By John H. Gilliland, president and CEO of Investment Real Estate, LLC
Remember where we were 10 years ago? In mid-2010, the country was in the worst recession since the Great Depression of the 1930s. Self-storage developers and owners were reeling. I personally had six facilities that were less than 30 percent occupied in March of 2009. Ouch! Needless to say, I had lots of tough conversations with my bankers and partners over those next three years. They were challenging times. One of my favorite quotes from Warren Buffet is, “You never know who is swimming naked until the tide goes out.” Well, let’s just say that I did a fair amount of skinny dipping in the boom-boom 2000s. It was a long, hard, and painful road to save all those properties. I took lots of hits to my equity and sold many assets to make it through.
I remember praying for help. I remember praying the broker’s prayer, “Dear Lord, please give me one more real estate boom and this time, I promise, I won’t spend all the money!” I went to the SSA and ISS conferences, and for four years attendance was at all-time lows. The trade show floors were deserted. The vendors looked at each other down the aisles and traded knick-knacks for our kids. It was a somber atmosphere. I traded war stories with my buddies and tried to lift their spirits with words of encouragement. Would we ever see a “normal” economy again? Surely it will never boom like it did from 2003 to 2008.
Fast forward to 2020. We are in the midst of the longest economic expansion in the history of America. Values of self-storage facilities hit all-time highs and maintained those levels. Banks are falling over themselves to lend us money. Developers are building all over the place. Rental rates and net operating income just keep increasing. Self-storage REIT stocks are soaring. We, as an industry, are in rarified air once again.
Looking back, I am very grateful for this experience. I learned many lessons that I can use the rest of my life. I learned to have lots of reserves and long lease-up periods in development projects. I learned that there really is risk in borrowing millions of dollars and signing the notes personally. I learned to use debt judicially. I learned to be a great operator, squeezing all I can from a property. I learned that cash is king, and that you can make a lot of money buying when people are forced to sell. I now know that I want to be the lender with cash or the equity partner with cash that saves the deal and takes the lion’s share of the upside!
But on a more personal level, I learned that I was not alone in the struggle. Lots of people wanted to help, and they did. My self-storage family rallied around me and each other to make sure we all made it through. My wife Denise gave me the love and support I needed to persevere through the worst of times. Our kids got quite the economic education around the dinner table. I learned to do whatever it took to survive. I learned that the more people I helped to survive the more they helped me to survive. I realized that we are in the most wonderful industry that anyone could ever hope for. I know that my best friends in the whole wide world are self-storage buddies. The Self Storage Association was the catalyst that brought all of us together. I am grateful and blessed to live and work in the greatest country in the world.
So, enjoy the times in which we live. Prepare for the next downturn that will surely come. Build your network of dear self-storage friends and enjoy the ride!