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Joel Friedland is an industrial real estate veteran with over 40 years of experience. In this episode Joel shares his insights on the industrial real estate market, explaining how he focuses on B and C industrial buildings, which are older and have lower ceilings than modern warehouses. He discusses the high demand for these types of buildings, particularly from manufacturers, and how he often sells them to users at a premium. Joel also shares his strategy of doing all-cash deals with no mortgages to mitigate risk.  

2:33 Why the workforce is so important in the industrial business
5:02 The value of B and C industrial buildings
10:22 The impact of the internet on industrial real estate
35:06 Joel and Scott share their experiences with development and redevelopment


Joel’s entrepreneurial journey began at 14 when he ran a landscaping business, managing the yards of 70 families and employing 40 students. He later founded a brokerage firm overseeing 20 brokers. 


Over four decades, Joel has participated in nearly 100 acquisitions, amassing about 3 million square feet and raising over $250 million in private capital. Currently, he manages an 18-building industrial portfolio, emphasizing low-risk, cash-flow-centric investments. 



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Listen Notes
Episode Transcript

Joel Friedland (00:00):

That was when the market was bad. Every time I’ve been through a down cycle and the market’s bad, all we have to do is put a building on the market and sell it to a user and bam, we get a huge premium for it.

Announcer (00:23):

This is the Self-Storage podcast where we share the knowledge and skills from the industry’s leading investors, developers, and operators to help you launch and grow your self storage business. Your host, Scott Meyers, over the past 18 years has acquired, Developed, converted, and Syndicated Nearly 5 million Square feet of self-storage Nationwide With the Help of his incredible, who has helped thousands of people achieve greatness in self storage.

Scott Meyers (00:57):

Hello everyone, and welcome back to the Self-Storage Podcast. I am your host, Scott Meyers, and we have a special treat to this week. We have at none other than Mr. Joel Friedland on the podcast. And Joel and I, we share very similar career paths and investment strategies, except the asset class is different. He is an industrial, and even though those of us that are in self-storage, many times we are purchasing self-storage facilities that are considered industrial real estate. We’re also converting and buying these big box of vacant warehouses or industrial space and then turning them into self storage. So on the front end of that, we’re doing the exact same things that Joel is doing. It’s just that the backend product, sometimes it looks a little bit different, but to discuss all things industrial as well as overall where are we sitting in the commercial real estate market space? And I had a whole host of other questions that I have for Joel. I would like to welcome him to the show. So Joel, welcome to the Self-Storage podcast.

Joel Friedland (01:53):

Hi Scott. It’s great to see you.

Scott Meyers (01:55):

Great to see you as well, my friend. So I filled folks on a little bit on what you do, but if you would fill in the gaps and tell us a little bit about your story and how you landed in focusing on primarily in industrial real estate.

Joel Friedland (02:07):

Sure. Well, first of all, I am 64 and I’ve been in the industrial real estate business since I was 22 years old. So I’ve got over 40 years of experience in doing nothing but industrial. And by the way, that includes selling buildings to self-storage operators. So we can get into that. I think that’ll be interesting to talk about.

Scott Meyers (02:31):


Joel Friedland (02:33):

Today, very interesting day today, I just got back from a grand opening. We put a 40,000 square foot edition on a 60,000 square foot building where they make baked goods. It’s called Eli’s Cheesecake, and they make products for Starbucks. If you go to Starbucks, you know that Rice Krispy treat thing, I think it’s called a marshmallow dream


That’s in the place that was at today. So they gave me a booty bag including this at Eli’s Cheesecake, and we had our Governor Pritzker make a speech and we had a senator. It was great. They have a lot of disabled employees and they have a lot of refugee employees. So we heard from the people that helped that manufacturing company get those people. And the industrial business is all about people. It’s about employees where they’re all struggling Today. Unemployment is not the issue in our world. There’s not enough of a workforce, and so everybody in our type of buildings is desperate to find people. It’s really tough right now.

Scott Meyers (03:43):

Well, hey, first of all, storage Nation, if you didn’t notice, always be selling. And you notice what Joel did there. If you haven’t had the race, Chris retreats at Starbucks or going into Starbucks, you need to and be able to buy more so that his folks that just expanded into their building have enough to do and that they stay as tenants and profitable tenants in his industrial buildings. So well done, Joel moving that in. And


A hundred percent we have our own mastermind. So storage mastermind and I’m a part of another. And just in general, the discussion out there, whether we talk about the challenges in business right now, it’s a team that does everything that we do. It is certainly not me and it’s not Joel, it’s all our lieutenants below us, and then the folks that are right on down the line. And not to get on my soapbox and sound like my grandfather or somebody else’s. It is tough to find folks that have a good strong work ethic that want to be a part of something and that just, I dunno, just kind of get it. It is a challenge out there right now and we don’t seem to have the answer other than we just know that we need to interview a lot and we really need to provide a lot and create an environment that is enticing to people. And pay and plaques don’t do it anymore.

