The AAA Storage Podcast

Welcome to the AAA storage podcast,
your integrated real estate and

development partner, exploring all
things, self storage investing to

bring you diversified success.

Let's dive in.

Brandon Giella: Welcome back to another
episode of the AAA Storage podcast.

I have with me as always, the illustrious.

Paul Bennett, thank you for joining.

And I also have today on the show
Logan Broyles, who is the senior

market analyst for AAA storage.

And today we're talking about
how to underwrite a deal, uh,

from the AAA storage perspective.

So there's a lot of data that
needs to be surfaced, written

down, analyzed, modeled out.

To get that go, no go kind of
perspective on each of these deals,

the properties that are involved.

And so Paul, you'll be driving
a lot of these questions.

Uh, so I'll turn it over to you to
introduce Logan and then, uh, and, and

figure out where does this process start.

Paul Bennett: Super.

Brandon, thanks, um, Logan.

Super excited to have
you on the podcast today.

Um, tell everybody a little
bit about your background.

I, I know you're a proud Virginia
Tech graduate, um, but particularly

what you were doing when you made the
transition to, uh, to AAA storage.

Logan Broyles: Yeah.

Yeah, absolutely.

Appreciate the, uh, the
introduction, uh, Brandon and Paul.

Um, so, uh, my background is in,
uh, due diligence, uh, specific and

feasibility specifically in, uh, the,
uh, self storage, uh, asset class.

Um.

And I know obviously here at AAA storage,
uh, the focus being self storage and

industrial flex space, uh, my, my
experience while focused in self storage,

uh, did have some involvement, uh, in, in
that industrial, uh, asset class as well.

Um, but really, uh, working with hundreds
of, of developers, uh, on nationwide,

um, to, to really, uh, assess their
properties and provide, um, you know,

a thorough, uh, due diligence process
to help them to assess an opportunity.

Um.

You know, that's, that's market,
um, vis, uh, market dynamics.

Uh, looking at the market dynamics,
um, and then pivoting from there to,

uh, quantifying a, uh, the demand in a
given market from a supply and demand

standpoint, and then help helping that
inform, uh, where we're at, uh, with,

uh, putting together a financial pro
forma and financial underwriting, um, is

really kind of a, a, I kind of think of a.

Think of it as a three step process.

Um, and that's really how we,
uh, how, how I've gone about it.

And, you know, I've worked with,
like I said, hundreds of developers

and, um, have visited a lot, most of
those projects, visited those sites

and seen, you know, those markets
and, you know, had those discussions.

And, um, that's, that's really kind
of what my world has kind of been,

uh, the last number of years, uh,
prior to, uh, to being with aaa.

Paul Bennett: Yeah, and we're,
we're, like I said, we're really

glad to have you on board.

Um, you've brought a, a, a very, a very.

Uh, not different, but
very broad perspective.

Um, you know, you only
know what you know, right?

And so when somebody comes in from outside
with your kind of experience, you brought

a whole different, uh, perspective on, on
the process of really doing due diligence

and feasibility on these projects.

So, uh.

So the process starts Logan as, as,
as we think, talk about, um, you know,

at different points in the podcasts
that we've done over the months, we,

we really underwrite a project twice.

Uh, we, we underwrite it when we buy
the land, particularly at the market

level, which is your true expertise.

And then a second underwriting is done.

Two years or so later when the project
is actually designed and we have all the

cost data and everything else, and, and
we're making a true investment decision.

But because we land bank the land,
initially, we're buying that land, um,

and gonna hold that land and get it
entitled for, for future investment.

Um, but.

In that first stage, the first
step in the process is really

defining what the market is.

Um, can you talk about that for just
a minute, and what does that look

like and what kind of factors might
influence how you define the market?

Is it three miles, five
miles, eight miles?

Is it shaped like a pair?

Is it shaped like a circle?

You know, what, what, what are the
kind of things that you look at when

you're trying to define the market?

Logan Broyles: Yeah.

Yeah, that's a great question.

