Q2 2020 Public Storage Earnings Call
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It is now my pleasure to turn the floor over to Ryan Burke, Vice President Investor Relations Ryan you may begin.
Thank you Maria and thanks to all of you for join US for a second quarter 2020 earnings call I'm here with Joe Russell and Tom Boyle before we begin we want to remind you that all statements other than statements of historical fact include 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 described in yesterday's earnings release.
Our reports filed with the FCC all forward looking statements speak only as of today August six 2020, we assume no obligation to update or revise any of these statements whether as a role to new information future events or otherwise a reconciliation to GAAP of the non-GAAP financial measures. We provided the call is included in our earnings release, you can find our press release.
As you see reports an audio replay of this conference call on our website at public storage dotcom.
What we do ask that you keep your questions limited to to after you asked to please feel free to jump back in queue Donald turned up in jail.
Thank you Ryan and thanks for joining us today.
Before I open the call for questions.
First like to acknowledge and thank the full public storage team along with our customers and business partners as we have come together to ensure a safe environment.
In the last four months during this pandemic, we have moved in over 400000, new customers as we continue to operate our entire 2500 property portfolio.
Clearly this volume of activity has been a validation of the strength of our platform and the resiliency of self storage.
With that I would now like to open the call for questions.
As a reminder, ladies and gentlemen to ask a question. Please press star one.
Our first question comes from line of Jeff Spector of Bank of America.
Great. Thank you Joe maybe I'll start the first question just on that point as you mentioned the volume is.
Very strong and.
You know the results were better in the quarter I think than initially expected if we compare comments to the last call, but at the same time I know your team is cautious on the second half of the year I guess can you tie those comments together.
Sure Jeff Yeah, Theres no question, Yeah, as I noted that we've been.
Very determined and focused on the amount of volume, we've been able to pull into the portfolio.
Coupled with obviously a number of cross currents. So if you step back and think about the last four months during the pandemic, we kind of think of going through four different phases.
And you know the early part of the pandemic March and April we did a number of things to ensure all the right safety protocols we.
Spend at auctions and really made sure that our entire environment was safe and secure as we were able to continue to operate all of our properties.
We saw a little bit a degradation in demand after an initial rush that came to us through primarily college.
And University shutting down early so we saw been of a rush, but then not long after that we started to see below degradation, but then going into the next phase. The second phase we began to put even more focus on customer focus we again suspended auctions and we opened up to a degree.
Some of their customer accommodation practices again to be reflective of the environment.
And we became more focused on different tools around top of funnel demand through advertising.
And other things that we're proving to be actually quite effective. So we started to see the residual benefit of that and.
Again, a lift in demand and move in volume.
The next phase again, we continued along those same lines, but continued to put even more focus on the ways in which we were able to draw new customers to the portfolio while month after month seeing a very positive impact from far fewer move outs.
And then finally, the most recent phase as we stand through the month of July we've actually I'm now going back to auctions.
We have reinstituted rent increases in many parts of the portfolio.
And again, we're starting to see very good.
Reaction to the amount of activity, both on move ins and lack of or.
Lower move outs.
So I'm speaking to the second half of the year, Yes, we do see you know a number of different pressures that I'll have Tom walk you through in a little bit more detail, but overall as I noted we've been very pleased by the overall resiliency and the ability to on our part to can you.
We continue to drive this level demand and literally we are dealing with in many markets record high levels of occupancy.
So Tom when you give a little more color and second half the year yeah. Thanks, Joe So.
As Joe mentioned operating metrics really started to improve as we move through the second quarter and have continued that post quarter. So we can spend more time, there if you like but I think part of your question was around passion around same store revenue trend. So how did those operating metrics translate to financial metrics and while operating metrics improved.
Throughout the second quarter financial metrics.
We saw revenue growth in the same store pool deteriorate. So if you think about the second quarter in aggregate into components.
Same store occupancy was up about 20 basis points.
