¶ Introduction and Guest Background
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.
Welcome back to another episode of the AAA Storage podcast. I have with me as always, the illustrious. Paul Bennett, thank you for joining. And I also have today on the show Logan Broyles, who is the senior market analyst for AAA storage. And today we're talking about how to underwrite a deal, uh, from the AAA storage perspective. So there's a lot of data that needs to be surfaced, written down, analyzed, modeled out.
To get that go, no go kind of perspective on each of these deals, the properties that are involved. And so Paul, you'll be driving a lot of these questions. Uh, so I'll turn it over to you to introduce Logan and then, uh, and, and figure out where does this process start.
Super. Brandon, thanks, um, Logan. Super excited to have you on the podcast today. Um, tell everybody a little bit about your background. I, I know you're a proud Virginia Tech graduate, um, but particularly what you were doing when you made the transition to, uh, to AAA storage.
Yeah. Yeah, absolutely. Appreciate the, uh, the introduction, uh, Brandon and Paul. Um, so, uh, my background is in, uh, due diligence, uh, specific and feasibility specifically in, uh, the, uh, self storage, uh, asset class. Um. And I know obviously here at AAA storage, uh, the focus being self storage and industrial flex space, uh, my, my experience while focused in self storage, uh, did have some involvement, uh, in, in that industrial, uh, asset class as well.
Um, but really, uh, working with hundreds of, of developers, uh, on nationwide, um, to, to really, uh, assess their properties and provide, um, you know, a thorough, uh, due diligence process to help them to assess an opportunity. Um. You know, that's, that's market, um, vis, uh, market dynamics.
Uh, looking at the market dynamics, um, and then pivoting from there to, uh, quantifying a, uh, the demand in a given market from a supply and demand standpoint, and then help helping that inform, uh, where we're at, uh, with, uh, putting together a financial pro forma and financial underwriting, um, is really kind of a, a, I kind of think of a. Think of it as a three step process. Um, and that's really how we, uh, how, how I've gone about it.
And, you know, I've worked with, like I said, hundreds of developers and, um, have visited a lot, most of those projects, visited those sites and seen, you know, those markets and, you know, had those discussions.
¶ Defining the Target Market
And, um, that's, that's really kind of what my world has kind of been, uh, the last number of years, uh, prior to, uh, to being with aaa.
Yeah, and we're, we're, like I said, we're really glad to have you on board. Um, you've brought a, a, a very, a very. Uh, not different, but very broad perspective. Um, you know, you only know what you know, right? And so when somebody comes in from outside with your kind of experience, you brought a whole different, uh, perspective on, on the process of really doing due diligence and feasibility on these projects. So, uh.
So the process starts Logan as, as, as we think, talk about, um, you know, at different points in the podcasts that we've done over the months, we, we really underwrite a project twice. Uh, we, we underwrite it when we buy the land, particularly at the market level, which is your true expertise. And then a second underwriting is done. Two years or so later when the project is actually designed and we have all the cost data and everything else, and, and we're making a true investment decision.
But because we land bank the land, initially, we're buying that land, um, and gonna hold that land and get it entitled for, for future investment. Um, but. In that first stage, the first step in the process is really defining what the market is. Um, can you talk about that for just a minute, and what does that look like and what kind of factors might influence how you define the market? Is it three miles, five miles, eight miles? Is it shaped like a pair? Is it shaped like a circle?
You know, what, what, what are the kind of things that you look at when you're trying to define the market?
Yeah. Yeah, that's a great question. So, um, and really, you know, once we have identified where that, where that piece of dirt lies, um, we, we wanted define that market and that informs everything else that we're going to do. Um, so the really, the two things that I look at. To help, uh, define that market Generally for, uh, self storage, it's gonna be somewhere between three to five mile radius, but there are, um, certain situations where that's not the case. Uh, maybe it is beyond that.
Maybe it's a more rural market and there's super urban market. You might have a smaller radius. Um, there's things to consider, like, uh, natural barriers, uh, lakes, rivers, mountains, oceans, whatever the case may be. Um, some certain types of segmentation where, um, you know, you may have a dynamic that exists where, uh, folks may not travel to a certain, you know.
