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: paul, welcome
back to another episode of

the AAA Storage Podcast.

I'm so glad that you're here as always,
and what I love most, I've said this

so many times in so many episodes,
but what I love most about talking

with you is you have been in the
investing world, especially in real

estate in the last 30 or 40 years doing
lots of deals, you've been through

a cycle or two up, down sideways.

Bunch of different cycles and, and,
and different experiences and causes

of the, the ups and the downs.

I was reading on, LinkedIn, recently.

Our dear friend Paul Shannon, shared
some wisdom he has experienced through

different cycles and, different advice
people have given him he was on a

panel recently sharing some ideas.

And I thought since last episode we
talked about the 2025 market outlook

and how self storage and real estate,
markets are performing I thought it

would be useful to hear from you, person
to person, your wisdom and experiences

of going through markets like these.

whether it's up or down.

we seem to be in a down period, we
talked last episode, is that the real

estate market seems to be kind of
bottoming, here, and, and hopeful.

Hopeful, you know, blue skies ahead.

but, you know, given this
moment that we are in.

Regarding the market now, what are
some things you have learned as an

investor over the years, over the
decades that you've been doing this

and what kind of, you know, wisdom
or advice or you know, any other

kind of commentary might you have

Let's say a high net worth
investor seeking to invest in real

estate, particularly self storage.

What would you share that maybe you
wish you knew 30 or 40 years ago?

Or what are some things that you've
learned along the way, maybe the hard way?

this is more of a relaxed episode of just
hearing commentary and wisdom from Paul.

'cause you've been doing this a long time.

Paul Bennett: Yeah.

and put a little bit of thought this
morning into it, Brandon, and, and I,

always want to give people, information
that's valuable or helpful and it

kind of falls into different buckets.

The first thing that I recommend, I
have a really significant allocation

within my own personal portfolio
to alternative assets in general

and real estate specifically.

Brandon Giella: Hmm.

Paul Bennett: highly unusual
if you looked at my portfolio.

Brandon Giella: Hmm.

Paul Bennett: but regardless, you need
to have a plan, and you need to have a

roadmap for how you're gonna allocate.

Capital within your portfolio.

I think having that prevents you
from over allocating when you get

excited or the market gets frothy and
under allocating, in other periods.

So at the end of the day, I
would say first sort of bucket

of advice and it's not really
different than the stock market,

Brandon Giella: Hmm

Paul Bennett: consistent over time.

dollar cost averaging is
what they call it, in stocks.

Brandon Giella: mm-hmm.

Paul Bennett: and remember that
market timing doesn't work.

Brandon Giella: Okay.

Paul Bennett: you'll never get it right.

Brandon Giella: Yeah.

Yeah.

Paul Bennett: you kind of hope to
buy somewhere in the vicinity or the

neighborhood of the bottom and, and
sell somewhere in the neighborhood,

the vicinity at the top, but it
doesn't always work out that like that.

just like stocks.

you hold them over time,
generally provide a solid return,

sometimes better than others.

So the next thought related
to that is time and money,

Brandon Giella: Hmm.

Paul Bennett: you have,
the more time you have.

Brandon Giella: Hmm.

Paul Bennett: about within your portfolio.

If you look at the oh 8 0 9 debacle,
when, when things went through its knees

in the real estate market, it was a
true external sort of black swan event.

The banks financing locked up,
real estate values plummeted.

You couldn't refinance,
you couldn't do anything.

People who had staying power,
number one, didn't lose the assets

or the investments they had.

And number two, as the bottom process
began to reveal itself, they had liquidity

and dry powder and got some amazing deals,

Brandon Giella: Mm-hmm.

Paul Bennett: that created some
real value over the 5, 6, 7 years.

You know, coming out of 2012, 1112,

Brandon Giella: Mm-hmm.

Paul Bennett: turned.

So, in more difficult markets.

smart about the use of leverage
and the debt structures in

the deals that you invest in.

you also have to consider the
timing of the real estate market.

try real hard not to make this
necessarily about AAA storage, but.

you're in a very difficult market and
all the data in multifamily is telling

you there's oversupply, rents are
being driven down and, it's difficult

to get traction with a new property.

the projections in most multifamily
deals, they anticipate lease up

in a year to year and a half.

