Unconventional Real Estate Investments: Masters in Business with Bob Moser

The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day. "My fellow Americans, this is Liberation Day." Stories that move markets. "Chair Powell opened the door to this first interest rate cut." Impact politics. Change businesses. This is a really stunning development for the AI world and how you think about your bottom line. Listen to the Big Take from Bloomberg News every week day afternoon. On the iHeart Radio app, Apple Podcasts or wherever you get your podcasts. Bloomberg Audio Studios. Podcasts, Radio News. This is Masters in Business with Barry Rittholds on Bloomberg Radio. This week on the podcast, what a fascinating conversation. Bob Moser is founder and CEO of Prime Group Holdings. They're the largest privately held self-storage owner operator investor in the country. Fascinating conversations started acquiring properties in college. Eventually started doing RVs and mobile homes. Just really fascinating methodology of identifying undervalued properties. I thought the conversation was fascinating and I think you will also. With no further ado, Bob Moser of Prime Group Holdings. Thanks for having me. Let's start out with your background. Bachelors with honors and economics from Union College. Yes, sir. What was the original career plan? The truth is, it was always real estate. I've always had an affinity for real estate. Really? My mom tells the story that when I was like 14 or 15, she'd drop me off at the local real estate broker's office. I would drive them nuts for a couple hours. It was either that or just to get rid of me, out of her hair probably. I always had it, got my real estate license before college. I got my brokerage license while at college. I actually started the business, basically my sophomore junior year while at Union. Wow, that's amazing. Your college thesis focused on how to value income producing real estate investments by comparing demand and value. You really knew exactly what you wanted to do by your senior year. What was the outcome of that college thesis? It's a good question. It was on the valuation of income producing properties using hedonic and non- hedonic regression analysis. When we say hedonic, you're adjusting for quality and location attributes of the property, taking away the revenue stream. What else adds value to the asset? I was really hyper focused on fragmented real estate assets. Basically every real estate asset, when you look at it, goes through the same life cycle. When they're originally owned, developed, managed by local regional developers, then over time the larger groups come in and consolidate. I was looking for that reflection point when that consolidation starts. I was focused back then in college on the thesis for manufactured housing communities. When you're a college student, people pick up the phone when you call. They're always trying to help somebody out. They're very fortunate to speak to Sam Zell and some other leaders in the real estate business. They gave me some great insight. One of the ones he said to me was that there's a lot of buyers, but there's not much product out there. You have to go out and find product for people. If you're going to be a good real estate investor, you have to have the ability to find the assets. I decided to start a company in college to facilitate that transaction. Obviously, I didn't have any money. I was a retired New York City detective. My mom was a teacher's aide, so I didn't grow up on the wealth. But I figured out that if I could find good product, it was an enormous amount of buyers to buy it. I did this by using the Freedom Information Act of New York and then various other states where I figured out that I could track all real estate asset classes using the same common denominator of water and sewer permitting. I had a job down the Albany and I made my request. Union was trimester. I had these big gaps off around Thanksgiving to New Year's. One day, UPS knocked at my door. I had converted my parents upstairs bedroom to my corporate office. He broke onto me or we do. He handed me a box. There's my real estate information. He's actually that truck out there. He had boxes and boxes of the old DOS printouts of every self-storage facility, every mobile home park, every RV park, Marina, multi-family. Just so some of the younger listeners can appreciate this. Forget AI. This is really before there was any sort of usable internet where you could say, "Hey, let me scan ny.gov and find all the real estate permitting." This is physical paper stored in physical office buildings and file cabinets. I had a pay per page on the printout. What did that cost? How long ago was this? This was back in '97. '96-'97. It probably cost me a couple hundred dollars, which I really didn't have as a college student. But I realized quickly that information was the key to finding assets. What I would do is I would systematically go through these lists, basically county by county asset type by asset type, identifying the institutional quality assets that were still owned by mom and pops or non-institutional investors. Then I would do a deep dive on those assets. I would call and get the rents. I would call the tax assessor to get the real estate taxes. My goal was to know more about the real estate than the owner did by the time I called them on the phone to see if they'd be interested in selling. Then I would continually call them every 30 to 45 days after that until they became a seller. That's unbelievable. That's what led you to unconventional overlook segments. You mentioned marinas and RV parks and other things like that, manufactured homes. How long did it take you before you managed to acquire your first property? I acquired my first property shortly after college and what happened was there was a mobile home park in Streetsboro, Ohio. It was actually called Camelot Village, a guy named Mike Duffy owned it. I used to call Mr. Duffy probably every 30 days to see if he would sell his asset. One day I finally got him to sell and I made a nice fee on the transaction. But I still needed a little bit more. I graduated and my mom took a home equity loan against the family house. Is that how you finance? That's how I financed my first acquisition. Before that, I was facilitating transaction