Side of the tracks because of, uh, this is just where everybody does their shopping and you know, or maybe it's drive times and the way that the interstate, uh, system is laid out in that given market. Uh, there's a lot of different variables to consider. Um, but, but the two things, um, that I really look at are population density. And number of quality competitors.
Uh, those two metrics, uh, specifically, um, are to be taken into account first and foremost, when you define that market, you know, I gave mention to, uh, earlier, uh, there being a, you know, a market where there's, you know, a lot of growth in, uh, within a three mile radius. Uh, but there's less than 20,000 people. Uh, that's not a lot of folks in a, in a three mile radius. Um, so, you know, you probably need to cast a wider net and really, you know, expand that market.
Um, and obviously once, you know, once we've kind of considered that and, and taken, uh, both of those, uh, two pieces into account, we can then, you know, confidently say this is our market. Um, and then dive in to, to exploring all of the other, um, dynamics there, uh, from, from that point.
Yeah. Super. Yeah, it's a critical first step. Um, in, in, in defining that market. 'cause it does, like you said, it drives everything else that you do from that standpoint and the data that you're generating and the, and the analytic process. You mentioned not only population growth, but the, the, uh, the, the number of people that live within that hyper-local market. Um, talk about that for a second.
'cause we've run into a couple situations where the growth numbers look great, but it was starting from a fairly small population, which can be problematic, right? Because only a certain segment of that population is gonna use storage.
Right. Yeah, absolutely Paul. And there's, um, yeah, there's a market that we've looked at recently where, um, you know, there's very strong growth numbers, um, in that market. Um, but it's got less than half of, of any of the other property, less than half of the population, uh, total, uh, currently. Than any other property that we've looked at recently. Um, so that's, that's really a
¶ Dual-Stage Underwriting Approach
red flag that jumps out to me and kind of, uh, weights that specific variable. Uh, much, much great in a much greater manner than the other variables in play, uh, because of that, because you just don't have a lot of people, um, you know, 5% growth on, you know, 10,000 people is a lot different than 5% growth on 50,000 obviously. So, um, yeah.
Exactly. Yeah, that's, that's super. Um, I'm trying to think about how to help people really walk through this. We actually underwrite a project multiple times. Um, we've talked about on the podcast before that we land bank land, we buy land, um, and then go through the entitlement and project design process. Um. So talk a little bit about that in terms of what you're looking at when we're looking at to purchase a piece of land versus what we're looking at when we're truly underwriting.
A specific self-storage project that's been designed has construction cost. You know, there's a little bit of difference. We don't do full proformas. At the point we're doing the initial land acquisition. 'cause there's a lot of unknowns at that point. We don't know what the project is gonna look like. We don't know how many square feet, that type of thing. Um, can you talk about sort of the two step underwriting that usually occurs?
We underwrite it when we buy the land to make sure it's a good market and good location, which is really your focus and expertise. And then we underwrite it a second time before we allow it to go into one of the investment vehicles to make sure that that market dynamic hasn't changed significantly. And that it's still, and that the project pencils from a financial standpoint.
Yeah. Yeah, for sure. You nailed it. And, um, I mean, as far as the dynamics, obviously every market dynamic is changing. Um, you know, it's, as we're kind of coming out of here currently, um, kind of a wall, uh, a little bit, uh, in the market and kind of, um, seeing, you know, some rental rates ticking upwards, occupancies may be ticking upwards a little bit. And I think that that trend may continue.
Um, but obviously market, you know, uh, dynamics change over time and that's something that, um, you know, we wanna make sure that we're capturing. And, um, you know, that's why, that's obviously the reason for, um, underwriting that multiple times and making sure we're as dialed in as possible.
Yeah. What are the major components? Um, you sort of ran through 'em quickly, but let's just hit the really, the, the critical components of supply and demand that you look at, and where do you get that data? How do you, how, how do you generate that data?
Yeah, that's a good question. So a couple things here. So we look at. We wanna look at, um, really at the core of what we're trying to do with, with our market analysis and then, and suit the financial underwriting is, uh, quantify demand in the market. Once we have an understanding of that, we can then move forward and, and project what those financials, uh, look like. Um, and in order to be able to quantify that demand in the market, we look at, uh, really, um, three, I think major things.