Joel Friedland (05:02):

No, it’s tough. Every industrial building, we own 20 industrial buildings right now in the Chicago area. Our specialty is owning b and C industrial, which is very different than those giant warehouses that you see on the side of the tollway. Our product is primarily 20,000 square foot buildings up to about a hundred thousand square feet. And what makes them b and c is that they don’t have that same kind of 36 foot clear ceiling because they’re older. And until just the last 15 years, most industrial buildings were built at about 16, 18, 20 foot clear. And so that’s what makes it a B building. It’s older, it’s got a lower ceiling and it might have fewer loading docks and it might not be quite as pretty as those painted those beautiful buildings. They come up with architectural designs. When you drive by, you see the windows on both ends, and then in the middle you see the truck docks.


But the walls, even though they’re very tall, they’ve come up with ways to make them look really attractive with medallions and stripes. Our buildings don’t look like that. Our buildings are older and the occupants of our buildings are mostly manufacturers because a distributor needs a higher ceiling and more loading docks. But here’s an interesting thing about the Chicago industrial market. We have 1.5 billion square feet. We have 16,000 buildings and we’ve got 22,000 companies that are in industrial buildings. And our little niche, which is this, b and c is really unusual because there’s nothing for sale. So when a manufacturer wants to move and they want to own their own building and sort of control their destiny, they can’t find anything. It’s really tough. It’s like finding a diamond in the rough. And so that is our main problem, is that we don’t have a lot of product in our, even though office buildings right now are struggling and they’re giving them back to lenders, they call that jingle mail. When they send the keys back in industrial, nobody’s giving anything back. There are no deals, there are no steals. Our vacancy factor here is about 4%, where normalized it’s 8%. And I was just in Toronto where I am involved in a building in Canada and the vacancy factor, and that market is one half percent. It’s under 1%

Scott Meyers (07:48):

Crazy. Joel, we’ve, I own one industrial building. We’ve purchased others that we converted, but I own one many years ago, and it was an old a and p, if you remember the and P grocery stores. It was the a and p Grocery Depot that fed the whole state. It was based out of Indianapolis here at my hometown, 200,000 square foot building. And it was, when I bought it, it had ceased to become, it was no longer a grocery depot, but they still had the warehouses there, the cold storage, the freezer space and the regular smaller spaces that had been chopped up and then had offices that had been built up on the top floor. Somebody had purchased it and retrofitted it and changed the use of it, but we still had a lot of industrial space. Well, I bought it twice. I bought it once back in 2005, sold it in 2007, then I bought ’em back again in 2012 when the folks lost it after the great recession.


And then we sold it again several years after. But what we found the first time around, and this was real briefly, the challenges that you mentioned, this was a C minus facility. It was back in 1929, all brick. It wasn’t pretty low seal, 18 foot clear as you mentioned. And it was bounded by a park on the side where the loading docks were. And back when it was built, the trailers were 39 foot, that was the standard. Well, now we’re at 53 foot and these guys had a heck of a time, there was not enough room to maneuver these things. I mean, only the seasoned veterans could have actually backed these trucks up into the loading dock areas. But what we found at that time, after we bought ’em, when we headed into 2008 and the great recession, well no longer, and these were small warehouses, 20,000, 23,000 square foot, but all of a sudden companies were downsizing or people were being downsized and they had to go start their own company and everybody wanted five to 10,000 square foot.


They’re starting their own shop or business had declined. They couldn’t buy something, they wanted to lease it. And that was hot and it was manufacturing. It wasn’t somebody that wanted to go X number of pallet spaces high as you just mentioned. And it was that space that we offered was flying off the shelf. Is that what you’re seeing right now in terms of the demand and the low vacancy you just mentioned, or a combination of or combined with the fact that everybody’s fighting for the last mile, Amazon’s got all the rest of this, but everybody’s trying to get to the last mile and get everything delivered to the homes. Could you speak to that?

Joel Friedland (10:22):

Yeah, it comes down to something a little bit different than that, Scott, that right now the internet is causing everything to be different. The buildings that you see are occupied by companies that used to send out mail and now they communicate by email and orders are done over the internet. And so everything’s happening faster and faster. And what it’s caused is a group of industrial owners have been bidding up these buildings and they’ve been buying them or building them from scratch on farmland. They find a piece of property that’s 20 or 30 or 40 or 50 acres and they’re taking a very low return because they’re using pension fund money. It’s not like being an individual investor like we are. And so those great big buildings are in a different world than the world we’re in the B and C business, they don’t want any part of our business.


They’re too small, they have too much money to push out. If you’re the teacher’s pension fund for the state of Ohio and you’ve got billions of dollars, you can’t be buying 30 and 50,000 foot buildings and you can’t be buying a 200,000 foot old building that someone needs to be creative and manage. They just want one big tenant or two big tenants. Wayfair, the target, they all have their warehouses for their online business. So in our world, in the industrial world, b and c, we cater to entrepreneurs and we cater to companies that have branches in many cities and don’t have their main location like your a and p back in the day, that was one tenant. Today, you divide it up because it’s a building that is, it’s functionally obsolete for a bigger tech.

