Q1 2020 Earnings Call
Time, all participants have been placed in listen only mode and the floor will be open for your questions. Following the presentation.
You have a question at that time. Please press star one on your Touchtone phone, if you wish to remove yourself from the Q. Please press the pound key it is now my pleasure to turn the floor for to Ryan Byrnes, Vice President of Investor Relations Ryan you may begin.
Thank you Erica good day, everyone. Thank you for join US for first quarter 2020 earnings call on here on the line with Joe Russell and Tom Boyle before we again, we want to remind you that all statements other than statements. Historical fact include on this call are forward looking statements that are subject to a number of risks and uncertainties that could cause.
Hopes to differ materially from those projected by the statements.
These risks and other factors could adversely affect our business and future results that are described in yesterday's earnings release and in our reports filed with that Cc. All forward looking statements speak only as of today may 1st 2020, we assume no obligation to update or revise any of the statements whether as a result of new information future events or otherwise.
A reconciliation to GAAP non-GAAP financial measures. We provide on this call is included in the earnings release, you can find a press release as you see reports in an audio replay of this conference call on our website public storage Dot com.
As usual, we do ask that you keep your questions limit it to two additionally of course after that please feel free to jump back in queue. If you have additional questions with that I'll turn it over to Joe.
Thank you Ryan and thank you for joining us we wish the best for all of you listening in today, particularly those that have been personally impacted by the pandemic.
I want to begin by thanking our employees customers and business partners for their extraordinary efforts and flexibility as we adapt to this environment.
Our focus is simple.
Safety is a top priority and everything we do protecting our employees and customers.
We are operating our entire 2500 plus portfolio in all markets as we are in a central business.
The need for self storage, even in disruptive times like these is yes again being validated.
In that regard our priorities beyond safety include servicing new and existing customers as our communities navigate through these challenging times.
To do so we are supporting our frontline employees in several ways to optimize customer service.
Protocols are in place that reinforce social distancing keeping properties clean and offering customers multiple avenues to read or access or space and a contact less way.
At the start of the pandemic. We also established the P.S. cares fund, which provides child care coverage extended paid time off and additional hourly compensation to our entire team a property managers.
I can't overstate, how valuable their commitment to public storage has been and we'll continue to be as they serve our 1.5 million customers.
As a public storage approach approaches its fiftyth year, we're clearly weather significant economic cycles and this one will likely rank as one of the most extreme.
We have a proven playbook to maneuver through severe economic and natural disasters. Our teams are battle tested our product is resilient and we have intentionally crafted a fortress balance sheet to not only survive, but thrive in times like these.
At its core the full public storage team as well equipped to not only face whatever challenges arise in the near term.
The confidently, we will find new ways of applying our unique strength and fortitude to find opportunities.
Now I will hand, the call over to the operator for questions.
[noise] as a reminder to ask a question you would need to press star one on your telephone to withdraw your question press the pound Cookie. Please standby well we come out became a day roster.
Your first question comes in a line of Jeff Spector with Bank of America.
Thank you good afternoon, and hope all of you were doing Okay. My first question just trying to tie some of the comments Joe you need on a you know the or I guess fundamentals or what you're seeing in the market validates.
The stability of the sector resilience.
In the past versus some of the caught the you know I guess the color around covert 19 in your you know your press release, which seem to be much more cautious can you just I guess discussed that that's that's my first question.
Yeah sure Jeff.
So you know again, we're obviously in an environment that is new and different for everybody. You know we've all been through you know a number of economic cycles of different.
The grades as Mike mentioned, we in particular from time to time go through what we call natural disasters Hurricanes and otherwise yeah. This is clearly even different than those because its health and science related.
You know the predictability of this environment is to be.
Determined at best with you know a lot of information none of us I've dealt with before.
Yeah, when we do look back at prior.
Cycles, you know again, our product type has.
Played through very well and you know and even though you know the the great recession. You know we were pleasantly surprised by again, the resiliency and the adaptability and relevance of the property type itself.
On one hand, we clearly know that there continues to be a high degree of need and usage of the product. This month or last month April we moved in 82000 customers into our portfolio now again, that's down but on the flip side Theres vibrancy there there's.
Need we see it also with the amount of activity at our properties that we can now track track Holistically, because we have a centralized access system. So again, whether it's at a rock consumer level and or anything that tiers into service oriented from a business that may or may not.
Even the type of activity that's going on with this co bid economy.
There there is a true and I think valid need for the product itself. So we are looking at the future with you know a fair degree of caution because frankly, we just don't know what's going to play through it I don't know how realistic you can predict anything because for six weeks into this and there's just going to be a number of things is.
