Q2 2020 Extra Space Storage Inc Earnings Call

At this time, all participants are in a listen-only mode following the speaker's presentation. There will be a question-and-answer session to ask a question via the telephone, please press star and the number one on a telephone keypad now like to hand the conference over to your speaker today. Mr. Jeff Norman. Thank you, please go ahead sir.

Thank you Warren. Welcome to Extra Space storage's second quarter 2020 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 to your questions may contain forward-looking statements as defined in the private Securities litigation Reform. Act wage results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC which we encourage our listeners to review.

Forward-looking statements represent Management's estimates as of today, August 5th 2020 the company assumes no obligation to revise or update any forward-looking statements because it's changing market conditions or other circumstances after the date of this conference call. I'd now like to turn the the call over to Joe Margolis chief executive officer. Thank you Jeff and thank you everyone for joining us on today's call the second quarter presented unique challenges to our country our industry and extra space. I am incredibly thankful to our employees continue to operate our stores service our customers grow our company strengthen our balance sheet and to do all the day-to-day blocking and tackling that gave us to optimize our performance.

All this good work was done in unusual and sometimes difficult working situations and often with added personal and family stress and uncertainty. It is said crisis does not create character but reveals character not I could not be prouder of the character the extra space team has shown during these past several months.

Order also presented a stark reminder of racial Injustice in our country. Approximately 40% of our teammates are black or other people of color and I am proud that wage routing developing and retaining diverse Talent has been a focus of our company for many years and is not a new initiative. However, the tragic events wage the last two months reinforced to me that while extra space is a values-driven company with the great inclusive culture. We can do better in response. We have enhanced our existing diversity and inclusion initiatives and have taken several concrete steps to improve as a company.

These steps are consistent with our company values and I'm committed at our response will not be limited to making statements or temporary steps, but we'll be continuing found substantive.

Turning to our performance in the second quarter most importantly we were able to grow ffo in the quarter on a year-over-year basis. We have started to see several positive Trends on which Scott will provide further detail.

Our platform is able to find and capture high value customers rentals have normalized and vacates remain muted as a result. Our occupancy is at an all-time high and prices have begun to move in the right direction where we can we have resumed more normal pricing operational practices and auctions. However, these positive Trends should not obscure the macro and industry-specific risks. We still face there are still uncertainties with respect to the course and length of the virus. It's economic impact and its effect on consumers and their willingness to pay for storage.

Well, our occupancy is at an all-time high until recently. We have not been allowed to initiate the auction process in several markets represent approximately 47% of our same store noi

As a result at the end of June approximately 150 basis points of our occupancy is from non-paying tenants due to delays in auction by the 8th of July this inflated occupancy increased to approximately 200 basis points. We are now moving forward with auctions in most States, but due to notice periods actual auctions in several States won't begin until September which will be outside of the peak leasing season for hunting these units.

Occupancy has also benefited from lower than normal vacates. I do not personally believe that the moderation and vacates represents a permanent behavioral shift of our customers Instead at some point more historically normal activity will resume and we will see vacates increased putting further pressure of occupancy when we may not have our full set of tools available to optimize returns due to government state of emergency orders or regulations.

Also, the non covet headwinds that we had coming in to 2020 are still present while we believe the pandemic has delayed new deliveries and Thursday reduced-price new projects and planning properties are still being delivered and there is still excess inventory leasing up in many markets, which is suppressing great growth.

So while we are encouraged by recent results, there are enough remaining uncertainties and risks. If we are not in a position to reinstate Guidance the possible outcomes rep too broad for guidance to be meaningful depending on how the risks I've outlined play out.

We will continue to be transparent on all metrics and answer questions that you may have.

And we will continue to work hard everyday and remain laser focused on maximizing shareholders long-term value and now like to wish Scott a happy birthday turn the time over him to walk through some of the metrics that I mentioned. Thank you Joe and hello, everyone. All of our properties are open and have been fully operating since Thursday. We modified our stores by adding plexiglass partitions stanchions to direct the flow of traffic and sanitation stations to provide a safer experience for our customers homes and our employees.