Scott Meyers (12:21):


Joel Friedland (12:23):

So what we figured out to do in our world is we like single tenant buildings that are small because of something that I’m going to skip the whole explanation and just jump to the punchline. We can sell them to users at the end and a user will pay a 30 to 50% premium to buy the building from us. So we’ve sold 80 industrial buildings over the past 30 something years, and 76 of them all, but four of those 80 have been sold to users at a premium. Because in any market, not only this market, but in any market, even when I was in the business in 1981, interest rates were 17% when I started out. But if there was a building that was a B or C building that came on the market for sale, some neighbor had to have it because they knew eventually their business was going to grow and they can’t afford to move out of the building they’re in and move all the equipment and spend millions of dollars.


So they try to get the building next door or across the street and they’ll pay a premium. So that was when the market was bad. So every time I’ve been through a down cycle and the market’s bad, all we have to do is put a building on the market and sell it to a user and bam, we get a huge premium for it. But today it’s like that on steroids because the internet’s changed and there’s nothing available. And these vacancy rates are so low, people can’t find buildings, they’re desperate. They look for three and four years to find a building to buy and they bang their head against the wall, they can’t find it. So that’s what we’re dealing with. And for us, that’s very lucky because those are the buildings we own. So when they become vacant, we have two choices. We can either release them to a single tenant or we can sell to a user that looks at the building as a tool for their business as opposed to as an investment.


So we never sell on cap rates, not about the cap rate, it’s about the user and the industrial market has to be big enough in wherever someone’s doing this that there’s a lot of velocity because you’re in Pierre, Wisconsin where we once had a building, which is a suburb of Green Bay. There aren’t that many users here. We have 2000 companies and here they’re 40. So this works in big cities and big metropolitan areas. Works in Indie by the way, works in la, works in New Jersey and New York works in Dallas, but some of the tertiary markets, that doesn’t work where you guys didn’t have self storage anywhere because you’ve got rooftops and people. Yeah, it’s very different. It’s a very different mindset to have a freestanding single tenant industrial building. But here’s the problem. In 2008, which was a huge downturn for everybody, I owned with a group of 200 investors, I had 50 buildings, and the world came to an end, and when tenants left, you couldn’t. I ended up learning an incredible lesson and falling into literally a deep depression. That couch behind me right there


Couldn’t get off. I was just so ashamed and devastated. I thought I had lost millions and millions of dollars and I saw no way out. And so what I’ve learned is that I have to be different than everybody else not to land back on that couch. What we do is we do all cash deals with no mortgages, which people, you must be an idiot to do that. How do you do that with leverage? Without leverage? How do you pump your returns? And my answer is we do single tenant buildings. It’s not like self storage where you have tenants or multifamily. So as great as it is to have one tenant, it’s also very dangerous. That’s why we do these deals with no mortgages and it’s just a different model.

Scott Meyers (16:42):

That’s the magic bullet. So you drew a line in the sand or the line and the sand was drawn for you in 2008. So at that point, you also made the decision not to bring on any private equity partners because that led to, well, a challenging business model, but that ultimately that allowed you on the couch because not only are you faced with your own failure, which those of us that are entrepreneurs, we’ve either stepped up to that line or gone over it, but we know we can build it back up again. But when you fail on behalf of and you have partners in it that have put their money in from their retirement, that’s a completely different place to be in. So you decided that at that point, no more private equity as well. Everything is cash and only cash that is generated by your business. Is that correct?

Joel Friedland (17:31):

Well, no, we are syndicators. So what I do is I’ll come up with a deal. Right now we have one, it’s a rebuilding packet. We’re raising $13 million and it’s rebuildings on the Chicago River in this area where I believe it’s going to go residential because of the water feature. They’re not obsolete buildings, but they’re definitely what we were talking about. Their buildings are not as functional as the brand new buildings. So we have seven year leases with companies that make fruit juice. All three buildings are occupied by fruit juice manufacturers, and if we’re lucky in seven years, or actually in five years, we may be able to get them rezoned as residential. If that happens, the land value, it’s like a covered land play. Land value could double or triple because in that same area are million dollar homes where the people who live there, it’s this cute little neighborhood where everybody knows each other. Whenever I go, they say, oh, you’re the guy buying the buildings across the street. When are you going to make ’em residential? But I can’t right now Because I’ve got these leases we’re buying, building subject to leases,

Scott Meyers (18:53):

Well storage essentially. It’s been around for a long time. I mean, you could trace the roots back to what they called the drayage houses that were in the harbors back when everybody was coming over from the old world. But then really it officially became a business in the form that it’s in right now. Back in the sixties, seventies being a big year of growth and where it grew up and actually became a business in industry. But even then, many times, at least for the mom and pop operators, it was a land bank. It was just what you mentioned, and it was intentionally, we would go out into the path of progress and buy a piece of dirt and put a storage unit on it to basically cover the taxes and make a little bit of a walking around money and then wait for the progress to come, and then somebody would grab it up to build residential or retail if you run a major road or what have you.


