The AAA Storage Podcast

Join us as we explore the world of oil and gas investing with Rachel Griffith and Tom Gray from King Operating Corporation. Together with Paul Bennett, we discuss how oil and gas can play a strategic role in a diversified portfolio, break down King Operating’s unique approach, and address the real risks and returns in today’s market. Discover practical insights on technology-driven de-risking, tax advantages, and smart asset allocation for investors looking beyond commercial real estate. Whether you’re seasoned in alternatives or exploring new opportunities, this episode delivers expert guidance and candid perspectives you won't want to miss.

Chapters
(00:00) Why Oil and Gas for Diversified Portfolios
(02:01) Guest Introductions and Company Background
(05:02) King Operating’s Unique Investment Model
(08:23) Overview of Fund Structure and Returns
(09:31) Understanding Risk and De-risking Strategies
(22:00) Return Profile and Exit Strategy
(26:00) Tax Advantages of Oil and Gas Investments
(32:00) Portfolio Allocation Across Asset Classes

Learn more about King Operating Corporation: https://kingoperating.com/

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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.

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 we've got a little
bit of a special podcast for you guys

where we are going to be talking about
oil and gas with two experts from King

Operating Corporation, king operating.com.

Please check them out, Rachel and
Tom, but before we get into there,

I want to, I want to introduce you
guys properly, but before that, Paul,

tell us why are we talking about
oil and gas today on our podcast?

Paul Bennett: Yeah, Brandon, you
know, usually we really are focused

on, on commercial real estate, but I
think people who, who follow us and

or listen to our podcasts on a regular
basis know we have a, a deep belief

in commitment to alternative assets
as a part of investors portfolios.

Um, and this is an opportunity to push
beyond commercial real estate and talk

about oil and gas, which is one of the.

Traditional areas, an alternative
invested, and man, what a time to do

that with what's going on in the world.

I was on my way to work this morning
and heard people talking about the

possibility of $200 a barrel oil.

So, uh, it, what, what a We
didn't plan it that way, but.

Um, but what an interesting
time to have that conversation.

So, you know, today we're gonna try to
get a, a, a good look at how the oil

and gas business works, particularly at
King Operating, what the returns look

like and, and what the opportunity is.

And then hopefully sort of at the
end, um, armed with that information,

have a little bit of discussion about
where it might fit in your portfolio,

particularly if you've been historically
really focused on commercial real estate.

And we're having this conversation
because at the end of the day,

it's, it's all about diversity.

And although it's what we do every day.

Uh, it would feel a little bit foolish
to simply focus or be so myopic that

you think the only valid alternative
investment is commercial real estate.

It certainly has a place in the portfolio,
but I'm super excited to have Tom and and

Rachel here today to, to talk about oil
and gas and educate our listeners and,

and you and I, Brandon, just a little bit.

So should be fun.

Brandon Giella: All right.

All right.

Thanks Paul.

Well, Tom, tell us a
little bit about yourself.

Give us the 15 second.

Who is Tom?

Tom Gray: Uh, I've been with.

King for 21 years now, been
around oil and gas for 35 years.

little, little bit of
everywhere in the field.

Uh, I do a lot of, know, talks
with, with potential investors

and, and things like that.

But, uh, just love the, love
the oil and gas industry and

love being out in the field.

Um, more than I like being in this office.

I can tell you that.

Paul Bennett: Just about
everybody I've ever met.

The oil and gas business is a lifer.

It's been basically what they've
done their entire career.

So, Rachel, how about you?

Give us your background a little bit and
tell us a little bit about King Operating.

Rachel Griffith: absolutely.

Well, I'm so excited to be with you
guys today and you know, Paul, we

are just loving the opportunity to
get on and talk to your audience and

share a little bit about oil and gas.

And of course, you know, like you
said, alternative ASME assets, they

pair so wonderfully together and
being at the best ever conference,

it was really fun to just.

Talk with real estate individuals,
talk with others who are in

alternative assets and how they
really pair so nicely together.

And as you said, we'll
get into that later.

But yeah, I mean, so I've been
with King Operating actually for

a year, and I absolutely love it.

My journey is a little
different than Tom's.

I was over feet overseas for 14 years, and

my

passion really comes from where I worked
before, the lack of energy independence

and really what we'd call energy poverty.

Really gives me a passion for the energy
industry here and also helping investors

capitalize on that, take advantage
of that, how it brings value to them.