So, um, and really, you know, once we
have identified where that, where that

piece of dirt lies, um, we, we wanted
define that market and that informs

everything else that we're going to do.

Um, so the really, the
two things that I look at.

To help, uh, define that market Generally
for, uh, self storage, it's gonna be

somewhere between three to five mile
radius, but there are, um, certain

situations where that's not the case.

Uh, maybe it is beyond that.

Maybe it's a more rural market
and there's super urban market.

You might have a smaller radius.

Um, there's things to consider,
like, uh, natural barriers,

uh, lakes, rivers, mountains,
oceans, whatever the case may be.

Um, some certain types of segmentation
where, um, you know, you may have a

dynamic that exists where, uh, folks
may not travel to a certain, you know.

Side of the tracks because of, uh, this is
just where everybody does their shopping

and you know, or maybe it's drive times
and the way that the interstate, uh,

system is laid out in that given market.

Uh, there's a lot of different
variables to consider.

Um, but, but the two things, um, that I
really look at are population density.

And number of quality competitors.

Uh, those two metrics, uh, specifically,
um, are to be taken into account first

and foremost, when you define that market,
you know, I gave mention to, uh, earlier,

uh, there being a, you know, a market
where there's, you know, a lot of growth

in, uh, within a three mile radius.

Uh, but there's less than 20,000 people.

Uh, that's not a lot of folks
in a, in a three mile radius.

Um, so, you know, you probably need
to cast a wider net and really,

you know, expand that market.

Um, and obviously once, you know, once
we've kind of considered that and, and

taken, uh, both of those, uh, two pieces
into account, we can then, you know,

confidently say this is our market.

Um, and then dive in to, to exploring
all of the other, um, dynamics

there, uh, from, from that point.

Paul Bennett: Yeah.

Super.

Yeah, it's a critical first step.

Um, in, in, in defining that market.

'cause it does, like you said, it
drives everything else that you

do from that standpoint and the
data that you're generating and

the, and the analytic process.

You mentioned not only population
growth, but the, the, uh, the,

the number of people that live
within that hyper-local market.

Um, talk about that for a second.

'cause we've run into a couple
situations where the growth numbers

look great, but it was starting
from a fairly small population,

which can be problematic, right?

Because only a certain segment of
that population is gonna use storage.

Logan Broyles: Right.

Yeah, absolutely Paul.

And there's, um, yeah, there's a market
that we've looked at recently where,

um, you know, there's very strong
growth numbers, um, in that market.

Um, but it's got less than half of, of any
of the other property, less than half of

the population, uh, total, uh, currently.

Than any other property that
we've looked at recently.

Um, so that's, that's really a red
flag that jumps out to me and kind of,

uh, weights that specific variable.

Uh, much, much great in a much greater
manner than the other variables in

play, uh, because of that, because
you just don't have a lot of people,

um, you know, 5% growth on, you know,
10,000 people is a lot different

than 5% growth on 50,000 obviously.

So, um, yeah.

Paul Bennett: Exactly.

Yeah, that's, that's super.

Um, I'm trying to think about how to
help people really walk through this.

We actually underwrite a
project multiple times.

Um, we've talked about on the podcast
before that we land bank land, we

buy land, um, and then go through the
entitlement and project design process.

Um.

So talk a little bit about that in
terms of what you're looking at when

we're looking at to purchase a piece
of land versus what we're looking

at when we're truly underwriting.

A specific self-storage project that's
been designed has construction cost.

You know, there's a
little bit of difference.

We don't do full proformas.

At the point we're doing the
initial land acquisition.

'cause there's a lot of
unknowns at that point.

We don't know what the
project is gonna look like.

We don't know how many square
feet, that type of thing.

Um, can you talk about sort of the two
step underwriting that usually occurs?

We underwrite it when we buy the
land to make sure it's a good

market and good location, which is
really your focus and expertise.

And then we underwrite it a second
time before we allow it to go into

one of the investment vehicles to
make sure that that market dynamic

hasn't changed significantly.

And that it's still, and that the project
pencils from a financial standpoint.

Logan Broyles: Yeah.