Until then all of a sudden in the nineties, everybody realized, oh, wait a minute, this is the highest and best use. And there were folks that, yep, a hundred percent agree with the single tenant and not having the headaches of having, for us, if we build a 400 500 unit facility, we also need to monitor, track and collect the rent on that. So that is a challenge. But for those of us in self-storage, that was one of the attractions for me is that I’ll flex my risk muscle all day long on an investment as long as it pencils out. But if I have one tenant and 100% of the income goes away, that scares the heck out of me. I’ll be honest with you on that, is I like to have those 30 day leases and know that I can raise rates and I’m not beholden to one client. So I see both sides of it. But either way, if you’re doing it as you just mentioned with cash, cash in or private equity, and you don’t have the bank calling a note due whenever the wind blows to the left or out of the south or when things go bad, that is absolutely a recipe for success.

Joel Friedland (20:47):

Yeah, yeah. I want to tell you a story about steal storage. My back, I have some experience with it. You’re going to laugh at this story. When I was a kid, when I was 14 years old, I started a landscape business. My parents went away for the weekend and I went door to door cold calling all my neighbors and convinced them to let me cut their lawn. I got 70 lawns in one weekend. So I had a summer business that became a business all through the rest of high school. I was in middle school, couldn’t even drive. I had to hire a neighbor kid to help me go to the store to buy lawnmowers, and he had to drive the lawnmowers back to my garage in his trunk. So I hired a bunch of kids to work for me and I started making some money at age 14 when I was 16, I had a little money in the bank and I decided I was going to buy some stocks.


And I went, in those days, you can go to a stock brokerage house, and they had the ticker tape on the top, and I lived in Highland Park, which is unfortunately famous for the 4th of July shooting, but it’s a beautiful town. And in downtown there was a brokerage firm. And I walked in and I met a woman and I said, I’d like to invest in stocks. And she said, I have something for you that you may not have ever heard of. It’s called public storage. And this was 1978. And I said, that’ll never work. I literally said, I don’t understand how that would work. And I didn’t do it. I didn’t buy the stock, I didn’t understand it. I should have listened to her. Sheila, I should have listened to Sheila because what happened over the next four debt was what’s happened to bring you and your group of people to where you are, which is so amazing. And I look back and I can’t believe it. I can’t believe that I didn’t see it.

Scott Meyers (22:36):

I wrote an article for Inside Self Storage a couple of years ago, and they asked me, which I do frequently, and they asked me, they said, Hey, would you write an article on the mistakes that you’ve made over the course of your career? And I thought, well, I’m an educator and I also syndicate, I don’t want to air all my dirty laundry in the magazine, so here’s what I’ll do. Yes, I’ll write the article for you. But then I reached out to many of my cohorts and some from one of the lead buyers for public storage and several of the others. And so I think I interviewed seven people in the industry and I asked, what was your biggest mistake, your greatest mistake over all the years in storage? And Joel, I kid you not the number one, the leading I answer from all of ’em unanimously was I should have gotten into this business sooner. I should have started sooner. I should have recognized this stuff for what it is. And even speaking for myself, I started my career in single family homes. I mean, most people that started real estate aren’t like you. They don’t jump into industrial. You just start and you get your feet wet with a rental house and you build some credit and some credibility with the lenders and private equity. And then we got into apartments, and then yeah, I realized I really didn’t like tenants and toilets, and so I’m going to go into another asset class within real estate. I love appreciation, I love depreciation and leverage, but that leaves if I don’t like tenants, it’s either parking lots or storage. And I looked into self-storage, and then once we bought our first one and I saw the benefits of being in essentially industrial real estate and not habitation and just storing people’s stuff, I saw the light and we sold everything else off. And so yes, me too. I’m in that same camp. That is the biggest mistake I ever made was not getting into self storage sooner. So however you want to look at it, you’re in good company, Joel.

Joel Friedland (24:14):

I got hit over the head again with it when I was in my thirties, so now I’m in my sixties. So going back over 30 years, I had another self-storage experience, which I should have learned from and didn’t. My partners and I, when we first started syndicating, we put together deals when we’d buy buildings for a million or 2 million with a group of investors and the investors would put in 20,000 each, 50,000 each. We found a building in a town here called Franklin Park, which is right near O’Hare Airport on Manheim Road. And we bought a building. It was, I believe our first building that we ever bought. We had built a few, but early on it was a 30,000 square foot building on two acres. And we ended up selling it months after we bought it, I think it was nine months later to a self-storage operator.


I don’t remember which one, but we couldn’t believe how much they were paying for it. We said, how could they do this? How could they afford to buy this property for this price? I think we had paid 1,000,001, and they came in and they paid us 1,000,007. We thought we hit the jackpot. And I drive by there all the time. It’s still there. It’s probably tripled in value, and they’ve been getting cash flow from this thing for all these years. It’s a metro self storage. I drive by there and I go, oh my goodness, what was I thinking or what wasn’t I banking? And they took the 30,000 foot building and they built it out with units. And then on the two acres, which was a parking lot, they built the freestanding units with the garage doors. And that was the first time that I didn’t get it. And then the second time I didn’t get it. I sold another building again. I thought, jackpot, these people are paying. And every time that happened, they did great. And we looked back and said, why didn’t we understand that?