So King Operating is
an incredible company.

It's actually been in business for
30 years and our CEO Jay Young, who

is a good friend of mine and actually
who I met through some of the work

I was doing overseas in Africa and
became a donor actually to one of the

projects that we were doing, is how I
got paired up with him four years ago.

And it was a wonderful connection coming.

To King Operating.

So he's a fourth
generation oil and gas man.

And so really the legacy of
our company is very deep.

We've been around for a long time.

Uh, people like Tom, people like
Jay and our operations team have

seen the ups, the downs, they've
done the don'ts, and now they do.

You know, we've got the dos, the don'ts,
we've got all the mix in there, which is

why I'm excited to talk to your audience
and really bring them some value about.

What do you look for in an
oil and gas opportunity?

What are the risks?

What are the benefits, and how does
it really play in your portfolio

to bring you value as an investor?

So I'm just so excited to
be on with you guys today.

Thank you.

Paul Bennett: Yeah.

And, and we definitely are
gonna dig into that, Rachel.

Um, and you guys can either, one can take
this question, but just real quickly,

what differentiates what's different
about King Operatings approach from

other oil and gas sponsors that may be
out there that people could consider?

What makes you guys a
little bit different?

Rachel Griffith: Yeah.

Um, so I'm okay.

Sure.

I'll go for it.

Well, honestly, we're very different.

And that's part of our journey here at
King Operating is coming from traditional

oil and gas, which just to give you a
quick overview, right, so in a, and a

majority in all the oil and gas deals
that we know that are available to

retail investors, accredited investors
is traditional models allow you to

take part in the production of one
well or a group of wells, and really

all you're going to receive is a tax
benefit and monthly or quarterly income.

The reason why King operating is so
different is that our deal is actually

structured much like real estate.

We actually use an acquire, develop,
and divest model that actually looks at

acquiring high quality mineral leases
where we develop them, prove them up.

Much like real estate, if you had a house
apartment complex or something where you

could purchase it, you could scale it
up, you could add improvements to it,

you would be able to sell that later on.

For a value.

That's what we do in oil and gas.

So our partners actually not only take
part in the production of one well,

but they actually own the mineral
lease, the producing well, and what

is naturally created in oil and
gas, which is called offset wells.

Those are called PUDs
proven undeveloped wells.

So

we allow our investors to actually
take part in the entirety of the

oil and gas process, not just.

One Producing well or a
group of producing wells.

Paul Bennett: Yeah, and Rachel,
that's one of the things that stood

out to me when we met at BEC is
that it is a lot like what we do.

We're developers at, at at, at
AAA storage and our strategy.

Is to develop, stabilize, and
sell, uh, these, these assets.

And you guys really kind
of follow the same formula.

You buy the mineral releases,
you develop the production.

Once it's established and you've got
those, those offset wells that you can

drill, you've created real asset value
that then you can sell on to institutional

investors or the large oil companies like

Exxon or Mobil or the other guys
that are in the game and, and give

your investors both current income
and ultimately growth of their

capital and return of that capital.

So it's a really, really unique structure.

Rachel Griffith: Paul,
you get an a plus on.

Oh my gosh, Paul paid total attention.

I am just like a plus to Paul.

That was

fantastic.

Paul Bennett: Yeah, I, well, I'll,
uh, well, yeah, it's, it's a concept

that made a lot of sense to me.

So let's, let's frame the investment
for our listeners for a minute.

Give us an overview of the current fund
and maybe include a little bit about the

timeline from when they invest to when
they can expect cash flow and how that

might compare to what you know about, uh.

Commercial real estate.

And then lastly, maybe hit on
some key factors that really

drive success or failure.

Um, you know, in your structure,
uh, one of them is the box

is already checked, right?

You want an environment where oil
prices are, are, are rising, and

it certainly appears with what's
going on in the world today.

We've got that in spades.

But anyway, yeah.

Give us a little overview
of the fund itself.

Tom Gray: I, I'll take this one.

Uh, the, you know, Rachel kind of
explained our, our methodology,

you know, acquire, develop, divest.

Uh, this current fund
is a $125 million fund.

We're about, I think, right now,
about 80 million through it right now.

Um, you mentioned, know, as, as far
as money going out, we started the

fund in November of 24 and started
sending out revenue in May of 25.

