The AAA Storage Podcast

In this episode, we break down the full life cycle of a self-storage investment, focusing on the crucial question every investor asks: how do you actually make money?

We discuss how exit strategies are planned, what drives the timing of a sale, and why relationships and trust can make or break a deal. With real-world anecdotes and honest insights, Paul unpacks the mechanics behind finding buyers, managing the closing process, and ultimately distributing returns to investors.

Tune in to discover what sets successful storage investments apart and gain a deeper understanding of the core principles that drive lasting results.

Ready to talk about your investment strategy? Reach out at https://www.aaastorageinvestments.com/contact

New episodes every two weeks. Subscribe on Apple Podcasts, Spotify, or wherever you listen to podcasts, and send this to an investor in your network who needs to hear it.

Chapters
(00:00) The Importance of the Exit Decision
(05:27) Finding and Selecting Buyers
(09:00) Closing Process and Due Diligence
(12:39) Investor Distributions and the Waterfall
(18:46) Tax Considerations and K-1 Reporting
(24:28) The Value of Exit Velocity
(27:50) Fund Structure and Return Blending

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10 Due Diligence Questions to Vet Any Real Estate Sponsor: https://www.aaastorageinvestments.com/info/10-due-diligence-questions-to-vet-any-real-estate-sponsor
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Creators and Guests

Host
Paul Bennett
Managing Director at AAA Storage

What is The AAA Storage Podcast?

Investing in self storage gives you the fundamentals and growth you need to grow your portfolio. But skip the opportunities from golf buddies and gurus—invest in a real track record. Started by John Muhich in 1993, AAA Storage has delivered 19% IRR across 90 deals, totaling $450M in exits. Listen to our expert insights on investing from the AAA Storage team. See more at aaastorageinvestments.com.

Paul: So during the entire life of that
asset, what we're tracking is how are

we performing against our projections,
and are we tracking to deliver the

return on that asset that we projected.

So, it's all about velocity.

I mentioned this on another podcast,
I'll caveat it again and say this is an

outlier, it's not what we expect, it's
not what our investors should ever expect.

We had an investment that returned
a 1300% IRR to our investors.

Although the profit was significant,
the biggest driver of that

enormous, ridiculous return was
the fact that we sold the project

8 months after we finished it.

And so the time factor affects
IRRs as much as dollars do, almost.

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: Today, this is gonna be
a great episode because we are finally

talking about how do I make money?

I give you money, and you give me money
back, and I wanna know how this works.

So I think if I'm following you, uh, based
on our previous conversation, you guys

decide to sell a property ever- after
it's, uh, you know, built and ready.

And so you go into a dark and
dusty pool hall back in the back

room, smoke-filled everywhere.

You do a blood sacrifice, spit
handshake, and then crypto is

distributed to all the parties.

Is that…

Am I, am I understanding
how this process works?

All right, so talk to me…

Okay, let's take this in a
couple of different chunks.

This is really important because when,
when you are deciding to invest in a

property, obviously it's for a return,
and so how that happens is important.

And so there's a couple
of different stages.

First is you guys decide to sell, and
then somebody decides to buy, and then

essentially you do all the paperwork
and closing to make that happen and

distribute those funds accordingly.

So talk to me about each of
those stages and how that works.

Paul: the exit's important.

Um, uh, the, the exit in any real
estate investment is where the bulk

of your return is gonna come from.

It doesn't matter whether
you buy an existing asset or

you do ground-up development.

Uh, in, in, in the acquisition
of ex- existing asset, there is

generally cash flow along the way.

That's a part of the return.

But the exit's still
the, the biggest deal.

In our strategy, which is to develop,
stabilize, and sell these assets in

order to harvest the, the profit, the,
the growth of capital that is created

in the development process, the exit's
our only source of return, essentially,

because we're selling these properties
at about the time they would be able to

start distributing cash to our investors.

So the exit's critical, uh,
particularly in a, a development, a

merchant development strategy, which
is really what Growth Fund II and

Growth Fund I were structured to be.

Um, that's the…

You know, I think that it starts
with the importance of the exit.

decision In a perfect world, is made…

We, we have a function within our
company called asset management.

We look at every asset that we
have invested in every quarter.

