GI284: Manufactured Housing and Self Storage Investing with Matthew Ricciardella

GI284: Manufactured Housing and Self Storage Investing with Matthew Ricciardella

Matthew Ricciardella has over 20 years of experience in the real estate industry and has been a principal in over $1 billion of real estate transactions. His firm, Crystal View Capital, acquires and manages self-storage and mobile home communities across the US and currently has $500 million in assets under management.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Matthew Rick-a-Della. He has over 20 years of experience in the real estate industry and has been a principal in over $1 billion of real estate transactions. His firm, Crystal View Capital, acquires and manages self-storage and mobile home communities across the US and currently has $500 million in assets under management. Thank you so much for being on the show!

Matthew:
Thanks for having me, Charles. I appreciate it. Excited to be here.

Charles:
Yeah. So please tell us about yourself, both personally and professionally prior to getting involved with starting your current firm crystal View Capital.

Matthew:
Yeah, so before I started Crystal View rewind pre 2014, when we launched our first fund from about 2007 to 2014, I was an investor, just in my own right. I was buying self storage and manufactured housing communities just for my own account. I was an owner operator. I put together a small management company to manage those assets, and, and we did extremely well. The, the issue we had was our capital was limited, so we had no ability to really scale, and it was a great business model. It still is today. But, but without capital, you just passing on so many deals. So that’s why we went and launched our, our fund one. Prior to that, I was a residential realtor in Southern California. I grew up in upstate New York, was in the restaurant bus. My family was in the restaurant business.

Matthew:
So I grew up as a kid and learning the value of hard work was in the kitchen, washing dishes and waiting on tables and doing all that good stuff. So that, that was kind of what I did as a teenager and, and even before that but did well, moved out to California, did well as a realtor and kind of built my business up, making cold calls because I didn’t know anybody. I was very new and young and, you know, the only way I could do it was be super aggressive and get out in front of buyers and sellers. So I got on the phone, I knocked on doors, and that’s how I built my business up. And it was really came back to, it was interesting, Charles. It was the power of, of relationships. At the end of the day, yes, we’re buying buildings, we’re buying land, but more importantly than that, we’re building a relationship and that’s what allows Crystal view to be successful. That’s what allowed me personally and professionally to be successful prior to forming Crystal View.

Charles:
Awesome, thank you so much for that. Can you break down what your kind of current company’s investment strategy and criteria is and the different asset classes that you focus on?

Matthew:
Yeah, right now it’s, it’s two asset classes exclusively mobile home communities and and self storage facilities is our core focus.

Charles:
And being involved with a number of different asset classes, especially from real residential to what you’re doing now you know, how did you choose those two asset classes over, I mean, there’s, there’s a dozen different real estate asset classes that you can really choose, let’s say.

Matthew:
Yeah, and you know, I, I invested in all asset classes. I invested in multifamily, in office, in retail, industrial, and I gravitated back to these two property types. And the reason for that was several reasons. One, I found that the ownership profile was really ideal for what I was trying to accomplish. You know, we’re a hands-on owner operator. We look to create value, we’re a value add player in the space. And if you’re buying fully stabilized assets from an institutional owner that are fully price, you know, that are priced per the market, it’s really difficult to make money in that type of scenario. However, if you’re buying assets off market and there’s a lot of operational inefficiencies there, and you’ve got the wherewithal and the, and the competency and the systems in place to identify where they’re underperforming, and you have the ability to pull out that value, create that value, and you’re finding these deals off market, you can make a lot of money in this business. So for that reason, I found that self-storage and manufactured housing were really predominantly mom and pop owned and operated. It’s very fragmented. Like if you get into office and industrial and retail, multifamily got a lot of large players that dominate and, and own a big chunk of the overall asset class. That’s not the case here. A lot of fragmentation. And that was why I really put my focus on these two asset classes and still do to to this day.

Charles:
Yeah, I think when I was preparing for this episode that’s one kind of recurring theme that I’ve found over the years. People that are doing funds with mobile homes and self storage off market is a huge part of their deal sourcing versus, like you just said we have a lot of multifamily people on the show, and that’s one thing where a lot of that is all brokers. It’s like inverse, you know what I mean? You know what I mean? It’s, it completely inverse. And so when I was looking through for stuff for this episode, I saw that you acquire over 92% of your deals off market. I mean, is that where you’re, your firm is actively reaching out to owners or are you what people would say off market, you know, via brokers?