Uh, we've grown that from five.

and a half percent to 11.4%,

uh, annual monthly annualized
returns as of last month.

Uh, and that was at
between 60 and $65 oil.

so we're, now we're just tacked
on $20 $30 a barrel, uh, with the

prices going up, which is gonna
be really nice for our investors.

Brandon Giella: Hmm.

Tom Gray: I, I, is

Rachel Griffith: Yeah.

yeah.

Do.

I would add on a little bit, Tom.

Tom Gray: Yeah.

Rachel Griffith: Yeah.

Absolutely, so, so like Tom said, our
current opportunity, you know, you

asked about some of the timelines.

So for us, this opportunity, and
actually I'll start here Paul,

'cause I think this is important
when someone is kind of looking at

an oil and gas opportunity, right?

Oil and gas is notorious
for this word we call risk.

risk.

right?

It's the word that sticks in a lot of
people's mind because when they think

about oil and gas, they often think about.

The dry hole, this looming word of the
dry hole, which honestly throughout

a lot of the drilling in the eighties
and the nineties, that, I mean, Tom

was a part of, I was being born.

But Tom was a part, and I'm just
joking, Tom, I'm just joking

Tom, this, I'm not that young.

Um, but, uh, you know, during the
eighties and nineties, honestly, the

way that drilling was done, and Tom
can talk about this even more, is

they were drilling vertical well.

And so you can imagine that if you
have layers of source rock, right?

These are the hydrocarbon layers
within the rocks and the geology.

And if you're basically taking a straw
and you're going straight down through

those rocks and that geology, you can
imagine you're trying to hit one of

those source rocks just right there.

Well, the chance of actually
hitting was so difficult.

That, that's why you had a lot of
really, people become burn victims

is what we called them in the past
when they invested in an oil deal

and they just got nothing back.

So a lot of what has changed in the oil
and gas space is actually the incredible

technology and the way that they actually
now drill, which is through horizontal

fracking and with seismic, where they're
actually basically going and able to see

down into the basin, see the geology.

So now when they're
fracking, they're going down.

And straight in to that
layer of source rock.

And that absolutely changed the
dynamics for oil and gas, and it helped

de-risk oil and gas in a huge way.

So really when we talk about risk number
one, when you're looking at a potential

oil and gas deal, you actually want to
look at the team track record, right?

Who is out there?

Are they the operators?

Are they buying non-op deals?

If you're looking at an
operator, you're looking out.

Who's on that team?

Who's making those decisions?

Right?

30 years at King operating in oil and gas.

There have been quite a few people come
through our team, you know, our operations

team, and right now I can say we have
one of the most incredible operations

teams that could be put together.

And that's because of experience, right?

So when you're getting geologists,
geophysicists engineers, petroleum

engineers, landmen, land and business
development, these are the gentlemen

who are going out and they're assessing.

Where are you drilling, right?

Are you doing exploratory work?

Are you wildcatting?

Are you hoping to

hit it big?

Paul Bennett: that was one of the
things, Rachel, I'm gonna stop you for

a second that I was gonna add because my
understanding is you're not wildcatting

and you're not doing exploratory drilling.

You're drilling in the Permian
Basin, which is a proven oil

field with proven reserves, and
that changes the risk profile

completely.

Rachel Griffith: you

nailed it.

That changes the risk profile, so
we actually drill in three areas.

We have Permia Basin, we have the
Biven Ranch up in our Amarillo

proven oil field in the state
of Texas and the Anadaco Basin.

Another widely proven oil
field in the state of Texas.

So we only work in developmental areas.

And if you're assessing an oil
deal, you wanna look at who in

this team is assessing these deals
and where are they drilling at.

Uh, do you have the track
record for the operations team?

And how did they assess these deals?

How much due diligence
did they do on them?

What kind of geology do they have on them?

What kind of data points from other
wells in the area have been drilled?

What was the success ratio of
other operators in that area?

So those are some of the key factors
that you can really look at when

you're looking at an oil and gas deal.

So for us, our operations team,
200 years of combined experience,

these gentlemen, many of them have
been in oil and gas 40 plus years.

And so when they've assessed our
deals that we're doing, the areas that

we're getting lease holds on, they are
developmental areas with a lot of data

and a lot of due diligence on them.

So

I think I side railed a little bit there.

Paul Bennett: No, no, it's good.