Um, we look at ev- performance
every month, but we, from an asset

management standpoint, we re-
look at it once a quarter, and we

look at how it's performing versus
projections, and we look at where

it is in its value creation curve.

and so in a, in a normal scenario,
the sale decision is made by the

asset managers, um, and the investment
committee that we've reached a

point with this asset that it…

that we think we can
get full value for it.

Th- there are two caveats to that.

One is we get several calls a week from
institutional investors who know us and

have bought property from us in the past,
um, who know we are merchant developers,

and they want new assets in their
portfolio, but they're not developers.

And so they routinely call us
to say, "Hey, what have you

got that's reaching maturity?

What have you got that you
might be ready to sell?"

So sometimes it's not a decision we make.

Sometimes it's, it's a reaction
to an inquiry that we get.

The other thing that we look at,
particularly from an asset management

standpoint, the velocity of the lease-up.

So a, a facility that's leasing up at ab-
above average rates, we can sell for full

value at 65 or 70% occupancy versus 80
or 85%, which is considered stabilized.

And the reason for that is if a buyer
can look at the lease-up curve and how

that pro- that asset is performing in
its market, and it's performing, you

know, at the levels I'm talking about,
the, the lease-up risk is minimal.

And so they're willing to pay
full value for it even though

it's not completely leased up.

Um, and so we're looking
for that in the portfolio.

If we've got an asset that's, that…

Lago Vista in Fund I, which we talked
about on the Fund I episode, update

episode we just did a little while ago.

Um, if it keeps this lease-up profile,
we'll be able to sell that facility

at 70% occupancy for full value, um,
because the lease-up risk is almost

nonexistent based on its history.

So those are sort of the ca- But in
most situations, it's a proactive

decision based on how we're managing
that asset to an objective and

a value target, a return target.

When we look at it, we just don't
say, "Well, it's 85% leased.

Let's sell it."

We look at what m- market cap rates are.

We look at what we think is a
reasonable value, and then we compare

it to the returns we projected in the
model say, "Okay, are we there yet?

And if not, what can
we do to get it there?"

So, um, but it's usually a proactive
decision made by the asset manager and

then approved by the investment committee.

Brandon Giella: I like how systematic
you guys are, and at the same

time it's still people-oriented.

People are calling you,
you're calling them.

Uh, and timing is a huge
component of it, you know.

And so it, it sounds like
it's a little bit of art and

science, if I could call it that.

Is that a fair…

Yeah.

Paul: definitely is.

But, um, you know, but once we make
the decision to sell, the next question

is: how do you find a buyer, right?

w- we have a two-stage approach, and
particularly for fund-related assets.

First of all, we have a number of
relationships with institutional buyers.

Um, all the, all the publicly traded
REITs, I've mentioned them before.

Um, you know, Storage King which
is Andover Properties, backed by,

uh, Anthony Gordon, one of the
largest private, uh, equity and

real estate firms on the planet.

Um, Prime Holdings, which raised a $2.1

billion fund in 2023 to buy self-storage
and develop self-storage, and I

can go on and on down the list.

We know those guys personally.

We've done business with them before.

first thing we do is we put together a
package sort of describing the asset,

you know, how it's performing, where
it's located, the market it's located

in, all the things that you would
expect, um, and we send that out to, to

those institutional buyers and and Um,
a-and that's without a broker involved.

We do that direct to, to, to the market.

y- that will generally generate
m- multiple conversations and,

and parties that have interest.

Um, if it doesn't or if the values
that we see don't line up with what

we feel like the asset is worth, then
and only then will we engage a broker

and take it out to the broader market.

Because what we need then is a broader
exposure the market to find a buyer

that is, is looking specifically in
that market for an asset and willing

to pay a premium price to get it.

really a two-step process,
um, to find buyers.

Um, a-and, and then at that
point, you know, hopefully we

have multiple letters of intent.

That's where the, the process starts.

Um, if we have multiple interested
buyers, we basically run an auction.

We'll give everybody a date for
their best and final offer, uh, and

we'll collect the letters of intent.

We'll analyze them.

Um, obviously purchase price is the
most important thing, but there are

other things that come into play.

How, how much is their deposit?

Um, how financially capable is that buyer?

