Retail to Riches: How Clint Harris Converts Dead Big Box Stores Into Self-Storage Assets

Clint Harris (00:00)
So we can buy that building. We’re buying the buildings for sometimes twenty to twenty-five dollars a square foot. We’re putting forty to forty-five dollars a square foot into it. On the day we get our certificate of occupancy, we will be all in on the cost of the building, the land, and the construction for between sixty-five and seventy dollars a square foot, versus a hundred and thirty dollars a square to build a facility plus the cost of the land. And it’s going to take two and a half to three years. So we have a competitive advantage by getting the shell of the building for a fraction of the replacement cost and then converting it.

Scott Bursey (02:06)
Welcome back to the Real Estate Pros Podcast, powered by Investor Fuel. I’m your host, Scott Bursey. And pros, today we’re tapping into some serious high-octane fuel. Joining us is Clint Harris from Nomad Capital. This man is a master at taking distressed retail eyesores and converting them into gold mine self-storage assets. We’re talking over $20 million raised and a unique edge in investor relations that you’re going to want to get the blueprint for. This one’s gonna be a master class. Clint, welcome to the show.

Clint Harris (02:39)
Scott, I am excited to be here. Thank you for your time. I’ve enjoyed connecting with you already. I know this is gonna be a great chance for us to connect and have a good conversation.

Scott Bursey (02:46)
Absolutely. And Clint, to help our pros get up to speed, please give us the front row seat, if you will, on how your career ignited and where you’re pouring your fuel now.

Clint Harris (02:55)
I will skip through a lot of the mistakes I’ve made over the years, but my journey is that I’m 43 years old, married with two little boys. I live in Carolina Beach, North Carolina. I started my career out of college as a medical sales rep in cardiology. I implanted pacemakers and defibrillators. I did that for 16 years. For 14 of the years that I was doing that, my wife and I were investing in single-family rentals, and then we did some flips, and then small multifamily properties. I took over a territory and moved from South Carolina to Wilmington, North Carolina in 2017, which is a beach town.

That opened up the opportunity for us to start looking into short-term rentals and Airbnb in a vacation spot. We ended up with three quadplexes and a duplex that we converted into Airbnbs and did very well, replacing my income in medical sales. And that’s when I realized I was doing it wrong. I was just after that financial freedom and I wasn’t focused on the time and location independence. And I ended up just creating a job for myself. So then we built a property management company. It took about two years to do that with partners that manage my listings. I’ve sold one of the quads; I’m down to 10 short-term rental listings, and then it manages about another 75.

Then a few years ago for diversification—and frankly, from being burned out on tenants—I started looking for another better avenue that had more of a focus on financial, time, and location independence all combined. And one of the places where I found that was in storage investing. The strategy that my partners and I used—and my partners had already done it in the past, and I connected and networked with them—was to buy old, vacant, big-box retail buildings that nobody else was looking for. We can get those buildings for pennies on the dollar and convert them into climate-controlled storage for about half the cost of building a facility from the ground up, and in about 10 to 12 months versus the two and a half to three years to build one.

So that was really the jumping-off point. I did that while I was working at the hospital, while I was owning and operating Airbnbs and a property management company. Started raising capital for that. We did a deal; it went very well. We did another one. We did a few more. Then I left medical sales in November of 2022. We’re doing commercial real estate full-time—some ground-up development and operational turnarounds, mostly conversions. I’ve raised a little over twenty million dollars and we’re around a hundred and forty to a hundred and fifty million dollars worth of assets at stabilization, with a couple more in the pipeline.

Scott Bursey (06:09)
Wow, talk about fascinating. That’s truly awesome. You know, Clint, what really caught my attention about you was the way you’ve been able to look at a shuttered retail box that everyone else writes off as a liability, and you see a high-performing climate-controlled storage gold mine. That’s not just a pivot, that’s a masterclass in asset class conversion.

Clint Harris (06:32)
So here’s the thing. Part of this jumped off the page at me when I had heard that my partners had already done this in 2016 and 2017 with some smaller warehouse conversions. But it’s basically what I was doing. I was buying nasty quadplexes on the small island community where we live that had bad tenants in place that hadn’t had a rent increase in 10 or 12 years. And over time, moving those people out, helping them find a better, safer place to live, renovating the property, and then staging it and operating it as an Airbnb. And when you convert that to short-term rentals in our market, it would 3.5 to 4X the gross potential rental income. And on a net operating income basis, the value of the property shoots up, right? And then you have opportunities for recapitalizing through refinancing. It’s basically the BRRRR strategy that people use on single-family homes; you’re just using it on small multifamily or commercial properties.