These updates have been effective and as demand started to pick up through the quarter or rentals rebounded improving from a negative 35% year-over-year Delta in April to apologize 4% rental growth rate in June vacates for the quarter were approximately 17% lower year-over-year resulting in strong occupancy growth which went from a -60 basis-point year-over-year Gap at the end of April to a positive 100 basis-point Gap at the end of the quarter at the end of July. This is expanding to a hundred and fifty basis points.

However, this increased occupancy came at a price our average achieved rate for the quarter was down approximately 17% And as Joe mentioned our quarter and occupancy inflated by 150 basis points from non-paying customers in may we restarted our collection efforts which which have been successful accounts receivable less than 60 days have dropped back to historical levels. However, due to the delayed due to delayed auctions in key states such as California, New Jersey and New York. We are still working accounts receivable greater than 60 days through the system today accounts receivable greater than 60 days as a percentage of rental income are running approximately 325 basis points higher than historical levels, and we have recognized the loss on a caged accounts receivable based on estimated wage.

directions

All of these factors together with temporarily pausing existing customer rate increases in March April and May will continue to drag on Revenue growth in the back half of the year when a street rates and Rental activity have improved significantly. It will take time for the impact of May and June lower achieved rate to flow through to revenue and we do not anticipate positive same-store Revenue growth in the second half of the Year while we are being proactive with controlling expenses to offset lower Revenue. We will continue to have expense pressure off payroll property taxes and marketing expense property level performance will continue to be challenged in the back half of the year, but we are finding success in other parts of the business office and have strengthened our balance sheet.

We continue to find ways to grow externally and to a creatively deploy capital in the self storage space. We have closed $52 million in Bridge loans year to date with another $170 under agreement to close in 20 20 and 20 21 in July. We purchased a 103 million senior mezzanine note at a discount with an anticipated the maturity of 6.1% are third-party management platform provides Capital light growth providing management fees and tended Insurance driving non same-store income. We also are we are also vigilantly pursuing acquisition opportunities and will act swiftly when we identify transactions that we believe add value to our shareholders. We continue to strengthen our balance sheet with the addition of a new $300 revolving credit facility and the closing of a $425 million-dollar private placement transaction during the course.

Funds from the private placement transaction will be taken will be taken through delayed draw to pay off our convertible notes and will increase our weighted average debt maturity as Joe mentioned. We haven't been immune to the impact of covid-19 and the pandemic has had and will continue to have an adverse impact impact on our business that said it is good to be in storage. Our company is well-positioned to navigate the current landscape. Our team has a track record of consistent high-level execution and we will continue to find ways to provide value to our shareholders regardless of the economic climate what that let's turn it over to Orange to start our Q&A.

Yes, sir, and ladies and gentlemen as a reminder to ask a question. That is star and the number one on your telephone keypad to draw your question, please press the pound key and Arthur's question comes from a Skidmore from Goldman Sachs.

Hi, good morning. Joe Scott Scott. Can you talk about the companies that debt policy and how you think about expensing and what the amount was in the quarterback expense? And how do you think about the uh account receivables greater than 60 days going forward things? Yeah. Thanks Rick. So our bad debt has historically run at 1.6 to 1.8 percentage of our Revenue during the quarter. Our bad debt expense was about 50% higher than that and that primarily has to do with the older accounts receivable and the things that have gone to auction our policy is to reserve or the majority of all accounts receivable that are ninety days or more past due so much of what's in the 60 days and certainly almost all of what's in the ninety days or more past due has already flown through bad debt.

Thank you. And then maybe 15 go to supply growth and talk about Supply. What are you seeing in terms of perhaps delays and Supply growth and deliveries and which particular markets do you see that Supply growth particularly challenging currently. So we we do see delays in delivery of new product. One of the reasons why we did have a good quarter with respect to new properties taking into our management platform who was a little less than anticipated because some projects were delayed and won't be taken out until later in the year, but we absolutely are both experiencing and seeing delays in new products being delivered the markets that were concerned with are still the same markets that we were concerned with before. It's the Texas, Georgia.

In Florida, Portland boroughs of New York City and markets like that. They're really covid-19 changed the the markets that are faced with my versus the ones that aren't thank you very much. Thank you.

And our next question comes from a rose from Citibank.