There's some other variables, but three core things, and that's, um, occupancies of existing stores. Uh, rental rates at those facilities, and then the, uh, percentage of, um, of, of households in a given market that are, that are using, uh, self storage. You know, what does, what does that usage look like? Those are really the, the three things that we key into to discern, uh, where demand is at in the market.
Obviously, there's other market variables that we look at in terms of, you know, competitor rates, um, potential new supply coming in, demographic growth, all of those pieces.
¶ Analyzing Supply and Demand Drivers
Um, those are really the three, uh, demand drivers, if, if you will, of, of, um, or demand indicators rather, um, of, of what that, um, looks like.
You, you hit two really important things there. I want you to expand on just a little bit. Um, you, you talked about, um, the utilization in that market. One of the key things we've talked about in other episodes is that we look at square foot per capita. In other words, how many square feet of storage exists in that hyperlocal market per capita? Um, and typically most people will tell you in the industry that you know, anything below 10. Is an acceptable level of, of supply, um, in the market.
Once you get north of 10, you better be in a pretty good growth market or have some other dynamics in play, but you actually look at it a little bit differently. Talk about the difference in utilization in a given market. And I, I'm kind of leading you here, but I, I know because of our conversations, um, on a day-to-day basis that you can look at the amount of storage. That is rented in a given market versus that population and determine that. I'm gonna make up an example.
For example, in a military town, utilization of storage may be closer to, to 15 to 18 square feet per capita because of the unique nature of that market. Talk about how you sort of dive into that, because I think it's an important nuance. We don't just look at, you know, at at, uh, square foot per capita and use a standard. 10 foot sort of cutoff. It is really a little bit more informed than that in terms of how you dig deeper into the data.
Right. Y Yeah. Yeah, absolutely. Um, so square foot per capita, it's, it's an interesting, uh, metric. A lot of folks talk about it in the industry. Um, you know, the way that I look at it is, um, you know, it's, it's, we're trying to quantify demand. Um, but square, square foot per capita, it, it, it tells us nothing about demand, really. It's a supply side metric. Um, and as we know, different markets absorb, absorb, um, you know, supply differently at, at different rates.
Um, like you mentioned, you know, in your example, a military town that may be, um, that a square foot per capita may be higher and ideal or. You know, in theory, uh, less favorable. Um, but that may not be the case because it absorbs it at a higher level. You know, I use the kind of the, the silly example of, you know, um, there's, there's probably more cowboy hats sold in Texas than there are in Connecticut. Um, but, but there's, you know, there's, um, that, that.
Well, that number, being low in Connecticut doesn't necessarily mean that that market can absorb a ton, a ton of more cowboy hats. It's just, you know, some markets absorb differently and we need to take that into account and not just use, you know, a a, a metric across the board and just assume that market markets are gonna absorb, absorb at the same rate. So.
Hmm,
and it, it could cause you to miss an opportunity or it can cause you to step in a hole because if you're sort of basing your analysis on 10 square feet per capita, and the reality is usage in that particular market for whatever reason, um, is. Sort of below the, the norm on a national average basis, you can step into a market that won't perform you. You mentioned something else. Where do you get your data on, on pipeline deals and how do you sort of really scrub it and confirm it?
Because that's another thing that you have to really be sensitive to, which is the market may look great today, but there may be six new facilities within five or six miles of the site you're looking at that are on the planning. You know, bored or, or coming outta the ground. And that market can change in six months to a year pretty dramatically.
So talk about how you gauge new supply and how you really make sure that we have an accurate view of what the new supply coming online in that market is.
Yeah. Yeah, absolutely. Um, you know, one, one piece that I dive into is kind of at a deeper level. Uh, so first, I guess starting first of all, you know, we use some of the different software platforms out there that are informative, specific to the self storage product. Um, so those are helpful. They're not always, um, you know, a hundred percent accurate. Um, but they, they are helpful in, in kind of a setting that initial, uh, picture of what a given market looks like.
