Atlas Storage Deals – Update 2

The last 90 days have been... busy.

Hello and welcome back to Atlas Self Storage's Quarterly newsletter.

Quick Intro If You're New Here:

Who are we:

Atlas Self Storage is a real estate investment firm started by Connor Gross & Giovanni Armonies-Assalone.

Our goal is simple. Buy ~$5-10M of value-add self storage facilities every year. Mainly in Texas.

Current Portfolio:

• 4 properties (3 in TX 1 in AR) valued around $3.8M (if you use an 8 cap on NOI)

• 345 units and 61,490 rentable SF

• $33,372 average monthly rental revenue

Why are we writing this?

Our goal is to build a $100M portfolio over the next 5-10 years.

I want to document that process. Along with teaching people just getting started how we're thinking about buying these deals. And maybe even attract some investors to partner with us along the way.

Updates Since The Last Email (Found Here)

Team

First of all, we have a team now.

Ecko & Elliot have leveled us up 10x from two guys chasing down deals to a real company in only 90 days.

Ecko has an extremely systems-driven background coming from a world where she oversaw 550,000 square feet of commercial healthcare facilities along with her time in the US Marines.

Elliot comes from a role where he built the acquisition team for luxury short term rentals and has had a career as broker over at Marcus and Millichap.

Between the 4 of us, I have a tough time seeing us not find incredible deals and operate them with best-in-class efforts.

We plan to run lean for this next year of business to keep overhead fixed.

However, 3 additional areas we'll likely hire for in the next 6-18 months will be:

• In-house call center rep

• Fractionalized/Part-Time CFO

• Commission based SDR/outbound rep

Portfolio Performance:

Numbers:

• Rental Revenue is up 12.8% across the portfolio (from $29,500 to $33,372)

• Physical Occupancy is up from 80% in December to 85% at the time of this writing (294 rented units)

• Collections are averaging 96%+ by the end of each month

Stories:

I think sometimes I give the impression that running storage facilities is easy. I hope this section changes that perception

• Arkansas Facility – One month behind schedule on gate installation after going back and forth with gate + electrical companies 12+ times to finish installation. Still not done.

• Midland Facility – 2 homeless tenants living in the units that we had to evict + dealing with law enforcement to evict them

• Lancaster Facility – Over a 12 break-ins in the course of 1 week. Dealing with cops + detective to handle. On top of fixing the doors there, we also have a $30,000+ capex project to rennovate an 1,800 SF contractor warehouse that hasn't been touched in 10+ years :)

It's not easy.

But we have the philosophy that spending the extra hours to get the details right will let us rent more units at higher rates & raise our properties value.

Which many owners and operators aren't willing to do today.

Deals:

It's been 6 months since we've bought our last facility.

I'm not pointing fingers (though if I were I'm looking at J Powell & his 8% interest rates).

Then all of the sudden we brought Elliot on 45 days ago.

These last 2 weeks have been like drinking from a fire hose.

Constantly underwriting new deals & making offers on properties throughout the country.

Last Wednesday I woke up at 4 AM to catch a flight to Houston and was back in bed by midnight. Stats for the day:

• 3,000 miles

• 5 coffees

• 1 shattered rental car windshield (from a nice rock that flew up on the highway)

Here's the property I toured:

Spoiler: You know it's a good deal when they collect rent in one of these:

They wanted $1.2M cash for it.

We got the contract signed for $1,075,000 which included $800,000 of seller financing for 2 years at 6% interest only.

However, after we went under contract, we ran through additional scenarios on our model & realized we'd be taking on a lot of risk if we couldn't sell the property in 2 years (we'd need to pay back the 800, which would be contingent on getting a loan at the value we needed, and stomaching what would likely be a 9% interest rate).

Investors Returns would've likely only been 12-14% IRR for what felt like too much risk.

So... we backed out. Which sucks.

We don't want to build a reputation of buyers who back out of contracts. So moving forward we're triple checking our numbers on our offers before sending the LOI.

Since then we've been looking at deals in South Carolina, Kansas, Florida & more in Texas.

Focus for the next 90 days:

• Deals. Find them, make great offers, and get them under contract. This is currently the entire companies #1 focus and priority.

• Potentially selling out Midland facility. We've leased it up to over 93% from the 70% we bought it at while still raising the rent. We are working with a broker today to see what we can get for it. Two reasons:

  • 1 – It will give us a better indication for cap rates on exit. Which will help us know what we can be underwriting future deals at.

  • 2 – It will give us more realized equity to invest in future deals

Misc. Activities:

• Performing a segregated depreciation study on our Fort Worth property. Should be able to save a few $100,000 in taxes this year depending on how that comes back. (I'll know next week)

• We rolled out a new tenant insurance program this quarter that should add an additional $1,000 in our pockets every month

• Finalize the last few capital intensive projects (gate, contractor unit, etc.)

Closing Thoughts

Overall, I think we're really damn close to finding a great deal.

It's a fine line between trying to build momentum daily by acting with a sense of urgency, and being patient knowing that there are potentially great deals around the corner from sellers who need cash quickly.

If you have any questions or want to get involved, please respond to this email! We'd love to chat.

-Connor & Giovanni