But I, I would imagine you pay a
little bit more for the mineral lease.

In, in an area like that because
it is an, a proven area of reserve.

So a little, little more expensive
on the front end, but that additional

investment changes the risk profile
because of where you're, you're drilling.

So it really turns out,
um, you know, differently.

Tom answered the question about timeframe.

Sounds like the current fund took about
six months from inception to cash flow.

Um.

Do the investors, if, if an investor,
you're $80 million into $125 million

raise, if I were to commit capital
to the current offering that you have

today, do I come into that pro rata?

Do I begin to get cash flow
almost immediately or what's

that like for a new investor?

Rachel Griffith: Yes, you do.

Tom Gray: Uh, right now we're in,
in March, so anything that has

been done since November of 24,
you're gonna get paid on that.

Uh, not since then, but
anything that we do in March.

You'll get paid on that in May.

We have a a 'cause we're too much
in arrears between when we get

paid for our oil and our gas.

But, but yeah, the answer is, you
know, you get paid on everything

that we've done since inception.

And especially like now, you'd start
I mean, we're expecting 14, maybe

14% returns, uh, next, next month.

And no, tell 'em what they'll be and.

In, May when, you know, if you were to put
a couple hundred grand in or whatever you,

you would be getting that money in May.

Paul Bennett: Yeah.

And I'm, I'm gonna, this
is sort of a, a very.

Rough way to to look at it, but if
I understand you correctly, is a new

investor coming in, I would, I would get
my pro rata share of the income that's

being produced from the wells that
the fund is drilled since inception.

And now the old investors are getting
the benefit of new capital that's

gonna tap new wells, and they're
getting their pro rata share.

So it actually turns out to be pretty
fair, uh, at the, at the end of the day.

So for a new investor, you're
really talking about 60 days

from investment to cash flow.

Um, the, the, the original
investors had to, had some.

You know, some ramp up time to get
wells drilled and begin production,

but the, the guys coming in now are
what are the key, and I don't wanna,

I wanna watch our time 'cause we got
some really fun things to talk about.

I don't want to burn up all our time
too early, but anything that comes

to mind that are key success fa
factors for, for one of your funds?

Um.

Or things that, that, you know,
create problems that create challenges

that, you know, what, what are
the keys to success or failure?

Um, maybe in oil and gas in general.

I think Rachel touched on some of those,
choosing the right partners, critical,

uh, with the right experience.

But within your fund, what are the
things that, you know that sort of, if

you look back across your history, I'm
sure some have outperformed others.

What was the difference?

Tom Gray: I think the big difference is
when we made the move and, and matter of

fact, we can, that watches this, you can
see the book behind Rachel right there.

Uh, the upside of oil and gas investing.

changed our model back in 2015 to
this acquired, developed divest model.

Where the partner owns
everything in the fund.

They own the leases, they own their
pr, proa, share of the leases.

Any, well, we drill, that's
one of the big things.

Uh, you know, we've had
successes, we've had failures.

There's no doubt about that.

We drill wells for a living.

Uh, but we, you know, just for instance on
our, on our Bivins Ranch project, I mean,

it took us 12 months of due diligence
just to finally, uh, get an agreement

done, uh, with the Bivins family.

But, and I'm kind of going off
track here, but, uh, that's Rachel.

Anything to add to that?

Rachel Griffith: No, I think that's good.

I mean, we did kind of cover some
of those, you know, risk factors.

I think, you know, the biggest
success for us was yeah, having

the right team in place and
getting the right locations right.

It's all about.

The team, the locations, and
then looking at the fund.

Overall success is that, especially
right now, if somebody's thinking about

assessing an oil and gas deal, right?

Is it a producing fund already
or are you giving capital that's

going to be deployed a year later?

That increases the risk profile by a lot.

So for us, some of our key, you know,
um, strong points I would say are

that we are a producing fund already.

So 14 producing wells already online, and
then the cashflow factor is really rare.

Not everybody can step into an oil and
gas deal and the month they invest.

So say it's like we said, it's March,
you're gonna get revenue for the

entirety of March on the entire fund,
and you're gonna see that 60 days out.

That is really rare, and that's
something that we do really to make

sure we add value to our partners,
that they're getting monthly

distributions on that revenue.

So that's really something that
we're very proud of here at King

operating at this point in the fund.

