Extra Space Borrows at 4.9%. You Can't. Here's Where the Deal Is.

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Extra Space Borrows at 4.9%. You Can't. Here's Where the Deal Is. Guests: Thaddeus Campbell — Director of Business Development, S3 Partners; Noah Starr — CEO, TractIQ; Armand Aghadjanians — Director of Acquisitions, Store Here Self Storage / RHW Capital Host: Chris Berg — Abernathey Development Recorded: August 31, 2026 Video: https://www.youtube.com/watch?v=yQyDJo5EW4w Key topics: Public Storage's acquisition of National Storage Affiliates; whether a new entrant can still aggregate a storage portfolio; independents own 43,000 facilities and 66% of US stores; REITs manage only 9.7% of net rentable square footage outside the top 100 MSAs; 30% of the NSA portfolio sits outside the top 100 MSAs; 250+ basis point cap rate spread in tertiary markets; 98.8% of REIT-managed stores run a street-to-web rate spread averaging 26% versus 18% of independents; Extra Space's $550M unsecured raise at 4.9% and SmartStop's sub-4% Canadian bonds; CubeSmart buying back stock instead of stabilized assets; LTV compression forcing value-add sponsors to create 1.5x to 2x the value for the same return; the 10-year Treasury, XLE energy breakout, and Warsh at Jackson Hole; hard assets, hyperinflation, and Argentina; AI, software multiples, and TractIQ's AI connector; the S&P 500 up over 10,000% against 1,100% wage growth since 1964; Noah Springer taking over as CEO of Extra Space Storage January 1, 2027. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Overlapping non-lexical backchannels ("Mm-hmm," "Yeah," laughter) captured as separate caption lines have been omitted where they interrupt another speaker mid-sentence; all substantive turns are retained. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Welcome to the Self-Storage Report Roundtable. I'm your host, Chris Berg, Head of Business Development with Abernathey Development, building great self-storage assets in California and Arizona. We're doing something new in today's show, which we hope you are going to enjoy and appreciate. Kind of taking that All-In podcast approach. You can see we've got three outstanding guests with us today. Thaddeus Campbell, Head of Business Development at S3 Partners. Thaddeus, welcome. Thaddeus Campbell: Thanks for having me. Chris, nice to be back on a podcast with you, my friend. I like the blue jackets back together. Chris Berg: I don't know if that's a good thing or not. We'll see. Also, Noah Starr, CEO of the one and only TractIQ. Noah, welcome back. And then we've got Armand Aghadjanians, he's Director of Acquisitions at Store Here Self Storage. So let's jump in. And Noah, I want to start with you. I think the big thing is, we're pretty excited about this, but for the people that are watching — why should they care? Why should they give us their most valuable asset, their time, and spend some time with us? Noah Starr: Well, I think we're still working on the name, right? But really the thought here was, I feel like the three of you all do really interesting stuff in storage. You all have podcasts or research or content, all of it, and I love working with you guys. So the thought was, what if we just got together and had a casual storage conversation to see if we can come up with any interesting insights, any contrarian takes, any unique conversations that we're all probably having in our heads and on our separate podcasts and webinars. But it could be fun to get together. So I don't know if we have necessarily like a crazy agenda today, but I think we definitely need to figure out the name of this. We need to figure out the cadence, but we for sure have some interesting topics to dive into. I think it'll be fun at the very least. And I'd be curious if people even want us to do this going forward. So that's my take, but I'm curious what you guys think. Chris Berg: Thaddeus, Armand, anybody else wanna jump in there? Thaddeus Campbell: I would tell you that, first of all, to say I have interesting content — I appreciate that, Noah. That makes me feel pretty good when you lump me in with Berg and Aghadjanians. I'm gonna say Aghadjanians as many times as I can on this podcast, by the way. That's gonna be the whole fun of this. My vote is for Exciting Content, Real Issues. That should be the name of this podcast. ECRI. Armand Aghadjanians: I like it. Chris Berg: That's very, very well played. Armand, you got any reason why you're doing this and what you want people to get out of it? Thaddeus Campbell: Notice how Chris did not say his last name. Chris Berg: Yeah, I know. Armand Aghadjanians: I struggle with my last name too, it's okay. I think it's really important to reach outside of storage as well. And that's one thing I'm focusing on. I've put a lot of thought into the content. I've been participating in the social media ecosphere for a long time, but never really have done any videos. So I feel like I'm doing it the easy way, by learning from Thaddeus, Chris and Noah how to put together a podcast and participate and put some good video content out there. So I'm excited for what's to come. Chris Berg: I've got two things that I would share with people. Number one is that I really hope that you and I can give people some insight around, hey, where should we be allocating capital, especially with what I believe is coming down the pipeline — pun intended, which you'll see what I'm gonna talk about later. So hopefully that'll be part of the aspect. And the second thing is that I always have a goal every day that I wanna be the dumbest person in the room. So you guys have helped me achieve that goal today, where I am clearly the dumbest person in the room here, and that's always gonna allow me to get better. It's like I'm playing tennis with the veterans. So thank you for that. Thaddeus, I want to start with you. Thaddeus Campbell: You went to Stanford, man. You can't be saying you were the dumbest person in the room. Chris Berg: Yeah, but I studied psychology. I did not study what we're gonna get into today. So Thaddeus, I wanna start with you, because we did talk about, hey, what are some topics that we think are gonna be of interest? I think you and I are gonna overlap here a little bit. But I really love where you were like, yeah, you know what I want to talk about is how do you get into storage today and have success? There's so much capital. Actually, I don't want to put words