Q4 2019 Earnings Call
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And it's now my pleasure to turn the floor over to Ryan Burke, Vice President Investor Relations Ryan you may begin.
Thank you Maria Good day, everyone. Thank you for join US for fourth quarter 2019 earnings call I'm here with Joe Roslund, Tom Boyle before we began we want to remind you that all statements other than statements of historical fact included on this call are forward looking statements that are subject to a number of risks and uncertainties that could cause actual.
Results to differ materially from those projected by the statements. These risks and other factors could adversely affect our business and future results that are subscribing yesterday's earnings release, you know reports filed with the FCC.
All forward looking statements speak only as of today February 26, 2020, we assume no obligation to update or revise any of these statements whether as a result of new information future events or otherwise a reconciliation to GAAP of the non-GAAP financial measures. We provide on this call is included in our earnings release you can.
Fine that press release RST FCC reports in an audio replay of this call on our web site at public storage Dot com.
We do ask that you initially limit yourself to two questions of course, if you have additional questions. After those please feel free to jump back in queue without or to turn the call over to Joe.
Thank you Ryan and thank you for joining US we had a good quarter, where we reported or seventh consecutive quarter with same store revenue growth between one and 2%.
As we previously disclosed in an 8-K filed on February 14th we submitted a nonbinding proposal to acquire 100% of the staple securities of Australian based national storage rate.
And it's controlled entities for $2.40 per share Australian dollars.
Please refer to the 8-K and we won't provide any update on this call.
Now I'd like to call to be open for questions.
Thank you as a reminder, ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad again does star one.
Our first question comes from the line of surely will of Bank of America.
Hey, guys. Thanks for taking the question.
Oh.
Hey, So my first question is on the marketing sand. So it's roughly 50% 19, those curious as to what your thoughts are on the effectiveness of any incremental fund and how you think definitely trying to 2020.
Sure I surely it's Tom I'll I'll speak a little bit about our advertising spend in the corner and then outlook as we as we had 20.
So we've been communicating a pretty consistent strategy on advertising throughout 2019.
We've liked what we've seen a with the increase in spend through 320 19 until as Weve spent more money.
Like see demand response, we received from customers.
Advertising was up 40%.
Fourth quarter.
That rate of growth didn't moderate from the third quarter and as we've discussed on our last call. We proactively pulled harder on the advertising to lever in the third quarter.
During the busy season to attract more customers during that time period.
Stepping back and we continue to have real advantages online our brand name, which is synonymous with our product and a top search term drives a meaningful portion of our movements either director side or through on each minerals, roughly two thirds of or or move ins come through on the channels those are our largest channels.
In addition to that.
Half of our paid move ins come through brand search and brand advertising, which comes at a lower cost so.
Those gives us some advantages with which we are utilizing today online.
We talk a lot about Google Google was as a primary portion of our advertising spend and we really like that tool given its dynamically marriage and very local and granular. So we can set or bidding strategy similar to how we set our pricing on.
Very local level.
But in addition to that we do utilize social media and affiliates as well. So we spent a lot of time talking about Google, but it's a broader marketing plan.
As we head into 2020, I would anticipate that if we continue to like the incremental.
Traffic that we're seeing from the advertising spends that we'll continue to spend and so far in 2020, we continue to like what we've seen so we anticipate that we continue to pull that lever along with rental rate changes.
And just counting to.
To drive traffic to our stores in what is it or.
What remains a challenging operating environment.
Got it that Oh, so I'm going on the flip side can you talk a little bit in terms of what you're seeing following a moves in rates in fourq, you and so far into one too as well she right.
Sure. So as you know surely we don't really like to talk about street rates, we think that move in rates are really more valuable some move in a race.
2.4%.
In the quarter, which is a little bit better than what we saw in in the second and third quarters.
But we did have lower moved and volumes.
So moving volumes were down 3.5% in the quarter.
Compared to roughly flat in the second and third quarter.
So while move in volumes were down 3.5%, we continue to be benefited by a lengthening stays of existing tenants and continued very good performance by existing tenants and so move out volumes were down 1.5% as well.
So continued good good trends there amongst them this initial or existing tenants, but.
