Stressed Self-Storage Assets with Colliers Tom de Jong

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Stressed Self-Storage Assets with Colliers' Tom de Jong Guest: Tom de Jong — Executive Vice President and founding member, Colliers Self-Storage practice group (Philadelphia area) Host: Chris Berg — Abernathey Development Published: June 6, 2025 (live) Video: https://www.youtube.com/watch?v=Ll0CQIItmKQ Key topics: Sentiment from the Union League real estate club event in Philadelphia, coming out of the post-COVID doldrums after 18–20% quarterly rent growth proved unsustainable, the confluence of new supply plus slowing demand plus rising rates, the unexplained December–January leasing wave and Rick Schontz of City Line Capital having no good explanation for it, more homes for sale than at any time in 20 years, why the housing market is the number one driver of tenant demand, Arman's occupancy data showing ~80% of properties improving, why self-storage is a submarket-driven industry, Tom's pre-data-provider days mapping Bay Area development with pins and an Excel sheet, the developer cheat sheet (50,000 population within three miles, seven to seven and a half square feet per capita or less, $150+ rents, $2.50 in vertical infill markets), why supply per capita fails in mature markets like Philadelphia, overlapping three-mile rings and the six-mile problem, feasibility studies and whether anyone ever gets told no, 40-cent web rates as deceptive pricing, SB 709 in California as a transparency win versus New York's proposed 2% caps, the $61M K-12 funding argument, why rate caps make operators raise rents preemptively, NCREIF's 2005 tracking of self-storage as an asset class opening the institutional floodgates, "see a Walmart and smell a McDonald's," most facilities missing pre-development projections, sponsors underwater with no incentive to sell while banks and pref equity hunt for an off-ramp, the GFC as falling off a cliff versus today being dragged through broken glass, why 2028's record-low deliveries make now the time to start development, the Extra Space bridge-loan "loan to own" question at the NYSSA Investment Forum, and Tom's definition of leadership. 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 Chris Berg. Joining us today, Tom de Jong. He has been in self-storage now for 18 years — founding member of the Colliers self-storage practice group. He's got a ton of experience. He recently was at an event in Philadelphia, so we want to get the sentiment there of what's going on. Also some conversation about possibly capping rental rates in New York City, as well as — you had a great post on LinkedIn about some of the assets that may not be performing as well as they thought back in the early 2020s. So Tom, it's great to have you on the show. We really appreciate the time. Tom de Jong: Yeah, Chris, hey, that's awesome. Thanks for having me. And yeah, I've been doing the self-storage thing for 18 years, and happy to share any of my thoughts or insights — and take them for what they're worth. They're one man's opinion, but an opinion coming from a position of a little bit of experience. So yeah, I'll start with the event. Yesterday I was at the Union League — they have a real estate club. I was fortunate to have a friend that's a member that got me an invite. I saw a post about the event and, given that I'm outside of Philly, thought, hey, it's in my backyard, so I've got to get in. And so I found a way in, and it was a great event. Couple of industry legends there, a couple of great presenters — folks that have been in the industry a long time, and then some folks that are a little bit newer to the industry. As you know, CubeSmart, based in Malvern, PA — there's a lot of history in the Pennsylvania, the Philadelphia market specifically, with storage, going back many years. So it was great to hear the different perspectives from people. The general consensus was that the market's kind of coming out of a little bit of the doldrums — the post-COVID doldrums, we'll call it. A lot has been written and spoken about with COVID: how everybody needed storage, all the facilities were full, rents were going up 18, 20% a quarter sometimes. It was crazy. Unsustainable, right? Well, at some point we had to pay the price for that, and so that's what's happened over the last two years. Coinciding with that was a huge amount of new supply entering the market, and demand slowing, and interest rates rising. So there's a confluence of headwinds that kind of hit the market all at the same time, pushing the operating metrics down, pushing the investment sales market down, etc. So yeah, rough — maybe 18, 24 months for the industry as a whole — but it's part of a, we'll call it, maturing process. So specifically trends-wise, they spoke of last December into mid-November, December into January of this year, everybody — not across the board, but in most properties — saw an uptick in leasing activity. And Rick Schontz, the CEO of City Line Capital — they own somewhere around 300 assets, owner-control around 300 assets — one of the guys in the room asked him specifically, like, why did he think rental activity increased just recently? And he really had no good explanation for where they're coming from. The housing market certainly hasn't recovered yet, right? And that's generally the number one driver of tenant demand. So we all need a