Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2019 extra space storage incorporated earnings conference call.
This time, all participants' lines turned to listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone. Please be advised of today's conference is being recorded.
If you acquire any further assistance please press star zero.
I'd now like to hand, the conference over to your Speaker Mr., Jeff Norman Please begin sir.
Thank you Norma.
Welcome to extra space storage is third quarter 2019 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website.
Please remember that management's prepared remarks and answers your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act.
Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties.
So stayed with the company's business.
These forward looking statements are qualified by the cautionary statements contained in the company's latest filings with the FCC.
Which we encourage our listeners to review.
Forward looking statements represent management's estimates as of today October Thirtyth 2019.
Company assumes no obligation to revise or update any forward looking statements because of changing market conditions or other circumstances. After the date of this conference call I.
I would now like turn the call over to Joe Margolis, Chief Executive Officer.
Thanks, Jeff Hello, everyone.
Thank you for joining us for our third quarter call and for your interest in extra space storage, we completed another busy and competitive leasing season sector headlines coming out of the summer or the same themes, we have been hearing for much of the year.
Any markets are feeling that headwind of new supply and digital advertising is as expensive as we have ever seen it.
External growth due to the traditional acquisitions is challenging due to capital flows into the sector.
We also continue to see pressure on multiple expense line items, including property taxes.
And despite these headwinds we had another solid quarter, allowing us to increase our annual guidance.
As expected we have started to experience the increased moderation in the second half for the year, which was projected in our guidance.
However, our diversified portfolio sophisticated platform and strong operations team continued to be resilient.
We continue to have pricing power with in place customers.
Maintain very strong occupancy at our properties.
We also continue to actively explore external growth opportunities that present attractive risk adjusted returns.
In addition to our acquisitions, we added five new stores the platform in New York City do a previously announced that lease transaction with W.P. Carey.
We also closed several bridge loans and expect to complete over 100 million in total originations in our first year with approximately 45 million of the balances held by asking space.
Yesterday, we closed to 150 billion dollar preferred equity investment with Smartstop with an additional $50 million committed for investment in the next 12 months.
The investment as a dividend of six in a quarter percent, which begins to escalate after year five.
This investment is senior to a significant amount of common equity and strengthened our ongoing relationship with smartstop.
Our third party management platform continues to see exceptional growth.
In the quarter, we added 40 to manage stores, bringing our year to date totaled 236.
During our third party programming RGB stores, we have 877 manage stores with the strong remaining pipeline for Q4 and for 2020.
I would now like to turn the time over to Scott stops our CFO .
Thank you, Joe and Hello, everyone.
Our core AFFO for the quarter was $1.24 per share meeting consensus, but one penny below the high end of our guidance. This was due to delays and completion of several solar projects and the related tax credits, resulting in higher income tax expense. These tax credits will be recognized next year.
Once these projects are completed.
Rental and tenant insurance revenue outperformed expectations.
Revenue growth was primarily driven by achieved great growth with lower discount usage also provided a benefit.
Year over year occupancy bounce back in Q3 and was flat at quarter end.
Like last year same store expenses were elevated due to increases in property tax and marketing expense.
We continue to be pleased with the quality of our balance sheet and our access to all types of capital during the quarter, we accessed or ATM and issued slightly over 100 million an equity at an average price of 100 1930 per share year to date, we have issued just over 200 million on or ATM. These funds were used for acquisitions entry.
Yes, the balances on our revolving lines.
During the quarter, we also exercised the accordion feature in our credit facility. This transaction provided several but benefits first it reduced interest costs second it converted 500 million unsecured debt to unsecured and third it extended the average term.
Subsequent to quarter, and we completed a 300 million 10 year private placement transaction at the rate of 3.47% further enhancing our unencumbered property pool.
Due to our property outperformance year to date, we've raised our annual same store guidance to 3% to 3.5%.
We revised our and our expense guidance to an annual range or 4.5% to 5%.
These changes result in annual same store NOI guidance of 2.25% to 3% at 25 basis point increase at the midpoint.