Paul Bennett: If you, if you look at in
the self-storage business, and you just

covered this, so maybe, maybe we can move
on, but in the self-storage business,

when we're looking at a particular
site, it's a very hyperlocal business.

So we're looking in a three to
five mile radius around our site.

We're looking at traffic
counts and visibility.

We're looking at.

The square footage of self storage that's
available in that market per capita.

We're looking at the demographics, the
population density, the population growth.

Um, those are the key things that
will make a site work or not work.

Um, sounds like there's some
similar things in your world.

There just may be a little more technical,
harder for a layman like me to understand,

but you're looking at the geology and
the history of, of the other operators

that have drilled in that same basin.

Proximity with good proximity
to your, you know, your leases.

Anything else that is a particular way
you underwrite and, and do due diligence

to, to reduce risk for your investors?

Rachel Griffith: That's a great question.

Tom, what do you think?

I mean, you kind of, you're Paul,
you're, I mean, I, I might have you

just do a couple of the calls for
me with some partners this week.

I'm just gonna

Paul Bennett: I, I'm sure you've got,
with oil prices doing what they're

doing today, I'm sure you've got
more phone calls that you can handle.

Rachel Griffith: I do, I'm gonna hand
some off to Paul, like Paul's got it.

Like, just talk to Paul.

He gets the whole thing.

Um, no.

Tom, anything to add to that?

I mean, that was a good recap.

What do you think?

Tom Gray: Yeah.

Uh, you know, a, a big thing
now is repeatability for us.

We

Rachel Griffith: Mm,

yes.

Tom Gray: that, that we can do, you know,
drill well and know we're gonna hit.

And with, with the advent of, you know,
not only I, I've seen it over the years.

I mean, I've seen the transition from,
you know, drilling a, a vertical well

versus drilling a horizontal well.

And then with the advent of new
fracking techniques, it, it's,

you're, you're gonna hit oil.

It's just a matter of how
much are you gonna hit.

Brandon Giella: Hmm.

Tom Gray: Um, but that's
one of the biggest things.

And 3D seismic, I mean.

know, we have a geoscience guy here
that can read that stuff and like, like

was saying, I mean, we know exactly it.

You're almost, it.

We've come so far that you're almost
steering that bit with a joystick.

I mean,

Paul Bennett: Wow.

Tom Gray: it's pretty amazing

what

Brandon Giella: Hmm.

Paul Bennett: pretty,
that is pretty incredible.

I, I will confess, I've made one
oil and gas investment in my life.

It was in Louisiana and it was actually
in the very early days of fracking a a,

a law firm down there that I did a lot of
business with, was in the oil business.

A lot of their clients were,
and they acquired several wells.

That had production had gotten to a point
where they weren't really economically

viable, so they'd been capped and they
were able to buy the wells at a, at a

fairly low price and then frack them
and get the production back up to where,

um, it really made economic sense.

And,

um, it was a very interesting investment
and I did well, but it's the only time

I've ever invested in, uh, in oil and gas.

Let's talk for a minute
about a couple things.

One, I really wanna spend time on, but.

Right now you're producing about 11.4%,

you know, income or return for your
investors from cash flow on a monthly

basis, but you also have that.

The end of the strategy where you
could dispose of the asset and

create a whole different return
profile on the growth side.

I, I know you can't predict, and I know
you wouldn't try to predict, but what's

your target in terms of an overall return?

11.4%

on its own isn't bad, but it sounds
like these reserves are gonna be worth a

lot of money, um, in the years to come.

And so when you start to exit these
positions, what kind of total return

profile does that create for investors?

Tom Gray: Rachel.

Rachel Griffith: Absolutely.

Yeah.

So like you said, definitely like for the
entire fund, we're gonna target nine to

14% annualized returns, but for us, it's
not just the returns, it is the exit.

And so for the exit, we
actually target a 2.8

x multiple.

And that is based on, yeah,
that is actually based on the

sale or the divestiture of those
assets in, in within the fund.

And how we really do that is through kind
of packaging what is called a J unit.

So that has an existing, well,
it has the acreage, the lease

acreage, and it has the offsets.

So those are really where
the value is, of course.

Right.

So that you already mentioned it, Paul,
we can go at the end of each year.

And put some of these assets up for
sale, see if it is right, and start

really getting a return of capital back
to our investors in a much bigger way.

And then through the three to five years
as we just continue to scale and sell,

that's where we really target that 2.8

x.