residential market that's healthy and moving again. We haven't seen it yet. In fact, recent reporting shows that there's more homes for sale now than at any time in the past 20 years. So inventory starting to build up in most markets — particularly in some of the Florida markets, sales are pretty soft — and so that does not help the inflow of tenants. So where did they come from, or why, like, in December, January, and then a pause, and then they're back now? It's hard to explain the wave of incoming tenants. But it's good to hear from multiple people, including Arman recently posted that they've seen 80% of their properties have seen increased occupancies recently. So I think there's a lot of good signs in the industry. Chris Berg: I do too. Speaking of Arman, he does such a nice job on LinkedIn. Just to give him credit here, to show this — and then here's maybe an updated or easier-to-read version of that graphic he put out. But he said, "Hey, this is a sign that the tides are turning." You can see last March of 2024, basically every market was in the negative, and now we've got some positive action. And it sounds like that was basically the sentiment coming out of Philadelphia. And I guess I should ask you, with your experience: does this data look like it's accurate to you, and what you're hearing and seeing throughout the assets? Tom de Jong: Yeah, 100%. We're seeing, particularly with the portfolio operators, improvements across most markets. It's such a submarket-driven industry, right? So you can't say, "Well, this market is great." Well, there might be a pocket in that market that's not. There could be pockets in a market that suck overall, but they're doing great, right? So you really have to dive down, open the hood, look under the hood, see what's going on in that particular submarket. So I hate to generalize too much, but from everything I'm hearing, signs are that we're turning the corner and most markets generally are improving. And one comment: if you're in the industry and you want to see good data — there's a lot of data points, but following Arman would be one of my top recommendations. Chris Berg: So, a little plug for Arman, but he does a great job of posting data. I always read what he posts. Tom de Jong: Yeah, no, he does. He does a great job of sharing, and it seems to be a pretty unbiased opinion. So like I said, if you're interested in getting into the industry, you're new — follow Arman and read his posts, because he does do a really good job. Chris Berg: You bring up such a good point about there's so much data now in this space. I'm presuming that even with all your experience, sometimes it's like, oh my gosh, there's so many data points. With your experience — I'm a big believer in pattern recognition, as you get to see things better and better — I'm curious, what are the top one or two metrics that you really focus on as you're looking at whether it be an acquisition that you're doing for a client, or maybe it's a development site? What are you really focused on? Tom de Jong: Yeah. So my team is pretty heavily involved in site selection work for clients looking to build, develop self-storage. I was one of the earliest guys that — before Yardi, before all these other data providers came around — at my desk, at the time I was in San Jose, California, in my cubicle I had a map of the Bay Area and I had pins in it for where all the new developments were. And then I had an Excel spreadsheet, and then people would say, "Hey, what's going on in Fremont, or Santa whatever?" So I'd take a picture of the map and send them the Excel spreadsheet with a picture, and that was the extent of the data available at the time. There was Dodge Reports and some other sources, but there were no industry data providers. Now there's just so much data out there. It really is hard to follow. There's a lot of opinions. But yeah, I'm a voracious reader. I love to read articles, I love the industry. I was reading an article from an organization called NCREIF this morning — that is the National Council of Real Estate Investment Fiduciaries. So they provide advice to institutional investors, endowments, pension funds. So they have a little different perspective than, let's say, MSM, Mini-Storage Messenger, some of the other data providers, right? So I like to look at data from all these different sources to kind of form my opinion on where we are in the market. Chris Berg: So as if you were working with a developer — have you found over the 18-year career, what do you think are the metrics that give a developer the highest probability to have a successful asset? Tom de Jong: Well, supply per capita is probably the most common metric that people provide. I will tell you a standard — if I was to say, here's your cheat sheet for what people would look for in a development: it's 50,000 population within a three-mile, seven or seven and a half square feet per capita of storage or less, $150-plus rental rates depending on the market. If it's a San Francisco infill market where you need to go vertical, you probably need $2.50 rents. Those are the big ones. Now, more recently, I think the data has gotten more nuanced — income is now becoming more of a factor that people are looking at. But probably the biggest concern any developer should have is any additional new supply coming into a market, right? So if you're looking to build and