to making fees almost like a broker but not a listing broker. Then the first asset I bought was when my parents took a home equity loan. You mentioned you got your real estate license in college. How you finding buyers for these sort of unconventional properties? Are you going to the big institutions and saying, "Hey, I have a property that fits into your portfolio?" What I actually did was I had these lists, obviously, that I got from the FOIL request. I hadn't seen the same name show up as buyers or sellers. That were owners. If I knew they owned five assets in that particular region, I thought, "Hey, if I develop one or get a relationship with a seller that would sell, I would bring it to that." You knew it would bring it 100%. Really, really quite fascinating. When did you find your own real estate brokerage firm? That was basically in college. That was in college. I became a real estate broker. Before college, I was a licensed salesperson. Then you have to have X amount of hours under your belt before you can become a brokerage. I got my brokerage license in 97. How long did you do that as a broker rather than an investor? They ran parallel paths. I was basically working exclusively for generating fees from 97 to 2000 as 2001. I started buying my first asset around $299 going into 2000. Obviously, the first one I bought, it took me a while to give up the transactional side until I could support myself on owning assets. You ramp up various assets until 2013 when you start Prime Group? What I did was my mom took the home equity loan my parents did against their home. The first asset I bought actually I sold to that gentleman 10 months prior. I called him up and I said, "Hey, Wayne, I sold you this property. It was on Cape Codd. Would you be interested in selling it?" I sold it to him for $3 million. He ended up selling it to me for $5 million. Wow. 10 months earlier. Then I moved up to Cape Codd and I actually ran the asset for the first two years to see how the business worked. I didn't want to be that owner that would tell people what to do without actually being able to do it themselves. Then I bought my second property and then I bought my third. Then by 2005, August 12, 2005, I had a large liquidity event. I sold the Group of Assets to Sam Zell. That's when he converted MHC, which was manufactured housing communities, his rate to equity lifestyle communities. He started to focus on RV parks. On that date, I sold him roughly five assets back then, which provided a substantial amount of liquidity to myself. I went out and did a bunch of that's when I really started to build the portfolio. I want to draw a line. You're a college kid, randomly calling big real estate investors, including Sam Zell, who took your phone call. I took my phone call. You had a long conversation with him. I did. How many years later is it like, "Hey, Sam, it's me, Bob. Do you remember me? I have some assets for you." It was funny when you say that because when I was dealing with the CEO, there's a CEO at the time. I always wanted to, because I never really spoke to him then after. I wonder if he actually put two and two together, I'm sure he did. It was a really interesting transit. action. You know, it was the RV world was an interesting business, the RV parks. It was basically, I was the first one to really use Securitized Financing in the RV Park world. It hadn't been really done prior. So it was, it was an interesting time. So now you have a liquidity event, you're tapping into Wall Street Securitization or the fund this. How, at what point do you say, oh, there's a ready source of capital, I could just put a roll up strategy together and run all these properties more efficiently than mom and pops can do. Every one of these would have to have a separate accounting and a separate tax filing and all that stuff. You centralize that and suddenly it's productive and efficient. 100% the way I so basically from let's say 2000 through 2005, 2006, I was acquiring a lot of mobile home RV parks. I also owned shopping centers a little bit of everything. It was a pretty diversified portfolio and what really transitioned to me to become an asset specialist, which we are now was how well self storage was doing during the first financial crisis. I was doing a year in portfolio review in around 2007, 2008 and the self storage assets were a smaller part of my portfolio back then, but they were outperforming everything else at that time. It wasn't like they were going straight up, but they were so defensive and they were doing so well when all these other assets were getting beat up. I decided at that point to become an asset specialist stingly focus on self storage. I sold off over the next few years, I sold off the rest of the mobile home RV parks. I had multi-family that went to third party management and from that time forward, I continued just to consolidate self storage. This was on my own balance sheet at this time and then I started the co-mingled fund business around 2014. From basically 2007, 2008 through 2014, I was using my own capital or in house capital to acquire these assets. I'm curious, why would self storage do well during the financial crisis? Was it literally people were losing their homes? They had to figure out where all their stuff had to go or what was happening in that period that made that such a standout performer. I would say it was more the defensive nature of it. These other assets were decreasing dramatically. Storage was holding its own. It's a need-based real estate. I do not buy aspirational real estate. I think that's where a lot of people get in trouble. I buy real estate that people need for all different economic cycles. That's what self storage is. It's upgrades, downgrades, death, divorce, all of those types of life cycles that happens in life creates a need for storage. It seems like you're in a variety of different regions everywhere from Saratoga to Springs to Chelsea here in New York City. How do your underwriting assumptions differ relative to, is this urban, is this suburban, is it ex-urban, is it out in the sticks? How do you look at these different spaces? Obviously, valuations differ and rents differ. What's the thought process? We, truly, obviously, real estate, and that's on cliche, but it's location, location, location. If you