Real Estate Underground

Why Self-Storage Outperforms other Real Estate Assets Even in the Worst Market Cycles with Joe Downs

• Ed Mathews • Season 4 • Episode 170

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Ed Mathews:

Greetings and salutations, Real Estate Undergrounders. It is Ed Mathews with the Real Estate Underground. Today, I am joined by a fellow Villanovan, which I'm very excited about. Joe Downs is the CEO of Belrose Asset Management. So today we're talking about self-storage and maybe some other asset classes, but I think we're going to focus on that. Joe, welcome to the show. I can't wait to have this conversation.

Joe Downs:

Ed, super excited to be here. Thanks for having me, and we're going to do our best collectively. We're going to hold each other accountable to not talk about Villanova basketball while we're at it.

Ed Mathews:

Yes, but I just discovered that, while I'm three degrees probably from the Pope, you actually know a guy who knows the Pope really well.

Joe Downs:

Just three people that are one degree, that know the Pope directly.

Ed Mathews:

Yeah, you got me beat, so that's awesome. Welcome to the show and thank you so much for your time. I know you're busy, so I appreciate it. Thanks for having me again. Yeah, tell us a little bit about you and Belrose.

Joe Downs:

Yeah, Belrose, me, I'm a conundrum of sorts. I've been someone that's had to reinvent themselves since Villanova. I think I realized later in life that I was an entrepreneur, after I'd already demonstrated it a few times. I actually was working while I was at Villanova, djing and bartending. So while you were at Kelly's hanging out, I was probably DJing, yeah, playing tunes you were listening to. But yeah, so that's me, I've, I've.

Joe Downs:

Since Philadelphia, I had one kind of short career it wasn't that short 70 years as a financial advisor and then, not because of 9-11, but because of 9-11, I decided that wasn't for me, and what I mean by that is it's not like I lost my brother or something in the towers, that wasn't, and there's no stolen valor here. It was just a moment in time. It made me realize the pause and say is this really what I want to be doing? And it wasn't. And from that point forward, all of my intentions were to be in real estate. It took me a couple of years, but I got there. So I've been in real estate for over 20 years now in some capacity. So I've been in real estate for over 20 years now in some capacity. So that's who I am and I love it and I wake up every day and it's how. What am I doing in real estate today and how am I excited about it, not to say a lot of days where the minutia of whatever you're involved in gets you, but I just love real estate.

Joe Downs:

So how did I end up in self-storage? I'm constantly finding that real estate is no different than other businesses and self-storage I'm constantly finding that real estate is no different than other businesses. There are cycles to what you're in and I found myself having to reinvent through some of those cycles. The mortgage meltdown in 2000 really started in eight, but most people recognize it as nine, 10, 11, right, and I was part of that, unfortunately, and I had to reinvent. But that led me to another business, distressed debt, and I still have that business, although that business went through a cycle of its own where I had to reinvent again. And in that reinvention is when I found storage. Oh, divine intervention, just down market cycles, financial intervention.

Ed Mathews:

Yeah.

Joe Downs:

Financial down cycle intervention. But you learn a lot through those cycles, not only about yourself and your character, but also about business, and you take each one of those experiences and you apply it to the next thing you're in. And so I've been in storage. I'm still in distressed step, by the way, but that down cycle gave me the opportunity to learn a new trade, a new trick, if you will. I wasn't an old dog yet, although I think I am now. I think we just discovered that we are, but in that opportunity I was able to learn about a space that a lot of people are talking about today, but they weren't six and seven years ago and now they are talking about today, which is great.

Joe Downs:

I get to be guests on podcasts like yours and thank you again for having me. It's been an exciting ride, fantastic to learn about storage, especially when I had a background raising money for multifamily and for office and for some other kind of alternative type of deals. So it's neat to be able to compare and contrast the two and see what you like and don't like. Now, I was never an operator, I was never CEO of those other companies. I was the sales guy. I was raising money. I didn't have to source the deals, find the deals, underwrite the deals.

Joe Downs:

I wasn't responsible in charge of any of that, so it's been very different this cycle, this time around this asset class, but I'm having so much fun and I'm loving it.

Ed Mathews:

Yeah, it's interesting. I've been looking at a friend of mine, actually now an investor in one of our funds, Brian. He has gotten me into flex and industrial spaces. So similar play to storage in some respects, but it's interesting the multifamily play, especially here in the Northeast. You're based in the Philly area, I'm based up here in Connecticut. It's been a bit of a challenge. The pricing is still out of alignment with the debt costs. It's pretty hard to find a deal that pencils well and looking at other asset classes just makes sense, which is one of the reasons I was excited to have you on the show.

