Marcus & Millichap 2024 Self-Storage outlook and the President of El Salvador

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Marcus & Millichap 2024 Self-Storage outlook and the President of El Salvador Host: Chris Berg — Abernathey Development Recorded: February 24, 2024 Video: https://www.youtube.com/watch?v=LDyTP13vgGQ Key topics: Marcus & Millichap 2024 Self Storage National Investment Outlook; municipal moratoriums on self storage; storage as a small-business incubator for the gig economy; Moreno Valley Planning Commission CUP approval; 3 commissioners endorsing the project on the record; Box Springs site designed to look like an office building; President Nayib Bukele at CPAC; El Salvador as the former murder capital of the world; Fed purchases of Treasury bonds and money printing; the dollar as world reserve currency; Sam Zell; Nixon going off the gold standard in 1971; El Salvador buying Bitcoin in March 2021 and making it legal tender; BlackRock Bitcoin ETF inflows; $8 trillion in money market accounts; upcoming podcast with Darius Dale of 42 Macro Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Recently Marcus & Millichap released their 2024 Self Storage Investment Outlook for the nation, and there's a very important piece in there I'm going to share with you about today in regards to what happened to us last night in front of a Planning Commission. Also, I put out a tweet yesterday, the president of El Salvador speaking at CPAC, and it just went, it just took off on X, formerly known as Twitter. So we'll talk about that and much more. Welcome to the Commercial Real Estate Report. I'm your host, Chris Berg. So let's get right to it here with the Marcus & Millichap piece. This is their 2024 self storage investment forecast, and I want to go to page 7 here, and then I'll blow it up a little bit for you so you can see specifically what I'm talking about. But if you're in self storage you're well aware of this: there are some local municipalities out there as of late that are starting to put moratoriums on self storage. You say, hey, there's not a lot of employees involved, there's not necessarily a lot of city taxes. We get all that. And yet one of the things that I would encourage local leaders to take a look at is there's a huge gig economy out there these days, right? There's a lot of small business owners out there these days that are trying to get it done, make it happen. And so we look at self storage as really like a small business incubator, where because people are just getting started, maybe it's Amazon shipping or whatnot, but it's an opportunity for them to have some kind of storage space, not overly expensive for them, but to get their business started, keep their cost down. So anyone out there who's in a Planning Commission position, city council position, just keep that in mind as people are coming to you in regards to self storage, that this also can act as an incubation space for some of these small business owners out there. Now this is where I think it gets to be really, really interesting. So we were in front of Moreno Valley Planning Commission last night. We've got a site going up there fairly soon and I want to share with you what happened last night in Moreno Valley. Now, these are 3 different planning commissioners, as we just got the city to say, hey look, we second this, we sign off on the CUP for this self storage here in Moreno Valley. And I obviously had no idea this was going to happen, knowing what's going on with the moratorium situation right now across the country, and then this happens with 3 different planning commissioners. Take a listen. Planning Commissioner 1: I actually like the facility. I've always liked these type of things and I think this one is going to be unique, even though we do have, I don't know her name, but lover, right? I actually like this facility, I like these kind of facilities, thank you very much. But they're just kind of like mundane, you know. This one has a lot of things going for it, and that area, I don't really believe we even have one in that area. So I think it's going to be a benefit, and like you said, there is a market out there for it. He doesn't have a problem, you know, it's not some building that's going to be built and then nobody's going to occupy or use. So I'm really for this. I'm just like, unless somebody else has something to say, I'm ready to approve it. Yes. Chris Berg: Did you hear that? Like, I was stunned. I'm like, wait, what, is this really happening right now? Because again, I've been just sort of drummed into my head about some of these moratorium possibilities that are out there. So there's 1. Here comes number 2. Planning Commissioner 2: You know, I just happen to fall in that category at one time when I was moving between, it was the first purchase of a home way back, well, not too far back, and it was amazing how you could not find storage in the city of Moreno Valley. I thought there were quite a few of them, but they fill up fast, and somebody might be... Chris Berg: So other city leaders out there, listen to what he's sharing there. Hey, I thought there was a lot out there. I think that's kind of a misnomer, at least the idea is that, oh my gosh, there's a ton of stores all over the place. And he's like, I thought there was two. This is a person who's in an important position within a Planning Commission thinking the same thing. But then all of a sudden when he actually needed the service he's like, oh wait a second, this is hard, there's not enough storage in our community. Transitioning from an apartment to a home or