Tom Dunkel

Welcome to the Real Estate Espresso Podcast, your morning shot of what's new in the world of real estate investing. I'm your host, Victor Menashe. This is the Weekend Edition where we interview notable people from the world of real estate investing. Today is no exception. We have a great guest all the way from Wayne, Pennsylvania, just outside of Philadelphia. Welcome to the show, Tom Dunkle.

Thank you, Victor. It's a pleasure being with you today.

Great to have you here. Now, Tom, you're involved in the world of self storage, as are we, and I love the space. Before we dive into those details, why don't you give us a little bit of your backstory and how you got to this point in your journey.

Sure. Thanks again, Victor. Very happy to be with you and the listeners today. I'm born and raised outside the Philadelphia area, outside Philadelphia, and did the old college and business school. I was in corporate America for a good 12 years where I was doing corporate finance and mergers and acquisitions. I had a great background there, worked with some incredible people. I cannot say enough about the great people I worked with. Ex military, ex fighter pilots, ex marines. So it was just a great environment to learn and cut my teeth. So I really got the deal bug back then doing mergers and acquisitions, raising a lot of money. But I always had the desire to go out on my own. So after having a career in corporate finance for that period of time, my boss at the time, in 2006, I was reporting to the CFO of a publicly traded company and said something very interesting to me that day. He said, you're fired. So gave me the kick in the pants that I needed to go out and finally do what I wanted to do, which was have my own business. And I'd always been interested in real estate. So since then I've been just trying out different things in real estate. And for the last about three years, we've been focused almost entirely on self storage because we just are very excited about the space. We've pulled together a fantastic team and we're just able to learn from all of our other experiences in real estate to really build. Maybe not a huge organization, but certainly an organization with passion, works with excellence. And I feel like we pound for pound, I think we're pretty amazing organization with world class people.

I love that. Well, there's no one set journey into this world, is there? There's so many different pathways. And maybe after the podcast interview we'll compare notes on corporate finance and M and A, because that's an area that I've Had a little bit of exposure to as well. And it's exciting and it's an adrenaline rush and all of those crazy things that happen during the whole M and A process.

Yes.

Now in the world of self storage, there's many different segments. So let's drill down, focus a little bit. Are you focused on your traditional box storage? Climate controlled, not climate controlled. Is it boat and rv? Is it new build? Is it value add? There's so many different ways to attack this business.

Yeah, there certainly are, Victor, and there's a lot of ways to win in this business. And I think there's just enough room for everyone. So like you, Victor, I'm happy to kind of share what we're doing and help out folks any way that I can. Whatever I can share. We are a value add shop. So we acquire mom and pop self storage facilities in the eastern United States that are generally in the 20 to 50,000 square foot range, bigger than maybe a mom and pop investor, but smaller than a real estate investment trust or a big private equity investor. So we play in that level of the market and we are looking for facilities that are not being run very well. And so we come in with our operations team and we turn those facilities around, we increase the revenue, we manage the expenses, we use technology to help to do that. And then ultimately we're going to exit that facility either by selling it or refinancing it in a compressed time period, two to three years.

When we do due diligence on any particular project, we're always looking at three things. We're looking at the submarket and seeing what the submarket is telling us. And when I say that, I mean in a hyperlocal sense. See what that submarket is telling us in terms of supply and demand. We're looking at, of course, the people involved. Who's the team that's ultimately going to be the boots on the ground running it. And then of course, the specifics of the deal. How do you make a decision you're going into maybe a primary market, maybe even a tertiary market for one of these facilities that is maybe in the fourth quarter, it hasn't been run very well and you're looking to execute a turnaround. How do you segment your due diligence?

Well, I think you hit the nail on the head, Victor. One of the first things we do is really dig into the market because we want to see who are the competitors, Are they full? What are their rates doing? How are their rates trending? So for example, we have a facility in Mount Airy, North Carolina, which is about 40 minutes northwest of Winston Salem. And we were buying this facility, we saw there was a lot of competition. So at first we were a little nervous about that. But as we dug into it, we saw that they were all full and our rates were well below theirs. I want to say 16, 17%. This is going back a couple years. And so we realized, hey, we can really work this demand curve here because we might be able to raise rates. And if our customers look to go somewhere else, well, they're not going to be able to go anywhere else because there's no other facility in the area that has any units available. So we were able to go in there and we were pretty aggressive about raising rates. In fact, we ended up raising rates above where the competitors were. And then they actually followed us. So I don't know, they should be sending me a holiday card or a little bonus or something because we're making them a little more money now. We're always looking at the market. We have several databases that we subscribe to. I'm sure you're familiar with some of those. We're just really combing through that information for sure. And then yeah, we're looking at the facility itself, those financials, using kind of my background in M and A and corporate finance and model building, that was kind of my thing. So I'm the kind of senior Excel nerd on our team. So we put those models together and we stress test them, we look at how much we might be able to push revenue, what we can do to manage on the expense side. And we're looking at really ultimately how can we deliver a solid return to our investors. And if the deal looks like it's going to work, we'll go after it. If it doesn't, we'll move on to the next one. And we do off market deals. We just closed our ninth acquisition and all but one of them was off market deal. So we really like finding those.