in your mouth, but that was sort of my interpretation of what you suggested. So the floor is yours. Thaddeus Campbell: Yeah, I think that I brought this up — and interesting, I did a poll on this on LinkedIn a few months ago when the Public Storage acquisition of NSA first came out. Just saying, hey, is there a pathway for somebody to come into storage today, aggregate a number of stores and be able to be successful at it? Because quite frankly, I don't see it. I don't see how you do it in the environment that we're in unless you're doing something that is completely different than everyone else doing it. There's a couple of young guys down in Atlanta that I know, Homegrown Storage, completely tech-driven platform in tertiary markets where they're aggregating a bunch of stores. Great guys, but the reality is it's $1 million to $3 million, maybe $4 million purchases. It's not, you know, $15 million, $20 million stores. Is there a pathway to go build a storage portfolio anymore, or are we at a point in the life cycle of storage where if you're going to be a major player, you're already in the space? Chris Berg: I guess I would love to get you guys' take on that. Before you guys jump in, I think it's fascinating because a while back I had Brett Henry on the Self-Storage Report. You can see down here, I asked Brett — that was kind of the opening question. Thaddeus Campbell: I had Armand Aghadjanians on Stories Behind the Door. You can see it on your YouTube channel. Chris Berg: That's so good. What's the name of this show again? ECRI? But I asked Armand, I was like, hey man, are the best days of self-storage behind us? And again, I don't want to put words in your mouth, Thaddeus, but that's kind of what I'm hearing you say. And Noah and Armand, I'd love to get your guys' take. Thaddeus Campbell: 100. Armand Aghadjanians: I have some input on this. So, you know, I was thinking about how the REITs are behaving, right? And it's all very different. With the NSA acquisition — I mean, I think Public in general, they're somewhat in a growth mode. They've been exploring purchases in the Oceanic region. They just took down their portion in Canada. That was kind of affiliated, but it wasn't officially Public Storage. I mean, they own a good chunk of Shurgard. Like, I wouldn't be surprised if they're looking there too. I mean, they're looking very far out, you know. So I think with the opportunity to buy NSA — I don't know if it was a sub-5 cap, because if you look at the enterprise value, including the debt, you're not just looking at the market cap. It could be a mid-5 cap deal. There's a lot of nuance to all those numbers, but they're in growth mode. And part of that makes sense. But then when you look at what Extra Space is doing, they're buying deals, but they're doing it from a JV structure. So they might be a 20% participant, they're making fees on everything, and it doesn't necessarily mean that they don't believe that now's not a good time to buy, but they've found partners that have a lower cost of capital, like pension funds or whatever else, that want a JV with them. They might not even have a lower cost of capital, but they have a lower return threshold and they need an operating partner. And the math just kind of pencils out better for them if they have these JV structures. And then you could go back to CubeSmart's — I think on one of the earnings calls, I wasn't sure if it was Q1 or Q2 — but essentially what they were saying was it was better for them to take their capital and buy their stock shares back than go buy new stabilized deals. So it might just be part of the time everybody's kind of trying to figure out what structure works and what doesn't. And so even the REITs have a widespread of how they want to participate in the space. I think largely — and just really quick — you have your value-add players. That's been kind of the main part of all these syndicators that are buying up deals, mid-tier companies. The way that that's structured is very different than the folks that are going out there just buying real estate like a triple net lease. They just want a cap rate, they don't necessarily know how long they're gonna hold on to it. Noah Starr: I'd love to jump in. Chris Berg: Yeah, no, please jump in. Noah Starr: So I've been working on a research project with AJ Osborne that we're gonna release in a couple of weeks, and the thesis of the project was: REITs suck up all the oxygen of the industry — what does the data look like for the rest of the industry? So I'll break down some of this, because I think it's important. You ask the question, is it possible to aggregate a portfolio that you're gonna be able to exit on down the road and do really well? So right now, independents own about 43,000 storage facilities across the country, which is still about 66% of facilities. It's only 46% of square footage in the industry, but 66% of storage facilities are still owned by independents. Thaddeus Campbell: Can you define independents for me, Noah? I apologize for interjecting. Noah Starr: These are, in this example, groups that have 14 or fewer facilities. So you have this dynamic, and then you have to look at your markets. So we then broke this down and looked at what percent of markets do REITs manage in — looking at top 25 MSAs, 26 to 100, 100-plus. In the top 25 MSAs, REITs manage about 50% of the net rentable square footage. Do you know what percent of the square footage REITs manage outside of the top 100 MSAs? Chris Berg: I'm gonna say 25%, which may be higher or low, but the point is, then where is your exit if you're in those tertiary markets? Noah Starr: I'll come to that. All right, 25%. Thaddeus, Armand, what do you guys think? Armand Aghadjanians: That seems fair. Thaddeus Campbell: I would say under 10. Noah Starr: 9.7% outside of the top 100 markets. Thaddeus Campbell: All right Chris, maybe you are the dumbest person in the room. Noah Starr: So what's really interesting is this is a post-NSA acquisition number. Okay? So you asked where the exit comes from. We looked at the NSA portfolio. What percent of NSA stores are outside of the top 100 MSAs? Thaddeus Campbell: Really? Armand Aghadjanians: 50. Okay. Noah Starr: It's about 30%. 