Happy Friday. This is The Shake 🤝 : the free weekly newsletter that’s bringing the heat as we inch closer to summer 🔥 

Here’s what we're serving up this week:

• IOS Is Cooking 🔥 

• Burning Man Says Owning > Renting

• Weekly Giveaway 🎰 

MARKET RADAR

IOS IS COOKING 🔥 

One alternative asset has been on a tear for the past two years as it surpasses a total market value of $200+ billion (and no, it doesn’t have anything to do with your iPhone).

Historically an “ugly duckling” of CRE, industrial outdoor storage (IOS) lots are typically used to support a wide range of businesses ranging from logistics, equipment rentals, & building materials.

 There are 3 main components that make a site perfect for this use:

1. Zoning - each municipality is different but 99% of the time it will be a form of industrial

2. Building coverage ratio - ideally 20-25% max building coverage

3. Infill Location - strategically close to ports, highways, or airports

Sound simple? Well, compared to other CRE asset classes, it kind of is.

So what makes it so attractive? It’s definitely not the looks. 

The fact that it’s been flying under the institutional radar for the past few years has created opportunities for new operators like Zenith IOS, Alterra Property Group, and Iconic Equities to build deal flow and demonstrate success as first movers.

All of these shops are now backed by billions of dollars of institutional capital that are looking to deploy ASAP.

Since the market isn’t as mature, many traditional mom-and-pop owners that thought their RV storage lot was an OK business are now getting a BAG 💰️ 

Tenant demand has sparked since COVID and overall parking supply around infill locations is extremely low. On the downside, it’s hard to price out from an investment perspective due to so little intel being available online.

But still, strong fundamentals mixed with the current overall investment environment are really the main drivers of capital flooding into this market.

You’re probably wondering what rents are like. Well, similar to industrial rents as a whole, IOS rents have been on the rise. It also helps that IOS supply is decreasing with every new development or rezoning of industrial infill land.

In Denver, folks have seen rents go from $5000/acre to $6000/acre in just a few years. Sites tend to vary in size from a minimum of 4 acres all the way to 25+ acres. With leases ranging from 5-7 years and triple nets in place, operational optimization is quickly feasible with little to no headaches.

In hindsight, this strategy truly is a haven for mass capital allocation. Steady returns, low operational costs, and a decreasing supply should make this attractive to any big PE fund.

For now, it’s an asset class that requires deep pockets to get in the game. It will be interesting to see how it shakes out 🤝 over the next several years.

Burning Man Says Owning > Renting

What is Burning Man? Admittingly we’re not music festival guys and we’re ready for the backlash we’re about to get from all of the speedo-wearing guys who are going to reply to this email.

For those of you who don’t know, Burning Man, according to the Holy Bible of Accurate Internet Information (Wikipedia) is “an event focused on community, art, self-expression, and self-reliance held annually in the western United States.”

Well, guess what, not only is it an event where people go “Bs to the W”, but it’s also a crazy real estate play.

Since 1986, every year late in the Summer almost 80,000 people come together, dress up in some combination of comic-con / olympic swimmer / desert chic to do drugs listen to music, and vibe out.

You might be thinking “Wow, that’s a lot of people — what kind of venue fits an event like this?”

Burning Man takes place at the Fly Ranch, a 3,800-acre parcel of land in the middle of the Black Rock Desert in Nevada which is +/- 8 hours from Vegas (before you even start thinking about planning the craziest Bachelor Party of your life for your buddy Tim who you feel like needs to “live a little”).

After over 20 years, Burning Man execs felt as though it was time to pull the trigger on purchasing the land that their event has called home for decades.

From their own blog: “Burning Man’s connection to Fly Ranch goes back nearly 20 years, and the organization has long imagined purchasing it. If you were at the event in 1997 you may remember soaking in the waters of Fly Geyser, since Black Rock City was built on the Fly Ranch property bordering Hualapai Flat that year.”

If it sounds like a community full of passion, that’s because it is.

Purchased for $6.5 million, some of the largest donors include Joe Gebbia (Airbnb), Bill Linton (Promega), Rob and Kristin Goldman (Facebook), billionaire Guy Laliberté (Cirque du Soleil), Farhad Mohit (Flipagram, now TikTok), Nushin Sabet (photographer), Alex Moradi (ICO), Graham Schneider (Real Estate investor), Jonathan Teo (Twitter, Instagram, Facebook), per Forbes.

$6.5 milly sounds like a pretty steep price, but it’s important to remember that Burning Man was spending almost $4 million per year for the largest variance in the state of Nevada to put the show on before.

With revenue averaging over $40 million, it looks like BM made the right move here.

Real Estate Agents now have a new example for their lease vs buy analysis - “Look, young people, even Burning Man knows the value in owning real estate,” says the realtor trying to relate to Gen Z-ers…

WEEKLY GIVEAWAY 🎰 

Together With Closing Packs

To end each edition, we will be sending one lucky subscriber a special item!

This week’s item is a LARQ Bottle

How do you win?

We are going to post a closed transaction with some high-level details and whoever can guess the right sale price, wins.

If nobody gets it right, the closest guess wins. If two people get it right (screw us right?!) we will hook you both up!

Let’s kick it off 👇️ 

This Florida IOS Site is 13K+ sf with over 2 acres of outdoor storage.

FIN 🤝 If you enjoyed this week's edition, don’t be selfish — share with a friend!

^{DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.}