That strategy is the same thing that my partners and I are doing at Nomad Capital. We’re finding an asset class that had a use, it has outlived its use, and the condition reflects it. If you think about it, there used to be 2,000 Kmarts in the country—they’re all gone. Nobody wants a hundred thousand square feet of big-box retail space. Walmart and Amazon have really decimated that space. But there’s a reason why it was built where it was built. It probably has the visibility, the location, and the residential density in a one, three, five, and seven-mile radius. And it’s dirt cheap.

So we can buy that building. We’re buying the buildings for sometimes twenty to twenty-five dollars a square foot. We’re putting forty to forty-five dollars a square foot into it. On the day we get our certificate of occupancy, we will be all in on the cost of the building, the lot, and the construction for between sixty-five and seventy dollars a square foot, versus a hundred and thirty dollars a square to build a facility plus the cost of the land. And it’s going to take two and a half to three years. So we have a competitive advantage by getting the shell of the building for a fraction of the replacement cost and then converting it.

Our biggest advantage is actually velocity, but everybody thinks it’s the basis. The first Kmart building we bought for 1.5 million. If we wanted to build that 87,500 square foot shell, it would have cost us around six and a half million just for the construction, not including the land. And then that’s the key, right? That’s the basis. It’s storage for half price. And then it opens up very unique opportunities at stabilization. Sometimes we’re sitting around 45% to 50% LTV, which means we could do a cash-out refinance, pay out all the investors that way, and leave everybody in the deal so that their return is non-taxable. We all stay in, hold it, and it continues to cash flow into the future.

Sometimes we exit a deal early. We’ve gotten behind on several of our deals because the housing market effectively screeched to a halt at the end of 2022 when the interest rates shot up twenty-eight hundred percent, which is the highest and fastest increase in history. But because of that basis, we’re still protected. We have one project in Danville, Virginia; we bought it for 2.5 million, we put 3 million into it, and 37 months later, we were into it for 5.5. 37 months later, we sold it for 9.53 million. We beat our projected returns. We paid that out this past August. We paid out an 18% and a 20% IRR. We’d been advertising a 17% and a 19%. Not a lot of groups are beating projected returns in the last three years.

The reason we did that is not because we sold it better than anybody else, and not because we managed it better than anybody else. It’s because our business basis was rock solid because we bought an asset that nobody else wanted. Everybody else looked at that as a liability, and as big-box retail, it was. But when you convert that to a different asset class, you change the formula by which that asset is valued. So then we crank up the net operating income, which drastically increases the value. Sometimes our strategy may be as simple as that. Sometimes it’s a little bit more complex.

Like, we’ve got a furniture store in Goldsboro, North Carolina. It’s a 40,000 square foot building, but it’s got tall ceilings. So we built a mezzanine and we split it into two floors. And now it’s 80,000 square feet and it’s yielding around 60,000 to 65,000 of net rentable square feet. And then we don’t need the giant parking lot anymore; we need like 15 spaces. So we can outparcel the parking lot. We can put a restaurant or a coffee shop tenant in there. We could sell the outparcel for a couple hundred thousand dollars, or we can put a 50-year land lease in place—which is what we just did in the last few weeks—to build a location for a restaurant or a coffee shop. And then that lot with that 50-year land lease on it, with a 3% escalator every year, is worth over a million dollars. And you could keep it, cash flow $65,000 a year, or you could turn around and you could sell the paper as well. And that’s all part of that investment; the investors benefit from that as well.

Then I’ve got a little over 800,000 square feet of rooftop space right now that we potentially could add solar to. We have parking lots that we can fence in and we could do boat and RV parking depending on where it is. Some towns will allow you to add non-climate-controlled drive-up units on the end. My point is that adaptive reuse is your opportunity to use your creativity to change the formula by which your asset is valued.

Scott Bursey (12:21)
You’re clearly pouring some serious fuel into the engine of your business. Now let’s go under the hood and talk some strategies. You’ve raised over twenty million. What’s the biggest hook that keeps investors coming back to Nomad Capital?

Clint Harris (12:36)
The biggest thing is just trust and honesty. Obviously, the low-hanging fruit is starting out with people that you know well, and that’s a two-way street. If you are ethical and doing things the right way, and you’re being honest and transparent, then the people that have known you for a long time are gonna be willing to invest in your business. And that’s what happened with my partners and I; we all brought our relationships to the table. I come from an industry that is traditionally filled with a lot of high-net-worth individuals, and most of our early investors are the physicians that I worked with for more than a decade. So that was a really good way to get started.