Um, you know, what is the length
of the due diligence period?

how quickly are they
willing and able to close?

Uh, those things all come in…

Purchase price is the number one
driver, but, but that, those things

also come into consideration, and
they're covered in the LOIs that we get.

Once we select a buyer and accept
the letter of intent, which the

letter of in-intent is non-binding.

It, it does bind us to not
offering the project…

There's an exclusivity clause in
most letters of intent, which means

once we sign the letter of intent,
for a period of time we can't offer

the property or discuss selling
the property to anybody else.

Um, but once that's signed, the
next work that gets done is the

development of the sales contract,
the purchase and sale agreement.

PSA is how it's referred to.

Um, generally the buyer will draft the
PSA, and it'll go back and forth between

us and the buyer multiple times, getting
marked up, negotiating different…

Because that's where all the details are.

The, the letters of intent are
usually two pages long, don't,

don't include a lot of detail.

Um, the PSA does include all the
detail as the binding contract.

Um, and once the signed, the buyer
deposits, um, uh, the-- whatever's been

agreed to as the escrow amount, and
then the due diligence period starts.

due diligence period usually short would
be thirty days, long would be sixty days.

Forty-five days is generally the average.

And during the due diligence period,
the buyer's doing everything they

need to do to confirm what we've told
them about the property is correct.

We provide them tax returns, annual
financial statements, bills, copies

of any major expense like the
utilities, taxes, property insurance.

Um, they do site visits.

They meet with our site manager, um,
and our director of construction and our

VP of property management, David Lutz,
really run the due diligence period.

It's part of the process with a buyer.

It's their responsibility
to provide the information.

Accounting gets involved
at some level, too.

Um, once the due diligence period expires
or we hit the end of it, and of the PSAs

will provide for at least one extension
of the due diligence period you know,

if everything hadn't gotten done or we
haven't gotten them all the information.

But when we get to the end of the due
diligence period, the contract's now

hard and that escrow money is at risk.

can pull out of the transaction at any
point and get their deposit back up until

the expiration of due diligence period.

Um, once we hit the end of that, then the
contract's hard and we proceed to closing.

That's when we change gears
from due diligence to preparing

the asset to transition.

Um, we have, we have
on-site property managers.

Uh, there has to be a decision about
whether that property manager is gonna

stay with the new owner or whether the
property manager's going to, you know, not

have a property to manage, and we're gonna
have to move them to another facility

Brandon Giella: Mm-hmm.

Paul: them.

Uh, and then all the other preparation
of, of things for the transition, um,

the proration of, you know, property tax.

Uh, all the calculations that
have to be done for closing.

And then there's the close.

Um, the closes are usually virtual.

Uh, we're not all in the same room.

Used to be, you know, there'd be
a big conference room table and

all the documents spread around,
and you'd go around the table and

sign and, you know, everybody then
shake hands and maybe go get a beer.

Uh, today it's all, it's all done

Brandon Giella: Yeah

Paul: with documents
flying back and forth.

Takes an afternoon.

Not terribly difficult.

Um-

Brandon Giella: Do you
miss the conference room,

Paul: Yeah,

Brandon Giella: getting
a beer afterward moments?

Yeah.

I knew you would.

I knew it.

Paul: Uh, I, I do a little bit,

Brandon Giella: Yeah.

That's a bygone time.

Yeah

Paul: yeah, um, I, I…

Lord have mercy, I have been in--
I have literally gotten on an

airplane and started flying west
on New Year's Eve in order to get

a deal closed before midnight.

Um, everybody involved in the closing

Brandon Giella: Okay

Paul: on a private plane, and
we started flying west, um,

so that we got the transaction
actually closed before midnight

Yeah.

Brandon Giella: nobody misses that.

Everybody wants to be home with their
families and all that kind of thing.

But I, but I love the human, you
know, "Hey man, we did it," you know?

And you know, like

Paul: and getting a closing
done before year-end,

Brandon Giella: yeah

Paul: made a, made a bigger
difference than it does

Brandon Giella: Sure, yeah.

Paul: the debt on the property,

Brandon Giella: Sure

Paul: loan or our construction to perm
loan gets paid off at closing directly.