We're discovering you know day to day week to week that this environment will create even additional types of.
Pressure points that we haven't seen before now again.
Other things, though are somewhat similar so far to what we've seen with you know extreme economic cycle. So in the great recession, our delinquency hovered around you know again, a 2% factor so through the month of April.
Similar so our customer base, even through the month of April.
From a collection and payments standpoint was consistent even on a year over year basis.
So it's a mixture and it's just something that we're going to.
Continue to.
React to we've got great tools to be nimble, we've got great analytics to continue to address.
Again, whatever continues to surface or does surface that we need to address and you know addressed through different tactics strategies et cetera.
So that would basically be an overview of how again, we're looking at you know this environment and clearly in a position that the predictability of it is still unknown.
Thank you that's very helpful. My second question, then if we could talk about the strength of the balance sheet and opportunities I think you discussed as quickly in your opening remarks, you know.
Well are you seeing what are you seeing today and how should we think about this and how can PS eight take advantage.
During this downturn verse I think one of the Rugrats was not being a bit more aggressive during the world financial crisis.
Sure well.
Tom can talk a little bit more specifically about the balance sheet as it stands today, so I'll, let him do that miseq, but again looking at.
You know extreme cycles like this one is likely to be there is evidence it's very early but it wont be surprising if you know again, a number of owners that have come into the sector, particularly over the last three or four years, where we've seen in abundance of new supply come into the market, particularly with.
Owner owners and ownership structures that may not be well suited to deal with something like this.
There could be again, a predictable effect, which would be more ability to capture assets.
Again, a price point that we think is very different and much more attractive than it's been over the last say three or four years.
We're starting to hear you know again Tom.
Rumblings around assets that I would say are under water, where they've been funded through a a certain level of debt and the valuations are below that value and so we're starting to again to hear some of that out in the market. It again, it's early but it wouldn't be.
Surprising to us and the ability for us to in particular take advantage of an environment that could create that additional level of transaction activity.
The balance sheets ready for it and it's ready.
In a meaningful way.
So.
We'll see how that plays through and I'll hand, it over its Tom you can give you a little bit more color one of the balance sheet stands today.
Thanks, Joe.
The balance sheets in in great shape as we've discussed on previous quarterly calls we.
We're sitting right now is debt to EBITDA just to touch over one times fixed charge coverage around eight times and over 700 million in cash on the balance sheet. So we feel very good about our financial and liquidity position to take advantage of potential opportunity should it arise.
As Joe mentioned, we're starting to see the early signs of that.
Thank you I wish everyone well.
Appreciate it Jeff you to do we thank you. Thank you.
Your next question is from Jeremy Metz with BMO capital markets.
Hey, guys.
Joe Tom I Wonder if you could just give a little more color on a on the trends and what happened in April in terms of occupancy and where you ended turnover I'm moving rents and then it sounded like delinquencies were 2% for April and that was in line with last years that was out right.
As well.
Sure Jeremy I'll walk through a number of those points it's Tom.
So stepping back looking at activity through the quarter and then into April.
We had a pretty good quarter on move ins, which really began in January February we were up 510% on move ins in January in.
In March we saw a meaningful increase in demand is customers pulled forward activity that would typically occur later in the second quarter, most notably college students and others ahead of stay at home waters. One week in March for instance, move ins were up.
About 20% to give you a contact but then that volume started to decline significantly as folks were encouraged to stay home.
Overall search volumes have come down inbound sales calls are down about 25% in April web visits are down about 7% in April.
Overall move in activity through the month of April was down 17%. Despite decreases in rental rates of circa 20% to drive volume across the country.
So for those customers that have a stores need will providing space with enhance precautions that our properties and utilizing our E rental online leaf.
Somewhat encouraging as Joe mentioned over 80% of last year's seasonal activity, we experienced in April.
Which which speaks to demand for for the products even in tough times.
Trends modestly improved as we move through April So last week of April for instance, move in volumes were down about 11%, but again it reduce rental rates.
Somewhat offsetting the decline in move ins wasn't anticipated decline and move outs.
So move out volumes not take into account or auction related move outs was down 9% in the month of April we're watching this metric closely and anticipate that stays as stay at home orders are lifted we may see an increase in tend to move out volume.
We talked about in the past.
That's in 2009, there was a shift in consumer behavior with longer length of stay customers moving out.
We have not seen that to date.
Our existing tenants continue to perform well.
And move outs remain down.