Yeah, for sure.

You nailed it.

And, um, I mean, as far as
the dynamics, obviously every

market dynamic is changing.

Um, you know, it's, as we're kind
of coming out of here currently,

um, kind of a wall, uh, a little
bit, uh, in the market and kind of,

um, seeing, you know, some rental
rates ticking upwards, occupancies

may be ticking upwards a little bit.

And I think that that trend may continue.

Um, but obviously market, you know,
uh, dynamics change over time and

that's something that, um, you know, we
wanna make sure that we're capturing.

And, um, you know, that's why, that's
obviously the reason for, um, underwriting

that multiple times and making sure
we're as dialed in as possible.

Paul Bennett: Yeah.

What are the major components?

Um, you sort of ran through 'em
quickly, but let's just hit the

really, the, the critical components
of supply and demand that you look

at, and where do you get that data?

How do you, how, how do
you generate that data?

Logan Broyles: Yeah,
that's a good question.

So a couple things here.

So we look at.

We wanna look at, um, really at the
core of what we're trying to do with,

with our market analysis and then,
and suit the financial underwriting

is, uh, quantify demand in the market.

Once we have an understanding of that,
we can then move forward and, and project

what those financials, uh, look like.

Um, and in order to be able to quantify
that demand in the market, we look at, uh,

really, um, three, I think major things.

There's some other variables, but
three core things, and that's, um,

occupancies of existing stores.

Uh, rental rates at those facilities,
and then the, uh, percentage of, um,

of, of households in a given market that
are, that are using, uh, self storage.

You know, what does, what
does that usage look like?

Those are really the, the three
things that we key into to discern,

uh, where demand is at in the market.

Obviously, there's other market
variables that we look at in terms

of, you know, competitor rates,
um, potential new supply coming in,

demographic growth, all of those pieces.

Um, those are really the three, uh,
demand drivers, if, if you will, of,

of, um, or demand indicators rather,
um, of, of what that, um, looks like.

Paul Bennett: You, you hit two
really important things there.

I want you to expand on just a little bit.

Um, you, you talked about, um,
the utilization in that market.

One of the key things we've talked
about in other episodes is that

we look at square foot per capita.

In other words, how many square
feet of storage exists in that

hyperlocal market per capita?

Um, and typically most people
will tell you in the industry

that you know, anything below 10.

Is an acceptable level of, of supply,

um, in the market.

Once you get north of 10, you better be in
a pretty good growth market or have some

other dynamics in play, but you actually
look at it a little bit differently.

Talk about the difference in
utilization in a given market.

And I, I'm kind of leading you here, but
I, I know because of our conversations,

um, on a day-to-day basis that you
can look at the amount of storage.

That is rented in a given market versus
that population and determine that.

I'm gonna make up an example.

For example, in a military town,
utilization of storage may be closer

to, to 15 to 18 square feet per capita

because of the unique
nature of that market.

Talk

about how you sort of dive into that,
because I think it's an important nuance.

We don't just look at, you
know, at at, uh, square foot

per capita and use a standard.

10 foot sort of cutoff.

It is really a little bit more
informed than that in terms of

how you dig deeper into the data.

Logan Broyles: Right.

Y Yeah.

Yeah, absolutely.

Um, so square foot per capita, it's,
it's an interesting, uh, metric.

A lot of folks talk
about it in the industry.

Um, you know, the way that I look
at it is, um, you know, it's, it's,

we're trying to quantify demand.

Um, but square, square foot
per capita, it, it, it tells us

nothing about demand, really.

It's a supply side metric.

Um, and as we know, different markets
absorb, absorb, um, you know, supply

differently at, at different rates.

Um, like you mentioned, you know, in
your example, a military town that

may be, um, that a square foot per
capita may be higher and ideal or.

You know, in theory, uh, less favorable.

Um, but that may not be the case
because it absorbs it at a higher level.

You know, I use the kind of the, the
silly example of, you know, um, there's,

there's probably more cowboy hats sold
in Texas than there are in Connecticut.