Joe Downs:

Yeah for sure. And, by the way, we're not immune to that in storage either, especially in primary markets. So there's this old saying if you want to beat Tiger Woods at something, just don't play him in golf. So in storage, for me that's public extra space, keep smart. And then probably 10 more institutions you've never heard of. Sure no disrespect, you're just not in the space. No one's ever heard of them. Their brands are not on buildings, but I can play against them. I'm going to lose a lot, but I can play against them. Or I can operate in markets where they don't play, in different sandboxes and smaller ponds. And so that's what we've done. We've figured out where they don't play and they can't play where we actually have the advantage over them, and that's in the secondary, tertiary markets Just is not immune to what you're going through.

Joe Downs:

We've just gone through a fairly difficult cycle where interest rates are higher, not just for us, because we can operate in any environment. Buyers and sellers can figure out where the equilibrium is on the transaction, but we are reliant on our tenants who are usually coming in and out of or around some sort of real estate transaction. So if the interest rates are too high for people to refi or move, then we're stagnant. So what we just came out with? What storage realized? Maybe for the first time ever, because they've only been really recognized storage as a real asset class since the year 2000. And I say that only because that's when we have robust data. You don't have a robust data before the year 2000. Starting in the early 2000s, we've got a lot of data on storage now that we've started to collect as an industry.

Joe Downs:

So, starting around there, storage for the first time in 23 and 24 saw a stagnant real estate market. We saw a crazy real estate market in 8, 9, 10, 11, 12. Everybody knows that was a good market for storage because it was transient. You had people downsizing, you had people losing jobs. All kinds of things were happening the 4Ds, death, divorce, dislocation all of that was happening in 2008, 9, 10, 11.

Joe Downs:

Real estate values plummeted but storage doesn't care about that. It's like shingles. Shingles doesn't care. Storage doesn't care about real estate values. Storage cares about transactions. Right, the more transactions the better. We do so. The first time in 23, 24, our transactions dried out. We were just coming off of the peak of self-storage in its history because of COVID, it never saw occupancies and rates as high as we saw during COVID. So coming out of COVID and your peak of everything, the bottom fell out of the market in terms of transactions, occupancy fell, rates went with. It became very hard. So we are not immune to those cycles and for the first time it's been documented and realized that, holy cow, this industry is more reliant on the transactions in real estate than anyone ever realized before, because it's never happened since they've been recording it.

Ed Mathews:

Obviously, every asset class has its cycles. I'm curious about how resilient storage has been as an asset class over the last. You said 22, 23,. Let's go back three, four years Over the last three, four years. How are properties changing hands adoption rates, things like that, vacancy rates how has that been affected?

Joe Downs:

Look, a bad operator can screw up a deal. The story is as solid as an asset class as there is the worst cycle it's ever seen. We just went through. Okay, as there is the worst cycle it's ever seen, we just went through. So even during those years where multifamily got crushed and office, which is getting brutally crushed, decimated retail, decimated, storage through its worst downturns, was still the best commercial real estate asset class. The industrial guys will make an argument that's the best asset class and the multifamily guys will say it's all cyclical. The storage is the best from a peak standpoint but it's certainly the best from a valley standpoint. Our lows are not nearly as low as any other commercial real estate asset class. It's not even close.

Ed Mathews:

I tell my team all the time I'm very happy to hit singles and doubles all the time. I don't care about home runs we find them every once in a blue moon. But let's stick to the knitting right. Let's get on base first and singles and doubles, that's it.

Joe Downs:

We're very resilient. Even through this downturn we're coming out okay. We got some bumps and bruises and it was difficult and you had to operate the hell out of your facilities because it wasn't a buying game anymore, it was an operating game. Right, you had to watch your expenses and really market your facilities and you're up against the reeds or tanking rates maybe in a market and that's where we got hurt. We've acquired 20 facilities. Four of them were in trouble, one of them was bad, three of them will be okay, the rest fantastic. But all of them went through that. Almost all of them went through that cycle. Most of them will come out, the ones where we're hurt, where we're feeling it the most. We also bought at the top of the market, not because we overpaid. We paid the right amount in that market cycle. That's just part of the market cycle.

Ed Mathews:

Yeah, when you acquire from a capital stack perspective. What does that look like for you? Do you use bridge debt at all, or is it all long-term debt?

Joe Downs:

No, we so. For most of our the 20 that we've acquired really 19 of the 20, we now are working with an institutional investor, so we moved away from the passive, smaller investor scenario. But most of them were bought with that. But I think the highest leverage we had was and that's we probably. I think we did two seller finance deals where the leverage went to 75, but we were comfortable with it because there were no covenants when we're controlling the loan docs and the seller has no idea what they look like. We stripped out all the not that there was, we weren't sharks, but we stripped out the banks. You can remove a lot of risk right.