Matthew:
Well, it, it would be the combination of both. We have a reputation in this space for doing what we say we’re gonna do. So that’s a great place to start. There, there’s a lot of operators in this space that are less than scrupulous. There’s a lot of operators that don’t have the financial wherewithal to take assets down. And merely what they’re doing is they’re tying deals up, wasting time, trying to assign contracts, acting kind of like a quasi broker if you’ll, so we’ve got a reputation in the brokerage community that our word is our bond. We execute, we’ve got capital. So a lot of brokers do bring us deal flow that’s, that’s off market because they know in, in a lot of cases, we’re the best suitor. But more often than not than that, even, we’re reaching out, we have a team, Charles of nine full-time professionals, and they’re reaching out directly to these owner operators and they’re building relationships.

Matthew:
They’re going out there to visit them. They’re having dinner with them, lunch with them, listening to their life story, understanding how hard they work to build this up. And we’re relatable because we’re their peer. It’s not like we’re approaching them, Hey, I’m a salesperson here. But no, we’re a fellow owner operator and we’re kind of, you know, best practices are going back and forth. We’re sharing ideas. It’s a mastermind. And that process doesn’t happen overnight. You know, a lot of these relationships I’ve built for more than 10 years. So these people know that we’re active, we have those relationships, and when it’s time to sell, you know, more times than not, they’re gonna reach out to me or somebody on my team. And that’s how we’re able to put these deals together. And these are fair prices. I mean, it’s not like we’re, we’re stealing these deals, but we’re not competing at the same time. So it, it’s really a win-win. We we’re interested in structuring win-win transactions and that

Charles:
Field. Yeah, when I’ve done cold outreach for multi-family properties it, it takes a, it takes a long time to build that rapport with the seller. And maybe they’re not even ready. They’re not even a seller yet. They’re just an owner, but you are top of list. When they do come to that realization that they’re gonna be selling this property,

Matthew:
Absolutely. And especially when they know that you’ve got the ability to close and you could work under their terms. Some sellers are tax motivated. We have specific tax strategies to meet those goals. Some want a quick close and they want all cash, we could do that. Each deal is a little bit differently. The trick is you need to structure it around what their motivation and what their goals are.

Charles:
Right. that, that brings me to my next question about the financing portion of it. You know, what types of financing do you typically use to capitalize your properties? And you’re saying that obviously every deal’s a little different. I imagine some of these are seller financing, but do you also utilize a lot of, for these for these asset classes, this much more like local and community banks type of funding that you normally reach out and acquire?

Matthew:
It, it’s a combination. A lot of times it’s all cash. What we do is we take deals down typically for cash. Then what we do is we have a revolving line of credit in our fund. Four, we have a $50 million line of credit in our fund. Three, we have a 75 million line of credit. So once we take a deal down, typically it’s underperforming or non-performing in some way, shape or form. So we don’t wanna put permanent debt on the deal, otherwise we’re gonna really have a super low loan to value on that deal. So what we wanna do is maximize NOI first then go out to, on the mobile home park side, Fannie and Freddie, which is our go-to debt financing source. And then on the storage side, it’s the CMBS market. But during that, that interim period from the time we acquire it for cash, and the time that we lock in that long term fixed rate debt with either one of those debt sources, it typically sits on our revolving line of credit.

Charles:
Yeah, and I imagine that’s something that a lot of your competitors, it’s the first time I’ve heard that on doing so many of these episodes. So with an operator in those asset classes, I imagine that gives you a leg up on your competitors because they might not be able to bring cash to a deal you know, in, in that, in that form.

Matthew:
Well, that’s, that’s exactly right. You know, cash is king and, and your ability to, you know, when we approach a seller and show them a proof of funds, it’s very different than when the seller’s having a conversation with the syndicator that says, Hey, lemme tie your deal up. Yeah, I’m gonna go out there and try to raise it and trust me, I could do it. I mean, it’s logical that they would go to us. It’s just certainty of execution.