As Joe mentioned, we have seen less overall activity a property so not just move ins and move outs, but just customer visits to the property our new centralized access system gives us insights into what's going on at the properties in.
April activity was down about 20% versus March.
In terms of occupancy.
We ended.
The first quarter up about 60 70 basis points in occupancy as we disclosed part of that was attributable to the fact that we had postponed auctions of delinquent customers.
We've continued to do that through the month of April.
So our occupancy at the end of April was up about 30 basis points.
But if you take into account the fact that we have some customers with us that we may have otherwise auctioned in prior years, our occupancy was down on a year over year basis.
Still up seasonally on an absolute basis, but down on a year over year basis.
Moving to collections, which is the third prong of your your commentary.
As noted in the press release and as Joe just highlighted April rent collections were very consistent with prior year.
That is consistent with what we saw in 2009.
We've collected about 95% of our April rent at this point.
Which is right in line with where we were last year at this time, so as the duration of this a pandemic elongates and we react to to where we go from here could very likely put more pressure on the consumer.
And we'll have to monitor that as we go forward, but at this point collections are very much in line.
That's great color and for my second question I'm going to double up a little day I just wanted to see Tom if you could.
Standalone, although a little more from what you're seeing a proper kinda talk about it from or a regional perspective, you know house attached as perform and just given the fall off in energy you know southern California, given the closure is Florida, you know what about areas that are starting to turn.
We hope and what are you starting to see there and then just if I could add on is just on the business customers side on the it sounds like you know they are pretty steady right now, but when do you expect to start hearing from them and what sort of trajectory are you seeing there or do you ever do you foresee there. Thanks.
Yeah. Thanks, Jeremy So there are regional trends that are worth speaking to you and I think the.
The high level takeaway is that the northeast has been more impacted and we've seen a slower rates and move ins in the northeast also saw rate to move outs that flow rates of move ins.
And so as you look at New York, or Boston or Philadelphia.
And really you can expand that up and down the east coast, because that would put Miami probably in that category as well.
Along the West coast move in volumes have been more similar with prior year still down but down more in a 5% to 10% range in many of those markets versus a higher in the northeast.
And then that extends through the southwest and into Texas.
Houston is a market that.
Certainly with the combination of the pandemic as well as with what's going on with oil prices, one that we and we suspect others are watching closely.
We have seen move in volumes hold up reasonably well in Houston, but we have cut rate in order to drive that volume more meaningfully in Houston than we have in other markets in Texas and and the West Coast that island.
Your next question is from Steve Sakwa with Evercore.
Thanks, Good morning, I know that the industry has kind of gone to a temporary hold on existing customer rent increases, which has really been kind of the single driver of revenue growth for the industry. I'm. Just curious what is the timetable on that I assume that that's still in place for May and.
And how long do you think that might be on hold for.
Sure. So we thought it made sense and it was appropriate to pause that program as we move through March and we did not send existing tenant rate increases out for June 1st billing and so that will continue through the second quarter.
Stepping back existing kind of rain increases in a more normal time or managed had a very granular level using data analytics to drive what we said when we send it and the magnitude.
That will be an important part of where we go from here and how we restart at the appropriate time.
Recognizing that a cut consumer behavior could be a little bit different post this event than what it was before but we'll be using the same tools that we have in the past in order to to determine those rental rate increases and the appropriate time with which to send them.
Yes, Tom just as a follow up is there something is there a guide posts visit about the amount of country. That's open I mean, what sort of guide post should we be looking forward to.
Kind of determined when those may be appropriate.
Yeah, I would say, it's a number of different things certainly the.
You know the situations that are going on in the local economies got consumer behavior that we're seeing.
And and we'll react to a number those things as we see them at this point, we thought it prudent not to send them out at the end of April for June one effective.
Okay. Thanks, and you mentioned in the press release.
Increasing kind of hourly wages by by $3 at least sounded like at least for the second quarter, maybe just talk about expenses overall, I think maybe online marketing costs.
We're still up that just how are those trending and how do you expect employee costs to kind of trend through the balance of the year.
Yes, Steve first on yeah.
Personnel related expense you will that will be elevated through Q2 by virtue of the things that we've discussed we put some information on that and that Q as well.
And again, we'll continue to moderate and understand you know again, how we need to react to the overall environment going forward in the second half a year.
And we're looking at all expense levels across the.
The company as whole.
The burden of tax increases is still with US we don't really have a way to predict that going one direction or another at the moment other than its just continuing to be elevated.
And.
Tom can give you a little bit more color on another.
Component of our expense tied to the advertising.
So again, that's been a vibrant tool for us we're going to continue to use that aggressively but.