You need to really consider what the
market looks like and how difficult

it's gonna be to lease that project up.

'cause if you don't, there's no cash flow.

If there's no cash flow,
you can't service the debt.

if you can't service the debt, you
either get a capital call to the lender.

Forecloses in self storage, our lease
up period for a project's four years.

I don't care what the market is today.

It's gonna be different in four years.

Brandon Giella: Mm-hmm.

Paul Bennett: behind the curve
for a period of time in terms of

the lease up that was projected.

But over that four year period, in almost
every circumstance, you're gonna see that

property be able to perform at a level
that will stabilize it and make the.

Investment that you made work.

So I think you have to consider
so many different aspects.

in every time in the market, you
have to consider a range of things.

When you're doing your due
diligence, you have to consider

the cycle that the market is in.

The sector that you're looking
to invest in, who the sponsor is,

what type of investment is it?

Is it core or core plus
value add development?

and then the specific timing of
the sector that you're invested

in relative to the cycle.

all of those things become important
and they become probably more important

when things are more difficult.

But anyway, a lot of rambling there
not a lot of good information.

Brandon Giella: That's always good.

location is a point of that.

I think you were talking
about what market are you in?

Maybe that's a component of it.

would you say that, whether you're in
Texas Florida New York or California,

those are very different markets,
but even more locally are you.

Rural versus urban.

And then what part of the urban,
I mean you guys talk about five

mile radiuses and the kind of
markets that you get involved in.

Is it down to that level for an
investor looking at properties?

Paul Bennett: I think that's where
you have to depend on the sponsor,

which is why choosing the right

Brandon Giella: Right.

Paul Bennett: important because
there's a level of detail and technical

knowledge that as a passive investor,
some are more active than others, some

really, nerd out on the data and like

Brandon Giella: Yeah.

Paul Bennett: super knowledgeable on that.

Others, really depend on the sponsor.

I think that's another issue
is alignment with the sponsor.

the sponsor have real skin in the game?

Because, the reality is
there are sponsors out there.

Who syndicate the next deal
because that's what they do.

in some cases they need the fee income
to keep their operations running.

so they'll sort of develop or acquire into
a market with a lot of danger signs, if

they've got their own money at risk in
a significant way, either as a guarantor

on the debt or as equity in the deal.

Preferably both.

then that's gonna color their decisions
it's like the pilot in an airplane.

I'm pretty sure that if there's a
real problem with that airplane,

he's not gonna take off.

he's gonna be sitting on the front of
it and he's gonna be the first one to

hit the ground at 600 miles an hour.

if it comes outta the sky,

Brandon Giella: That's right.

Paul Bennett: in that same seat

Brandon Giella: Okay.

Paul Bennett: just as much pain and have
to meet the same capital calls that you

have to meet as an investor in the deal.

I think having a sponsor with
a real significant, meaningful

commitment to invest alongside the
limited partners in a deal is a

really important thing to look at.

Brandon Giella: That's great.

Okay.

How do you, how do you,
think about liquidity?

When you're making investments,
especially, in a down market or in

the kind of, less certain waters
that we find ourselves in now.

How do you think about, like, personally
as an investor, thinking about

liquidity and how you would invest
and having that kind of dry powder?

Is it like definitely have more in
a period like this or less, any kind

of thoughts or parameters on that?

Paul Bennett: I think we're in
a time now, we talked about this

either last week or the week before
on the podcast where you're seeing.

a relatively short down cycle
in the real estate markets.

Multifamily self-storage has had
its own headwinds, but it's been

a relatively short down cycle.

generally speaking, when you're going
to make investments in what is a more

challenged market, more liquidity.

Is the right place to sit in because the
likelihood of getting a capital call,

remember time and money are related.

The more money you have, the more
time you have any real estate deal

is ultimately, more than likely going
to be worth what you invested in it.

How much more is always the question.

And it really has to do
with a lot of factors.

but what you don't wanna do is
getting taken outta the game

because you don't have liquidity.

to survive a down period.

I told you the story.

We owned a piece of land we bought
in 2006 17 acres, in Concord, North

Carolina, kind of between Charlotte
and Concord, just down the road, a mile

down the road from the largest regional
mall in the state of North Carolina.

