Self-Storage Underwriting Success Secrets w/ Crowe Holdings Kristin Millington

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Self-Storage Underwriting Success Secrets with Crow Holdings' Kristin Millington Guest: Kristin Millington — Managing Director, Manufactured Housing and Self-Storage, Crow Holdings Capital (Dallas) Host: Chris Berg — Abernathey Development Published: August 8, 2025 (live) Video: https://www.youtube.com/watch?v=S2pSU4hAHDA Key topics: Takeaways from the CSSA conference in Newport Beach and why the legislative panel stood out, why rent control is a smaller risk in storage than in manufactured housing ("it is just your excess stuff"), storage operators as unusually tenant-friendly landlords (no credit checks, no background checks, no security deposits), the sticker shock of a 30% increase versus a low cost-to-income ratio, Gary Sugarman and the CSSA coalition's property-tax and school-funding argument, why a disclosure bill would actually help underwriting, the REITs raising public rates ahead of the legislation, the notably negative sentiment toward developers at the conference, Crow's record of ~85 investments since 2016 with 80% development and only four deals in the last two years, the top-down partner/market/deal filter, why the same per-capita number means different things in Dallas or LA versus a tertiary Midwest market, income as an emerging screen and how ECRI plays out differently in lower-income markets, quality and vintage of supply mattering more than the raw number, driving markets and looking for dark retail and convertible Kmarts, pulling in-place rate data from relationships rather than taking feasibility studies at face value, yield on cost and getting out of negative leverage, reputation over spreadsheet track record, demand as a micro question (three-mile rings that really operate at two miles, the right side of the highway, topography), Crow's 12-person investment committee and the "preview placemat" process, why Kristin pounds the table for a deal instead of leading with why not to do it, and the 2021 six-pack sale to Extra Space that delivered a 42% IRR and a 2.2x multiple. Note: Speaker attribution reconstructed from YouTube captions. Light cleanup of transcription errors only; wording preserved. ————————————————————————————— Chris Berg: Welcome to the Self Storage Report. I'm your host, Chris Berg. Excited for our guest today. She was a special round table guest at the recent CSSA event down in Newport — did an absolutely amazing job. She's the managing director of manufactured housing and self-storage for Crow Holdings, Kristin Millington. Kristin, it's great to have you with us. I want to jump right in: what stood out to you the most, or what surprised you the most, from the CSSA event in — which was mid-July? Seems like that was months ago, but in mid-July. Kristin Millington: Yeah. Well, I'm missing the California weather, because I sit here in Dallas and it is hot as we start off August. So for sure missing that. It also seems like it was a long time ago, but it was my first time at that conference. It won't be my last. I feel like it's similar — I think you said you haven't been to the ski conference. It's similar to that conference in that it feels like it's primarily owners, operators. I handle acquisitions, development, really across the country — all of our investment activity on the storage side. And so from my perspective, it was kind of more of my peer set and folks to compare notes with, which I thought was great. Something that I thought was really interesting was the focus on legislation. I thought that was really neat. I have a nationwide focus, and so pretty small allocation to California — we currently own three deals there, one kind of central California and then two in Southern California. And so from that perspective, I'm not as close to the conversations around legislation, rent control, everything that's happening there. And so I really found the legislative update particularly interesting. It felt really in-depth and different than I think a lot of panels do. I kind of feel like we all get the same sound bites of ECRI and rent strategies and "is this strategy sustainable," etc., etc. And so I felt like this one was really kind of different — interesting speakers, very in-depth. You mentioned it at the intro, and I think I mentioned it on my panel, but I cover manufactured housing as well. Rent control in manufactured housing is, and always has been, a big conversation. And so I'm kind of used to it on that side. But on the storage side, it has really started to permeate our conversations and our investment committee over there as well. And so about six months ago is when my ears perked up and said, we really need to start thinking about this. And so I thought everything that they said was really interesting, and I think that they agreed with this point: I've always been of the opinion — and kind of how I pitch it to our investment committee and investors — is I think this will be a transparency bill and a disclosure bill really more than anything else. The way that I always think about rent control in this asset class is, it's not necessarily a needs-based thing. It's not housing, it's not manufactured housing, it's not apartments, it's not anything like that. It is just your excess stuff and what you're doing with that stuff. And so I think that rent control is less of a risk because of that. One of the panelists pointed out — and I thought it was a really interesting thought — was, we are very tenant-friendly landlords by the nature of what we do. And