Charles:
Yeah, and I imagine for a broker that takes, you know, they’re coming and they’re paid only on commission and they’re bringing a deal to you, and they know that, well, the financing contingency is not really there anymore. So that’s one nice thing, and it’s really just, we’re coming to terms and pricing.

Matthew:
That’s it. That’s it. So if everything checks out, we’re gonna close on that deal.

Charles:
Fantastic. One of the things I saw, and I I know this is much more normal in self storage and mobile home communities is like, bring, bringing your property management in-house. And since you’re buying across the United States, I mean how, I mean, property management’s a challenging business, but what are the main reasons behind being vertically integrated and bringing that all in-house under one roof? Yeah,

Matthew:
Great question. I think this is one of the differentiating factors in crystal view and what makes us different from a lot of our peers and competitors. And the answer to that question, Charles, is we wanna control our own destiny. And I’ll tell you what that means. What a first off, what a lot of groups do is they’re what I call a capital allocator. They go out to the general public, they raise capital, and what they’re doing is they’re saying, Hey, I found a great deal. I’m gonna allocate capital into this deal, and then I’m gonna call a third property property management company, a third party property management company, excuse me. They’re gonna them, and they’re gonna say, Hey, I hope you do a great job for me and my investors. You know, go out there, collect the rents. You know, if you could find some homes, fill vacant sites you know, I trust that you’re gonna do a great job.

Matthew:
That property manager not taking anything away from them, they’re only in it to earn their fees. So whether that property does extremely well or it’s a failure, it doesn’t really matter that much to them. For us, there’s this really strong alignment of interest between ourselves and our investors. I put a significant portion of my network into these funds as a limited partner right alongside my investors. I’ve got a strong vested interest here. So I don’t believe anybody can do as good of a job in managing that property and executing the business plan to maximize net operating income. Nobody could do it as well as, as our team can. So that’s why I say we control our own destiny. We create all of that value in-House, and if we did it any other way, I don’t believe Crystal view would deliver, would be able to deliver the returns as we have in the past.

Charles:
Yeah, I was reading on in one of the bios or one of the things that you’re invested eight figures into all your funds over the years.

Matthew:
That’s right. Now, you know that that’s a good chunk of, of capital. Obviously I wouldn’t feel comfortable pulling out the yellow pages and calling a third party property management company and trusting that my eight figures are gonna be maximized with them. I I know nobody’s gonna maximize the return on those eight figures better than myself. And my investors believe that too. And that’s why they invested in me.

Charles:
So Matthew over all the decades of doing this different asset classes, I mean, how has your investment strategy evolved over the years? Because I remember, you know, when I started multi-family investing in oh six, it’s changed dramatically every couple years. I’m fine tuning and what we’re buying, what vintages, everything like that. How has yours over the years changed?

Matthew:
You know, this put simply Charles, the strategy hasn’t changed very much. What has changed back to that vertical integration? Back to the power with controlling our own destiny, we’ve really refined our systems, our operations. In the past, it was more or less, Hey, you find a great deal. You buy it, right? You bring the rents to a market level and you’re done. You pull that one lever, right? That that ship has kind of sailed in this business. Yes, those exist, but they’re few and far between. If you wanna scalable business, you need to be more than a one trick pony that could just pull one lever. You need to be able to bring homes in and fill vacant sites. You need to be able to add more storage units. You need to have the ability to cut costs where you need to. Submetering utilities as an example. We’ve got all those capabilities, all that functionality under one roof. So that’s really how our investment process has changed, is we’ve got more mechanisms, more levers to pull to create value than we did in the past. But the strategy, strategy itself is finding an undervalued asset put simply, you know, creating value, cash flow, and then you sell the investment at some point down the road for very attractive returns. Strategy is the same. It’s just we have more means to create better returns for our investors.

Charles:
Yeah, that makes perfect sense because I’ll get these emails from, you know, general partners trying to pitch their deals and, you know, syndicators and you know, you’ll, you’ll see the same business plan in a lot of ’em in all different asset classes, you know what I mean, throughout commercial real estate. And so it’s very interesting that you’ve added on additional like you said, levers to pull for specific deals in order to really, you know, push that, that value. And you know, really the NOI and everything for the properties.

Matthew:
Absolutely.