somebody's already broken ground, either you land bank the site and wait till they're well into lease-up before you break ground, to time it out, or you just have to walk away from a deal. Because we've seen markets as good as San Jose, California, where rents were easily $2 a foot — four or five properties got delivered within a three-mile radius, and rents were, at one point I was looking at rents of 50 cents a square foot for a 10x10, and it took three years to get back to $1.50 a square foot. Now finally, with COVID, they probably got up to that $2 again, but they're now back down below the $2 rate that was there before all this new supply came in. So be very aware of any new supply coming into a market. Don't be the second or third guy in, unless the market can really support it. And get a good feasibility study if you're going to commit the money. I can't tell you how many people I've seen — "Oh yeah, we've looked at the numbers, we're comfortable with it." They go out and spend three, four million on the land, they spend $18, $20 million to build the site, and then they wonder why it's not leased up. Oh, maybe it wasn't in the best location or the best market, or maybe the additional supply coming in was kind of a barrier. So, know the market. Chris Berg: Tom, I didn't think we were going to go there today, but I'm really grateful that you brought this up. So with what you're suggesting — one of the things that we do is we're getting much better at also just a defensive strategy, going, "Okay, we really like this piece of dirt, but how many other pieces of dirt around it potentially could have self-storage?" So I'm curious — I mean, your lease-up war, I totally agree with that. I'm curious, as you're sitting with clients, how much do you also look at, "Okay, guys, we've got to make sure that we understand the zoning around here and do the best thing we can to provide a moat"? How much time do you spend on that? Tom de Jong: Yeah. And it depends on the location, right? So we were looking at a market in Arizona yesterday with one of my teammates out of San Diego — he's doing a lot of our site acquisition work, trying to identify good sites. The site's in a good market, the metrics clicked most of the boxes. When we sent it to a couple of our usual developer clients, the feedback we got was there's too much vacant land around the site zoned for the use, or that could be zoned for the use. So we try not to make the decisions for our clients, right? We try to give them sites that they look at, and then they'll plug it into their model and they'll give us their feedback. So I don't want to preclude a site that we think has got some potential. When I saw the site I said, "Ah, I don't know, it's probably a marginal site at best, but let's send it off to these three guys and get their feedback." So we did, and the feedback we got was, hey, there's too much land in the area. There was actually one other competitor coming in just outside the three mile, but the population was such that — even so, when you draw concentric circles of three miles each, right, and you're here and they're here, that's really a six-mile radius you have to deal with, not just three miles. People sometimes don't look out, they just look at that three mile, think, "Oh, that's it, we're good." And then somebody's here and somebody's here — well, they're going to poach from the three mile from there. So you've got these concentric circles, and none of it is precise anyway, right? People can come from four, 10, 12 miles. Sometimes it depends maybe where they work. There's a lot of factors. Generally I love the three-mile model, but it's certainly not perfect, and certainly I think you need to look beyond that. We use Propri as a data provider. We use Yardi Matrix. They all have their benefits. I'd say the one thing that I don't like in Yardi is, on a development site, you can only run a five mile, right? And so I've always said you need to go at least six if you're looking at three miles, because again, you've got to — where the circles overlap. Anyway, that's just a nitpicky comment. But doing your homework, getting a feasibility study from an expert — those are all super critical. We pre-screen sites. We send out sites all the time. I'd say it used to be 30% of the sites we'd send would get traction very quickly. Now it's more like eight or 10%. So people are much more strategic today than they were three, four years ago. Chris Berg: Very fair. Question for you, because you see a lot of chatter on social media about feasibility studies: have you ever seen somebody hire a feasibility person and have them tell them no, don't do this site? Tom de Jong: I actually have. Chris Berg: Okay, good. Tom de Jong: It's not very often, I've got to be honest. Tell you no — it does happen. It does. You know, DM me and I'm happy to share some of the folks that I think are more honest about that than others. Some people are more optimistic and, obviously, they don't want to bite the hand that feeds them, right? So, try to put a positive spin on something, especially if somebody really wants it. But everybody benefits from quality work. Chris Berg: I was just going to say — and I think that's the thing, is that when you were breaking down the numbers, and hey, everyone's a big proponent obviously of this industry. And at the same point in time, I'm not in your shoes, but