Hi, how are you? It's it's me, it's City. I wanted to ask you just a little bit more about the existing customer rate increases. I think it's June you provided an update where you were able to increase rates and 27 out of 40 States in which you were operating. What is that now and I guess what percentage of customers are, you know have been or or expect to receive rate increases and maybe you could just talk a little bit about the acceptance rate of you know, what you've seen so far as you push out rate increases for those who can get them.

So there's six states. Now. We're we're prohibited from issuing existing customer rate increase notices and bought a few of those States. We we have some meaningful exposure to and then there's another fourteen states where our ability wage limit it to a certain percentage and in some case that percentage is so high it's it's a meaningless limit so far. We as we have instituted existing customer rate increase notices. We have not seen any change in Behavior. We have not seen increased move out in response to those notices, although I would also caution you, you know, it's something we're closely monitoring and we're probably still early in that game. We're interested to see what happens what you know, we've been when the additional wage

Employment Insurance runs out and

Factors like that. So something we're watching closely Smiths.

Okay, and then could you just talk a little bit more about the meslow that you mentioned that you purchased is that back by portfolio of assets and kind of how are you thinking about that investment? Is it off of loan-to-own or just to get the the yield or just maybe a little more color? They're sure so it's absolutely a portfolio of 64 storage assets, you know, they're in markets that overlay our footprint and as with any loan we make if we end up having to own the assets, we're fully capable of operating them adding value and that's not a negative experience for us to your

Oh, go ahead. I'm sorry.

So, you know, we are always looking for opportunities to smartly invest our shareholders money in a creative position with the good risk posture. Well our position in the first year is about $53 a square foot. So we feel pretty good about that. We think we're getting a fair return and we're very comfortable with the risk posture of the investment.

Okay, great. Thank you. Appreciate it.

And your next question comes from Mister Jeff Spector from Bank of America.

Thank you. Good afternoon. I appreciate Joe your you know, your balance comments in your introductory remarks and just trying to think about you know, many of the lessons you learned during some of the worst months. We we seen let's say, you know, March April into May in recognizing, of course the risks in the coming months. Would you do anything different in the coming months? Let's say if the you know, the the re openings or closings continue verse what you initially did.

So I can't tell you we were perfect right? We certainly did things and learned lessons that we will apply in the future. One thing that I will tell you that a company like extra space that has a large portfolio has an advantage is we don't have to guess too much of things. So I thought we were going as we were faced with many of these new situations. We very quickly tried different things in a test basis in you know, several hundred stores and learned what worked and what what didn't so we we didn't have to make kind of final decisions for the whole portfolio and that was very beneficial because we we offer, you know faced with, you know, new customer situation new customer Behavior. We were able to quickly get to what perform best and we'll certainly take those off.

is with us in the future and

Also take our our testing culture and approach to new situations with us as well.

Thank you. And I mean again just thinking about the comments in particular, you know the the risk of with the auctions and you know, a lot of them. Let's say happening in September outside Peak leasing. I mean, we've heard other sectors people comment that you know this year that maybe there's no peek leasing. Maybe there's just the steady leasing may even pent-up demand like again, I'm just trying to get a feel for your comments and I totally respect and get the comments that we need to be cautious here. There's still a lot of risks. I think expectations coming out of the Year by the way were pretty low. But I mean, do you think that that there actually was a peek leasing or or is this just a could could the false prize us?

I agree with you. I think we don't know I think we're in a new situation and we don't know if there will be steady leasing if there is pent-up demand, We'll see the more traditional leasing patterns and you know, it's one of the reasons we're uncomfortable, you know providing guidance on what's going to happen for the rest of the year because there are these unknowns. Okay, totally got that. Thank you very much. Thank you.

And our next question comes from Mister Todd Thomas from kibaek keybanc Capital Market.

Hi, thanks. Just first question following up on the bad debt expense Scott. You you indicated that you know, historically the reserves 1.5 to 1.8% of Revenue. So, you know fifty percent greater this quarter an incremental 82 to 90 basis points of bad debt is is that going to Trend higher in future quarters or or normalize beginning in third-quarter as you as you work through, you know, some of the auctions and and delinquencies

So we were you know, I think July will be a little bit higher but we would expect it to normalize going forward and what we're basing that on is if you look at our 0 to 60 a ours, they're back to historical Norms. They're not continuing to grow. So assuming that continues that Trend continues those zero to sixty s become your 60 plus if they were not paying and so the fact that they've gone back to historical Norms. Hopefully, everything else goes back to historical Norms from here. So by the end of July, you've recognized the majority of your bad debt related to this.