Charles:
So one significant benefit when I see mobile home communities is really the lack of new supply. I mean, it’s not really something that people want in their backyard, it’s, you really have like a mode around that business. One thing though, that’s different with self storage though I was reading that in 2023, you know, construction for self storage was like $6.9 billion or something, an all time high, which is like five or 600 new complexes. So how has like this new supply for self storage affected the industry and I mean your different funds and investments,

Matthew:
You know, it is, I’m gonna say it’s market specific, Charles. You’re absolutely, absolutely right with your comment on the manufactured housing side, we call it nimby, not My Backyard. They’re really not allowing any new mobile home communities to be built. So you’ve got this tremendous advantage as being, from being a park owner. You’ve got very limited or shrinking supply and exploding demand. So it’s fantastic dynamic on the storage side you’re also right in the in look at, you’re looking at it broadly, right? So you’ve got all these new facilities being built. With that being said, we’re really focusing on secondary and tertiary markets. A lot of those facilities aren’t being built by mom and pops. They’re being built by REITs, institutional capital and, and private equity backed developers. That capital wants to see new facilities built in your prime markets, your New York City, your Los Angeles, your Dallas, you’re might, you’re down in south Florida.

Matthew:
I’m sure you’d see these things popping up left and right down on my end. So that’s kind of where that capital wants to be. And we’re in some of these smaller obscure markets. I could give you the names of the cities like Missoula, Montana, as an example. We’re in some small towns in Michigan, in Wisconsin and Indiana outside of Indianapolis, where you’re just not seeing a lot of that new supply coming in. So those, those dynamics of limited supply and growing demand that you’re getting on the manufactured housing side, you’re still getting that on the storage if you’re invested in the right markets. And for us, those are secondary and tertiary markets.

Charles:
Yeah, that makes perfect sense. With the institutional money pushing it. Yeah. They’re not gonna be going into those markets. I never really thought of it like that. They’re gonna be pushing for your, your more prime markets. I imagine it’s easier for them to justify putting, putting up new complexes.

Matthew:
That’s that’s absolutely correct.

Charles:
So over the years, I mean, how has your relationship towards money changed from starting as a broker, coming from New York to to southern California to where you are now with I think your three funds in, or four funds in?

Matthew:
Well, it’s, it’s, I guess from an investor standpoint is what, how you’re asking how it’s changed?

Charles:
Yeah, just it could be personally or it could be professionally. Okay.

Matthew:
I mean, look at, at this stage, I, I love what I do, and if I didn’t, I’d probably go off and do something else, you know, whether that’s sitting on the beach or playing golf or, or doing some, but I find more joy and thrill in being with you here today as an example, or finding a great opportunity and creating value or inspiring a team. I, I find that I could be a lot more productive member of society doing those things versus some of the other things I mentioned before. But the, but the way that relationship with money has changed is I’m really looking to compound that wealth to do this at a larger scale and have a larger impact in society to give back more. So the way I’m thinking about investments today is how do I compound this? Let me find a great investment vehicle, IE crystal view, let me go out there and execute, build a great team around myself, and then how do I continually reinvest, reinvest and kind of get this thing on automatic pilot.

Matthew:
So my gains and my wealth is compounding over time, and that’s, my investors gets a coattail ride on that philosophy and that way of thinking, because that’s the same exact vehicle that we’re providing to them. So I think, you know, rewind back to 2004, when I got started, I didn’t even understand what the definition of compounding returns was. I was just trying to make enough money to eat, to buy a pair of sneakers and just basic living expenses at that point. So then you become independently wealthy and you really have to find where your passion lies. And for me, it lies in doing what I’m doing. I’m very lucky in that. But really the name of the game is compounding returns and compounding wealth and, and leaving a legacy behind.

Charles:
Yeah. How you explain your deals is different from how most indicators end. I like it where they’re riding alongside you or they’re joining you in the investment. It’s not really like you’re offering them something. It’s really, Hey, I’m doing this. Do you want to join in with me? And I think that mindset is much more comforting for a passive investor where, hey, someone’s done it so many times, I’m joining ’em, they’re allowing me into this opportunity. It’s a whole different kind of I I wouldn’t say sales process, but like a whole different kind of presentation of how you’re bringing them deals.