it'd almost be a disservice if you weren't frank with your client to go, "Hey, you're about to put $20 million down on this project, hypothetically, right? Let's make sure that we've got every kind of i dotted and t crossed, to make sure that we're going to maximize your opportunity." Tom de Jong: It's all about having the right data, honestly. And you want to know what you need to know, and you want to know what you don't know necessarily — and that's where you just have got to ask a lot of questions and hire the right people around you. You don't want yes-men around you telling you, "Hey, this is a great site," whatever. You need people to play the devil's advocate: what could go wrong? Because we've seen a lot of what could go wrong did go wrong. And I'll tell you, so the Philadelphia market is a good example. We've seen — and it's a good example of why square foot per capita isn't the best metric necessarily. Because this was a market — now, the Philadelphia MSA includes parts of New Jersey — and so supply was in the threes, maybe in the low twos in some of these areas. So everybody said, "Well, okay, there's three other sites being built, but that will still only bring it to seven feet per capita, right?" But this is a very mature market, right? So yeah, there's some residential development going on — follow the rooftops is always good advice. But if you go into a mature area where there's not a lot of growth, and there's been three feet per capita for 20 years, now all of a sudden you think, "Well, we can go to seven with five facilities" — it's going to be a bloodbath. And it has been. I mean, we saw rents go from, you know, this was like a $1.80, $1.90 market generally, to 40 cents, and in a lot of cases web rates being that low, just trying to poach the next person looking for a unit. I'm not a fan of that pricing model. I've made a number of posts about it. I don't like it. I don't think the industry should practice — I don't know if it's predatory pricing, but it's certainly a little deceptive, right? Where you bring somebody in at 40 cents just to get them there, and you know you're going to push rents 150% by month three or four, and then another 100% in month six or seven. And I guess that leads to the conversation we had earlier about pricing. California dodged a bullet, right? So instead of a price control model in SB 709, we got a transparency legislation, right? So transparency is always good. A lot of chatter about what's happening in New York. I mean, they're talking about 2% caps on rent increases. That's insanity — that's not even the level of inflation. It could be a killer on the market. So I would say support your local SSA, and the operators need to do what they can to support the lobbyists pushing against it, and use California as a model — that, hey, yeah, okay, mea culpa, we messed up, we'll do better. Let's install some transparency in the industry, let's change our pricing models. Now, I was recently presenting at a deal for the CSSA — we do this peer power hour — and then I went to the Napa conference, and a lot of the slides I saw were actually where California rents before the passage, or before the discussion on SB 709, were elevated noticeably. Because everybody was afraid if they passed this legislation they wouldn't be able to get the rents up. So it actually helped the industry stop some of these pricing models and bring rents up to where they probably should have been all along. So that, if it did get passed, they wouldn't get stuck where they could only push rents 5% plus inflation — I think that was kind of the model in California they were discussing. Chris Berg: Yeah. And one of the things I think California did really, really well with the CSSA and that coalition was — I don't know if you saw the data, but they put it out where it showed, hey, if you want to go ahead and put these caps on, you can. Just understand you're going to lower the value of these assets by X, thus reducing your tax revenue by Y. And one of those numbers was $61 million a year in K-12 funding. So I'm hoping that the people in New York go out and do their homework and do something similar and say, "Hey, we don't necessarily agree with this, but just understand if you do…" I mean, because New York — just so everyone here realizes — like, right now the storage market value is at $237 billion. New York, I saw in StorageCafe, is like a tenth of it, $22.5 billion of the total self-storage market. So I think it's a pretty powerful statement from them to be, hey, if you guys want to do this, go for it, but you're going to lower the assessed values, that's lowering your tax revenue. And I don't know any politician, or city or state or federal for that matter, that wants to see less revenue. What are your thoughts? Tom de Jong: I've got to say, the other thing that happens — and what I just said about California — is everybody raised their rents, right? So it has the opposite of their desired effect. They're trying to protect the consumer, but because they know they'll only be able to raise rents by a set amount, they're going to raise rents now. So forget about these move-in rates and promotional rents and low street rates, crazy web rates. They're just going to raise the rents. So everybody's going to pay more day one, even before they pass the legislation. They're going to raise the rents, and it's going to hurt the