Blake Potolicchio- Profitable Outdoor Storage Investing (#126)

Bio

Blake Potolicchio, Co-Chief Investment Officer

More than a dozen years of experience in real estate acquisitions, dispositions, financing, asset management, and leasing. Prior to Open Industrial Blake spent 15 years spearheading a local private equity real estate fund’s strategic direction focused on acquisitions, entitlement, leasing and asset management.

Show Notes

• Introduction and Welcome (00:04:30)
  • Blake is welcomed to the show and expresses gratitude for the invitation.
• Blake’s Role and Responsibilities (00:04:40)
  • Blake describes his role as co-chief investment officer at Open Industrial.
• Investment Strategy Overview (00:04:50)
  • Discussion on acquiring heavy industrial zoned land for outdoor storage and its significance.
• Average Deal Size (00:05:15)
  • Blake shares insights on the average deal size and the strategy of high volume, small check sizes.
• Impact of COVID-19 (00:05:50)
  • The importance of their tenants during COVID-19 and the supply chain disruptions experienced.
• Challenges in Finding Suitable Sites (00:06:15)
  • Blake discusses the difficulties in finding sites that meet zoning and user requirements.
• Motivation Behind Founding Open Industrial (00:06:45)
  • Personal motivations and the market conditions that led to the establishment of Open Industrial.
• Identifying Market Opportunities (00:07:30)
  • Blake explains how zoning and limited availability create market opportunities for outdoor storage.
• Economic Viability and Investment Perspective (00:08:15)
  • Discussion on the economic aspects and long-term viability of their investment strategy.
• Acquisition Strategy and Market Focus (00:10:30)
  • Blake outlines the geographic focus and strategy of the acquisitions team at Open Industrial.
• Background and Education (00:11:15)
  • Blake shares his upbringing, education, and the importance of learning in his early years.
• Family Background (00:12:00)
  • Details about Blake’s family, including his mother’s real estate career and father’s medical profession.
• College Experience (00:12:15)
  • Blake discusses his college experience at the College of the Holy Cross and his athletic involvement.
• Career Aspirations Post-College (00:14:00)
  • Blake reflects on his uncertainty about career paths after college and his initial interest in medicine.
• Internship Experience (00:15:30)
  • Blake describes his internship at JLL and the various aspects of real estate he explored.
• Interest in Real Estate (00:16:15)
  • Discussion on what sparked Blake’s interest in the real estate industry.
• Early Career at Rock Creek Property Group (00:17:45)
  • Blake explains his entry into Rock Creek Property Group and his initial roles.
• Learning from Tenant Representation (00:18:00)
  • Insights on the importance of understanding tenant needs from his experience in tenant representation.
• Market Analysis and Reporting (00:20:00)
  • Blake discusses his experience with market data analysis and reporting during his early career.
• Starting as a Deal Analyst (00:20:30)
  • Blake explains his transition to sourcing deals and the focus on value during the GFC.
• Challenges in Deal-Making (00:22:00)
  • Blake reflects on the complexities and unique challenges of real estate deals he encountered.
• Embassy Deals and Unique Experiences (00:22:30)
  • Discussion on the unique nature of embassy deals and the intricacies involved.
• Length of Tenure at Rock Creek (00:24:45)
  • Blake summarizes his 13 years at Rock Creek and the evolution of the firm during that time.
• Opportunistic Deals Strategy (00:25:30)
  • Discussion on starting with opportunistic middle market deals, avoiding larger firms.
• Diverse Product Types (00:26:00)
  • Insights on the benefits of investing in multiple product types for broader perspectives.
• Geographical Focus (00:26:15)
  • Blake explains the importance of focusing on the Washington DC metro area for investments.
• Portfolio Growth at Rock Creek (00:27:00)
  • Overview of the portfolio size and diversity of deals during Blake’s tenure at Rock Creek.
• Fund Management Experience (00:27:30)
  • Blake reflects on his involvement in fund management and the challenges of fundraising.
• Investor Relations Importance (00:28:00)
  • The necessity of strong investor relations for business success in real estate.
• Family Office vs. Limited Partnerships (00:28:30)
  • Comparison of family office structures to limited partnerships in real estate investments.
• Initial Strategy and Fund Formation (00:29:30)
  • Blake discusses the initial strategy and the decision to create a fund for efficiency.
• Education on Financing (00:30:30)
  • Ongoing education efforts regarding financing structures for their investment strategy.
• Lease Duration and Market Dynamics (00:32:00)
  • Impact of market conditions on lease terms and the need for longer leases.
• Data Transparency in Outdoor Storage (00:34:30)
  • Importance of accurate data for institutionalizing the outdoor storage market.
• Proprietary Software Development (00:34:50)
  • Introduction of a proprietary software tool to aggregate data for acquisitions.
• Understanding Tenant Costs (00:36:45)
  • Blake explains reverse engineering tenant costs to determine feasible rent structures.
• Creating Value for Tenants (00:39:30)
  • Strategies for providing value to tenants and minimizing business interruptions.
• Market Consolidation Trends (00:41:15)
  • Observation of tenant growth and consolidation trends in the outdoor storage sector.
• Integration of Technology in Operations (00:42:23)
  • Discussion on how technology enhances operations and decision-making processes at Open Industrial.
• Company Structure and Growth (00:44:45)
  • Blake discusses the team composition at Open Industrial and the focus on acquisitions.
• Office Locations and Expansion (00:46:30)
  • The conversation shifts to Open Industrial’s office locations and plans for expansion.
• Market Analysis for Outdoor Industrial (00:47:30)
  • Blake explains why Las Vegas is targeted over other major cities based on market analysis.
• Displacement Characteristics in Northern Virginia (00:48:30)
  • Discussion on the impact of data centers displacing tenants in Northern Virginia’s outdoor industrial market.
• Opportunities with Data Centers (00:50:15)
  • Blake explores potential partnerships with data center businesses for outdoor storage needs.
• Challenges in Northern Virginia (00:51:00)
  • The conversation addresses rising land costs due to competition from data center developers.
• Interim Uses for Sites (00:51:30)
  • Blake suggests interim uses for land to address power access issues and site management.
• Peripheral Land Value in Malls (00:52:00)
  • Discussion on the profitability of peripheral land versus main retail spaces in regional malls.
• Interaction with Gross Industrial Market (00:53:45)
  • Blake talks about the significance of ports in the outdoor storage market.
• Impact of Container Business (00:54:15)
  • The discussion highlights how containerization has transformed logistics and storage needs.
• Macroeconomic Factors Affecting Demand (00:54:45)
  • Blake explains how tariffs and port developments influence the industrial real estate market.
• Lease Leaseback Business Concept (0