Um, to take a deeper dive and really kind of get an understanding of what's taking place in a given market. Um, you know, we reach out to, uh, you know, local planning office and try to confirm and get, um, you know, specific information about a given project, uh, size of a project status, where it's at in the, in the pipeline. Is it moving forward? Is it not? When is it expected to enter the market distance from our site to that project? And is it really a threat?
Um, is it, is it kind of a different submarket? What does that look like? Um, and, and how does that all affect, um, what we're doing? You know, if there's an influx of, of a lot of new supply coming in, uh, you know, that you run the risk of, um, you know, prolonged lease up and, um, you know, softened rental rates. Um, so that's, that's really the, obviously the, the main concern that we wanna try to, um, account for and, and accurately forecast for.
Yeah.
That's amazing.
At the end of the day, when you really understand the, the demand side of the equation and you've determined that the, the market, um, can support another self-storage facility. How does that data sort of talk about for a minute, how you work with our financial analyst and what your role is in, in producing the ultimate financial model that, um, drives the real investment decision from, from our standpoint.
Which clearly has to have a hundred tabs because of the amount of data that you guys are looking at right now. It's amazing.
I, I will tell you this, we just did an investment committee meeting, um, sort of doing a, a, another review of the fund two properties and just the market analysis that, uh, Logan generated on those 11 properties was 125 pages of data.
Oh my gosh. Okay. Well I'm glad there's people like you doing this.
promise you we're only scratching the surface on the, the sort of all the different perspectives and, and, and data that, that Logan generates
¶ Beyond Conventional Metrics
to really come up with, uh, with a, as, as complete a picture as, as humanly possible. Nobody can predict the future, but, um, but talk about Logan, how that, um, how that translates. So you, you've done the market analysis, you've determined, you know, the supply and demand balance. You understand the rate environment in terms of what rates we can charge in, in, in a given market.
And, and all of that then is used to talk about how you coordinate with our financial analyst and your, your role in generating the financial projections that ultimately really make or break the investment decision. Go or no go. Does it meet our criteria?
Yeah, yeah, absolutely. And, and putting together, you know, really the, the way that I look at it kind of mentally I approach it is, you know, you have the market, uh, market definition, really definition of the market's, the first piece, and then obviously the market dynamics that kind of come ensuing with that. Um, you know, rates, uh, new supply, things we've already discussed here. Um, and then, you know, looking at, at that demand where, where is, um.
Where's that demand level in the market? Is the market oversupplied? Is it undersupplied? Is it near equilibrium? Is it trending toward equilibrium? What is the case there? And then from that, uh, that informs what, uh, you know, what we feel like is realistic to project and forecast with, with, uh, the financial underwriting there.
Um, and really, um, the lease up model, um, that, that's a big part of, of what I've been involved in, uh, and the financial underwriting piece and, you know, the speed, the, the velocity of lease up. Um, you know, we generally at AAA will do a, a phased approach and looking at, you know, once we get to a certain threshold with occupancy, um, you know, looking at, at going with an additional phase. Um, so taking that into account.
Those are all, uh, factors that, that I've been kind of living in. You know, considering what is realistic to, um, to expect, um, you know, going forward, uh, with, with obviously an ever-changing market. So, um, that's, uh, that, that's a, that's a big piece of it.
Hmm.
Yeah, the, the, the, the financial modeling piece, which is ultimately again, what decides whether it's an appropriate investment for, for our investors or not, really involves three or four different groups. First of all, the market data that you generate is what's used to drive rates and, and lease up velocity. In other words, time. How long does it take to get that first phase leased up to 65 or 70% before we build phase two?
How long is it gonna take once we get phase two built to stabilize that whole project? But you also have inputs from our construction and development team because they're the ones that have done the project, actual project design and and CapEx budget. To build the project. Uh, David Lutz, our VP of property management, gets involved because he's really looking at the expense side of the equation and, and working with you on the, the revenue projection side.
'cause he's the one that ultimately has to deliver that result. So he's gotta be comfortable with that. Um, and, and, and so you, you've got all these inputs that come together that ultimately create a p and LA forecast. Um, and at the end of the day, w. Time is what's really important, right? It, it, you get a whole different return profile. If a project takes, if you project it to lease up in four, it takes six. That's a whole different outcome.