I hadn't thought about it this way: we don't do credit checks, we don't do background checks, there's no security deposits, there's a lot of flexibility. And so I think those things, combined with the fact that this is more of a one-space thing, really bodes well for preventing rent control. And then on the flip side of that, they of course pointed out that any bit of regulation will make it more difficult to carry out our business plan and continue to provide that level of flexibility to the consumer — and that's really the core of our business. But I don't know if you remember the video that they showed, I think it was somewhere in California, the Senate floor, whatever it was. But it was basically like one constituent complained, and this legislator was hit by a couple of increases. And so the point that was made was basically, yes, 30% on its face might look like a lot — there's an element of sticker shock — but in reality, the cost-to-income ratio is still very low. And so I think, in short, my biggest takeaway from the conference was that our industry has a loud voice. I don't get to see it every day, sitting here in Dallas, when you guys experience everything in California. But I left very confident that everyone is very committed to lobbying against the legislation. I think that it was promising. The CEO panel mentioned that no one was really concerned about the threat of rent control — they said it's not going to constrict the appetite for assets in California. And so I think that speaks to everyone's confidence that we're all committed to not having this pass. So I would say the legislative panel, I thought, was different. It was interesting, probably California-specific to CSSA, but a great panel. Chris Berg: Big shout out to Gary Sugarman, everyone at CSSA that actually put that coalition together to go battle against this legislation. I'm curious — as you learn more, and then we had a chance to talk after the conference, I shared with you that information about the tax stuff. Has that changed your dialogue within your investment committee, and does it continue to make you bullish on California, or are you a little bit more sheepish? Kristin Millington: No. Yeah, I thought that was great. You sent me the interview that you did with Gary Sugarman, and I think part of that interview — it was embedded in the interview — was something so interesting that he pointed out. And I'm trying to remember. He basically said: this is how rent control is going to affect the valuation of storage, this is how the valuation of storage can negatively affect property tax revenue, of school funding — the list goes on and on. And so I think that again gave me confidence that everyone in the industry has the tools to combat this rent control. But more than anything, it gave me a lot of talking points as we go to our investment committee and our investors. My kind of talking point or defense in the past has been that this is not a needs-based housing type sector — this is once. But now we know, okay, cost-to-income ratio remains low. What I said earlier, and what I learned in the legislative panel about, we have so much flexibility, we let people come in without a background check. And then really pointing out the impact to municipalities. I think we have a lot of tools in the tool belt to combat the risk of rent control. And so for me, I wouldn't say that it made me any more sheepish on California. I think if anything, we've been very conservative in how we've underwritten California, and we're mindful of that risk. But we feel really confident that it's going to be a disclosure thing, and all of those tools kind of give me talking points to say, like, this is not going to happen because of XYZ. Chris Berg: Yeah, I think you said it really well. I mean, I don't know any politician in the world that's going to go lose $60 million a year on K-12 funding because of one constituent complaint, right? It's just not going to happen. Kristin Millington: That's the thing, and I think that's what they pointed out in the panel. It's sticker shock. 30% looks really bad — and we have to talk about that in our model too, with this new ECRI program. We used to show rent bumps of 3% every year. Well, now you're starting really low, and so your first year you might show 20% rent increase. Well, that is obviously going to be big questions from our investment committee, but there's ways you kind of have to explain how that makes sense. And it's kind of the same here. Yeah, 30% looks crazy and of course we should have legislation around that — well, in reality, 30% can be like five bucks. I mean, it's nothing. So I think it's just framing these conversations to be practical, in saying, 30% might look bad, but think about these other things. Chris Berg: The way you framed that on the round table was great. Like, hey, look, if I'm making X amount of money a year and you raise my thing 30 bucks, like, whatever, it just hit my credit card, right? So, depends on where that site is at. Kristin Millington: Correct. Yeah, I think that's right. And I said that I think this will go more towards adding disclosures, and they talked a lot about that on the CEO panel. And I think that's right — I think that that will happen, but ultimately I think that'll be good for the space. I think consumers are smart, I think they're getting smarter. It's a promotional rate, and they want to know that it's a promotional rate, and I think the disclosures around that are important. I think by having some kind of disclosure that tells when and how much your rent is going to increase, that