Joe Downs:

We removed all the risks. So going to 75 or 77 or whatever it was on a seller finance deal we were very comfortable with On any bank loan we have I don't even know if we have one at 70. We might. The rest are all 65 LTV and everything else was equity.

Joe Downs:

We put money in every deal and then we have investors in the deals. So even the deals I'm talking about were struggling. Those were underwritten very conservatively. Deals so even the deals I'm talking about were struggling. Those were underwritten very conservatively. And if we bought at a seven cap or a six cap, our exit in the performing what was a six cap or a seven cap. We didn't play with numbers. You're very conservative with everything.

Joe Downs:

Sometimes it's just a tough cycle or a tough market. In the case of our deal where we're going to lose money on, that deal was not just bought at the top of the market. It turned out to be the most challenging market we were in in terms of small one, three, five mile market. We had retold up. They tanked rates. We had something else going on. It was a perfect storm of bad. Yeah, scariest part is in hindsight there's not that much different we could have done, because some of the stuff just came out of nowhere. There's a few things we've learned we probably would have done differently. But look, one out of 20 is a pretty good odds in any industry, I think.

Ed Mathews:

Yeah, I was speaking to a group not that long ago and one of the questions was how did you plan for COVID and how did that impact your business? And I said we didn't. Who plans for a global pandemic? But what we did do was we're rigorous with our tenants, our residents, and so we know that they're good, hardworking, responsible people and if there's a problem on the employment side, they pick up the phone and call us and we work it out Right, and that's what saved us. It wasn't necessarily that we had 18 months of reserves sitting there waiting for somebody to take the sniffles.

Joe Downs:

You rolled up your sleeves, you put your operator hat on, you started operating because it wasn't money just to buy them anymore.

Ed Mathews:

So there are things you can't plan for and I'm an Irishman, I fully expect mushroom clouds on the horizon and when they don't appear I'm pleasantly surprised. But I plan for the mushroom clouds. And COVID certainly changed how we look at things. So you look at like market downturns and everything. And it's interesting because in parallel and admittedly I haven't looked at the numbers, the comparison numbers in the last year or so, but the last time I looked, multifamily was in the 12, 13% historical return and storage was in the I want to say 16, 17% historical returns give or take. And is that still consistent with your experience?

Joe Downs:

Yeah, what's the snapshot? Just after the last few years, maybe it's down to 15. I'm not even looking. It sounds about right. The deals that we see that we should be in, that we do go into. Yeah, I'd say 15 to 20, so call it an average.

Ed Mathews:

When you're buying, regardless of your cost of debt. It's relative to your debt right the cost of debt and operating costs and all the other things that you're figuring out. If you're comfortable at the point of purchase and you're cash flowing or at least you have a path to cash flowing once you fix what's going on in the operation, it doesn't matter what the market does to cashflow. And once you fix what's going on in the operation, it doesn't matter what the market does, because you're operating in a snapshot in time where you sign that 20, 30, 40 year debt at a certain interest rate, certain terms, and you're buying at a price point relative to those terms. So it doesn't matter if the market goes up or down, as long as you're cashflowing, it doesn't. It doesn't matter Cashflow versus appreciation. And if you're a three to seven year, 10 year hold on a property like that, it doesn't matter what happens the next 12 months, 18 months. The cycle will change in 18 months.

Joe Downs:

Look, I'm agreeing with what you're saying. We have to go into every deal with we're going to operate this and improve and increase the value of this facility. I can't control what cap rates and interest rates do. What it can do is put us in a better position to take advantage of a favorable cap rate and interest rate environment. The only risk really facing us is a five, because whether the debt's 20 or 30 or 40 years, regardless of what the debt is, it's a five-year term. So five years that marks matter. So we need to be in a better position five years from now than we are today, and we focus on doing that in year one and two, right From year three and four. Look, we have to put out performance, but it's a crystal ball at that point. We're focused on the next 24 months. That's our job. It's improved the value of this facility from day one of ownership to 24 month of ownership, sure, and for us, the way we do that, what's maybe a lot different? I'm sure there's crossover in multifamily.

Joe Downs:

One of the glaring differences is in multifamily. Particularly if you're talking to an investor or whoever, you can physically see the changes you make. I'm assuming there's still Formica countertops out there and you're swapping them out for courts or whatever right. You can do before and after pictures and say, look what we did and see how beautiful it is, and anyone can see the difference. That's harder for us to do with storage. If you took a picture of a before and after of a storage facility, 99 out of a hundred people would not tell you the difference. I'll notice it. I'll notice that you added cameras and lighting and maybe put a fence here and a sign there or something, because it's not pretty Right.

