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- Atlas Storage Deals – Update 1
Hey,
Welcome to Atlas Storage's deal newsletter.
We only write 4 emails per year.
So if you're reading this now, welcome to the club 😎
PSA: This is a 1,490-word email... it's ~highly recommended~ to enjoy with a coffee ☕️
2 Housekeeping Items
Who are we?
Atlas Self Storage is a real estate investment firm started by Connor Gross & Giovanni Armonies-Assalone.
In 2020 we sold our e-commerce business. Since then, we've taken most of that money and put it into storage facilities in Texas.
In the last 14 months, we've bought ~ $2,200,000 in properties with the latest appraised value of ~ $3,200,000. All entirely our own money.
Now that we've learned the strategy, our goal is to buy ~$5-10M of value-add self storage facilities every year. Mainly in Texas.
Why are we writing this?
Honestly, 3 reasons:
Help Younger Investors Enter Real Estate – When we were first starting, words like 'cap rate' or 'underwriting' were foreign to me. But truthfully, real estate is a simple (not easy) industry. These updates will contain very little jargon to help first-time investors.
Keep Friends & Family In The Loop – I love learning about what my friends are working on. These updates will serve to keep friends up to date and hopefully document the journey as we're learning.
Find Potential Partners – We're always looking to partner with people who want to be involved in future deals, especially as we do bigger & bigger deals. If that's you, reply & introduce yourself!
Cool? Great.
Let's dive into what we've been working on.
Email Overview:
Portfolio Overview
Current Focus
2023 Focus
Portfolio Overview
This will be the longest section since it's the 1st email. So feel free to skim it or skip to the next section for more choppy updates.
TL;DR:
4 Properties
61,490 sq ft
345 units
278 rentals (80% occupancy)
$17,600 in monthly rent at the acquisition of each property:
$29,500 in current monthly rent – $354,000 annualized
$247,800 NOI (We have a 70% margin before debt)
$111,480 profit after debt ($11,360 monthly payments on $1.7M in debt)
$464,713 of our own money is still tied up in the properties.
Averaging ~23.9% Cash on Cash return
OK let's see which deals were the winners & which have given us some trouble:
Deal #1: Lancaster Storage
So far our first deal has been our best deal.
Bought in all cash in 7 days for $400,000 (full story in a podcast here)
After the last 12 months stabilizing it, we had an appraisal done – it came back at $1.25M
We pulled out $501,000 in tax-free debt 2 months ago (all of our cash and some extra)
This property should be able to get another $2,000 in rent between a 1,800 square foot contractor unit that we just evicted the tenant from and need to renovate along with leasing up a few remaining units.
When we bought, revenue was around ~$4,000/month. It currently sits around $9,000/month and I think we can get it to $11,000+ soon.
Deal #2: Able Storage
Deal number 2 was sourced from a Google ad 🙂
After 17 unqualified leads of people who wanted to sell their individual storage units filled with old furniture, we finally found someone who wanted to sell their 94 unit storage facility.
It's located in Arkansas which, to be honest, we didn't want to go into that market.
But we called every competitor nearby and everyone was 100% full.
Soo..
We bought it. Closed for $450,000 and favorable debt.
We raised revenue by 30% with no change to occupancy. The most difficult part here was that last month we had 7 break-ins (an unfortunate part of this business) so we're investing ~$30,000 into a new gate, cameras and lights.
Deal #3: A-Z Storage
This was a $600k deal that we bought from someone wholesaling the contract.
This property was... well, I won't sugarcoat it. It was gross:
Puke yellow with a sprinkle of rust 😎
We put ~ $56,000 into the property for
$20,000 of paint
$25,000 for a new automated gate
~$6,000 for light installation
~$5,000 for tree removal, signs, bollards, etc.
And now it looks like this:
Much nicer.
The biggest frustration we have with this property is leasing has been difficult. The square foot per capita of storage in Midland is high. So we're getting creative with filling up these units (calling businesses, offering promos, sending postcards, etc.)
So now that the facility looks nicer we're spending time getting units filled up at new market rates.
Deal #4: Alcatraz Storage
This is our most recent deal which we closed in September.
We closed for $750k
Raised rates on day 1 (this was a tough decision because the previous owner raised rates 45 days before selling the property, so we were raising the rates on tenants twice in 3 months... they weren't ecstatic).
But with every property, we're never raising rates to be the market leader. The price jump simply matched the market rent other facilities were already charging.
So far the previous owner was bringing in $5,750 at acquisition and this month we've collected $8,903 to date.
Current Focus
Right now we have 2 focuses for the next 45 days:
Ops:
Two weeks ago we brought on a full-time US-based operations manager for our portfolio. She's been great. Gio and Connor are training her on collections, auctions, vendor management, property management, etc.
To be honest with you... we feel like we hired early here.
Hiring a full-time operations manager would've made a lot more sense at the 8-12 property mark.
But... we want to free up all of our focus to find as many great deals as humanly possible this year. And if we can dial in our systems earlier, that's a huge win.
Plus improving collections and leasing will be a big portfolio win across the board.
Deal Flow:
We're jumping back into the Hubspot CRM to call the 5,534 storage facilities Gio sourced.
This will be the hardest part of the business – finding great deals.
But we believe if we can dial the process in here for 2023 and execute hard here for the next 6 months, it'll make everything easier.
We're targeting:
Brokers
Wholesalers
Individual Owners (that 5k+ list)
And planning on getting creative for the top 100 properties that we'd love to own (mainly ones near our current facilities to introduce some economies of scale)
2023 Focus
If you're still with me, I think you'll enjoy this part.
We just finished 2023 planning.
Here's where our heads are at:
100% of operations are systemized and running – This entire business only works if we can manage properties well. So we're working with our operations manager to build checklists, weekly reviews, and monthly procedures to have each facility humming with high margins and high occupancy.
Build the best deal machine in Texas – Every operator knows this is the most difficult part. The people who are selling these properties are often older but I believe we can find a unique wedge from being digitally-native. We can source deals via Google Ads, PPC, researching court documents of recent bankruptcies/divorces, etc. I think this is a widely used strategy for multi family but not done enough in self storage. I also think given our current lifestyle (20-somethings in cities) we can drop what we're doing on a dime and fly down to meet the seller on site. That's how we've won 3 of the last 4 deals
Begin raising outside capital – I'll be 100% upfront. We only have $600k in the bank right now. Which is peanuts if you want to be competitive in real estate. So we can reasonably buy another ~1.5M deal if we want to... and then we just sit around until we collect enough rent to buy another one. This is a viable strategy, and people make a lot of money doing this. But it's not what gets us excited. So as our deal flow picks up, we plan to have more conversations around syndicating deals. If you're interested in getting exposure to the Texas Self Storage market, I'd be happy to talk more.
Ok... that's a lot.
14 months of work summarized in under 1,500 words.
Future updates won't be this long but I appreciate you reading if you made it this far.
If you have any questions or want to get involved, please respond to this email! We'd love to chat.
-Connor & Giovanni