Same store rents were down 2%. So that leads you to your negative 1.8% performance for rental income in the same store pool in the second quarter.
The collections were down 32% in the quarter.
Those collections were down for two primary reasons earlier in the quarter it related to customer accommodations and customers request requesting.
On the really and so we did grant.
Last majority of those requests.
The collections frankly were quite good through the quarter and so as we move through the second quarter, our fee collections were lower year over year.
On about a 30% basis, because customers were paying us sooner.
And we anticipate that's likely to continue at least we've seen it continues through July.
This point, which is leading to lower fee collections.
So that was the second quarter as we think about.
Other component of your question around the second half.
I just highlighted the rents were down 2% in the second quarter on average we ended the quarter down 3.1% on contract rents. So clearly we're starting the third quarter in a lower year over year rent growth position and we're still seeing fee collections.
Lower because of good collections.
Thank you very helpful. I guess my one follow up then just to confirm <unk> what are we saying that the second half you think.
Could be worse than to Q, I think that's where I'm a bit confused because there seems like we highlighted in the Mdna 10-Q, which is we think it's likely that the second half will have same store revenue performance worse than the second quarter.
Okay. Thank you.
Thanks, Jeff.
Our next question comes from line Smedes Rose of Citi.
Okay.
Hi, Thanks.
Just wanted to I was interested that you talked about in your Q that bad debt expense was was in line with historic levels.
Does that just tie into what are you just talked about where your granting.
See relief says that they so customers don't necessarily kind of fall into a bad debt category or is there.
Something maybe I'm just not understanding correctly no I think it's really pretty simple collection trends through the quarter were good.
We had a customers that were paying US earlier, we did have customers that while we had auctions pause for a period of time.
Stayed with us for a longer period of time, we've begun to work through that.
During the quarter and so right now we're sitting with about 20 basis points of occupancy that is delayed auction activity.
But as you think about.
Bad debt through the quarter, it was pretty consistent year over year.
And frankly as we sit here today away from it was written off in the second quarter the receivable as we ended.
The quarter was actually down a little bit year over year.
Okay stepping back that is obviously a focus of the team to focus on basis basics through the quarter renting spaces and collecting rent and I think we saw.
Good customer reaction and validation that our spaces are important to them and.
And.
We saw good payment activity and rental activity I.
I think theres also broader things that work, there's no question that government stimulus or government support for many individuals throughout the economy.
We suspect helped our collection trends through the quarter and as we look across industries credit cards or otherwise.
Any other industries are seeing similar collection trends is.
The government has done.
Good bit to support individuals financers.
Okay. Thanks, and then just a follow up you know you continue to make acquisitions and see thing. So you've got that you've got your purchasing just wondering if you could just speak to what.
I guess compelling about the opportunities. This is a cap rates is it just the ability to manage it better kind of what what are you sort of seeing now this is maybe versus kind of pre pandemic I guess on your acquisition activity Yeah sure Smedes.
No. There's no question at the.
Beginning of the pandemic.
Investment market on many fronts basically went into pause mode.
We had.
Again in the March and April timeframe.
A handful of assets that had been already vetted. We've we still thought they were very attractive investments for us to make we closed on those deals.
Toward the earlier part of the quarter.
And then you know things settle down we actually began to see and continue through today.
A bit of an elevation of return to market and or just conversations that we had in motion prior to the pandemic a variety of different deals that continue to the particularly attractive.
So for the most part the types of assets that are commanding normal or consistent cap rates pre pandemic would be stabilized assets theres still lot of capital on the sidelines itself looking for those types of investments what we've done Alternatively is look for.
Again value opportunities, particularly around assets that may not be stabilize and or in parts of our markets that we think round out our presence. So we are seeing a.
Little bit more opening up of.
Owners that are coming back to the market some of which do not see a way to.
Basically get out of some of the constraints they may be under for.
