[00:00:01] Speaker A: You're listening to PTC point of view, brought to you by preferred trust Company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered nest egg that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control because we're taking you on the alternate route to investing with your IRA.
[00:00:39] Speaker B: Welcome back to another episode of PTC Point of View. On today's episode, we have Kerry Cook, CEO of Preferred Trust Company, interviewing Ryan Gibson from Spartan Investment Group. Ryan is the president, chief investment officer and co founder of Spartan Investment Group. He has organized over 200 million of private equity for spartans projects. For Spartan Investment Group, Ryan is responsible for investor relations and capital raises for projects. Ryan is also a highly experienced commercial airline pilot. He has a bachelor's degree in business with concentration in marketing, management and advertising. Spartan Investment Group started in residential and quickly moved into commercial development using the evaluation criteria of easy to manage, easy to maintain and easy to evict. They quickly settled on self storage. So today, Ryan's going to be talking about why they decided to settle on self storage. In 2021, Spartan was named one of the fastest growing companies by Inc. 505th in the real estate industry. Today, Spartan is a team of 75 spread out over nine states. Quick reminder for everyone listening. Preferred Trust Company is a licensed trust company in the state of Nevada, and we are not licensed to give you investment advice. We are just here to inform you of the available options that you can invest in. Using your self directed IRA. Using your self directed IRA, you can invest in alternative investments such as real estate, which includes self storage, which is what we're going to be talking about today. So, everyone, please welcome Kerry and Ryan.
[00:02:18] Speaker C: All right, so we're going to start very basic, simple. Who is Spartan Investment?
[00:02:25] Speaker D: Yeah, Spartan Investment Group is a company that finds self storage facilities, finds the funding for them, to buy them, and then we finish them. So it's a group of professionals that makes up our construction, property management team, syndication, acquisitions organization, and we look for self storage opportunities and commercial investment space.
[00:02:51] Speaker C: Why did you guys decide to go into self storage?
[00:02:54] Speaker D: Great question. So we got into self storage because during the, when we were looking at different asset classes. During the last four downturns, self storage was one of the top performing asset classes. We also went through a whole rigorous research. What we want to do as a company. And we like the three e's of self storage. Easy to own, easy to evict, and easy to maintain.
[00:03:18] Speaker C: How do you determine locations in which you're willing to acquire, build, manage? Is it all the same in all three of those areas, or are there different values that you're looking for?
[00:03:32] Speaker D: Yeah, so I really love this question. So we have a research team that looks at every investment that we purchase. One of the most important things that a self storage owner, operator, or somebody who's considering an investment can do is make sure that it meets the demand, that there is enough demand. So we look at the hyper local market for self storage. So the macro market is important, but really what's important is self storage is a three mile business, meaning that your customers all live within the immediate area of that property. So you have to know that there's enough unmet demand to fulfill your business plan. So we'll look at what the five minute, ten minute, 15 minutes drive time is in an area so that we can understand what the population is and then what the saturation is of self storage within that given market to determine if there's enough demand for what we want to do. So, great example. We built a 120,000 square foot facility in Seattle, just south of Seattle. And we had to make sure that before we built that and spent millions of dollars, that there was enough demand in that market so that we could build at that specific location. And so what we do is mystery shop all the competitors within that 15 minutes drive time. We get the rental rates, we pull occupancy data, we pull permits in the pipeline. Because if you're going to build a facility, you want to make sure you understand what's coming up around you as well. Understanding the barriers to entry is really important because if it's, if you can just walk into the permit office and pick up a permit the same day, that should go into your consideration. Or if it's very difficult to get permits in some markets, you have to kind of consider all those factors. But we put together a complete feasibility study for every facility that we buy or build to understand what the demand is in the market.
[00:05:29] Speaker C: All right, so now I'm just going to go off on a limb here.
[00:05:31] Speaker D: Yeah.
[00:05:32] Speaker C: Get ready for it.
[00:05:33] Speaker D: Yep.
[00:05:34] Speaker C: Storage wars. Let's talk about this for just a second.
[00:05:37] Speaker D: I love it.
[00:05:38] Speaker C: Okay. So does this really happen?
[00:05:41] Speaker D: No.
[00:05:42] Speaker C: Do you really do this?