Joe Downs:

The physical improvements where you smoothed out the gravel or added some gravel over here. These are the physical improvements that we make and they're not a lot to facilities. The value that we add is in the management. It's taking a mom-and-pop run facility and bringing it into the 21st century and delivering to whoever the buyer is. In our case, typically we want the buyer to be some sort of institutional buyer. Right? We're delivering them a turnkey facility that's operating the way that they operate, because we know how they operate.

Ed Mathews:

It's hard to visualize an upgrade in software.

Joe Downs:

Or even adding software at all. You drive by the facility. You don't know what software they're using, if they're using it at all.

Joe Downs:

Or a paper-based ledger of some sort. What I tell people is, regardless of the condition that we find the facility in from a management standpoint, but when we're done with it and this is like within a week you can find it on your cell phone, run a unit on your cell phone, set up your auto pay and we're adding a small little insurance to it as well. Nice, the main difference that you can tell when we're done with the facility, after we take it over, we've brought it into the digital world and then from there there's marketing website, all that stuff.

Joe Downs:

But all those are intended for home, because that is the future, that's where our renters are, it's the here and now, man, it's the now.

Ed Mathews:

Yeah, no, I know, bringing modernizing a storage business operation is so different in terms of the things you can do to affect the net operating income and profitability of that kind of business, versus going in and say, using your example, going in and ripping out the formica and adding granite and charging $100 more a month in rent.

Joe Downs:

Add a clubhouse and a pool $1,200. Exactly right. You knew that Everyone looks at it and says I get why this makes more sense Understood.

Ed Mathews:

Let's get into the final five. I'm always curious about how leaders like yourself, how your brains work and what gets you out of bed on Monday morning. And leaders like yourself, how your brains work and what gets you out of bed on Monday morning. And I think about it in terms of you've been very successful. You run an excellent business I have no doubt that it's very successful and which means the college tuitions are probably already figured out, the mortgage is taken care of, the car payments are probably non-existent. Right, you're good financially and yet you still get out of bed on Monday morning, go to work, and you're fired up to do it. So that tells me that's purpose. Right, it's what gets me out of bed. I suspect it's what gets you out of bed on Monday to go to work. It also eliminates the Sunday. What do they call it? The Sunday horrors or the Sunday jitters? Right, because I'm fired up to go to work on Sunday afternoon. What gets you out of bed on Monday morning? What's your purpose?

Joe Downs:

The easy layup response is my family right, but to your point, because you cut my needs out from under me there saying you probably set up financially. Okay, fair, and you're right, there's plenty of money towards college, multiple houses, we're in good financial shape for sure, so why do we keep doing it? I'm actually up in the Poconos right now and my partner one of my partners just left. We're having an offsite meeting. He asked me that same question. He's in a different financial situation than I am. He's almost 20 years younger and I said because I love this, this is exciting. I told you I want to start a podcast as well. Why? Because I'm passionate about it. I've got a lot of knowledge I want to share and I realized I like sharing it.

Joe Downs:

I actually teach storage. I went through, I learned storage through Scott and Byron's Academy. I teach there. Now I actually run the thing. Now my company is responsible for all the student fulfillment, meaning we mentor and train all the students. We redesign the program. Yeah, we do everything. Now my company does it. I'm actually taking it over as Scott takes a step back. I'm becoming more involved. Let's say that in the Scott Myers category. So why I'm a big believer in.

Joe Downs:

Have you heard of Dan Sullivan, a strategic coach? He wrote the book who Knows? Yeah, so I'm a strategic coach. I go once a quarter up to Toronto and we have a one-day workshop once a quarter. Dan and his leadership program has made me realize there's way more to life. I'm looking forward to. The word retirement means nothing to me. My wife says retirement what does that mean to you? I'm not going to stop working. I'm going to work less. I'm going to do what I want to do, but my goal, what I'm working now towards is growing what we have, which is growing my employees. I love watching them grow.

Joe Downs:

Now I'm focused on the next generation, which is my kids. So my one son. He'll be a sophomore at Mahato Prep. He came to me over the summer. He wants to start a business. We're starting a business. I don't really have the bandwidth for it, but I'm helping him start an Amazon wholesale business. My daughter's a dancer. She's into some other stuff. I got my other son. They're both lacrosse players. He's flipping lacrosse heads. Now he's buying used lacrosse heads online, cleaning them up, streaming them, painting them or whatever you call it, dipping them, dyeing them and selling them. So I'm now incubating entrepreneurs. So that's my why it's really them. I'm not done with Everything's paid for, but it's staying active, it's teaching, it's being involved on, and I'm doing it also because I'm going to be doing it for the next generation and I'm love it. It's fun, I love it.

Joe Downs:

Couldn't agree more I love sharing stories, so what would I do?