And that first hundred thousand is probably the hardest to raise. And then the first million is the hardest million. And then the first five is harder than the second five million, and the first 10 million is harder than the second 10 million. It becomes a flywheel. Part of the issue is that these are slow-developing projects. We are developers and these are development deals. So it’s going to take us a year to build it out. At the end of that year, it’s worth way more than when we started, but it’s empty. Now we’ve got to fill it up. So it takes some time to develop. But if you can push through that valley of those first few deals and you do that with the right investors that trust the process and are patient capital, then it starts to kick out and it becomes that flywheel and really picks up velocity.

Scott Bursey (13:54)
Those are some undeniable wins, and it’s clear you have a solid foundation. But even the highest-performing engines have a drag, Clint. To help our listeners get even more tactical, let’s look at the other side of the coin. You know, transitioning from medical sales to multifamily and now to large-scale storage, what was the biggest operational hurdle you had to learn?

Clint Harris (14:17)
Wow, what a great question. Through the process of building out, we had our Airbnb properties that my wife and I had built on the side, and that was very laborious. So we had to build systems and processes and streamlining in place to help with that. I think the hardest part was actually building the property management company after that. And that was when I read a book by Dan Sullivan and Benjamin Hardy called *Who Not How*. And *Who Not How* made me realize, okay, I’m an okay operator—I can be a good operator when I really need to, but I don’t thrive at that. When I put people in place that were better than me and got out of their way, the company did significantly better, which is humbling, but it’s the truth.

And that’s when I really understood the value of the right person in the right seat, and the value of structure and organization. It’s amazing when you start doing million or 10 million or 100 million-dollar deals or portfolios, it’s the same fundamental lessons that we have all learned when we are flipping a single-family house or a small multifamily property or renovating a bathroom at your own house. The process and the lessons that you learn are all the same. It’s just your ability to extrapolate that and be more careful with more checks and balances once you’re using other people’s money and just adding a few more zeros, making sure that you’re de-risking things as much as possible. It was actually those hard lessons that I learned earlier on on the smaller projects, and then they just kind of all translate to bigger things.

Scott Bursey (16:33)
Now that we know where you’re tightening the bolts, let’s open up the throttle and track growth here. Where are the biggest green lights or untapped opportunities in the current market to scale your fuel?

Clint Harris (16:44)
Right now for us, we’ve spent the last two and a half years tripling the size of our construction department. So we are unlimited licensed, NASCLA certified GCs. So we’re certified in about 20 states. We’ve only ever built for us; all of our focus has been on finding the deals ourselves, raising the capital in-house, doing the construction at cost-plus at a very low number, and then doing in-house property and asset management under the brand name of City Storage. We are not trying to get rich on construction or acquisition fees or management. Our job is to land at the lowest basis that we can on our storage facilities so that it gives us multiple options on the refinance—whether a cash-out refinance and hold the properties, a partial liquidation sale, or bringing on a rollout partner. There’s a lot of different things that you can do depending on how much equity you have in the property. So that’s really the key for us is to stay streamlined, especially with those conversion projects.

But there is a lot of opportunity to build for other people as well. So we just now have launched out and we’ve got a few multi-million dollar construction projects for other developers. And then one thing that we’ve done is over the last few years, we have worked towards building relationships with those institutional-level buyers to find out exactly what they want. And as we’re doing ground-up Class A development, we’re building things to the perfect specs as to what they want for an exit. Then we’re giving people the option: we’re going to build this, we’re going to operate it, and you can buy it at certificate of occupancy, you can buy it during lease-up, or you could buy it at stabilization if you’d like to. And we are tracking the net present value of that opportunity; if they hit that number at any point along the way, they can take it, and we built it for exactly what they’re looking for. If not, we’re more than happy to keep it and continue to manage. We’re creating a mix of those conversion projects with the really low basis and the construction projects that take a little bit longer and cost a little bit more, but we have institutional-level buyers that are willing to buy them at a lower cap rate.

Scott Bursey (18:50)
You have your eyes on some massive growth opportunities. But in this game, we are always playing offense and defense at the same time. Clint, looking at the landscape, what do you see as the biggest external threat that could throw a wrench, if you will, in your game plan? And how are you preparing for it?

Clint Harris (19:08)
Well, you know, five years ago, I probably would have said interest rates, but that ship has sailed, right? So the interest rates shot up. Luckily for us, we’ve never used any variable-rate debt. We always use fixed-rate debt on these assets because the empty buildings typically appraise for a lot more than we’re paying for them and we can get great terms. So that creates some safety there. I think the biggest issue is competition, obviously. It’s a very fragmented market that is rapidly consolidating with a lot of larger players doing roll-ups on smaller facilities.