30%. But Public Storage just bought all of those stores that are now outside of the top 100 MSAs. So then I looked at cap rates, comparing top 25 MSAs to up to 100, to 100-plus. 100-plus, there's more than a 250 basis point cap rate delta. So, you know, that's where you take a group that's like Homegrown, who's a customer of ours and I know them very well and they're awesome. And you think of like, okay, what's the play in self-storage? I totally agree — if you're trying to go into primary markets and look for 6 or 7 cap in-place deals, you're competing with the REITs. I don't know if that's still possible unless it's off market and you get lucky and all sorts of things. But I think to me this is an example of, there isn't enough data that's out there around the opportunity in storage, because the REITs tend to suck up all the oxygen. Chris Berg: So where do you guys see — because this is fascinating since the announcement, and I've actually asked the CEO of Public Storage about this and I haven't gotten a lot of clarity — but when you layer in the NSA, the ability now to go into secondary and tertiary markets, and then the Welltower joint venture, which has got the best probably tech stack, they've been working on it for the past decade — where do you see Public Storage beginning to maneuver over the next five to ten years? Like what markets do you see them going into? Noah Starr: I'll let someone else answer if they want to take that first. Armand Aghadjanians: I mean, honestly, I think it could go anywhere. Sorry, go ahead, Thad. Thaddeus Campbell: No, you go ahead, Armand. Armand Aghadjanians: Look, you know, I mean, they were very serious about doing a deal in Oceania. They just went into Canada. That was a very, very big deal. I mean, the Canadian market is large. Australia itself is as big of a market as California. So they're casting a wide net. But I think that they're trying to do deals in all places. You could do a 1980s deal, you know, as long as it makes sense and it's adding value — they wanna see all of it. So I wouldn't look at one large deal. It could be from any different angle. It's always changing. Chris Berg: So Thaddeus, I'm going to jump in in a second, but also you've got to think about, they've got their regional managers, the different managers. Like, we've looked at different areas because Public Storage manages our assets. We've looked at different areas and we've thought, hey, this is a great place to develop. And they're like, sorry, you can't build there because we don't have any managers in place. That's where I think this gets exciting. They've got this incredible tech platform. Now they start putting the management and their scale, economies of scale, in different places. I think you're exactly right. I mean, basically anywhere can become somewhat viable — and I say that not meaning exactly anywhere, but point being, as we talk to our people at Public Storage, there's a really tiny asset we're looking to develop right now. And we just can't get the buildable envelope to work from a numbers perspective. But when you talk to Public and go, hey, would you guys hypothetically buy this as part of a portfolio, even though it's super tiny, they're like, look, at the end of the day, we're buying cash flow. So if it has good NOI, absolutely we're gonna take it as part of a portfolio. Noah Starr: And I'd even say that those folks weren't wrong years ago when you went to them, because we looked at Public's portfolio. Only about 285 stores, give or take, of their pre-NSA portfolio were in markets outside of the top 100, which is about 8% of their portfolio. Now 30% of NSA's portfolio, so call it almost 400 stores, are now in these markets. They've more than doubled their footprint in markets outside of the top 100. And to your point, if the cap rates are genuinely 200 to 300 basis points higher, and now they have facilities in these tertiary or secondary markets — forever is a long time, right? And that's, Public Storage is trying to do this forever, not for five years. They're trying to do this for a hundred years from now. And so you take growth patterns and migration and all sorts of things. I think those are interesting stats. Armand Aghadjanians: Sorry, really quick. I don't think the dust is settled yet, you know, in terms of the whole NSA deal. Because after Extra bought Life, there was still a period of figuring out which ones they wanted to keep, didn't work out for them. So that might play out in different ways, but I think it's still pretty early in the holding period to see how they wanna play the whole thing. So it might not be forever. I mean, they could exit out of all of Wichita for whatever reason. Who knows? Chris Berg: Thaddeus, I want you to jump in, but then I want to talk about the platform piece of it. Anything else you want to add, Thaddeus? Thaddeus Campbell: I was gonna say two things. Number one, even 250 basis points lower in tertiary markets, you're still talking about mid-7 caps, right? I think Public announced in Q1 they're targeting 5.25 purchases to push to a 6, right? And so let's say you're at 7.75 in a tertiary market. Well, lending right now, you're in the mid-6s at best, right? On a traditional loan. If you can go get life co money, God bless. But that's kind of my point — it's like you're fighting a losing battle if you're trying to buy a tertiary market project and you've got a one-bip spread. Your upside is not great. That's why you get higher cap rates in tertiary markets, right? Because you're not gonna have that natural growth and value of it. And then the other piece of that puzzle is, how do you compete with Public's ability? What did they say? They think they're going to raise the average NSA store by 9% NOI, right? Just because of their operating efficiencies, the abilities of their platform. So that goes back to the question I originally posed. You're fighting a really thin margin. No value-add investor gets into trying to buy one-bip spreads. You know, that's not why you try and buy value-add deals. Armand Aghadjanians: Yeah. You know what's funny is, people in the eighties when interest rates were extremely high — you know, Public Storage were doing 10 cap deals in the eighties, but interest rates were like 14%. And they were doing them all cash. They weren't taking on debt for quite a long time. Thaddeus Campbell: 16. Yeah, you're right. Armand Aghadjanians: So there's always that — that's a narrative that's been around for decades, right? And there's always opportunities to add value. The question, I think, isn't how do the little guys beat them, it's what type of buyer is gonna be the one participating