[00:05:43] Speaker D: No and yes.
[00:05:44] Speaker C: Okay.
[00:05:44] Speaker D: Okay.
[00:05:44] Speaker C: So you did say that you do property management as well?
[00:05:48] Speaker D: Yes.
[00:05:48] Speaker C: Okay.
[00:05:49] Speaker D: It's not the drama that you see on storage wars.
[00:05:51] Speaker C: Okay.
[00:05:52] Speaker D: You know the guy that stands on the shoulders and looks in the unit because the door can't open.
[00:05:56] Speaker C: Yes.
[00:05:56] Speaker D: Like that.
[00:05:56] Speaker C: Yeah.
[00:05:57] Speaker D: Most states are open door, meaning that we can take a picture of all the belongings in the unit before we auction it. So that's kind of a myth that is in the show. The show is very entertaining.
[00:06:07] Speaker C: Oh, yes, absolutely.
[00:06:09] Speaker D: Most of our facilities are in open door. And right now, if you got out your laptop, you could go to selfstorageauctions.net, you could type in whatever zip code we're in, and you could find all of the auctions, all the units that being auctioned in the Vegas area.
[00:06:25] Speaker C: Yeah.
[00:06:26] Speaker D: And you could see what is exactly in the unit and you could bid on them.
So there's no need to even go to a property. Interesting. Yeah. And then what we do is we work with those third party companies. We use a company called late to lean. That's who we use. And so what happens in self storage, I think, is kind of playing into this question. It's got the most powerful lease provision in commercial real estate. If you look at a lease, a self storage lease to a customer, and the second paragraph, it says in the event that the customer doesn't pay the owner, we can lien the occupants belongings within 30 days. So if you don't pay. Absolutely. If you don't pay, we lien your belongings and we kick you over to late to lien. They do all the filings for us, notices in the paper, notices to the tenants, certified mail, all the things that are required by that state's law. And then your stuff gets put up on this auction site and auctioned off. Here's the reality. We're not finding a million dollars cash. We're not finding Harley Davidson. I mean, we found. We've. We've found some cool stuff. But the reality is, is that we don't really make a lot of money on auctions. And in fact, if you did find a Ferrari or a motorcycle in a unit.
[00:07:36] Speaker C: Yeah.
[00:07:37] Speaker D: You could only pay back what you're owed in total expenses and lost rent. So let's say the customer hasn't paid in a year, and they. Well, we wouldn't let it go that long, but. And they owe us $10,000 and we sold the Ferrari for 200,000. We would only get 10,100, 90,000 would go to the tenant.
[00:07:57] Speaker C: Interesting.
[00:07:58] Speaker D: Yeah.
[00:07:58] Speaker C: Okay. Well, I appreciate you.
[00:08:00] Speaker D: Yeah.
[00:08:01] Speaker C: Minimizing these myths that are out there. Although it is quite entertaining and exciting.
[00:08:06] Speaker D: It is exciting. And the concept, though, is the same. Right. I mean, it's a unit. They just like to make it a little bit more dramatic by not showing you what's behind the door. Yeah, yeah.
[00:08:15] Speaker C: How often do people not pay their rent when it comes to storage?
[00:08:19] Speaker D: Yeah, I would say.
[00:08:20] Speaker C: What percentage would you say is our.
[00:08:22] Speaker D: Delinquency rate on average is about three to 4%. It's very, very low. Yeah, yeah. And it, it depends too, right. It's, you know, if you hold people accountable, they tend to pay. If you make it easy for people to pay, they tend to pay. If you get them on auto, pay if you don't accept cash, you know, think things that make it easy to pay. So all of our facilities, when we take them over, depending on who the seller is, most of them are mom and pops. There's usually a lot of delinquent and past due tenants, and that's because they're not enforcing the auctions, they're not enforcing consistent payments, or they haven't accommodated the tenant to pay in a way that is scalable. So when we take over a property, the first thing we do is put dozens of units into auction and get those non paying tenants out. And then we also share out that they can join our newsletter when a new customer comes in. We say, hey, we have auctions every month here for people who don't pay. If you'd like to be put on our newsletter for the auctions. And it's kind of a two words with 1 st, because it's, hey, you can bid on our auctions and bid up these units. And also if you don't pay, you're going to end up on this list.