Um, but, but there's, you
know, there's, um, that, that.

Well, that number, being low in
Connecticut doesn't necessarily

mean that that market can absorb
a ton, a ton of more cowboy hats.

It's just, you know, some markets absorb
differently and we need to take that

into account and not just use, you
know, a a, a metric across the board

and just assume that market markets are
gonna absorb, absorb at the same rate.

So.

Brandon Giella: Hmm,

Paul Bennett: and it, it could cause
you to miss an opportunity or it can

cause you to step in a hole because
if you're sort of basing your analysis

on 10 square feet per capita, and the
reality is usage in that particular

market for whatever reason, um, is.

Sort of below the, the norm on a
national average basis, you can step

into a market that won't perform

you.

You mentioned something else.

Where do you get your data on, on
pipeline deals and how do you sort

of really scrub it and confirm it?

Because that's another thing that you have
to really be sensitive to, which is the

market may look great today, but there
may be six new facilities within five or

six miles of the site you're looking at

that are on the planning.

You know, bored or, or
coming outta the ground.

And that market can change in six
months to a year pretty dramatically.

So talk about how you gauge new supply
and how you really make sure that we

have an accurate view of what the new
supply coming online in that market is.

Logan Broyles: Yeah.

Yeah, absolutely.

Um, you know, one, one piece that I
dive into is kind of at a deeper level.

Uh, so first, I guess starting first
of all, you know, we use some of

the different software platforms
out there that are informative,

specific to the self storage product.

Um, so those are helpful.

They're not always, um, you
know, a hundred percent accurate.

Um, but they, they are helpful in, in
kind of a setting that initial, uh,

picture of what a given market looks like.

Um, to take a deeper dive and really
kind of get an understanding of

what's taking place in a given market.

Um, you know, we reach out to, uh,
you know, local planning office and

try to confirm and get, um, you know,
specific information about a given

project, uh, size of a project status,
where it's at in the, in the pipeline.

Is it moving forward?

Is it not?

When is it expected to enter the market
distance from our site to that project?

And is it really a threat?

Um, is it, is it kind of
a different submarket?

What does that look like?

Um, and, and how does that all
affect, um, what we're doing?

You know, if there's an influx of,
of a lot of new supply coming in, uh,

you know, that you run the risk of,
um, you know, prolonged lease up and,

um, you know, softened rental rates.

Um, so that's, that's really the,
obviously the, the main concern that

we wanna try to, um, account for
and, and accurately forecast for.

Paul Bennett: Yeah.

Brandon Giella: That's amazing.

Paul Bennett: At the end of the day,
when you really understand the, the

demand side of the equation and you've
determined that the, the market, um, can

support another self-storage facility.

How does that data sort of talk about for
a minute, how you work with our financial

analyst and what your role is in, in
producing the ultimate financial model

that, um, drives the real investment
decision from, from our standpoint.

Brandon Giella: Which clearly has
to have a hundred tabs because

of the amount of data that you
guys are looking at right now.

It's amazing.

Paul Bennett: I, I will tell you
this, we just did an investment

committee meeting, um, sort of doing
a, a, another review of the fund two

properties and just the market analysis
that, uh, Logan generated on those

11 properties was 125 pages of data.

Brandon Giella: Oh my gosh.

Okay.

Well I'm glad there's
people like you doing this.

Paul Bennett: promise you we're
only scratching the surface on

the, the sort of all the different
perspectives and, and, and data that,

that Logan generates to really come
up with, uh, with a, as, as complete

a picture as, as humanly possible.

Nobody can predict the future, but,

um, but talk about Logan, how
that, um, how that translates.

So you, you've done the market
analysis, you've determined, you

know, the supply and demand balance.

You understand the rate environment
in terms of what rates we can

charge in, in, in a given market.

And, and all of that then is used to
talk about how you coordinate with

our financial analyst and your, your
role in generating the financial

projections that ultimately really
make or break the investment decision.

Go or no go.

Does it meet our criteria?

Logan Broyles: Yeah, yeah, absolutely.