whatever, and they need to put their stuff in there for a little while, and they are full. Planning Commissioner 2: So we commend you. I say we really need it. I know folks will think no, we don't need storage, but I tell you what, they fill really fast. Chris Berg: Again, very important note there, right? He goes, I know a lot of people think we don't need this, and yet I will tell you that we absolutely do need it, and they fill up really, really fast. Obviously showing the demand for self storage. Planning Commissioner 2: So you're probably going to be very successful. Chris Berg: We hope so. [attribution inferred] Chris Berg: Right, there's 2. Planning Commissioner 3: Mr. Chair, I have a comment. I would just like to say this: this facility, I like it because it looks like an office building. So if you're driving up Box Springs you probably wouldn't even notice it. Chris Berg: Yeah, it's a premium quality storage facility with the best quality of appearance and with upscale landscaping for screening. [attribution inferred] Planning Commissioner 3: But also, I think about apartments around there and the other single family homes around there. Could you imagine, you know, when I lived in the apartment it would have been nice to have a storage center where I could have just put my stuff off there, and I have to go 50 miles out of the way. I'm just exaggerating, but the point is it's in close proximity to where people live. So if you live in those apartments around there, it'd be easy for you to store your stuff. And the single family, they got things, and maybe the gardeners who have equipment and stuff could store it over there. But also too, I like the fact that, like I said, the architectural designs, and so to me it provides more privacy to the surrounding neighborhoods. And it's cool, it looks like, like I said, looks like an office, but drive up, you wouldn't even notice it. So anyway, that's, I have to say thank you. Chris Berg: And there's number 3. And thank you, we appreciate the kind words. People, you know, dropping some knowledge there about what's happening with, whoops, the storage space. So very grateful for that. So, want to share that with other people, please do so, especially if you've got some people in positions within city planning commission, city council. Please share this video with them so they can see another perspective on why self storage is very, very valuable to the community. All right, I want to share this with you as well today. I put this tweet out yesterday, and actually I was out walking by my place and I'd seen a little bit, let me put this up here for you, seen a little bit of President Bukele's speech at CPAC, and I mean it was really fascinating. Who would have thought? As you can see from my tweet: did you ever think you would see the day where the president of El Salvador, a country once known as the murder capital of the world, would be lecturing the United States about freedom and safety? And that's a lot of what he did yesterday in the speech. So that was one piece of it. Thing went wild, you can see there, you know, 62,000 views in a very short period of time. And then not only did he talk about freedom and safety, he also began to start speaking about currency and the economy and taxes. And so I just want to play this clip for you in the context of the Commercial Real Estate Report, because recently the late great Sam Zell was being interviewed and they asked him, what's the one thing that keeps you up at night? And Sam Zell said, you know, the one thing that concerns me the most right now for the United States of America is are we going to continue to be the world reserve currency. So people may not appreciate the power that gives us as a nation, and if we ever lose our position as the world reserve currency it is going to be a dire, dire day for the United States of America. So here is the president of El Salvador yesterday at CPAC lecturing Americans about the financial system. Now, one thing I want to share with you, you may not remember this, so just to give you some context with what he's going to talk about as far as fiat currency. You may remember it's back, I believe, in March of 2021, I'll share this with you, but El Salvador actually took money out of their treasury and bought a big chunk of Bitcoin. So they're now back in the black since this recent rally. You can see this was December 4th of 2023. But in case you didn't remember that, there was a time when Bukele took money out of their treasury, bought a bunch of Bitcoin, actually made Bitcoin legal tender within El Salvador. I can't say it was a perfect rollout, but it's definitely made a lot more people there bankable. So I want to give you that context as you hear the president of El Salvador talk about fiat currency and what's happening right now with the US Treasury and the Federal Reserve. President Nayib Bukele: There are other symptoms that are even more difficult to diagnose, for instance the financial situation of the United States. When I talk to my conservative friends right here, they always tell me that the problem is high taxes. But they're wrong. Of course, high taxes are extremely high here in the United States, I give you that, you're right in that. But that's not the real problem. The real problem is not the high taxes themselves, but the fact that they are not even really funding the government. Not even those high taxes, higher than a lot of places in the world, not even those taxes are really funding the government. So who's financing the government? Government is financed by treasury bonds. Paper. And who