Making Money in Multifamily Real Estate Show

178 | Self Storage metrics, advancements in tech, and opportunities to scale with Scott Krone

May 18, 2022 Dave Morgia Season 1
Making Money in Multifamily Real Estate Show
178 | Self Storage metrics, advancements in tech, and opportunities to scale with Scott Krone
Show Notes Transcript

Scott's Background:

  • Scott is a Chicago native whose career began in 1991 by pursuing his Masters of Architecture from the Illinois Institute of Technology.
  • Fast forward to 2012, Scott founded Coda Management Group – a firm who specializes in managing real estate assets. Since its inception, Coda manages a wide range of real estate including single and multi-family homes, retail, commercial warehouse, self- storage and multi-use flex athletic spaces. Currently, their investments total over $55 million.
  • Scott has authored High Performance Homes – Navigating the Green Road to Your Dream Home, a book for homeowner’s seeking to incorporate green technology into their home.

In this episode we cover:

  • 03:02 Scott's Transition into RE
  • 08:52 Good investment metrics for Self Storage
  • 14:08 All in costs and risk/reward
  • 20:22 Biggest hedge on a proforma
  • 23:00 Staying focused on economies of scale
  • 26:00 5 Key Questions

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Intro:

Welcome to the Making Money in Multifamily Show, where we discuss everything to do with multifamily real estate investing. We believe it's the best way to gain financial freedom and build lasting wealth. This is where you'll find it the best information and practices to help you succeed in your real estate business, whether you're already experienced or just starting out. Here's your host, Dave Morgia.

Dave Morgia:

hello listener and welcome to the show. I'm your host, Dave Morgia. And with me today is Scott Krone. Scott, welcome to the show. Thanks for having me, Dave. I'm really looking forward to this. Yeah, should be a good one. And just for the listener wanted to fill you in about Scott's background. Scott started his career back in 1991. After getting his master's in architecture from the Illinois Institute of Technology, fast forwarding to 2012 Scott founded Kota Management Group, a firm who specializes in managing real estate assets. since its birth, Kota has managed a wide range of real estate, including single and multifamily, retail, commercial warehouse, self storage, and Multiflex athletic spaces. And currently, their investments totaled over 55 million. And last but not least, Scott has authored high performance homes, navigating the Green Road to your dream home, which is a book for homeowners seeking to incorporate green technology into their home. I thought that was pretty interesting. Yeah. So yeah, I appreciate you coming on. And I just would just give the listeners a little bit more of your background. If in case I missed any of the gaps there.

Scott Krone:

I appreciate it. You know, my while doing my master's, I worked for my professor. And so my background is really in multifamily, because he was a multifamily developer, and architect and contractor. And so my master's thesis was one of his projects. And I was the only one who went to an undergraduate that was not architecture. So that meant I could read and write. And so I got, I got put more on the development side of things. And then while in class, I was working on the architectural side of things. And so you know, I began really learning the business side. And so that's how I got more into being a developer than just strictly being an architect. And, you know, I started my company at the ripe old age of 28. And we began with single family, and then, you know, after a few of those we got into multifamily. And then that led to mixed use. And we also worked on a bunch of churches and things along those lines. So it's been a pretty diverse career. But our specialty right now is what we're focusing in on is the Self Storage arena.

Dave Morgia:

Yeah, you know, there's a large gap there between the birth of the you know, interest in real estate and getting into that sort of thing and what you're into today, before we get into maybe the current status of code, and what you guys are into, was it kind of more of like a total switch that kind of hit in your head that you wanted to get more into that side of things instead of the architecture? Or what was kind of the was it more of like a malleable path to get into kind of your focus now?