look at our portfolio, it basically, you take the United States and it looks like a U. So we're up and down the coasts. Right now, we don't have exposure in Texas. The reason why is that there's a lot of open zoning in Texas and one of our major requirements is barriers to entry. The reason why we're along coastlines and then we're up picking up in the mountain cities out in Utah and Colorado is that there's a barrier that's, natural barrier, keeping the population tight to a nucleus. So we want to be in predictable downtown retail corridors when we're choosing the asset. So that's the first glance over deciding where we're going to buy. Then it goes down to what is the supply, what's going to constrain the supply in that particular market? Because like any other type of real estate, there's always areas that are oversupplied and the key is finding these areas that are undersupplied. When I was first doing this with paper, it was a lot of obviously, you know, calling on the phone, calling the assessor, feeling the market out, visiting. Now we have built very sophisticated software that helps us pre-identify these areas that we should be buying, not even the area, the exact asset we should be buying, even though it's not for sale. So we built out this program where it basically, I can put in our buy box and it populates out of the 60,000 self-stores facilities in the country, the ones we should go after, even though they're not for sale. And then what we have is our deal teams, which are a group of roughly three dozen people internally, that we allocate the deals that fit our criteria to. And then they continue to call and visit those owners until we convert them to sellers. So we truly buy everything off market and it's 100% organically originated. Really, really fascinating. Coming up, we continue our conversation with Bob Moser, CEO of Prime Group Holdings, discussing the Prime Storage Business. I'm Barry Rittholz, you're listening to Masters in Business on Bloomberg Radio. The Big TIG podcast from Bloomberg News keeps you on top of the biggest stories of the day. By fellow Americans, this is Liberation Day. Stories that move markets. Chair Powell opened the door to this first interest rate cut. Impact politics. Change businesses. Listen to the Big TIG from Bloomberg News every week day after news on the iHeartRadio app, Apple podcasts, or wherever you get your podcasts. I'm Barry Rittholz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Bob Moser. He is the CEO of Prime Group Holdings, specializing in privately held self-storage commercial real estate. The firm has acquired over 10 billion dollars in real estate assets across 350 locations, 28 states, cannel and the Virgin Islands. So let's talk a little bit about the business model of self-storage. I see these areas popping up everywhere. I see these self-storage facilities popping up everywhere. How widely used are they? How profitable are they versus traditional commercial real estate? What is the appeal that just over the past 10, 20 years, this space has exploded? It's a great question. So self-storage has the lowest break-even occupancy of any institutional real estate asset class I can think of. So at 40% occupied, you're breaking even on expenses. So it's very risk-adverse. It's a very risk-adverse asset from top to bottom. When you're looking at what the tenant signs to become a tenant, these are month-to-month leases, so we can adjust to what's happening in the macro environment at any given time. There's no lease risk whatsoever in the asset class. So no lobby, no dormant, no shower, no tenants. No family. Correct. Make so expensive. Well, you think about a multi-family. If you're going to turn a unit, it's going to clutch anywhere from, let's say, 1,500 to 5,000 depending on what you're doing. Self-storage is $5. We're sweeping it and replacing a light bulb if there is one. So the tenant improvement is what really hurts, especially office, but a lot of real estate assets. You're constantly chasing that capital improvement. Really, really quite interesting. What about ancillary revenue streams? We've all seen those silly reality shows where they find these, someone abandons the unit and they find some million dollar painting in there. How much nonsense? Yeah, I haven't had that look, but it's funny that you bring that up. So prior to those TV shows, we would have the auctions on site, kind of like you see in those TV shows. What happened, though, everybody also started showing up to these, had a personality. They thought they were on TV. Right. The traffic became overwhelming on the asset. So everything now is virtual. So when we have an auction, it's all done online. And it's not a revenue source for the business. So we put our properties through a five-step value creation process. And one of those steps is diversifying the revenue stream. And it's a great question because there's substantial amount of value picked up in self-storage through these ancillary revenue streams. One of them is a tenant protection program where the tenants are able to push the liability of a storm or something happening to their goods onto the landlord for paying a certain price. There's obviously, there's prime access. If you need access past the operating hours, so let's say you need access 24 hours a day, you're a small business. You can pay for that. So these items obviously add up when you have two to 300,000 units like we currently operate. I hadn't even thought about the idea of a storm. So you live near a coast. There's a big hurricane coming. Hey, I have a bunch of furniture and I want to get soaked if we're swamped. Let's move in inland to a storage area. And that's and God forbid something happens to their home. Obviously, a lot of stuff gets moved into the storage facility. So you guys are the largest privately held self-storage set of ownership. What's the competition like? I know Blackstone is in here. We see cubes everywhere. We see public storage. Who are your big competitors and is there an eventual play where someone takes you out? Correct. So there's the group of public companies that you were just mentioning. You have extra space. You have public storage at cubes more at you hall. You all, I didn't even think of you all that's right. Most people think I'm just at the moving rise, but