The initial acquisition of customers remains challenging and this operating environment.
Got it thanks guys.
That.
Our next question comes from one of Jeremy Metz, a female capital markets.
Hey, Joe HM.
Joe I wanted to go back.
NSR I understand you can't comment on the process here.
And that's not where the questions relate I guess, because I think about what you have going on in that you actually have a lot going on with developments and expansions you've been increasingly active on acquisitions you have to broader Capex program initiated a while back and that's still ongoing you had some tech initiatives, we all know about supply in the market the pressure on.
Revenues and expenses I guess, you take all that together.
Why would now be the time to look to make a move.
Outside the us in a big way.
Well, Jerry Jeremy I appreciate and you did a good job characterizing the variety of things that we're looking to do from a capital allocation standpoint, so as an entity.
We have and always will be inquisitive, along a number of different fronts, whether it's you know within our borders here or where opportunities may lie outside of our borders you can see that from obviously the investment that we made into the shurgard platform a number of years ago.
We have talked over the years about you know again the outlook and the desire on our part to continue to that and understand.
Markets outside of our borders.
And with that we're going to continue to look you know for those opportunities as they arise.
Looking at you know the things you talk specifically about yeah, we have had over the last year in particular, a particularly strong.
Strong uptick in the amount of volume that we've done, particularly tied to acquisitions, we're seeing.
Healthy amount of attractive opportunities that continue to.
Lead to the kind of volume that we did in 2019, where we bought approximately $430 million of acquisitions.
44 separate properties.
And again, that's higher than the volume that we done we've done in the prior four years. So we continue to bad and leverage our relationships leverage the amount of opportunities that we're seeing out in the market and we're seeing good good trends. We also have a decent backlog.
Acquisition activity going into 2020, so we continue to be equally focused on everything that happens right here within the United States and then from time to time, if things happened outside of our borders we're going to take a strong look at that too.
You mentioned the development and redevelopment activity that to again for 2019 with a vibrant part of our business. We brought 40 properties online weather from ground up or redevelopment again.
About.
$375 million of investment and you know again, if you combine.
That activity with the acquisition activity. We brought in you know about 85 additional assets into the portfolio. We think there's great additions to the platform and we will continue again from the development redevelopment standpoint, the fund that business as we're finding attractive opportunities we're seeing good.
Land sites that are coming to us I would tell you frankly, we're seeing more of those right now than we have in the last two or three years because there.
Is a little bit of.
Winding relative to some of the spec development has been going on in certain markets. So we're seeing a number of additional land sites that are attractive. So we're going to continue to look at that so.
Overall, I mean, we've got a number of very positive things happening.
The management team well prepared to embrace the kind of volume and again from a capital allocation standpoint, the way that we can drive good return.
To our shareholders and Weve.
No no confusion or balance sheet has been and continues to be ready to fund a whole range of different.
Capital allocation initiatives. So we continue to be encouraged by what we're seeing out there and like I said looking at the beginning of this year, we've got some good momentum at hand.
Thanks for that in the second question for me.
And your 10-K, you do alluded to prop 13 initiative on the ballot.
Granted timing of any reassessment or.
Okay.
Getting.
Actually.
Happen if it passes is uncertain. If there is there anything you can share with us on the potential impact if it did pass or any color.
On your assets, there and what that kind of mark to market could look like on the tax side. Thanks sure. Jeremy So we do benefit from us very strong portfolio of about 440 properties here in the state of California.
And many of those assets are in great locations and were acquired are built by the company years ago, which gives us a great competitive position in many of our markets.
So we'd like we really like to portfolio in the 10-K you highlight we did include some disclosure I think that's the best information. We can give you to allow you to be able to underwrite what you think the impact would be so we provide to you.
In that risk factor, what our 2019 state of California net operating income is also are.
Property taxes for the state of California, So depending on what time period or valuation strategy. You think will be employed you can model what you think the impact.
Thanks, guys.
Thanks, Jeremy Thanks, Jeremy.
Our next question comes the line of Smedes Rose City.
