We recently caught up with Clifton Minsley, Co-Founder and Principal at 10 Federal, to chat about what keeps his firm attractive to LPs. 10 Federal is a 2024 Juniper Square Top Fundraiser, and made our top fundraisers list for the second straight year.
Q: You successfully raised your fourth value-add self-storage offering in 2024. What gave you and your team the confidence to fundraise?
A: First and foremost, we're in a good business—self-storage. Storage is a resilient business that tends to perform in both bull and bear markets. Beyond that, I would attribute our success to our strong track record, and I think our LP base appreciates that we are constantly innovating. However, our LPs know that while we continue to find ways to improve, we always operate conservatively aiming to limit downside risk. Specifically, we focus on structuring debt appropriately with low leverage which has served us very well over the recent past. This is one of the most important risk mitigation factors for real estate operators.
We're willing to innovate, to be curious, and take some risks but we always seek to limit the downside by structuring our real estate deals in a prudent manner.
Q: You also raised a total of $40 million in late Q3 for your first opportunistic fund and were oversubscribed. What makes the strategy for this fund distinctive from the previous fundraise, and what sparked your team to pursue this strategy?
A: With sustained high interest rates and restricted access to capital, we recognized there were interesting development opportunities where land had been entitled and perhaps site planned or even permitted by smaller developers, but the ownership or the sponsorship was unable to make the project financially viable because they had inadequate access to capital and lending resources.
We were able to find these “shovel-ready” sites and acquire the project site for maybe the par value of the land only. We essentially get all the entitlements and all the design for free if we can simply help the landowner liquidate the land to pay off their land loan and return capital to fatigued LPs. That eliminates the front-end risk for us—the entitlement and development risk in a normal development project. We can start construction much quicker and get a bit more of an outsized return by taking a bit less risk than you would normally see in a development project.
Q: You have a high reinvestment rate. What keeps LPs coming back to 10 Federal?
A: We do what we say. It's communicating clearly to your LPs and continuing to follow through with investing in technology and innovation to drive efficiencies and returns. We see a lot of opportunities for further consolidation in the marketplace and creating value through innovation.
Q: When it comes to innovation, what are the key investments you’re making at 10 Federal?
A: It’s a multi-pronged approach. In our acquisition model, when we identify properties and decide to execute on an acquisition, we try to make those buying decisions as objective as possible by relying very heavily on data, which has been a tremendous investment. Similarly, for our internal procedures, we are always looking for innovative ways to become more efficient through the use of technology. We are leaning heavily in trying to understand how artificial intelligence can add efficiencies to our business.
Not long ago, our LP pitch advertised that we had 0.8 to 0.9 management employees per self-storage location; that number is now in the 0.5 to 0.6 range. Recently, the majority of those efficiencies were captured by investing in an AI chatbot to help tackle the reoccurring questions that flow into our call center. We plan to take that a step further this year by introducing a verbalized AI agent to tackle some of the remaining topics, allowing us to consolidate even further.
We’re relentless in pursuing a seamless and frictionless experience for our tenants through technology. We’re leaning into and listening to how our customers want to interact with our product, whether it is at home on a laptop or on their phone.
Q: Self-storage is a hot asset type, and we’ve seen LPs appear to be favoring larger fund managers. How have you differentiated 10 Federal in an increasingly crowded field?
A: Our model is unique. We target the major Metropolitan Statistical Areas of the southeastern United States and Texas, but we really like the peripheral markets that encircle those MSAs. The assets that you find out there tend to skew smaller and the markets are typically not oversaturated.
Our automated model elevates the customer experience at these smaller stores. Previously, the operator would struggle to provide full onsite management because they just don't have the gross revenues to support an onsite manager or deliver a sophisticated experience to their customers. Our lightweight, automated model allows us to tap these secondary and tertiary markets where there's a lot of pent-up yield.
We aim to capture that yield and consolidate an arbitrage by selling the assets to the institutions that want to enter the space but cannot do so at the same granular level that we can. I think our existing LPs understand that, and I think our new LP relationships understand what we are focused on and they desire those specialty niche business plans in real estate asset classes like self-storage. That sets us apart.
Q: You’re proof that fund managers who are very focused on a particular asset class or geographies can be successful. Do you consider 10 Federal a “sharpshooter’?
A: I like the sharpshooter analogy. I feel like we're hunting prey that's been elusive to others and through automating the onsite management, it feels as if we’ve finally discovered an efficient method for hunting that type of prey. So, I do think we're kind of a “sharpshooter” and since there’s so much untapped opportunity, I think we can be happy hunters for a long time.
Q: Do you have any advice to give others who are going to fundraise in 2025?
A: It's critical to be honest and communicate clearly. And I think it's important to be authentic. Do your research, know your business, don’t be afraid to innovate, and then sell what you believe.
10 Federal was featured as one of Juniper Square's 2024 Top Fundraisers, based on our analysis of the capital raised by our clients using digital subscriptions. Digital subscriptions is one of Juniper Square's digital fundraising tools, helping GPs deliver a better investor experience and raise more capital.