Scott Meyers (26:09):

Here’s what we found Joel. And that is when we look at, well, it’s maybe not the best analogy, but I guess still family friendly. If you like bourbon or whiskey, and you go to the bar and you pay for a shot, it’s going to be a few bucks. Well, if you bought that entire bottle by the shot at the bar, an entire whatever, 750 milliliter, whatever that is, that’s a lot of money. You’re going to pay a whole lot. Or you can go down to Costco and you can buy the whole bottle and it’s going to be a fraction of the price. And that’s kind of the way that we looked at these buildings. If we’re going to buy one of those industrial buildings that you’re looking at, you and I are looking at it, if I buy it, I’m going to buy it by the gallon and I’m going to lease it by the shot. You’re going to buy it by the gallon and you’re going to lease it by the shot. And I’m almost always going to get more rent per square foot than you will because people are going to pay more for that small amount, even above all my conversion costs and improvements and adding the walls and the doors and even a mezzanine in there. That is the difference between the two. Unless it’s one of those anomalies where there’s just more demand for industrial space than there is for cell storage. That’s the way the numbers usually pencil out.

Joel Friedland (27:22):

Is it going to continue? That’s the question I used to think the world can’t take one more industrial building if someone builds another half a million building for it, and then it was half a million and then 1,000,600 thousand feet and 108,000 feet, and they just kept filling up and filling up and filling up, and then the internet sensation happened, and now there’s reshoring where companies don’t want to make Their Overseas and they’re bringing, Because Political it’s coming Back.


So what I thought would never road, but if they kept building, they’d run out of tenants. They’d never run out of tenants. I look at self storage and I wonder, okay, I didn’t get on the train back when I was 16. I didn’t get on the train, first deal in my thirties, didn’t get on the train in my forties. And I look at it and I see what you guys do, and I’m just wondering, what’s the growth element? How does it look in your mind? From what I’ve learned in 40 years? I think if you keep building good facilities and good locations, it looks like they just will fill up.

Scott Meyers (28:34):

Yeah, it’s always a function of demand. We’ve got our KPIs and we’ve got our baselines that we look at and all types of metrics in a market. And for years, a market, seven square foot per capita, seven square feet of, so stores per capita, that’s equilibrium. If there’s 10 square feet of so storage in a market’s probably over supplied, maybe getting overbuilt. If there’s three or four square foot, it’s under supplied, and we’ll look at rental rates and see, ooh, they’re kind of high and all these facilities are full. I think this market could use another. And so we’ll find a piece of dirt or a building and build. And that’s the same thing that every other storage professional does. And That’s Been the model. But now we’re seeing there’s some anomalies. The Sunbelt states and take Florida, Texas, and other places. Well, there’s been a migration after Covid to these places, but people like to live down there. And so we’re seeing 10, 12, 15 square foot per capita and everybody’s still full and rates are going up. Granted there’s no basements and houses are getting smaller, but there’s always going to be some factors that seem to be for now driving that We thought when the boomer generation goes, that was the largest generation, they’re done downsizing and going into then assisted living and then dying, and their stuff goes into their ears, put it into storage, that’s going to disappear. And then the millennials coming in behind it, they’re minimalists. They want small houses and condos, and they’re transient and they just move and they don’t covet having stuff. They covet relationships and experience.


And so that’s going to be the end of self storage. Well, Joel, what we found is that the demand from that generation of millennials is 40% greater than the boomers. And that’s because yeah, they like small houses and tiny houses, even condos, they’re transient. They like experiences. Well, they got small houses, small places, they’re transient and their experiences come with camping gear and mountain bikes and kayaks and motorcycles than ATVs. And that stuff has to go somewhere. It won’t fit in their tiny house. And so the demand is greater. The generations that are coming behind them are even more transient. Covid allowed us to be able to work from home, so now everybody’s moving, or they have two places and they put stuff in storage because they don’t have to live in Flint, Michigan if their employer was there, now they can live wherever they want.


And so there’s always going to be dynamics at play. It’s only when there’s maybe a major shift that happens quickly that all of a sudden renders some of these maybe not so useful, and we’ll keep our eye on that. But I guess the question for you and I, Joel, is that we’re syndicators and we’re usually on a five-year timeline maybe or maybe a little bit longer, maybe shorter. Do we care if we’re going to be out in five years on our projects and we can wind these things down at our own pace without losing it? I don’t know what’s going to happen in 30, 40, 50 years from now. What we’re keeping an eye on is what’s happening today, and again, it’s the last mile that’s being met that is driving demand for storage manufacturing, you’re right, is coming back to the states and that’s driving demand for some larger units. And so storage is filling that in as well. But I think industrial is the place to be no matter what. You look around the world, if you look at the asset class, industrial and storage of some sort is in highest demand. And I think that will be for a number of years, or at least until I’m done doing this actively.

Joel Friedland (31:46):

Yeah, I see that too. Industrial is, it seems like there’s an endless demand and every time I talk to a tenant of ours, they want to expand. They need another building. But although the economy’s been just on such a roll, the question is what happens if there is another downturn? And there ultimately will be another downturn, which is that the reason that I really like your business, and I like multifamily, but I love industrial, and again, why we do this, no debt, low debt thing, because what bad happens, I really want to be able to get through it through without having to figure out every day how to save portfolio.