Fabulous. So when you go into a market and you've got a mom and pop shop that's been run the old fashioned way, they maybe have a banner outside no digital marketing. How do you approach that? Do you get aggressive on the digital marketing side? How are you approaching modernizing the business not just from an operations standpoint? Sure.

Well, we definitely go after the digital marketing. All the trends are showing us that folks are wanting to rent a unit from their smartphone. So we're doing the search engine optimization, etc. So that we can be one of the top results on a Google search. And so that way the customer can just click right through on their smartphone and bingo, they've got a unit. So yeah, we're absolutely doing that. And then we do some of the simple blocking and tackling things like feather banners outside on the street, hopefully facilities in a visible location. So we like to do those kinds of things. We like to freshen up the signage, make the signage nice and clear with the phone number and website. So yeah, we do all of those basic things. And that's honestly one of the things I really like about self storage is there's not a lot of rocket science involved here. I mean it's concrete floors, metal boxes and roll up doors. And so it's not a super complicated business, but we do take a business and professional approach to it. And so we use those marketing channels as best we can to make sure we're keeping our facility full and keeping our rates competitive.

If you segment your customer base, their needs are different. Maybe a college student is going to be very different from a law office that's got years of legal records or medical office that's got years of medical records, some of which need to be kept, some of which need to be shredded once they age past a certain point. Do you segment the customer base at all and target offerings specifically to them, or are you just saying we're just generic storage? How do you approach it?

Well, using technology and especially now in the post pandemic world where people seem to be more comfortable not interacting with a human unless they absolutely have to, we're finding any technology user is going to be more likely to be a customer of ours than not. Now of course, we're inheriting customers from our moms and pops that we're buying from who a lot of times are not very tech savvy. So we do have kind of everywhere in between and we do our best to help those folks out as well. But it boils down to the market as well, Victor, because we do have facilities that are near colleges, so we're sensitive to that. It's, it's a little bit of a love hate relationship with the students because there is demand there for storage units, but it's typically for a short period of time and then they all move out and now you've got potential vacancies to fill up. It really boils down to that specific market and that specific facility, whether it's climate control or non climate control. And that's really where our operations team kicks into gear. They are outstanding at figuring out the market and getting the Right. Customers into our facilities.

I love it. Well, Tom, if folks want to connect, if they want to learn more, I know you've got some resources on your website that can help people understand the business a little deeper. What's the best way?

Yeah, we do, Victor. Thank you. So I encourage everyone to Visit our website, bellrosestoragegroup.com we have a resource there that I think folks will find very valuable. And it's free. No information is needed to get it. I know a lot of times you need to give all kinds of information about yourself to get a freebie, but this is truly a freebie. I just want to share with the people out there things that I've learned over the years. We have a resource that we call an ebook called the Safe Investing Method. And it's not just for self storage. It's for all kinds of alternative investments or really any kind of investments. And it's something that I developed over the years because I've been a high net worth investor now for 16 years and learned a lot of things along the way, made mistakes. But ultimately this resource is designed for people who might be too busy or they're curious about alternative investments. They see that self storage is a great market, but they're just not sure how to get started. So, so this is a resource. Again, it's called the Safe Investment method and SAFE is an acronym. It stands for S. Safe S is for sponsor. Who's the person or the company that you're handing over your hard earned money to and gives a list of questions to ask about the sponsor. And ultimately the question is, can you sleep well at night knowing that this person or this group has your hard earned money? A is for asset. So it's a list of questions so that investors can get a sense of what is the asset that they're purchasing. So in the deals that we do, the syndications that we do for self storage, our investors are purchasing membership interests in an LLC that owns a storage facility. I challenge someone who's buying Bitcoin to tell me what they're really investing in. But that's for another podcast. F is for financials. So you need to understand the financial projections and the key financial metrics of this investment opportunity. So whole list of questions about that. And then E is for exit. So exit is how do you get out of this thing? You can't really go to schwab.com and click, click, click and sell your membership interests in the LLC that owns the self storage facility because it's just not set up that way. So as an alternative investor, you need to be comfortable a lot of times with having your money tied up for, you know, two, three, four, 10 years, perhaps, depending on the deal. So that's the Safe method in a nutshell. And I think it's a good resource for busy people who are professionals. And maybe they don't have a ton of time to go out and find their own deals, but they are interested in it. So hopefully this resource will be helpful for folks out there.

Fabulous. Well, Tom, love the perspective, love watching your journey. And for the listeners at home, definitely connect with Tom at bellrosestoragegroup. Com. The link will be in the show notes and download the ebook on their Safe method. In the meantime, have an awesome rest of your weekend. Go make some great things happen. We'll talk to you again tomorrow.