And, and putting together, you know,
really the, the way that I look at

it kind of mentally I approach it is,
you know, you have the market, uh,

market definition, really definition
of the market's, the first piece, and

then obviously the market dynamics
that kind of come ensuing with that.

Um, you know, rates, uh, new supply,
things we've already discussed here.

Um, and then, you know, looking at,
at that demand where, where is, um.

Where's that demand level in the market?

Is the market oversupplied?

Is it undersupplied?

Is it near equilibrium?

Is it trending toward equilibrium?

What is the case there?

And then from that, uh, that
informs what, uh, you know, what we

feel like is realistic to project
and forecast with, with, uh, the

financial underwriting there.

Um, and really, um, the lease up
model, um, that, that's a big part

of, of what I've been involved in,
uh, and the financial underwriting

piece and, you know, the speed,
the, the velocity of lease up.

Um, you know, we generally at AAA will do
a, a phased approach and looking at, you

know, once we get to a certain threshold
with occupancy, um, you know, looking

at, at going with an additional phase.

Um, so taking that into account.

Those are all, uh, factors that,
that I've been kind of living in.

You know, considering what is
realistic to, um, to expect, um, you

know, going forward, uh, with, with
obviously an ever-changing market.

So, um, that's, uh, that, that's
a, that's a big piece of it.

Brandon Giella: Hmm.

Paul Bennett: Yeah, the, the, the,
the financial modeling piece, which

is ultimately again, what decides
whether it's an appropriate investment

for, for our investors or not, really
involves three or four different groups.

First of all, the market data that
you generate is what's used to drive

rates and, and lease up velocity.

In other words, time.

How long does it take to get that
first phase leased up to 65 or

70% before we build phase two?

How long is it gonna take
once we get phase two built to

stabilize that whole project?

But you also have inputs from our
construction and development team because

they're the ones that have done the
project, actual project design and and

CapEx budget.

To build the project.

Uh, David Lutz, our VP of property
management, gets involved because he's

really looking at the expense side of
the equation and, and working with you

on the, the revenue projection side.

'cause he's the one that ultimately
has to deliver that result.

So he's gotta be comfortable with that.

Um, and, and, and so you, you've got
all these inputs that come together that

ultimately create a p and LA forecast.

Um, and at the end of the day, w.

Time is what's really important, right?

It, it, you get a whole
different return profile.

If a project takes, if you project
it to lease up in four, it takes six.

That's

a whole different outcome.

Um, and obviously we don't
control every aspect of it and

we don't have crystal ball, but.

Um, you've done a pretty good job.

If you look at the projects that are in
flight now in in fund one at, we're pretty

much hitting our marks in terms of what
we projected and what we expected, and

that's the result of really solid
underwriting on, on your part.

There was a question in there somewhere
or not, I don't know where I lost

it along the way, but that happens

sometimes.

Right.

Brandon Giella: Happens to us all.

maybe you got some more set up, but I'm
curious too of, uh, from thinking from

the investor's perspective, so as an, as
an outsider, so I do wanna get there at

some point in the conversation of just
like you go through this whole process,

you work on the, the, you know, analysis.

You build the model,
working with an analyst.

It goes to an investment committee.

You guys kind of, you know, give the
green light, red light kind of thing.

And then there's ultimately information
that's presented to the investor.

Um, and, and so I'm, I'm curious how
that dynamic takes place and, and almost

like, um, how is this process serving
the investor at the end of the day and,

and getting their, you know, making sure
they're getting the returns that are,

are hoped for and that sort of thing.

So that's kind of where my mind's going.

But Paul, you might have some, uh,
something to jump in before that.

Paul Bennett: No,

Logan, take a

Logan Broyles: Yeah, and I can
speak to that as far as, you

know, the investment committee.

Um, that's, that's something
that, you know, we do internally.

You know, we get, uh, a property,
you know, come through, come to me

and I'll, I'll do that initial, uh,
what I call a sniff test and just

kind of vetted at a high level and
look at, you know, uh, any red flags.