Um, and obviously we don't control every aspect of it and we don't have crystal ball, but. Um, you've done a pretty good job. If you look at the projects that are in flight now in in fund one at, we're pretty much hitting our marks in terms of what we projected and what we expected, and that's the result of really solid underwriting on, on your part. There was a question in there somewhere or not, I don't know where I lost it along the way, but that happens sometimes. Right.
Happens to us all. maybe you got some more set up, but I'm curious too of, uh, from thinking from the investor's perspective, so as an, as an outsider, so I do wanna get there at some point in the conversation of just like you go through this whole process, you work on the, the, you know, analysis. You build the model, working with an analyst. It goes to an investment committee. You guys kind of, you know, give the green light, red light kind of thing.
¶ Pipeline Scrutiny and Data Verification
And then there's ultimately information that's presented to the investor. Um, and, and so I'm, I'm curious how that dynamic takes place and, and almost like, um, how is this process serving the investor at the end of the day and, and getting their, you know, making sure they're getting the returns that are, are hoped for and that sort of thing. So that's kind of where my mind's going. But Paul, you might have some, uh, something to jump in before that.
No, Logan, take a
Yeah, and I can speak to that as far as, you know, the investment committee. Um, that's, that's something that, you know, we do internally. You know, we get, uh, a property, you know, come through, come to me and I'll, I'll do that initial, uh, what I call a sniff test and just kind of vetted at a high level and look at, you know, uh, any red flags. And, um, you know, if it seems to check out initially, um, you know, I'll, I'll, um.
Uh, engage, um, our construction department, um, and kind of get their, their viewpoint and their perspective on it. Um, and then we will, um, you know, if we think that it makes sense, we will, um, you know, we'll bring it to, uh, we have a monthly, um, investment committee meeting to, to present and, and discuss any, uh, potential new, uh, acquisition, um, for, for, uh, for self storage or, uh, industrial flex space. So,
So have folks read that? Like is that committee, they've read that 125 page report essentially, or you got a couple of 'em that you guys are, are peering through and that takes obviously a lot of time to sit down and read that?
Right. Right. And, and yeah. And, and so the, uh, the, the lengthy report that, that Paul had mentioned, that's, that's more, um, that, that's not one single property. That's our whole fund, um, over overview. So that's not, that's not every, every property to be clear. But, but, um, yeah. So we will, um, we, we will move forward and, um, you know, set up that investment committee. Uh, on a monthly basis and review any properties that we have, uh, to discuss.
Uh, we have, uh, the actual, um, I guess the committee that we have internally is made up of three individuals. Uh, uh, Paul is on that committee and, uh, they will, um, review, uh, that presentation that we put together both from the, um, you know, financial perspective, market market perspective, as well as, uh, construction viewpoint. And, uh, you know, consider is this something that makes sense for, uh, for the group to take on. Um, so that's, that's really kind of the process.
Um, at a high level of what we do with, with the properties.
So Paul, you and your team would be kind of like the red team blue team kind of thing. Like you're poking holes at the, at the model and kind of the projections, maybe things
Yeah. And it does occur, I said this at the beginning, but it occurs at two different stages. The way we look at land when we're buying land, 'cause we're spending our own capital to buy this land and land bank it for a future fund, um, is a little bit different than the way we look at a complete. Investment opportunity on behalf of one of the funds. 'cause at that point, like I said, the project's not designed, we don't have exact cost information.
We can't look at yield on cost or, or internal rates of return to investors because we're looking at a piece of land that we've just seen for the first time. So we really, really lean into Logan's expertise at that stage. 'cause the only question we can answer is, is this a market we want to be in or not? Um, and so once that decision is made, the land is bought. then it goes through a two year process. Our architectural team is doing the design work on the project.
We engage a civil engineer to do the site design. Um, the construction department
¶ Integrating Market Analysis with Financial Modeling
is, is costing out the project. All of that goes on during a two year period. Um, and then it comes back to the investment committee as a complete investment. So now we have all the data. We've got Logan's updated market data, we've got all the construction costs we've got at that point. Um, you know, maybe we've got at least a, a, a preliminary proposal on a loan. If not, we've made some assumptions about, you know, debt and, and what the terms will be.