obviously they own a substantial amount of self-storage, substantial amount. What we do differently is we operate differently. We have a different, I would say rationale when it comes to operating compared to the REITs where the REITs are highly focused on occupancy. They want to keep their occupancy below 90, 92 percent, where out trade occupancy for top-line revenue. So what we'll do is in the off-season when it's slower, we'll hold our rents, create some occupancy, and then come spring when the season's busier, we have room to put the higher payers in. Where the reach are more focused on keeping that occupancy steady at 92, then come spring, they have no room to put those people in. So we really focus on driving the value. We've looked at what works over the last 20 years, and then we've just implemented it on scale across the portfolio. And then the related issue I see are the mobile pods people sometimes use, it seems sort of adjacent to the space. What are your thoughts on that? So we're not in that business, it's a lot more labor intensive. You got to physically drop the pod off and collect it later. Correct. So in storage, one of the main benefits is we take no abalement risk. So we're never taking possession of the person's goods. Where the pod, you start to cross that line a bit. So on the storage, it's 100% the consumers or the client's possessions. We have no contact with it. They put their lock on it. They're the only one that has access to it. We're 100% hands off. Hmm. So this really went from kind of a niche to a mainstream investment class over the past couple of years. You were really early in this space. What did you see that are those myths? And what do you think a lot of commercial real estate investors don't quite understand about this space? It was the fragmentation. Again, the first fragment assets I was focused on with the mobile home parks and RV parks, which I saw starting to consolidate. And then obviously how well storage did during those tougher times, which really led me to storage being highly fragmented. When I first entered the asset class, even back in around 2015 to 2014, it was roughly 80% still owned by mom and pops. So just the reach of the institution was only on 20% of the outstanding. And today it's probably closer to 70, 75%. So there's been a lot of consolidation. But what's interesting about storage is that the new supply coming online is being brought online by what we call merchant builders. So there are regional developers who have an extra piece of land, there's shop and center developers who put a storage up on that corner lot, or that key lot they might have. It's not the large institutions building the supply. So it keeps it pretty fragmented. So they're the ones adding the new supply to the market. That's really that's really kind of interesting. So a couple of years ago, you did a raise, a couple of billion dollars from outside investors. Seems like that's a good chunk of money to go out and start either buying or building. How do you look at the two options? So we don't like taking construction risks. So I like that we buy cashflow. So day one for an asset to make it through our IC committee. We have a very high threshold and that part of that threshold is cashflow. We pride ourselves on being able to distribute free cashflow to our investors pretty early in the fund's life, even during the investment period, which is pretty rare. But the fund business started in actually 2015 as a smaller fund up into that point. I had only purchased on my own capital and we did a test fund that did very well. It was a smaller fund. It was only 154 million. And then the second fund, we grew it to 725 million. And then the third fund is the one you're referring to is roughly two and a half billion dollar fund. So why go to outside investors rather than go the securitized route? Is it that much less expensive to do? It was basically it's a scale play. So we I knew the asset class was going to consolidate quickly once the other the large institutions understood it better or when the origin investors did. And I wanted to have that foothold in the market. And the best way to do it was through the co-mingled fund way where and also by doing that, I think we were able to disrupt things a bit because we pride ourselves on delivering what we call entrepreneurial type returns. We are operators. We are in the field on a daily basis. We're in the office grinding this out. So we try to deliver direct property level returns to our investors. So so not hands off, read like correct numbers. So so let's you mentioned your investment committee. Walk us through the typical acquisition. How do you source these things? Is it still just calling people up and saying, Hey, let us know when you want to sell and following up. And then what's the process like through the investment committee? So this this is where it takes at the correct personality to be this part of the team. And these are what we call our deal team members. So what we use is our prior proprietary software we have developed in house that we load our entire buy box into this software. And it projects. It's an AI system every self storage that fits that criteria in the country. And it has every data point about that asset, the owner, how big it is, the taxes, the rate, everything you can imagine. Then we allocate that deal to the deal team member that covers that area. Then here she continues to call that owner every 30 to 45 days until we convert them to a seller. So some of these deals that we're buying today, we've been working on for a decade. And we finally got the seller to the point to sell. So it's a very thick skinned long, you know, relationship, but it's a numbers game. So if we have 36 people with good information calling these owners and the reason why we do so much upfront information is we want to know more about the asset than the seller does in a way because we want to separate our social, anybody else calling them. We want to show that we're sincerely interested in buying their asset when we're able to tell them, you know, or even educate them about their own asset at times. So I get calls from an emails from private equity guys, hey, do you guys want to sell blah, blah, blah, blah, it's like it gets annoying at a point. What's the conversation like with