Diving into Self-Storage Investment with Drew Dolan

Drew Dolan Over his 20-year career in development and construction, Drew has focused on structuring real estate investments, joint ventures, and capital management. Previously, he was President of Titan Development, managing Titan’s self-storage and multifamily divisions. In 2017, Drew helped launch Titan Development Real Estate Fund I, a $112 million fully-discretionary fund focused on ground-up development.. He served as Co-Fund Manager until 2019, when he became Fund Manager. Drew is currently a member of YPO, active on his ULI Council, and was formerly on NAIOP’s national board. He holds a BS in Industrial Engineering from Arizona State University.

Episode Highlights Here:

Drew:

As interest rates go up, those prices will have to come down.

Pierce

Let me ask you this if there were someone who wants to get into the development of self-storage, right, what do they need? To have a successful operation what do they need to do?

Drew:

Well, you know, I think you gotta make the decision do you want to buy existing or build. It is a. It’s a rather tough time to buy existing because there is so much money that has poured into self-storage, sophisticated capital. This is the money going to hospitality or office or senior living that’s not going there. It hasn’t been going there for the last two years, and it went into data centers and cold storage, and self-storage and that’s driven prices way up. As interest rates go up, those prices will have to come down. So there is a, you know, a pending shakeout. It doesn’t mean you can’t find an existing great acquisition deal. I’m just saying from a macro level, that pricing is high right now. So we’re focused on ground-up development, we will find off-market acquisitions, but on ground-up development, you know, gotta have capital, you gotta have a strategy, you got to pick great sights. So happy, happy peers to dive into any one of those you think we’re talking about?

Pierce:

Yeah, okay, so back up here for a second. So you’re focusing on the ground-up development, starting with the macro data and pinpointing your markets? and then you’re going from there? What are two to three things you’re looking for in the market? That is like the key indicators like, Hey, this is a site? Are we going for it? And if they don’t have those, are they, like, immediately dead.

Drew:

Yeah. Yeah, great question. It starts with rates. Because the REITs, who own the better properties, and better markets, bigger markets better located, they are changing their rates every day and that’s why storage is uniquely positioned to track inflation. Because you can change what rates you’re offering that facility every day if you want, and every lease that gets signed by our tenants it’s a 30-day lease. So you could change the rates on that lease every 30 days. If you did it every 30 days, people would probably move out, but you could. So we start with rates because the same pricing dynamic rates are the best indicator of how healthy or unhealthy the market is and the analogy I like to think about is imagining you’re going from New York to Las Vegas, it’s New Year’s Eve, the last flight of the night, you have to be there, and there’s one seat left on the last flight. Do you think a price is going to be expensive or cheap? It’s gonna be very expensive and that’s the same thing as storage. You know, it’s a lot like airline prices. It’s extremely dynamic. You even have some of the more sophisticated operators that they’ll change pricing intraday now, and that’s where a lot of the smaller operators don’t change prices which means they’re not capitalizing on what the market is doing and how the supply-demand curve is either in balance or completely out of balance.

Pierce:

That sounds like a lot of like, volatility to consistently manage

Listen to the full episode here:

Watch the episode here:

Important Links:

About Drew Dolan

Drew Dolan Over his 20-year career in development and construction, Drew has focused on structuring real estate investments, joint ventures, and capital management. Previously he was President of Titan Development, managing Titan’s self-storage and multifamily divisions. In 2017, Drew helped launch Titan Development Real Estate Fund I, a $112 million fully-discretionary fund focused on ground-up development.. He served as Co-Fund Manager until 2019, when he became Fund Manager. Drew is currently a member of YPO, active on his ULI Council, and was formerly on NAIOP’s national board. He holds a BS in Industrial Engineering from Arizona State University.