We're also raising our core after AFFO guidance to $4.84 to board hours in 87 cents per share. Our AFFO guidance includes seven cents, a dilution from value add acquisitions and an additional 16 cents dilution from CFO stores for total dilution of 23 cents, which is unchanged from our initial.
You'll guidance.
Without with that let's turn it over to norm at the start acuity.
Thank you as a reminder to ask question, you'll need to press star one on your telephone to try to your question. Please press the pound Keith Please standby well, we compile have shown a roster.
Our first question comes from Smedes Rose of Citi. Your line is open.
Hi, Thanks.
I wanted to ask you just really if you could just talk about move in rates I'm in the quarter versus move out rates and the gap there and kind of how that's been trending so far into fourth quarter.
Yes made thanks.
At the end of the second quarter, when we looked at how we're performing we looked at or one of the things that weve focused on those are occupancy and our occupancy was down about 60 basis points and while we're always solving for revenue and trying to maximize revenue. We did a couple of things in the quarter to bring that occupancy back.
And so during the quarter, we decreased rage and.
And we increased our occupancy so we went from being down 60 basis point to being flat at the ended the quarter and then today, we're actually 10 basis points ahead in October so lowering rates, obviously help now when I talk about lowering rates I'm, saying are achieved.
Our achieved rate was actually lower during the third quarter at the end of the quarter and where we are today is our achieved rates are actually slightly negative year over year are cheap rates are slightly negative to the tune up low single digits.
Okay, and then are you thinking about any changes I guess in your pricing strategies going forward in order to retain a higher paying in place customers or any thoughts around that no. Yeah, no significant changes in our pricing strategy I, one thing that will happen in the fourth quarter is we do.
Lose the benefit of our discounts and so what I mean by that is discounts are provided about a 40 basis point tailwind for us for the year and in the fourth quarter. We are really laugh when we changed that strategy and so the fourth quarter is comparable year over year.
Okay. Thanks, and then Joe could you just talk about the Smartstop investment.
The portfolio from them before is this a investment a lead up to similar transaction or is it just an attractive return.
Hopefully both I mean, we've had a good long relationship with Smartstop as you point out we bought out large portfolio from them in 2015.
Action with that transaction, we made a loan to them, which they are fully paid back and without the fall we manage the almost a 100 stores for them until they internalized management. So we know this company is these properties very very well this was a good investment for us.
He'd have investment.
We are in a very comfortable position from a risk standpoint, and it also we also feel it strengthens our relationship with the company and hopefully, we'll do more with them in the future.
Okay. Thank you.
Thanks bidding.
Thank you and our next question comes from surely will of Bank of America. Your line is open.
Hey, guys. Thanks for taking the question. So my first question has to do with guidance, you've raised both revenue and analyze but the midpoint of guidance on sizing traffic sequential the celebration.
Revenues to one sector for Q and negative and a life before Q. So wondering if you could provide some more color on a cadence I don't mean of here.
He gets the high level and stuff this guidance ranges.
Yes. So if you look at how we performed year to date and then how we're performing into October you're correct. It wouldn't take upward pretty significant decrease in the fourth quarter hit the low end of guidance and we do not feel like that's likely if you look at our cadence into the fourth quarter. We are our guidance does assume.
Some continued moderation as well as that loss of the discount benefit or 40 basis points.
Okay. Thanks, I color and on my second question.
Goes to marketing so three two is up around almost 44% so could you.
Give us some thoughts on your strategy moving forward as you reflect on what you've seen this year and effectiveness.
After marketing strategy.
Your thoughts about using marketing into 2020 itself.
Sure. So I think the first thing to make sure. We all understand is the marketing dollars. We spend a very good ROI that we are spending more money in marketing we wish we didn't have too, but it is leading to.
More folks in the stores paying rent and we get a good return on our marketing dollars.
We expect marketing expense to remain elevated and our job is to make sure. We are smarties, we can possibly be with our marketing dollars in terms of bidding on the right terms in the right places at the right time and also finding alternatives to Google.
Drive business to our stores.
Got it thanks, Joe.
Thank you.
And our next question comes from the line of Jeremy Mass with BMO capital markets. Your line is open.
Hey, guys.