can really help us on the underwriting side, because it's not going to be some black box of, you know, when do you underwrite an increase and all of those things. And so I think it's ultimately pretty good for the industry. Chris Berg: I think what's interesting too is you saw the REITs — when this news started to hit, you could see the REITs start to raise their public rates anyway. So it kind of became, I don't want to say a completely moot point, but maybe more moot. And the other thing that jumped out to me — I don't want to put words in your mouth — but when we spoke after the event, you also mentioned, you're like, "Yeah, I was really intrigued by the conversation around development and developers too." Do you want to share on that? Kristin Millington: Yeah, just in general about — can't remember my talking point. Chris Berg: I don't know what words you'd rather — you're like, just how much they, and I'll be nice, they don't really like developers, right? Like, it was like, holy cow. Kristin Millington: Yes. Yes. It was very — yeah, I felt like it was, and I wasn't necessarily used to seeing, this was just how kind of negatively slanted it was on development and on new development. So about 80% of what we've done is development. We've been in the space since 2016, invested in probably 85 investments; 80% of that is new development, and I think that will continue. We like to build a best-in-class asset where we can command the premium rents. And so we're still going to be fairly active on the development side. I think what you're seeing now, at least from us, we're being way more selective on who we work with, on their track record, on everything. And I think that's what you're seeing across the board — just groups really returning to discipline, and being able to say no to more deals, and being able to not do every deal that a developer brings you. We're looking at track record, we're asking a lot more questions. I think data is king, and we're trying to work with the developers that have the data, that have the experience, and that know what to do with that data. And so I don't think — we particularly are not pressing pause on development. We're just having to make sure that it makes a lot of sense. We have to feel good about the land basis. We have to feel good about the rates that you're getting. For us, there's always a push to get capital out, but I would say we're being very selective. We're not in an environment where you can just kind of arb your cap rate and say it's going to be okay. We are being very selective on our partners, and making sure that we want to work with those groups. Chris Berg: I want to get into that in a moment, but I think the other thing just to acknowledge that really jumped out that you mentioned — you said, "Hey, I think in the last…" — my numbers are wrong, correct me — "in the last nine years we've done 85 deals, but in the last two, been four." And I was like, so you average basically 10 a year for seven years, and then two a year. If you want to comment on that, or we can just jump into this partnership conversation as well. Do you want to comment on that, or no? Kristin Millington: Yeah. I mean, like I said, we've just been way more selective, and we're making sure that deals make sense for us. We are not in the business of just putting capital out to put capital out. We want to make sure that we feel convicted in the deal — well, kind of in underwriting. And happy to kind of get into how we underwrite. But we kind of have a top-down approach, where you're getting comfortable with the partner, you're getting comfortable with the market, and then you're getting comfortable with the deal. And even if you can get comfortable with the market, you feel good about the supply, you feel good about the rates, but you don't think the partner can perform — we're not going to do it. If we think that the partner is being too bullish on rates, we're not going to do it. If we love the market — undersupplied, hard to develop — but the land basis is too high, we're not going to do it. I think we're out of the market of giving any kind of land lift and giving any kind of premium on land. And so for us, it's been: we want to get capital out, the capital is there, the bar is much higher. Our risk-adjusted return threshold is much higher. Storage has historically checked a lot of boxes for us — needs-based demand, fragmented ownership, low capex, all those things we talk about. Those themes still resonate, but we're just asking tougher questions now around supply, realistic rent growth, how much can you actually push ECRI. So we want to deploy capital, we just want to do it in good deals. And I would say we've been sitting on the sidelines longer than we have in the past. We also want to see deal-by-deal visibility. We don't have a blind pool where we're just giving a developer a bucket of money to put to work. We really want to show that operational expertise and that kind of boots-on-the-ground expertise. Chris Berg: One of the things that I was so impressed from you on the round table was just the way that you saw assets, and kind of your point of view, the perspective on them, and then the way you would walk through it from "hey, not all supply is the same." You just did an amazing job. And so what I'd like to do is let's go into — let's say I've got a project that we're about to develop and I come to you. Walk us through that process from A to Z. Kristin Millington: Yeah. Well, first and foremost, I just said it: I think it's very important who you work with. We're very selective in our partners. We