Hi, Thanks, I just wanted to ask you a little more on the acquisition side, you had pretty high volume and 19 and it looks like 20 is starting out ahead of where you were at this time last year and I mean would you expect that you could see the same kind in volume acquisition volume activity. This year that you were able to put up last year.
Yes, I mean, it's always tough to predict I'll just try to answer the question around again, the number of things that are driving the opportunity set that weve.
And able to capture so we are seeing a higher level of.
Sellers coming into the market they have either.
Wired or build assets over say the last three to five years with certain sets of expectations, many of which have not met either pro forma or have not basically put them in the position that they expected to be and at this point.
A number of the deals and frankly, the majority of the deals that we did in 2019 were off market. So some of this comes with.
Enduring relationships that we've got with these owners.
And you know again some of that's harder to predict to get to your question well how much volume might we see in 2020. The thing that is pronounced and I think we talk to quarter by quarter last year.
As you know this theme of more onerous coming to us with more anxious motivation to get out right. So.
That is again of more vibrant arena, our acquisitions team is very busy.
Looking out a number of opportunities you know again with the kinds of circumstances that I described and.
We also have a number of owners have also come to us and said hey, it's been a great business timings right and they to want to.
Exit for a variety of different reasons, we continue to.
Evaluate the quality and the pricing of these assets, we are filters as tight as it ever has been and frankly with that.
We're off to a good start as you mentioned in 2020, how much of that play through the balance of the year to be determined but.
If you step back and look at the wave of development activity in particular, that's taken place over the last four or five years.
There's a.
Pretty strong collection of assets that have come into various markets. Many with ownership histories that have nothing to do with long term commitment to the storage business and there are a lot of entities out there looking for exits and we've been pleased by again.
The amount of volume that weve seen come through the quality of the assets and in our view again, the appropriate time to acquire and see ultimately good returns from those investments.
Okay. Thank you and I just wanted to ask you you lined out development.
Spending.
We just when you look at the quality of your portfolio now you know you've talked in the past about bringing some of the older facility is kind of more.
I have more curb appeal for lack of a better where do you know do you still it's still a pretty big efforts to be done this year or did you how much of the portfolio. I guess you feel like it's too I guess be improved from a looks perspective, yeah sure. So yeah, you're speaking to what we call or property of Tomorrow program.
So net launched in 2018 last year, we we put about $100 million into that platform, where we retooled approximately 250 assets or so in a variety of different markets and if you look at 2020 the size of that program will take another.
Step up so it's a multiyear program, we're embedding a number of our latest generation assets into existing assets to get the not only curb appeal impact, but relevancy to our brand.
The optimization of some of the physical characteristics of the asset were were retooling lighting for instance, in some cases were putting solar on assets.
We're optimizing the customer environment.
And doing a number of different things to again enhance the overall quality because frankly, we've got many assets that continue to do phenomenally well and we've just gotten to the point, where we think that ultimate lift to our most recent generation five quality standard.
Very appropriate.
Customers are responding well to our employees are responding well to it we're prioritizing as were ratcheting through the full portfolio and again. This program is likely to take five years or more to get through the the portfolio at large, but we are probably prioritizing around market.
Concentrations higher revenue markets, where we're seeing even better impact from the investment so.
All things considered we're seeing good traction from the investment in the program and it'll continue like I mentioned over the next few years.
Okay. Thank you sure.
Our next question comes from a lot of Steve Sakwa Evercore ISI.
Thanks, Good morning.
Hi, Tom I don't think in the 10-K, you explicitly provided kind of the fourth quarter average move in rates or the move outs I guess, we sort of backed into the numbers for both of those and got about a 17% decline I was just wondering if you a had those or does that sound about right and.
I know you don't provide guidance, but do you feel like that number is my kind of getting towards the bottom or do you feel like that can continue to sort of wide now to because if that seventeens right that was probably the lightest number we've seen on that statistic.
You did a good job with our numbers that.
The gap between move in rents in the fourth quarter and move out brands on a per square foot basis.
Was 17%.
Look back at prior year, it was 16% and so while it did get a little bit wider that's a seasonally.
Wider time period, and so that obviously it sounds like a reasonably large number but lower our rental rates seasonally through the fourth quarter and in the first quarter as occupancy dip and we have vacancy to fill.