The attorneys wire…

We have, you know, the, the
payoff amount for the loan.

Um, and, uh, that gets
wired directly from closing.

And then, um, after that, the,
the funds from the buyer get wired

directly into that property's account.

Um, and that's where they're held,
um, until we can complete all the

calculations and make the distribution, so

Brandon Giella: Cool, cool.

Lots of details to figure out.

I'm curious, uh, in this
process, how important to you

is relationships and trust?

What I mean is, where I'm going with this
is, let's say I listen to 44 episodes

of the AAA Storage podcast, and I wanna
start a real estate investment firm, and

I have all the materials I need to do
it, but I can't find a buyer 'cause I

don't know these people, and I can't…

When, when I call, they don't pick up.

They don't know who I am.

Do you have that kind of moment where
because you've been doing this for such

a long time, you have access and you
guys are, you know, working at such

a level that, you know, most others
are not able to, to really get there?

Paul: I, I, I think trust matters.

I think relationship matters.

It's absolutely possible to sell
properties without any of those.

There are people out
there that are looking for

Brandon Giella: Yeah

Paul: that are looking for the right
opportunity, and they really don't

care if Attila the Hun owns it.

Um, they, they … If it's, if,
if it fits their buy box, you

know, and, and, and it, and it

Brandon Giella: Sure, yeah

Paul: they're fine.

I think it speeds the process.

The people that we've dealt with

Brandon Giella: Oh, okay.

Yeah

Paul: know going in
that it's a good asset.

They know they can trust
the data we give them.

They

Brandon Giella: Yeah.

Okay

Paul: So i- i- … I
think it does the skids.

Uh, I don't think it's the

Brandon Giella: There you go

Paul: able to sell a property
or not sell a property.

But it is the difference of being able
to sell a property without a broker.

It, I mean,

Brandon Giella: Okay.

Yeah, yeah.

Got you.

Yeah

Paul: for our investors.

If we can, if we can get a sale
transaction done without involving

a broker, um, then, you know, we
save three, four, 5% the purchase

price, which can be, you know,

Brandon Giella: Yeah, yeah, yeah

Paul: of dollars

Brandon Giella: Yeah, yeah, yeah.

Uh, I think you just, uh, summarized the
Speed of Trust by Stephen, Stephen Covey.

So yeah, that's, that's great.

Okay, great.

Okay, so you found a buyer.

You guys have shaken hands
metaphorically, digitally.

Uh, and then now as an
investor, I want that money.

How does that happen?

Paul: the, the waterfall is applied
to each property when it's sold,

and we distribute the proceeds from
a sale, um, you know, within 30…

Here's something I didn't mention.

we don't- Say a property
has been sold out loud.

In other words, we don't inform our
investors until it's under contract.

And we'll let them know that we
have a, you know, bonding purchase

and sale agreement for a property.

But we also tell them that that doesn't
mean the sale is gonna happen because

we got to get through due diligence.

And even then, if the buyer has problems
with financing or something else,

which we try to eliminate early in the
process, um, but, you know, it- it's

even possible after a contract goes hard
that the buyer walks away and leaves his

hundred thousand dollar deposit behind.

Um, so it's never done until it's done.

But we'll let them know
it's under contract.

And then certainly when we have a closing
and the property is sold, we'll notify

the investors, "Hey, congratulations.

Fund One has sold this asset at
this value at these returns."

And so we'll let them
know the whole picture.

Um, it generally will
take about thirty days.

Um, our-- We don't do the calculations
at the application of the waterfall.

Our fund administrator, IQEQ, um,
is responsible for doing that.

Um, and they do it for literally
hundreds if not thousands of

sponsors all over the world.

So they obviously have our PPM.

They use that as their reference,
and they do all the calculations.

Um, one of the things that people
might not think about or maybe not

understand is that there is an exact
amount of capital allocated to each

project, it's based on the accounting
records and the equity that was injected

into that project, um, over its life.

And so the return of capital
calculation is really already done.

We know exactly how much capital was,
was deployed in that particular asset,

we know each investor's pro rata
interest of-- in the overall fund and

therefore in each individual project.

So, uh, that's a simple
multiplication, you know, exercise.

And so return of capital is calculated.