Again, it's it's going to be a factor in the mix as well we continue to look at all of our operational expenses, whether again, it's tied to vendor contracts the amount of.
Maintenance capital that we're putting another portfolio et cetera. So it's definitely something that we continue to focus on and look for ways of.
In this environment to optimizing overall cost levels and then Tom if you want to give a little bit more color on what we're doing with advertising and marketing spend sure Atlanta show just briefly touch on that because that's a lever that we pulled pretty hard through 2019, and the first quarter and.
In the first quarter like we saw last year, we saw a pretty good demand response from that and that's continued through in April. So we're going to continue pushing pretty hard on advertising as we continue to see a great response to the public storage brand online.
And so we'd anticipate that that's been remains somewhat elevated.
As we seek to drive.
Volume to our website call center and the properties.
Thanks, that's it for me.
Thanks, Steve Thanks.
Your next question is from Todd Thomas with Keybanc.
Hi, Thanks, good morning.
Thanks for the the April trends that information is helpful. It sounds like you haven't yet seen an increase in move outs, so and I'm just curious if you look back at.
Prior cycles and I realize this is a different environment there what youve seen in prior cycles, but any sense, what kind of lag you might expect to see between.
Job loss and move outs.
Sure.
Todd I think you know looking back at 2009 as a guide post, but 2009 was a different environment and.
As I look at move and move out trends in 2009, they were more gradual as they came on than what we've seen to date. So to give you a context, we did see a material increase in move outs.
But as you look at the quarters in which they took place in the fourth quarter 2000.
Eight in the first quarter 2009, or you know the magnitude of those were in the mid mid single digit, which as you compare that to the orders of magnitude that we're seeing and the sharp decrease in move ins and move outs already.
At this.
Juncture, given the pandemic, it's a different reaction given the fact that.
Folks are being encouraged to stay at home and we're all kind of awaiting scientific research and development. So I think.
It's hard to point back at that and say, it's a it's a perfect analog to be honest, but it did happen with increased move outs pretty quickly on the back of declines and in employment in the fourth quarter 2008.
I think the one of the biggest drivers now is not just job loss as it relates to move outs, but it's also the fact that there are customers who are staying at home and maybe don't want to come visit our properties to to move out right now because they feel good about the safety and security of their goods at our properties.
So, we'll see where where we go from here, but your point that you made is the right one which is we have not seen any noticeable shift to date and in fact move and move outs are down.
Okay. That's helpful and then.
The rent reductions for new move in customers that you mentioned, Tom I think 20%.
Is that across the platform on average and can you talk about whether or not you anticipate needing to change pricing.
Going forward here based on their call volumes are site visits and just I guess rentals and conversions overall.
Yeah sure Yeah, we do actively manage our pricing on a day to day basis across the country at a unit size and property level basis, and so as you would expect my comments around volumes being different by region.
Pricing strategy is different by region as well so there's some regions in the country, where pricing is only down call it 5% year over year, and Theres, others, where pricing is down 30% and so there's a good mix there and we're managing that dynamically in order to drive both.
Volume.
As well as revenue outcome.
Okay, but norm normally in the peak leasing season.
You know that there'd be a few.
A large net move in months in a row.
You'd be you'd be raising rates right. So.
You know, you're discounting and lowering rents here.
Do you expect to be able to.
Begin to take you know that pressure off a little bit and be able to move rents higher on a on a seasonal basis at all throughout the spring and summer months.
Well I think you know looking at last year as a guide post is probably thrown out the window, we manage our pricing advertising promotion strategies on a real time basis.
At all times, regardless of of what's going on and certainly we're reacting to different signals that are coming in this year than what we saw last year your point on seasonality.
You know we've already seen an impact to the seasonality to date, which is the college students that with college is going to E learning and and shutting down physical presence in the month of March we saw that activity pull forward.
As we move into the month of May and June you'd have other seasonal use cases that would or would come up whether we see those this year I think is to be determined and may very well differ materially.
By region and jurisdiction.
Given how.
How things are managed would stay at home orders. This year. So I think it's too early to comment too much on.
What seasonality may play out through the second and third quarters.
But we'll be managing real time, as we always do.
Okay. Thank you.
Our next question is from.
With Citi.
Hi, Thanks, I wanted to ask you I'm going back to the compensation increases that you put in place for the second quarter, there that that you might.
Extend them and I was just wondering if the decision around potentially extending them to do with shutdowns and disruption from this pandemic or is it more just a reflection of.
Kind of competition for that so that level of work or the property level or kind of I guess what are the issues that would help you make that decision.