So thats a strategy that weve employees year end year out for a number of years and you saw that again this year in terms of overall move in rate trends I.
I think it's really a story of market and it's hard to to talk about at a high level.
What it is we're going to see for 2020, but if you look at the different market performance in the fourth quarter you have markets.
That have been impacted by new supply where move in rates, we lowered proactively to drive volume. So a market that I highlighted is Houston.
We're seeing some encouraging trends in Houston as it relates to.
Year over year move in performance as we went through the fourth quarter into the first quarter, but it's come at a lower rates so fourth quarter move in rates in Houston were down 16%.
But for the first time and in a little while in 2019, we started to see real volume in Houston. Some move in volume was up north of 5% in Houston.
And we're seeing better traction as we go through the first quarter.
You have markets like a Houston or Atlanta.
Where the impact of new supply continues to be felt and we have little pricing power in those markets, where we're utilizing rate.
We're utilizing advertising to fill in occupancy the good news is in Houston, we are getting good occupancy traction right now we're sitting.
At 300 basis points plus year over year occupancy.
Looking at my desk for this morning, so getting some good occupancy traction, but it's coming at lower rates.
And then going to flip side.
The market like L.A., where we had positive move and rent growth.
In the fourth quarter so.
Stepping back we continue to think there's going to be ebb and flows through through markets as they are impacted by new supply in 2020.
Just as it another snapshot in the fourth quarter of 2019, we reported 1.1% same store revenue growth.
In the fourth quarter 18, we reported 1.2% same store revenue growth, so pretty consistent revenue growth, but if you look at the contribution from the different markets.
It's a barbell and you've got markets like Chicago Denver in Dallas said actually are the best year over year change in revenue growth.
In the flip side as you continue to have Houston be a laggard Atlanta as I highlighted in Boston that was impacted by new supply in 2019 that that impacted us so.
Another quarter of reasonably consistent revenue growth in the fourth quarter, but the market contributions continue to shift as we navigate through as a tough operating environment.
Okay. I guess, maybe second question, just kind of big picture, maybe for you or Joe just in terms of like the pressure from supply I mean, it's interesting to see that revenue growth or decline in revenue growth seems to be stabilizing a bit and frankly, it was a little bit better in Q4 than we thought.
Generally speaking I realize the markets will will change in mix around but do you feel like the overall competitive pressure from new supply is beginning to kind of find a footing here and maybe it doesn't get a lot worse from here and the question then as you know how quickly can it improve in 21 and beyond or do you still feel like there.
More supply coming and there's more competitive pressures as we move into into 20, and how does that sort of play into the.
Yes, the Google spend on the advertising side.
Well, there's a lot of.
Correlations between all those things, Steve and you're right.
We are seeing less deceleration, we feel like we have a you know a strong tool kit to continue to maneuver through.
Higher supply markets as Tom mentioned some of that is shifting the supply picture nationally.
We'll have another strong year of deliveries in 2020 it could be.
Plus or minus say, 10% down from what we saw in 2019 again these are elevated levels of.
Construction that we're now going into the fourth year of a range of anywhere from $4 billion to $5 billion and deliveries and.
Again.
If you don't have the right playbook to deal with supply as it impacts particular assets, so you're right down to that three to five mile trade area.
You could definitely have some pretty strong headwinds to deal with and frankly, that's where we continue to see some not all but some of our acquisition opportunities as well the.
The interesting thing is.
It ties to the resiliency of.
The product overall, the resiliency of our own brand et cetera is we are seeing.
Deliveries come down in markets like Denver, Charlotte, Houston, Austin, Chicago, and not Ironically those are some of the markets now that we're actually starting to see some decent percolation and we're encouraged by that now going into this next year, we've got our eyes wide open on markets like Portland Boston.
Seattle, Miami DC in New York, because there's more deliveries coming to those markets some of which haven't had the kind of.
Development activity in quite some time, but.
Reflecting on some of the comments Tom just walked you through relative to you know again the ways that we're using our own brand our marketing strategies the ways that we're improving the quality of the assets directly themselves. The way we're doing more on revenue management pricing strategies I mean, we.