Scott Krone:

Well, I think it was way back when I was in class. You know, we were, you know, my, had three weeks off between college and graduate school. And so the first class that we had to take to, it was like a pre qualification. So we were, you know, qualified to get into the school, but we had to pass that first class in order to continue the program. And that was from like nine to five every day. We'd been in Crown Hall, which is a Mies van der Rohe, classic building all glass. And so it meant they got really hot during the summer. And we were just drawing we were drawing for, like, you know, from nine in the morning till five at night, every day. And so as we're drawing, there's plenty of time just to talk. And we were talking about, you know, the process, you know, the what, what is the process within real estate and construction and development and all those sorts of things. And it became very clear to me that the developers control the whole process, it wasn't the architect or the contractor is really the developer. So if I was going to best understand the industry, I really had to understand it from the perspective of a developer. And that's how I got connected to my professor who was the, you know, I was his TA. And he owned this company that developed and at that point in time, the the first project I worked on was $100 million project. And so, you know, is just dumping into the deep end and getting submerged in it. And so, you know, here I was designing things and then also working on the entire financial performance for this. And keep in mind, this is a long time ago, I mean, you know, I don't have much hair on the back anymore, but you know, we were working with, you might not even know these words, but like WordPerfect and Quadra Pro and, you know,

Dave Morgia:

I recognize cloudtrail Probably not the first one. He was, like, the

Scott Krone:

precursor to Word and Excel, right. And, you know, the systems were so old, you know, or not old at that point, and they're brand new, but, you know, I'm sitting there, the file was so big that I was trying to click on something they would take, like three minutes for the cursor to move, and I'm sitting there You know, just waiting for it to happen. And the owner comes by and goes, What are you doing? I'm like, he goes, Why aren't you working? I'm like, I'm waiting for the computer respond. And he looked at me, he could see it just sort of spinning. That's all he knew about computers. Like if there was anything that he knew he couldn't do anything, right. And so he goes, That's not good. He walks away, you know, and the next day, I find out that they've ordered we like the largest computer that they can possibly get. So I can process all this information. So I mean, that's what it was way back when 30 years ago.

Dave Morgia:

And I mean, I'm sure you'd agree. But the space not only just real estate, but everything in general, access is just at your fingertips specifically in real estate, you can do just about anything, and it seems like minutes compared to, to what it used to be. It's still a slower space, I think, in general, as far as like adopting technology, and all those things go, but it's amazing. You know, how much can get done today, compared to the stories you're talking about? I can't even imagine I remember having my first my first laptop, back when I was I don't know, in middle school or something. And that was like, the coolest thing and had barely like a functioning trackpad and all these things, but it was, you know, same thing, typing up Word documents, or whatever. And it was like, Wow, I'm doing it. But, uh, yeah, much different today. So I guess maybe we'll we'll kind of catch up to now, you mentioned, you know, self storage, investing. So what is kind of your guys's focus? Obviously, it's that but you know, where are you guys looking to buy properties? How are you looking to, you know, do deals these days?

Scott Krone:

Well, we're doing a couple different things. One, you know, we have not taken the developer out of our business. So what we're looking for is underperforming commercial buildings, and we actually convert them into self storage. So the idea is that we can buy them far below replacement costs, rehab them and convert them in in markets that are, you know, needing self storage, or we're buying existing facilities. And we're trying to making sure that we can improve them either from a performance or side of things or increase the number of units, or both. And so those are the things that we're predominantly doing. And we're focusing on the Midwest, the flyover states. So right now we have properties from Wisconsin, Illinois, Michigan, Ohio, Kentucky, Virginia, in Maine, those are the areas where we have properties right now.

Dave Morgia:

Okay, so quite a spread estate's how, I guess, local, is your search, are you really kind of pushing, you know, local communities to help redevelop these? Or are you just really looking at opportunities that are kind of already zoned for this type of conversion, that it's a little easier to get the paperwork done and get to building?

Scott Krone:

Well, if we're doing conversions, then we're looking at bigger urban areas. So you know, because we're looking for an industrial space that is, or commercial space. I mean, we bought office space and converted it. But we're looking in predominantly cities, because that's where you have more of the density. So like, for instance, in Chicago, we have over half a million people within three miles of our facility, and within five miles in Wisconsin and Milwaukee. So incredibly dense area. So we're looking for growth in those areas we're looking for under, we look at square foot, per capita, and there's a there's a saturation level, and we want to be well below that saturation level. For the Midwest, it's around seven square feet of lockers per capita. I mean, we're seeing new developments in Florida, which they're building at 13. And we're like, those are just markets we're avoiding. And so, you know, that is what we're trying to do is find those underserved markets. If we're buying an existing facility, then we're obviously looking at what are the underlying demographics? What are the underlying, you know, pricing of that market to see what ability is there to expand or improve the asset.