And, um, you know, if it seems
to check out initially, um,

you know, I'll, I'll, um.

Uh, engage, um, our construction
department, um, and kind of

get their, their viewpoint
and their perspective on it.

Um, and then we will, um, you know,
if we think that it makes sense, we

will, um, you know, we'll bring it to,
uh, we have a monthly, um, investment

committee meeting to, to present and,
and discuss any, uh, potential new, uh,

acquisition, um, for, for, uh, for self
storage or, uh, industrial flex space.

So,

Brandon Giella: So have folks read that?

Like is that committee, they've read that
125 page report essentially, or you got

a couple of 'em that you guys are, are
peering through and that takes obviously

a lot of time to sit down and read that?

Logan Broyles: Right.

Right.

And, and yeah.

And, and so the, uh, the, the
lengthy report that, that Paul had

mentioned, that's, that's more, um,
that, that's not one single property.

That's our whole fund, um, over overview.

So that's not, that's not every,
every property to be clear.

But, but, um, yeah.

So we will, um, we, we will move
forward and, um, you know, set

up that investment committee.

Uh, on a monthly basis and review any
properties that we have, uh, to discuss.

Uh, we have, uh, the actual, um, I guess
the committee that we have internally

is made up of three individuals.

Uh, uh, Paul is on that committee
and, uh, they will, um, review, uh,

that presentation that we put together
both from the, um, you know, financial

perspective, market market perspective,
as well as, uh, construction viewpoint.

And, uh, you know, consider is
this something that makes sense

for, uh, for the group to take on.

Um, so that's, that's
really kind of the process.

Um, at a high level of what we
do with, with the properties.

Brandon Giella: So Paul, you and
your team would be kind of like the

red team blue team kind of thing.

Like you're poking holes at
the, at the model and kind of

the projections, maybe things

Paul Bennett: Yeah.

And it does occur, I said
this at the beginning, but it

occurs at two different stages.

The way we look at land
when we're buying land,

'cause we're spending our own capital
to buy this land and land bank it for

a future fund, um, is a
little bit different than the

way we look at a complete.

Investment opportunity

on behalf of one of the funds.

'cause at that point, like I said,
the project's not designed, we

don't have exact cost information.

We can't look at yield on cost
or, or internal rates of return

to investors because we're
looking at a piece of land that

we've just seen for the first time.

So we really, really lean into
Logan's expertise at that stage.

'cause the only question we can answer is,
is this a market we want to be in or not?

Um, and so once that decision
is made, the land is bought.

then it goes through a two year process.

Our architectural team is doing
the design work on the project.

We engage a civil engineer
to do the site design.

Um, the construction department
is, is costing out the project.

All of that goes on
during a two year period.

Um, and then it comes back
to the investment committee

as a complete investment.

So

now we have all the data.

We've got Logan's updated market
data, we've got all the construction

costs we've got at that point.

Um, you know, maybe we've got at least
a, a, a preliminary proposal on a loan.

If not, we've made some assumptions
about, you know, debt and,

and what the terms will be.

Um, but we have a really complete picture.

And at that point, Logan's market data has
driven and informed the financial model.

He's worked closely with the analyst.

Um.

What comes out of that is we're
able to look at yield on cost.

Does this project meet our 9.5%

yield on cost hurdle or not?

On an UNT trended basis, we can see
cash flows, how much working capital,

how much total capital, not just
CapEx, but CapEx and working capital.

Is that project going to, uh,
to need based on Logan's rate

projections and lease up velocity?

We can see the point at
which we project it to.

Stabilize.

And at that point the
model projects a sale.

Logan's influential in what the cap rate.

Is used what cap rate is
used to, to drive that sale.

And then we see the sale result
and we can see an internal

rate of return on the project.

And we calculate that rate of
return on a gross basis and on

a net basis to the investors.

So we can all the way through that.

The, the second underwriting process
is all driven by the work that

Logan does, but it adds on top of
it all the different departments.

The investment committee is comprised of
John Uch, my partner, myself, and Andy Mu.

Which is basically our,
our board of directors.

