OZ Pitch Day Recordings
Self Storage In Opportunity Zones, With YourSpace America
In this webinar, Russ Colvin presents a ground up construction of self storage project in Las Vegas.
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Webinar Highlights
- Overview of the self storage asset class historically.
- Summary of the project costs, timeline, and expected returns.
- Renderings of the planned development.
- Discussion of the competitive landscape in Las Vegas.
- Summary of processes and partners.
- Live Q&A with OZ Pitch Day attendees.
Industry Spotlight: YourSpace America
YourSpace America, Inc was formed as an investment vehicle to provide superior risk adjusted returns in the growing self-storage industry. This commercial real estate asset class is characterized by strong cash flows, low break-even margins and best in REIT universe returns for the last 28 years.
Learn More About YourSpace America
- Visit YourSpaceAmerica.com
Webinar Transcript
Jimmy: Russ is with Your Space America self storage. He’s gonna be presenting that…they have a variety of self storage development projects all around the country. Three of them, I believe, are in Opportunity Zones. They have an Opportunity Zone deal in Phoenix, an Opportunity Zone deal in Tucson. But today you’re gonna be hearing about their Opportunity Zone self storage deal in Las Vegas, Nevada. Russ, there you are. How you doing?
Russ: Very good. Good morning.
Jimmy: There you go. I can hear you now. Good morning to you as well. Ross, without further ado, I’m gonna go off camera here and let you walk everybody through your presentation.
Russ: Very good. Okay, thank you. And thank you, everybody, for taking the time to join us today and participate in the presentation. I’d like to start out by talking about the Owens property, and then I’d like to get into the self storage industry, and why it’s become America’s safest real estate investment, and then provide a little time to discuss our company.
As I mentioned, self storage has become probably the most desirable commercial real estate investment in America. Indeed, it’s really evolved into a core asset class for institutional investors, and that’s really due to its unmatched performance in the commercial real estate sector. In the past 30 years, self storage has been the top-performing property type in the Nareit index. That’s 1994 to 2023, with average annual returns of 17.3%, so, outperformed every other product type for the past 30 years. Okay.
So, this first slide is a rendering of a completed project, the Owens project. And as you can see, it really doesn’t even look like self storage, with climate control generation 5 facility. Next slide. Let’s see. Disclosure. Everybody should read the disclosure. Next slide. I will get more into details as we move along here, but the plan is to essentially develop an approximately 160,000 square foot facility, that is in an ideal location along Interstate 15, in an area with a growing population and undersupplied self storage market. And people often ask me, well, what do you look for in a self storage project? And as I will discuss as we move along here, this project checks all of those boxes. Next slide. Okay. Next slide. Okay. This is a more close-up rendering of the property. Next slide. This, basically, is an overview of the total project cost, and our timing for the project. And we are at a point now, we’re about ready to pull our building permits and begin construction. Construction will last about a year. And we estimate it takes three years for stabilization, but our property manager’s telling us that it should be done more soon than that, but we take the most conservative approach, obviously. Next slide.
As I mentioned, this will be a 1189-unit facility, and we will soon be under construction. Our plan here is, when we first designed this, was to make it very investor-friendly. So, it has a 10% preferred return, an 80/20 to a 15% return, and 70/30 thereafter. We estimate that the project-level returns on a 10-year hold would be about 24.77% to the investor, on average, with an investor equity multiple of about 4.21. So, in other words, if you invest $100,000, you should get your money back plus about $321,000. So, very attractive returns compared to basically any other product type. Next slide.
Project costs. Again, this gives a breakdown of total project costs and the returns. And I should add, obviously, this is an Opp Zone hold. We do plan to refinance around month 24, return capital, so people can pay any taxes that they owe. And, again, on sale, there’s no recapture of depreciation, so, you know, the returns, when you analyze them carefully, are actually better than what we have here in the deck. Next slide. This, again, is a detailed overview of the project, project costs, etc. Next slide. Due diligence. We’ve performed all of our due diligence, obviously, on the property. We’ve been working on it for about two years. And as I mentioned, we’re fully entitled, about ready to begin construction. Our plan is to use ARCO Murray, who is one of the largest contractors in the United States, and probably the largest in self storage. Next slide.
This slide kind of gives an overview of the local area. And as I’ll show you in just a moment, one of the things that I mentioned’s very attractive about this is the proximity to Interstate 15, the population numbers in the five-mile radius. There’s 524,000 people, which is definitely something that we find very attractive about this project. Next slide. I mentioned the competition in the area. And so, there are no projects under development in a one-mile radius around the property. There are two projects in the three-mile radius, that are under development. And even with those new projects, the market will be pretty dramatically undersupplied. This project is very strongly supported by the city of Las Vegas. We are breaking ground here shortly, and we have, expect to have the mayor there. It’s the Councilman for the area, and a lot of local VIPs, so, it’s very strongly supported in the community. The area needs a lot more self storage. And this project certainly fills that need for the community. Next slide.