the seller? Hey, spoke to you back in October, just checking and seeing if anything changes, how receptive are people to this? So it's more than, and I get those same emails and it drives me nuts or the phone call, will you sell your property and like which property, what area? So when we call, you know, we're referring to an exact asset, we've already been by the asset. We know what the numbers are. We know the size of it. We've done, and we might have spent already two weeks researching that asset before we called the owner. And instead of somebody just blindly calling you, Barry, but if they called you and they knew a lot about, you know, your business and they knew the numbers are estimated. Sometimes you're more intrigued to say, Hey, this guy spent the time to learn a bot. But then we visit them on the holidays. We find out when their, their birthday is, we send them a card, but it's a constantly being in contact with them. And then we try to solve that problem what they do with the money afterwards. How do they maximize their sale proceeds? And we hold their hand through the process. And they become one of our biggest referrals sellers. That's amazing. Maximizing returns afterwards. I'm going to assume that some combination of it's, it's obviously capital gains. There's a bunch of depreciation that comes along. There's a lot of different things. A seller can do. I would not have thought that a buyer is going to facilitate that process. We hold their hand through it because we want to eliminate any kind of friction. We need the buy assets. We need to buy that asset. Like I said, we're not blindly taking a shotgun and just waiting for something to come to market. We're specifically targeting assets that fit our criteria. So we know which ones make sense until we dive into the actual, you know, initially it's all hypothetical until we get the actual numbers from that seller. That's the only time things would change. So this sounds like it's a really unique approach to commercial real estate. Are you concerned that someone's going to say, Hey, these guys seem to have figured out. Let's do what they're doing. We have 25 year head start on them. So we have decades of information gathering, decades of conversations with these sellers. Moreover, it's a heavy lift. It's a burdensome. It's a lot expensive. What I carry on my deal teams. But the reason we do it is because there's no other way to buy assets, the way we do and create the value we do. If we were buying them on the open market, you think about it. If we weren't buying it this way, we would be buying it like 99% of every other asset where it gets brokered. Beautiful pictures are taken. It's presented in this best color. It's shot gunned around to 100 buyers. You go through multiple layers of bidding and at the end you'll repeat for the asset. The winner's curse in an auction situation. Exactly. The more buyers that are, the more likely it is the winner overpaid 100%. So we bypass all that and we go directly to the seller and we solve problems for them. That's really fascinating. I would not have guessed that degree of complexity, sophistication and facilitation to the seller. Here's the crazy thing. We're closing six to seven deals a month. So one or two a week on average when you look at that way, we'll bundle them up so they all close in a certain maybe couple quarters, but you have when you average it out. So it sounds like just the prep before you make an offer. If it's a few weeks, it sounds like you're spending tens of thousands, maybe hundreds of thousand of dollars. Really? But you think about it. If I don't get that asset today, I might get it in a month. If I don't get it in a month, I might get it next year. If I don't get it next year, we're into this for the long run. We're building a, I think, become the best operator of alternative assets. And when you guys raised fund three, that was the largest dedicated self storage fund raise at the time. I think that was two and a half billion dollars or something like that. Is that still the largest? Have there been other subsequent raises in the self storage space? That's the largest I know of. That might have been one of the largest property specific funds raised as well. I've heard that before. And what's the total self storage headcount? That's over 300 now. We have over 300, close to 350 assets. We have around seven or eight hundred employees around the country. We have two main, actually three main offices now. We have one in Saratoga Springs where it's our main headquarters then we have one in Jupiter, Florida and we're just open to an office here in West Chelsea. Coming up, we continue our conversation with Bob Moser, founder and CEO of Prime Group Holdings discussing the state of commercial real estate today. I'm Barry Richholz. You're listening to Masters in Business on Bloomberg, Greg Radio. The Big Tech podcast from Bloomberg News keeps you on top of the biggest stories of the day. My fellow Americans, this is Liberation Day. Impact politics, change businesses. Listen to the Big Tech from Bloomberg News every week day afternoon on the I Heart Radio app, Apple podcasts or wherever you get your podcasts. I'm Barry Richholz. You're listening to Masters in Business on Bloomberg Radio and watching Masters in Business on YouTube. He is the CEO of Prime Group Holdings, the largest privately held self-storage investment group in the United States. Over 350 locations across 28 states, the US Virgin Islands and Canada. I want to talk a little bit about the state of commercial real estate today, but I still have a handful of questions I have to ask you about self-storage. You mentioned small businesses are a big customer. I wouldn't have guessed that. What percentage of your units are rented by small businesses and what do they use this for? It's probably one of the most overlooked aspects of self-storage. Self-storage has two demand drivers, which is very unique in real estate in general. You think about residential. You have residential demand. An office has business demand. Self-storage, we have both residential and business demand. A lot of people think of self-storage. They think of storing their grandmother's couch. It's far from it. That might be one or two percent. The rest is 30 to 40 percent are small businesses. Contractors, land scapers, a lot of pharmaceutical reps. So we are their warehouse. We are the warehouse for that small business that employs the majority of the US population. And what's nice about storage being on a month-to-month basis, the terms of the contract, they can expand or contract as needed with their business. They don't have to sign a long term lease with an industrial or warehouse. It's a perfect fit for an entrepreneur or a starting business or even a mature business. Really interesting. We were talking previously about self-storage isn't covered by the traditional landlord tenant law. This is a much easier set of rules to operate under. This is a lean law system. Is that true in all states? Most states? 