I'm just trying to connect the dots here Joe between your comments in the opening about acquisitions being more challenging due to capital flows in the sector. On this is something we've been hearing about for a while you're still managed to find your share of deals over time allotted that came through the third parties platform. So wondering if that.
Thats dried up a little here and therefore are even if temporarily in there for a major smartstop deal a little more compelling which.
From a return perspective, it's fine at the six in the corner, but one wagers compare that to where you've been able to buying stabilized and even the same with your Seo deals.
That is generally then been higher so any color Matt.
Sure yes, thanks, thanks for the opportunity to clarify.
You know first to your last point I think relative return always goes with relative risk. So yeah. This is an six in accordance dividend payment, but it is bought it is ahead of hundreds of millions of dollars significant amount of common equity. So the return may not be is.
It is doing a COO deal, but the risk is significantly significantly less and this point in the market cycle.
We are very focused on on risk.
So my comments on the introduction about capital flows difficulty finding deals.
Huh.
Really focuses on you know traditional marketed deal what's the deal gets out to the market and a broker has it and there's many many bidders I think it's very difficult for us.
To be that high bidder and capture that deal.
That being said we've been very active on the acquisition side through the ended the third quarter, we purchased $362 million, we've invested $362 million in acquisitions, we have another $52 million 50 $52 million under contract to close this year, we hope to find a couple of.
The deal in addition, do little over $100 million in our bridge loan program. We did did not least deal which had no capital outlay, but a good returns.
So.
Well, we haven't been able to purchase a lot in the market.
They are having very good relationships buying things from our JV partners or management, plus finding creative deals we've been able to have what I think is a good year on a on the growth right.
Yeah, and sticking just with the growth.
Angle here can you talk about the environment today.
For the for C of O deals you've previously mentioned avoid you've seen in funding some lease up deals. That's why you started the bridge loan program, but are you still see in a lot a presale type opportunities or even conversely opportunities or outright purchases of lease up deals that on hitting underwriting or developers wanting to get out.
So we see view.
CFO opportunities.
Part of that is the moderation in development and part of that is our view of the acceptable return level to take that risk of Oh Leaseup store in this environment that being said, we have our committee so far as five new deal.
You see see although deal in 2019, one in Hawaii in a package affordable Dude joint venture in Minneapolis in and around me out.
The lease upside there are those opportunities coming up the partially lease stores being brought to the market.
And I believe sellers' expectations versus I'll say extra space is a pricing there's still some gap there in many instances we look at a lot of home and we underwrite a lot of home and we'll participate when we think the pricing is right.
Great. Thanks.
Thanks, Jeremy.
Thank you.
Our next question comes from Steve Sakwa.
Evercore ISI your line is open.
Thanks, I guess the question is really around sort of the D cell that you've seen throughout the year and the implied revenue guide.
I was somewhere maybe in kind of mid to upper ones to maybe the low twos for Q4, which is down from you know a little over 4% in the first quarter and I'm. Just if you think about kind of the exit velocity of 19 in fourth quarter going into 2020, you know how do we think about that sorta twoish kind of revenue number a as it relates to maybe growth.
All of next year.
So I would tell you we are in the process of doing our budgets and were probably not ready to give 2020 guidance, but I think that you have seen deceleration throughout the year. You know started the year closer to four and then any this quarter closer to three and then some implied.
Celleration in the fourth quarter, so I think that as we roll up the budgets and take a look at where we are so it was supply because I think a portion of the supply. This projected for 19 will actually push into 20, and so until we kind of have some of those moving pieces stop moving it's really difficult to give that number without knowing that and so.
Look for that in the February call.
Okay I can appreciate that it made just is there anything in the 2019 numbers whether it was you know with same store pool shift or just kind of any one time items that may.
May have kind of elevated the 19 number versus 20, putting kinda fundamentals aside.
Yeah, our effective the same store shift is pretty modest it's depending on how you know if you're looking at the prior year the two prior years.
And a 30 basis points, so that really doesn't have a thank god.
The effect on the numbers, yes, I think in that quarter. It was about 10 basis points, Steve and then if you look on the expense side.