This next slide shows the two projects that I mentioned, the two competitive projects. As you can see in the red, there’s our project, right along Interstate 15, and here are the other two projects that are under development. Next slide. This gives, once again, just another overview of the market. As you can see, the city and so forth, the location, north of the strip. Okay. Next slide. This is a great overview, this slide, of the property along Interstate 15. The red dot is obviously our facility. We have 175,000 vehicles per day along Interstate 15, and about 14,000, nearly 15,000 in front of the property, so about 190,000 vehicles per day passing by our property. This site is about 30 feet above the Interstate. So, imagine you’re traveling on Interstate 15, and this site will be right there, along Interstate 15. The building will be about 50 feet high, so, at the top of the building, we’ll have signage. The city is also letting us put in an 80-foot sign. So, truly, this will be one of the most recognizable self storage facilities in Las Vegas when it’s completed. Next slide. This is the site plan of the property. Over to the right, obviously, is Interstate 15. This is our project. As you can see, the layout here, and the entrance, along Owens. There’s plenty of loading areas, very well laid-out here. So, customers will have very convenient loading and unloading, which is something we look for in every facility that we do, is to making a pleasant experience for the customer who comes in. About two-thirds of self storage customers these days are women, and they want a facility that is clean, that’s safe, that’s well-lit, that’s convenient, all of those things.
We also increasingly have more and more businesses that use self storage. That’s an interesting phenomenon of the last five years or so, more and more businesses using self storage. And so we also take that into account, and try to make it, you know, very convenient for them as well. Business tenants tend to stay longer than individual tenants. They don’t mind rental increases, so business tenants are a good thing for a self storage facility. Next slide. This is a very important subject here, what I’m about to talk about here, is the general contractor selection, oversight of the project. We, as I mentioned, use ARCO Murray. And as you’ll see in an upcoming slide, this project will be managed by Public Storage, which is the largest owner of self storage in the world, with about 3000 self storage properties, and about 25 properties in the Las Vegas market. So, they have a major presence in the Las Vegas market, and I think they’re great managers. And we also have very good site security during the construction process. But we run a tight ship, and that is basically, and through the entire process. From the time we find a site to the time we ultimately sell the property, we really believe in running a tight ship and doing the best things for our investors in all scenarios. Next slide. This is kind of an overview of what I just mentioned. ARCO Murray is the contractor. In this case, we’re using Public Storage as the manager. We believe they are the best manager for this site. And we already have our management agreement with them in place. Next slide.
Now I’d like to take a little time and talk about the self storage industry. And as I mentioned, self storage is probably the most desirable class of real estate investment in commercial real estate, because of its returns, because of its safety, because of its performance during the Great Recession, because of its performance during the pandemic. It is just proven to be a very safe product, so now you have major institutional investors all over the world that now invest in self storage. And obviously, as we’ll see in the upcoming slides, there’s reasons for that. Next slide. Next slide. This is the subject that I mentioned, was the performance of self storage relative to other product types. Next slide. And I mentioned, for the last 30 years, from 1994 to 2023, outperforming every other product type, and their average return of 17.3%. Next slide. As you can see in this graph here, obviously, this is self storage, in green. All the rest in blue. So, basically outperforming industrial, office, retail, residential, all other product types, on average, for the past 30 years, which obviously is a reason why so many people are interested in this product type, in addition to its safety. Next slide.
This is an overview of the growth value of the stock of Public Storage from 2001 to 2024, as you can see, continual growth in the value of the company over a long period of time. Which shows you the interest in the market in self storage investment. Next slide. This next slide is a graph of Extra Space, which is the second-largest owner of self storage in the world. You can see their growth in their stock for the last 20 years. Next slide. You have CubeSmart. Same story. You know, strong growth over a long period of time. Next slide. This next slide is NSA, which is another one of the publicly-traded self storage REITs. You know, strong growth since they went public in 2015. Next slide. This next slide is interesting. This is self storage performance during the pandemic era, which is essentially beginning of 2020 through June of 2022. And you can see how self storage performed against other product types. It was considered a necessary product type during the pandemic, so, people had access to their self storage facilities, you know, as if there was no pandemic. So, people used their self storage facilities for a lot of different reasons during that time. And occupancy levels increased, rents increased. It was a very good time for self storage, during the pandemic. But it just goes to show you the resilience of the product type through all market cycles. Next slide.