Our strategy on the conversion side creates a competitive moat that I really like. If we can find a 40,000 to 120,000 square foot big-box retail building—some of those are more industrial and in outlying areas, but specifically what we’re focused on is the old textile mill warehouse in the middle of a secondary or tertiary market in North or South Carolina, a furniture store, a boot factory, a carpet factory, a grocery store, a Kmart—anything like that that was big-box retail with great residential density. A lot of times if we find that space, what really matters for storage is about seven miles. That’s about as far as people are willing to travel. So you’re not driving 20 miles to the other side of town to find a unit that’s 15 bucks cheaper per month, right? It’s about proximity, and then it’s about speed.

So if we get the right location, we can convert it very quickly. Our basis is half of what anybody else’s basis is going to be. That means we haven’t had to, but if we have to play the pricing game, we can. And then the competitive moat is that if a competitor wants to find the five to seven acres or whatever they need to build their facility, it’s probably hard to do because we are likely in that interior core of that town where it’s hard to find that much space. And secondly, it’s going to take them two and a half to three years to build that facility, and we know that their basis is going to be higher than ours. So by the time they do that, we are likely on the way to stabilization, if not stabilized, and we’re at a significantly lower LTV than they are, which means we could recapitalize, pull capital out for our investors and ourselves, move on to the next one, and not always have to sell.

Scott Bursey (21:16)
That is some massive rocket fuel for our pros. Now let’s look forward a little bit. You know, let’s look eighteen months out. Where are you doubling down on your focus?

Clint Harris (21:27)
Six to eight deals a year. So hopefully by then, 1.5 times that number is the plan. We want a solid mix of building out facilities for other people, because one of the things that we’re finding is that as we’re having those conversations with those groups, a lot of times the capital that we’re looking for and the new deal flow that we’re looking for is with those groups already. So we’re building those relationships. We have grown from using our own money on early projects to a combination of our money and mostly limited partner money on the next eight to ten projects, and now getting to the point of having fractional family offices and sub-institutional money that is interested in being an individual investor in our deals that can cut a single check—which means that even if we give them a better split, it doesn’t take us as long to raise the capital and we’re not spending as much money on marketing to do that.

There are economic headwinds that make sense for going one route when the cost of capital has gotten a lot more expensive over the last few years because so many operators have really struggled, versus doing that with individual investors that also are patient capital and understand that storage and development are a long-term game. And when you shorten the timeline of how much it takes us to get projects lined up—like the next raise is about four million dollars, but if that gets solved very quickly, my job is to move on to the one after that and continue to scale and put those in place.

We’ve been cranking up the size of our construction department, cranking up the efficiency of our acquisitions team and AI filters that we’re building there to look through 50 to 70 properties a week to get down to one to three a month that we’re going to send a letter of intent on. And then fixing the capital bottleneck—instead of needing to raise capital from our private pool of 2,000 investors that we have in our ecosystem, we still have deals for those people, but there are some deals that work great for syndication. There are some deals that are better for an individual partner or as a joint venture, and so we look at each one accordingly. One may be a great fit for our limited partners, and we always want to make sure we have deals available for them. But being able to access deals that an individual or an institutional-level partner can write a check for immediately, that’s what picks up the velocity. And when we have economies of scale because our construction footprint has gotten a lot larger, that’s where it really starts to turn into a flywheel. And the momentum is generating its own deal flow, its own capital flow, and that’s our pathway forward towards half a billion and beyond.

Scott Bursey (23:58)
That covers the tactical playbook you’re running today. And honestly, that’s pure investor fuel. Now let’s step back and take a look here, if you would. If you had to raise your first 10 million today with zero track record, Clint, what is the one specific activity you would do every single day to build trust and get that first yes?

Clint Harris (24:22)
In retrospect, my podcast was the thing that had the biggest impact. Starting out, it was posting on social media, letting people know what we’re doing, underwriting the deals, understanding them intimately, and then looking for opportunities to connect on that. And I think social media was really good in that short space, just so people could be like, “Wait, what are you doing over here?”

Ultimately, I think a smart way to look at it is I have a podcast called Truly Passive Income, about 150 episodes. We’ve been doing it for a couple of years now. Let’s say I needed to raise $10 million. Let’s make up some easy numbers here, and these are not that far off: my average investment is close to $178,000 the last time I looked at the number. Let’s say the average investor puts in $100,000, even though it’s a $50,000 minimum. And let’s say if everybody that hears about our opportunity, 10% of people are interested, and then 10% of those people are actually going to turn into investors. That means of everyone that hears about what we are doing, 1% of those people are going to come in with an average investment of around $100,000. So if I need to raise $10 million, I need a hundred people that end up as investors. That means I need to get in front of 10,000 people to let them know about our message—and not just 10,000 random people, but 10,000 people that are potentially interested in real estate.

