mean because it's a conversion that happens at all. Right. So they know the value they're looking for. They can underwrite it. They know it. But a lot of times I see people, they buy conversions and it actually cost them more than if they would have just built it or its previous use.
00:24:10:18 - 00:24:25:08
AJ
It wasn't discounted enough. And you also got to understand that market, and that's what they've done. Good on a few of these. I can imagine the hospital wasn't quite like that. The hospital was probably a little different. It was not probably the cheapest thing ever.
00:24:25:09 - 00:24:26:23
Chris
We bought at $9 a square foot.
00:24:27:04 - 00:24:29:11
AJ
Geez, that's 100.
00:24:29:12 - 00:24:32:08
Chris
50, 850,000ft². And on those square foot.
00:24:32:10 - 00:24:34:07
AJ
And where was that located?
00:24:34:09 - 00:24:42:15
Ronald
In Pasadena, Texas. Really? When you draw a circle around Houston proper, it's it's in it. I mean, it's it's carved out and called Pasadena.
00:24:42:19 - 00:24:43:15
Conner
That's so cool.
00:24:43:15 - 00:25:08:15
Ronald
The population is strong. The building is I mean, it's it's a the building is concrete structure, most well-built building that we owned before. It's, it's like a bomb shelter. And when we came in, we spray foamed all the perimeter walls. So the temperature that it holds, it's just unbelievable. We're almost out there. Force air conditioned units to run, because it holds the temperature so well.
00:25:08:17 - 00:25:09:19
Conner
Yeah. That's amazing.
00:25:09:19 - 00:25:10:18
AJ
That is amazing.
00:25:10:20 - 00:25:27:15
Ronald
You can drive straight the way that is designed. We you drive straight through where the front entrance was, you drive straight through the building with your vehicle or U-Haul. Stop at the glass doors at the elevator to load and offload. Very, very convenient concept. And it really turned out to be a beautiful building.
00:25:27:17 - 00:25:45:03
Conner
And when you guys are looking at these, I want to touch on a couple things. You'd mentioned being able to go in and maximize square footage by finding a certain ceiling or roof height. And, I wanted to just figure out what other things are you guys looking at when you're going in and looking at opportunities to maximize square footage?
00:25:45:03 - 00:25:57:16
Conner
So I want to touch on that. But then I also want to jump into how you guys are finding these conversion projects too. So what are you guys looking for first and foremost, when you go in to see those opportunities to maximize square footage value, cost savings, those things.
00:25:57:18 - 00:26:20:17
Ronald
Because maximizing rentable square footage, if we have 18 to 20ft clear height inside of a building, and we drill the foundation and see that it is strong enough to handle, second floor interior build out, then we're we're all about it to double up the square footage. Of course, you need to look at how much square footage are you really going to create by doing so?
00:26:20:17 - 00:26:47:01
Ronald
So that you can justify the cost of a personnel freight elevator to handle that? I'm always looking at that, and that opportunity arises, and you could get a tall enough building to build out the inside of. We definitely we definitely entertain that every time. Now, when it comes to the, net rentable versus gross square footage of the space, you know, the ultimate goal every time, especially with a single story, is to have an 80 over 20 split.
00:26:47:01 - 00:27:13:00
Ronald
You want 80 to 80% rentable at 20%. Your hallways in your office, whenever you get into multi-story, you lose elevator square footage, you lose stairwell square footage. And a lot of times we end up at a 7030 or a 6832 split roughly. But we've we've been fortunate not to to really get hit hard with, 60, 40 splits on that.
00:27:13:00 - 00:27:35:04
Ronald
So, you know, the dimensions are nominal in and out in a way. So if you have a 109ft long run of storage units, and you have a divider wall every ten feet between each unit, and you want to get that extra unit in there, but you're going to have a ten by nine instead of a ten by ten.
00:27:35:06 - 00:27:55:00
Ronald
The dimensions are nominal. If you shift every single one of those partition walls over a half an inch or a little bit more, you end up getting your ten by ten units because the dimensions are nominal. And when it comes to that. So even if their unit is nine foot 11in by ten foot, they're not. Nobody's beat you up on rates for that.
00:27:55:01 - 00:28:13:04
Ronald
So there are ways to maximize square footage, get the right amount of units by condensing some of that. If going inside of an existing building, the dimensions aren't exact, you can still make that work with a little bit of thought and a good superintendent working with you to maximize that for you.
00:28:13:05 - 00:28:32:21
Chris
I don't think Rondo gives himself enough credit on that, because he lays out the storage units in the building, right? And then gives it to the architect and designs it. Right, because he's looking at it from the aspect of I'm maximizing my net rentable square footage, and no one's going to lay out this better than me, because I'm also know how I'm going to construct it.