We expect property taxes to still be elevated, but hopefully less elevated we expect them to be above inflation, but we budgeted 5% to 6% for the last couple of years, we're hoping to that numbers down we haven't finalized our budgets yet, but we're hoping it's more in that three to five range.
Okay, and then I guess, Joe you made the comment about do you know the Google marketing and trying to find other ways given just how extensive that a that channel has become I'm just curious.
What are some of those other options I mean have you use them in the past and you know how effective or those versus kind of the Google you know click you know paid.
Advertising.
So social media is.
A very small now but growing pretty quickly so that that's an interesting avenues that that.
We and others are trying we actually the last quarter went back to some hard billboards and doing some things like that so we are.
Trying other avenues and I think it's way too early to say, how effective they'll be in and what will be the winners and what well may not be the winners.
Okay. That's it for me thanks.
Thank you.
Thank you and our next question comes from Todd Thomas of Keybanc markets Capital markets. Your line is open.
Hi, Thanks first question in terms of the price adjustments that you made late last quarter to support the recovery and occupancy.
Operate nearly 1800 stores and I'm just curious if you saw.
Bigger swings are more volatile pricing from competitors at that time as they look to to gain ground and drive customer traffic when when you made those changes across the platform.
I'm not sure it's specific to the quarter I think we've been seeing people adjusting prices throughout the year, and obviously very aggressive in markets with new supply.
Okay.
In terms of discounting you know it seems a little bit more less pronounced today. Then then I I think we've seen in sort of prior cycles and you mentioned was lower year over year in the quarter might smoothed out a little bit going forward, but we've heard from others that discounting is down also can can you explain why discounting you know appears to be sort of.
So effective today or is that not really the right way to think about it necessarily.
I think it's probably not the correct way to think about it we're typically looking at different strategies and testing and right. Now we have found the marketing spend and adjusting pricing slightly to be more effective and discounting last year, we were a more aggressive with discounting this year less aggressive and last year, we held rate a little.
Better this year, we've had that give a little bit on rent.
Okay, but so the response overall from from discounting, though you know it's still there. If you increased discounting you still feel that you can increase customer traffic to the system.
So in effective tool, but we've done some of the other should be more effective this year.
Okay and then just last question on the bridge loan program I was just wondering if you can provide a little bit more detail on the outlook for for that.
Book heading into 2020, I think you said $100 million is sort of the volume that you're going to do this year.
Would you expect to see that grow in 2020 and sort of what kind of rates are you getting and how large of an investment and in.
Would you be would you be willing to to do with on the bridge on the bridge program.
Sure. So I would expect the original program to.
Grow significantly I would say at least double.
2020.
Rates, we get range from you know plus or minus LIBOR plus 400. So when we started we started all BMT stores coming right on Ceos and it turns out we found lots of other situations folks wanted was partially be stores. So some of those rates are lower and then.
Picked our highest rate so far has been LIBOR plus 440 so.
Plus or minus LIBOR, plus 400 returned to us depends on whether we use our debt partner to take the they piece. If you will in which case, we can be up to LIBOR plus eight 900.
On our piece.
And I think the last question is how much we will we will.
Do that.
I think that's meant to be seen that type of volume. We're talking about right now is very comfortable for us given our different.
Having use of capital, but one of the reasons. We arranged this program with a debt partner was not only to enhance our returns but to be able to control how much capital. We had in the program. So we have that that tools to make sure.
We're in a comfortable place.
Okay all right. Thank you.
Thanks, Todd Thank you.
And our next question comes from Ivan Kim with Suntrust. Your line is open.
Good afternoon. So obviously expenses are a little bit elevated right now I shouldn't be a big surprise, but as we lap lapped the higher expenses comps get easier mathematically, but should we expect continued inflation and expenses I'm talking about marketing and also things like property taxes.
Get into next year.
Yeah, Ki bin I would expect property taxes to be above inflation, hopefully they come off where they've been the last couple of years.
Marketing I would expect to be above inflation, and then I think that we will see some pressure on wages and part of that is because we have such a hard comp from this year, our wages have been very low year over year. This year, but we don't expect us to be able to maintain that.
Okay, and Adam on it's not too much time on the Smartstop deal but.