Am I gonna build my podcast to 10,000 listeners? No. But what I can do is start a base, create a place where I can be a subject-matter expert to walk through our deals and what we’re doing, and then look for ways to network with other podcasters, just like you. You’re looking for content for your audience, you’re trying to bring value to your listeners, and I’m trying to do the same. So I’ll go find people like you that have a wealth of knowledge and experience that I don’t have. I’ll bring you on and interview you, and sometimes that leads to a situation like this where I end up on somebody else’s podcast.

In that situation, especially from my background, I’ve done, I think, 63 or 64 podcast spots over the last year and a half, but most of them are not real estate. Most of them are cardiologists that are interested in alternative investments, or dentistry, or plastic surgery. My background, which is the hospital system and white-coat professionals, involves helping those people understand the different opportunities that are out there for alternative investments. Not a sales pitch, not to push you towards me, but like, you don’t just have to worry about paper assets; you can invest in storage, or ATMs, or multifamily, or car washes, or mobile home parks. And you don’t have to do it all. You have to have a combination of time, experience, and money, but it doesn’t mean that you have to have all of those things. If you have capital, you can put it to work with investor partners that can execute the deal, and you all can benefit in that together. And it’s something that people still are very much learning about because it hasn’t been available that long since the JOBS Act. And so that education level and approaching it that way is by far what has led to more market penetration and ultimately more investors from outside of our ecosystem. Those are the people that didn’t know us at first. And I think that’s probably your question of if you need to go raise $10 million and it’s not in your ecosystem, how are you going to do that? And the best way to do that is to do things right, ethically and transparently, and then find your ways to connect with those other communities. And podcasting is one way that I did that.

Scott Bursey (27:48)
That is a tactical blueprint for our pros right there, Clint. Thank you for that. And we can’t let you go just yet. You’ve given us so many great words of wisdom. But are there some final thoughts that you could leave with our pros today?

Clint Harris (28:04)
Sure. The first thing that comes to mind is I would repeat what one of my partners taught me years ago when we first got started: risk is a muscle. At the end of the day, whatever you do, if you’re taking on any level of investment, that’s going to take up a certain amount of your time, your energy, and your mental capacity. So start off small, learn your lessons. But the reality is after you’ve been doing it a little while, if you’re a little seasoned and if you’re gonna take a bite, you might as well take the biggest bite that you can. Whether you’re flipping a single-family house, a 12-unit small multifamily property, or a hundred-million-dollar portfolio, at the end of the day, a lot of times it’s the same amount of work and the same amount of stress. So if you’re gonna take a bite, you should at least be working towards taking the biggest bite that you can. And that can sound really scary until you understand that risk is a muscle.

And just like every other muscle, it gets stronger from you working it. And you work that muscle to the point where once you start seeing opportunities, it stops feeling like risk and it feels like calculated risk. There’s a big difference between risk and calculated risk. And risk is that muscle. If you’re not doing anything to work that muscle, that’s on you. But at the end of the year, you’re not gonna be able to pick up whatever size weight you think you want to be able to throw around.

You know, if you want to be 80 years old and pick up your grandchild from the floor to standing, that’s a 40-pound goblet squat. If you want to do that at 80, that means that at 70, you need to be able to do a 60-pound goblet squat, which means at 60, you need to be able to do an 80-pound goblet squat. And you can work backwards to where you need to be. So look ahead to get the velocity that you’re looking for in your family. What level of risk are you going to need to take on, and what implementation do you need now to build that risk muscle?

Scott Bursey (29:57)
Clint, this has been an absolute master class. And for those of our listeners that want to keep this conversation moving, stay in their lane, or collaborate with you on future deals, what is the best way for them to plug into your pipeline and reach you directly?

Clint Harris (30:11)
The easiest way is to go to our website, nomadcapital.us. You can email me directly at [email protected]. I’m happy to talk to anybody about Airbnb, multifamily, building a property management company, raising capital, or storage. That’s where all my focus is now these days, and that’s where we continue to focus. But at the end of the day, I believe in the power of connection. I believe in relationships, and I’m more than happy to connect.

Scott Bursey (30:36)
Clint, thank you for joining us today, my friend.

Clint Harris (30:38)
Pleasure. Thank you so much for having me. I appreciate it, and thanks for what you’re doing. It’s bringing a lot of value to a lot of people.

Scott Bursey (30:43)
And to our listeners, we appreciate you. If you got value from today’s episode, please subscribe. We’ll be fueling your tanks with a lineup of elite guests just like Clint Harris, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.