Um, but we have a really complete picture. And at that point, Logan's market data has driven and informed the financial model. He's worked closely with the analyst. Um. What comes out of that is we're able to look at yield on cost. Does this project meet our 9.5% yield on cost hurdle or not? On an UNT trended basis, we can see cash flows, how much working capital, how much total capital, not just CapEx, but CapEx and working capital.
Is that project going to, uh, to need based on Logan's rate projections and lease up velocity? We can see the point at which we project it to. Stabilize. And at that point the model projects a sale. Logan's influential in what the cap rate. Is used what cap rate is used to, to drive that sale. And then we see the sale result and we can see an internal rate of return on the project. And we calculate that rate of return on a gross basis and on a net basis to the investors.
So we can all the way through that. The, the second underwriting process is all driven by the work that Logan does, but it adds on top of it all the different departments. The investment committee is comprised of John Uch, my partner, myself, and Andy Mu. Which is basically our, our board of directors. Everybody, every department head in our organization participates in that meeting 'cause Logan is there to speak to the market data.
David Lutz is there to speak to the market along with Logan, as well as any property management issues. Sean Beagler, our Director of development and construction, is there to talk about. The assumptions in their costing and what, if any, challenges they see and, and that type of thing. So we have all of that input into one event focused on a property, determine whether this is the right investment to make or not.
And I know I'm sort of hogging Logan's time here, but you asked the question, why is that important to an investor? Uh uh, first of all. Said this a hundred times. We're the largest investor in any of our investment vehicles. So we're looking at it from, is this something we wanna invest in? Um, secondly, it's the critical stage. You know, if, if you don't have it right from the beginning, then the probability of the outcome you're expecting. isn't very high.
And so this is the critical, the underwriting is the critical step, uh, and good judgment and lots of data. Um, and, and a good solid, robust process is critical to, it's, it, it's, it's what's driven our track record for 30 years and, and, um, and we've actually made the process more robust in the last 12 to 18 months. What?
I said no pressure on Logan's part. That that's a, you know, we're,
Uh, lo Logan has been such a huge addition to our team, um, his level of expertise. Logan spent five plus years before he joined us, um, as a consultant to developers around the country doing feasibility studies for self storage and, and industrial projects. So, um, he, he brought a, a whole different process and, and different, um, viewpoint to that process, and it's, he's been extraordinarily bad. Logan talk for a minute. Real quickly, you, you, you have a range of factors.
I can't remember how many it is. Uh, but you probably know at least close how many total factors and then you weight those factors, um, so that you have a weighted result. And so when Logan does an initial assessment of a property, he has. I don't know, 10, 12 factors that he, that he thinks are important and we think are important. And then he does a weighted, he weights those so that you basically wind up with a score. Talk. Talk about that for a second,
Yeah, yeah, absolutely. Um, so, you know, some of those factors may be, um, you know, market, market focused. Things like, um, you know, we like to look at, uh, uh, specifically on the rental rate side, like a 10 by 10, uh, climate controlled unit, a very popular unit size. Most facilities will have, um, you know, a, a good number of those available. Um, so really
¶ Investment Committee Review and Investor Assurance
where is that unit at in a given market? Um, that's, that's, that's a good barometer on where, uh, you know, where rents may be. That's, that's one, one metric. Uh, I mentioned population, um, the, the, the quantity of population, but also in addition to that, the population growth. You know, what, what does that look like?
And kind of getting back to my comment earlier about, um, you know, property that, um, you know, seeing large, you know, growth numbers, but not having the, um, the, the, the numbers there, uh, presently, um, obviously that's something that plays into it. So those are a couple things. Um. Things like, um, obviously land cost, that's, that's a critical metric that, you know, we would obviously evaluate from the outset.
Um, but those, those are some of the, the high level things that we would look at. Um, when, when assessing a property initially, um, other things would be, you know, a new supply coming in. Um, we look at it from a per, uh, the way I like to view it is, um. Uh, what, from a percentage standpoint, uh, how, how much is, is the market expanding by that new supply coming in? Um, this is what we have today.