100 percent. It actually carries the candidates as well in parts of Europe that we're looking at. But yeah, and it's basically very similar to a bank loaning money. They're collateral or the lean against in a particular asset. And that's the way they look at it. And remember, we take, like I've seen, for no bailment risk. So we have no idea what's being stored, what the value is. So that is the collateral to their lease if they don't pay. That there's an auction process. Obviously, we don't want to auction off anybody's goods. And if let's say we send out 50 auction notices, maybe one or two go because hopefully we can work with that tenant and get them caught up. But it provides a way to collect the rent that's owed. Unlike a multifamily where it might take you a year if you're lucky to even somebody that's not paying. Self-storage is a lot quicker, easier process. And you mentioned Europe. I don't think you have a whole lot of exposure currently in Europe. How big a push are you looking to make on the continent? So we've been doing a lot of digging in figuring out what the different aspects in different cities. You know, it's interesting because some of the owners in Europe, let's say let's look at London, there will be two or three owners that own the majority of that inventory. Our play again is going out and buying from that one off owner. I really haven't go into that much. But it's an important aspect to our businesses. We identify the institutional asset that's still owned by mom and pop. So we target that person that owns one or two facilities. And the reason for that is that they're not a professional operator. And the chances are that we'll be able to achieve our returns if not better than what we estimated based on putting our systems and processes over that family-operated asset. So in Europe, they've been consolidated into groups. It really doesn't provide us that ability to buy assets that we think are highly undermanaged. So we're very risk-adverse. So we'd like to see exactly how the value is going to be created. You know, we have a game plan on every asset, what levers need to be pulled in order to create that value. And one of those is a lot of the optimization of the rent role, optimization of the actual unit mix, the layout of the facility. And if it's a larger, more professional owner, the chances are those low-hanging fruit might not be there. So we're still trying to find the markets that have that fragmentation, where there's still one-off and two-off owners, because that is really our bread and butter. So in the U.S, the law is very somewhat from state to state, but it's fairly uniform. How different is it country to country in the EU? Even in the United States. But even in the States, when it comes to the actual implementation of the lean law, it does, there's different timings, there's different fees that can be charged, there's different things that you do with the proceeds from the auction. Let's say you receive more than what the person owed to, some of it gets donated away, some of it gets contributed back to that seller, depending on the state, that extra free proceeds determines where it goes. So we have a whole legal compliance team that works on this on a daily basis to make sure that each state law is being followed every, you know, municipality in the U.S., every county, or every territory in Canada. And that's the research we're doing right now in Europe and in Australia, trying to find the markets where we know we can go in and consolidate, get economies of scale out of it, but by the assets the way we want to buy them on this one-off way. - Really interesting. So commercial real estates have seen higher rates of costs, interest rates, and inflation have been kind of stubborn and sticky. What sort of refinancing stresses does that create? Where are you sidesteping that whole interest rate chase these days? - So we're very fortunate being in real estate for as long as we have developed really deep relationships with the large institutional lenders from city bank to gold, in the JP, the BMO, to northern trust. You know, I'm sure I'm missing one. I'll probably get a call after this. But we have very deep rooted relationships and we're relationship oriented. So we're there. We work with these banks and there, it's a flight to quality during this time, where lenders are going to the lenders. They have long turn in relationship and track records with. But we spend a lot of time making sure that we're hedging our interest rates. We're making sure that we're, you know, we're putting the right debt on the assets at the right time. You know, making sure we're not cross-cladderizing too much. So it a lot goes into it. - I can totally imagine. We've certainly seen shifts in demographics with everything from migration and remote work and aging populations. How does that affect demand for commercial real estate, both self storage and other related real estate? - For it's a big demand driver for self storage. So when you think about it, people now are living in apartments more. I think I just heard the average the first time home buyers now until like they're 40 now. - Yeah, some late 40s. - It's crazy. When it used to be like 28 or 26. So obviously they live in smaller apartments. They need place to put their stuff. They need storage. Storage is almost like a trade off. Is it that extra bedroom that might cost you a $500 a month or is it a storage for $75 a month? You know, so it's always a trade. Same thing with an office. Is it that bigger office where you can have stuff on site or do supplement it with a less expensive