want to do deals with people that, like I said, have a track record, know what they're doing, have local expertise. It's so important on the development side to understand the entitlement process, understand — I mean, even things like permitting fees. We've had deals where we had significant cost overruns because a developer didn't know that there was a permitting fee or a tax. And so I think those little local nuances are so important in a developer, and I really put a developer in a favorable light when they understand that kind of local nuance. So, kind of the developer bucket aside, I would say that's the first thing. But then I really look at it macro to micro. I look at the market, and I really start with supply. I think supply is the single biggest headwind that we face in storage. So we typically start with the normal per-capita supply analysis. Anything above seven, eight, nine foot per capita starts to raise questions for us. But that's just the headline — and I said this in the panel — supply is much more nuanced than saying, oh, nine per capita, we're not going to do the deal. The same per-capita threshold means very different things in — and I think I used this example — dense infill markets versus sprawling markets. So I look at Dallas, or LA, Southern California, San Diego, Dallas — any dense market might tolerate 10-plus square feet per capita per person, because they have the population growth, they have the job growth, they have the density. In a tertiary market — call it somewhere in the Midwest, no job growth, no population growth — even five, six square feet per capita can be problematic. And so you really have to look at the market and figure out, is it a market that can bear new supply? And on incomes. Incomes I think are becoming really important too, because: is it a market that can afford the utilization of supply? Do they need storage? Can they afford storage? Can they bear the rate increases that we're seeing now? We're seeing this ECRI strategy play out much differently in smaller, lower-income markets than we are in higher-income markets. It sounds obvious to say — when I said it out loud it sounds very obvious — but it's true that you really have to pay attention to incomes too. So kind of past the demographic piece, the other piece I look at in supply is quality. If we're building a Class A, 100% climate-controlled facility, our hope is that we get best-in-class rents, we get that premium demand. So if I have 15 net rentable square feet per capita but nothing's been built since 2000, that feels a lot better than building into six square feet per capita but everyone's in lease-up. And so I think it's a lot more nuanced than just having a number. You really have to look at the timing, the barriers to entry, the operating strategy. I think looking at retail vacancies has become really important. Anytime we drive a market — and I was going to say, I think being in the market is so important, to just go around and drive. My husband always laughs, because we're on the road a lot for work, and he's like, "Why don't you just get on Google Maps and look at something?" And it's like, no, it's so different being in a market, looking and feeling and going into the storage facilities, seeing the dark retail. Is there a lot of retail vacancy? Is there a dark Kmart down the street that can be converted? And so we try to get really granular: focus on the pipeline, focus on population growth, what do rent trends look like, what do occupancy trends look like. So that's kind of how I look at supply. Next step, when you look at rates — rates are so nuanced, every market is so different. For lease-up deals, we start with unit-level comps. We look at real-time street rates. We adjust for concessions. I don't think we take feasibility studies at face value. I said it earlier, but data right now is king. And you can do all of the research on Radius and Yardi, pulling street rates — but really what you have to have is relationships, and calling up your buddies at Extra Space and Public Storage and whoever else to pull in-place rate data. Because that truly is what market data is: pulling the actual comps and what people are actually paying. So that's kind of how I look at supply, demos, rates. Finally, if all of those things check out — you have an undersupplied market, you have high barriers to entry, you have a shovel-ready site, you feel great about your rates — ultimately, you have to feel good about your math and your underwriting. At the end of the day, we have to achieve a certain return; that's what we owe to our investors. And we have to feel good about the basis and about the underwriting. We look a lot at negative leverage and how quickly we can grow out of that. We look at the yields that we're building to, to make sure that we feel good about the spread over spot cap rates. And so I think we can feel convicted about a site in a market, but if it doesn't pencil, it doesn't work. I actually had a deal yesterday that I was looking at in South Florida. The market checked out, the rates checked out — ultimately, the math just didn't work. You were going to be in negative leverage too long, you didn't get the yields that you needed, you didn't get the growth that you needed. And so you can have a perfect site, but at the end of the day you're not going to get the return that you want. Chris Berg: And was that math not working because construction costs are elevated so much right now? Or what made the math not work, if the rates were good and the site was good? Kristin Millington: So that deal was actually an