We all know how AI is changing the self-storage landscape. Others smarter than me have talked about using chatbots for storage answering services, AI in revenue management and tenant data analysis (determining which tenants can pay what rate based on behavior), and many of the tools savvy operators in the industry use today.
In reality, I am truly in my infancy stage of understanding the full implications of AI and utilizing it as a tool and advisor in my self-storage business. However, how my team and I are moving through the due diligence period on a project we have under contract has been eye-opening in regard to using AI.
Let me share with you some of the ways it has changed what and how I move through the due diligence process and some of the ways we are using it.
I currently have two subscriptions for AI, Claude, owned and developed by Anthropic, and ChatGPT, developed by OpenAI (which is preparing to go public, having filed an S-1 registration with the SEC, with Microsoft as a major investor).
Currently, I like both. In simple terms, ChatGPT creates better images and I have used it longer, so it knows my personality better (what little I may have). Claude, on the other hand, is very powerful and will interact with most of my programs on my computer — creating spreadsheets, Word docs, PowerPoint decks, etc. Unbelievable what it can do when loaded on your computer.
I prefer the subscriptions because (not 100% sure but have been reassured multiple times) what I ask and the output I get are not out there on the internet as public information.
Also, some partners and members of the Inner Circle have created bots and workflows using AI. Many of the subscriptions to software and operating systems we also use in our day-to-day business have AI embedded in them. Obviously, I (we) didn’t create that and we don’t manage it. We just utilize it.
That is the extent of my AI access today. But it has totally altered how we move through taking self-storage projects to closing. Let me share how.
Initial Process:
Initially, we uploaded the executed contract into Claude and received a detailed Due Diligence Critical Date Checklist for the due diligence period with all the items and dates based on the execution date of the contract. It was almost perfect with us only having to change a few line-item names.
However, our contract called out for the actual due diligence period to begin when we received all the due diligence items from the sellers. Once we received them, I uploaded that date and Claude updated the checklist where applicable, adjusting the “by when” dates to reflect the actual due diligence start date.
Total time for both lists, created in Word and/or Excel, was under 2.5 minutes. In the past, it would have taken me or someone well over an hour to create it, double-check it, etc. And the AI version was probably more accurate.
Proformas:
Next, I took our proformas (I and another partner each create one) and uploaded both to Claude and received a combined proforma (in my format, which is simpler for my simple mind) that I can alter and adjust as we move through the due diligence period.
I periodically upload my current version and get feedback about which assumptions may need adjusting as we get more hard numbers.
I can also upload the feasibility reports and have the AI make or suggest recommended changes to the proforma based on that data. Not every suggestion I will take, but most are very good.
This has saved me hours and hours of work and prevented a lot of mistakes — because I am not the best with spreadsheets, especially someone else’s.
Budgets
So far, we have created a reserve budget for the projects based on inspection reports we have had completed.
In our last closing, we purchased an industrial building and had a detailed building report done. We uploaded that report and it gave us a maintenance schedule and reserve budget based on future costs of items that may need replacing, adjusted for inflation, and gave us a reserve amount to collect monthly along with a regular maintenance schedule and potential capital replacement dates along with anticipated costs.
Vendor Contracts
I have uploaded vendor contracts the current seller has, and Claude tells us the pros and cons, how to exit if we want to, and whether the same or better service could be provided by different vendors at lower cost.
Obviously, we will check this out to see if a change will indeed help us, but I have a feeling it will.
It also tells us the best ways to renegotiate the contracts. If we are so inclined.
Dials and Levers on Operational Changes
As we get toward removing our contingencies, we are currently uploading end-of-the-month operational management summary reports from the current owner’s software. It is amazing the analysis we get.
Based on current uploads, it has also designed a very comprehensive first 90-day operational plan and checklist. I had to modify a few things as well as add a few line items. However, I put perhaps one half hour into what used to take me days to design and create.
Our manager will have a week-by-week plan, checklist and benchmarks to hit as we tighten up the management. Much better than anything I ever created on my own.
Post Closing
Each month, we will upload our monthly management summary report and Claude will cross-reference our progress with the plan and tell us where we are ahead and where we are behind in the execution of the first 90-day strategy.
The report will also help our manager know where to focus their attention.
We will also upload our financials monthly and get feedback on where we can improve. It is startling, some of the suggestions that have already made a difference on existing deals I am involved with.
Financial and Operational Reporting to Investors and Partners
We will use Claude to create the reports and updates that we send to our partners and investors quarterly.
Typically, I upload the financial reports, the management summaries in the form of bullet-point operational updates, and Claude does the rest. We edit, change a few things (but not many), and in just minutes there will be the quarterly reports our partners and investors access. Hundreds of man-hours removed over the life of the investment.
Conclusion
I know there are others who are vastly better at using AI than I am, but it has totally changed how I approach due diligence today.
As our new brands unfold, I am really looking forward to better results for these projects for our partners, and more downtime with my bride, all possible through the intelligent use of AI.
And I am just in the infancy stage of utilizing it.
Perhaps my golf handicap index will lower as well.