Scott Meyers (32:34):

So I started to pull on this thread when we had the industrial building in the last downturn. We started putting up walls, even just some basic cyclone fencing, and took a 20,000 square foot warehouse and turned it into, took two less dock doors away from it and put a fence up and created 10,000 or 7,000 because we kept having over and over brokers were coming to us, individuals that were starting businesses, they wanted that. Did you do any of that in 2008 and oh nine? Was there a demand or were you still tied to the large leases or how did you do that and could you do that over again if you needed to?

Joel Friedland (33:11):

I had a disaster story actually in Columbus, Ohio. My brother-in-law at the time lived in Columbus and he was a civil engineer, wanted to get into industrial real estate. So he and his wife and his kids moved to Chicago and I taught him for a few months the industrial business. And he went back to Columbus and he called me, he says, I found a building that I want to buy. It’s an old grocery warehouse, just like your old a and p. And it was 212,000 square feet at 10 33, Brent Nell Avenue, which I’ll never forget that address. It has caused me more grief than almost any deal. And he said, we can divide this up and we can make different sizes for different tenants. And they had a banana room and same kind of thing as yours. They kept different kinds of refrigerated products and they had dry products and they had truck docks, but the cost of dividing is so high that once you do that, if you borrowed the money to do it and then you’ve got some vacancy, you can’t cover the debt service.


And that’s what happened to us. We had a mortgage on the property and we started dividing it, and then we had a couple tenants because it was 2008, nine who didn’t make it. And we had vacancies and we couldn’t fill them, and we hadn’t divided the rest of the building. So we had a somewhat divided up building and a somewhat not divided up building. And ultimately we sold it for a loss. And it was one of those really bad experiences. And I determined that I am not a developer and I’m not a redeveloper. All I do is I buy existing buildings. I keep them just like they are. I even say to new tenants, you take it as is, that’ll be great. And they say, well, will you do carpet and paint in the little office? No, just as is. It’s industrial. You just take it as is.


And I learned from Sam Z, who was a Chicago guy that taught me something which is don’t develop, don’t be a developer. It’s a different business. If you’re a developer, be a developer. But if you’re not a developer, don’t try it because it’s not a hobby that you can learn when you’re figuring it out, you’re going to lose a lot. And so I decided that all we’re going to do is buy these B and C buildings and not divide them up. And every time I have that brain fart that I see a building that I think I could divide up after meditating on it, let’s say for a few weeks, I wake up and I say, no, remember Columbus. So I leave it to you guys to do your thing.

Scott Meyers (35:50):

I don’t know whether that was successful or not in that case of the industrial experiment, if you will, but we had enough demand, and that’s what the market was telling us is that this is what would lease up. Because we had a number of people ask and we said, Nope, we can’t until we did, and then we leased those up. But then you’re faced with it. Fortunately we didn’t go all in. We were doing cyclone fencing and it was making it real easy to be able to then take that back out. It would’ve been costly, but that was the decision we made and then we leased it up and we sold it before we had to figure out or make any change. And the economy didn’t change by the time we maximized it and sold it again at that point. But you’re right, I look back on that building and others in which we’ve did our best to accommodate a potential client, a potential tenant that, Hey, if you do all the office and do these improvements and then roll all the tenant improvement work into our lease, we will move in.


I think, well, we can do that. We’ll get it back and we’ll raise the lease. There’s a higher lease cost to pay for that. But at the end of the day, many times didn’t write out the lease. And then all those improvements being made were not any that were going to be carried forward for the new tenant. They didn’t want it, and so it ended up getting ripped out. So yes, Sam Zell is correct, and you are very correct and and following him, Joel, you typically don’t get that investment back in those, so stick to what you got. Development is not for the faint of heart and it is a skillset and not to be treated like a hobby or a bolt-on that you can just learn when you have a tenant in hand in 30 days, you got to figure out how to be a developer. That’s not a good business strategy.

Joel Friedland (37:31):

No many mistakes can be made in that process. I’ve seen it. We’ve tried it a few times and we just wear it off. You’re a hundred percent on target, it’s just not our thing.

Scott Meyers (37:43):

Well, on the other end, we are developers in storage, but as I say that developers, we buy properties and convert them and we develop from the ground up, but that’s with the help of a third party feasibility study. Even though we do, and I have good people underneath me and I have contractors, I don’t want to say that I don’t know the first thing about development, but I couldn’t run a development company if I were forced to. But we have the right team and the right people in place and we’ve been very successful on the development of that side. But that is all about the team, and I can’t take any credit for that other than every once in a while I’ll stumble across a building or a site that has brought to me. But our acquisitions side and developers and the GCs that we work with, they tell me to stay in my own lane and as a matter of fact, to stay off the site to stay out of here. And that is a secret to success.

Joel Friedland (38:30):

It sure is. Yes, it is.

Scott Meyers (38:33):

So tell me if you would, I ask many folks that are operating at scale, you’ve been around, you’ve been through three recessions at least maybe four. If you want to count the pandemic as one, which it acted like one as well, we tend to be able to see a little further down the road. So how’s your crystal ball looking? What does the balance of 2024 look like, either in general or for yourself? How are you approaching the balance of this year and next year?