So our project does really, and we haven't
even talked about the tax benefits in oil

and

Paul Bennett: we're going

there next.

That's the next thing I'm gonna

Rachel Griffith: so.

So I'll just say the three real
pillars that King Operating really

tries to bring value to our investors
is, number one, the tax benefit.

Number two, monthly revenue
and income, and number three,

growth in their portfolio.

Paul Bennett: That's just a such an
amazing and interesting combination.

Um.

What, what is the life cycle?

Let's just take the current fund.

It's still raising capital.

Uh, it looks, sounds like you
broke escrow in November of 24.

WW when I, I guess at some
level it doesn't matter if I've

gotten all my capital back and
I'm still getting a return.

I, I don't know why I would care.

But is there a life,
expected life of the fund?

Is there a point at which you
divest all of the assets in the fund

and basically that fund is done?

You distribute the cash and you're done.

Or?

Tom Gray: Yeah.

Rachel Griffith: Tom.

Tom Gray: the.

You know, our, our deck shows a
three to five year hold period.

Paul Bennett: Okay.

Tom Gray: Uh, we would, we would
like to be more on that two to three

year horizon, uh, which gives us
the exact amount of time to get the

wells drilled, get 'em online, and
you want to try to sell the asset.

You know, it a well is gonna decline
before it declines, obviously.

so we want to catch that.

Right at the right moment.

And of course, oil prices help
as well, natural gas prices.

Uh, but to answer your question, a,
a, a three to five year hold is what

Paul Bennett: Okay.

That, that surprises me.

I thought it might be a little longer
than that, but that's, that's fantastic.

So let's go to the tax benefits.

So one of the things that
our investors may or.

May not be aware of, depending
on how sensitive they are to tax

issues, is there's a fundamental
difference in the tax benefits we

can create in commercial real estate
and that you create an oil and gas.

And the difference is simply this.

If we produce losses using the bonus
depreciation that the big beautiful

bill brought, you know, back into
play, um, those losses can generally

only be offset against passive income.

Right.

And my understanding is in the oil
and gas business, that's not the case.

That that your investors, at least the IDC
portion of their tax benefits can actually

be used to offset W2 or, or active income.

So talk a little bit about that and
probably more importantly, overall, what

kind of tax benefits do your investors,

you know, usually enjoy
and, and should they expect?

Rachel Griffith: Yeah.

Yes, Tom, you wanna start?

Okay.

Tom Gray: Uh, IDCs Intangible Drilling
costs, uh, the tax law was put into

effect during the Reagan administration
to encourage more drilling and

exploration Uh, in the United States.

So it's, it's not
something that we made up.

typically you're able to write off between
75 and 85% of what you put into the fund.

you can write off any kind of W2, 1099
capital gains, anything like that.

It, it comes in the form of a,
of a K-1 It's a huge, you know,

that's what usually gets, uh.

People's attention to oil and gas.

First is, is the tax benefit.

And then they learn, oh my gosh, I
can, I can get monthly income and I

have a potential for, for an exit, in

uh, in a three to five year period.

the, the, the Rachel, you want
to touch anymore on taxes?

Rachel Griffith: Sure.

I

Paul Bennett: I just want to clarify
something real quick, Tom, I, for

our, for our listeners, so if I made
a half a million dollar investment.

In the current fund, I should expect a tax
deduction that could be used to offset not

just passive losses, but earned income,
uh, you know, capital gains of $375,000.

For my $500,000 investment,
that's 75% of, of 500,000.

Over what period of time
would I see that tax benefit?

Tom Gray: That the, the
first part of it, 85%.

We've averaged 82.6%

first year tax write off,
uh, the last four years.

Uh, the

Paul Bennett: Wow.

Tom Gray: bill helped us out as
well, we're, we used to amateurize

everything on top of the ground over

Paul Bennett: Yeah.

Tom Gray: year period, we'd write it off.

now we're writing it off year
one, so that gave us an extra

two or three points right there.

yeah, depending on what
tax bracket you do fall in.

You, you're, you're correct that 300 and
something thousand dollars you would write

off against any kind of income, correct?

Paul Bennett: the, the first return
that an investor would get would

be about $145,000 of tax savings on
their half million dollar investment.

And a little example I made up here and
then begin to receive monthly income and

then ultimately begin to see return of
capital when you start to divest assets.