buys the treasury bonds? Mostly the Fed. And how does the Fed buy them? By printing money. But what backing does the Fed have for that money being printed? The treasury bonds themselves. So basically you finance the government by printing money out of thin air. Someone could ask, someone could ask, well, so if the government can print unlimited amounts of money out of thin air, why did they collect [Applause] taxes? I mean, in theory it would make sense, right? If they can print unlimited amounts of money, why would they need taxes for? The answer is simple, but it's very shocking. The real problem is that you pay high taxes only to uphold the illusion that you are funding the government, which you are not. It's shocking, but it's true. The government is funded by money printing. Paper backed with paper. A bubble that will inevitably burst. The situation is even worse than it seems, because if most Americans and the rest of the world were to become aware of this farce, confidence in your currency will be lost, the dollar will fall, and the western civilization with it. If the next president of the United States doesn't make the necessary policies and structural changes, sooner or later that bubble will burst. There's still time. You don't have to make the same mistakes we did in the 60s and the 70s. You can still jump before the water boils. Chris Berg: So it's interesting, brings up the 60s and 70s. A couple things to note there in regards to President Bukele is the fact that, number 1, remember what happened in 1971 here in the United States of America, right? Nixon came out and said, hey, the economy is great, we're just going to temporarily, temporarily go off the gold standard. Yeah, it wasn't very temporary. I would encourage you to check out "WTF Happened in 1971", incredible graphics, data points there that talk about what's taken place since we've become completely fiat, removed ourselves from the gold standard. I think the second thing you may want to do some homework on is watch what Bukele is doing. He's basically following a model of Singapore. You remember back in the day, it was in the 60s and 70s, Singapore was very insecure, very dangerous, not doing well financially. He has adopted that Singapore model now into El Salvador. We've seen what's happened, where during his acceptance speech recently he talked about El Salvador being actually the safest country in the Western Hemisphere. I don't have the data points to back that up, but I know that at one point, you know, 10 years ago, you're talking over 1,000 homicides a year in that country, thus the reason it was dubbed the murder capital of the world. Now it's much, much less than that. The people there actually feel safe. So, one day we may do some of this only in Spanish as well, because there's so much happening right now in Latin America. But I think the third thing I'll share, again just to remind you, that what he's saying there is exactly why he's also taking money from his US Treasury and invested in Bitcoin. You know, he also went out on Twitter and talked about, hey, guess what, I was here before the BlackRock ETF and things like that. So he's very pro what's happening in that space. I don't know if you've been watching what's going on with the Bitcoin ETFs, but the amount of capital and liquidity that is flowing into those ETFs is just at a stunning rate, a stunning rate. So people that are in the know know that, hey, there are some challenges right now with the US dollar. And as he just mentioned, as Sam Zell mentioned, if there were ever a time that the US currency, the US dollar, was no longer the world reserve currency, it would be very bad news for the United States of America. All right, we'd love to know your point of view here on the Commercial Real Estate Report on this Friday. Please share this video with your colleagues as well. If you just joined us, earlier we talked about the Marcus & Millichap 2024 Self Storage National Investment Outlook, and one of the key things they discussed in there is the fact that many municipalities are placing moratoriums on self storage. And then last night we were in front of the Moreno Valley Planning Commission. We had 3, and I want to say thank you to all of them, we had 3 planning commissioners come out and say, hey, we love this self storage project, we need more self storage. It's been great for their personal lives and I think it's going to be great for their city. So please share that as well. And we'll see, by the way, I forgot to mention, join me on Tuesday live, we're going to be doing a podcast with Darius Dale from 42 Macro. He's on Pomp's podcast a bunch. It should be a phenomenal, phenomenal interview. We're going to talk about, he's really into the macro, obviously, piece of the economy, and the global liquidity. We'll probably touch in fact on this Fed and the T-bill conversation that Bukele just mentioned. But it'll be very interesting to get his take on how global liquidity is going to impact commercial real estate. We said a while back here on the show that there's about 8 trillion dollars right now in money market accounts, basically, you know, liquid assets for people, 8 trillion with a T. If and when the Fed does lower rates, that money is going to move into different asset classes. It'll be interesting to get his take on how much of that liquidity does he believe is going to move into real estate versus, again, maybe Bitcoin, equities and whatnot. So thanks for joining us, have a great Friday and weekend, we'll see you back here on Tuesday with the podcast with Darius Dale. — END OF TRANSCRIPT —