Dave Morgia:

So with you guys being in mostly what you call the flyover states, you mentioned that seven price or seven per square foot per capita, what exactly is that a relatively consistent number, I guess, would you say across the states? I'm sure it's not totally consistent, but But if not, what would be like the variance that you would call to be deemed appropriately low enough for you guys to invest in a certain area?

Scott Krone:

Well, when we first got into it, it was seven in like New York, and Florida was at nine. And as I said, like Florida now is at 13. So predominantly, if I just look, generally speaking at the country, the East Coast, Florida, Texas, and then the West Coast, are heavily saturated. So, you know, is it possible to find a location in those markets? Sure. But you know, nine times out of 10. You know, the market is such that it's heavily saturated. You know, I have a story when I went to a conference in California, and this woman's like, oh, yeah, she was a single family home developer. And she's like, oh, yeah, I'm gonna I have this piece of property. It's like 10 acres. I'm gonna develop self storage there. And I'm like, why have you done a feasibility report? And she's like, No, she, and I said, Well, why not? She goes, Well, I figured that when I decided to do it, they would just tell me what to build. And I said, No, the feasibility study is just to determine whether or not you should build. And I said, Why don't you give me the address and I'll, I'll just do a quick, cursory look, and then I'll have it the report done more in depth in terms of what the saturation is. And I tell you In the address, it wasn't near Austin taxes. And I did all I do is put in the address, and I did Self Storage near me. And like 27 facilities came lit up with like, in two miles, right. And I saw her the next day at the conference. And I said, you know, I haven't done. I haven't gotten back the full report yet. But I'm pretty certain what it's going to say, because of the fact that you have 27 facilities within two miles. She's like, No, I don't, I'm like, Okay, I'm not gonna argue with you, but just, you know, put it in Google. And sure enough, like, the market report came back. And she she was at nine, before, you know, her project was even on the books. And so, you know, I just told him to go, you can do whatever you want. But it's not a market that I would ever build self storage in, and just left it at that. But that's, you know, we look very specifically, we'll put in the actual address to determine what that market is. Now, your your question was, is every market good for I mean, we looked at one where just recently, it was North, a tech is north of Austin, and, like an hour north, and they they were promoting that we could expand this facility, there was already like, 150 units. And I said, Well, what's the demographics out there? And we did the one mile, and there was less people in the community than there were lockers.

Dave Morgia:

I was just like, that's gotta be rare.

Scott Krone:

We're not going after that facility. That's just way too low, right? So we look that they're scattered, we typically you want to have like, 10% of the population of the population is lockers. I mean, 10% of the population buys lockers. So that's a that's a good ratio right there.

Dave Morgia:

And you mentioned that feasibility report, I'd love to pick it that for a minute. I'm sure you're doing probably on just about every every site that you're looking at potentially grown to build. What exactly would deter you from that report to say, this is not enough? And I guess even better, is there sometimes some situation where you kind of went against a recommendation in the report, just because you were seeing something else that that maybe the report didn't cover?

Scott Krone:

We've never gone against the report, that, you know, we hire third party consultants to protect us. And that's, you know, one of the underlying factors there. So, we do look to see is like, does the data makes sense? You know, and if we have questions on that, then we'll certainly raise those questions with the consultant. And we'll have conversations about them. So it's, it's not like we just get the report, and we never want it done. Right. It's not one and done. So, you know, if the location is more rural than, you know, the reports can get a little whacked or out of skew based upon an urban setting. And so we want to make sure that we understand the data for what it's saying, comparatively to what is really happening in the marketplace. So, so we've always gone with it. And, you know, I will also add, that by the time we order the report, we've already done an extensive amount of our own due diligence, that we have a pretty good sense of what the reports can say. I mean, it's not too often we're shocked by the report.