That's a, that's a pretty
strong combination.

Rachel, you were gonna add some to that?

I interrupted you so.

Rachel Griffith: No, no, you're good.

Um, yeah.

Well, what I was gonna say is the, the
difference, a lot of the difference versus

real estate, commercial real estate and
oil and gas is like, like Tom mentioned.

The IRS is incentivizing you to help
production, but in order to take

advantage of the intangible drilling
costs in a operation like, uh, like

ours, you come in as a general partner.

So that's one difference.

You actually

come into the fund as a general partner.

What that allows you to do is take
those active losses so you're actually

taking an active loss that applies.

As you know, like you said, it's gonna
actually be a deduction on your K one that

goes against any active income you have,
whether that's W2, whether that's short

term or long term cap gains, and that's
really what draws people to oil and gas.

Again, we always like to say, don't
let the tax, what is it, the tax

tail wag the investment dog, right?

You still need to make sure that
you're actually investing in a solid

program that's not just giving you.

I mean, it's amazing.

You think about, okay, 30%,
it's almost a 30% return year.

One, you can take the bulk of that year
one that's a 30% return, but then make

sure that you are in a solid investment

that's going to pay out.

Paul Bennett: Yeah.

I tell people all the time, and
we're, we're running along here,

but we're gonna keep going.

You'll just have to edit it, Brandon.

Um, but the, the, the, the.

You know, the people who do 10 30
ones to defer taxes in a real estate

environment, the biggest piece of
advices I give 'em is that paying

taxes is better than doing a bad deal.

Um,

so don't just throw your money
at some piece of real estate

to get the tax deferral.

'cause you gotta make
a decision in 45 days.

And, and certainly, I mean, I can give
money to charities and write it all off,

but I don't get, I don't get any return.

So

it's important that there.

There are economics attached
to the tax benefits.

Um.

And, uh, but I, that's a powerful,
powerful point of return and benefit

for investors in oil and gas.

Now we're in the time we got left.

I wanna, I wanna switch gears and,
and maybe we need to do a whole

nother podcast 'cause this is what
we're really trying to get to.

Um.

I think we've talked about the environment
in your sector right now, and I don't

that that was one thing we were gonna talk
about, but I think we can skip over that.

If, if you're, you know, fog in a mirror,
you kind of have the idea that oil and

gas is a pretty good place to be right
now with what's going on in the world.

But let's talk about the combination
of investing in real estate and

um, and oil and gas together.

And I'm gonna do it with what may be
sort of a provocative question, but

if you had a million dollars today.

Um, and you are gonna allocate
between oil and gas and self-storage

in small bay industrial, which is
what we do on the development side.

We're developers in a different
way, but similar to you guys.

How would you allocate it and why?

What, what?

And you could both answer, 'cause
you might have different answers.

Rachel Griffith: Who wants to go first?

You want me to Go ahead?

Well, I love this question and I know,
I know we're short on time, so I will

try not to talk long 'cause I think
we're probably running long because

of me, but, so basically what I love,
again, portfolio diversification.

Key in any wealth building strategy.

Look at what's happening
in the world right now.

Stocks are plummeting.

Oil and gas is rising, right?

Stocks can plummet.

Oil and gas can go up.

Real estate can be solid.

Real estate could go down.

You have all these ups
and downs and cycles.

So the best way to protect
yourself as an investor and have

a great strategy is diversify into
different asset classes, right?

That that is solid investing.

If I had a million dollars, I
would take five hundred thousand I

would put it into King operating.

I would get my tax deduction and I
would start getting my passive income.

I would take the other five hundred
thousand I would put it into

self-storage and I'd be looking at a
little bit more longer term play for

growth, because I know you guys take
a little while to ramp up, right?

So what I love is having something
that gives me a tax deduction that

gives me monthly income, but I
also like to have something in my

portfolio that I know I can't touch.

Right.

What I love about alternatives
is that you can't touch it.

It's not a stock, right?

You can't just go, I'm freaked out.

You know what?

Let me just pull my
liquidity out right now.

It's stuck in self-storage
You're giving it time to develop.

You're giving it time to ramp up,
which actually helps you build

wealth, and then you have a growth
opportunity at the end of that.

And that is really one of the best
ways that I like to separate my

money into different categories.

Paul Bennett: Yeah, I think that's that.

Think that sounds good.