consumer. So who are they trying to protect? Chris Berg: It's so well said. And we had a really good conversation with Gary Sugarman from the William Warren Group about this, and he had this great data point. I wish I had it to share with you right now, but he's like, "Well, Chris, if you look over the last two and a half years, year-over-year rental rates are actually down." So the free market's good for the consumer, because — again, it's a 30-day agreement, right? So you can kind of bounce in and out. Rather than, like you're saying, get rid of these promo rates, and now it actually hurts the person that these politicians think that they're protecting. So thank you for sharing, that was good. Tom de Jong: No, I do think there's a huge benefit to increasing transparency in the industry. I mean, if you looked at some of the ratings or comments, the Yelp reviews or whatever, on storage facilities — they were getting a bad rap because people felt deceived in a lot of cases, right? Where they went in at $60 for their 5x10, and all of a sudden they raised the rent to $140 three months later, and they had no idea that was coming. So I think some of that transparency is beneficial. I also, like I said, I'm not a fan of the super low going-in rates. At the end of the day, Chris, you cannot create self-storage demand. It's not like you can say, "Hey, come to McDonald's and we'll give you three Big Macs for a dollar." People are going to run — there's a line, right? People aren't going to say, "Well, let me clean out my garage today, because oh yeah, I could get a storage unit for 40 bucks." You need a storage unit or you don't, right? So I don't think — maybe they create a little bit of demand, but they're not going to create enough demand to fill all those units that they're trying to fill. And then to leave a bad taste in the consumer's mouth by bringing them in at one level and then going way up very quickly — again, I'm not a huge fan of the strategy. Chris Berg: Very well understood. I want to move on to a post that you put out fairly recently — a few days ago. You just talked about, hey, it's clear that the banks have been punting on some of their trouble assets, I should say. And you just said, look, there's some assets out there that probably were acquired in that '21 to '23 time not hitting projections. I'd love for you to speak into this, because I'm hearing about this as well. Just what are you seeing, and what do you think the solution is? Tom de Jong: Sure. Yeah, and this kind of came about from conversations with a number of portfolio owners. So you almost have to rewind back to 2005. What happened is the industry started maturing at that point, and NCREIF — the organization I mentioned earlier — started tracking the self-storage industry as an asset class. So what that did is that allowed institutional investors, endowments, pension funds, etc. to come into the business, right? It opened the door for these large funds to look at the industry, because now all of a sudden it was a rated asset class. So that started the wave of capital coming into the industry. And it takes a few years — these funds don't move, it's like turning a tanker ship, it takes a minute, right? So it took them a few years to really notice the asset class. And as we got through the great recession, the GFC, everybody started noticing that self-storage was somewhat recession-resilient, right? So more and more money flowed into the industry. So what we saw most recently with COVID, and everybody seeing how well the asset class was performing, started developing heavily. Now generally — like, I know Chris Burnham would always say with storage, he would always say, "If you can see a Walmart and smell a McDonald's, it's a good site for self-storage," right? That's his old adage. Well, I agree — but you don't want to stick it back behind the Walmart at the end of a cul-de-sac with no visibility. But that's what people did, right? Because every site started to make sense during COVID. Chris Berg: Yes. Tom de Jong: And coming out of the COVID era, right? So when rents and occupancies are at record highs, I could plug into models and, man, this is insane — I can't believe I'm saying this is a great site for storage. I'm guilty of it. We all were. And people invested millions of dollars to build sites in these locations where they probably shouldn't have built, and overbuilt in markets that should have never been overbuilt. People weren't cautious. Caution was thrown to the wind and everybody just started throwing all this money in. Well, with this oversupply, the majority of facilities are not hitting their pre-development projections, right? So when you take out a loan, when you take investors' capital, you're providing your blue sky documents, all these projections, right, of what the facility will do. And very, very few are hitting close to those numbers. So bankers, investors — there's a lot of people out there that would love to find an off-ramp, right, to get their capital out. But the sponsors of these deals generally are underwater, right? So there may be enough capital in the deal to pay the bank, there may be enough to get your pref equity out of a deal, but the sponsor doesn't get their money out until they hit a number. And at this point we're not seeing anything close to those numbers. So the sponsors have no incentive to turn around and sell — although the capital, the banks, etc., they are looking for an off-ramp. They want out of the deal. But I think the banks learned a lot during the GFC — punting on deals, giving people a little bit more time. Time heals a lot of wounds. And I do think, as we get through this leasing season, if we have a good leasing year, by the end of summer I think a lot of these things will start to work themselves out. All of a sudden sponsors may have a little bit of equity in a deal and it's time to say, "Hey, we need to move on it." There's a lot of pressure from the various sources of capital to find an off-ramp, and so I think the investment market will start seeing some of this stuff flush out in the next 12, 18 months. But it's been a lot of indigestion. When rates are down, occupancies are down, incomes are down for two years in a row, it gets to be a very tough market — when you were projecting with a market at 18% annual rent increases. And that's what happened. Chris Berg: So let's look at the other side, because you said, hey, if there's more movement, then these things may pick back up. But again, we don't know where rates are going to go, we don't know if people are going to start buying homes again — I mean, they're so overpriced in the buyer's eyes the way it is right now. Let's say that that movement doesn't happen, and maybe we do step into a recession, there's more unemployment, which doesn't necessarily hurt storage as much. I'm just curious, if that were the thesis, that that plays out to be true — and now you've got some of these guys that took out loans in, let's say, 2021, and some of these refis are coming up. What are you going to do? At some point something needs to give. Tom de Jong: Right, right. And I was in this industry before the GFC, and I did all of two bank-owned deals for US Bank back in the day, for guys that built in areas that were like on the path of development but they weren't quite building there yet. Well, the housing market just absolutely collapsed in the GFC, right? And so these deals didn't lease up. US Bank took — you know, non-recourse debt — bank takes them back, we sold them. I know the one I sold to Trojan in Roseville, California, they absolutely crushed it on that deal. Like a 5x return, right? Just guilty of good timing, and good brokerage — but they got in at the right time. What, Chris — I think the analogy I use is, the GFC, we fell off a cliff. This time right now, it's like we're being dragged through broken glass. Okay? It's just dragging on and on. The banks are guilty, sponsors are guilty — everybody's just kind of like, let's just get to '26 and we'll see how the market's doing and hopefully we'll be okay, right? So what happens? I don't know, man. I don't know where we're going. Chris Berg: At some point it's going to happen. I love you being positive, but you and I both know hope's not a strategy, right? So it's like, okay, if things go wrong, you can hope and pray, my friend. You can hope and pray. Tom de Jong: Luck's not a strategy either, but I've seen a lot of people making a lot of money getting lucky, you know? Chris Berg: True. Tom de Jong: So, whatever it takes. But look, I do think that time is helping, right? A good leasing season is helping. So we are recovering some of that lost equity. Not everybody's going to be made whole — there's going to be people that get hurt. But in general the market is being buoyed by good leasing, and it will be buoyed further by a strong lease-up season. Chris Berg: So that's fair. You know, it's so incredible — and again, I'm grateful for your time, your experience in this industry. I'm curious, for some of the younger guys out there maybe getting started in this industry, that would probably include myself: if you were to go back to yourself that started in 2007, with everything you know today, what would you say to that guy, and what would you have done differently? Tom de Jong: I mean, I would have bought every asset I could have afforded to buy at that time, right, if I could go back. But look — [Music] — I study the market, listen to different sources. Like I said, Arman's a great source. There's a lot of — join your local SSA, go to the conferences, find a mentor. This industry is very open. I can't tell you how many senior, senior people that I just have a question, a burning thing I can't figure out, whatever — pick up the phone and call somebody. There's a lot of people that are willing to help in this industry. I know there's industries that are like really tight-knit and nobody's going to share. This industry is not that. This industry is all about helping people — all boats rise with the tide kind of thing. So don't be afraid to ask questions. Chris Berg: I love how you said "study the market." I come from an athletic background, so I would study my playbook, right? I'm studying game film — but that was a daily thing. Every day you're in the playbook, you're studying film. So I'm curious, if you wouldn't mind, walk us through: do you have sort of a daily practice of what your game film is? I mean, is there certain publications that you read, certain guys you're watching? You said Arman a couple times. Is there kind of a game film type of schedule that you have, like, okay, I've got to make sure I get this in today — that's my three-step, five-step drop kind of practice thing? Tom de Jong: I get emails from different