Dave Morgia:

Now, and I think you answered my roundabout question, pretty direct way. The data is the data but qualifying it and kind of quantifying it is, can be can be tricky, I guess. So. Yeah. It was just more curious to see, you know, in markets that you're not too familiar, how you basically colorize everything to make sense of it. And yeah, it just seems like you have to be careful. Because if you assume something from a report, it can be dangerous. But but essentially doing your due diligence and asking the right questions essentially gets you there. 9.9 times out of 10. So, so I'd say you're probably probably doing it. Alright. But yeah, getting getting back into, I guess, the site building way back earlier, you mentioned, you know, obviously you'll build when the purchase price plus plus the build cost makes sense? Is that number different versus what you just buy outright? For? I assume it is because there's more risk on a project like that. And how would you kind of back those numbers out?

Scott Krone:

Well, ultimately, whenever we do a buy, we're looking at, you know, the purchase price is always the last number. Does that make sense? Yeah. So the cost of the land or the class of the existing building is always we back into that number. So we you know, if we're looking at an existing facility, we'll run the numbers and then see if what the broker is doing is an appropriate cat cap rate. And is the valuation higher lower comparatively mean? I just one on came across my desk literally yesterday morning, like a three and a half cap at $27 million. And I was like, holy cow. That is like the highest one I've ever seen. And it wasn't even like your typical class a it was a drive up type facility. But $27 million, and I was just like This is pushing like new. I mean, of course, I just went, delete.

Dave Morgia:

Yeah. Getting Past replacement costs there potentially. So, yeah,

Scott Krone:

I mean, I mean, right now, I mean, the cap rate is lower than the interest rate, you know, so that it just what does that say right there in terms of the investment in ability. So that is one of the things that we look at is like, does, it doesn't make sense, and then we back into the number. And so you know, we won't, we won't really look at what the brokers asking for, we'll do our own underwriting and seeing like, Okay, if it's an A class, a B class, or C class, which is, you know, different types of self storage, rather than bad or good neighborhoods, it's really more of a different type of self storage. So typically, our class A's are big facilities over, you know, four or 500 units, so you can drive into them fully climate control, we consider those to be like a growth stock, and more suburban in maybe climate control. But newer, you know, between 200, and maybe 400 500, tops units would be a Class B, and that's like a blue chip stock, and then the small mom and pop one out in the country, you know, we consider that a Class C, which is like first generation, and that's like a penny stock. And each of those cases, you can certainly make money. But what we're doing is we're saying, Okay, if someone's coming to us, and they're like, it's a Class C, and they're putting a four cap on it, and they don't have the accurate books and records, then, you know, then it makes us really hard for us to justify buying that. And so we won't even really begin the conversation there will begin the conversation based on the data that we do have and say, This is what the market is in, you know, this is where we're comfortable making an offer.

Dave Morgia:

That's a that's a really great point that, when I'll relate it back to just traditional multifamily. It's kind of gets overlooked sometimes is the accuracy and the availability of data when you're talking across asset classes. Like you say, if you have a C class, and you have to do all this legwork to figure out the numbers and you're still not sure the numbers then if you were looking at an A class property, that's, that's kind of tough, and it leaves a lot of risk out there, you know, to then move forward with that C Class property, not that it's comparing apples to apples to the A Class piece. But it definitely can be trickier on the risk profile to justify you buying something at a low cap rate. So is there anything I mean, you said you'll you'll touch anything? But is there anything you're kind of just really not counting on asset class wise closing in the kind of transitory or pre transitory period? You would call it right now? Whatever you may call it?

Scott Krone:

No, I mean, we just bought a, you're making a great point about the current state of the economy that was just won an award out in Vegas last week, and I my speech about was what was happening with the economy, and where we're headed, and I definitely believe we're heading towards recession very quickly. I think before the midterms, we will be in a recessionary market. But that being said, I mean, the reason why we've gotten into self storage is I've studied the market of self storage. And I went back and studied it all the way to when I first got into this, which was massive inflation. And you know, the late 90s. I mean, I mean, sorry, late 80s, early 90s, when I first was starting to work on multifamily banks were coming to us and say, Hey, do you want to buy points, as a developer to offer them to your buyers, that it's more incentive? And I was like, you know, I here I am, like a, you know, 22 year old kid, I'm like, What do you mean buying points? You know, I had never, you know, bought a house before. So I had no idea what points were. And what they were saying is like, if the developer goes and buys like, call it two points for the total value of the of the asset $100 million, they would can then pass on a cap lock on the interest rates. So if the interest rates were at seven, they could offer him at 5%, because the developer had bought two points. And so because the interest rates were so high, I mean, comparatively to now they were like triple. And so you know, that was the first recessionary market that we looked at, we looked at also back at the late 70s, when we had the oil embargo. And then we looked at when the the internet bust crash. And then we looked at 911, we looked at Oh, 809 when the whole housing market crashed, and then we look at the pandemic, which technically wasn't even a recession. But it was like, massive drop in the gross domestic product. No reason why it wasn't recession was because we didn't sustain it for two consecutive quarters. It

Dave Morgia:

was by definition that long enough. Yeah. It was one

Scott Krone:

month. Yep. And so we classify we looked at all of those and then we compare what what was happening with self storage in terms of occupancy. And what we found was, it was basically staying at 90% like there'll be like a slight drop, and then a two or three point increase every single time. And, you know, it's like to me it's like a lot of people deemed Self Storage recessionary proof. I don't think there's anything proof in real estate you know, As soon as you make that comment, I guarantee the market will change. But I call it recessionary resistant, because of how well it performs itself in in a recessionary downward turn. So we're buying in preparing for that. But when we do buy, we stress, test it to make sure that we're not buying it too high, or looking at the overall value, put decreasing the valuation or income and see if it will still perform to make sure that we're covering ourselves.

Dave Morgia:

So let's, let's go there for a minute, talking about how you underwrite against and essentially hedge these pro formas. The big ones to me, or you kind of mentioned a big one already is buying points, getting a cap on your loan, I'm sure you guys are looking at that, depending on the deal. Another one is probably just making sure your forecast and expenses kind of properly. Because once once inflation kind of runs away, it might be tricky to keep up with expenses, if you're not, if you're underwriting them, you know, low low, kind of year over year, it'll it'll kind of get away from you. What else you guys looking at to kind of make sure you're okay, just exit caps is that probably the third biggest one, I assume?

Scott Krone:

I would say the biggest one is our acquisition, making sure that we're not overpaying

Dave Morgia:

by right is the biggest one. Exactly.

Scott Krone:

So you know, that's the first thing that we're doing is we're, you know, especially when we're buying a conversion, the fact that we're, you know, buying buildings for, you know, 1012 $13 per square foot, I can't build them for anywhere near that. So the fact that if I go in there, and I have a competitive advantage, because I'm building it 60% of the marketplace, comparative new construction, then I have a 40% margin that my competition doesn't have. And so that's what we're really looking for is making sure that we buy right, and then next thing we're doing is we're looking at operational expenses, making sure those are good. And that our you know, our, our marketing team is doing what they're supposed to be doing that we're getting our velocity. So those are the three things that we really focus in on. And then

Dave Morgia:

in this period, I mean, it sounds like you're pretty prepared for what may change in the coming months. You mentioned the midterm, who knows? You know, it's always a catalyst you never really expect not that I'm, you know, super, super senior, and I've seen a lot of downturns anything, but it seems like the catalysts are always kind of relatively unexpected. But what are you guys kind of doing on the activity side of things to make sure you're prepared to either, you know, slow down and tighten up the current properties you have under management or, you know, continue the activity? I guess, what is the game plan overall? For you guys? Are you adjusting any any at all in this time period, essentially,

Scott Krone:

we are adjusting we're, you know, right now, we're in the process of refinancing three of our assets. So that's, that's step number one. But two, we're also looking at how we can acquire more, because we, in a outside of self storage and recessionary market, things are going to be changing. So when we do buy, we're going to have to adjust for the the interest rates and the cap rates to see what will happen there. So you know, we are just making sure that when we're going into the acquisition mode, that our purchase price are good in our assumptions are conservative, we don't want to be overly aggressive in our in our assumptions.