This next slide, some people may find interesting, which is the 10 largest owners of Public Storage, which is a publicly-traded company with about a $50 billion market cap. And you look at the owners here that have a major ownership in this company, and you have people like Vanguard, that have nearly a $6 billion position, or you look at BlackRock. Every one of these investors listed here is a major institutional investor, household name investor, with a large position in Public Storage. That tells you a lot about self storage. Next slide. Next slide. Kind of the same message, if you will. Major institutional investors that have a large position in self storage. And again, it speaks to the safety and resilience and returns involved with self storage. Next slide. CMBS data. This is an interesting point here, and this is delinquency rates of self storage compared to other product types. And the delinquency rates for self storage are extremely low over a long period of time, which again speaks to the safety of self storage. Next slide. This is basically the average of self storage performance before, during, and after the Great Recession. You can see the average on the bottom here. Basically exponentially lower than every other product type. Next slide.
This next slide shows the delinquency rate for various commercial types of real estate during the pandemic era. And as you can see, in the very bottom down here, on green, you have self storage, which is below 1%, and then on the top up here with the blue, you have all other product types. But this is very interesting in the sense that it’s a pretty vivid overview of the safety of self storage in comparison to other product types. Next slide.
And now, I’d like to take a few moments and talk about our company. As was alluded to, we created Your Space in 2021 because I wanted to, after having spent many years at North American Self Store as CEO, I wanted to develop projects and hold them for a longer period of time, and even though we had had very strong returns for investors, something like a 39% average IRR during that time, I still felt that we could achieve even better returns for investors with a longer hold. And that is what we are doing, is trying to hold them and maximize returns for our investors, and that’s one of the things that we really like about Opportunity Zone investing, is that we can have a longer hold, and not only do we have great returns for investors, but there are great tax benefits too. In fact, when our attorneys first started talking about Opp Zone investing, I was, I kind of joked with them. I said, “Well, is this legal?” But it’s a great investment. And with self storage, there’s the ability to refinance, you know, after it’s completed, so, which also allows us to return capital to investors, so they can pay taxes or whatever they need to do. But definitely a great investment.
We do projects that are non-Opp Zone, but as was pointed out, we have three Opp Zone projects, one in Phoenix, this one here, and then one in Tucson. The one in Phoenix is nearly sold out. But all, you know, great projects, great locations. Very compelling investments. Next slide. We have a great management team at YSA, very focused on acquisition, underwriting, relationships, strong management, finding great projects, managing them well, and servicing our investors to the best of our ability. One thing, if you talk to any of our investors, they’ll tell you, is I’m always available. So, you know, not only if they need to talk to anybody in the company, but if somebody wants to call me at 3:00 on Sunday, they know they’ll be able to reach me. So, I think that’s important. I’ve always felt that way, and I think it’s important, again, that people should be able to reach us whenever they need to. Next slide. Management team. Just like to touch on that for a moment. I mentioned myself, Russ Colvin. I’m the CEO and president. And we have a great management team and executive management team in place, a great board of directors. We also have an advisory board of industry professionals, very highly regarded industry professionals. But just a great team in every regard. So, the combination of a great team, great projects, great management, translates to great returns for investors, safety, and all of those things. So, with that, I will go on, turn it back to Jimmy.
Jimmy: All right. Awesome. Thank you, Russ. We’ve got time for quite a few questions here. Let me see. I think we’re gonna start our “Ask the OZ Experts” panel in probably about the next 5 or 10 minutes here. We’ll get that panel started. We’ve got all three of those panelists ready to join me in a moment. In a few minutes, we’re also gonna start Russ Colvin’s breakout session. It’ll run concurrently with that panel. In case you’re just joining us, I’m gonna send a link to that separate Zoom session, for you to join, momentarily, if you wanna have a one-on-one conversation with Russ. Otherwise, you can stay here, and enjoy our interactive Q&A panel, “Ask the Opportunity Zone Experts.” Let’s see. Russ, we did have a few questions here. First of all, I got a question from Frank, asking, “Hey, I missed some parts of this webinar. Can I watch the whole webinar later? Where is the link to it?” We’re gonna post recordings of all of the segments from OZ Pitch Day on our website by tomorrow, so check the website tomorrow, ozpitchday.com. They will all be there. Let me see some questions here. I gotta get open the Q&A, and actually, I’m gonna stop the screen share for a second so I can get the Q&A. Here it is. Okay. Let’s see. Here we go. YSA Self Storage. This question’s from John Smith. “What are the terms and interest rate for the construction loan, and are there any significant risks related to market interest rate?”