Brandon Giella: Hmm.

Paul Bennett: 2000 7, 8 9 happened and we
had to sit on that property for 15 years.

in

Brandon Giella: Man.

Paul Bennett: to get to a point where
we could develop it, and it's now a

very successful mixed use project.

the reality is had we not had the
liquidity and the staying power

to stay in that deal, we would've
lost a significant amount of money.

'cause if we had been forced to sell

Brandon Giella: Yeah.

Paul Bennett: or give it back to the bank,
'cause originally we had some debt on the

land, It would not have turned out well.

However, we did have the staying power.

we paid off the loan that we had on
it and we had the liquidity to pay the

property taxes for a long period of time.

And then we were able to develop it and
we came out, came outta that pretty well.

But,

Brandon Giella: Amazing.

what other experiences have
you had like that, that taught

you these important lessons?

if it was 10 years ago or 20 years
ago, or 30 years ago maybe, when you

started investing significant capital
in real estate, did you have a moment

or a story where something happened
or a deal went a particular way, or a

market went a particular way and you
were like, I will never forget that.

You know, it's kind of these soul
level lessons that you've learned.

Paul Bennett: Yeah.

1986, Tax

Brandon Giella: Okay.

Paul Bennett: I got in this industry in
1981, and at that point in time, what

was in vogue very highly leveraged.

We did a lot of multifamily,
but we also did, you know,

retail shopping center type.

Properties, office hotels, but it was
all very highly leveraged and structured

to provide excessive tax write-offs.

we were doing deals in 19 83, 4 or five,
where the investors were getting a, a,

a, they were getting allocated losses
that were twice their equity investment.

With a high net worth individual
at that time that was close

to the 50% tax bracket.

The government was basically, they
were able to take dollars, they

would've paid in taxes and put 'em in
a piece of real estate and roll the

dice and hope they made some money.

Brandon Giella: Hmm.

Paul Bennett: But in order to make
those deals pencil with the kinda

leverage they had on 'em, the
projections were really unrealistic.

And I, you know, I

Brandon Giella: Hmm.

Paul Bennett: how we thought about rent
growth and net operating income growth.

there are two kinds of statistics, I
guess, and the last one's damn lies.

Brandon Giella: Right.

Paul Bennett: to be, you
know, damn lies in a sense.

and so looking back on that period
when the Tax reform act was passed in

1986, it changed the landscape of the
real estate world and sucked about

25% of the value out of every piece of
multifamily real estate in the country.

because it stripped out the tax
benefits that were a component of

what people were willing to pay

Brandon Giella: Yeah.

Paul Bennett: estate.

And that combined with being grossly
over leveraged deal after deal between

86 and 90 hit the wall and exploded.

And the investors lost a lot of money.

Brandon Giella: Wow.

Paul Bennett: that was a lesson
because I was on the inside of that.

I wasn't driving that market, but I was
certainly putting together deals and a

part of deals that had those same fatal
flaws, and that's something that I'll

never forget and I'll never do again.

Brandon Giella: And the lesson
is watch your projections.

Watch your leverage.

what's the moral of the story?

Paul Bennett: Tax benefits are a great
side benefit, but it can never be the

primary reason you make an investment.

it's all about the economics.

it's all about a solid asset that will
move through more difficult cycles.

Yes, it may be a little less valuable
in the bottoming of a cycle, but

again, over time, if you look at
that piece of real estate, just like

if you look at a blue-chip stock or
you look at the S&P over a 10 year

period, it's gonna provide a return.

so.

Invested in the right quality, the right
structure, having the staying power to get

through a cycle if you get caught in one.

and thinking intermediate to
long term, not short term.

Brandon Giella: It seems like a lot
of this is coming back down to time.

do you have the time to stay in it?

and then what is the
projections over time?

obviously there's time value of money
and it's central to finance, but I'm

hearing you really hammer that point.

Paul Bennett: I'm not trying
to do a commercial, but.

sometimes the time is, if the deals that
you're in provide for capital calls,

if additional capital is needed, then
you become the source of that capital.

Brandon Giella: Right.

Paul Bennett: also has a lot
to do with the sponsor and the

sponsor alignment in our funds.

We don't have the right to call
additional capital from our investors

We have such strong alignment.