Dave Morgia:

Yeah, that makes sense. I mean, with your thesis, you know, the recession resistance, like you called it sounds sounds like as long as, as you're buying, right. And I mean, with your background, it seems like the you know, the construction piece ends up being a pretty mitigated risk for you guys. So the all in cost is pretty mitigated. Sounds like there's no reason to really slow down. Is it going to be those markets to continue on, you know, the flyover states? Or is, are you just gonna kind of keep your eyes and ears open to maybe other opportunities, where are some sub markets may change,

Scott Krone:

we'll look at anything, but there's economies of scales for us to do things. So for instance, right now we have, you know, in Lansing, Michigan, and then we have Toledo, and then date and then Louisville. I mean, it literally in one day, we can hit all those because it's like a straight line, you know, just down that corridor that we can hit all four of those properties. So for us, there's economies of scale there. And same with Milwaukee and Chicago, you know, we can get back and forth between those two within an hour. So we're, you know, if something's out in Colorado, or Texas, or Oklahoma, or wherever, we'll look at it. But it's got to be, it's got to make it worth our while just to spend the day traveling just to that facility to make sure that it works.

Dave Morgia:

And I guess we're probably getting close to where I'd like to ask these five key questions. But before we get there, is there anything kind of in this space, whether it's, you know, talking about today, or maybe just rewinding to kind of your background in general, how you started out just some piece of information that you think maybe is a little bit useful for the listener?

Scott Krone:

Well, first of all, David, thanks for having me on the call today. And in appreciation for that. What we'd like to do is offer your listeners two tools about self storage so they can compare them to multifamily to self storage, because for me, you know, when people say to me like, Well, I understand multifamily, but I don't get self storage. I really don't understand that comment, because to me, I'm just running a box without a toilet. So I have I don't have you know, I don't have the calls in the middle of night like my toilets broken because I had a really fun time last night, and then I broken Well, you know, those sorts of calls. So the, you know, it's the most simplistic form of a rental unit that there is in my mind. So the two tools that we like to give your listeners if they email us, and they reference the show is one the feasibility study, you know, we will give them one that we did on our project in Dayton. So that way they can understand that market, but it also describes the overall self storage industry is and the nationwide. And then two will give them a self storage deal analyzer. So that you can put in your assumptions, and then you can play with the numbers, and it will calculate your NOI and your cap rate and all those things. And that way you can get a sense of, you know, what is, you know, what makes a good deal versus a not so good deal?

Dave Morgia:

Yeah, that's, that's incredible. I think, a lot of times starting out, if you don't have kind of at least a couple accessible tools, you kind of get that analysis, paralysis, and maybe just spin your wheels longer than he should have. So anything to get you, you know, moving in the positive direction is like the best best first step you can take. So appreciate that. But yes, as long as you're ready, I'd love to hit these five key questions. Absolutely. So the first one is, if you could only pick one trait that explains your success, what is that trait? And why?

Scott Krone:

I would, I would say my tenacity, you know, the, the, to go after something and work really hard at it. And to learn how to do that and to do it. Well, that has been one of the things that has driven me and making sure that I'm, you know, I don't It's not about being right, it's about doing it well. And that, to me is important and an underlying concept of our business.

Dave Morgia:

It is my favorite and most popular answer. And I've I've used that to my advantage by remind myself the same thing. So and then Scott, what is the most uncharacteristic thing you have done in your business? And why did you do it?

Scott Krone:

Well, I think the uncharacteristic thing is going into self storage. I mean, from you know, design point of view, it's like the most boring thing possible, because, you know, I'm designing boxes, right? So it doesn't take me that long to design things. And people are like, well, doesn't he get boring design? And I'm like, Yes, but that's why we also have our design build firm. So if you wanted me to design something else, that's exciting. That's fun. But you know, it's, it's really not that exciting, especially when you have an existing building. And all I'm doing is like, here's the office, here's where we get into the building. And then, you know, we're lay out lockers. I mean, it doesn't take that long. So that's the most uncharacteristic thing.

Dave Morgia:

Yeah, I guess I never really considered your background, how, how opposite that could be as far as you know, the entry goes on the art side of things, if you call it that, right. So that's really, really interesting. And then see I can you name a time where you felt like you were not going to end up successful and how did you overcome that fear?