Yes me.
Yeah, I wouldn't take that is we intend to do any of the things you're talking about its really we felt comfortable in the near term that the range of issues at our employee base was facing we thought the right thing to do was to elevate.
Their level of overall compensation and other tools they had at their disposal that we can help fund whether it was childcare or extended time off et cetera, So again because of the unpredictability going into the second.
Half of this year and frankly, even for the rest of this quarter I mean, we'll see how that how things go on I'll tell you, though that the the.
Variety of wage rates, we have nationally is something that we constantly do evaluate we look at again the relative pay for the scope and the.
Applicability of skill for the type of compensation that we haven't we think we're aligned in that regard.
And again, that's just something that will continue to be fluid.
Clearly one of the things that you know we have the ability to do and we clearly thought it was the right thing to do was to again give additional support to our frontline workers in particular, there, yes, I mentioned my opening comments a critical part of our overall operational.
Strategies, and taking care of customers et cetera. So it's just something that we'll continue to evaluate again in an environment that has a lot of excuse me unpredictability, even around the way even some of the stimulus packages are working and other things that.
Our at everybody's potential access, but at the same time, knowing that we had the ability to give additional support and we thought it was the right thing to do.
Yeah, No Mexico makes sense. Thank you I mean, the other thing I just wanted to ask you for the behavior or pricing behavior or facilities that are still in and lease up.
Has had has to pay taking a more aggressive approach on rates there just to kind of gain whatever kind of market share there is available or what what's happening I guess, specifically at those properties versus your stabilized assets.
Yeah. This meet those properties continue to lease up we have reacted to the new pricing environment and have lowered pricing on many of those as well, but again depending on.
The level of volume and interest going on in those individual markets that surrounds the trade areas of those properties.
But they've continued to lease up through the month of April which were encouraged by albeit at lower pricing.
Thank you.
Great. Thank you. Thank you.
Your next question is from Jonathan Hughes with Raymond James.
Hey, good morning out there first off thanks for the outlook commentary in Yesterdays release I found it to be very helpful.
Could you just remind us of your average length of stay which I believe a bit higher than your peers and do you think that makes them more or less price sensitive to renewal rate increases whenever those are of course slated to Brazil.
Sure our average length of stay is right around 10 months and that's really a.
A barbell between some customers that have used cases for storage that are very short term in nature or be it between apartments et cetera, and those customers that are using the space for longer term needs be it.
During seasonal goods business is an extension of folks homes et cetera.
And in terms of sensitivity to two rate increases theres lots of different factors that that play into that stickiness of customers. Once you get past really that one year Mark it is quite sticky and that's remain the case through the month of April.
And we'll have to evaluate what consumer behavior may change and business behavior may change as we move through.
Navigating this pandemic, but at this point no changes.
Maybe another maybe similar question I mean, what percentage of your customers have been there for over a year number two years.
Yeah about 60% of our customers little little less than 60% of our customers have been with us for.
Longer than a year and.
In a little over 40% of our customers are going with us for longer than two.
Okay, and what percentage of those are not okay.
Almost all good percentage it auto pay for us is around 50% of the tenant base.
And we haven't seen any change in.
Ought to pay sign ups or any cancellation trends.
Very consistent.
Got it right I'm going to think of one more have you.
Looked at expanding the size of your credit facility to be able to take advantage of acquisition opportunities or do you feel you have enough capacity.
Now with free cash flow and what's your cash and revolver capacity for any opportunity you you pursue.
Yeah sure I I think we feel very good about out of the current liquidity with over 700 million in cash and the balance sheet.
Entirely undrawn revolver.
And access to capital markets given or.
Uniquely low leverage and high coverage and so we feel very good about the fire power we have in order to fund.
Potential opportunities.
And we await that opportunity.
In the next several quarters.
I got it thanks for that that they help.
You too.
Your next question is from Ronald Camden with Morgan Stanley.
Hey, just a couple of quick one thinks of the disclosure I thought very helpful.
The first is just.
Let's talk about maybe.
The small business and then.
In the portfolio Im just just high level sort of win of the exposure and higher they bearing a in this environment as to the extent you can.
Sure so.
Small business customers are a component of our tenant base.
They typically.
Our good paying customers as it relates to collections and that's continued through through the month of April.
And the one notable trend I would highlight is oh, we have seen a decrease in move in volume more pronounced for business customers than we have for individual consumers.
Particularly over the last four weeks.
So that's not surprising in this environment given the fact that than many businesses are not open in operational.