[00:09:28] Speaker C: Yeah.
[00:09:28] Speaker D: So I think originally the delinquency is high, might be a little bit higher than that, but then once we take it over, it drops down.
[00:09:35] Speaker C: Interesting. Is that why you decided to do the a to z philosophy of acquisition, development, construction, property management? Is that why you decided to do that? Did you see revenue streams all the way along the way and say, you know what, we want to control the revenue, or did you do it for other reasons?
[00:09:51] Speaker D: We did it for risk mitigation. That was the number one reason. We wanted to mitigate risk by owning the value chain, and that was the number one reason. But of course, the ancillary benefits to that is the ancillary income that you generate from these types of things. Yeah.
[00:10:06] Speaker C: Well, then let's switch gears here then. Where can I invest? Can I invest with you through the acquisition, the development, the construction?
What does your investment provide me? Where can I engage throughout that process. What does that look like?
[00:10:21] Speaker D: Sure. So I'll just keep it into two buckets. One is our traditional self storage deal where we're buying an existing property that has existing cash flow in place. You can buy it, you can invest at the time that we buy the property. You invest with us, 50,000 are minimum. You can invest right when we buy the property. If it's a ground up development deal, they differ, but generally it's the same. You can invest, you invest with us right at the time of acquisition.
Now, we like to mitigate risk for our investors as much as possible in a ground up development. Can't mitigate all the risks, but you can mitigate, you can mitigate away most of it. For example, we might not present that deal to our investors until it's fully permitted. Or sometimes we say, hey, you're going to get a little bit more reward, but this isn't permitted yet. So we let our investors know what risk they're taking on. Obviously, buying an existing facility is the lowest risk you can take. But the ground up being our higher yielding, higher riskier deal, and just to put some perspective on it, 95% of what we buy is already existing. So we do very little ground up, maybe one or two a year at the most.
[00:11:31] Speaker C: Okay, tell me what your investor looks like who's investing with Spartan.
[00:11:37] Speaker D: We have four different types of avatars.
[00:11:40] Speaker C: Okay.
[00:11:40] Speaker D: The retired, we call them CEO Charlie, that is our CEO, who has, works in the C suite, has a high income, doesn't have time to learn real estate, wants to be in real estate, and wants diversification from the stock market. This person obviously invests usually, typically a lot with us. Usually a CEO's household will be a million plus, and they want to be updated infrequently. But when they call, they want an answer and a quick update to the point, because they don't have time. So that's CEO.
Our next investor, who's probably our most popular is, we call them exited Eric. That's the Avatar. Exited Eric is a business owner. They own a contracting company, a concrete company, a.
They are a mortgage broker, and they have their own shop. They invest in other forms of real estate, such as short term rentals, or they do a lot of their own active investing. They've built and sold a business, and they've exited the company. Right. They've had a big payout. We have a lot of tech investors who built tech companies and sold their tech companies. Those are all kind of categorized as exited Eric. And that is our most common investor. And then we like to say the next investor, we like to call professional services Simon. So this is somebody who's a doctor, a lawyer, an airline pilot, an anesthesiologist, an ophthalmologist, whatever it might be. They're a very disciplined in their field, specialized investor. And they are busy, but they're very interested in learning. So we have a whole aspect in how they can learn more about how our syndications work. We have a YouTube channel. We have ongoing education meetups, things like that. And usually those folks like to learn more about what it is or high income earning in their forties and fifties, maybe their late thirties.
And that's kind of a bucket. And then we have, we call it, sorry, emerging investor Ivan, who's, you know, they're in crypto. They're excited. They're doing new things. Right. And they want to kind of try everything. Yep. So we have everybody from kind of the more risk tolerant to the more conservative, wealth preservation investor, and kind of everybody in the middle.
[00:14:00] Speaker C: Nice. How do they find you?
[00:14:03] Speaker D: They find us through podcasts and webinars and meetups and speaking at conferences.
They find us through us doing continuing education.
[00:14:14] Speaker C: And then we have a lot of.
[00:14:14] Speaker D: People that mostly come from referrals. So a lot of our investors have good experiences with us, and they tell their friends, yeah, yeah.
[00:14:22] Speaker C: It's the best kind.