The pref return, the seven
percent pref return that our

investors get is calculated.

The, the pref catch-up that we
get as a sponsor is calculated.

And then at that point, you, you know
the remaining amount of dollars that are

allocated seventy/thirty in our structure,
seventy percent to the investors

and thirty percent to the sponsor.

So at that point, the numbers are known,
um, and the IQEQ sends out a, uh, a

notice to investors that a distribution
is forthcoming, and they wire those funds

directly into the investor's account,
whatever account they've indicated.

We have that wire instruction
information for each investor

in their investor portal.

So there's no-- the investor doesn't have
to send us information or do anything.

They just get a notification, "Hey,
a distribution's going out tomorrow.

You're gonna receive this amount."

And, you know, and, and then the
wire hits their account and they

have their, their proceeds from that
sale, um, that their return on of

their investment with us in the, in
fund one or fund two return to them.

So…

Brandon Giella: And
there is much rejoicing.

Paul: Yep.

Brandon Giella: There's yeah.

And so yeah, so they get a, a, a portion
that is for that particular asset, not

the entire fund at the time, right?

Yeah.

Okay

Paul: and, uh, that, that occurs
every time we sell a property.

So in Fund I, um, there'll be, you know,
seven or eight of those transactions.

Um, usually, as we talked about
on the Fund I update, we look like

we're gonna get an exit maybe a
year earlier than we expected.

and

Brandon Giella: Cool.

Yeah

Paul: will follow sort of in sequence
behind that over the next two or three

years, with the objective of exiting
everything and distributing all the

cash back to our investors by…

We tell people six to eight years.

I really like to shoot for six, and
reality is probably a six to seven

years, is probably the ultimate reality

Brandon Giella: Yeah.

Yeah, cool.

Okay.

Yeah, I love that.

Um, so of course, at that point,
there is the tax man, and so

I have to pay taxes on that.

Paul: maybe

Brandon Giella: does,

Paul: maybe you

Brandon Giella: how does that work?

Paul: um,

Brandon Giella: Okay.

This you should take up with
your, uh, your tax advisor,

your CPA, your tax consultant.

Paul: I am

Brandon Giella: We're not a tax company.

Paul: I am not giving tax
advice, I can promise you

Brandon Giella: Yeah, yeah.

Paul: uh,

Brandon Giella: Yes.

Yes.

Paul: uh, f- of all, the, the,
the K-1 that is issued at the

end of the year for each fund.

In the case of a year where there was
an exit, the K-1 will include both the

operational financial result of the
fund, but also will include the capital

gains portion, um, that is attributable
to that particular sale transaction.

Um, and the vast majority of the proceeds
from a sale are either return of capital

or taxed at long-term capital gains
rates, which is the most attractive

tax, you know, result you can get.

The caveat to that is we are claiming
bonus depreciation on these assets.

We actually hadn't claimed it for the
first two years fund one, but we reserve

the right to go back and claim it.

We're having cost segregation studies
done, and we will ultimately take

all the bonus depreciation that
we're allowed, which looks like it's

about 35% of the value of the asset.

Uh, or 35% of the equity
in the fund, excuse me

What we recommend, what, what, what we
recommend investors talk to their tax

advisor about the, is the opportunity
during the life of the fund, when you

get that bonus depreciation loss on your
K-1, don't take it in the year it occurs.

Roll it forward.

Um, and you can do that, and the reason
is, it's only … It can only be used

to offset passive income or passive
gains from other passive investors.

So, uh, investments.

So unless you are an, an investor that's
invested in multiple deals over time,

it's not very likely you're gonna have
passive income, a significant amount

of passive income, to shelter or to
eliminate the tax on in any given year

when we have, you know, when, when, when,
when it shows up on your K-1 from us.

What we recommend is that you roll it
forward, and then when the fund starts

selling assets, which is generating
passive gains, that you use the, the

bonus depreciation that's accumulated
over the first three or four years

of the fund's life to offset those
gains, making, potentially making

the first exit or two tax-free

Brandon Giella: Okay, I
will Google this later.

But does this…

Paul: ChatGPT or Claude

Brandon Giella: I don't
understand this stuff later.

There you go.

Yeah, yeah.