throughout this next phase. And when you have flat growth, let's just say nationally — flat growth, right? If I'm buying a deal two years ago or three or four years ago, you could get 70% LTV. Now if I'm getting a 50% LTV, I'm paying higher interest. I would need to create 1.5 to 2 times as much value to make the targeted returns for my investors. Thaddeus Campbell: Same return. Armand Aghadjanians: And it's even because I'm borrowing more money for that portion of the capital stack and I'm promising more. So the more I have to raise from investors as a share, the more I have to return at a higher percentage of the deal. So maybe something I would buy for $5 million that I would have to sell for $6.5 million — now I'd have to sell it for $7.5 million, right, to pay everybody back what I promised them. So not only is it harder to project in this type of environment, you know, tremendous value-add, but the way the capital stack works, I just have to return so much more. That's why all these value-add players are looking at deals and they're like, I'm millions off. Why am I millions off? And you're looking at the numbers — I'm sure every acquisitions guy is like, wait, I would have to buy this at a 9 cap. Like that doesn't make sense, right? But it's just the play that we have isn't appropriate for the time. But with the REITs, they can make sense of it right now. But I think that there is an avenue for a lot of people to get involved with storage. And that's something I've had in mind. Chris Berg: So when Armand says it makes sense, I hear the word C-E-N-T-S for the REITs, and I'll share with you why, because Thaddeus and Armand have both talked about the capital stack. Thaddeus, you and I have talked about this in the past, but many people have forgotten that back in June of '24, Extra Space went out and got $550 million at 4.9%. Right? I mean, this is just simple — typically IO unsecured debt they're gonna be able to use at 4.9. Nobody else can go play that way. And Thaddeus, you and I talked about SmartStop, right? When Michael was up there and he's got sub-4 Canadian bonds. It's like, good luck trying to compete against that. What say you? Thaddeus Campbell: 500 million Canadian, right? 350 million US dollars, which is a sad testament to the strength of the Canadian dollar. But regardless, 350 million US dollars that he had to put to the test. I say that jokingly — my family all lives on the border and they get crushed when Canadians stop crossing the border because they can't afford to shop anymore. That's a whole different story, I digress a little bit. But no, this is again — I think Armand made an incredible point, right? It's not that there isn't a path. It's not the go-raise-syndication-money path that it was five, six, eight, ten years ago, right? It's got to be a different kind of buyer that's going to come in and compete. To your point, what you just showed — you know, if you have debt under five, you have a lot of, and not only the debt, but Extra to a lesser extent, Public definitely have cash on hand to fill the equity bucket, right? If I go raise LP, my equity costs more than my debt. And my debt, even if I get life co money, is mid to high fives. I'm not competing with the SmartStops and the Extra Spaces. Cube did a big JV agreement earlier this year with CBRE. Public was sitting on $600 million of cash, right? Those are hard buckets to fight against. Chris Berg: So let's go — Noah, you've got obviously institutional background. So let's just say, I'll use a round number. I come, you and I go— Thaddeus Campbell: Financial institutional background. Let's make sure we clarify what institution. Chris Berg: Well, but that's just what I wanna get at. Like, okay, so you're in storage, you've got a financial institutional background, I hand you $100 million and I say, hey, I wanna go buy storage. What's your strategy? Noah Starr: Yeah, Chris, you've asked me this question like four times within the last year. Chris Berg: I can remember one other time, but let's go, because I think right now, based on this conversation, unless you say to me, hey Chris, I'm gonna go develop in California like you are, I don't know where you're gonna put it. Noah Starr: So there's a lot of really interesting data, because — and I do think it's about being really intentional. So it's again primary versus call it secondary versus tertiary markets. We looked at that, and then comparing between, like, who are you buying from? Is it a REIT, is it a group with 15 or more facilities, or 14 or fewer, like those independents? Just some data points. So the average cap rate for deals right now on market in TractIQ is 7%. The average cap rate for deals in tertiary markets is 7.5% to 8.5%. Okay? And then Thaddeus, I would challenge you, because if you were to do $100 million of this stuff, could you get debt better than 7%? We can come back to that. But the last thing— Thaddeus Campbell: Yes, I can. Even me, I could do that. Noah Starr: And so the last thing is who are you buying from. So like these independents, right, we're talking about — so we looked at the REITs, groups that are 15 or more facilities that are not REITs, and then the independents. 98.8% of stores managed by a REIT have a spread between their street and web rates. And it's on average about 26%. Okay. Do you know what percent of independents do any sort of difference between their web and street rate? Chris Berg: Twelve. Noah Starr: Twelve percent? That's pretty low. Thaddeus Campbell: I say 30. Chris Berg: Remember, I'm the dumbest guy in the room. I'm just guessing. Let's go. Noah Starr: It's 18%. It's really low. Really low. So that was pretty good. It was better than your last guess. Armand Aghadjanians: That is pretty low. That's still pretty low. Thaddeus Campbell: You got pretty close, Chris. Noah Starr: But the point being is you have such a cap rate disparity, and then you have such different operator types. I mean, if you're not doing anything — there's no web and street rate difference — that tells you a lot about how that owner is running the store. So if you're already able to buy at a cap rate premium where you're getting 100, 200, 300 basis points above core markets, and you're buying from operators who are not in any way close to how an institutional group would want to drive performance, that's where I would look if I was trying to get some sort of, you know, 20% IRR over five years, double the money in five