00:28:32:22 - 00:28:53:17
Chris
While I'm designing it. Right. So that's the true benefit there, because you're right, you're trying to maximize the most net rentable square foot you have and not have any dead spaces in your building. And then also know how you can convert a lot of the units as well, because you're making a lot of speculation on what the unit mix demand is, especially if it's your first facility in a market.
00:28:53:17 - 00:29:13:19
Chris
Right? So you sometimes you need the ability to change some of the unit sizes as well. And another way we we we do that sometimes is by phase right. Storage has a unique ability to be able to phase construction. For that. One of those reasons alone is we need to understand what the market dynamic is or what the demand is for certain unit sizes.
00:29:13:19 - 00:29:19:20
Chris
And by phasing, that's a that's a benefit of phasing, along with a lot of other benefits of phasing as well.
00:29:19:22 - 00:29:35:07
Ronald
And a lot of time when you're dealing with a, you know, 100,000 square foot building or bigger or even a little less, it's if you don't have a set of plans when you purchase it, and you're having to recreate everything in some of your dimensions of the buildings or not. Square, or wall thickness is very on the same wall.
00:29:35:07 - 00:29:56:02
Ronald
For some unknown reason that happens. You can bust your dimensions one way or the other. And if I'm not on site, my superintendents do a phenomenal job. Chris. Mike. Both when it comes to laying those out to max to help me maximize. I'm not going to take all the credit because they help me maximize rentable square footage is on site whenever I'm not in that town at the time.
00:29:56:03 - 00:30:19:18
Ronald
And they come back to me, they're always thinking ahead, trying to gain an extra unit here or there and making the numbers work to where we get more units. And typically when we finish projects that size, we don't really don't lose square footage from what we estimate, and we always end up with a little bit more rentable square footage than we had on those plans, than we do a final as built drawing to accommodate for that.
00:30:19:20 - 00:30:35:01
Ronald
And so not every time when we trying to go with, you know, try to get say that, for example, that ten by ten, if it's not nine and a half, if we can get an extra ten by 11 or 10 by 12 and make some of these units bigger, just because we got a little bit more space, we're going to do that as well.
00:30:35:03 - 00:30:43:13
Ronald
So it's just it's a team effort. But history has definitely proven that that's what what we've been able to accomplish accomplish with these conversions.
00:30:43:13 - 00:31:00:21
Conner
Yeah, those are all phenomenal insights. And such a testament that you really have got to have people on your team that know and understand that a half an inch in a unit, you know, multiplied over, you know, a hundred units, that that means a lot. It's not just a, hey, you know, we'll do ten by ten and this and that.
00:31:00:23 - 00:31:22:22
Conner
When you understand that you're trying to maximize rentable square footage, you have the people on your team that also understand that and the people that can make it happen know how to make it happen. It's an absolute, especially when you're coming into these conversions. Like, it's like you guys said, there's so much just unknown when you're coming into these if you're not working with those experts, good luck.
00:31:23:00 - 00:31:31:21
Conner
It's not going to be fun. So it's a huge testament to that for sure. Thanks for sharing. So on top of that, how are you guys finding these things?
00:31:31:21 - 00:31:36:06
AJ
Yeah. How do you find the conversions? Like, what are you looking through? Where are you going?
00:31:36:12 - 00:31:38:00
Ronald
Hat's off to Chris on this one.
00:31:38:04 - 00:32:03:17
Chris
Yeah. That's typically my role. Within our partnership. Right. Spending the time trying to. Trying to find the needle in a haystack. Right. Because essentially what it is. Right? Finding the building that is the right building for conversion is a needle in a haystack. And I have to say, I mean, it's it's no secret method of of how you do this other than be known in the area that you're looking for storage conversions.
00:32:03:17 - 00:32:08:18
Chris
Right. Most of the deals that we get come from people that know what we're looking for.
00:32:08:18 - 00:32:09:12
AJ
Yes.
00:32:09:14 - 00:32:26:15
Chris
That is the number one way to find you. If there's certain markets you like, go to the retail brokers. Right. Not to storage brokers. I don't go to the storage brokers when I'm looking for deals. I'm going to the other, you know, asset class brokers to tell them what I'm looking for as far as a shell, right?
00:32:26:16 - 00:32:48:19
Chris
I mean, single tenant retail or the best ones. Those make for the best conversions. The old Kmart, the old Sears buildings, you know, because they're already typically already sprinkled. They're well-built, built in, and it's hard to find different uses for them. So that by far is the number one. Right. Is is people knowing what you do and know what you look for.