The safety Nets comment you made Joe It also does rely on the common equity being in the money.
I don't know this marks our portfolio in and out but.
Given the vintage of it do you feel pretty comfortable that the common equity that you're ahead of its actually into money.
To it to a deep degree.
So we do know the smartstop portfolio when it out we managed almost all of these stores for a long period of time before they internalized management and we also know the company very well and have a lot of comfort both from our knowledge of them and also from.
Restrict you kind of typical market restrictions in the documents.
But there are allowed to do as a company not allowed to do so we feel.
Very very comfortable with this transaction from a risk standpoint.
Okay. Thanks, and just last question.
What type of IR ours.
Do you are you targeting for acquisition.
So we we certainly run the iron ores and look at Irish, but it's really not the focus of what we do right because of how we underwrite because to create an eye or are you have to have a hold period and the terminal cap rate and we generally hold things for a very very long time.
And I can't guess, what cap rates are going to be in seven years or 10 years or 15 years. So we look much more.
Cash flows over a seven year period, and what the average cash flows will be.
Hi, and focus much more on that.
Okay. Thank you.
Thank you.
And as a reminder, ladies and gentlemen that star I want to ask a question.
And our next question comes from Rommel Camden.
Morgan Stanley Your line is open.
Hey, Thanks for taking my question just.
Back to the marketing spend just a few is there any more color in terms of how much is the rise basically actually just cost for clicks increasing versus just more usage of the marketing and and is there any broad regions or.
All right.
Okay.
Maybe even more elevated.
The average.
Yeah. It's.
Fairly difficult to break down that way, we would tell you it primarily relates to the inflationary aspect of it and us being more aggressive on our bids and less to do with the additional clicks or the additional rentals from that.
Got it helpful and then.
Last one was just on.
I think there's a lot of talks about you know technology.
Great and the platform is there is there any low hanging fruits.
Left on on the payroll side, so obviously, you've done a great job keeping that pretty tight.
This year, but did they haven't further opportunities to automate and sort of continue to reduce that that line item.
So a couple of things I think there are always things, we can do to improve to centralize to get more efficient technology perform some jobs.
But that being said I think the wage pressure, we're seeing in this country with the low unemployment.
Is going to override that at least in the short term.
The next year.
Also we put a high value on our people and whether it's the data scientists here in Salt Lake city or the folks in the store who are face to face with the customer every day.
And we are business that has very high operating margins. So the incremental cost of having a very high quality employee in front of.
The customers versus losing wanted to rentals a month.
It it.
Thomas that's an easy equation, we want to make sure we have.
Good and high quality people in our stores.
Meets we're going to see some pressure on.
The wage side and Thats, a trade we're willing to make.
Got it and then the last quarter was I don't if you provide any updated thoughts on just got your supply outlook, maybe nothing's changed there but.
Just curious how you got to thinking about it now thank you.
Sure we do we.
Don't have a lot of new thoughts on supply we continue to believe that.
You know 2020, there'll be some moderation from 2019, but not no wholesale falling off the cliff.
We'll see some markets that will be in worst positions and we'll see some markets. It will be better positioned as they lease up and of course, we with our broadly diversified portfolio also have exposure to a lot of markets that have never been in.
In the supply.
Headwind situation.
So.
You know, we will continue to precious and supply in.
2020, well we're happy this is really even see deliveries starting to moderate.
Helpful. Thank so much.
Sure. Thank you thanks, Rob.
Thank you and our next question comes from Ryan Levine of Green Street Advisors. Your line is open.
Thanks.
Going back to the preferred deal are there you know multiple other opportunities on the horizon similar to this and who knows if you're going to become a sort of a pillar of the capital or asset light model or is this sort of a one off deals just based on the relationship that you guys I was wondering.
I would say more the more the laddered than the former similar kind of similar to the net lease deal company. We had a relationship with had a specific need in this situation and we were able to plug that hole and fill it we're not seeking to start a preferred equity shop.
But I you know if and other opportunity arose that.
I had similar risk reward characteristics and provided a good return to US we would certainly look at it.
Sure.