sources about every day — the ISS, the SSA, MSM. Those are probably the most common publications. Sign up, get on their email list. Self-storage has some good articles that they put out. I like to look at some of the institutional reports — you know, we work with institutional partners, so PERE, private equity real estate, NCREIF. I'm in SIOR, which is some of the top brokers in the industry. So I read not just about self-storage, but trends in other types of assets, other asset classes. We generally follow multifamily by, say, 12 to 18 months from an investment standpoint. We generally tend to lag behind the apartment market a little bit. So look at, follow that market, look at retail, look at trends that are across different real estate and private equity. I mean, there's a lot of private equity in the business. I majored in finance, I've got an MBA, I love economic reports and finance, so I'm kind of a nerd that way. But yeah, I think you've got to study more than just the self-storage industry itself. But the biggest thing is join your local state association, go to the conferences, and ask a lot of questions, because a lot of people will share with you. Chris Berg: Let's talk about the macro piece, because I'm into that and it sounds like you are as well, and that's kind of what you're studying to see, hey, how are these macro trends going to impact my asset class? And again, just — I'll use game film as an athlete — as you're looking at macro information, is there anything specific that you focus on maybe daily, quarterly? I mean, I get the ten-year, but anything else that you're kind of like, this is really important for me to keep my eye on, Chris, to ensure that I kind of understand where things are headed? Tom de Jong: I don't know. It's so hard now — the news flow is just way too frequent. I was asked to write an article about the impacts of tariffs on steel and aluminum. I asked the question yesterday of a few of the panelists — one of the guys from A&E Construction was there as a panelist, so they're prolific builders in the Northeast, Mid-Atlantic and down into Florida. I said, "What do you expect the impact of these tariffs to be?" And they're like, "Nope, we're not going there." Nobody wanted to address the issue, because I think if the wrong person hears you talking about it, you could be stigmatized, I guess. Chris Berg: Wow. Tom de Jong: So I don't know. I mean, the macro trends are just so hard now. The ten-year is obviously the most common one. The Europeans just lowered their rate again today. I watch Bloomberg — I usually catch Bloomberg in the morning for about an hour, listen to different perspectives there. And then just read and talk to people. The macro trends are tough right now because it's just a moving target. Chris Berg: So with that being said, I saw a great clip of Eric Schmidt, the former CEO of Google, talking about, "Hey, I think the one thing that people don't do a good enough job at is building out a five-year plan and trying to understand where their business is going to be five years from now." Tough question, based on what you just said — but if you said, "Okay, Chris, here's my thesis on the next five years in this industry," what would you say? Tom de Jong: Well, it's funny you asked. So my son Dylan de Jong just joined my team, and I told him — I'm now 60, so I said I've got a 10-year plan. And so that plan is, I want to build not just build him up, but continue building out our team, and grow that team nationally. We're already one of the more experienced and bigger players in the industry, but continue growing that on a national basis. Chris Berg: So where do you look? Where are the levers right now that you look at? Tom de Jong: I mean, I think development — given that it's generally a two or three year window to find and build. So we're ahead of that now. Everybody's shutting down their development, but we're actively looking at sites, because the folks that have the foresight, knowing that in 2028 deliveries will be at all-time lows — that's a good time to enter the market, right? So try to stay ahead of the trends in the market, not just follow the trends. As you said, I've spoken to a lot of institutional developers, merchant builders that are all looking for an off-ramp. I have conversations with them almost daily trying to find out where they're at. At some point we will see a number of these deals transact. If I had money sitting on the sideline, that's probably where I would target — some of the guys that need to find that off-ramp. My guess is we'll see a lot of the Public Storages and the bigger institutional guys make a number of portfolio acquisitions in that world — kind of a rescue acquisition of big portfolios that were built, right? So that's kind of the stuff I see coming in the next 12 to 18 months. Chris Berg: Man, Tom, I could talk to you forever. I want to be respectful of your time. Will you come back another time in the future? Tom de Jong: Yeah, anytime, man. Anytime. I love talking about the industry. Chris Berg: So next time, let's have your son join us as well, as he's building up his brand, and do that too. So I have so much I want to ask you. Just two more questions. One is, I want to get your thoughts on — again, I think this is kind of a newer mechanism, if you will, within the REITs — your thoughts on, I don't call it this, but some people