Everybody, every department head
in our organization participates

in that meeting 'cause Logan is
there to speak to the market data.

David Lutz is there to speak to the
market along with Logan, as well

as any property management issues.

Sean Beagler, our Director of development
and construction, is there to talk about.

The assumptions in their costing
and what, if any, challenges they

see and, and that type of thing.

So we have all of that input into
one event focused on a property,

determine whether this is the
right investment to make or not.

And I know

I'm sort of hogging Logan's time
here, but you asked the question,

why is that important to an investor?

Uh uh, first of all.

Said this a hundred times.

We're the largest investor in
any of our investment vehicles.

So we're looking at it from, is
this something we wanna invest in?

Um, secondly, it's the critical stage.

You know, if, if you don't have it right
from the beginning, then the probability

of the outcome you're expecting.

isn't very high.

And so this is the critical, the
underwriting is the critical step,

uh, and good judgment and lots of data.

Um, and, and a good solid, robust
process is critical to, it's, it, it's,

it's what's driven our track record
for 30 years and, and, um, and we've

actually made the process more

robust in the last 12 to 18 months.

What?

Brandon Giella: I said no
pressure on Logan's part.

That that's a, you know, we're,

Paul Bennett: Uh, lo Logan has
been such a huge addition to our

team, um, his level of expertise.

Logan spent five plus years before
he joined us, um, as a consultant

to developers around the country
doing feasibility studies for self

storage and, and industrial projects.

So, um, he, he brought a, a whole
different process and, and different,

um, viewpoint to that process, and
it's, he's been extraordinarily bad.

Logan talk for a minute.

Real quickly, you, you, you
have a range of factors.

I can't remember how many it is.

Uh, but you probably know at least
close how many total factors and

then you weight those factors, um,
so that you have a weighted result.

And so when Logan does an initial
assessment of a property, he has.

I don't know, 10, 12 factors that
he, that he thinks are important

and we think are important.

And then he does a weighted,
he weights those so that you

basically wind up with a score.

Talk.

Talk about that for a second,

Logan Broyles: Yeah, yeah, absolutely.

Um, so, you know, some of
those factors may be, um, you

know, market, market focused.

Things like, um, you know, we like to look
at, uh, uh, specifically on the rental

rate side, like a 10 by 10, uh, climate
controlled unit, a very popular unit size.

Most facilities will have, um, you know,
a, a good number of those available.

Um, so really where is that
unit at in a given market?

Um, that's, that's, that's a
good barometer on where, uh,

you know, where rents may be.

That's, that's one, one metric.

Uh, I mentioned population, um, the, the,
the quantity of population, but also in

addition to that, the population growth.

You know, what, what does that look like?

And kind of getting back to my comment
earlier about, um, you know, property

that, um, you know, seeing large,
you know, growth numbers, but not

having the, um, the, the, the numbers
there, uh, presently, um, obviously

that's something that plays into it.

So those are a couple things.

Um.

Things like, um, obviously land
cost, that's, that's a critical

metric that, you know, we would
obviously evaluate from the outset.

Um, but those, those are some of the, the
high level things that we would look at.

Um, when, when assessing a property
initially, um, other things would

be, you know, a new supply coming in.

Um, we look at it from a per, uh,
the way I like to view it is, um.

Uh, what, from a percentage standpoint,
uh, how, how much is, is the market

expanding by that new supply coming in?

Um, this is what we have today.

If there's, you know, a hundred
thousand, you know, we have a, you know,

500,000 square feet, net, net rentable
square feet in a given market today.

Uh, they're building a hundred thousand,
uh, net rentable that's gonna be added

in the next three to four months.

Um, you know, that obviously is a
market expansion of, what's that?

I mean, uh, 20%.

Uh, so, um, obviously that's
critical, you know, 20%.

Um, I would say anything beyond
a 20% expansion in a market,

from a market standpoint in
supply is, uh, is significant.

And that's something that.

We should certainly take into
account, you know, the, there's

some markets where I see it, you
know, you talk about red flags.