We continue to have ways that we feel our strong components to to work through these higher supply conditions.
The the outlet or the outlook price or beyond even this year.
As more murky.
We are seeing.
Fewer C of O deals.
Get delivered to the market I think thats, an encouraging sign that there may be some tapering down of the.
The.
Part of the market that was driving against your development just based on spec developers out there just flipping an asset in trying to get a quick return because there were many buyers that were basically just aggressively taking down empty facilities.
That volumes down quite a bit and part of the reason it's down again. Its you could look at I'd say this is probably a healthy thing as rents are down too so they're not making the pro formas that they intended to maybe when they acquired that piece of land or how to tied up so there are a.
A number of things that are starting to work through that hopefully will lead to a more balanced market by market set of conditions, but again this year in 2020, we still got the lingering impact of the supply that's been built over the last say two to three years. We'll have you know again, a number of deliveries this year, but we.
We are highly encouraged by our own capabilities and the things that we can do do uniquely enough to keep again. This band performance at least what you see him for the last seven quarters.
In pretty.
Pretty tough market conditions.
If things actually start improving then we'll hopefully see the the upside to that to its too soon to tell but again, we will we'll continue to to use all those tools that we've got.
Great. Thanks.
Thanks, Steve.
As a reminder, ladies and gentlemen, if he wants to ask a question simply press star one from the number one on your telephone keypad.
Our next question comes from the line as Todd Thomas of Keybanc capital markets.
Hi, Thanks.
Just a quick follow up on Steve's question, there about revenue growth, maybe taking a step back and thinking about it at a high level. Joe you just commented again and in your prepared remarks, you mentioned that to seven straight quarter of revenue growth between one and 2% for the for the company do you see that continuing to hold.
Well again, Todd we're not going to give guidance I again, the point that I just.
Made and to Steves question was tied to the fact that yet we've got tools. We've got ways you know again to.
Continue to deal with higher supply conditions.
And we'll have to see how that plays fourth going forward.
Deceleration that we were dealing with has eased.
Will it continue to ease of what we'll see but again, we feel very confident we've got the right.
Set of strategies and capabilities to deal with the environment that we've had over the last two or three years.
Okay, and then so switching to investments and thinking about.
And expansion overseas your your invested in Europe and have that platform there, but in terms of thinking about.
Investments outside of the us or halfway across the globe can you just help us understand the synergies from from investing outside of the U.S. that that may not be obvious.
Our self storage the only thing I've really speak to Todd is what we've said consistently for a number of years, which is we will continue to evaluate a variety of different markets.
It's likely but not always but likely beneficial to.
Enter any market, we're not in through some kind of a platform. So okay look at shurgard that was the platform. Okay. So does that mean, that's the one and only way to do it absolutely not is a way that can have certain advantages yes. So.
And then beyond that as I mentioned my opening comments, we're really not going to talk more specifically about any.
As action, we're looking at but that again, the mathematically is and will continue to be the way that we'll evaluate.
Any opportunity not that again it has to be tied to a specific platform, but there are many inherent benefits that will likely come through with it if it's the right type of platform that aligns well with what we do right here in the United States Shurgard was a perfect example of that so I can just pointed out and say that that was a very sucks.
Vessel playbook.
Okay and to the extent you were to make a large acquisition something in excess of the sources of capital that the company has over say the next approximately 12 months how should we think about obviously you have a lot of capacity and access to capital, but how should we think about funding a larger investment if something were.
Work to materialize I'll now, we're not going to comment and specifics, but balance sheets in very very good shape last year was a good capital raising year for us.
We extended line of credit, we issued $1 billion or preferred we redeemed $1 billion preferred.
We issued some debt in the U.S., we recently issued debt in Europe. So we've got a lot of capital sources at our fingertips and.
Capitals pretty attractively priced today so.
Overall, we like our capital sources heading into the year, regardless of what the the capital will be allocated to and you know maybe to put the exclamation point on that the balance sheets never been in better shape. So.
Okay. Thank you.
Our next question comes from one of Ki bin Kim Suntrust.
Thanks, just going back to prop 13 discussion could you give us a sense of their average tax year basis in California.
Well.