Tom, what about you?

Tom Gray: I, I would totally
agree with what, what Rachel said.

Uh, some are, know, a lot of people are.

Risk averse to oil and gas.

Um, you know, some of 'em might want to
take that, that million dollars and put

200,000, into, into oil and gas and that.

I, I don't know, that's, I, I talk to
a lot of people and they're like, Hey,

how much of my portfolio should I have
in oil and gas or in alternatives and.

You know, what Rachel said
is pretty much on the money.

I mean, you know, some people
might not want to put that a

whole 500 grand, into oil and gas.

Uh, know, maybe a more tangible
asset like self storage.

but you know, I would agree.

Rachel Griffith: I think this
is why, you know, you, you wanna

have good advisors in your life.

You wanna listen to good podcasts like
this, because also it just depends

on people's financial position, where
they're at in life, what is their

net worth, you know what I mean?

How much income do they have in coming in?

So much of that goes into play in how
you wanna be positioning your portfolio.

I mean, age matters, right?

When you're younger, you can be a
little bit more risky, you take higher

risk.

As you begin to get older,
you're thinking a little bit

more about wealth preservation.

You're thinking about your children and
your grandchildren, and you're making

different decisions based on that.

So everybody's in a different place.

But I think you know, alternative assets,
what you said is the best thing is owning

hard assets is incredibly important to
have within your portfolio, especially

when we look at market volatility.

We look at different things happening in
the world, having a certain portion, you

know, you have many buckets in investing.

You don't want alternatives to be the
bulk of your portfolio, but you do want

them to be a portion of your portfolio.

Paul Bennett: Yeah, I, and our
listeners know, because I talk

about this frequently, I'm a firm
believer that you ought to have a 40

to 60% allocation to alternatives.

Um, and that's on the
aggressive end of the scale.

And it does tie, as you said, Tom, I
believe, to where you are in your, in

your journey, in your evolution during
the wealth creation phase, which is

generally from age 30 up to about age 55.

Um, I, I think that aggressive
and allocation makes sense.

But the other opportunity that you
have, um, is in both asset classes you

can slide from developmental oriented.

Opportunities where there's a little
bit more risk and a little bit more

upside to purely income oriented
opportunities in oil and gas or real

estate where you're buying stabilized
assets that just produce income.

Um, so there's, there's all kinds
of ways to structure a portfolio.

I wish I had thought to put together
an a numeric example of what it

would look like to invest split.

A hundred thousand or 500,000 between
what you're doing and what we're doing.

And I'm gonna do that and send it to you.

'cause I think it'd be fun to look at in
terms of the, the blended tax benefits,

the cash flows, and the ultimate growth
in your capital by, by diversifying

across these two asset classes.

Um, I think absolutely
sounds like a smart play.

And I wanna see the numbers
'cause I'm a numbers guy, but

Rachel Griffith: I love

Paul Bennett: been.

Great to have you guys with us today.

Um, we're not too much overtime,
so hopefully folks have stayed

with us and, but it's been a blast.

And, uh, so thanks.

Give everybody your contact
information and, uh, so if they're

interested in learning more about
King Operating and what you guys are

doing, they can get in touch with you.

Rachel Griffith: Absolutely.

It's, our emails are easy.

I mean, you can see our
names there, Rachel Griffith.

So you're just gonna go
rGriffith@kingoperating.com

and T Gray.

At King operating.com,

and that's how you can get ahold of us.

Paul Bennett: That's awesome.

Thanks guys.

Really enjoyed having you on.

Go ahead, Tom.

Tom Gray: Yeah, if, if you go
on our website, uh, there will

be an area on there that you can
click on to, uh, know, get more

Rachel Griffith: Mm-hmm.

Tom Gray: us, and just mention
in there that you found us on

the AAA Storage Podcast, please.

Rachel Griffith: Yep.

Just type in AA storage.

Paul Bennett: Yep, and, and
ours is, everybody knows there.

Our listeners know our web address and
know that they can find episodes of

the podcast, blog posts, newsletters,
and information on our fund at

at a aa storage investments.com.

But thanks guys for being with us.

A load of fun.

Really enjoyed it.

We'll do this again,

Rachel Griffith: Absolutely.

Thank you so much guys.

Thank

you.

Tom Gray: Thanks Paul.

Have a good one.

Paul Bennett: Thanks guys.