Russ: That’s a great question, and it’s something that we look at every day, especially in the current environment. We are assuming that during the first two years, we’ll be paying 10% for construction financing, and then 6% thereafter. We’re finalizing a couple of offers right now that are a little below that, one that’s right at that. But the consensus is that obviously, and you even had the Fed chairman yesterday talking about it was likely they’ll have a rate cut in the fourth quarter. But, you know, for example, on this Owens property, if it starts in June/July, and it takes about 12 months to build it, you’d be looking at potentially putting new financing on later in 2025, and I certainly think by that point in time, we should be in a different interest rate environment than we are now. The Fed’s talking about lowering rates at the end of the year now, so I would think by later in 2025, nearly a year later, that we would have even lower rates. But the other good thing about self storage is, that of all the product types you could walk into a lender with, and say, “I need a construction loan,” or, “I need a permanent loan to finance this project,” you’ll probably get the best reception with a self storage project. There’s a lot of demand by lenders for self storage because of its safety.
So, they also have, even with the current environment, there are some very good permanent financing loans available for self storage today. And less than 7%. So, you know, having, being in an environment where we’ve had higher interest rates the last couple of years, and it’s going into a mode of lower interest rates around the time this property is completed, I think the timing is exciting. As a matter of fact, in addition to that, the consensus within the industry seems that, as I mentioned, the build-up in terms of rates and so forth during the pandemic, and it backed off in the industry a bit, the consensus is that it should be heating back up in 2025. So, this, I think, is an ideal time for these projects to be rolling out, in terms of lease-up and so forth, and rates. Did I answer that? Anyway… Thank you.
Jimmy: I think you answered very thoroughly. Thank you. We had a few more questions here. What’s the minimum investment?
Russ: Well, that’s a great question. Well, we have… We’re open to as low as $25,000. That’s not really in our PPM. But, for example, we have a couple of investors that wanna put money in every project, so they write a check for $25,000 or $50,000. And we welcome them as much as the investors that write checks for $2 million. So, we welcome all investors. We wanna make money for all investors.
Jimmy: That’s very favorable. I didn’t realize your minimum was that low. That’s very favorable.
Russ: Well, it’s really, our low is higher than that, but we have the prerogative, if we want, to take lower. Like, for example, as I mentioned, we have a few people that like our projects, and they wanna put money in every project. So, you know, they’re welcome.
Jimmy: Well, that’s tremendous. A lot of the other minimums are much higher than that. $25,000’s the lowest minimum I’ve heard of. So, good on you for being able to accept $25,000.
Russ: We don’t have many at that size, but if they want to, they’re welcome. And they’re just as important as anyone else.
Jimmy: We also had a question about, you know, given that this particular deal is an Opportunity Zone deal, are you only accepting capital gains dollars into the deal, or are you able to accept non-capital gains dollars?
Russ: No. No. And that’s a great question. So, let’s assume that you’re, obviously, if you’re a non-Opp Zone investor, you know, when we ultimately sell or dispose of the property, you know, your gains will be taxable, of course. But in terms of it being a great investment, the strong returns, depreciation, return of capital, all those nice things about this project, you know, are all available to non-Opp Zone investors. It’s just the way that the depreciation and the gains are treated in terms of taxation. That’s all.
Jimmy: Fantastic. And then, one more question I got is…let’s see. And this is a good one. John asks, “Will Russ’s breakout session be recorded? I’m gonna miss it because I wanna stay here in the parallel Q&A session.” John, great question. We don’t usually… We do record those. We don’t usually put them on the site publicly, but, John, if you send me an email, I can get you the recording. But if anybody else wants the recording of that breakout session, just let me know. Let me see if we have any other questions here. I don’t see any other questions related specifically to this investment opportunity, and we have reached time. So, I’m going to post a link to the breakout session now, in the chat. Just give me a minute to finish speaking here, and then I’m gonna post that link, in the Zoom chat, for Russ Colvin’s breakout session. Russ is gonna be available in this concurrently-running parallel breakout session, if you wanna interact directly with Ross, have one-on-one time with him, ask him more questions about this Las Vegas self storage project. Or maybe you wanna know about… I alluded to, he’s got two Opportunity Zone self storage projects in Arizona, one in Tucson, one in Phoenix. And I’m sure he’d love to answer any questions on those as well. I’m gonna post that link in the breakout right now. And if you wanna learn more, you can get in touch with Russ’s team directly. Head to their website, yourspaceamerica.com. And Russ, while I just type in the message about the breakout session in the chat, any final thoughts from you?
Russ: Well, I would just like to say again, if anybody, after this presentation, if anybody wants to contact me directly, I think my email is in the deck, and my phone number is in there. So, just call me directly, and look forward to talking to anybody that would like to talk.
Jimmy: Fantastic. So, I’ve just posted the link to the breakout session. If you wish to join that now, please go ahead and do so, and then, Russ, you should click that link, and head over there right now. And thank you again for participating today. Really appreciate your time, Russ.