Ed Mathews:

if I wasn't doing. A buddy of mine, actually a fellow Villanova, Jack Flood, said hey, at what point are you going to retire? I'm like never I'm having too much. Why would I do that? Will I be doing 10 deals, 20 deals a year? No, when I'm 80 years old, I might do one.

Joe Downs:

I won't be the CEO of my company in a couple of years, and that's. I'm looking forward to that next chapter, but in the meantime I'm building towards that.

Ed Mathews:

Yeah, and I think we're both a similar age. We're both looking for that emeritus or emeritus title after our name, so that'd be cool. Yeah, I was hoping you might be able to help me out with that, but thank God for chat GPT. So I'm always curious about mentors and coaches that you've had in your life. You mentioned that you're doing that for other people. I'm curious about the best advice you ever got and who gave it to you.

Joe Downs:

Yeah, I'm going to go with. There's been so many little good ones. But I'm going to go back to Strategic Coach for this Because it wasn't one eye-opening moment. I could probably just lean on the book who, not how, but there's so much more to that book that you get when you go to Strategic Coach. You really understand what's behind that book. The who, not how is not about delegation, it's about recognizing there are people better suited to do whatever the task at hand that needs to be done. I'll give you one. I could design a website, so could. There are tutorials out there. We could even now use ChatGPT to help us. We could go through all the prompts and set up.

Joe Downs:

You and I are smart enough to do that. Should we be doing it? Nope, or should we be paying someone else to do it? Because where's our time better spent? What is our unique ability?

Joe Downs:

My unique ability is talking to people. It's educating people. It's motivating people. It's triaging things and pulling stuff together. It's not tasks that are however big or small. It's not running out step one through step 100, which is what it would take to build a website. Right, that's not my unique ability. So the best advice I've ever been given started with the book who, not how, which talks about your unique ability in there a lot, but at the high level you really dive into it. As a strategic coach. It's been learning to embrace the fact that we all have unique abilities and we should really focus on ours and when something falls out of our unique ability, find your who Don't figure out how to do it. Find your who's going to do it and that who it better be their unique ability. Fall with the scope of their unique ability. Me, that's honestly the best advice. It wasn't like one statement, it wasn't something I read, it was an amalgamation of from a book to coaching classes.

Ed Mathews:

Right on. Yeah, I agree with you that it's not a delegation book, that's a book on scaling right, and that's an entirely different concept and effort and one of my favorites. As a matter of fact, we'll make sure that we put a link in the show notes to that book, cause if you haven't read it, you need to. I'm also curious about and we touched on this earlier in the conversation, but I think, fundamentally, we learn more from the mistakes that we make professionally than the successes, and so I'm curious about the decision that you've made over the years that you look back on and you go man, I'd love to have that one back. What'd you do about it? So I made the same mistake twice in two different businesses.

Joe Downs:

The first one, you'll know, was a bar and restaurant. So after I was a financial advisor for a year and a half, you used to know it as the brick bar. You probably went in for a honey brown jug nights or something like that, buddy Dan.

Ed Mathews:

I know exactly what you're talking about.

Joe Downs:

It was this Villanova bar that got shut down. I was a bartender for years. I reopened it back up more as a pub restaurant. Everything was going fine for a while. Here's the mistake I made and learned later and then made again. I knew how to run the front end, the bar. That was the easy part. I didn't know anything about the kitchen and the kitchen killed me. So I ended up losing that business and losing a hundred grand of not even all my money. So money had to pay back the money I was responsible for, which at the time I was 30, maybe and 31. And that was a painful, brutal mistake, learning lesson. I look back on it and I say, well, that was almost better than college, right? But the takeaway was and this is what I tell people even though I made it again. I'll explain in a second what I mean.

Joe Downs:

The phrase I still use is you have to know what's going on in your kitchen. I had no idea what was going on in the kitchen. I thought the chef was the expert there and he had it. That's fine, he was the who. But you still have to make sure that who was doing what they're supposed to be doing, still have to have checks and balances there. I made the same mistake in storage. Us be doing still have to have checks and balances there.

Joe Downs:

Yeah, I made the same mistake in storage. We had someone come along say they were an expert and they could handle all of our management, our underwriting and management. So early on in storage we allowed this individual to run our underwriting and we listened to everything she said. We came to the management of facilities. The facility I'm losing the only one we're gonna lose money on was a direct result of her underwriting and her management and me allowing it to happen. I didn't know what was happening in my storage kitchen. I was off finding other deals growing the company. I forgot 15, 20 years later, wherever it was. 20 years later, the same lesson and I made the same mistake twice. It's embarrassing, but I did it again and I'll never do it again. So how do you mitigate that issue now Without micromanaging?

Ed Mathews:

That's too much brain damage for me.

Joe Downs:

I have to know what's going on. I have regular check-ins. What's happening? They now question everything. Sometimes I don't know what I'm questioning.