[00:14:23] Speaker D: Yeah.
[00:14:24] Speaker C: Referrals are always the best because then you can keep them in those buckets.
[00:14:27] Speaker D: Exactly. Yeah.
[00:14:28] Speaker C: Simons stay with the Simons. The Ivans stay with the Ivans. Was it Ivan?
[00:14:32] Speaker D: Ivan, yeah.
[00:14:32] Speaker C: Ivan. Yep.
[00:14:33] Speaker D: Okay.
[00:14:34] Speaker C: They tend to. Right. We gravitate. Gravitate towards the same type of people.
[00:14:38] Speaker D: That's right.
[00:14:39] Speaker C: That really helps, you know, stabilize those four buckets for you. That's why you have four buckets.
[00:14:43] Speaker D: Absolutely.
[00:14:44] Speaker C: I wish I had four buckets.
[00:14:45] Speaker D: Well, you do not.
[00:14:46] Speaker C: I feel like I have 20 buckets. We got four buckets. I love the four buckets.
[00:14:50] Speaker D: I think, I don't know, maybe your investors won't, but sometimes they typically, that's a pretty good profile, typically, of who you're talking to. And it's interesting, like a, like a CEO is going to learn different or care about what they learn differently than a professional service assignment who is definitely listening to podcasts.
[00:15:07] Speaker C: True.
[00:15:08] Speaker D: Yeah, definitely. And learning more kind of on the fly. On the fly.
[00:15:12] Speaker C: As they're working.
[00:15:13] Speaker D: As they're working, taking in the information. That's exactly right.
[00:15:16] Speaker C: That intellectual. Like, I got it. I got to learn something new today. What am I going to learn? Well, I'm doing my job, but feed me that. Feed me that through my ears and I'll make a decision.
[00:15:25] Speaker D: And that's where I start, from what I hear. Yeah. I was an airline pilot, and when I was on my layovers, I was jamming to podcasts about real estate and learned a ton from it and got to know the podcast hosts by going to their events and their conferences and really kind of diving in and learning a lot. So.
[00:15:43] Speaker C: So how do people invest? They invest with cash. They invest with qualified funds. What are they investing with? Are they businesses? Are they investing their 401 ks?
[00:15:52] Speaker D: Yeah.
[00:15:52] Speaker C: So how are they getting involved?
[00:15:53] Speaker D: Yeah, I would say ten to 20% are doing it through their qualified retirement plans. For what? Solo 401K, seps, iras, self directed iras. And then there is a probably 40% to 60% is going to just be straight cash under their personal accounts. And then we have a lot of trusts, llcs and other vehicles that people invest with. And that makes up probably 20 to ten to ten to 20% where people are using a living trust or they're using an entity that they set up through their own asset protection plan for their family.
[00:16:31] Speaker C: And that's all taxed through 1099 or how is that?
[00:16:35] Speaker D: Yeah, all k one.
[00:16:36] Speaker C: All k one.
[00:16:37] Speaker D: All k one through the equity side.
[00:16:39] Speaker C: Okay.
[00:16:39] Speaker D: Yeah. And then we do do some debt offerings from time to time. And those are a 1099 Inc.
[00:16:43] Speaker C: Okay.
[00:16:44] Speaker D: Yeah. And they all come out in March?
[00:16:46] Speaker C: They all come out in March.
[00:16:47] Speaker D: They all come out in March. That's our.
[00:16:48] Speaker C: So no extensions required?
[00:16:50] Speaker D: No extensions required. We. We hammer our cpas pretty hard to get everything out in March so people can get on with their tax returns.
[00:16:56] Speaker C: So that's fabulous.
[00:16:57] Speaker D: I always encourage people to extend, but, yeah, you know, people want to. People have a professional needs sometimes to file early if they're, like, working for the state Department or otherwise. Sometimes they have to file by a certain time.
[00:17:10] Speaker C: So, interesting.
[00:17:11] Speaker D: Yeah.
[00:17:12] Speaker C: What makes Spartan different than others in your industry?