Folks are being encouraged to stay at home. So I wouldn't point to anything concerning there, but we have seen a decline in move in volume more so.
And and what percentage of the business customers the portfolio is it.
Yes, so there's a variety of different businesses that use our space. We have about five 6% of customers that are true businesses that sign business leases with us.
And then we have appreciably more.
Customers that our business users that by survey indicates something.
More like 15, 20% of our customer base, which is you know sales reps and others that use our space and those customers.
So that gives you a sense of the composition.
Very helpful.
Another quick one just looking at late charge.
He is.
You saw was down 3.5% year over year that is their thought.
Either this go around or did you do this last cycle as well.
In terms of trying to deal with customers and potentially waving at some late fees or is there so no change in strategy there.
Yeah sure so one of the things that.
That we did was provide some incremental customer accommodation for those impacted by the pandemic I would.
To highlight that.
Our operational teams have dealt with crisis situations over the past several years and are well equipped to deal with situations that materially impact local communities.
And so while that's historically happened in very tight geographies in this case, it really happened across the country.
But our operational team pivoted to that stance.
Very quickly and effectively and so we are.
Waiving fees, reducing rent in some instances and working with delinquent customers across the country for those impacted by the covert pandemic, a we already talked about the fact that we paused auctions and existing tenant rate increases as well, but have been really impressed by our operation teams ability to to move into crisis.
Mode and to help those that have been impacted to date and that that is a driver of.
Some of the fees that you highlight and would expect that to be the case as we move through the second quarter as well.
Great one more it by May I, just was noticing that I think Minneapolis.
It was looked like it was added this in the Q this quarter and from the market you called out that supply. Okay. I got that right, but it is maybe provide a little bit more color or maybe what what's what's happening there.
To warn that call out.
Yeah sure Ronald Minneapolis is a market that first of all we have significant market share and presence. So over the last two years weve boosted that bye.
I'm doing three things, we've added to our own portfolio through acquisitions.
Ground up development and redevelopment in a market that we hadn't actually had a lot of investment activity in for some time, we like and see I think very good long term traction relative to the market itself and the additional inventory and new proper.
He is that we put into that market all told for us directly is.
About 10000 units and lease up there is going well on the new properties.
We're not seeing a like for like.
Additional.
Magnitude of new development going on the market, but there are some but we felt it was relevant to call it out because again our same store.
Is not progressing as well as some other markets have been in the near term, but we feel like the stabilization that will take place over the next one to two years as again, we see good absorption of the new product in.
Any if.
Any things are happening or existing properties correct as well so again the markets I think well plays for future growth and we're really pleased with the additives scale and the range of new assets either.
Directly built and required that we put into that market.
Hi, everyone is its Ryan Burke would you have a number of analysts left that want to ask questions. So please do try to keep it to two and then feel free to jump back in Q.
Sure. Thanks, Thank you.
Thanks Randall.
Your next question is from Todd Stender with <unk> with Wells Fargo.
Hi, Thanks, just to flesh out that rent relief question.
As you may offer tenants if they ask is a deferred.
The expectation that should receive it later on.
Maybe just trying to flesh that out is it a maintenance or ability to maintain occupancy she'll give around holiday you're looking at that.
Yeah, I would say first off it's been a.
Relatively modest amount of requests that have come in for for things like that.
We have a little bit of a different business than than many other real estate.
Asset types that may have long term leases and maybe talking about blend and extend and things like that we have month to month leases. So as we think about customers and their rent.
And navigating this environment, obviously, one of the choices that customers have as they have the ability to move out and so you know extending.
Payment plans or otherwise are a little bit less applicable for.
For our product type than others.
But we have a variety of different tools to work with customers impacted by this.
Derek.
Right understood.
And then habits your stance on share buybacks as you look at the stock.
Some inside of maybe a navy estimate you're looking at putting cash to work should the stock a decline.
Sure.
Stock buybacks or something that one we have authorization from the board to to undertaken in two is part of our regular capital allocation dialogue.
We we are hopeful and optimistic that this pandemic could create a different business environment different acquisition pricing environment.
Which could allow us to use our balance sheet to grow the portfolio in an attractive manner.
And we will see how that plays out and in addition to that no stock buybacks or another tool that we have two to allocate capital.
At this point, we have not buyback any stock.
Okay. That's helpful. Thank you.
Thanks.
And as a reminder, if you would like to ask your question at this time simply press Star then the number one on your telephone keypad.
Hi bin Kim with Suntrust.
Thanks.
Just wanted to clarify a couple of comments you guys made earlier.
You said April at the end of April occupancy was up 30 basis points, but that included.