acquisition. And so, just in my opinion, you weren't getting the growth that you needed to hit the seller's asking price. The broker underwriting and the partner was underwriting growth that I just don't think is achievable. The rate today feels good, but I don't think you can buy an Extra Space facility and think that you're going to push rate a whole lot more on a stabilized asset. Chris Berg: Very, very fair. And it's interesting you say that, because if you listen to some of the REITs' earnings calls as of late, that's kind of the challenge. They're like, hey, the acquisitions aren't working, so they're looking at, hey, where are we going to deploy capital? I want to back up on a few things. You talked about track record. So I'm curious, what's your DD as you're looking at partners and there's a track record — hey, we've had one round trip, 10 round trips, 100, what? Kristin Millington: Yeah, I would say that we don't have like a hard-and-fast line in the sand of, oh, you haven't done 10, you have to do 10 deals to work with us, or something like that. I think most importantly for me — and I think everyone's probably different on this — I think it's a combination of track record. Do you have experience in that market? Of your experience, how often have you been on budget, on time? Have you round-tripped that? Did you get out of it on time? How did that experience go? But even more so than track record to me is: this is a tight-knit industry. And that's why I liked this conference so much, and the ski conference — because that's where I think relationships are really formed and you get to meet people. And if I can't find one of my peers that has either worked with this group, or known someone that's worked with this group, or knows of them, or any of those things, then I have real pause in working with them. I want someone that is known in the space that has a good reputation. If you have both of those things, then you likely have a great track record. And so instead of studying someone's track record and getting some spreadsheet that shows how much they've built and their returns and all that, I really want to talk to people. And I call up peers — I'll call you and say, "Hey, have you worked with XYZ?" Or if you haven't, do you know people that have? What's the reputation? What do people know about them? I think that's more important. And I think this is an industry — real estate in general, but self-storage particularly, these kind of specialty sectors — your reputation follows you. And if you have that reputation, then I can trust that you've done things right along the way and that you'll treat us right as well. And you're talking to your partners day in and day out, and I want to like who I work with. I want to enjoy the working relationship. I think if you get along, it makes the project a lot more enjoyable and successful. Chris Berg: We say the same thing. Like, hey, we just want to work with people that we have a good time with as we get done. Kristin Millington: Exactly. Exactly. I mean, if you've done 10 deals or 100 deals, if you're not fun to work with, then we're out. Chris Berg: Very well said. Let's go back to the supply and demand piece as well that you mentioned. I'm curious: do you have kind of a formula or way that you determine the demand metric in a market? Kristin Millington: We don't really have a formula. We used to, in our underwriting packages — it was before my time — and it was a very complicated formula about population growth and supply and all these metrics that I didn't think made a whole lot of sense. And so I wouldn't say there's necessarily a formula that says this much population growth equals this much demand. I think it's more looking at demographic trends and shifts in a market: job growth, population growth, housing growth. We have actually in the past couple of months kind of implemented into our investment committee packages a lot of information around demographic trends in a market. And it varies by deal — I would say it's not a formulaic, you have to have these metrics in the investment committee package. It's more — Texas, for instance, is a good example of a market. If you look at the U-Haul — I don't know if you've looked at the stat, but if you look at one-way U-Haul trips, like inbound trips, I think Texas is like the top. I always think it's a funny stat. Texas is like the top U-Haul inbound thing. And so if it's a high-growth market like that, okay, great — where is all the housing going? Is it going to infill Dallas, or is it going to the sprawling north suburbs where the good schools are? So I think looking at just micro shifts like that — there's a lot of deals that we're seeing, or opportunities, in far north Dallas, Lucas, Prosper, markets like that, where on a map they might look like they're small town, middle of nowhere, but in reality that's kind of where the population is moving. And so we look at everything on a three mile in real estate, but I think storage is much more micro than that. And you have to look at the natural barriers to entry. You have to look at where is the demand going. Are you on the right side of the highway? Did you pull the three-mile radius, but really it operates in a two-mile radius because of drive time? And so, kind of a long-winded way to say, I don't think there's any formulaic way to look at demand. I think it's really micro, and you need to be boots on the ground touring those assets to figure out, like, okay, a Public Storage is expanding two miles down the road — well, is there a bunch of topography in the middle? Are they two completely