Joe Downs:

You start getting into the minutia of the operations. Look, part of it is I've learned a ton about how to operate these things right, but you don't want me operating your storage facility day to day. That's not my unique ability. Oh, there are certain things that happen that I'm just. I don't know how you transition a facility and set up the credit cards and this, and that I don't know anything about it. And I don't want to, I shouldn't. But I should know that it's being done and it's being handled properly and taken care of, and I should be checking in on it. And I also know that I have my partners who are capable overseeing it as well. So I'm really checking in on them and questioning them and pushing them. You have to know, or at the very least pretend like you know, what's going on in your kitchen, because if you do, then there's checks and balances and people will operate properly. And, by the way, you'll start to see it in the numbers In the bar and restaurant.

Joe Downs:

I wasn't even looking at the numbers, I was just looking at the globe. Well, why can't I pay the mortgage? Why can't I pay this? Why is revenue down? It wasn't the revenue was down, it's the expenses were up. That's what killed me is the expenses in the kitchen. I should have streamlined things earlier so that we could make it through a certain period of time, right the slower seasons and streamline the menu, cut down the cost. I didn't do it. I didn't know to anything. Pay attention to it.

Ed Mathews:

Yep.

Joe Downs:

Just focused on revenue.

Ed Mathews:

Yeah, I've been guilty of the same thing. It's easy to do. I abhor bookkeeping. I will do anything not to bookkeep, but there's a responsibility that you and I, as the CEO, have that we've got to know what our numbers are and we've got to know, at least at a key performance metrics perspective, what's working, what's not.

Joe Downs:

And what's working and what's not working from a marketing standpoint. I'm marketing for 10 years. What's working, what's not working? Why isn't it working? Why are we continuing to spend money here if we're yielding no results?

Ed Mathews:

Yeah, you improve what you measure. If the folks that work for you aren't paying attention to it, then nobody. It's a common thing. We're two guys who've been doing this for a long time and we both made that mistake. So Dan Sullivan's book. But I'm curious about lately what book is on your nightstand virtual or physical, it doesn't matter. But who are you paying attention to these days in terms of the books you read or the information you're taking in?

Joe Downs:

The book I just finished that every business owner should read, and I can't believe it took me this long to read. It is by Keith Cunningham, called the Road Less Stupid, sitting right on my desk.

Ed Mathews:

I just received it actually.

Joe Downs:

I'm going to listen to it because I do a fair amount of driving around, or to listen to it again. I found that's one of the things I found, so I listened to who, not how? Probably three times.

Ed Mathews:

Yep.

Joe Downs:

I find a really good, impactful, meaningful book. I usually listen to it a second or third time, even though it's a heavy lift. It's probably nine, 10 hours of listening time. I'm going to listen to it again. There's so many good nuggets in there to the point where I'm finding it hard to get through a bunch of books. I can probably read off a list in my Audible right now of all the books I'd like to get to.

Joe Downs:

But what I have found and I don't know if you've done this in chat GPT. But have you created your own board of advisors? I have not. Yeah, so if you have the pro, are you paying for it? Yes, 20 bucks. So you can go into, create a GPT and you can actually ask GPT. First, how do I create my own board of advisors and then I'll tell you how to create a GPT. But you can go in and create a board of advisors. You can ask questions too. So, like on my board of advisors, I have Warren Buffett, keith Cunningham, charlie Munger, elon Musk, richard Branson, kobe Bryant, marcus Aurelius.

Joe Downs:

The GPT already searches their entire life's work, everything they've published, that they can get its hands on, and then, when you ask it the question or for advice. It will give you every single person, everyone on your board's suggestion, as well as an example, like for Charlie Munger, we'll tell you about. I would do this. It reminds me of this time at See's Candy, which is a famous company that they own, for it, when we had this happen and this is how we handle it. Or, keith Cunningham I'm still reading books and that's what is top of mind for me. Sure, I don't even know what's next. Am I? Am I audible? Probably the road less stupid again. But if you're saying, if you're asking the questions, what's top of mind, what's your go-to next? That's actually my go-to. I'm learning more from them. And then the other, the other really neat AI hack I'm going to give you right now because it feels like this is where it fits.

Joe Downs:

Yeah, I'm paying for all the AIs right now, so I'm also paying for Grok, but Grok you can have a conversation with. So Grok was the Elon Musk's. Yeah, sure, 20 bucks a month. You full-on voice mode. You put your earbuds in or you're driving or whatever. You can have full-on conversations. So, storage, self-storage, is what brought me here. We're also developing pro-storage, which is because we recognize there's so many needs and paradigm shifts happening in the world in general. Pro storage is the storage version of flex industrial. It's just b2b storage. So it's the same potential customer who would rent a thousand square foot unit of flex industrial would also potentially rent a pro storage unit which would be a thousand square feet, which is month a month versus a three-year lease so tell me more about pro storage, what I have a preconceived notion, but I don't want to.