at the self storage? So this goes back to self storage being a need based real estate. And this is why during tougher times the aspirational real estate are the ones that take the hit. Like we've seen it office lately. - Yeah, speaking of office, we've seen a lot of underutilized office properties work from home, continues, hybrid working, continues. How is that affecting what you're doing? I just related to this. I just saw a piece in the Wall Street Journal this week that there has been a sudden surge of office to residential conversions in lower Manhattan, which two years ago everybody said, "Oh, it's too expensive. It's too time consuming." Do you track that sort of stuff? What sort of impact does that have? - We're actually working on one of those now actually. - Oh, really? - It is. It's pretty interesting. So commercial office to residential real estate. - So what it was was we there was a group of assets in West Chelsea that we ended up buying that one of them buy actually two of them buy right could be self storage. We're converting one to a high end storage of the future we're calling it. And I can go into that more modern, a lot of technology driven self storage. And the other part of the project was a nine story building that's on the high line that we are going in to have it converted from office to residential. - On the high line, all those properties have become incredibly valuable with some Stark attack designers and that's sort of stuff. It's always fascinating. I'm sure that's going to be interesting. When you say high-tech self-storage, I can imagine an app and an ability to have stuff brought out to you or stuff brought into you. What does high-tech self-storage look like? So we have actually harnessed the free energy of your cell phone to unlock the lock. So it's pretty interesting. So it's almost like a PayPal, I believe, or Apple Pay uses. So basically, if you look at the lock, it's what controls this business, the actual lock that's put on. And you have this physical key. You can lose that key. You know, it's hard to share. Like, let's say, your small business, how do you give your employee access or how do you give them multiple keys? So we've devised and have built a lock that your cell phone gets an electronic key sent to it. And then you can use that to open up the lock. There's no batteries needed. There's no Wi-Fi needed. Some of the new EVs are the same way where you show up with a phone and it-- Exactly. --examine or locks the car. It lets you start it. So we're bringing this to the self-storage business. And we have our first 5,000 being deployed as we speak right now. But what's really nice, it's catering not only to the residential particular-- the business consumer, then can share their key for one time user coming to use with an employee. The other thing isn't if they're late and don't pay their electronic keys turned off. But the-- also, the customer gets a full audit at the end of the month. When their unit's been opened, what time it was so they know who's been in and out of their unit-- He tracks it. --100%. Huh. If it's not Wi-Fi, how does the key operate? Is that Bluetooth or something else? No, it's purely off. So your cell phone gives off energy just sitting there. And it was enough the harness to actually flip that cell annoyed. It's pretty amazing. So we've been working for a couple years to get this perfected. I'm assuming there has to be a battery. No battery. Your phone. No battery. No battery. That's the key to this. Wow. And it's good that you brought that up because everybody else has done it with a battery in the lot. And eventually that battery-- That battery guy. The digital saves. 100%. 100%. The digital saves have a battery. The first time the battery dies on your safe, you're like, oh my god. And you call them up and say just replace that battery. This wasn't supposed to happen. Right. Now it is. So you think about it. One of our facilities in NISTORIA is 3,300 units. It's 256,000 square feet. So first of the month comes, if people haven't paid, that manager has to leave the front desk, go around and double lock those units. Right. Now the electronic key just imagily freezes the unit. So it reduces our labor. It gives the consumer a better product and easier product to use. After we're about losing a key, they have a lock for free on their unit. They get an audit of their unit. It gives them everything they want to know. It's a great win-win. Huh. Quite fascinating. So given your perspective and experience in all sorts of commercial real estate, 2026, there's a lot of questions. People have no idea what's going on in terms of rates and terms of government policies and tariffs and all these different things. What are you seeing in the commercial real estate space? So our go 2026. That's a good question. I was on the phone on the way down here with some of my bankers talking about this. You know, where is the curve look like in the short term? Obviously, I think so far is going to be coming down. Obviously for a reason being lowered. I'm hoping to see that on the five-year treasury as well. Is that your benchmark for fees as opposed to 10-year for mortgages? Yeah. So I look at the five-year quite a bit. We'll do 10-year in some. But the length of the fund made really the five-year is probably the most conducive in a fund structure. It gives you the flexibility. You can refinance out of it, but you're not locked into a point where at times the debt could be a penalty. If it's under leverage, you eliminate a lot of buyers at the end when you do a roll-up or if it's too costly, then you have defesence and everything else that goes along with it. You'll maintenance. But the five-year works well. So we've been hearing from various manufacturers. There's no sort of clarity as to policy. Everybody is kind of frozen, capex in place and are a little reluctant to build or acquire. I get the sense that's not really an issue with your business. Going back, it's a need-based real estate. People need it to no matter what the life cycle is, whatever the macro economy is, they need space for their products, goods, inventory, their personal items. Last question before we get to our favourites. So what do you think commercial real estate investors aren't thinking about or talking about, what perhaps should