separate neighborhoods? I think it's just so micro to track demand. Chris Berg: So true. It's such a neighborhood — it's been really interesting to see how much of just kind of a neighborhood-type business it is. Like, you can drop a pin here, move it maybe 400 meters, and you're like, whoa, it's a totally different situation. Kristin Millington: That's exactly right. And I think that's why it's so important to, number one, have a partner that's familiar with that market. I don't want someone that sits in Dallas with me and we're trying to do deals all over and they don't know either. And number two — I mean, you have to get out, and this is true of any asset class. You have to get out and drive that market and drive the comp set and figure out — it looks a lot different on paper than it does when you're driving it. Chris Berg: Well, and I love what you said. I want to tie this in — how you were saying, hey, I also don't want to get into a lease-up battle, right? Like, we were going to do something in Elk Grove, California, but right next door was a beautiful asset that was just getting under construction by Trojan Storage — 250,000. We're like, we're just going to cannibalize each other, right? So there's a lot of developers maybe don't think about, oh my gosh, the lease-up battle is not a fun one. Kristin Millington: Yeah, that's exactly right. I mean, I think if you look at supply and you look at — you talked about underwriting — if you look at all these things and it all makes sense, the worst thing that I think I can do is not overpaying for a deal necessarily, but it's overpaying for a deal that's also delivering into new supply. Because that is going to crush you. There's no way to get out of that. And so I think that's why it's so important to — I mean, you have to have a really good understanding of what's coming online, of doing the digging not only on Radius or Yardi and the softwares that say these things, but just in talking to different partners. We actually had a deal in Florida that one of our partners had brought us. We dug in pretty hard on it, ultimately didn't love the market, didn't do the deal. Another partner brought us a deal that was actually in the three-mile — another development. We'd already passed on the market, so it wasn't necessarily — we weren't going to do it. But had we not, let's say we were going to move forward, had we not had that partner bring us another deal — it didn't show up in Yardi or Radius or anywhere. You'd have to really do some digging and some city council meetings for approvals. But I mean, that just goes to show, conversations — especially conversations at these conferences — that's where you really get to understand the supply and everything going on. All that to say, you really just have to go beyond what the software is selling you and figure out: is there a vacant land site that can become storage? Is there — I mentioned earlier — a big box? You really have to know what's coming online, because I think that's the worst thing you can do. Chris Berg: You've kind of answered this, but just for more clarity for people — because I don't think, at least what I've seen, and correct me if I'm wrong, but I don't think a lot of people do a great job on the defensive strategy. It's one thing to underwrite offensively, but it's another thing to go, okay, now what other parcels of dirt here potentially could be self-storage? What zone, what's the likelihood of a rezone? So I'm curious — I don't know if you played sports, but I did, so I go into these sort of like, hey, I'm putting together an offensive game plan. When you put together your strategy to defend your moat for these assets, what's your strategy to go about doing that? Kristin Millington: I think I kind of said it, but it's really: you go to the software, figure out what the supply is. But I think it's even more important to just, number one, have a partner that is close to city council and municipality and knows kind of the ins and outs of what's going on, and knows what's going to happen, what's coming online, how difficult it is to develop. I think it's important to go drive it and look at — I've mentioned it a couple times — I think retail vacancies are really important to look at. I think office vacancy is going to become important to look at. I think looking at vacant land — if we look at a site and there's a bunch of vacant land around it, you have to really know what the barriers to entry are to develop there. And so it kind of goes back to the point of the offensive strategy: if everything checks out, you like the supply story, you like the rate, you like the partner — you can like all those things, but if you have a lot of land around you or a lot of retail around you that can be developed, that scares me. And so I think looking at supply is one thing — I think that's where you start — but I think looking at that from a defensive mechanism is even better, because you have to know what the possibility is. And we kind of have a joke: our investment committee will be in the meeting and they'll all be on their phones looking at a map and kind of playing around on Google Earth. And so it really kind of forces you to figure out what's around and what's it going to become, because they'll be like, "Oh, there's a piece of land here — what's that going to be? What's it zoned for?" And so it's forced me to be able to play that game. But I mean, you really have to know in your three mile what are the vacant parcels and what are they zoned for. Chris Berg: Want to be respectful of your time, so just a few more questions. As