I think what we've disclosed we feel as adequate for you to be able to do some underwriting if you want to talk through that on a one off basis. We can certainly do that we disclose $42 million of property taxes paid.
In 2019.
And we disclosed our California, NOI and so that should give you an ability to underwrite different assessed values.
And compare those assessed values and ultimate taxes to what we paid last year.
Okay, and kind of going back to your acquisition.
Hi, I'm, just trying to get a sense of if theres been any incremental change in that thinking strategically for about your excellent growth.
Okay, and basically trying to get a sense of are more assets and deals just fitting into parameters that you've always said or are you also expanding the parameters that you're looking for our <unk>, our IR threshold, yeah, I mean, what we're not never we've never been an IR buyer Ki bin but no I wouldn't say in any way we've.
Widen ours are our underwriting and made some additional accommodation to what we've always done historically, we have a pretty stringent disciplined methodology that we use for acquisitions again were frankly, we're just we're pleased by we're seeing good quality assets.
More of them that meet our threshold and.
We we've been pleased by the amount of volume that's come to us.
And we're going to you know again continue to stay focused on.
The range of opportunities that are out there.
And.
The teams working hard and many of these situations don't evolve.
At a moment's notice some of them take.
80 years in some cases to evolve so we've got a whole collection, a different kind of opportunities around us and we're going to continue to bet.
And determine whether or not the right types of deals to bring into the portfolio.
We like the quality.
That we're seeing with the range of assets its a combination of.
Some more mature assets in some relatively new assets as well so good quality good location very additive to the platform.
And.
You know again like I mentioned in 20.
19, we book, we pulled and 44 assets and overall is kind of a seamless transition. So ops teams ready to continue to absorb that volume and more and.
It's all going very well.
And I remember years ago, you guys had a.
A pretty big emphasis on buying things below replacement cost is that still the case then how does some of these deals compare yeah.
Yes, we definitely we strip out a lot of different financial factors and compartmentalize them and that that being one. Okay. So just you know again to step back I mean, we have the only development platform.
The public arena and we by far the biggest development platform the United States, we understand.
Replacement costs.
Quite well, we deal with it literally on a daily basis as a ties our own development and redevelopment activities. It's a great benchmark for us to continue evaluate the price point that we're looking at assets and that is a key factor that we look at.
Okay. Thank you.
[music].
Again, ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad.
Our next question comes from the line as Brian Moms with Green Street Advisors.
Thanks, just wondering if you could.
Expend on what drove a labor costs higher during the quarter.
And if it was sort of onetime in nature or if you anticipate this to be some sort of longer term trend.
Sure.
So as you look at that labor costs in the quarter onsite property manager payroll.
It was up about 6% the drivers of that was was largely wages.
And we've talked for.
Now a number of years about that very tight labor market that we find ourselves in today nationally.
There's certainly some pockets that are that are even tighter than the national numbers.
So what we've done over time is make sure we're being as efficient as possible.
And some of that comes down to some of the initiatives tied to what you have to and otherwise that we were able to utilize efficiencies and reduced number of hours, but ultimately we continued over that time period, including last year to increase wages to to attract the competitive.
Employee.
And provide a competitive package for employees to give our customers a good customer service at the property level. So wages is the short answer on would anticipate that we continue to have wage pressure as we go through 2020.
As always we're looking for ways to be more efficient and utilize the hours that we have best.
I would anticipate the wages will be a pressure in 2020.
Sure and then I guess related to the comments that you made on.
The property of Tomorrow initiative, what do you think about the expansions.
Is it a decision that has made based on.
Market by market basis.
Some markets are there more apt or more suited for expansions or is it sort of an asset by asset basis. Some assets are.
Well suited for an expansion regardless of market or Howard. This is made there yeah. So Ryan you have the the property. It Tomorrow program isn't directly tied to expansions, that's really tied to like for like asset.
Condition. So separately, we do have oral Oliver initiatives tied to redevelopment, which would include expansions. So in that does go right down to a case by case basis. So what comes with that is.
There there are a whole host of.
Roadblocks that you might have to go through depending on zoning.
