Q2 2024 Update
Dear Partners,
I would like to thank all of our investors who joined us in our most recent acquisition: a 20k sqft multi-tenant industrial property which we closed last week. I am very excited at the upside presented and our team is already hard at work beginning the process of stabilization.
Existing investors committed approximately 91% of the capital for this project; if you are interested in investing, but didn't get a chance to join, please reply to this email and get in touch - I would like to make sure you are signed up and have the opportunity to see the next one.
Now - on to the update. I'd like to thank you all for your patience; it has been 5 months since my last newsletter, and I am eager to share with you what I am seeing across our properties and the market in general:
Multi-Tenant Industrial Portfolio and Market
Portfolio and Rent Growth:
- We now operate 27 multi-tenant industrial units across 3 properties in the Atlanta MSA.
- Our multi-tenant industrial portfolio is experiencing significant rent growth. Based on current renewal negotiations we are working through, it appears that, at least in our specific submarkets, rent has grown at least 6% and up to 15% YoY.
- The number of comparable spaces available for lease is effectively 0% in some of our markets, and the number of business owners seeking space does not seem to have changed.
- Business owners, tired of paying more and more money in rent, are bidding up single tenant buildings to a point that, from a monthly cost basis, it is significantly more economical to rent at multi-tenant parks like ours.
Compounding Efforts:
- Our market presence is compounding our ability to discover and vet new opportunities, as well as operate our properties more effectively.
- We now have 3 industrial properties and 3 self-storage properties within a 2 hour drive of each other.
- Across these properties we have 4 part-time "boots on the ground" handymen who live throughout Atlanta and N. Georgia. Thanks to the demands of our self-storage business, and unlike virtually every competing buyer in this market, we offer 7-days per week, 8am-7:30pm, property management services.
- Over the last 12 months we have amassed over 413 high quality lease comps for properties similar to ours (not even counting CoStar data) in the Atlanta MSA alone.
- Every day, our ability to underwrite and accurately predict market rents improves.
- We are energetically seeking opportunities in Atlanta, Greenville, and Charlotte.
Properties in stabilization:
- We are currently working through renewals and new leases for 16 month-to-month rented units acquired last week
- We have another 6 units across our properties acquired in 2023 with leases expiring in February 2025, which we are working to renew.
Acquisitions:
- With vacancy rates so low, owners have little incentive to sell, and the supply of inventory for purchase is similarly very slim. While we underwrite and offer on hundreds of opportunities every quarter, we are finding that the vast majority of these properties really aren't for sale - the seller's are testing the market unsuccessfully.
- We are buying exclusively where we want to own long term.
- We are increasingly weary of investing in lower quality markets with higher crime or negative growth rates, even when rental rates appear strong today.
- Earlier this year, I predicted 2024 would be more similar to 2022, when we purchased 0 properties, than to 2023, when we purchased 5. So far we have acquired 1, and while I hope we can close one more out this year, this year will be a "low" with regards to acquisition activity compared to 2023.
In general, I am very excited about the opportunity to acquire more multi-tenant industrial properties, and very thankful for the properties we own today.
Self Storage Portfolio
In general, demand for self-storage is below the highs we saw in 2021 and 2022. Moving accounts for 20-30% of self-storage demand, and with very few homes transacting, that core demand driver is down. While occupancy at our facilities is down slightly YoY, our revenue remains either flat or slightly higher than the year prior due to our existing tenant rent increases.
 
REITs began undercutting us in nearly every market last year, and we have adopted their strategy of offering a low entry price with a rent bump 90 days into the tenant's stay to achieve desired rents. This, combined with typical summer demand, has led to a boost in occupancy this summer over spring.
Many operators are suffering, though. I have offered on multiple properties this year in which the asking price, which was 30% above our offer price, represented a significant haircut to the seller's original purchase price in 2021/2022.
Basis is everything, and the reason our self-storage portfolio is doing well is because we simply did not participate in 2022 when the highest number, and most outrageous, transactions were taking place.
Self Storage Market
Despite the clear reversion in pricing, we are still being outbid by 30-40% on every transaction. I believe that the vast majority of value-add opportunity has been captured in the storage market, and current products on market are selling to buyers who believe that they can achieve above market rents via existing customer rent increases.
There are some lease up opportunities, but in a time where demand is down, a lease up is moreso a bet on interest rates coming down than anything else, and those are not the kind of bets we make. In general, I have never been less interested in the self-storage market than I am today.
Going Forward
We are very excited about our most recent acquisition, a 20k sqft multi-tenant property with 16 tenants in Gainesville GA. Over the next three months, we plan to aggressively work to renew these tenants at market rate and fill any vacancies that arise. We are also in discussions with multiple tenants at our other properties regarding renewals in 2025.
At our self-storage properties, we are seeing early signs that our new pricing model is working, and we and plan to continue pushing that strategy in efforts to maximize occupancy before the slower winter months.
As always, we are looking for new opportunities and new investment partners. If you know of any interesting deals or would like to discuss potential investments in the future, please be sure to sign up for a time to meet so that we can add you to our "deal list". Once we've had the chance to connect, you'll be added to the official deal distribution list ("deal list") where you will receive a link to our deal room (full 5y financial projections, offering memorandum, site images, video deal walkthrough, etc..) and all deal rooms going forward. Accredited investors only (am I an accredited investor?).
If you enjoyed this article, or have suggestions, please let me know!
Thank you for reading.
All the very best,
Ryan Auger
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