you're taking things through this process, I'm curious: when does the time come when you go, "Okay, time to go in front of the investment review committee and pitch them on this asset"? When does that happen, and kind of walk us through — what's the pitch like? Kristin Millington: Yeah, I would say not necessarily a set time frame. Some deals we have a long lead time — we're doing a deal in Southern California right now that we've tracked for two years with our partner, and so excited. I'd never taken it up to committee, because they don't need to know that we've tracked it for that, they weren't privy to those conversations. But by the time we go to committee, we're obviously very ready to pitch that. And then there's deals that have a shorter fuse. And so we kind of have a two-step — I'd say three-step — committee process. We do kind of what we call a round table preview, and we sit — it's very casual. We have a 12-person investment committee. We prepare what we call the preview placemat, and it's a one-pager: tells the supply story, tells the rate story, tells the — you can see the demographic trends. And we sit there, and that's really where we hash out the deal. That is kind of where I give my pitch, and that's the question and answer. That's where we sit and discuss, people poke holes in it, that's where people are on their phones on the map. But that's really the chance to sell the deal to committee. They poke holes in it and I figure out where I need to go dig in more. Oftentimes they'll find something that I didn't think of and, you know, yeah, that was a great point and it doesn't make sense for the deal. Or it gives me the opportunity to say, yes, we thought about that, and here's the mitigant for what you just talked about. After that process, that's kind of where we have the most back and forth, and where we go back to our partner and say, here was the feedback, let's figure out how we can get some more risk mitigants here. How can we think about a downside here? Are we thinking about all the downside scenarios? We run a lot of risk sensitivities with downside scenarios — exit risk, financing risk, rate risk, lease-up risk, all those things. And if we can run all those downsides and the deal still makes sense, then I feel great about it, and I think that's important to point out to committee. So that's really kind of where we hash out whether the deal is a fit or not. The second step, we have a diligence approval — that's the more formal, like, yes, you can move forward and spend money on this. And then the final approval would be before you go hard. And so those are kind of the two formal pieces of approval. But really that first one is where it's a casual setting. I'm fortunate to work in an office where everyone is extremely close. I think the average tenure of our investment committee is like 25 years, so they've been at Crow a long time. They know the process very well, they know our strategy obviously extremely well. And so that's really where the benefit for me is: I get 12 different viewpoints. We have people that focus on industrial, multi, specialty, the investor relations side. And so you get 12 different viewpoints that you didn't think about, which is so helpful for me and really for our whole team. Chris Berg: Quick question, and then a couple more. So there's a great book called King of Capital about Blackstone, and there's some great stories in there about Stephen Schwarzman. His second deal went awry, and so I'm curious if you take this similar strategy: from now on at Blackstone, anytime somebody comes in to pitch the investment review committee, they have to start with why we shouldn't do this deal. Do you do the same thing, or no? Kristin Millington: Well, that's funny, because I kind of take the opposite. And this is just how I learned it and how I think about it. You're going into a 12-person investment committee that are extremely experienced, obviously experts in the field, but come from different backgrounds. I am the product lead for self-storage, and I have a man that sits on investment committee that kind of oversees our specialty sectors, and so there's some expertise there. But there's people around the table that don't know storage as well and don't know the market as well. And so I look at my position to come in and kind of pound the table and say, this is why we should do this deal. If I'm bringing it to committee at that point, then I want to do the deal. I believe in it, I think it's a great deal, and I think I need to exude the confidence that, like, we have to do this deal, and this is why — if we don't do this deal we're crazy. And so I think that's kind of what I lead with, and that kind of confidence — because I think that if you come in and you're a little bit sheepish and like, "I don't know, what do you guys think?", then no one's going to say yes. And so I kind of take the opposite approach: I come in and, if we don't do this deal we're crazy. And then when we talk about the risks and the downsides, that's when I can say, hey, here's a risk that I've thought about, but this is why we should still do the deal. Chris Berg: Nice. So nice. The Blackstone experts — probably that has a book about him — might have a better strategy, but that's fine. No, I don't think — I just think it was very interesting, because the second deal went awry. He's like, "Wait, we've got to do much more to mitigate risk here." He's like, "I need to know why we shouldn't do it, and then we can figure out," right? Kristin Millington: Well, and — a girl that works with me — we're always, every deal