Kind of approvals and opportunities to actually expand an asset the face value may look like a prime candidates, but it may be a condition, where frankly, you just can't kids the appropriate zoning and ability to expand the site itself. So that's one hurley up to work through.
I'll make hurdles that you have to work through because if we're going into an asset in disrupting current income can be quite dilutive in some cases. So you have some measure and understand.
That as well and then counterbalances with the kind of returns and opportunities that you would get by putting basically weather is.
Some additional size into an existing property through.
Single larger building or a multitude of you know again, new Gen five properties or in some cases actually tearing down the entire site. So theres a whole host of parameters that go into that but it goes right down to a case by case property in property basis.
Sure. Thanks, guys.
Thank you.
Our next question comes from line as Michael Mueller of Jpmorgan.
Yes, Hi, Tom I think you were talking about.
Marketing spend levels expecting to continue to spend in 2020 should we be in the mindset of.
You've seen the spend levels ratchet up a notch on up.
Absolute dollar basis, and you're thinking more about maintaining that absolute level or we could see it move up again and just have.
Notable growth on top of a year of pretty accelerated growth.
Yes, so we did see accelerated growth in 2019, but if you go back through 2018, we actually continued to ramp good spend in 2000, well and we've liked what we've seen so there's no question that we spend more in 2019 than we did in 2018 to your point around comps as we get into 2020 is a fair one.
We don't manage our advertising spend based on what we spent last year, we manage it based on what it is we're getting for it and with the return is on a current period and so if we like.
What we're seeing.
We're going to spend even more in 2029, we won't hesitate to do that if we like the returns in the flip side is we're managing dynamically so.
Yes, there will be markets, where we turned down advertising spend and ones, where we we likely increase as we get in between 20.
One thing I highlighted on the last call was just stepping back and thinking about advertising spend as a percentage of revenue.
And the fact that it was three plus percent.
Historically in previous cycles got as low as about 1% of revenue in 2015 2016, when frankly, we were fall.
And didnt need to spend on marketing we've been increasing it.
Consistently over the past several years and we anticipate that we increase it in 2020 as well, but if you look historically, we're in a comfortable range for advertising spend.
Got it Okay, and then and then Joe looking on the looking at the 2020 acquisitions and kind of what I guess, what you have earmarked for under contract right now I mean, what are the buckets that those would fall into if you split it between.
Here's a bunch of what the market, we considered to be stabilized properties versus hear something that's clearly lease up can you just kind of walk through it thats whats been yeah, Mike It's a combination.
There there are assets that are.
You know newer.
I would say anywhere from one to three years older than some that are more stabilized at a bit in place for 10 plus years. So it.
It's a combination and is motivated by many of the things I outlined earlier in my comments.
Some owners come into the market.
Thinking they were going to get.
A quick or profit or be able to turn turn an asset and achieve whatever pro forma hurdles. They were looking at and kind of step back and said no I don't want to.
Continue let's let's look at a quicker exit and then some have been more mature owners. The for a variety of reasons to are saying. This is a good time to exit so it's a combination.
Got it so total mix bag, okay, yes that was it. Thank you you bet. Thanks Michael.
Our next question comes from the line of Steve Sakwa Evercore ISI.
Sorry, just one follow up guys on just the Google kind of AD spending and just some changes Google might have made I think there was a referencing your 10-K about maybe level the playing field I'm. Just curious is there anything you can share with us about maybe just how Google AD searches are working and.
Just things that maybe are leveling the playing field there is any real change and that dynamic that we should be thinking amount.
Yes, we concluded that to just described frankly, the evolution of paid search.
On Google and the other search platforms over the last couple of years I think that they've got a great business obviously seat.
Garner as many competitors in the.
The key word auctions as they can.
And I think they're doing a pretty good job of it.
We're just highlighting the fact that it's gotten more competitive.
And there.
They are doing a good job of getting more people into those auctions.
Okay. So it wasn't that theres something more recent that really change. It's just more the general trend that general trend there and.
They've got a great business.
Okay. Thanks, that's it.
Thanks, Steve.
And that was our final question on now, let's turn the floor back over to Ryan Burke for any additional or closing remarks.
Thanks to all of you for joining US today, we look forward to interacting as the year progressive how good we.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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