If there's, you know, a hundred thousand, you know, we have a, you know, 500,000 square feet, net, net rentable square feet in a given market today. Uh, they're building a hundred thousand, uh, net rentable that's gonna be added in the next three to four months. Um, you know, that obviously is a market expansion of, what's that? I mean, uh, 20%. Uh, so, um, obviously that's critical, you know, 20%.
Um, I would say anything beyond a 20% expansion in a market, from a market standpoint in supply is, uh, is significant. And that's something that. We should certainly take into account, you know, the, there's some markets where I see it, you know, you talk about red flags. Um, you know, if you're 40, 50% market expansion, that's a, that's a major red flag to me. Um, because that's a lot of new supply coming in and the market has to absorb that and it, it's gonna, you know, take a period of time.
So those are, those are things that I like to look at. In addition, um, one thing I hadn't touched on, just specific market variables, um, distance, uh, proximity to other competitors in the market. Um, you know, uh. If there's, if there's a little bit of a hole in a market that that's something that's, that's interesting, that can create a kind of a unique dynamic. Maybe there's a lot of strong competitors.
Um, but you may have a, you know, maybe it's a two, two and a half mile gap between, between where your, where your site is to the closest competitor. Um, that's something we wanna identify. And also, too, um, speaking specifically about those competitors, um, you know. Like to look at, uh, how many of them are REIT competitors, you know, national, big, big players, na, on the national scene.
Um, you know, that's something to take into consideration as, as oftentimes as we've seen here in, in the last probably two years or so. Um, some, some of the, uh, pricing, um. Approach to, to some of the pricing games, um, that some of those operators take is a little bit different than maybe some of your regional or local operators. Um, so that's something to key into as well as how many, you know, of those competitors in the market are, are national REITs.
So those are some of the things that I look at. Um, there's probably some others, but uh, hopefully that kind of gives you, um, a high level of, of some of those metrics and, and how, you know, like Paul said, some of them are weighted more so than others. Um, like the one market that I mentioned, just, you know, a lot of favorable, uh, uh, metrics, uh, specific to that given market.
Um, but just the fact that there was not, you know, hardly anybody there, it really kind of trumped everything else. So, yeah, definitely, uh, weighting those metrics accordingly. And, you know, each one is, is to be taken, um, and considered independent of each other obviously.
Yeah. Super. That's a really good explanation. Logan. Uh, Brandon, as you can see, uh, this process is a lot of science and a little bit of art. There's a little bit of art in here because there's so many different. Things to consider, even when you look at these very concrete parameters and um, and checkpoints that, that Logan uses. Um, we, in the investment committee, we were talking about a piece of property that really did not have sufficient.
Population on the surface, but when you, it also had almost 30,000 cars a day passing in front of it. And, and it was in between a major employment area and the bedroom communities that were feeding those employers. And so what you had is, this wasn't 30,000 cars a day that were on their way to California. Property happened to be in Texas. This was 30,000 cars a day that were going from their home to work, and they passed that facility every day.
Something like that can actually change your view of whether that property has a chance to be successful or not. Um,
You know, they say like, looking at
gone long enough,
model or a a 10 K, the story really is in the footnotes. You know, those details are actually really key.
Yeah. And, and so at the end of the day, Logan's process really informs the financial models, particularly from a, a lease up velocity and timing standpoint, rate standpoint. And, uh, um, like I said, he's, we're, we're super thankful to have him on board. He is been a great addition to the team, and thanks for, for doing this today. Logan, I know you've got a lot on your plate right now, so.
Yeah. Yeah, absolutely. This has been a pleasure. Um, you know, this is. Really kind of a step outside of, um, I guess my, my day to day and, and to be a part of this, but, uh, hopefully, hopefully this has been a, um, you know, insightful and, and I've enjoyed it.
Yeah.
¶ Weighted Metrics and Nuanced Judgments
Yeah, we're grateful to have you on the show. Thank you. Thank you. And uh, I'm really grateful for your work. Really. I mean this like, to Paul's point, your work is what helps create that kind of track record that you guys have had for so long. So, um, appreciate you and I know your investors are too well. We will see you on the next episode. Thanks so much for joining. We'll see you.
guys. Thanks.