Joel Friedland (39:02):

So I listened to a podcast that I love, it’s called Wealthy on W E A L T H I O N. And the host of that podcast is a guy named Adam Taggart. If you listen to him twice a week, you’ll hear conflicting reports about the economy from the smartest economist in the world. On Wednesday, he interviews someone who says that the economy’s going to crash, and on Friday he interviews someone who says, the market’s going to keep climbing and it’s going to be great. And they talk about the Fed and interest rates and all that. So I’ve given up prognosticating because when I listened to these really smart people, I can’t keep up with them. I can understand that they don’t agree with each other. When I went to the University of Michigan and took economics classes, I would’ve a 10 o’clock class with one economics professor said the opposite thing of the one at 11.


So I don’t know. I believe there will be a big downturn. I think that it’s been too good for too long. I think that there’s been a lag effect because of these interest rates climbing. I think that the uncertainty and politics and in the world has not really hit yet as having an economic effect. So all I can do is make the best decisions. I think that good judgment is a mission. I think people generally don’t have good judgment. I think that making good decisions with good advice and thinking things through really well is the secret to mitigating risk. And so before I do anything, I have these eight advisors that I talk to or investors with me, they each put some money in every deal, and I just want to make sure that the individual deal that we make is not a stupid deal because we miss something and we still miss things.


But I just want to do great due diligence. So what I’m doing now is I’m buying buildings where there’s immediate cashflow where we can reten them or sell them to a user because in the right locations, in the right sizes, and we raise money, a million dollars here and 2 million there, and people put in 50,000 or a hundred thousand dollars, and we try to average an 8% return over a seven year period with hopeful profits at the end. But we also say you should look out because you might be in these deals with us forever, long-term holders. We actually have a property in Aurora, Illinois where we’ve owned it for 30 years and some of the investors have passed away and some have wanted to get out. So new investors are in and old investors are out. We have a little mini trading floor that people want liquidity, and I just have to make the best deals I can in places where I believe even if the market falls apart, that we’ll still be okay with no debt. So if the market falls apart, we’ll still be okay. And that’s as far as I can go because if you want to hear prediction, I think there’s a big downturn, huge downturn in early 2024. But I said that last year about late 2023, and we’re here and it has separate office building owners. They’re

Scott Meyers (42:12):

Getting crushed. It’s a dumpster fire on that end. I feel sorry for those folks. Yeah, it’s going to get better anytime soon. So Joel, we keep politics and religion and usually school alumni out of this podcast for the most part. And so we won’t go into this, but from a fellow Michigan alumni as well, I ran into basically the same, and I think there’s two classes, two courses. My marketing guy, and believe it or not, my management information systems, oh, I take that back in three was our business law professor. Those are the only three I remember from my time at the University of Michigan. And it’s because those guys, their own agencies, law firms, and one of the guys worked for GM and he was on a high-end engineering side, and they would just close the book and say, Tess is going to be here and there and the quiz.


And then they say, now lemme tell you what’s going on in the real world. And they talk about their agency, what’s going on at GM and then what’s going on? And those were the ones and my economists there. Yeah, same story, but I do the same thing. I try to follow very smart people and there are basically two to three economists that I listen to as well, and this same as you. I sit back and I wonder and I think, well, these are really smart people, and some of the things that come out of their mouth, smile is really smart. And I think, did they call it right the last time? And are they trying to go a different direction maybe than the herd to build a name for themselves? Maybe on the chance that they’ll say, I told you so and build a name for themselves on the back end.


I just wonder when they give what they call advice or projections or predictions, where’s it coming from? Is it really what they think and what’s that based upon? And I got to go with my gut. Here’s the rules as they stand right now in the investment arena, here’s the cost of capital. My underwriting doesn’t change, it’s just as conservative as it is before. And the yield is the same When I got buffers built in and I got profits I got to make on the backend, really the change in the input is the cost of capital. And if it still pencils out and I meet my projections with today’s cost of capital, I believe we’re going to be in better shape when interest rates eventually come down at the bottom of the bell curve and cap rates, and that’s when we’re going to be selling or have the ability to sell. And so that’s what we build in at the time. But outside that, there’s a few other factors that figure into this, but I think if we stay tried and true as you just mentioned to the business model and not get caught up in and invest out of fear or out of bravado, I think we’ll be in good shape.

Joel Friedland (44:44):

Yeah, bravado sometimes. This is one thing I have to mention. Sometimes real estate guys are actually unwittingly gamblers. They’re actually gamblers. When someone says, I’m a deal junkie, I wouldn’t invest with them because I don’t like in anything junkie to invest with. I have enough friends and family with addiction issues. I wouldn’t invest with them. They’re my people. But I don’t want someone who’s a junkie. So when someone says I’m a deal junkie, what it means to me is I’m going to do deals regardless of what the deal is. I’m going to buy stuff. I’m going to take risks. If they said I’m incredibly careful, deliberate, methodical person with really solid judgment who asks great questions, I’d invest with them, not the deal junkie. So I think that I have to call a spade a spade. I was probably a deal junkie until 2008. I just did so many deals and I don’t think that the mitigation of risk was at the level that I’ve learned today is absolutely necessary for me not to end up on. So I look at it that way.

