"In the Arena Trying Stuff ... Always Learning."

Here's what I'm pursuing right this second.

While hunting for a workable deal for a possible capital partner who expressed interest in the Charlotte area, I cold-called the owner of a brand-new but only partially completed facility that was open for business.

I brought in a co-sponsor who has a ton of storage experience - I just enjoy working with them and it lightens the load a little. He had told me the perfect seller in this environment is someone who is mid-lease up and not loving it, and someone who built the facility with his own bare hands. This owner, based in a town called China Grove in the far-out exurbs of the Charlotte MSA, checks off all those boxes.

I couldn't figure out exactly how big the place was from the photos that are available online, and the aerial was confusing, showing mostly a big dirt lot. But the property is several acres, so even if not yet fully “built out,” it could potentially become a good-sized facility. This was all encouraging stuff.

Took him a week to call back, but he was surprisingly open to selling and easy to talk to. He'd only built like 90 units, all drive-up/non-climate, but had gotten site plan approval for another few hundred, also drive-up, such that the total rentable square footage would be 40-45,000. This struck me as perfect because it’s big enough for an exit but not overly ambitious. He'd been open for many months and was happy to share some leasing reports, which revealed he was only 30-ish percent occupied.

Problem is, 90 is not that many units to fill up and at this point he's been open for over a year and stuck at 30ish for several months. We’ve done all DD (surveys, environmental, etc.), all of which is clean/good to go, but it’s time to make a deposit to Betco for the drawings so that we can get permitted before closing, and we’d prefer to see a little more leasing progress before continuing to place bigger bets on this location/ultimately quadruple the size of the facility.

Granted, there are several things this owner could be doing that could potentially turn the ship around. I’m not going to start doing his job for him, but it’s worth testing a couple changes. He was kind enough to drop his rents dramatically, so we’re trying that, and I sent him some ‘open now’ flags for him to stick out front, because his signage kind of sucks and you never know what might move the needle.

I hope we get comfortable enough to close. We’ll see.

Also: slightly ashamed to say I've followed the herd into small bay industrial despite past reluctance. A longtime friend has been wanting to be the sole/main equity partner in a deal, and we’d kicked all kinds of things around over the past few years without closing on anything. He'd expressed interest in the shallow bay world in the past so I finally started looking.

I cold-called all over smaller markets, having been taught that good small bay tenants can be found in a variety of small markets and knowing that Atlanta is hyper-competitive. I also now know that very high rents are often achieved in some of these small markets because they are often more undersupplied than big cities.

Given my experience doing and chasing deals in South Carolina, I looked at a few different Lowcountry markets where I have seen strong dynamics in other asset types, and after talking to lots of owners about off-market warehouses, ended up finding one we like in North Charleston that was broadly marketed.

It’s 100% occupied by two tenants, but both are well below market in terms of rent, according to a local source of mine (and I see much higher rents in various places online). It’s a small enough bet for my first industrial deal, and it’s not a steal, but it’d be positive cash flow after debt service day one and we’re not looking for a quick flip.

A ‘fun’ wrinkle to this one is that some environmental studies have revealed some contaminants in the ground. This can be tackled by entering South Carolina’s brownfield program, which is not as complicated or expensive as it sounds and releases the owner from liability – it’s not a remediation process, we just have to do some monitoring.

So that’s what I’m up to. Wish me luck; I’ll talk more about these later.