Clarkstoragellc- 2024 year end wrap up

[Henry Clark]

You can look back at our 2023 Year-end Wrap-up Post for further perspective.

Economy- my perspective right or wrong throughout 2024. This is the basis for some of our business decisions. Basically, put our money where our perspective was. Costs on Self Storage buildings and Flex buildings are double what they were about 5 years ago. No reduction in sight. We have been past our "Wealth Number" for several years, so expanding into this Economic market we weighed more towards Risk Avoidance and Wealth Preservation; versus bigger numbers and increased exposure. Again, this is our perspective, forget whether we are right or wrong. But this is the basis for our decisions. We have diversified wealth. Even if an economic downturn we are fine. Your perspective along with your W2 job will be different.

Self-Storage:

We are primarily at 100 % at all of our B/C locations. Our A location is at 80%, thus in 2025 we will need to think about expanding.

Debt level. Pulled back to around a 40% LTV across all properties, by selling 3 our our C locations in 2024. Two years ago, we refinanced to a 7-year balloon. Plus, part of our portfolio is an SBA loan on a 20-year fixed interest rate term, except for the local participating bank with 10 years fixed. Thus, increased interest rates don't really impact our decision on our existing Storage investments.

Decided to sell these C locations, since the rent was not high enough to warrant investing in more new buildings. Paid down on existing debt on those and other locations, took portion of funds to investment in better return properties, set aside some cash for a potential New A location development in 2025.

Future-

A. Sitting on 5 acres purchased to do an "A" location. Not ready to pull the trigger to start building. The interstate system construction around this location has been completed and will slowly start to increase the value in this area.

B. Black Swan- there are a lot of potential economic hits right now. China collapse, China/Taiwan, China production moving to other countries, Ukraine/Russia war, Ukraine/Russia fertilizer and wheat, Panama Canal water levels, US debt versus GDP, US illegal immigration, US Baby Boomer social costs coming online, Stock market P/E ratio. Even if interest rates dropped 2% points, I am very leery of the economic outlook. We are sitting in a good spot, but there are a lot of things I am looking over my shoulder.

C. Rerunning numbers on a New “A” Self-Storage location. About 500 storage units and parking spots. 3 phases, but in total $3mm development. Market analysis is best ever. Banker is on board. No money down, would use cross collateralization with one of our other properties.

Flex buildings:

We have the land, the contractor, the plans, the zoning and the financing in place. This is a new market even though similar to Self-Storage. A little uncomfortable. Holding off, have a better potential deal above.

Subdivisions: We do Country subdivisions. 2 acres up to 6 acre lots. We just subdivide the lots and sell them. Bought a new location with 75 acres that we are developing. Lookup Silver Springs post. Ended up with 18 lots. Bought at auction for $675k; will invest around $200k into roads/electric/fiber, 1 pond, and development costs. Plan to sell lots for $80k up to $150k per lot. I tell people doing a Subdivision development right now is a bad idea. Where we are ahead, is this is a pure cash play with no debt, thus no holding costs (yes opportunity cost is missed but let's say 5%). Our area we are very low on housing inventory, so people are willing to build. The target market with the lot price point and the building Covenants are people who have the money and are not as impacted as other home builders. Are we right? As I always tell people, it's your money, your always right, even if you're wrong.

Lessons learned on these subdivision projects. People love trees, ponds and boulders. We plant trees as needed. Build ponds. Trucked in about 100 tons of boulders and strategically placed.

Waiting on Subdivision approval this next month. Will start to market this summer/fall 2025. If interest rates continue downward, then interest will rise. We are planning on a 5-year sale cycle for this project.

Teak Plantation in Belize:

Teak trees are going great. Continue trimming and thinning trees. Have almost all new seedlings planted. Bought a skylift and transported there. Starting to trim up to 35 feet. So, we can get 3 clean logs. In middle of a deal for an additional 89 acres next to one of our existing properties. Will clean off and plant more seedlings.

Building our third house down in Belize for one of our worker's who will be cutting back fulltime.  He will check all of our tree locations every day and take care of the animals and plants.  Plus do a little trimming and spraying.  This will be 900 square feet with a concrete ceiling which is also the floor for a roof top covered patio.  300 sqft covered porch on two sides of the house.  Trying to build this for $25,000 USD unfinished.  Finish will be about $5,000.  If we come close, may start building these as Expat rental units for $800 per month.  Almost zero property taxes, almost zero income tax, zero insurance, no capital gains if we sale them.  People as they are looking to move to Belize would like to live there while looking for properties or waiting on their construction.

Funnest Idea Last year:

Taught our guys how to raise Hogs and Ducks/Geese. Then showed them how to butcher and process hogs. Bought a freezer. They take home free pork every week. They can only afford chicken once a week, so this is a big deal. Ducks/Geese are setting on eggs, and we are incubating. Shooting for about 300 Ducks/Geese by this fall. The workers will eat Ducks and duck eggs for free. Geese they will sell for $150 each in the fall. Why??? We pay them good, and they just have to work Steady. One of the easiest ways to make money in Belize is to steal trees. My guys know they need to protect our trees, or they lose their jobs, plus the free food. 300 chickens are our next project when I go down next month.

Dumbest Idea Last year:

Not investing. Selling 3 very low debt, high monthly cash returning properties. There were our reasons, but still.

Outlook for 2025:

Still playing it conservatively. Will let the new Subdivision get completed and go to market this summer. We need 10 of the 18 lots to be sold to break even, thus not a lot of pressure. But the market will decide. Still have both Cash and a lot of Equity on the sidelines. Have three properties shovel ready. Will wait and see how the subdivision does, then look at costs again on new projects. Not really looking to buy existing Self Storage. Premiums are too high. Making more money developing than buying existing locations. Finance terms were solidified to 7-year balloons and SBA 20 years, so have no downsides if interest rates increase for the Self-Storage business. At about 40% LTV across the board on Self Storage and Flex buildings; thus, no Banker "call" issues. Only downside on higher interest rates will be sales of the Subdivision lots, which since this is a cash investment, we can sit on and hold.

Good luck on your 2025 investments.

It's your money, you are always right, even if you're wrong.

Start small and Make Your Big Mistakes Early.

[Ronald Rohde]

Thanks for sharing as always.

I'd consider a larger percentage of outdoor storage if you put a building on the A site. You can get low risk returns with boat and RV storage. I do truck parking, but get calls all the time from retail users.

I sold an industrial property, sitting on a 3x EM, no real reason to sell, but it reduced my PG debt and booked a tidy profit. Making nearly the same on just 4.4% accounts...