years. But again, a lot of this stuff, it's hard to see, 'cause everyone— Chris Berg: Can I just ask — so you're gonna go deploy to these mom-and-pops, right? Is that a fair assessment, is what you're saying? Which is great. But then I go back to, what's your exit, right? Like, it's great if you've got a site somewhere, unless you're gonna have— Noah Starr: Public Storage just bought 400 stores in top-100-plus MSAs. Do we not think consolidation is accelerating? I mean, we've seen Life Storage and NSA be bought in the last five years. Chris Berg: And you think you're gonna get top dollar from Public? I'm sure it is. But I don't know if you're gonna get your 20% from a sale to Public. You might, but that's what I'm trying to get at. Armand, go ahead. Armand Aghadjanians: I just want to counter Noah really quick on that idea. The way I interpret that, Noah, is a little bit different, because what you're telling me is that I could go buy this facility in a town — not a lot of people, maybe minor league baseball is there. Okay, so I buy there and— Thaddeus Campbell: That was such a SoCal thing to say right there. Armand Aghadjanians: I don't know how to explain it. There's a lot of places a lot of people haven't heard of. Anyway. Thaddeus Campbell: Maybe they got minor league baseball. Chris Berg: Dude, Bull Durham is rolling over right now. Armand Aghadjanians: Okay. Let's say top 130. And we are in towns today that you guys haven't heard of. And we are like twice above everybody else in terms of rental rate. We're absolutely crushing it. It's done really well for us. We expanded one location there and we're expanding another one there. We're absorbing — almost, we have no competitors when it comes to advertising online. It's very mom-and-pop, right? No sophistication. However, when I'm underwriting the deals, one of the issues I have is, okay, if I know all of my other competitors are not aggressive with their rental rates, they're not using those type of revenue management systems, then maybe they're depressing rates. So the next thing you know — and you could see this if you look at certain markets in Oklahoma or Kansas or whatever — they could be stuck in terms of revenue for many, many years. And so that diminishes the value-add narrative, because I am also limited to how far I could push everything by how my competitors react. Although if you do look at some of our performance, it says otherwise. But that's something I can't underwrite to. That becomes a challenge — you need somebody to buy into your platform above almost what you could project. So it's something to think about. But I mean, that's kind of what I would struggle with on those type of deals. And I think you could provide enough information to get somebody comfortable, but you know, that's typically the challenge. Chris Berg: All right guys, we're gonna move on here, to kind of dovetail this. Noah Starr: You don't think this is getting spicy enough, Chris? No retorts? Chris Berg: I think we've kind of done this one. We've kind of talked in circles, in my opinion. Thaddeus Campbell: I think we know who the two smartest people in the room are. I'll say that. Armand Aghadjanians: It's the guy in the suits. Chris Berg: So we're gonna move on to something that kind of dovetails on the same thing. So we just talked about your capital stack. How do you compete against 4.9%? Now, if you've been watching the ten-year, like I'm sure many of you are in this business — this is just one example of a chart. I could give you a ton of charts to show you that, hey, it's clearly — I don't know if you guys are into technical analysis, but I love charts. It's like watching game film back in the day. You can clearly see that this ten-year is now starting to bounce out, and if it starts to break around, you know, 4.95, this particular person says, hey, there's no going back. We'll see. I'm not suggesting that we're gonna be at — I don't know, maybe we will be — but 12, 13, 14 percent like back in '81 with Volcker. I hope that doesn't happen. But point being is, if this were to take place, now you gotta go out and find deals at borrowing rates that probably aren't gonna make sense. If you listened to Warsh in Jackson Hole last week — and I could play the clip for you, but I won't, 'cause these guys have got such boring conversations — but he's like, look, the number one thing right now for us is obviously we've got to get— Thaddeus Campbell: Is your YouTube listening to us? Because that's Tyler Harper from Homegrown on the right side that we've been talking about the whole show. I really wanna understand what your YouTube is doing. Chris Berg: I gotta tell you, man, anytime I have a conversation I pull my phone up now. Like, it is crazy how it's like, wait, I was just talking — anyways, that's another show. Thaddeus Campbell: Sorry, yeah. I digress. Warsh — go back to what you were talking about. Chris Berg: Warsh was very clear on, look, the number one thing for us is we've got to get this thing back to 2%. He sounded very hawkish, in my opinion. My thesis is, hey, he's going to come out with his focus groups next year, he's going to be much more dovish because they're going to try to juice this thing as long as they can, as long as President Trump is president. But point being is that I think the market interpreted him as being hawkish, suggesting he's probably going to have to raise rates. I don't think he does before the midterms, but because of inflation — and then I want to share with you one more thing that I think talks exactly to inflation. This is a 15-year base of XLE, the energy portfolio. And so you can see here that thing just broke out. Which, if you've been watching oil — and by the way, there's a war going on in Iran — like, you could easily see oil break out as well. And so that is the driver of inflation. Point being, let's say these things were to line up and the ten-year starts to escalate, not even rapidly, but it just continues to go up over the next five to ten years. What does that mean for people that are going out and trying to borrow and buy new assets? Armand Aghadjanians: Well, think back to — sorry, go ahead, Thad. Thaddeus Campbell: First of all, I want to give — I'm gonna be super quick, Armand. I want to give Chris a ton of credit, because all of the last half of last year, he was talking about the potential for a war. And I couldn't see any way that we would go to war anywhere. And