Scott Krone:

Well, the first PUD that we did, which is a plant urban development, so we we were under contract to buy just under an acre. And it was a giant greenhouse, it was all glass structure. And we were going to tear it all down and put into it 12 townhomes. And to do that we had to go through the PUD project. And so we submitted a precursor to the city. And typically, we're always criticized for being too contemporary, you know, so we did a very traditional design, and we presented the city administrators, and she looked at me and she goes, shame on you. And I said, I'm sorry for what she was based upon your background and where you went to school. This should be a lot more contemporary. We want it more contemporary. I'm like, holy cow. Well, yeah, we'll make it work. And I said, you know, my only concern would be the neighbors that she goes, Don't worry about it. I'm like she goes, just have a community meeting and describe what you're doing. And so we came up with this idea, we actually altered the orientation of the townhomes so that every two townhomes were connected. And they were like, perpendicular to one another. And so they weren't just in a row, they they all had we we created these vistas and views. And so, you know, people's backyards were towards the street, because then we created berms and mounds and trees to create private spaces, but it gave every town home three views as opposed to just two views. And and we had a one big common driveway for everybody to use. So we minimize blacktop, we maximize green space, it was like very green component to what we were doing. And so we show up to host the meeting, and I kid you not there's like 250 people in this conference room at the community center. And we're doing a PUD, the best sign that you're gonna get approved is that nobody shows up. Okay, you really don't

Dave Morgia:

want to get there. You get a lot of interest in this one apparently. So yeah,

Scott Krone:

I mean, I've been through like one one project took 36 meetings, and they're like, this project is so ugly, it's like his tie, and I'm like, What's wrong with my tie? You know? So I'm just like, oh my gosh, we're dead in the water. I was convinced that there was no way we're gonna get through this meeting. And so I start my presentation, and people are just like, interrupting it interrupting. And I felt like I just said, you know, we'll answer some questions. And person raised their hand, I said, Okay, what they're like, is this gonna be low income housing? And I'm like, no, no, this is gonna be market rate housing, you know, nothing that we've ever presented as low income housing. And they're like, Okay, and then like, all the hands went down. And I'm like, is there any other questions, and then another hand shot, the, we don't like to yellow, we have really like this yellow trellises to designate the entrances to the spaces. And, you know, where the where the entrance to the homes were going to be? And they're like, does it have to be yellow? And I said, No, we just thought yellow was like a really nice color to bold, emphasize the entrance. Is there a color you prefer? And they said, Can you make it white? I said, Sure.

Dave Morgia:

And yeah, but imagine you just being firm on that one and killing the deal right there. Just because the firm on yellow, that's amazing.

Scott Krone:

Like, pretty much people just started leaving. Okay. And I mean, it was just like, him, like, is that the is that the concerns? And they're like, yep. And my partner's, like, I really wanted yellow. And I was like, we got it done. I don't mean it later. But I mean, it was like, the bottom line is, you know, we we listen to the response to the community, but I was convinced that I was dead in the water.

Dave Morgia:

Man, that is, that is very interesting. I guess the takeaway for you is maybe to, to, I don't know, somehow get it out to the public beforehand, you know, the the common concerns, so that way, they don't even have to show up to attend, I guess, I guess, color schemes. And, you know, the, the market for the housing is probably probably two pain points they care about, which is very interesting. But yeah,

Scott Krone:

if someone went around and was telling everybody that we were doing putting in low income housing, in reality, I probably should thank that person, because of the fact that when we took that off the table, I mean, that killed like, 90% of the concerns.

Dave Morgia:

Yeah, I guess it made him a much rosier appeal for everybody after that. So that's a good way.

Scott Krone:

We went before the city, we our consent agenda known Shut up.

Dave Morgia:

Easy Street after that nice. And then I guess maybe it's the same story, but pretty much the flip to that, can you name a time where something in your business went perfectly? And what did you do to make that a reality?