And then last quarter due I think you said that you don't see any moderation in demand anywhere can you just say is that still your view today or you know if there's any sort of market level color on demand what direction demand is moving broadly.
That is still still our view today is that demand is very steady very strong and you know all of our challenges are due to supply and demand.
Okay. That's all for me thanks, guys.
Thank you thanks Ryan.
Thank you and our next question comes from Todd Stender.
Wells Fargo. Your line is open.
Hi, Thanks, just on the acquisition front.
You didn't buy any stabilize stores in your wholly owned portfolio, but you've been it remain active in joint ventures can we just here some of the underwriting metrics like maybe growth expectations in place occupancy and how there.
I guess adequate feed investing in the joint venture, but not wholly owned.
So underwriting metrics vary by market.
You know.
We would underwrite stronger rent growth in Los Angeles than in Dallas. For example, so I can't give you you know we don't have a menu that we pick all of our assumptions off but that's created on a deal by deal basis based on the specific sub market opportunity.
And we're lucky to have 1800 stores and have a lot of data about what goes on these markets. So we feel we can underwrite very accurately.
With respect to why do something in a joint venture versus wholly owned.
Joint ventures, do a number of things for US one is a spread risk no. We have smaller dollar investment in a particular asset secondly, any enhances returns in a couple of ways. One is we did get all the tenant insurance on a smaller investment based on a 100% own we get a management fee.
And many of them, we get the opportunity to earn a promote.
Down the road so our ER our return levels are are higher in a joint venture.
Oh. Thank you. It was these on a slower growth expectation range I know, there's a little more leverage you can add and I. Appreciate your comments there, but how you distinguish but a habit. These in particular or maybe a little more lease up.
So when you say easy foods.
Sorry, yeah. The three that you acquired in the quarter I'm just distinguishing why these went into a joint venture maybe it does the slower growth expectations any any any little contacts you can provide mike.
Yes.
So these were three assets in Albuquerque, New Mexico that on a wholly owned bases, we did feel provided a risk reward.
Metric that we're comfortable.
For our shareholders.
Got it okay. That's helpful.
And then just going back to the guidance just did two categories that I think amongst others differentiate you guys from your peers is a tenant insurance income and then the management fees. They both increased just as a reminder, can we here.
Anything that you can provide based on margins, how you're achieving these kind of growth for both a any context you can provide around both thanks.
Yes, so our management fee business has grown primarily just by adding properties and a large portion of those properties our lease up asset. So is there revenues go up our management fee also goes up the many of them when they come on at day, one or just earning the minimum management beat and so as they start to get more occupied we obviously make more money.
In terms of tenant insurance business as we add properties. We attended insurance. We also have the ability to increase penetration many of our lease up stores have higher penetration just because.
You have the opportunity to offer tenant insurance from day, one first as we typically don't go back and tried here to increase our penetration with existing customers.
And the lease of Scott for that that's a that's a higher.
Penetration.
Seven to eight out of 10.
Tenants get it is that fair.
So I should say.
I would tell you it's a little higher than that you know your overall penetration is just north of 70, and you don't want to lease up stores typically higher than that.
Okay. Thank you.
Thanks Scott.
Thank you.
And there have a follow up with Smedes rose with Citi. Your line is open.
It's Michael Bilerman here was needs.
What do you can talk little about the competitive environment relative to say.
In the sense of no they're bigger focus over the last let's call. It 12 to 18 month on two fronts. One is you know when the capex from and improving one of their front door and really investing and that's probably if tomorrow their fifth generation.
In the second that's a really big folks and asset management in the second being a focus but they had done before on the third party management business.
And I'm just wondering how you seen any impact.
From those two relative to the markets that you can pekin.
So much more comfortable talking about what we're doing.
No what public storage is doing we started a seven year rebranding program to rebrand all of our stores and were to four years in that and the vast majority of our reach stores have now been rebranded less massive RGB managed stores, but we've been pretty.
That type of capital into our properties for a number of years now and we think we have benefited in terms of performance from those capital investments.
And in terms of the management.
Business.