[00:17:16] Speaker D: Yeah. For the longest time, you know, we've really found what our niche is, and that's our values. You know, we say, invest in our values. Our values are defined by our grits, which is growth, respect, integrity, tenacity, and transparency. And I think having a values driven company guides our day to day actions. And having leadership that cares about our values and talks to our team members about that and eliminates those who don't meet with our values or meet our values. Whether it be a contractor or someone we work with, we always are focused on living by our values. And I think that has helped guide us to make great decisions. And, you know, that followed through with the grit and just making sure our values are followed during the hiring process has really helped us to assemble a great team.
[00:18:04] Speaker C: Yeah. Where are you located?
[00:18:06] Speaker D: Our headquarters is in Golden, Colorado, and our capital team is based in. We have a satellite office in Seattle, Washington.
[00:18:14] Speaker C: Okay. Is that where most of your properties are located or.
[00:18:18] Speaker D: No, by state? Our most. Our biggest footprint is in Texas and followed by Georgia. And then it's a kind of a mixed bag between Tennessee, Florida, Colorado, and Wisconsin, so. But we're picking up. We have. We have three now in Kentucky, and we're working on adding a few more in the Carolinas right now through acquisitions, so. But our biggest footprint by far is Texas, Dallas Fort Worth, Tyler Longview, Houston area. We have. We're pretty much all over the state. Yeah.
[00:18:54] Speaker C: Where do you see the next projects outside of what you just described?
[00:18:59] Speaker D: Yeah.
[00:18:59] Speaker C: So is there something else you guys are really just honed in on over the next year or two?
[00:19:03] Speaker D: Yeah. So we're looking for growth. So we focus just on the bedroom communities surrounding a major metropolitan area. So we'll look at tertiary markets. So if you think of. If you're familiar with Dallas Fort Worth metroplex, we look at places like Wexahatchee, Forest Hill, Richmond Hills. We look at Tyler Longview. You know, we won't be in Dallas, but we'll be in Corsicana, Texas, which is about an hour and 20 minutes south. So we're very much focused on the bedroom communities where the growth is going. And we will be in any market that has 2% or more population growth, 1% income growth. We like to see that. And then we like to see access to population within a 30 minutes drive. Time.
[00:19:49] Speaker C: Supply and demand.
[00:19:50] Speaker D: Yep. So that's where the people go, is where storage goes.
And then we look for economic drivers, like, we're investing in Raleigh Durham right now. And it's a fantastic market. You know, we're investing in Louisville, around the two properties in Louisville that we're buying.
It's eight times the national population growth, two times more than the income growth around the property. So we love that.
[00:20:15] Speaker C: Nice.
[00:20:16] Speaker D: Yeah. So we'll look for, you know, macroeconomic trends bring us to the area, but then, like I said earlier, that micro local market drives it home. It drives it home. Yeah. It has to make sense. Yeah. Where we won't invest, we won't invest in. You know, I can say this because I'm from Detroit, but we won't invest in cities that have declining population or declining income growth, things like that. We'll stay away from, you know, most cities in the midwest, with few exceptions of like Madison that's growing, or places like Columbus that are growing, Columbus, Ohio. But we'll stay away from cities that don't have those good macroeconomic drivers to the area.
[00:20:56] Speaker A: Okay, you're listening to PTC point of view brought to you by preferred trust company.
[00:21:08] Speaker C: Are there any questions I haven't asked you that I should have?
[00:21:12] Speaker D: I think what you asked in the beginning probably couldn't be stressed enough, which is site selection. You know, does this facility make the most sense to buy? I think if you're looking at investing or if you're looking at building yourself, I think, you know, really understanding the main economic drivers that make a self storage site feasible is a really important thing to understand.
So I would usually people don't ask enough about that. I can't stress that enough. I would probably say that most people don't understand why we love our self storage in the United States in general. And it's not because we have too much stuff. I mean, we do have too much stuff, but life events are what drive people to use self storage, and I think that cannot be underscored enough. The reason why we had high occupancy and Covid and storage occupancy just absolutely surged, and rents were up 1213 percent year over year is because America had a massive life event, and people can use self storage as a tool. It doesn't exist in a lot of places in the world, but where it does exist, it thrives when there's life events. Another great example is I think self storage is kind of foolish. I get rid of stuff, I put it on buy nothing groups, I jettison things that we haven't touched in six months.
[00:22:30] Speaker C: That's not most people.