Yeah, just, uh, look at this t-transcript
and put it into Claude later on.

Um, does this matter whether…

Because we, we often say, you know, this
is not for income-oriented investors.

This is for growth-minded investors.

Does that have an impact on, on
taxes the way that you guys think

about it, recommendations you make?

Paul: it, it, it, it really doesn't.

Whether you buy existing assets or,

Brandon Giella: Okay

Paul: assets, um, it's all about
profit over your, your basis,

how much profit did you make?

And it's all taxed at long-term
capital gains rate, which again, nobody

likes to pay taxes, but there is no
better, there is no better tax to pay

than a long-term capital gains tax.

It's the lowest combined federal and
state tax rate of any other, you know…

Uh, I guess maybe today dividends are
taxed at 15%, so that's, you know, a,

a little bit better from a C corp, a

Brandon Giella: Okay

Paul: But anyway, it's a…

Uh, yeah, I had my

Brandon Giella: Okay

Paul: me one time, "Don't ever
complain about paying taxes.

It means you made money," so.

I was, I was

Brandon Giella: It's fair.

It's fair.

Yep

Paul: taxes.

He said, "Well, the alternative is you
did, you, you could not make money."

And so, you know, I kind of
thought about that, said,

"Yeah, he's probably right," so

Brandon Giella: And politicians and
CPAs everywhere listening are rolling

in their graves on opposite ends of
that spectrum, so we can talk about…

Paul: a lot,

Brandon Giella: We're
not gonna get into that.

We, we said…

Paul: people

Brandon Giella: Yeah.

Yeah, yeah, yeah.

I have no idea how this stuff works.

Um, okay, so, uh, so all the, you
know, due diligence period from the

buyers works toward all the paperwork
for the investors, your investors

that are receiving this income.

They get a K-1.

They get all the kind of statements
and disclosures and details and

documents that you guys offer, and
so that they can take that to their

CPAs or tax, tax consultants, uh,
and work this out on their end.

Uh, and then what happens next?

They get money in their account.

Paul: Yep.

Brandon Giella: Everything's great.

Paul: Um,

Brandon Giella: what?

Paul: we keep pushing.

We keep the remaining assets in

Brandon Giella: All right

Paul: to manage them, drive
lease up, and get them to the

point where we can sell them.

'Cause what we wanna have in fund,
you know, what we wanna have in fund

three is 11 of those events, um,

Brandon Giella: Hmm

Paul: three-year period.

Um

Brandon Giella: Hmm.

We've got some other episodes on the
mechanics of the waterfall and things

like that, so there's a lot more
details that go in there in how the

pref works and how, you know, the funds
are actually distributed and, and some

of the, the, the numbers behind that.

But real briefly, my last question for
you is, uh, tell, tell me about the point

of exit velocity or why you guys think
about that in terms of your investment

and what that means for investors

Paul: the metric from a return
standpoint that we focus on more than

any other is time-valued returns.

Um, and a, a, a dollar that you get
today is more valuable than a dollar

you get next year, um, because of
inflation, because of lots of things.

It's, um, you know…

And, and, and so we're driven to create
the value in the development process and

realize the value and get the profit and
the original capital back to our investors

as quickly as we reasonably can, as,
as quickly as the process will allow.

And so we, as part of the asset
management process, we have a projection.

We have projections month by month
for the entire life of the project.

And then as the project rolls along,
that same model shows actuals versus

projected on a month-to-month basis.

Um, so, and, and, and
what the end returns are.

So during the entire life of that
asset, what we're tracking is how are

we performing against our projections,
and are we tracking to deliver the

return on that asset that we projected.

So it's all about velocity.

And, uh, the, the, uh, I mentioned this on
another podcast, and I'll, uh, I'll caveat

it again and say this is an outlier.

It's not what we expect.

It's not what our investors
should ever expect.

we had a, an investment that returned
a 1300% IRR to our investors.

And a- although the profit was
significant, the biggest driver of

that enormous, ridiculous return was
the fact that we sold the project

8 months after we finished it

And so the time factor affects IRRs
m- as much as dollars do almost,

from a sensitivity standpoint.