You know public storage is a good manager they know how to run properties Cubesmart as a good manager they know how to run properties. We have good competitors on that side, we don't get every piece of business, but we hold on pricing, which is more expensive than our competitors.
Because we want to remain a profitable business.
And we've been able to keep growing this business, we've added 136 stores gross.
Through the end of the third quarter, we've lost 43 stores, but 25 of those 43, we purchased store became that leases. So these you know just shifted on the platform.
So do three quarters, we've got at 93 stores.
And our pipeline looks very similar going forward.
And so while Oh, we have good competitors in that business, we're still able to when we start sharing.
Right and I'm not trying to say limit is wrong for what you're doing it's just when others in the marketplace do something right. You've got you can't control them out to supply you can control what you build but you can't control what other people, Belgium, and you can't control what competitors and if you have a competitor that you know has decided to change the way they are operating right.
And then that's a lot of capital their assets, one would imagine that could have an impact on the entire marketplace and affect all competitors, including yourselves right.
That's where I was really trying to understand whether any part of this year's performance you feel and had some impact from the competitive set and maybe top tier say specific but yeah the market.
Getting better in that sense, yes, a tougher environment well for you to compete and.
You know what I think that's a fair comment I think it is a tougher environment to compete in in our competitors don't sit still and they decided to put capital into their buildings or decide to get it management business, we're improving pricing systems.
Or whatever they are doing and we you know we.
Fully understand that.
It's not a static environment and that's why we need to get better and everything we do we need to continue to invest in technology and we need to continue to refine our pricing systems are our keyword bidding systems need to do more data analytics more testing and we do that all the time and we don't maybe talk about enough.
No our competitors are running to catch up we need to run just as fast to stay ahead.
Right, that's a lot faster once you've done [laughter].
We we go back and where we're sitting in Salt Lake you spent a lot of time on optimist, prime and leveraging Google and being able to it really target how individual search words to really reduced pricing.
You talked a little bit about how Google has gotten more expenses and has has your systems not been able to figure out of weighed to start to.
I didn't to some of that increase at all.
Oh, Hi, I believe they have I believe our systems are very good at spending money, where it has an impact and not bidding on terms. If that's the system, you're talking about where there's not a very strong return.
It doesn't look like it because because the increase has been so much but we had been very careful to make sure. We're spending money, where it's where it has a positive impact and I think the bottom line kind of proof is in the putting is the results were pretty.
Yeah.
Last one just you know on on Dalai you had the U.P.S. I know.
They're initiatives and adding because Atlanta under test markets.
During the quarter.
Obviously, you've had some make space partner up with Iron Mountain is there has there been any impact that you see a changing in the marketplace from those sorts of initiatives.
We just haven't felt the impact.
We look at our small units in urban markets, where those valley.
Companies are operating you know look at the occupancy and rents and.
You know.
I don't know if they're getting a customer that is in a traditional sports customer or if we're able to maintain.
Our performance in spite of them nibbling at the edge is but we just haven't felt.
Okay. Thanks for the time Chuck.
Thanks, Michael we should Michael.
Thank you and I'm currently showing no further questions I'd like to turn the call back over to Mr., Joe markedly for closing comments.
Great. Thank you everyone for joining us today.
We were 10 months into the year now and what is really gratifying to me is I look back is how the year has played out as we expected. We went into this year, knowing we would face headwinds from new supply and then we would have to be nimble in creative to adjust the challenges in those particular market.
We wanted to hear knowing the traditional acquisitions would be difficult due to capital flows into the sector and then we would have to be innovative to create create to create accretive growth opportunities and I think we've done that.
And we went into your knowing that expecting to have continued growth in our third party management business is we just talked about we've had a great year and not fun.
The two surprises we've had this year is the higher marketing expenses and we've had to had to deal with that and.
Hey performance in spite of those increased costs.
And the second surprises been that the moderation in revenue growth.
Taking longer to occur and that benefited us in allowed us to increase our guidance.
So looking back over the 10 months I'm I'm very happy and proud that our systems deeds is handled the environment.
Machine has worked new we've been able to put up the performance that we have so far and we expect to for the remainder of the year.
Thank you very much for your interest in extra space I hope everyone has a great vested or days.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.