We have such a significant investment
as a limited partner in our

deals, and we guarantee the debt.

In the instances where we've had deals
that were slower leasing up and had

some degree of financial stress on
them, we've loaned them millions of

dollars to get them through that cycle.

Now, that ultimately still affects.

investors return, because it means
that debt has to be repaid when

the property's ultimately sold.

And so it, it dilutes the return,
not as much as equity would, but it

does dilute the return a little bit.

But as a sponsor, we
have the staying power.

to get a deal or deals
through a difficult market.

If we get caught short and don't
have the capital we need to keep it

on its feet until we can get to the
other side of whatever the headwind

is that's caused the problem.

Brandon Giella: Yeah, I love that.

Paul Bennett: invested in sponsors
that are financially strong, that have

good alignment with their investors,
is probably one of the most important,

Things that you can do to avoid
having, really bad news come your

way in the process of a down cycle.

Brandon Giella: I love that.

One thing that Paul Shannon shared,
in one of his posts on LinkedIn, he

was sharing that, you know, in 2022.

People were telling me this and now in
2025 people are telling me this I chose

this direction, I chose that direction,
then I'm glad I did that kind of thing.

I'm curious for you, is there something
that you are hearing or you think is

a common story or that you're seeing
in headlines that you think maybe

misaligned or not quite lining up with
reality or what you expect the future?

do you see any Major dislocation
in a common story, what people are

saying, what headlines read versus
how you're interpreting things.

Paul Bennett: Well, my first comment
would be about the herd mentality.

I can remember in the, early 2000's Up to
about 2006, actually, probably even 2007.

you'd go to a cocktail party and
there'd be five guys there that had

quit their job and were flipping houses.

That should have

Yes.

Right?

yes,

Brandon Giella: yes.

Paul Bennett: That
should have been a sign.

when that's happening, run the other way.

when everybody thinks multifamily
is the place to invest.

That means there's gonna be a lot
of capital flowing into multifamily,

which means there's gonna be a lot
of new deals, which means you're

creating your own problem 24 to
36 months down the road, right?

Oversupply, pressure on rents, all
the things that happen in a cycle.

I said last time we
talked about this, know.

Developers and sponsors
sometimes aren't very smart.

we become our own worst enemy, right?

The conditions are good and
capital's readily available.

So we build too many apartments or sell
storage facilities and next thing you

know, there's rate, pressure and occupancy
issues and 'cause we built too much.

but, but the herd mentality
Is a very dangerous thing.

If you ask the average person
on the street, they would say,

multifamilies had a really tough time.

And there's been, you know, there've
been, you know, distress rates on the

dead have gone through the roof, and
their foreclosures and new developments

have struggled to get off the ground.

they were exactly right.

They're only 18 months late now.

Brandon Giella: Interesting.

Paul Bennett: the other
direction, which is, you know.

Absorption of new units is up
about 60 or 70% versus a year ago.

the new supply that's coming
online is down by 47%.

we're in the bottoming process
that we talked about, before.

now could be, an excellent time.

And Paul Shannon made the comment that
if he listened to what everybody's

saying now on multifamily, he'd
likely miss the best opportunity.

Right.

Uh,

Brandon Giella: That's right.

Paul Bennett: market time.

You can't be exact.

but if you're invested in the
development of a new multi-family

project today, means it's not gonna
deliver into the market for another year.

A year and a half, maybe two years.

if we're in the bottoming process, it's
delivering right into a point in time

when demand is gonna be there, prices
are gonna be stabilized and increasing.

You have to think about, I'm
making the investment today, but

when is this piece of real estate?

What's the critical timeframe
for that piece of real estate?

Um, and the same thing applies
to self storage, you know.

Development activity has
declined dramatically over

the last, 18 months or so.

And there's forecasted to
continue to decline, into 2027.

But because of the time it takes from
the idea to dropping a self storage

facility on the ground and starting
to lease it up, we're very comfortable

developing in this environment, knowing
we're gonna be delivering projects in.

26, 27, 28, even into 2030.

the underlying demographic demand
data is so consistent and strong

that we're not swayed by the current
market today 'cause we're looking at

where we're gonna be five, six years
out when these properties deliver.

Brandon Giella: I am hearing
now is the time to invest.