Okay, and and then you know the the Lade auction activity that that's causing that this inflated, you know, sort of physical occupancy. Have you started getting back units at all? Or you know with notice periods. As you mentioned is that process really just beginning now and then you know as we think about the auction activity increasing in the months ahead, you know, is that going to result in an influx of of rentable units and effective, you know sort of increase in Supply coming back to the market over the next few months or is that not the right way to think about it?

so we

Have you know one of the negatives of the delaying auction is the opportunity cost to not be able to get the unit back? So we actually absolutely we'll try where we can to work with our tenants and make some arrangement where they turn the the unit back to us so we can re tenant it but the majority of the units have to go back through the auction process. We won't get them back until late in the third quarter and at that point, we'll have to re-tenant them and you know kind of similar to just call earlier. We'll see what the environment is then to do. So.

Okay, and and then can you just comment on you know what the the recovery rates are I guess the collection rates have been like on you know, the the cars here. Are you seeing bigger right off than you have historically, you know, is there any information you can you can share on that it Todd our recoveries have actually been slightly better than the historical Norm, you know, we'll see if that continues but that's life experience so far in the options that have happened.

What do you attribute that to?

You know some of these people might just be choosing not to pay and so they may just be paying late versus, you know, having a true problem, you know, I don't know for sure. That's some of our speculation one thing we see across other asset classes is when the government tells you you don't have to pay or the government tells you he's no penalty. If you don't have to pay some people just choose not to do so.

Okay. Thank you.

And our next question comes from a mr. Sameer with evercore.

Yeah, good afternoon guys. Hey Scott, as we think about the the headwinds we're facing now and you've talked about the occupancy for being inflated, you know, two hundred basis points the 325 base package or which could potentially be you know bad debt. Is this a set up to a quarter the third quarter where it where things are going to get worse before they get better or do you think the second quarter is sort of trauma Revenue growth and then there's sort of tail lens where we start to see Improvement going into the back half of this year where where things are still negative but less bad.

Yeah, so first of all, I think just to clarify one thing that they are the majority of that has a large majority of that has already been written off. So you basically reserved for it in the second quarter. Once they hit that off 60 to 90 days, especially the 90-day accounts receivable have been reserved for so we don't expect that to be a negative in the third quarter to the degree. It was in the same quarter. We do expect those units coming back online to be a potential, you know headwind for us.

And and what about it just kind of following up with the tail. Once you think there's enough sort of tail winds here to to to see some improvement in Revenue growth where things are going to be less negative or or that's too early to say right now.

So we I mean, we always hope for and we have confidence in our team in our systems that we're going to you know, get every dollar we can and optimize performance but I would tell you there's enough juice certainties in macro economy. And in other factors that we we can't say for for certain now.

Okay, and I guess just just another question for me. And and I know this was addressed a little bit earlier on ECR eyes, but just maybe a little bit more color, you know, California as well documented with with sort of 10% Max or or increase on that and I think some of the other states and municipalities have applied restrictions as well. But what do you think? How should we think about sort of em to push packs you're getting from States and municipalities and it's not really a question for this year's growth. But as we think about maybe growth in a next year, how should we think about growth throughout from an acri perspective?

Well, we would hope that these restrictions would be lifted and we can go back to our normal operating practice with respect to walk ins but we don't control that. So our job is to control what we can control and maximize performance and follow the law and other places with Sameer. The other thing I would maybe add there is, you know, they're not necessarily additive in a normal year. But in a year like this where they are going to be below average if you have certain states that either don't allow them or allow them to a limited amount. It does make it difficult to continue to grow your revenues, especially for customer who came in today at a level significantly below Street rate. It's difficult for us to move them more quickly to the the average rate.

Okay. Got it. Thanks. Thank you.

And our next question comes from Mister Ryan lung from Green Street advisors.