Some units that were.
I've been auction off yet so you looked at it.
Maybe from a paying occupancy standpoint.
How does April look year over year.
I will we finished April down about 40 50 basis points in occupancy if you take out those units that may have been auction in the previous year.
Okay.
And.
In terms of move in rates you ended the first quarter down 4.2%.
How did that trend in April.
Yeah keep that have already commented on that in terms of the ranges of different move in rates by different markets on average it down around 20%.
Okay. So I was confused about volume versus late.
Alright Thats it for me. Thank you great. Thank you.
Your next question is from Mike.
P. Morgan.
Yes, hi in terms of the plan capital spending that you talked about the K for property upgrades and everything is there going to be in disruption to Don or any notable change the to the bunch and good mobs.
So yeah Mike.
We obviously reset that from what we spoke to a quarter ago, where we were looking at something along the lines of 250 million or so.
And we re have reset that to about 175 million. So there's some things in the mix there the.
Have led to the reduction one is a number of the capital projects that we launched.
Into 2019 carried into this year, along with some of our strategic investments around what we call our property of Tomorrow initiative.
Have we have tapered that down knowing that we're going to be looking at delays.
And approval and or permitting basis in one regard.
Through the next.
Few months based on what we're seeing at the moment as cities of shutdown many of their own staffing levels and or sets of approvals that come through when you're doing work along those lines coupled with the fact that we think we're going to go into a much more.
Beneficial arena, even for bidding and continuing from a scale standpoint, the transition of properties to our Gen. Five standard that the property of tomorrow programs aligned with so that that was one component.
A number of other things that I'm also we were intending to do through this year not in any way related to functionality of properties or anything else, but it just makes sense based on availability and predictability of not only vendor.
Effectiveness, but even from a cost standpoint, we think we're going to be much better suited to do more of that going into 2021.
On the flip side of that we still are anticipating about 175 million.
It will happen this year at it ties to things that we will continue to do as we always do we keeping our properties highly functional doing repairs doing everything that we can to facilitate high degree of customer move ins and high occupancy.
We also still are doing a few things that.
Vendor friction aside that we think we can still doing this environment that would also relate to upgrades to ltd, and energy efficiency, we're putting solar on a number of properties. So that's really what's led to the reset on our expectation for 2020.
Got it okay. That's it thank you.
Thanks, Mike Thanks.
Your next question is from Spencer.
Green Street advisor.
Oh actually all my questions have been asked thank you.
Great. Thank you.
Your next question is from Parker to Crane with Citi.
Oh, Hey, it's Michael Bilerman here.
So just couple of questions.
The first is more strategic.
Pandemic is going to.
Change the way we live work play.
Both in the near term, but but certainly.
For a longer term have you given thought about.
The live part of it and if there's going to be a shift.
Of population out of urban dense cities.
Into more suburban house living.
Even a modest shift, but it could certainly accelerate how does that change the dynamics of demand for your product.
Yeah, Michael I, Yeah, we'll see how that does play through obviously, we have the benefit with 2500 locations 38 States, we've got a sizable portfolio, both urban and suburban related.
Too soon to tell yet if you know ones being benefited versus the other.
So.
Well, we'll assess that and see what kinds of trends might play through just on again, how the population shifts one direction or another from as you mentioned pure urban.
Desirability to something that maybe more desirable from a suburban standpoint, but.
Don't know yet, but we've got plenty of.
Tentacles out there as we continue to see the type of impact at this environment may create in that regard, it's not coming through yet meaningful other than Tom mentioned that we have seen.
A little bit more of a.
Impact in the northeast and I think you can make sense of that really more from a health standpoint in the science standpoint, because that's frankly, where.
The most dramatic impact to the.
<unk> advisor virus has been so far and again many of those communities or you know in major locked down so we'll see.
And we play in both arenas very actively continually as we speak you know we're making.
Development decisions, both in suburban and urban markets, we use a lot of demographic data point us even on a very.
Macro basis, where to located investment properties, where we're where we think we can continue to see good demand.
Right I think about the shifts that you made into some extraordinarily larger facilities and more urban markets.
Is there anything you can glean from those during this pandemic yet.
No it's tough to its Michael it's really tough to isolate what longer term trends will be based on the last six weeks that weve navigating this pandemic because I think the bigger driver of activity over the past six weeks is been people dealing with this crisis and navigating it both.
For their personal use as well as for their business.
And I don't I'm not sure that that's indicative of what the longer term impacts that you're pointing to that could be three four or 510 15 years down the road as it relates to customers affinity towards urban living versus suburban or X are living.