you do, there's always something. You can do this 85 times, you do it 100 times, and there's always something that you learn. And so I've told her, like, hey, you're always going to — there's always going to be a lesson learned. Just don't make the same mistake twice, as we all know. And so I think we've kind of created more risk scenarios and downside scenarios that we run because of different mistakes. But if we think we shouldn't do a deal, we won't bring it in. But it has expanded our downside scenarios that we run, for sure. Chris Berg: Number one metric your investment review committee focuses on is what? Kristin Millington: I would say, from an underwriting standpoint, we really look at yield on cost and how much you can grow that, and when you can get out of negative leverage. From just a deal standpoint, I would say supply. I think supply is the biggest headwind you face. Like we've said over and over here, if you deliver a facility and there's a deal leasing up across the street, that's tough. Chris Berg: It's so funny, because there's so much minutiae talk in this business, but yet if you just follow Sam Zell and the old supply and demand, it's pretty basic. Last question for you. You had a really unique deal with Extra Space where I believe it was a six-asset deal, where you put together some different operators. Walk us through that — because my understanding is, because of the way you did that, you got a premium cap rate for all your sellers and everyone made more money than maybe they would have on their own. So it was awesome. Kristin Millington: Yeah, this was an interesting deal, and this is back in 2021, so obviously a little bit of a different time. But outside of the deal metrics, it was a great deal for us — we got a 42% IRR, I think a 2.2 multiple, and we'd held each of them maybe three years or under. So, fantastic outcome for us. But I think what really was unique about it — and we sold this to Extra Space, and like I said, fall of '21 — I think what was interesting about this is, it was a six-pack that we put together. It was three acquisitions and three developments, each of them with different partners. So six different partners, blended occupancies, kind of each deal was in a different phase of its life cycle. Some were in CofO, some were in lease-up, some were fully stabilized. We have always said we underwrite typically on a five-year hold, but we've always said we're opportunistic sellers. Where we can hit a two multiple, we will try to get out, and we're always monitoring the market for the right time to sell. And so what we noticed — this is when Heitman was taking a portfolio to market. We underwrote that, I think, in early summer of that year; we couldn't make the numbers work. Once we saw what it traded for, we saw that there was a demand for that size portfolio — it was around a hundred million. So we kind of took that as our cue: let's look at our portfolio and figure out what we can put together and take it to market. The lease-up wasn't done, but what we saw was the opportunity to achieve the highest value that we could. And so we kind of went through our portfolio, picked the six assets that made the most sense from both a life cycle standpoint and a deal size standpoint — we wanted to be around a hundred million — put those together in a portfolio, took it to market. Extra Space bought it. Fantastic outcome. The benefit for our partners was they were able to take advantage of this portfolio premium that you get at exit, but they didn't have to assimilate the portfolio — we kind of put that together. I think it's a huge selling point when we talk to different partners, because we have the scale. We've done this. We do the deals on a one-off basis, but obviously it's always better to sell as a portfolio, both from ease of transaction and just premium return. And so that's a big advantage to our development partners: they get the benefit of being able to take advantage of a portfolio sale and that cap rate compression that you get by aggregation, without having to do six developments or six deals to get that done. Chris Berg: Thank you. I thought it was super creative. Congratulations on — would you say a two-two multiple? That was phenomenal. So appreciate the time. Just want to give you a last word — anything you want to add or share that I haven't asked yet? Kristin Millington: No, I think this was so helpful. The foundation of our fund really is industrial and multifamily — about 70% is those kind of two product types. That's really been the foundation of Crow forever, was industrial; that's how Trammell Crow got his start 75 years ago. I think compared to those product types, storage still, we think, ranks really well on just a risk-adjusted basis. You still have an asset class that has low capex, stable tenant demand, no TI dollars, real-time pricing, month-to-month — the list goes on. We really still think it's an attractive asset class, and we look forward to continuing to be active in the future. Chris Berg: So if there's anybody out there that wants to reach out to you, how can they do that? Kristin Millington: Send me an email: kmillington@crowholdings.com. Chris Berg: kmillington@crowholdings.com. Kristin, really appreciate the time, the insight. Love how you view assets and do the underwriting, and would love to have you back in the future. Kristin Millington: Okay, yeah. Thanks so much, Chris. Great talking with you. Thank you. Chris Berg: Fantastic. This is the Self Storage Report. Please share this with your colleagues, and we'll see you back here soon. — END OF TRANSCRIPT —