Berg, the historian, and a guy who hosted a political show very ably for more than a decade, saw it. And here we are now, what are we, six months into, seven months into what's going on in Iran, with no apparent exit ramp. I'm gonna leave it at that. I'm gonna let Armand chime in on the actual answer, but it's not pretty to look at. Chris Berg: And I want to just add one more thing, Armand, before you talk, to give us more context. And then if you take in context what Bessent is doing, you know, trying to buy down the longer yield — I mean, that also is again sort of an easing, if you will, which isn't gonna bode well for the dollar. So I think it's just gonna continue to tell the bond guys like, America just can't get this done. They're not gonna cut the budget. We're in trouble. Armand Aghadjanians: I mean, generally, you know, we look back and now in hindsight you could say everybody thought they were a genius because rates were going down, so property values went up and they refi'd on the way down. So I mean, it's almost as basic as that. Think about the inverse. Yeah, you might be getting a better rate, so if you had to refi, you weren't really sure — okay, do it now. But if you're buying with the assumption that the cost of capital is probably less today than it would be in the future — well, look at how that turned out, you know, the last few years when people were getting 4% notes and now they have to refi at 6.5%. So you always really want to be in an environment, hopefully, where rates are going down. I mean, this all takes a long time to manifest. But I've been saying this for years too, and I used to get a lot of pushback about it, but I kept saying, you know, cap rates are gonna widen, they're gonna decompress, and it just takes time for the market to reveal itself. But if rates go higher, cap rates are gonna go higher, and that's just how it plays out. But the way I look at it, because I have decades in my, you know, I guess perspective of how I look at this stuff, that just sets you up for a rant. What is that? Is that typing? Thaddeus Campbell: Armand is giving such incredible insight that Noah had to take notes to track it. That was not Thaddeus. I just want to say that for the record. I type fast, but I do not pound the keyboard quite that hard. Armand Aghadjanians: That's got — he was with one hand. Anyway. Chris Berg: All right, Noah, you're up, my friend. Thaddeus Campbell: Full credit to Aghadjanians, because he kept talking straight through that without a blink. We could hear it. That was Travis Barker in the background laying the drum beat. Chris Berg: He did. He just was like, 100%. It's like I was like, earmuffs, earmuffs. Noah Starr: I didn't even know you guys could hear that. Armand Aghadjanians: Is that mechanical? Noah Starr: I was like, I'll just sneak this under the rug. You guys won't be able to hear me typing as I ask a question. But I think it's really interesting, and I love history, and I studied economics. And so what was I typing? I was typing, what do investors do in countries with hyperinflation, like Argentina? Like, how do they think about it? I think that's a really interesting question. And I'd want to look at that further. But I mean, I think if you believe that we're at the bottom for cost of capital and it's going to get materially worse in the next five years, I think it's hard to want to be in real estate. Right? There are other things that you'd probably want to do with your money than invest in real estate that is so dependent on debt. But go ahead, Chris. Chris Berg: Can I just jump — I was gonna say this earlier and I wanted to just sort of let it go. Where again, maybe it's because I'm the dumbest guy in the room, and I don't get so wrapped up in cap rates. And I think that, because look, the last thing you want to be in right now is USD, right? If Bessent does what Bessent's about to do, and the five-year's going up and they're gonna try to print money to just inflate the debt away, the last place you wanna be is USD. So I think if you can solve for a cash flow problem, you know, real estate — I think that's a different conversation, right? Because now you can get some appreciation, you get the depreciation with your taxes, you get some cash flow. And then yeah, I definitely would be in gold and other commodities. I got a whole conversation I could have, but I'm not gonna go there today. But so with that being said, I think that there's an opportunity to be in good real estate, but I just wouldn't be solving for cap rate, if that makes sense. Armand Aghadjanians: I don't know — and I know what you're talking about, right, 'cause you're looking at different investments and how far your dollar goes — but I don't think a lot of investors look at it from the dollar. But what I do know historically, like let's say the stock market crashes, which I would look at the S&P 500 indexing, all of the wealth that's accumulated there. Why would you take your money out of there and put it in real estate when it's been crushing it for so long? And until there's pain in there — once there is, like that was part of the reason why capital started really flowing into self-storage in the GFC. It wasn't just because it did well, that's something we could say in hindsight. But people wanted real assets. They didn't want to hold stocks anymore. You get crushed by a big dip that goes on for two years and you want something real, right? And I don't think that the macro setting is there quite yet. But I think a result would be, if something happened in the stock market that was pretty catastrophic, you're gonna see a lot of money flowing and cycling into real estate as a defensive measure. So I think you do have a point there. I just don't know if them looking at the dollar today is enough to get people cycling into real estate. Noah Starr: And what's interesting, Armand — I remember I even made this pitch wrongly years ago, but when everyone was worried about inflation, like, self-storage is perfect for it, it's a great hedge against inflation. You've got month-to-month leases, you could just increase the rents. Look at the rent growth we've had over the last couple of years, right? I incorrectly made that pitch years ago, before TractIQ. But yeah, I'd actually wanna look at this even further and I'm going to after this call, but it looks like in countries like Argentina, lots of investors flow into hard assets that actually have quantifiable