be? What's really overlooked in terms of pick a subject, assets, geographies, policy, that's getting overlooked, but really deserves more focus. And I really think it's about how to really create value in real estate. Real estate is not a short-term investment. And a lot of people look, and I'm not even talking three to five years as short in real estate. I remember years ago, this old time, or told me that real estate is boring for the first 30 years. But it's true. It really takes a while, not only to not be boring, but to be actually profitable lucrative, then you start to multiply on itself. As the rents go up and you stabilize those expenses, things start to grow rapidly. But I think it's the longer-term vision to really create true value in real estate. I think the time horizon needs to be a little bit bigger than three to five years. Because what happens then people are put into the situation where they have to sell, or they have to do something. Where instead, real estate has to live through those cycles. And it's just the best way to manage them and just buying the right assets, defensive assets, like when we're buying an asset. One of the biggest things is traffic count. But it's not just traffic count. It's traffic pattern. We want to make sure that on our storage assets, you're driving past that facility every day on the way to work, on the way to school. It's location, location, location driven. People have to remember the basics at times. And sometimes we get away from that. And we start to look things that are too sexy or stay simple, things that people constantly need. And you'll realize when you buy assets like that, there's inflation hedges built in, like storage. I can adjust rents on a 30-day notice. There's a lot of inflation hedges built into those types of assets. It's funny, the line real estate is boring for the first 30 years. After Sam's L passed away, I read a biography of him and one of the things that kind of, that stunned me was he owned some of his properties for half a century. Very ever. That's just that's just an unbelievable number. It's almost like the war and Buffett way of buying real estate. And that's the way I, and I think that was probably the hardest thing for me to get my head around doing the funds. Because I know what real estate can do over, when you get past that 10-year period, that's when the values start to really start escalating and really, really growing. And it's really having the right LPs understanding the asset classes. Long term is really long term when it comes to real estate. I'm God willing, I'll be here when I'm 94. So let's jump to our favorite questions that we ask all of our guests starting with, who are your mentors? Who helped shape this obsession with real estate from the earliest days and help shape your career? I've been very fortunate to have some great partners along the way from some of my kindling go and founder from deep. I was a really close friend and mentor. But along the way, I've been, I think, you learn from everybody you meet along the way. I think, you kind of, and when you look at that, anybody can be a mentor at any given point in time. But I've been fortunate to have some of the largest investors in the world like the late Ira Harris, who was absolutely amazing and taught me a lot. Just life lessons speaking to them, knowing, you know, the long term look at assets, how to be patient, what to look for. You know, there's a lot that have added up over the years and hopefully now I'm passing that along the others. So let's talk about books. What, what are you reading and what are some of your favorites? I think probably my favorite was Reminets of a stock operator. It was a great book. What about streaming? What are you listening to or watching anything keeping you entertained these days? Podcast why I've said yourself, we were all in. We're listening to some of that on the way down. It was just listening to your interview with Lang Sons CEO. Well, Helm Schmidt of LA. Fascinating. Really, really. I was a great interview, by the way. I didn't realize how big into cars he was. Can I tell you there are worse places to be than a beautiful sunny weekend. I can imagine. You sound very happy. Yeah. I had a good time that weekend. So final two questions. What sort of advice would you give to a recent college grad? What interest in the career in commercial real estate investment? I think it's in anything. Don't count somebody else's money. I see a lot of younger people wondering what the other person next to him is making and concerned about that. Always do more than what you're paid for. And you have to be enthusiastic. As a result, probably the biggest driver of success I can think of. Infusiasm. And our final question. What do you know about the world of commercial real estate investing? Today would have been helpful back in the 1990s when you were first starting out. I would say it was more about managing people. It took me a long time to learn how to manage people. I didn't have the benefit of working for a company. I started my own business in college. Obviously, grew it straight through. Never had that experience. It took me a long time to learn how to manage different, I would say, strengths of different people. And I wish I had the ability to empower people. It took, you know, obviously it took me probably a decade and a half before I really felt comfortable doing that. But yeah, I think that was probably if I had done that earlier, I'd probably be bigger. Thanks, Bob, for being so generous with your time. We have been speaking to Bob Moser. is the founder and CEO of Prime Group Holdings, America's largest privately held self-storage investment fund. If you enjoy this conversation, well be sure and check out any of the 592 that we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, or wherever you get your favorite podcast. I would be remiss if I did not thank the crack team that helps me put these conversations together each and every week. Alexis Norega is my video producer, Sean Russo is my head of research, Annalook is my podcast producer. I'm Barry Rittholtz. You've been listening to Masters in Business on Bloomberg Radio. Listen to the Big Tech from Bloomberg News every weekday afternoon on the iHeart Radio app, Apple podcasts, or wherever you get your podcasts.