Joe Downs:

So self-storage is B to C. I have a storage facility. Ed Mathews rents a 10 by 10 and stores all of his life's treasures in there, which is junk, right. Yep. Pro storage is for business owners Like contractors.

Joe Downs:

We own a storage facility in Wilmington, north Carolina. When we bought it it was different than all the rest and I'm skipping over the whole story because of time. We have 60,000 square feet of business owners and the unit sizes are 500 square feet to 1,000 square feet. Self-storage your unit sizes are 50 square feet to 200 square feet. The two-bedroom apartment of self-storage is the 10 by 10. It's 100 square feet. The two-bedroom apartment of self-storage is the 10 by 10. It's a hundred square feet. Two bedroom apartment of pro storage, which again is just like flex industrial space, might be 750 square feet. The middle ground is 500, 750, a thousand. They'll come in different sizes, but point so it's for contractors, business owners. It doesn't have to be a contractor. Think about a catering company. What you need? You need an office, probably the retail center, where you pitch, you sell the nice looking office with the pictures of the events and you sell the bride and groom. They come in, they select the flowers, they select that food, they select what don't you.

Joe Downs:

That's 25, 30 bucks a square foot retail right, what don't you need to pay 25 bucks or 30 bucks a foot for to store your racks of glasses and dishes and tables? Don't you need to pay 25 bucks or 30 bucks is foot forward to store your racks of glasses and dishes and tables and chairs. You need industrial fuck space for that, right. So it's not just for contractors, it's for business owners furniture stores with extra inventory, whatever. We're also seeing businesses pop up now because of look, we're all changing the paradigm. Shit if I'm referring to is how we consume ordered goods now, yep, perishable. We go to the store actually not necessarily because we've got Amazon Fresh now, but everything else is delivered to our house. It's changing distribution centers. It's changing last mile you've heard of last mile warehouse. That's so that they can get you whatever you ordered by tomorrow. You want a stat that'll blow your mind and this is why Flex Industrial is going to do well and Pro Storage is going to do well Right now. So Walmart and Amazon are the two largest online retailers right, they're the two biggest that are gobbling all this space and they're gobbling up all the space that's already existing, the smaller warehouses, which is displacing all the former tenants, contractors, hvac companies, whatever. They're all getting displaced because the rents have doubled, because their space is in demand. Why? Because today Walmart and Amazon know this is August 7th 2025. Walmart and Amazon know right now, today, if they cannot deliver a product to you by tomorrow, they're losing 25% of their sales. A year from now, they expect that same 25% loss to occur if they can't deliver it to you same day. We as consumers will not accept anything less than tomorrow. So to get you whatever the hell you're going to order next and I don't know what that is they have to have it within a day's drive of your house and really within an hour or two.

Joe Downs:

My son, on the way to school last year, was begging me to order a pull-up bar. He's all into fitness and working out. I said absolutely not. You're not ruining our door jams, it's going to be successful. He beat me down and beat me down Dad, this one doesn't do it. It doesn't clamp, it doesn't this, it doesn't hurt the paint. There's videos. Fine, this was on the way to school. I said go ahead, order it. I didn't even know he was doing it in the car. He did it in the car, came home that night, dead Six o'clock at night, dead Doesn't hurt. The door jams. What are you talking about? The pull-up bar within two hours of my house? How is that even possible? That's how these logistic companies are thinking. They have to have every product near us. To do that, they have to have a warehouse space. It's going to have to be smart warehouse space with RFID, so they know what's coming and going.

Ed Mathews:

Yeah, that's fascinating.

Joe Downs:

I'm also expecting the Amazons and the Walmarts to start gobbling up on that space as well. So the investment you're making with your buddies is a smart one.

Ed Mathews:

Yeah, the hundreds of thousands and probably millions of square feet that Amazon alone here in Connecticut is putting in place over the last three to five years is insane Getting set up to deliver to you. So I'm curious about how you define success in your life.

Joe Downs:

Yeah, that's a tough one. I think it's an evolving one. I'm a father, so for me there's no greater dopamine release than to hear someone tell me how polite my son or daughter was or how great it was to have them around, whatever. And I know that sounds cliche and I know our parents told us the same thing. But you realize, as a parent, that's impactful and meaningful, right. So success to me health, obviously, but it's having a really solid core family unit that is holding itself in society. And I know it sounds like such a BS answer, but it's really meaningful. And years ago I don't think I could have answered it this way. I think I would have talked about something monetarily, but to me that's become the most important thing. Money matters. Money allows you to achieve that. We just took a two-week vacation to Europe. If we didn't have money we couldn't have done that and we couldn't have bonded as a family and grown together as a family. So I'm not giving you some BS answer that it's all philosophical. Highfalutin, I'll give my money away as long as I have my health and my family. That's not true. I think that's too ideological. There's a modicum of success that I want personally too. We all need that. I'm not a recognition guy other than privately and quietly and seeing people grow and knowing I'd handed it. I love seeing closed storage deals, like students of mine that close their first deal. The looks on their faces, storage deals, students of mine, I closed their first deal the looks on their faces, the excitement that they have to me that fuels that's successful to me. So for me, it's health and family and being able to be present in my kids' lives is huge.