Matthew:
Yeah. You know, it’s a different relationship. You know, typically a sponsor such as myself, which is somebody who’s out there raising capital from the public whether it’s retail investors or institutional capital, a lot of them are thinking about it as I’m a feed generator. So they’re there only there, there are thought processes. How do I bring in capital to generate fees? And perhaps the decisions they make aren’t in direct alignment of interest with their investors. The way that I’m looking at it is we’re partners and this is a partnership, and I’ve got a big chunk of my own capital, my own invested alongside you. Yes. I still earn fees as well. You know, you’ve gotta compensate talent, you’ve gotta pay the light bill, you need office space, you need to have fees in place. But the most important thing is the alignment of interest. We eat our own cooking, as we like to say, and that creates that bond that creates that partnership. You know, writing a check separates conviction from conversation. So if anybody is thinking of investing in a sponsor, I think the first logical question to ask is, how much of your own money do you have investing? Yeah,

Charles:
No, that’s a very important question. And yeah, it’s, there’s a lot of people out there that don’t put money or that much money into their deals, and it doesn’t show that really solid alignment of interest.

Matthew:
Agreed.

Charles:
What are common mistakes that you’d see real estate investors make over the years, whether it’s in your asset classes that you focus on, or maybe real estate in general?

Matthew:
I mean, I see a first off. I mean, truth be told, I’ve made my share of mistakes. Let’s just be clear on that. I see a lot of my peers and competitors making mistakes and we’re constantly learning from our mistakes. I think the biggest mistake, I can’t really speak for them, I I know recently, which is topical, that the biggest mistake, and this is generally speaking investors made, was overly optimistic underwriting assumptions and taking deals down with floating rate debt. So when you couple those two together where you didn’t hit your performer and your projections and your debt balloons from 3% to where you underwrote it to six or 7% today, you’ve got a major problem. So I think that was the, the largest problem that was made by real estate investors over the past 24 to 36 months. Fortunately we didn’t make those mistakes.

Matthew:
All of our debt is fixed. We were very conservative. We’ve got a diligence team, and we’re very conservative in our underwriting. The largest mistake I made was with people, Charles you know, selecting the wrong people on the management team for a certain job. And then once I’ve identified that they’re not the right person, maybe it is ’cause you know, your heart’s too big or you just didn’t fire that person and, and that like made a bad problem worse, it just proliferated it. So I, I think any advice I could give to somebody who’s wants to scale a business and really create a dynamic team, find the best talent you can, put them in the spots where they’re gonna shine, and if it’s not working out, be quick to cut the cord. And because it’s a disservice to them, it’s a disservice to you, to the company and to your investors to leave that person in a position where they don’t belong.

Charles:
Oh, that’s a lot of great information there. So Matthew, thank you so much for coming on today. How can our listeners learn more about you and and your business?

Matthew:
Yeah, no, it’s, it’s great being here. I enjoyed it. If anybody wants to learn more about what we’re doing you could reach out to us at invest at crystal capital com or you could visit our website at www crystal capital

Charles:
Com. Thank you so much for coming on today, Matthew, and looking forward to connecting with you here in the near future. Likewise.

Matthew:
Thanks so much, Charles.

Charles:
Bye-Bye.

Links and Contact Information Mentioned In The Episode:

About Matthew Ricciardella

Matthew Ricciardella is a self-made entrepreneur, business executive, investor, and philanthropist. Matthew is the proud Founder and Principal Manager of Crystal View Capital. With over 20 years of experience in the real estate industry, Mr. Ricciardella is responsible for the management and oversight of all Crystal View Capital Fund aspects, including investment strategy, fundraising, asset management, and operations. He currently manages over $400 Million in real estate assets. Matthew inspires confidence and helps others achieve their full potential with his strong leadership expertise and alignment of interest in all Funds. With a personal investment of $10M+ in Crystal View Capital Fund I, II and III, Matthew has created a very strong personal bond with his stakeholders. Under Mr. Ricciardella’s leadership, Fund I’s investors have realized an average internal rate of return of 47% since its inception. Matthew has earned a reputation for dealing fairly, honestly, and with integrity with his stakeholders and sellers, which he believes is his most valuable asset. In Mr. Ricciardella’s free time, He loves spending time with his two sons and loving wife, Jessica, a company co-founder.

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