The importance of cash flow
I’ve spent my entire career in commercial real estate, splitting my time between institutional investment and asset management and proptech. As a commercial real estate owner, there’s often a focus on property valuations as a key indicator of success. And as a startup, it’s all about revenue revenue revenue (although profitability is having a moment now).
Recent events have highlighted the critical importance of cash flow in any industry. I read almost daily news about landlords defaulting on loans and companies filing for bankruptcy or going out of business. In February, my jaw dropped when I read about Brookfield defaulting on loans covering two massive Los Angeles towers — Gas Company Tower and 777 Tower. I admire Brookfield (I mean…it’s Brookfield), and my gut told me that more bad news was on the way.
Since then, Blackstone has faced many issues, including loans in New York and Las Vegas going into special servicing because property cash flows were no longer covering debt payments. In Las Vegas, the firm reportedly struggled with “an inability to fund future monthly payments” and “had begun writing off the equity value of the loan in 2020.” Blackstone’s 11-property, New York multifamily portfolio “should have benefited from the booming rental market in Manhattan for the past two years,” but the portfolio was set up for failure thanks to steep valuations.
There are more examples from RXR, Veritas (San Francisco’s largest multifamily landlord), Columbia Property Trust, GFP Real Estate, and many more, especially those who operate under the radar. As a former investor, owner, operator, I realize no one could have underwritten a downside case involving a pandemic that would wipe away real estate needs for an entire generation. Valuations are certainly an important metric in commercial real estate but can often be misleading about cash flow potential, because they are based on historical data, which may not accurately reflect current market conditions.
I’m sharing my thoughts, not to poo-poo commercial real estate owners (we partner with many), but to advocate for Stuf as a cash flow opportunity that landlords should seriously consider. We monetize underutilized spaces, such as basements and garages, as tech-enabled self storage to create a new cash flow stream for our landlord partners, which include Jamestown, Hines, Vanbarton, Swig, Granite, and many more. Stuf serves a dual purpose in that it’s also an amenity for residents or office tenants who seek flexibility and extra space for themselves or their businesses, and it’s one of few building amenities that actually make money.
Self storage is so often stigmatized in pop culture, but we’re on a mission to rebrand the entire product and industry. Our landlords know our top priorities are access and security, both for the building and its tenants, as well as for our members. Additionally, we’re now on to 2 or 3 locations (and growing) with many of our landlord partners.
We would love to make new friends, share our story, and provide more details about our operating platform so we can grow your cash flow. Please reach out at realestate@stufstorage.com! And even when this cycle passes (I hope it will), let’s never forget the importance of cash flow.