Thanks, Joe. Last quarter share the view that were likely to see a good number of distress. Let me see if our deals or stores in some stage of lease up coming to Market given the stress in the market given what appears to be at least some improvement in demand in recent weeks. We still anticipate the same volume of distressed assets coming to Market. Maybe this year or next.

Yes, I think there's going to be a number of stores that you know, we're not stabilized that the owner or the length or the equity Ambassador is going to force some type of capital event. So I would say yes.

Okay, and then I think you had mentioned in the past that when the operating environment changed so dramatically in March and April that many of the rules are often ships that govern sort of Revenue management system were either sort of less effective or not applicable to the very new environment found the approach the revenue management a disorder temporarily be reworked. I just curious any color would be great to what extent has the approached Revenue management sort of return to normal or off or are we still operating in sort of a uh, this time is different from just trying new things.

I guess part of my answer is I would say an extra space. We're always trying new things. We're always testing innovating trying to make the tools a little sharper and see what what works as I said earlier. I think we've learned a lot through this experience some of which may be may be permanent license and some may just be temporary, you know, we are seeing more return to normal in terms of customer Behavior. So often are walk-in traffic has has improved significantly and that's an important metric that we look at and and govern some of our our behaviors.

Okay, and ladies and gentlemen, just as a reminder to ask a question. That is start and the number one on your telephone keypad. And our next question comes from the line of Mister Mike Miller from JP Morgan.

I couple questions and I've had phone issues. So I apologize that this was addressed earlier first. Can you disclose if you haven't already what the rate is on the mezz investment that wage and then second if you're looking to see a bow deals in the market today. Have you seen any meaningful changes to pricing?

So we have not approved a new C of O deal certainly in 2020. Maybe maybe even for twelve months I think about that but we have not certainly not approved a new C of O deal in 2020. They just uh pricing doesn't seem to make sense for us. Now the rate the base rate wage on our note is five and half percent and the yield to maturity is 6.1% on the senior men's dope.

Got it. Okay. That was it. Thank you. Thank you.

And our next question comes from the line of a John Kim with BMO Capital markets.

Thanks. Good morning. I think Scott you mentioned expense pressure on payroll, which I thought was interesting just given the unemployment rate, but I was wondering if you could comment on that as well as the potential ability to more permanently alleviate this cost with either touch with leasing or variable employee hours.

Yeah, so the payroll cost comes the pressure on payroll comes more from a tough comp from last year. Our payroll was actually very low last year and one or two quarters. I believe we were off so it's tough comps as the main comment there in terms of you know, what we're looking at in you know, we think our managers are important. We think they're an important part of the sales process. We're always looking for opportunities to go touchless and deliver our customers the product in the manner that they would like to consume it. So the example I would give you is pre Cove it. I think most people enjoyed working a manager like our managers, you know, they were very successful in leasing units since this has happened. We've gone to a touchless process where our managers are involved via telephone and we have expanded even further where they can do a complete rental online at 3 a.m. With no manager involvement. And that's at I believe about 1,200 of our stores as of today. So we continue to evolve that

Okay, and you also mentioned that you were actively or more actively pursuing a position. I was wondering if you could elaborate on how pricing is moved and if you're seeing more interested in opportunities, in fact about product stabilize assets or more potential Investments.

Talk to clarify my remarks. I I didn't mean to give the impression. We are more actively pursuing Acquisitions. We're always pursuing Acquisitions. We're always looking for ways to smartly off-road this company and we're lucky to be in a great Capital position where we have plenty of capital of all different sorts to pursue any acquisition that I think makes sense. The acquisition Market has been somewhat muted in terms of things coming to the market and particularly things that seem to make sense for us, but we're always trying to find smart ways to present a good risk profile for us to grow the company. So whether that's Acquisitions Acquisitions and Ventures faith in our existing properties through expansions Bridge loans buying the mezlan that we just bought. We're just going to try to be smart allocators of capital.

And how would pricing it?