Joe Downs:

I actually used to drink a lot. I'm an Irishman as well. I quit drinking because I felt like I was drinking too much. It was like maybe four or five years ago and I wasn't. I was physically around my kids but I wasn't mentally present because I might've been buzzed. So that's something that's, to me, is successful. That that's success. It's being present. However, that is that's. I mean. You have to quit drinking. That's what it was for me. That's what I needed to do. But, yeah, I think it's a lot of those like feel good things that add up to hey, you know what? I'm living a successful life and certainly building successful businesses is part of it. There's dopamine release from that as well. I'm not going to say there isn't. I would like to break 70 one day in golf, but I don't know if that works.

Ed Mathews:

I'm still trying to break 90 or, If I break 90, I'm walking in the clubhouse hands raised overhead, looking for my green jacket.

Joe Downs:

You got to hit me up when you put me there.

Ed Mathews:

Absolutely. I have a profound lack of talent when it comes to golf. As long as you're fun out there, I can carry on. That's all it is for me. I get my money's worth. We're paying by the stroke. I'm doing very well. Hey Joe, I really admire the business you've built and how you think and how you operate. When you're not talking about real estate, what do you just mentioned travel and being present with your kids. What else do you like to do?

Joe Downs:

I'm the world's most underpaid Uber driver, although my son just turned 16, got his permit Revolutionary, isn't it? I'm inching closer to my best. I still got a 13-year-old, so I got a couple of years ahead of me. I find myself on a lot of lacrosse sidelines. There's not that many dance competitions I go to actually sidelines. There aren't that many dance competitions I go to actually. It's my daughter. I'm on a lot of lacrosse sidelines with multiple clubs in school and my boys are very good. They're very good athletes, so it's a lot of fun. They play for a pretty well-renowned high school in lacrosse. That's pretty cool. Golf, obviously, is what I'm doing. I'm not doing that, and then my wife and I have a couple of short-term rental properties, airbnbs, poconos, the Jersey Shore Tinkering with that stuff and other. But you said, when I don't have my real estate, yeah, I guess it's head first thing to kids and then golf, if I have time on the side for that.

Ed Mathews:

My kids are swimmers and a softball player. I used to joke with somebody that swimming meets was eight hours of sitting for two minutes of swimming. She'd be in the water for a minute in the beginning of the match and then somewhere in the middle she'd swim for another 30 seconds and then at the end she was part of the relay, and so we were there for eight hours. I was never better read than during those years when she was swimming, because it's just Exciting. Two minutes, though, but the four hours in between I had my nose in a book and my wife would elbow me and say, hey, katie's on the block, let's go. And yeah, with mags, it's softball. We're either in the car or on a plane chasing her around watching her play ball.

Joe Downs:

I imagine there's some good reading opportunities there as well, between games.

Ed Mathews:

Yes, but I'm a former baseball player and a softball coach, so I'm really into the whole strategy and all that and so I really enjoy it. But swimming I didn't know anything about. So that was just me cheering my daughter.

Joe Downs:

That's me with dance. So you have maybe three or four two minute routines and nine hours of other girls dancing in between.

Ed Mathews:

So how can people learn more about Belrose Asset Management or get in touch with you?

Joe Downs:

Email's probably the best way. joe@belrose. com email is , so B-E-L-R-O-S-E-A is an asset. Amazon management com is the best way Awesome. I'm amazed at all the people that don't reach out of fear. Shoot me an email if you're interested in storage, or one direction pointing. We don't have passive investors anymore, but if you're interested, I can point you in the right direction. If you're interested, whether you want to buy storage or learn more about storage, or come to Scott Myers Academy, where I'll be in teach other conversation.

Ed Mathews:

Yeah, I tell everybody I'm a cheap cup. I'll buy anybody a cup of coffee, either virtual or in person.

Joe Downs:

Yeah, if you're in Silly, let me know.

Ed Mathews:

Oh yeah, I'll be there. Joe, thank you so much for your time. It's great to see you and continued good fortune.

Joe Downs:

Thank you so much for having me.

Ed Mathews:

Truly my pleasure.

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Ed Mathews - Clark St Capital

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