Scott Meyers (46:01):

I would say the same. Our time to learn those lessons was 99 and 2000 with the dotcom crash and the impending mini recession. At that point, we were heavy in houses and apartments. And then that administration decided to spark the economy by creating the Community Reinvestment Act or the C R a. And so basically anybody that could fog a mirror, could buy a house. And so our tenants all left and who could blame ’em? And then what that left us with to some high vacancies at that time, and then that single act of lighting up and really bolstering the community Reinvestment Act is what led to the crash in 2008. All those crappy loans that were made back in 2000 to bolster the economy then came back to bite us all. That was a time in the next three years where we struggled mightily and I realized, you know what? I could be really good, or maybe I think I’m really Good, but There’s outside forces that are going to show me that I’m not all that. It doesn’t matter how hard I work or how smart I really am or think I am, I have to prepare for the inevitable and things that are out of my control.

Joel Friedland (47:09):

That’s vulnerability. And that may be the most important trait that a person can have. It doesn’t mean weakness. It means you’re open to the fact that we are not in control of all things that happened and you still persevere and go forward anyway with your best decisions. But vulnerability is something that some people are afraid of. But I think it’s the key to being successful and avoiding a lot of this.

Scott Meyers (47:37):

I was at a passive investor conference last year coming up on a year now, and one of the heads of the family office group was speaking to investment, well, both sides, syndicators and passive investors. And he said, for all of you that are passive investors, he said, if you’re seeking out sponsors or syndicators to partner with, he said, I never go into battle unless I was following a general that had a limp. And I thought, that’s pretty sound advice. So the folks, those of us that have been around and have taken our lumps and others out there, I think there’s a lot to learn from that, from being out through it and coming out on the backside, learning the lessons and being humble enough to recognize that. And so I help, I’m at that place. And at the very least for those of you that are out there that are passive investors to heeded that advice as well, because Joel and I are humans and we can mess up.


But if we learn from those lessons, you’ll be better for it. We’re better for it. And look to those investors that are doing the same. So with that, Joel, I appreciate our time. We’re going to definitely have to have a round two. I need to be mindful of your time as well. But in the time that we have left, first of all, two questions. One, where is that the best place that people get in touch with you to follow you to see a little bit more about what you’re doing and maybe come the best alongside of you?

Joel Friedland (48:57):

Sure. Our website is brit, B R i t one T And one of the things on our website that I recommend, we have an article that sort of says why you should not invest. It’s got all the questions and reasons why Somebody Who’s a good thinker wouldn’t do it if they don’t ask those questions and get suitable answers.

Scott Meyers (49:20):

Very good. Also, a way to weed out some of the folks that you may not want to have as your limited partners, even if they are limited as well. So I appreciate that. And Then lastly, What Is maybe the best advice that you could give? You’ve been at this for a while, call it advice that either you could give to someone else or maybe the advice that has been given to you that you’ve held onto over the years.

Joel Friedland (49:41):

Yeah, it’s a solid mentoring, more than one actually. At different times in my life. I’ve had these fabulous mentors starting in 1981 with a family I worked for at industrial. That’s how I got in and trained and learned from just very capable, smart people. And over the years, I’ve been so fortunate To Meet people who know more than I do, who are willing to share their knowledge and their experience. It’s been great. So mentorship and then giving back by being a mentor for other people and teach what you learn. I consider some of the people I teach, the great grandchildren original mentor that I had in 1981 because I trained someone. They train someone, they train.

Scott Meyers (50:29):

I love it. Well, obviously we’re big fans that agree to that as well. We built a second business in self storage on that. There’s just not enough good mentoring to go around. And so folks that want to get into the business, they want to do it quicker, faster with a bigger group, then we provide that as well. But I absolutely wouldn’t be at the place where I am right now, even though I thought in the very beginning that I can do this on my own. I’m going to blaze my own trail. You’re going to get education one of two ways. Either you’re going to pay for it upfront unless you have a mentor that just happens to have a lot of time to be able to spend with you, or the market’s going to make you pay for it. Either way, you’re going to pay for education, so you best get it upfront and find a mentor and somebody that can help you as well. So couldn’t agree more. Couldn’t agree more. Joel? Well, Joel, once again, thanks so much for your time and looking forward to having you back. And we will include your information in the show notes for everyone else out there. And so with that Storage Nation, you’ve been hanging out with Joel Friedland and myself talking about a little different angle to the commercial real estate industry in industrial. But the principles apply and the information that Joel has given has been very valuable. So thanks everyone. Looking forward to seeing you on the flip side. Take care.

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Scott Meyers

Scott Meyers is one of the nation’s leading experts in the self-storage business. Scott has a passion to share his experience and wisdom to help others succeed. Since 1993, he has architected dozens of extremely successful real estate transactions. He has built several multi-million dollar businesses in real estate including; single-family flips, to multi-family projects, industrial buildings, commercial office buildings, cold-storage buildings, warehousing, parking lots, and his favorite – self-storage.