So I don't think pricing has moved for stabilized properties and there's not a ton of cops out there. But if you have a stabilized self-storage asset long, it's going to attract in a good Market. It's going to attract the very low cap rate because people understand the stability of cash flow that comes from a self storage assets wage rates are low and the alternatives are are not as good. So I think you know cap rates are still low. What is much more difficult to say is on a set, you know one's view of the cap rate depends on one's view of the timing and rate on which you can lease up that store and people can have very very different views of what that is and I would say pricing is uncertain.

Okay, great. Thank you. Sure. Thank you.

And our next question comes from a Ronald with Morgan Stanley. Hey, two quick ones for me one was just going back to sort of the bad dog. I know the apartment peers for its variations geographically. Just curious when I think about States like New York, New Jersey California, was there any sort of know the difference is there versus sort of the average of the portfolio or any other color you can provide

So some observations we can make we are seeing higher at stores that are in markets with lower household income wage also its doors if there's more cash paying customers as opposed to credit cards, but the biggest impact is if you kind of get the trifecta of lower household income in a cash-paying customers and you're in a state where we can auction that that's where we have the highest.

Got it makes sense. The other question was we're hearing a lot more about theme of organization. I people moving from Urban to Suburban and not just curious when you think about your portfolio. Are you seeing that translating into potentially more more traffic or more more demand in your on the margin for your suburban versus the urban part of the portfolio or is it's just too tough to tell

So I would say we're seeing good demand across our portfolio. And if there is that Trend it is probably too early to tell what one of the advantages of having a broadly Diversified portfolio across a lot of primary and secondary or Urban and Suburban. However, you want to characterize growth markets is you know, we should be in a good balanced position to benefit from that if it occurs

Got it, you know the last night I made you you mentioned July occupancy. Did you provide July achieved race as well?

We did not let me just kind of give you a little history of the rates through the quarter and how they progressed negative 10% in April -20 in May and this is birth rates from -16 in June. And then July that are cheap rates were effectively flat now. That sounds great. If you don't put that in context and the context I would give you as one July was an easy comp last year. We actually dropped rates in July to increase our occupancy and then to we've seen a shift in channel in July where we've seen month tenant coming walking in and renting at effective through our highest channel. It's a highest price channel. So we're encouraged by July and especially the trend of going going from being so negative may have been flat in July, but I think that it probably helps that will context there.

very helpful

That's all for me. Thank you. Thank you.

Our next question comes from Mister Rose from City.

It's Michael bellermann here with me you made the Smart Stop preferred investment. Last October hundred fifty million, which had a $50 million dollar add-on feature off had you did you invest that in the quarter or do you have plans to buy October which I think was the one your timeline so that that decision Smart Stop will make wage can't force them to take that money. They have the option to take that money.

And your discussions with them will make that likely or unlikely would you which way are they going to draw that capital? And do you have any sort of details on how long the portfolio is trending?

So smart stop would be the appropriate folks to ask if they want to take the capital or not. I don't want to speak for them. And we do monitor their portfolio and I think them I mean they're a good manager and they're performing similar to other good managers in the country.

And how do you when you look at the competitive lens? What are you seeing from? The large or institutionally owned platforms versus the smaller operators and what sort of opportunities but also challenges does that present in still a pretty you know dispersed set of owners life terms of the competitive landscape?

It's a it's a difficult question to answer Michael cuz there's not a lot of clarity as to how some of the real small black folks behaving. You know, you really don't know what their occupancy rate expenses are until you know, they want to sell it and you can take a look at their financials in general. You know, when we see smaller operators either because they want us to take over management of their stores or because they're putting their store for sale. We can do better than they can it's just as simple as that we can run the stores better. We can fill them up more and we can get higher rates and I don't think that has changed it all because if Covetous if anything I think maybe because more customers are now accessing shorts through the web are advantages, you know may have improved.

And then you said the yield on the mezz was in the fives with a I think a 6-1 yield-to-maturity where you stand within the capital stack. I think you talked a little bit about the per square foot sort of value. But can you talk about the capital structure the the yield and I recognize rates are low, but they yield for meds just seems light. So maybe you can just talk through the Dynamics a little bit.

