Tobin Capital Group's innovative self-storage strategy

Transcript:

I'm Joe Tobin, CEO and founder of Tobin Capital Group. We focus on self-storage under our flagship brand, BuxBear Storage. 

We believe that real estate should always be vertically integrated and that storage is a particularly attractive place because it provides a resilient cash flow and the ability to adjust to an inflationary environment. We created BuxBearStorage, our brand because we felt there was huge white space in an industry that has historically been very antiquated. Not a lot of use of technology, not a lot of use of best practices in terms of revenue management, and very few people actually operating the assets. And so it became clear that attracting world-class talent to this problem space and leveraging an existing portfolio, and building a brand identity would allow us to really differentiate. 

The fund is singularly focused on self-storage under the BuxBear brand. A pain point we identified in the universe of private equity and specifically real estate is that it was designed by and large for not the nontaxable investor, meaning as a family, as an individual, we'd be subject to very high rates of selling assets, incurring lots of tax and being inefficient over the long run. And our underlying view of the world, whether it's investing in people relationships, is about long-term compounding, and what compounding means is growth on your growth. So if we grow 10% a year, the first year it's a 100, it goes to 110 the next year. The powerful thing is that 110 goes to 121 because we're getting the 10% growth on the original and on that new growth that's really powerful over long runs. It means that if you grow a dollar at 10% a year for 30 years, it turns into $17.4. It's unbelievable. That has the power to change people's lives. 

And so we designed a fund where it's closed-end, meaning all money moves in at the same initial time, and then there's not a forced sale date so that we can elect to sell assets or to refinance when it's the most financially advantageous. And that, to us, is the key. Making the right decisions that we would make as a family with solely our own capital for the broader investor base. That's why we're putting 20 million behind this strategy. And we sit side by side on that. At our peak, we got up to 13 storage facilities. Today we have 11. It's roughly 5300 units across five states. What we're looking to do is replicate what we have done across our portfolio in this space and continue to scale it.

We like two types of deals. One is the one where things are still done in a very tech-disabled way, i.e., people are using pen and paper or pencil. They're not pricing dynamically, they're not doing their digital marketing correctly, they're not answering the phone like a lot of simple things, but that are able to exist in this business because the fundamentals are so good. We took over these four properties up in the Pacific Northwest, and when we took them over, we put in our suite of technology, and we found out the phone was only being answered 60% of the time. Each missed call is either a frustrated tenant or lost revenue. What do we do? We put in our tech. We train the managers; we incentivize them. Today, 95% of calls are answered. Those kinds of operational best-in-class practices are what set us apart. And a view that as a team, the way we learn is by learning from other exceptional businesses. And the question ask yourself is, should we, in training key frontline staff, come up with our own program from scratch, or should we recognize that Starbucks is a best-in-class company and leverage as much as we can their experiences and apply it to an industry that previously has not gotten that benefit? So for us, innovation is actually learning and reapplication from other exceptional industries. So that's one, the under-managed asset. 

Two is what we call a fill-up deal. And the way to think about it is someone builds a brand new building, and they fill it part of the way. But then there's still more work to do. And so we'll buy that asset at a discount to a stabilized value and then take one year to two years of filling it properly. And that means attracting the right tenants, strategically making sure all of our branding works and is visible in a local market. And it means training the manager to make sure we have the right presence for the brand there. We like both of those because we believe they're inefficient parts of the market, and they allow us to go to work and really drive value add change. 

Now, for the firm, the key thing is vertical integration and operations. And for the long-term vision, it's that we start with storage. We hit $1,000,000,000 of storage, and then we add a second vertical. And again, the threshold on that second vertical is $1,000,000,000, and then add a third. And so the idea is we become sector specialists where we heavily over-index to investing in people and teams and giving incredible talent the opportunity to shine.