[00:22:31] Speaker D: That's not most people. However, I had a life event. I had two kids, and I had to expand my house, so I moved all my stuff into storage while we renovated our entire house and expanded it. And then, and I was like, I'm just gonna need this storage unit for maybe two months. Two years later, two years later, I'm pulling my stuff out of self storage because the renovation scope creeps. And we did way more than we thought, and it took a lot longer than we ever imagined, so I think it can't be understated. And 30% of our customers are actually businesses. So when you think about COVID and everybody leaving the office environment, you think about restaurants having to put things in storage or swap stuff out.
It just drives the business. And whether you're in a thriving economy or in a down market, you have life events, and you have self storage needs. I think that's why it's one of the fastest growing segments in commercial real estate, and that's why we continue to see the highest occupancies and the highest rent growth, you know, across the. Across the board.
[00:23:37] Speaker C: Yeah. Well, I'm glad you hit that home, because I will never forget that life events correlate to storage, because it's so true. When you said that, I was like, oh, yeah, I remember my mother in law died. You know what we did? We had life events. You get married, you're merging homes. Life event. You don't want to get rid of something. Somebody wants it. The other person's like, no, please. This. You know, this isn't a bachelor pad anymore. You're 100% correct.
[00:24:01] Speaker D: Yeah. And I like to get to know my. I like to get to get to know my passengers when I fly.
[00:24:05] Speaker C: Yeah.
[00:24:05] Speaker D: And in the last few trips I did was during COVID right when Covid started. And I'm flying, you know, a 200 passenger jet down to Orlando, and it's empty, and there's one passenger on the plane. And so I went to that passenger, and I said, I got to ask you, like, what are you doing?
[00:24:23] Speaker C: Yeah.
[00:24:24] Speaker D: And she said, my mother in law just passed away.
I'm flying to Florida to put herself and put her stuff into storage. And I was like, there you go. Doesn't matter what's going on in the world. The one person on the plane is literally going and using self storage. So it's a thing that really adds value. One more thing. If I could sneak it in there. How do you add value to a self storage facility? I think is a question that I commonly get. So multifamily, it's pretty easy, right? Well, not easy. It's hard work. But you buy 300 units, and the rent's below market, and then you take 100, and you upgrade them with washers and dryers and floor packages and things like that, and then you raise the rents and you boost the NoI. So self storage is mom and pop heavily, heavily owned by mom and pop, and they just care about occupancy, and they don't care about marketing and revenue and optimization and ancillary income and things like that. So I think the way we really find value in self storage is we will buy a property that haven't has, you know, haven't had the rents increased in, like, 2030. Years. And the market rents are 40, 50% higher than what we're purchasing.
[00:25:25] Speaker C: Instant.
[00:25:26] Speaker D: Instant bump. And we don't have to take the unit offline. It's an empty box.
[00:25:30] Speaker C: Yeah.
[00:25:30] Speaker D: The other thing that we do is we sell tenant insurance. So when you come to our stores, you have to buy, you have to be insured. You don't have to buy our insurance, but we actually provide the insurance and then we, we revenue share that insurance. So our goal is to constantly make sure that all of our customers are insured and we share on that revenue quite a bit. So.
[00:25:51] Speaker C: I like that. I like that.
[00:25:52] Speaker D: Yeah.
[00:25:53] Speaker C: Well, Ryan, it was great to have you today.
[00:25:55] Speaker D: Thank you.
[00:25:56] Speaker C: But before we leave, tell our listeners, how do they find you? How do they find Spartan investment Group?
[00:26:02] Speaker D: Yeah, so our website is spartan investors.com dot. You can email
[email protected], or you can find me on LinkedIn. I'm pretty active on LinkedIn. And, or you can check out our social channels, YouTube, Spartan Investment Group and our Facebook page as well.
[00:26:21] Speaker C: Great. It's great to have you today.
[00:26:23] Speaker D: Thanks for having me.
[00:26:23] Speaker C: Thanks.
[00:26:25] Speaker A: Thanks for joining us for another episode of PTC Point of View, where retirement savers meet alternative investments. Know someone who's struggling with a retirement strategy? Tell them about our show. Can't wait for the next episode. To learn more, visit our
[email protected], or give us a call at 888992.