Lending reasons or not making the yields that they had expected and those conversations are becoming more vibrant I will tell you that and with that we've got again.
As we pointed to in the press release, we've got a few assets that are in motion and we're confident we'll probably see more.
Theres still a very few bigger portfolios on the market today, we are also seeing.
Maybe no surprise, a few more land holding opportunities coming up as well where again.
Owners that have taken down positions and land maybe have taken him through various stages of entitlement are.
Not again seeing the.
So forma.
And return expectations come through particularly with what's going on with rates across most markets are looking for a way to come out of those positions. So.
The acquisition team is busy looking at many different types of opportunities and we'll see how this continues to play for us in the coming quarters.
Great. Thank you appreciate it.
Our next question comes from the line of Spencer Ali of Green Street Advisors.
Thank you maybe follow up on the resumed a rate increases can you, perhaps just quantify or provide more color around what percent of the portfolio has now seen rate increases and whether they have entered the same degree.
That you would have sent out to existing customers pre cobot.
Sure. Thanks Spencer this is Tom.
So as Joe mentioned, we did pause existing tenant rate increases for the second quarter. They did resume on July onest and.
Resumed at really on a cash basis on July onest, and if since more broadly resumed.
On August Onest and expect to on September Onest as well.
In terms of the breadth of it across the country those increases our.
Oddly spread throughout the country. So in the vast majority of the country, we're able to send existing tenant rate increases.
Magnitude of them compared to prior years, though is lower and we did that on a test basis on July onest to try to understand consumer behavior.
During the pandemic and saw encouraging trends there, but as we look forward.
There are headwinds to sending the same sorts of increases as we did in prior years really related to state and local jurisdictions and the price related regulations. There. So we would anticipate the magnitude of the increases.
We will be lower on a year over year basis.
For the.
Next several months or longer depending on how long those regulations in place.
Okay. Thank you.
Thank you.
Our next question comes from the line of John Ken female capital markets.
Good morning. Thank you. Thank you.
A follow up on that rate increase but what percentage were accepted then if you could maybe provide some parameters around the.
Average increase.
Yes sure the in terms of.
A percentage of those accepted.
I'm not going to get into details there, but I would say a year over year basis, we saw good trends there as it relates to acceptance and continued rental activity with with public storage.
In terms of the magnitudes typically as I've highlighted that.
Upper single digits to 10% type increases.
This year, we were averaging a little bit below that because of the things I just highlighted for sensors. So on average.
A bit lower than that.
And then you mentioned the revenues declined gain more pronounced.
In the second after the year I'm wondering if you could also provide commentary on the expense side.
And if there's any potential savings from when you to marketing or other variable comp.
Yeah, I'll begin with part of what you saw in the second quarter, we had elevated payroll costs that was tied to Rps cares fun, where we were again boosting pay rate within our hourly employee ranks as well as providing a number of.
Different accommodations reflective of the environment to support costs tied to childcare.
More opportunity to take CTO and again look at the different opportunities or challenges that the workforce at large was dealing with so the.
Hey rate increase did end at the end of the second quarter. So you'll see some moderation down and the elevated costs of payroll, which was about 20% in the second quarter.
And then we'll also as you see be looking at.
Lower taxes potentially because we saw property taxes come in lower at about 3.6% in the second quarter.
And then.
The the other thing that we're going to keep an eye on as the cost of advertising and promotions for the.
Remaining rest of the year so.
Yes, I'd just highlight that there's pretty good line by line detailed and.
And then DNA in our 10-Q.
But we would anticipate cranks nicky's growth moderates from the second quarter.
Got it thanks.
Our next question comes from the line of keeping Kim of chest.
Thanks, Good morning.
Just going back to the existing customer rate increase program I mean, it's my understanding that if you stop that program for three months it really doesn't make a big impact right. If you stopped for a prolonged period of time, that's when they start to bleed into results and you start to see a bigger impact.
So I'm just curious like what was.
