self storage report cover - the real asset investor · 1. superior returns according to the...

SELF-STORAGE REPORT

Five Reasons to Invest in Self Storage

0 T� � �Ef'� �S� �T www.TheReaIAssetlnvestor.com

www.therealassetinvestor.com

Five Reasons to Invest in Self-Storage

1. Superior Returns

According to the National Association of REIT (Real Estate Investment Trusts) the Self-Storage sector produced an average of 17.43% annual returns from other REIT sectors over the same time period.

For illustration, let's assume you invested $100,000 in each one of the REITs above in 1994. You also reinvested your annual returns back into the fund at the end of each year, creating a compounded return. What would that investment look like 23 years later?

20%

Average Annual Return by REIT Sector

vs. S&P 500 from 1994-2017

::: 111111111 � 5% ■

Source: NAREIT, https://dqydj.com/sp-500-return-calculator

$1001000 Invested in 1994 Would be Worth How Much in 2017?

2017

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000

Self-Storage, $4,026,413

Residential, $1,810,763

Industrial, $1,788,859

Healthcare, $1,785,233

Apartments, $1,774,397

Mortgage, $1,144,493

S&P 500, $532,243

Self-Storage outperformed the next best performing asset class by $,Z21�6S0

and outperformed the S&P 500 by $�49�170I

Look at the data from NAREIT, there is a tremendous amount of data here:

https://www.reit.com/data-research/reit-indexes/annual-index-values-returns

1!tT�� Ef'� �S��Twww.TheRealAssetlnvestor.com

2.

https://dqydj.com/sp-500-return-calculator

https://www.reit.com/data-research/reit-indexes/annual-index-values-returns



2. Recession Resistance

According to the NAREIT the self-storage asset class also outperformed other sectors in the most recent recession. From 2007-2009 the self-storage sector produced an average of -3.80%. For comparison, here are the returns from the other REIT sectors over that same time period.

Why was self-storage able to outperform almost every REIT sector during the most recent recession? And why is this sector somewhat insulated to the impact the recession had on other market sectors?

Average Annual Return by REIT Sector vs. S&P

20.00% 500, 2007-2009 Recession

10.00%

0.00% -10.00% -3�%-G

�% I

-20.00%-30.00%

4.9% ■

0.5%

-6.7%

Source: NAREIT, https://dqydj.com/sp-500-return-calculator

When the economy is good and disposable income is on the rise, people buy more "stuff' and need a place to store it. In the midst of the recession, when homeowners were losing their homes to foreclosure or downsizing to apartments, they also needed a place to put their stuff. Where do they go? Self-storage units! At the heart of this issue is the fact that Americans have a culture of buying too many things and we can't seem to get rid of most of it. The demand curve for self-storage seems to be inelastic which helps pull the sector through major downturns. Estimates are that one-third of

storage space is filled with items that have been there for over three years.


3.

https://dqydj.com/sp-500-return-calculator



3. Rent Growth & Positive Net Operating IncomeIn-place self-storage tenants are generally not price sensitive, as the self-storage rental fee is normally a smallportion of a tenant's monthly disposable income. Thisallows operations to raiserents as the market demand

Asking Rents - National Yearly Avg. 10x10 Units

$180

$160

$140

grows without an impact on occupancy. For example if s 12o

you are paying $100 a month for your 1Ox10 $100

-Non-Oimate -Climate Control led

storage unit and the rent 2011 2012 2013 2014 201s 2016 2011 2021

g OeS UP 6 % to $1 06 a Sources· Newmant Kmghl Frank Research, Real C prtal Analytics, REIS

month most tenants are not price sensitive enough to rent a moving truck and spend a Saturday moving to another storage facility.

In addition, there is minimal communication between different tenants at a given facility, which allows for the operator to selectively adjust rental rates for individual tenants. This is one of the main reasons large self-storage operators are able to, in general, increase rental rates by 5-12% annually. We are working with a self-storage operator who experienced 12% rent growth in the 4 7 property portfolio across the Southeast. Consistent rent growth of 12% is far too aggressive to include in pro-forma for a self-storage investment but certainly speaks to the pricing opportunity in this asset class.

What does this rent growth allow for? An increase in net operating income drives increased value of the property which drives returns for us as the investor.


4.



4. Tax Benefits of Depreciation

One of the many benefits of real estate investing, including self-storage, is depreciation - the loss in the value of a building over time due to wear and tear, deterioration and age. Depreciation can only be applied to the building, not to the land, since land does not wear out over time. Luckily for real estate investors, depreciation reduces one's reportable net income and their taxes. This depreciation is passed through to investors via their K-1 statements.

5. Fragmented Market

Nearly 80% of self-storage properties remain in the hands of small,

independent investors. The sector's solid past performance has begun to capture the attention of large institutional investors. Larger properties in

particular are increasingly the subject of interest from institutional buyers, including the larger self-storage companies that run themselves as real estate investment trusts (REITs). The top 6 public companies control approximately 18% of all the facilities with the remaining approximately 82% of the facilities controlled by independent owners. This fragmentation should provide for the opportunity for well capitalized and sophisticated operators to selectively target individual assets and portfolios at attractive cap rates. Consolidation will allow some of these operators to amass attractive portfolios of assets and emerge as large industry players. Once stabilized these portfolios become attractive assets for a REIT to purchase and create an attractive exit for investors.