If you wanna be in, this
is a pretty good time.

Maybe not be exact, but it
sounds like a good time.

Paul Bennett: and it certainly could
be viewed as self-serving, right?

Um, you know

Brandon Giella: Of course.

Paul Bennett: coming outta my

Brandon Giella: right.

Of course.

Of course.

Of course.

Paul Bennett: I absolutely agree
with you, and I think guys like

Paul Shannon agree with you.

Warren Buffet said, when
people are greedy, be fearful.

And when people are fearful, be greedy.

It's the herd mentality.

it can be counterintuitive, but I
absolutely believe that if you can

really figure out where the masses
are going, go the other direction.

Brandon Giella: He said in a, a.

Interview recently that,
most people don't have the

psychological state to be investing.

And you kind of getting at
that, that herd mentality.

People are very fearful or they
get very greedy or whatever.

And you need to actually be more
measured if you wanna be a successful

investor, be more measured, have a
plan, like you said at the beginning.

Think through what you're doing.

it reminds me of this book.

There's.

There's a, a book, Robert
Schiller, who's famous economist

for the, the K Schiller Index.

He has a book called Narrative
Economics, and he talks about how

there's so many stories that drive,
you know, market mania, which is a

common thing, he unpacks what that
really looks like in economic terms.

It's really fascinating, but you hear
these stories, but it may not be true.

so be measured, have a plan, think
through what you're investing in.

Paul Bennett: with, the market
volatility over the last month

particularly affected by tariffs.

What you see happen is you see people
selling stocks, because of the uncertainty

and their fear that, you know, things
may be going in the wrong direction,

if you look carefully, you can find.

Opportunities to buy companies or buy the
stock in companies that aren't directly

correlated or impacted by the tariff
environment, but yet maybe down 15, 18,

19% from where they were three months
ago because people just sold stocks.

Brandon Giella: Right.

Paul Bennett: so you're kind of swimming
upstream, but you're doing it with a

plan, which is if something's super
exposed to the impact of tariffs and

there's real uncertainty about their
impact, then find the stocks that aren't,

but have been affected by the general
psychology of the market and driven down.

'cause now you're getting value.

Brandon Giella: That's right.

It's one of the, benefits of
index investing and dollar cost

averaging like you're saying.

as they sell all that index, all
of the market goes down, then

there's actually non-efficient.

Opportunities, which is great.

Paul Bennett: Yeah,

Brandon Giella: That's a technical point,

Paul Bennett: estate doesn't move as
quick, but it's, very, very similar.

And, the market cycles are
generally fairly short.

And so, you know, if you're
trying to buy a house and flip it.

It, can get caught real easy, right?

'cause that's generally a

Brandon Giella: Yeah.

Right.

Mm-hmm.

Paul Bennett: but if you're investing
in a solid multifamily project, in

a good market with a good sponsor
that has staying power, and you're

looking at a five to eight year time
horizon, what's happening today,

you know, less, less critical to me.

Brandon Giella: Yeah.

Right, right, right.

Paul Bennett: I said,
I'm not over allocated.

It's my choice.

It's what I've decided to do
and have done for 40 years.

a significant percentage of
my net worth is invested in

real estate in various forms.

Brandon Giella: That's right.

You got skin in the game in this market.

Paul Bennett: yeah.

and I, you know.

it's where I'm comfortable.

Not everybody has that same,
it's not for everybody, but,

Brandon Giella: Yeah.

Paul Bennett: I have done
what I said at the beginning.

I have been consistent over time.

I've ignored market timing and I've
tried to find good opportunities that

stand alone and stand out on their own,
in any sort of current market context.

By doing that over time, I've made
some pretty successful investments.

Brandon Giella: Benjamin
Graham would be proud.

I love that.

last question for you.

Thinking about people that have
influenced you whether they're real

estate investors, investors generally
could be economists, could be a friend.

What is some of the best advice you've
ever heard that has stuck with you?

Somebody told you one time or
explained something to you and it's

always stuck with you as being really
sound advice through the years.

Paul Bennett: Wow.

That's a hard one.

let me think about that one for a minute.

Brandon Giella: Next episode maybe.

Paul Bennett: it wasn't a comment,
it wasn't a piece of information.