00:32:48:21 - 00:32:51:10
Chris
And they know the right building to bring to you.
00:32:51:10 - 00:33:12:02
Ronald
Well, and you can find buildings. But the feasibility that Christian hadn't mentioned yet, I mean the amount of of a deep dive that Chris takes into these markets, instead of hiring feasibility analysis to companies to come in and do feasibility for us. Chris, does that. When it comes to me on the storage side and the unit mixes and all that.
00:33:12:02 - 00:33:26:00
Ronald
Yeah, that's what I do. Well, Chris is equally as important and as good at what he does on the feasibility analysis side of it, and also on the negotiations to get the deals to the closing table. He's a workhorse when it comes to all of that.
00:33:26:00 - 00:33:48:13
AJ
You really have to understand, okay, this may be a conversion. And that building actually may be perfect for a conversion, but the market may not be. And that's why I don't want a haystack, because it's not just the opportunity as in a cost perspective. And what's the basis and is it allowed and can we, get it to be qualified for it?
00:33:48:13 - 00:34:06:02
AJ
It's also is this market even good? Could this market hold that much storage or is this an overbuilt market? So those two worlds have to come together. And that adds, a much higher layer of complexity on to the projects in order to make it successful.
00:34:06:07 - 00:34:09:12
Chris
Yeah, we could have done a whole lot more deals if we were selective as we are.
00:34:09:12 - 00:34:15:09
Ronald
But now is the time where we're so grateful and thankful to God for being that selective and.
00:34:15:09 - 00:34:16:10
AJ
Just.
00:34:16:12 - 00:34:33:02
Ronald
Being strategic on it. When you get a soft market with the housing market, people not moving, rental rates going down, everything get more competitive, interest rates going up. We're very blessed to have been really thinking about that and attentive to that whenever we took on these deals.
00:34:33:04 - 00:34:34:05
AJ
Absolutely.
00:34:34:05 - 00:34:47:17
Conner
Yeah. No I wanted to also touch on you talked about kind of looking for the asset and then backing into the market. Can you walk us through what that process looks like for you. Because I know a lot of people like you said they'll go and look at markets first.
00:34:47:20 - 00:35:08:10
Chris
Yeah. I mean you guys may know there's more, but we don't do a lot of deals on the West Coast, but try to find it. A good conversion of the West Coast is a lot harder, because there's not a stock of older buildings that need to be repurposed. Right. And as you move more south or southeast, where it's an older town that's, you know, built in the early 1900s to the late 1800s, right?
00:35:08:10 - 00:35:25:18
Chris
So no new markets where there's a good stock of buildings, but you're still looking for all the things that other asset classes would look for right now. Look, if I wanted to go into an industrial park, I would find tons of buildings that meet great conversions. But does that mean that's a good the site for your storage facility?
00:35:25:18 - 00:35:48:08
Chris
No, because I mean the same fundamentals hold true, right? You want to be on major thoroughfares. You want people to see you. You know, I mean, we all know that most people still rent from the facility. They drive by every day. Right? Some of those old fundamentals are not going to change. You could do some of the best marketing online, but at the end of the day, your visibility still makes the most sense, right?
00:35:48:08 - 00:36:06:21
Chris
And that's why we love the single tenant retail buildings because they're retail location, right? They've already went through that process of building in an area that that has the most density and the most rooftops, because that's actually age. That's what we're looking for. We're looking for rooftops, right? We're looking for rooftops around a building. We're looking for density around the building.
00:36:06:21 - 00:36:26:19
Chris
Will we just like anything? We're kind of shifting more towards a more drive time than we do a traditional radius, right? You put a radius around, you build it is half your radius around, you know, an ocean or a golf or, you know, a mountain range or whatever it may be. Right? You know, most people still want to stay less than 20 minutes from their facility, a river.
00:36:26:19 - 00:36:28:19
Ronald
A bridge and a river makes a big difference.
00:36:28:22 - 00:36:44:16
Chris
Where they would go over and go storage facility. So true. So if I really like a market and want to buy in that market, I'm doing the old school things. I'm growing the market, I'm driving around, I'm looking for vacant buildings. Yeah, right. Vacant buildings. I'm going to get the best deals on a vacant building.
00:36:44:16 - 00:36:57:14
AJ
So are you seeing this as a good environment moment to be executing on conversions, or is it harder to find good opportunities today? Or is it gotten easier?
00:36:57:16 - 00:37:20:17
Chris
I think it's absolutely harder, especially in stores right now. Right. Because who has a crystal ball? Right. For the past ten, 15 years it's been Goldilocks. It's been the Goldilocks asset class. Yep. So now things started getting difficult where me and Ronald we would have never acquired an existing facility. 2 or 3 years ago. Never. There was no value in our opinion there.