The last six weeks wouldn't point to anything notable and they've been a very unique six weeks in our history, Yes, I think the other thing as you know again the reason.
We.
I think through and design and either build or invest in our larger assets, whether again are in urban or suburban markets as its highly correlated to you know again demographic.
Data, which is both population based and its competitive based so.
Some of our very largest properties even through the last few weeks are doing just as well as they've done historically, so right it's way too soon to tell.
And then second question just in terms of operations and thank you for the detailed MCU and the press release can you talk about same store NOI being negative for the rest of the year given the pressures on revenues and certainly the investments you're making in your employee base and then to keep your facility safe and clean.
So, but the revenue and expense impact if you look to the last two recessions that we've gone through.
In the early 2000 same store NOI to cross the self storage sector was down high single digit.
Year over year on a quarterly basis, you go back to the O 910 timeframe.
Down 4% to 6% on a quarterly year over year basis, how should we what type of goalposts should investors think about in terms of the rate of decline.
I think you talked about it will be a much quicker impact.
To your business than the prior recessions just given all these stay at home orders and a complete halted the economy should we be gearing up for a high single digit maybe even a double digit decline given the expense drag.
Is that where our mine should be up by the end of the year.
Well, Michael first of all you know well, we don't guide even in quote unquote normal time.
And it's it's a crystal ball I mean, we we clearly don't know what direction. This can play through you're right. I mean has been a severe in Missouri dramatic change jobless claims are now at 30 million I mean, that's a massive shock to the entire.
Our economy I don't know how long, it's going to take for that to correct I don't know how long.
Will play through what kind of impact it could have on our broad customer base.
GDP growth is going to be ugly.
From a predictability standpoint this quarter in particular, so we'll see.
Yeah, and Michael you're obviously pointing to the right historical benchmarks, but I'm not sure that they're really analogous to my and my points earlier and to Joe's comments. So.
We we provided some line by line detail as to what we're seeing at this point as we move forward through 2020, a lot of what we see will be driven by science and political decisions of which is difficult to underwrite and.
You know we tried to provide you the color in the context around what the drivers are but we'll see here.
Yes, no what I know you don't provide guidance and that's why I appreciate the details and taking all the questions on the call about impacts you did put out there a negative number I just didnt know.
Whether you could at least goalpost, a little bit about how Nick yes, well.
That's where I'm just trying to.
Quarter, I'm kind of right in between one and 2%. So right. Yeah same store revenue growth is between one and 2% for the last eight quarters and I think over that last eight quarters same store NOI is probably the.
Maybe the exception to third quarter last year between zero and 1% Yeah. So certainly we're not in that environment that we were in over the last eight quarters.
We're seeing a decline in move in volumes.
Our existing tenants are performing well at this point, but will remain to see where they go from here.
And collections have been solid in April.
Hi, Thanks for the time, great. Thank you.
Your next question is from Jeremy Metz with BMO capital markets.
Hey, just one quick follow up John and Tom you guys. Both commented earlier on capital allocations, you mentioned acquisitions.
Had a question about stock buybacks in there somewhere just wondering how you're thinking about the marginal dollar there versus reinvesting in your existing portfolio just given the pullback.
That we saw outlined in the queue for the Capex program.
Yeah, Jeremy you know like always as Tom alluded to I mean, that's the stock buybacks and in of itself from a capital allocation decisions something that you know it again has always been an alternative will continue to assess it.
I couldn't at this point.
Did you too okay, Where's it stack rank or how are we benchmarking against.
You know other uses of capital at the moment.
The thing that's.
On the horizon likely though that we've already talked to is.
With the potential impact to a number of owners.
That have put anywhere from say 1500 to 2000 properties collective Lee into our sector over the last three to four years a lot of those.
Investments are not going to come close to the pro forma expectations or underwriting hurdles that they had put forth. So we would anticipate but we'll see that unlike other big corrections that this too will lead to an opportunity for us to.
Allocate capital that direction, but to be determined so.
Yes, we've got a variety of different cap allocation options and we'll continue to set some interesting place through.
Yes, no that's where I figure is just trying to think through you know hydrating the portfolio externally versus focusing on the internal which you guys have made a big priority.
In recent years. So appreciate it thanks, yes, yes, thanks Jeremy.
For your questions at this time.
Sure.
For any closing remarks.
Thanks to all of you for joining US today, we're certainly hope the best for everyone. As we continue to manage through this interesting environment.
Thanks, I'll stay safe.
Thank you.
Ladies.
Conclude today's conference call. Thank you for participating you may now disconnect.
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