So to, to exit an a- an asset in three
years instead of the normal four drives

those v- time-value returns much higher

Brandon Giella: And, uh, on our previous
episode, we were talking about Fund

One, how things are going there, and
it sounds like y- really optimistic.

Uh, you know, and we can't predict
the future and, and so on and so

on, but really optimistic about how
things are shaping up in terms of the

time to sale, which is really cool.

Paul: got a couple assets

Brandon Giella: Yeah.

Paul: one that are kind of tracking
where we would normally think.

But at the same time, we have more than
one asset, th- three, in fact, that

are ahead of what we would normally
expect from a timing standpoint.

And it's the way … It's, it's
why the fund concept works so well.

If you invest in a single asset,
I … There's nothing wrong with it.

I've done it.

it, it's a fine way.

It allows you to really focus on that
particular asset and the underwriting and

the assumptions and everything that goes
… the market, everything that goes with it.

But the problem is every deal
isn't a good deal, and there are

so many things you can't control.

If you invest in a single asset and you
happen to it happens to be a mediocre

performance, you get a mediocre return.

In the fund, I can promise you,
we will have several assets that

outperform expectations and several
assets that underperform expectations.

And the objective is to get to
that targeted return, that 20% IRR.

And the blend of the returns in a
multi-property portfolio gives you a

higher chance, a higher probability of
hitting that blended targeted 20% IRR

' Cause if you'd invested in two deals with

Brandon Giella: Well

Paul: and they happened to be our
best and our worst, on one of them

you would've gotten a 3% return, and
on the other one you'd gotten 1,300

Um, so I, yeah,

Brandon Giella: Just got to
do that every time, Paul.

Paul: I, I love you brother, but I
wouldn't be sitting here talking to

you if I could do that every time.

I, I, I would, I, I would have done

Brandon Giella: That's right

Paul: a beach somewhere
with an umbrella drink.

Yeah.

Yeah.

Brandon Giella: Yeah, that's right.

That's right.

You'd be flying on a
private plane west and east.

Yeah.

Okay.

I-- That was super helpful.

You gave us a, a really great
picture of how this happens.

So at the beginning, there is a
decision to sell, and that is,

you know, several criteria and
things that you're thinking about.

But then there's also the human element.

Sometimes you get a phone
call that makes you think.

And then there's the, uh, decision
for somebody to buy, and there

are different ways to do that.

So there's, you know, calling folks that
you know, and then there's also the,

the broader market through a broker.

And then all the paperwork in
between to ultimately give that

money back to the investors.

It's wired into their account
from the fund manager.

Anything I missed in there that is,

Paul: are lots

Brandon Giella: that is helpful to know?

All right.

Paul: each

Brandon Giella: All right.

Paul: but, um, yeah.

Brandon Giella: make it
look easy, but yeah, yeah.

Paul: makes it look

Brandon Giella: Yeah

Paul: but, uh, we, we…

Brandon Giella: That's right.

Paul: like

Brandon Giella: That's right

Paul: and I say this,
ooh, it sounds, um…

But so far we've done that 94
times, so we, we kinda have

it down at this point, so

Brandon Giella: Incredible.

Paul: yeah

Brandon Giella: Incredible.

Incredible.

Well, Paul, thanks so much for
your insight and the experience of

your team doing this ninety-four
times, and hopefully, uh, another

ninety-four to go and, and hopefully
great returns are left in the future,

especially for Growth Fund II.

We'll see how it shakes out

Paul: listeners if they haven't, go to our
website, um, aaastorageinvestments.com.

We've got a great resource guide on
commercial real estate that came out

of an episode we did, gosh, Brandon,
was it a month ago, two months ago?

That is really one of the

Brandon Giella: Yeah.

Mm-hmm

Paul: ever produced.

I'd really encourage you to go
to the website, hit the Insights

tab, scroll down a little bit, and
you'll find that guide to commercial

real estate, and, uh, grab it.

I think it'll, it'll,
it'll … It's interesting reading.

At least I think it's
a really cool piece, so

Brandon Giella: Yeah, it, it helps, uh,
get your mind around all the different

components of what we're talking about
with real estate investing, the different

sectors and classes, and the different
risks and rewards that are associated with

each, which is really, really helpful.

Awesome.

Well, Paul, thank you so much.

We will see you on the next episode