00:37:20:18 - 00:37:45:09
Chris
Yeah. Because we were buying at sub six cap rates. I don't see we don't see value in that work. It's because again, we're developers, right. Where some other are more operators. Right? So they create their value through operations. Right? We put all of our buildings on third party management. We have a great partner in our third party, manager that we rely heavily on.
00:37:45:09 - 00:37:54:14
Chris
A lot of that feasibility. So everybody has their unique way of, of how they look at things today. Would we consider new construction? I don't think so.
00:37:54:15 - 00:37:59:14
Ronald
I want the tariffs taken off right now, too. I mean, if steel prices are going to continue to go up, it's going.
00:37:59:14 - 00:38:00:15
Conner
To be my next question.
00:38:00:15 - 00:38:22:23
Ronald
Yeah. We're not seeing the interest rates moving right now yet either. So there's a lot of stuff to look at I think, streamlining your operations and getting everything ready and being prepared to go is what we are doing right now. That's that's what we're focusing on so that we hit the ground running when we start seeing, you know, start seeing some opportunities come up.
00:38:23:01 - 00:38:44:15
Chris
But see, we have to then go, okay. Are we now willing to start looking at acquisitions? Right. Because maybe things weren't priced what they were three years ago. But that's a whole set of different underwriting criteria than what we're typically used to. So we have to adjust, right and kind of figure out what is our game plan. But what I can tell you is we will always do conversions right?
00:38:44:15 - 00:39:02:04
Chris
But again, if you just do conversions, you're limited to coach. We're so selective. You're limited to the amount of buildings you can find. If you wanted to scale quicker and you wanted to grow, which a lot of operators and sponsors want to do, you have to almost acquire existing facilities or build new.
00:39:02:06 - 00:39:23:04
Ronald
We're not opposed to either one. We'll definitely do more, now that we're getting our head back above water with all the ones that we developed them in a gross square. Footage of what we developed the last couple of years just for ourself was right at 500,000ft². So and that's still with me having my construction company and all of our other customers and everything else that we do, all for all the other services that we offer.
00:39:23:10 - 00:39:28:03
Ronald
But I'm excited and I'm getting to where I'm from, but ready to start rolling with a whole nother set.
00:39:28:03 - 00:39:47:22
AJ
So awesome. Well, you guys, this is an amazing topic, especially for right now in today's environment because I know people are looking for opportunities, but where can people find out more about you guys? Where can they reach out directly to you guys? We've all spent an hour here, and I know people are going to have a lot more questions.
00:39:47:22 - 00:39:52:17
AJ
Obviously, we can't dive in there somewhere where we can send or point people to, you know.
00:39:52:19 - 00:40:15:21
Chris
We have a website. It's, you know, our storage name is, Safe Space Storage. And our umbrella company brand is Safe Space Company. So, it's, safe space companies, plural.com. That's our website. If anyone wants to reach out to us there, they can, you know, they can fill out a form and happy to chat with anyone, regarding anything that they need to know.
00:40:15:21 - 00:40:36:13
AJ
Perfect, perfect. Awesome. We will put that in the show notes. You guys, it was wonderful to meet you in Louisiana. These projects you're doing are awesome. I love the way you're thinking about it and looking at markets. We really appreciate you guys coming on and sharing. You know, your wisdom, what you guys have learned and your expertise.
00:40:36:14 - 00:40:38:21
AJ
It's extraordinarily helpful to our listeners.
00:40:38:23 - 00:40:45:20
Chris
Absolutely happy to do it, AJ, and appreciate what you guys do for bringing education to this space, which obviously we love.
00:40:46:00 - 00:40:59:19
Ronald
Thank you. And I appreciate y'all time as well. And for, for putting this together and, well, we have some more time to visit. Another time, I'll be able to tell you a bunch of stories of all the random stuff we found in the storage units at kids. Oh, that sounds nice.
00:40:59:21 - 00:41:01:16
Conner
All talk storage in Elkhart and whatever.
00:41:01:18 - 00:41:02:17
AJ
That's right.
00:41:02:19 - 00:41:04:17
Conner
That's definitely.
00:41:04:19 - 00:41:05:19
Ronald
Definitely good.
00:41:05:20 - 00:41:07:00
AJ
All right. Thanks, guys.
00:41:07:02 - 00:41:07:15
Chris
Thanks, guys.
00:41:07:19 - 00:41:08:15
Ronald
Thank you. Appreciate.