The investment community has taken notice of self-storage as a viable commercial real estate asset class, and the underlying dynamics continue to fuel the sector's success. With solid recent post performance and upward trending occupancies and rental rates, self-storage represents a tremendous opportunity if purchased at the right price and with the right

operator.


5.


There is Much More to Making a Smart

Investment Than Just Reviewing a Balance Sheet ...

The Right Team

With a wealth of experience in investment comes the knowledge that the right team is a key component for success. This philosophy is a cornerstone for all investment opportunities at The Real Asset Investor. When you are considering a self-storage opportunity to put in your portfolio, it is imperative that the property is properly managed.

Look for a property management team that specializes in self-storage and does it well. Take time to do the research and seek out a team with a proven track record. While their main goals are obviously decreasing vacancies while increasing revenues, there is so much more to a successful self- storage business. A management team committed to maintaining peak performance insures continued viability and ongoing success. This forward- thinking mindset ensures even better ROI in the event of a possible sale of the business at some point in time.

Other Questions to Ask ...

• What is the ratio of properties to account manager?• Is it so high that emergency response is all they're capable of?

Or, is it low enough to allow them to drive revenue and makecustomer satisfaction a priority?

• Does the property management team have the ability to:

• Administer day-to-day operations of the facility

• Manage staff• Market the business• Conduct compliance audits for consistent adherence to policies and

procedures

• Implement rate increases• Conduct foreclosures

• Increase ancillary sales

• Manage vendors for facility repairs, upgrades and maintenance

• Conduct periodic market analysis and respond accordingly


7.


There is Much More to Making a Smart

Investment Than Just Reviewing a Balance Sheet ...

Room for Growth

Not all properties are created equal. Ideally, the self-storage property under consideration would have room for growth from both a sales perspective and possible (physical) expansion to meet the growing demand for self-storage.

Consider value-added components such as outside storage for equipment, RVs and boats. Or, partnering with an on-site moving

company. Perhaps incorporating value-added services such as tenant insurance or retailing moving supplies.

The possibilities are endless with a bit of creative thinking.

"In Your Research & Discovery

Process Look for

Ways to Fuel Sales Growth"

Location. Location. Location.

You don't have to be invested in real estate to know that location means everything. The metrics of any property under consideration must provide good hard data to support growth and viability for the self-storage business.

The best properties should include:

• Increasing population

• Local development• New businesses which increases employment • Types of business .. . Are they the type that are likely to increase their

employee base because of sustainable future needs?• Lack of local competition. Or, local competition with limited expansion

capabilities.• Minimally restrictive zoning

• High visibility• Proximity to customer base

• Robust current occupancy metrics ... Translates into opportunity for rate increase

i!t $ THE REAL ASSETI N V E S T O R

www.TheRealAssetlnvestor.com

8.


In Conclusion

Does a Self-Storage Investment Make Sense

for the Smaller Investor?

You can reap the benefits of investing in a large-scale asset without the risks of going it alone. The independent investor will most likely experience a higher risk in their portfolio regardless of the type of investment they make. Partnering with an investment group through syndication minimizes your risk and increases your opportunity to profit.You become part of the larger investor's market and gain access to bigger deals.

Syndication also provides diversification of your portfolio with a smallerinitial investment than typically required as a lone investor. Other benefits are limited liability exposure and a passive investment with a low dollar entry point in addition to tax benefits allowing you to reduce or eliminate your tax liability.

For more information on the self-storage space visit our website at www.TheRealAssetlnvestor.com

''You con be conventional or you con be wealthy. Pick one.// TM

- Dave Zook


9.



DAVE ZOOK

Founder & CEO of The Real Asset Investor

Dave Zook is a successful business owner and an experienced real estate investor active in Multi-Family Apartments, Self-storage, ATMs and Commodity and Energy related projects.

Dave has acquired more that $100 Million worth of real estate since 2010. At the time of this writing, he and his investors own approximately 3000 Multi-Family Apartment units and several hundred thousand square feet of self-storage

Together with his business partner, Dave is a renowned and trusted professional resource in the Automatic Teller Machine (ATM) investment market where they have deployed more than $100 million of investor capital and they are heavily invested personally in the ATM space.

As a #1 Best Selling Author and a sought after speaker, Dave has shared his knowledge at The International Business Conference, The Jason Hartman Real Estate Mastermind, The Wealth Formula Podcast and The Real Estate Guys radio show. Additionally, Dave is a faculty member and presenter at The Secrets of Successful Syndication Seminar.

Dave, his wife Susan, and their 4 children live in Lancaster County, PA

e [email protected]

Self-storage Investments Multi - Family Apartments ATM Investment Opportunities


10.


mailto:[email protected]

self storage report cover - the real asset investor · 1. superior returns according to the...

Documents