Um, you know, if you're 40,
50% market expansion, that's a,

that's a major red flag to me.

Um, because that's a lot of new
supply coming in and the market has

to absorb that and it, it's gonna,
you know, take a period of time.

So those are, those are
things that I like to look at.

In addition, um, one thing I hadn't
touched on, just specific market

variables, um, distance, uh, proximity
to other competitors in the market.

Um, you know, uh.

If there's, if there's a little bit of
a hole in a market that that's something

that's, that's interesting, that can
create a kind of a unique dynamic.

Maybe there's a lot of strong competitors.

Um, but you may have a, you know,
maybe it's a two, two and a half mile

gap between, between where your, where
your site is to the closest competitor.

Um, that's something we wanna identify.

And also, too, um, speaking specifically
about those competitors, um, you know.

Like to look at, uh, how many of them are
REIT competitors, you know, national, big,

big players, na, on the national scene.

Um, you know, that's something
to take into consideration as, as

oftentimes as we've seen here in, in
the last probably two years or so.

Um, some, some of the, uh, pricing, um.

Approach to, to some of the pricing games,
um, that some of those operators take is

a little bit different than maybe some
of your regional or local operators.

Um, so that's something to key
into as well as how many, you

know, of those competitors in the
market are, are national REITs.

So those are some of the
things that I look at.

Um, there's probably some others,
but uh, hopefully that kind of gives

you, um, a high level of, of some
of those metrics and, and how, you

know, like Paul said, some of them
are weighted more so than others.

Um, like the one market that I
mentioned, just, you know, a lot

of favorable, uh, uh, metrics,
uh, specific to that given market.

Um, but just the fact that there was
not, you know, hardly anybody there, it

really kind of trumped everything else.

So, yeah, definitely, uh, weighting
those metrics accordingly.

And, you know, each one is, is
to be taken, um, and considered

independent of each other obviously.

Paul Bennett: Yeah.

Super.

That's a really good explanation.

Logan.

Uh, Brandon, as you can see,
uh, this process is a lot of

science and a little bit of art.

There's a little bit of art in here
because there's so many different.

Things to consider, even when you look
at these very concrete parameters and um,

and checkpoints that, that Logan uses.

Um, we, in the investment committee, we
were talking about a piece of property

that really did not have sufficient.

Population on the surface, but
when you, it also had almost 30,000

cars a day passing in front of it.

And, and it was in between
a major employment area and

the bedroom communities that
were feeding those employers.

And so what you had is, this
wasn't 30,000 cars a day that

were on their way to California.

Property happened to be in Texas.

This was 30,000 cars a day that were
going from their home to work, and

they passed that facility every day.

Something like that can actually change
your view of whether that property

has a chance to be successful or not.

Um,

Brandon Giella: You know,
they say like, looking at

Paul Bennett: gone long enough,

Brandon Giella: model or a a 10 K,
the story really is in the footnotes.

You know, those details
are actually really key.

Paul Bennett: Yeah.

And, and

so at the end of the day, Logan's process
really informs the financial models,

particularly from a, a lease up velocity
and timing standpoint, rate standpoint.

And, uh, um, like I said, he's, we're,
we're super thankful to have him on board.

He is been a great addition to the team,
and thanks for, for doing this today.

Logan, I know you've got a lot
on your plate right now, so.

Logan Broyles: Yeah.

Yeah, absolutely.

This has been a pleasure.

Um, you know, this is.

Really kind of a step outside of, um,
I guess my, my day to day and, and to

be a part of this, but, uh, hopefully,
hopefully this has been a, um, you know,

insightful and, and I've enjoyed it.

Paul Bennett: Yeah.

Brandon Giella: Yeah, we're
grateful to have you on the show.

Thank you.

Thank you.

And uh, I'm really grateful for your work.

Really.

I mean this like, to Paul's point,
your work is what helps create

that kind of track record that
you guys have had for so long.

So, um, appreciate you and I
know your investors are too well.

We will see you on the next episode.

Thanks so much for joining.

We'll see you.

Paul Bennett: guys.

Thanks.