Yeah, so I can't really talk about Capital. It's the question I would ask right. It's a great question what percentage are you but I can't really talk about that cuz I don't want to talk about our valuation of the portfolio. But if you think about self storage in a $53 a square foot number it will tell you where in a pretty secure were very secure part of the capital stack. Sorry, maybe just talk about the capital structure without yeah without giving us the equity value. Maybe just talk through how much you know, I'm a debt is there is there other sort of loans that are outstanding is there just to understand the pieces that are in front of you or behind you.

So there is a about a hundred million dollar first. There was our piece and then there's a junior mass of about $82 million dollars off and then there's the equity so our won't loan to value is much lower than a traditional Mass where you would expect to see a higher interest rate off right where you have a 82 of of Junior. So it's this thing's got a fall pretty dramatically for you to be in the ownership position versus just getting repaid where you got to blow through that $80 million of Junior math.

That's correct.

And then you know, is there anything on the valet storage side that you've witnessed sort of during this pandemic, you know, is that increased at all you suck at an increased competitive Source at all as people wanted to maybe just you know store their goods and let someone else, you know grab it from them.

Yeah, I would not say we seen an increased increased competition from valet during the pandemic.

We've not observed that I certainly wouldn't want someone coming to my home, but I just didn't know whether there was just given the movement of of people whether that was being used by by others off.

Okay. Thanks Michael. All right. Thanks, sir.

And our next question comes from the line of Jonathan Hughes with Raymond James.

Hey, good morning out there on the external growth front. If you guys looked at any large portfolios lately or just one-off. I know you mentioned you you always looked that extra on growth opportunities, but you know, we did see a big portfolio transact recently curious if you look at that one or if it's it's more of a focus on the one-off opportunities.

So we're in active acquirer every year of storage and because of that, you know, we're brought and we see every opportunity in the market place under item all we look hard at them and where we think that we can require it in and create a fashion. We'll we'll try to execute and if not, let it go. So we I I feel confident saying that we we see and analyze everything that's out there.

Okay, and then can you quantify the exposure to those six states that are prohibiting the rate increases is that similar or maybe identical to the I think 47% of it under auction restrictions much less than the 47% I'm looking at the states now. I don't have a number for you. We can wage that can't we just we'll get that number to you fair enough. That's it for me. I think for this. I'm happy birthday. She got home.

And our next question comes from a mr. Steve with evercore is I

Hi, thanks. Just wanted to ask about new Supply and kind of the pipeline. You know, I guess the macro data still shows it being relatively elevated and kind of the future pipeline still high as well. So I'm just curious if you kind of think that that data is accurate or kind of overstates. And and you know, what do you think it really takes to see the pipeline materially come down? I know some of the starts incompletions got delayed, but you know, it's still seems like there's new projects going in which sort of seems hard to think that they tensile today, but just curious on your thoughts moving forward.

Yeah, so Matt data is always interesting but it's important to remember that worrying a very very micro marketing business. So, you know the fact it's much more interesting where the stores are going than how many of them are going. So, you know in a development turns off in a market that has seen oversupply that market will recover even if the macro data shows development is in other markets Thursday, we see them macro data that's available. It is a little overstated. It is also subject to delays even in there's there's substantial delays. I think they don't take projects off their list that get killed as quickly as as they could. It's not a criticism.

It's hard information to get but but but I'm not disagreeing with your point that we're still in the development cycle. There's still are going to be projects that are going to be delivered and it's just something we're going to have to operate through in many markets.

And I guess just maybe as a follow-up. I mean, when would you expect kind of the I guess a sharp or fall off of new Supply in your submarkets? Is that more like the back home 21 or we have really looking more like a 22 at this point.

Yeah, I think it's going to be a you know, a gradual decline in deliveries across all markets is as opposed to you know, developments gonna fall off a cliff and they'll be no more development anymore.

I didn't give you a year on purpose. I'm sorry about that. Okay. Thanks.

And ladies and gentlemen at this time. We have no further questions Mister Joe. Would you like to have any last remarks?

Yes, so thank you everyone for your interest. As I said earlier. We we have some headwinds we're battling through them. We will control we can control and focus all our efforts on hansing shareholder value regardless of of what gets thrown at us. I hope everyone in their families are well, we will get through this and we found a better time soon. Thank you very much.

Ladies and gentlemen, this does conclude today's conference call. Thank you very much for participating may now disconnect.

Yep. Yep.