value and quantifiable returns. And it looks like they even make these transactions in dollars, not in the local currency, so that they can kind of have a steady value base. But yeah, I think this is a really interesting topic. And Thaddeus, I have The Secret Life of Real Estate and Banking sitting right next to me. So maybe it's time to dive in there. Chris Berg: Definitely time. If I were you, I would be reading that thing like starting now, as soon as we get done with this pod, because if it plays out like it suggests, you know, you're looking at probably second half of 2027 we see that stock market piece you're talking about, Armand. And then I think — and that's why I brought up this piece a moment ago about oil — like, I think you're gonna see a capital rotation coming up over the next two to three years. And I think this shows you exactly, hey, we're early in this capital rotation right now. And I think you're gonna wanna definitely, as you guys are suggesting, own hard assets over the next few years for sure. Especially if rates go up, because now you're killing — and Noah— Noah Starr: Does this make you wanna get longer-term debt, Chris? Like instead of like a five-year loan? Chris Berg: A hundred percent, a hundred percent. Dude, if I could go out and buy a bunch of fourplexes right now with 30-year fixed rates, I would be doing that yesterday, right? I just — that hasn't been my strategy up to this point. But I think — and Noah, I'd love your thoughts on this, and look, I'm saying this with love because I love what you do, but just from a business perspective, I want to hear where your head is at. Because look, if rates go up, this is where I think hard assets become very valuable, like in oil, for example. Whereas what happens if rates go up is you start to crush the multiples in the tech space. Have you considered that? Have you thought about that? And if so, what's your strategy around it? Noah Starr: That was an awesome flip. I would say we are not VC-backed. We're a founder-controlled company. And it's funny, I think with the exit in mind — my exit is potentially doing this for a long time. So I don't pay attention that much to multiples. I also think software in and of itself, it's been a really interesting place to be the last couple of years. Actually talking about how data is important three years ago, and now everyone obviously knows how important data is. So you have different kinds of software companies. I think with what we're trying to build at TractIQ, we would make the argument that we're the data company that has data everyone needs that's really hard to get at scale. And we're the place where transactions and all the deal flow happens in self-storage, and we track every facility across the country. That's really, really hard to do. So we would wanna make the case that we should get the higher-end multiple, but I think every CEO of a software company would try to do something similar. Chris Berg: And I mean, I think you can make a pitch that data is the new oil, right? I was stunned, Noah — and I've talked about this on our team internally — when I was at the New York SSA, the amount of capital that was being spent on data scientists was staggering. And I didn't really maybe get it at the moment. I was like, this is really interesting. Like, what is going on? What am I missing? And now it's like, I see why these guys are putting so much money into getting the best data scientists. Noah Starr: And I think we've also seen in software a big rebound across lots of companies, in terms of the bottom maybe six months ago when everyone realized, wait, what is this AI thing — because they heard that TractIQ came out with an AI connector and then everyone freaked out, the whole world. But I think we're starting to see a rebounding in software companies, because even though it's never been easier to stand up a prototype — Armand, you could probably talk to us all about what that's like — it's really hard to maintain something over time, and especially with the standards that lots of companies require. Armand Aghadjanians: I think all the people that care about what's going on in AI are still learning by using it, right? And it never really quite plays out exactly how we thought it would. Everybody had different opinions and ideas of where it's gonna go, and now we're kind of understanding limitations, use cases, if there's an ROI attached to it, and we're adjusting how we're using it. I mean, you know, I'm still — have a lot of questions about where it's all going and it's still all fascinating. But I too, Noah, I'm seeing — I've been tracking a lot of software stocks and some of them look a lot more interesting. I just, you know, I think it's gonna be hit or miss with who they are, but like, we're gonna see more agents internally and all of that stuff. So it's super interesting how it's gonna evolve. I don't think a lot of people have it nailed down how it's gonna play out. I sure don't. But it's gonna be something strange. Chris Berg: Speaking of that — I mean, last week I think it was, Salesforce announced their partnership with Anthropic, was up over 22% on the day, right? I mean, so the SaaS apocalypse isn't happening yet. So I want to give each one of you a last word. I will start. Just to be clear, none of this is investment advice, this is just a conversation. I will put my flag in the ground though and say that I think — hey, look for the stock — this is just my opinion again, not investment advice — stock market tops out mid-to-late 2027, maybe early 2028. Land prices are already starting to go down. We've talked about that in the past, Thaddeus. So you want to be aware of that. And if this rate continues to go up, I think hard assets are a good thing to be a part of. So that's my last word. Thaddeus, we'll start with you. Your last word, my friend. Thaddeus Campbell: Yeah, I read The Secret Life of Real Estate and Banking. It's important to study history. I'm a history graduate — that's my degree, from Tufts University. And that book is a slog. It is not easy to get through, but it is incredibly, incredibly insightful. And to Chris's point, listen, nothing goes up forever. The stock market is going to come down. It's a matter of when. That book gives you some really good things to look at to try and understand when it's most likely to happen. I'm not excited for what the next couple years might look for, because there's gonna be a