call it like the Extra Space "loan to own" program, right? This bridge loan program that the REITs are using. Your thoughts? Tom de Jong: Yeah, that's — it's hard for me to touch that one, because I know a lot of guys in the program. But I was at the New York Self Storage Association's Investment Forum in January. There was a panel of the bridge lenders — there were four of them: Public, Extra Space, Andover and StorageMart. So I specifically got up and asked a question: is this a loan to own program? And Extra Space was very adamant that this is absolutely not a loan to own program — this is a separate profit center, this is how we look at it. Will it end up being a loan to own program in some cases? I think it's inevitable, right? There's guys that are underwater that just do not have the capital to replenish the required interest reserves to get to cash flow positive with debt service. They're 90% loans for the most part, and they're 90% on what their value was projected at a few years ago. So you can imagine, when values drop, now it's probably 140% loan to value or 150% loan to value. Guys are scratching, trying to hold on. I think Extra Space was the earliest in this particular space, right, so they've got the most loans — I think some are $800, $900 million worth. So they have some indigestion to work through. I do think they're generally trying to work with their folks, they want to keep the properties on their platform, etc. But it's tough for a lot of guys, and I think that's where the first domino could fall from a people-getting-hurt standpoint, right? Chris Berg: Yeah. Tom de Jong: If Extra Space takes them back quietly, which they may do, they'll just roll them in. Now, right now a lot of those are not accretive to their balance sheet, right? So they bring their cap rate up, and they don't want that. So they're really looking for assets that are not going to take down their implied cap rate — and that's a challenge, because a lot of those are underwater from that perspective. So they're pushing people to resolve, but it's a challenge for some. Chris Berg: Thank you for how you laid that out, because we've talked about it internally as a team as well. And I think, from a loan perspective, you can see, hey, this can really add value to our shareholders — but then, like you said, they start to get underwater, it starts to move up the cap rates, and you're like, this isn't so good for the shareholders. So, yeah, we'll see how it works out. Tom de Jong: I mean, I think they've made a fair share of money on it, and overall I think the program was probably a positive for them. And these other guys are really just getting rolling on it, so we'll see. I think overall for the industry, it's good to have that capital available. Some of it may be some form of rescue capital. But because Extra Space was so early on in the process, there's definitely some facilities that are struggling. Chris Berg: Yep. Last question: how would you define leadership, and what makes a great leader? Tom de Jong: Oh, I think a leader is, you train people to be their best selves and you get out of the way. Chris Berg: Mhm. Tom de Jong: I love mentoring younger brokers and I'm always happy to help people. But I surely don't know everything, and I may not be the best manager in the world. Time management is sometimes tough for me, because there's so many demands on your time, right? So from that standpoint, maybe I'm not the best manager — but I try to be a better leader by giving them the tools they need to succeed, and then letting them succeed or fail on their own. And then if they make a mistake, hey, great, you just learn from that, right? What's the lesson? What's the lesson here? And then move on to the next mistake. And if you're not making mistakes, you're not trying hard enough, right? Chris Berg: 100%. Yeah, 100%. Thank you. I mean, that's one of the things I appreciate about getting to know you just over this conversation, and really this whole industry — it's just, people are very humble. Like, they're doing well, but they're humble about it. And I appreciate you taking that same approach. So if people want to reach out to you, maybe to talk about some sites or do some business with you, how can they do that? Tom de Jong: Yeah, so my cell is the best: 408-724-0337. Or DM me on LinkedIn — hit me up on LinkedIn. Or tom.dejong@colliers.com. Any of those. Like I said, I'm always happy to help people in the industry. I do a lot of advisory work. I would say I'm 50% pro bono and 50% a paid broker, but you know what, I always try to build lifetime relationships with folks. And I've had conversations with people for 15 years I've never transacted with, and I consider them friends — and hopefully one day that leads to some kind of a commissionable event, whatever. But I love the industry, and I always try to do what I can to add more value than I get myself. So, the old golden rule, right? Chris Berg: So Tom de Jong, thank you. It really was a pleasure to have you on. Look forward to having you back. And again, if your son's open to join us, be fun to have — Tom de Jong: Absolutely. Give me a few months to get him fully up to speed, and we'll jump right on in. Chris Berg: All right, that sounds good. Again, thank you so much for joining us here on the Self Storage Report. Please share this conversation with your colleagues. — END OF TRANSCRIPT —