Scott Krone:

Well, I don't I don't know if there's ever a time where everything went perfectly. You know, we there obviously been times of greater success versus not greater success. And, you know, but fortunately, you know, I feel that we've been on the side of more success more than more than challenges. But the next PUD, we're not the next, but at UD that we did was, we were, you know, trying to convert this building into self storage. And we were looking at the code. And it was so archaic, that they basically said to us, we're really small community. And I mean, it was a very affluent community in a very good neighborhood. But they, the way the property was situated, we were in this small little annex portion of a village that was like way over here, and our property was way over there. And we're like, How in the world is this in this community? And they said, We don't have the manpower to write the zoning code. So will you write the zoning code, and we'll approve it? And I was like, oh, like, I'm a Master's in architecture, urban planning. But sure, if it's gonna get the project done, we'll we'll do it. And so, you know, that was like, pretty perfect in terms of the approval process. I mean, it was done in two months.

Dave Morgia:

Yeah. Sounds like as long as you, you know, did enough homework. And, and you presented a pretty good case there for the for the setup, it probably went pretty smoothly. So that's good. And I guess maybe they can use that for, you know, for any other reference for any future projects. So maybe that's what they were looking to get out of it. Who knows?

Scott Krone:

That's what they were looking to get out of it. And what we did is we modeled it after the county. So

Dave Morgia:

probably perfect. Yeah, you could just say it'd be comparison. Yeah. Here's a basis for it. That's awesome. And then last one, Scott, what do you been focusing on lately to improve yourself or your business?

Scott Krone:

That's, that's a question. And we could probably spend weeks on Sure. There's a lot to improve here. But I haven't been going through a two and a half year program on transformation. And so we meet quarterly, and it begins on Sunday afternoon. And it goes through Tuesday, around lunch or little later, depending on the week or the quarter. And it begins with silence and solitude. And we you know, there's you know, it's up at a monastery and the seminary for priests and so you know, we have these grand, huge spaces and you know, it's a huge outdoor area that too, we can go for long walks and stuff like that, but it gives me a lot of time to reflect and also look at different elements of my my life and my character and you know what's going on in my business and to so I can improve upon being a better leader within our business.

Dave Morgia:

Yeah, I think that's vitally important. And that avenue, that channel is different for everybody I, I run, that's how I kind of clear my head. I live in New York City. So there's not as a ton of greenery compared to something like that I do get out to, you know, the parks and stuff. But whatever that channel is for you to kind of, you know, clear your head and get some kind of alignment. Try to find it if you don't have it, you know, to the listener, because it's it's key, you really figure out a lot about yourself when you can sit and think for a minute. So,

Scott Krone:

absolutely. I mean, I begin every morning, you know, we get up at 530. And I head down to the beach, and even right now, I'm paddleboards last four days in a row. You know, just being on Lake Michigan and even granted the waters 38 degrees. But there's a lot of incentive not to fall in when the waters 30 degrees. And but today, I mean, it was looking at like, a sheet of gold. I mean, the sun was coming up, and it was all a bright yellow. And it was perfectly flat. And we're, you know, I'm out there and it's just quiet and still and it was less like, allow my mind and my, you know, everything that's going on and just to settle down and listen, rather than trying to think and solve, but just to listen.

Dave Morgia:

Yeah, you just get to like be for a moment, which is, you know, very rare. So you gotta appreciate it when you can definitely, definitely agree. But yeah, Scott, I know, you mentioned the feasibility report. I know you mentioned the underwriting sheet. If the listener wanted to reach out today, how else could they find you?

Scott Krone:

Well, if they just email us at info at Kota co D A, M g.com. Like I said, if they mentioned the show, Dave, we will we will forward the those things to them. But we're on Coda mg.com And we actually started our own brand, which is one stop self storage.com.

Dave Morgia:

Yeah, wealth analysis got a lot of self storage and like I don't like I say I don't I don't touch it heavily. And I do have, you know, kind of a supplementary knowledge of it, but you definitely got my gears turning on a couple of things. So I have a couple of friends that are investing in the space. I'm probably going to pick their brain after this one. So, Bobby, I much appreciate it. Scott. Thanks for joining me on the show today.

Scott Krone:

Thank you for having me.

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