lot of pain, I think. On the flip side, the more you understand what's coming, the more you can pound away on your keyboard and look up what you should be doing during that time. I couldn't resist one parting shot. Love you, Noah. Chris Berg: Thaddeus, thank you. With that note, we'll give the last word to you, my friend, if you want to take one more shot or just give us a last word. Noah Starr: This is fun, right? Aren't we having a good time on this first podcast? This has been great. I really enjoyed the conversation, actually. I think I would love to do this again and hopefully people find it interesting. I think, you know, Warren Buffett always would talk about how during the Great Depression, having that long-term optimism has paid off well. So I think in the long run, I definitely subscribe to the optimistic view of society and the world, and think we have got a lot of smart people out there solving real problems, and we're gonna always have problems. But I think in our case, this was a really interesting conversation. I'm gonna dive into a couple of takeaways here — not just the book, but also how to think about hyperinflation. I think that's just interesting. But trying to come out with data and insights so that we can all at least look at the same things when we're trying to make these macro conclusions about self-storage in the coming years. Chris Berg: Armand, you're up, my friend. Armand Aghadjanians: You know, real estate is cyclical, and I think when you're experiencing peakish, euphoric behaviors, that's typically where trouble's brewing. And right now, I think everybody's trying to kind of make sense of it. They're licking wounds. And you just got to believe that history's true, that this is all cyclical. And time could be expensive, it could be painful, but just stick with the course. I'm a great believer in the asset class. This is a fantastic asset class. I've been involved with many others. So, you know, you just gotta keep grinding, and we're gonna do that ourselves here. Chris Berg: I want to share one last thing, gentlemen, just to get your reaction to it, in the context of Noah talking about hyperinflation. This is a graphic here that shows stocks versus wages. And you look at our K-shaped economy today, and why I think you're probably gonna potentially have a socialist be our next president, or at least win some very high levels of office in 2028. When you see this — wages in America have gone up roughly 1,100% since 1964. The S&P 500, over 10,000%. So if you're an asset owner, you're winning. If you're living paycheck to paycheck, good luck. And it's because of the way — well, anyways, I just think it's sad how this disparity is taking place, but the numbers don't lie at this point. Thoughts? Thaddeus Campbell: If you know that that's the reality, then you have the ability to go and take advantage of it. The downside of that S&P 500 graphic is that that's not a thing that people saw the profit from. You had to put money in, leave money in with very low returns in the short term, to take advantage of that profit. And that's the hard argument there. Chris Berg: What I would counter with, where I guess I struggle, is that if our thesis is right about the ten-year, and oil goes up and inflation goes up, and you've got families right now that are just struggling to make ends meet, they don't have the capital to go put into the S&P 500. And that's where I think it just, you know, we've gotta do something. And so that's my thoughts. Thaddeus Campbell: 100% right. I don't disagree with that side of it today. You're 100% right. There's going to be a reckoning that happens for sure. Or we're going to have a bunch of Democratic socialists. Chris Berg: Man, great conversation. Yeah. Armand. Armand Aghadjanians: I still struggle with the fact that maybe there isn't gonna be a reckoning. Like, we really don't know. I've kind of fallen back to this ignorance mindset of, like, I really have no idea what could happen. I mean, it could be a blip and it just — maybe it goes down 25% and in three months it's just soaring back up. Who knows at this point? But that is one — when you look at that graph, that's what we've been competing with. If I'm trying to convince an LP to invest with us and they just have millions in the stock market and they're like, you know, we're crushing it, okay, 20% return — I mean, like, I'm doing 30% in the S&P. It's like, okay, you know? So that's what we're competing with, until we're not. So who knows what will happen. But, and then by the way, there's a lot more indexing these days. There's a lot more indexing. There's a lot of people that just have it parked and they don't touch it. So I don't know if it's quite the same mechanisms, you know. Chris Berg: I mean, gosh, guys, we could go on for so long. I do want to wrap this thing up. But I think even if you look at a recent research piece I did, where the spread between just buying a storage REIT versus actually buying a storage asset was so slim, it's like, man, I get a nice little dividend paid off my REIT — it just becomes kind of, you know, how are you gonna allocate capital? That was what we wanted to solve for today, and hopefully help give some people some insight. And hey, if you're a capital allocator, like Noah with $100 million, where are you gonna put that money to go and get the best return? So, I'm Chris Berg. Thaddeus Campbell: Hey, can I give a quick shout-out before we sign off, to the second most well-known Noah in storage, Noah Springer. Kudos — he's gonna take over as the CEO of Extra Space. And quite frankly, guys, I would love nothing more than to come back on and talk about what that might mean, because given what Public Storage did when Tom Boyle took over, there's a little bit of a gauntlet that was thrown down. Gonna be very interesting to see what Noah Springer does January 1, 2027. Chris Berg: I know most of us on this call have got some connection to Noah. I think we should probably get Noah on this next All-In pod that we do for self-storage and fire some questions at him and see what the vision is. Thaddeus Campbell: We definitely aren't gonna call it the ECRI podcast if we have him come join us. Noah Starr: Yeah, that name doesn't work. Chris Berg: All right you guys, thanks so much for this. Thanks for everybody tuning in. Enjoy it. Please share this with your colleagues. We'll see you back here next time. Have a great day. — END OF TRANSCRIPT —