It was an attitude and an approach.

The

Brandon Giella: Hmm.

Paul Bennett: I ever had in the
syndication industry with a regional

syndicator, in North Carolina.

And the chief legal counsel
and chief operating officer

was a guy named Joe Green.

Joe went on, To bigger and better things.

He became the CFO and then the president
of a publicly traded reit, Winston Hotels.

He then migrated into the student housing
world and, was super successful there.

Joe didn't say this, but he did it.

And his attitude was,
if you work hard enough.

As a real estate professional
and you think hard enough,

you can make any deal work.

You can

Brandon Giella: Hmm.

Paul Bennett: by, in some
markets it's easier than others.

But if you are focused and committed
to finding solutions to the short term

problems that can come up in a real estate
environment and investment environment,

you can, you can find your way out of.

deal and, and you can make it
work some better than others.

Joe was a pretty extraordinary guy.

One of the hardest working guys
I've, ever worked with, ever known.

I think across his career, he may have
made some decisions or investments

that, whether they were misses on
his part or things beyond his control

didn't go well for a period of time.

But I don't know across his whole career
that he ever had a deal that failed.

Because he was

Brandon Giella: Interesting.

Amazing.

Paul Bennett: a solution, to
make the economics of, the deals

that he put his name on work.

And, I don't know why that
came to mind when you asked

me that question, but it's an

Brandon Giella: Hmm.

Paul Bennett: It's, it's, this
sounds silly in business, but it's

sort of a refuse to lose attitude.

Brandon Giella: That is the
best thing you could have said.

it's not a piece of advice, It's not
an argument or a piece of information.

it's a way of being.

And to be successful in this world,
in this asset class, you have to

have a certain way of being about you
being determined, solutions oriented.

And I know what, you know,
a little, I know of you.

it seems like that's rubbed
off on you in a lot of ways.

I know you're a very hard worker,
very diligent And put a lot of time

into finding good solutions and making
deals work, it's a really admirable

trait, so I appreciate that about you.

Paul Bennett: I learned it from a
guy, who was a mentor to me early

in my career, has been a friend over
the years, and, has been successful.

Joe has been involved in everything
from, I don't know if he is ever

done any self storage, but he's done
multifamily, hotels, student housing,

he's crossed a lot of, you know.

Areas in the real estate world.

And so, but yeah, I think that's, and
I, again, when talking about passive

investing versus, doing things directly
on your own, I think it's one of the

things you wanna look for, to sponsor.

Brandon Giella: Right.

Paul Bennett: oriented who's not gonna
hit the exit, you know, not gonna put on

the parachute and jump outta the plane
just 'cause things get a little bumpy.

'cause they do sometimes, right?

It's the nature of doing the

Brandon Giella: Yeah.

Paul Bennett: market they
do in any ING environment.

but again, at the end of the day, I
think the thing, the reason I've been

drawn to real estate is, number one,
it just made sense to me from day one.

Number two, it's a tangible asset if
you have the ability to hold onto it

long enough, you will never lose money.

Brandon Giella: Hmm,

Paul Bennett: There

Brandon Giella: It's important.

Paul Bennett: there are stocks
that can become worthless, right?

That's

Brandon Giella: Yeah.

Right.

Paul Bennett: zero value for a
company is, theoretically possible.

It doesn't happen all that
often with larger companies.

But wild swings in value and, the
possibility of losing all of your

investment is very real in real
estate, you own a tangible asset.

So long as you have the staying power,
it will always be worth something.

Brandon Giella: That's right.

That's right.

I love that.

Well, I think that's a good
place to end this episode.

Paul.

I'm grateful for your, your way of
being, your attitude about these things.

'cause it, it is very helpful and
very encouraging to me, you know, as

a younger, less experienced investor,
but to hear from you in the way that

you're thinking about things, it's
just, so encouraging and, helpful.

So I hope that listeners.

Even though some of it may
sound self-serving, I, I know

you'd be a very genuine person.

You're, you're offering like
very sound advice, regardless

of where you sit in the world.

but I'm really grateful and
I know our listeners are too.

So Paul, thank you and
we'll see you next episode.

Paul Bennett: Always fun, Brandon.

Brandon Giella: All right, man.

See you later.