Niche Real Estate Investing

Tim Newington:

Hi, Elana. Thanks so much for having me. 

Elana Margulies-Snyderman:  

Absolutely. So, to kick off the conversation, tell us a little about Macritchie and how you got to where you are today. 

Tim Newington:

Sure. First of all, we started the firm in 2014, and we were initially focused on self-storage conversions. In about two or three years, we morphed that into ground-up self-storage development. And to date we've done 22 of those projects. In 2019, we launched our second vertical Otter Self Storage, which is focused on buying cash-flowing self-storage facilities and our strategy is a little bit different in that we run these facilities remotely. We don't have a facility manager on-site. And to do this, we built up an operations' platform in Chicago and we have 24 Otter Self Storage facilities. And then in 2020 we moved into the RV storage facility vertical. We have 15 operating facilities currently in that vertical under the Honey Bee RV storage brand. And we're the second-largest RV storage operator in the U.S. And in 2024, we entered the multi-tenant industrial outdoor storage market. And basically, we're taking what we know in self-storage and we're applying it to industrial outdoor storage, in that we'll buy a piece of land, and we'll develop it. And we'll provide storage for about 150 small businesses versus traditional IOS where they're just really having one tenant. And finally, we're in the process of launching our most recent vertical, and that's Bison Business Parks, which is multi-bay industrial, and we currently have one of those facilities in Sarasota, Florida. So, to date, we've got just under $600 million of committed capital, and we have a team of about 60 in place. 

Elana Margulies-Snyderman: 

Congrats on the expansion, Tim. That segues nicely into the question I have for you next. Given your focus on niche real estate investing, I would love to hear your high-level outlook for the space. 

Tim Newington:

Sure. Obviously, we're pretty bullish on it given that's what we do all day every day. And really the reason for being focused on this vertical is a couple of reasons. First of all, it's the opportunity set and the attractive risk return. In that respect, we can deliver opportunistic returns, so think well north of 12%-13% unlevered gross returns. And it really allows a smaller player, such as the Macritchie Group, to attract capital because quite frankly, it'd be very difficult for us to attract capital and compete with some of the big players in sectors such as multifamily. You just need to be very large and have attractive to significant amounts of capital, and we just don't have the ability to compete with them. Also, when you think about some of the recent challenges that have happened in real estate, particularly in the office and retail space, we're hopeful that the allocators will allocate a bit more of their real estate book to the niche sectors. And obviously that would help players like us and anybody in the niche real estate sector. 

Elana Margulies-Snyderman: 

And Tim, more specifically, what are some of the greatest opportunities you see in your space and why? 

Tim Newington:

Sure. So, for us, in the verticals we're focused on, I think it would really be RV storage, multi-tenant, IOS, and probably Bison which is the micro-bay industrial space we're focused on. And there's several reasons for that. The first one being that each of those markets is pretty significant, which allows us to scale or put quite a bit of money to work, which obviously is important for a money manager. Institutional capital is just starting to focus on them. So, there is a very substantial opportunity set for a player such as ourselves. And the potential returns are and should remain quite attractive for a number of years, obviously which is quite attractive to us. And when you start thinking about any of these verticals, an operator such as Macritchie really needs a unique set of skills to be successful. First of all, you need to be able to find the asset or the land, then you need to be able to buy it or build it. And from a build perspective, we have our own in-house development team and general contractor, which really helps us find. And you also need to be obviously be able to fill it. So, you need some pretty good marketing both online and local marketing skills. And then finally, you need to optimize the cashflow generation. And to do well in those last two points I notified or put forward, you really need to build your own team to execute as third-party operators just don't exist. So, if you don't have the team in place, it's really hard to be successful. So, we built an organization that has all those components on it. So, we think we have a competitive advantage to be a leader in all the verticals we're playing in. 

Elana Margulies-Snyderman: 

Tim, on the other hand, what are some of the greatest challenges you face in your space and why? 

Tim Newington:

It's really about execution and moving quickly. You can put anything into a spreadsheet that you want, but if you can't actually execute it in real life, you're actually not going to put up the returns and you're not going to be successful. And when you think about what we do, it's really smaller investments and smaller facilities. So, each facility would be in the range of $10-$15 million. So, to scale, you need to do a significant number of transactions. So, we really think about this as a manufacturing process whereby we're using a lot of data and a lot of processes to find, as I stated, define them, buy or build them, fill them and operate them. So new players are going to come along. We do have a competitive advantage, but we do need to move quickly in order to take proper opportunity of the markets that we're in. 

Elana Margulies-Snyderman:  

Tim, we've covered a lot of ground today and wanted to see if you have any final thoughts you would like to share with us. 

Tim Newington: 

Sure. We're very excited about what we've accomplished so far, and we're really excited about the future. Near term, we're going to be raising capital for RV storage or multi-tenant and our Bison or mini-bay industrial. And as always, we're always researching new verticals to launch in the years to come. So, stay tuned. 

Elana Margulies-Snyderman: 

Tim, I wanted to thank you so much for sharing your perspective with our listeners. 

Tim Newington: 

Thank you very much for having me, Elana. I really appreciate it. 

Elana Margulies-Snyderman: 

And thank you for listening to the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business. 

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