The lack of contribution if you will in the second quarter from stopping that program and how should that.
How should that change going forward.
Sure.
Taking a step back pausing on existing tenants for any month, we'll have a meaningful impact on in place rents.
And so as we paused throughout the second quarter, there was a cumulative impact of several months.
Outstanding existing tenant increases and as I highlighted not only do we not send those during the second quarter when we re sense.
And our spending increases in the second half.
They are at lower magnitudes, given some of the regulations and things that we're doing to be mindful of the environment.
So as you think about contribution to second quarter.
Rental rate trends you saw that on average rent per occupied square foot was down 2% in second quarter.
The largest component of that decline.
From the ended the first quarter to the end of the second quarter was really.
No no or very little contribution from existing credit rate increases.
Rest of it was rent roll down.
Which we disclosed.
Our.
Move and move out trend throughout the second quarter, which is also were.
Clearly contributing factors, particularly early on in the quarter.
And then turns of.
Looking forward that should moderate.
Yeah.
Could you are spending lender that is out again.
Even though it is the lower rate yet we shouldn't have the same level of.
Rental rate decline from existing tenants, because we will be sending them out.
Okay, and just going.
Back to the late fees and admin charges that were down.
I think 30% or sell your every year.
Can you just give a little more color on what those fees are is that just late fees and.
I am assuming if.
Operations starts reserving returned back to normal that segment price should normalize pretty quickly or am I missing something.
Sure. So the different components of the late charges and administrative fees breakdown into several components. One is administrative fees that are charged and moving into that line item will trend based on move in volumes and.
And that over time this move in volumes are down you're going to see those admin fees be a little bit down.
So we did see that in in the second quarter.
The other charges related to lake.
And then lean lean sale fees, the largest components of it being late fees. So if a customer doesnt pay the rent on time of fee is charged to their account.
That's where we saw improving collection trends.
Reduce the amount of fees collected as we move through the quarter.
I would say that down 32% in fees collected actually remained somewhat consistent through the second quarter and into July but the composition of the driver changed as we move through the quarter.
In the month of April in the first part of May the majority of the driver there was fee accommodation customers requesting fee relief.
I shared on the last call that during the month of April we had about 7% of our customers request.
Some sort of customer accommodation either rent or fee relief. The majority of that was fee relief on the majority that was granted.
As we move through the quarter the amount of request that we received.
Diminished and collection trends improved such that by the time, we got into June.
Down 30% in FY collections was driven primarily by better collection trends and Thats continued through July.
Terms of how much into the future, we can anticipate that fee trends.
We'll remain that way.
The call.
You would have asked us in March whether collections would be meaningfully better year over year as we move through the quarter I don't think I would have sat here and told you that.
But now having seen it for a number of months and seen it through the month of July in good trends, even as we get into August here.
It does feel like it's part of the environment and as I highlighted there's no question, there's there's bigger factors there at work and so.
It's certainly a potential driver of lower same store revenues in the second half.
Because we continue to see it play out through the third quarter and.
Even to get a little bit more perspective Ki bin.
Tom said through the quarter and even through July.
Level of customer request has continued to diminish.
Coupled with the fact customers are paying on time.
So.
Customer behavior through the pandemic has actually been quite strong and.
Validates the way in which our platform has been well tuned to.
Not only address and environment like this but it's been able to optimize the collection process as a whole.
Yes, I think clearly lower fee collections isn't a great thing from a same store revenue trend standpoint, but it's a great thing for the shape of our customers in the business.
Validates the demand for self storage as well as.
The.
Customers value in using our space.
Right.
No. One can argue that if people are paying on time and you have less late fees as a bad thing.
Assuming again the the good yeah, it's a good thing right.
So I'm, assuming that the kind of the mix of that fee structure.
That's lower year over year isn't out of the Signup fee administratively that's probably lower right.
Or making a bigger impact.
Uh huh.
It's that it's that late fee did customers paying us on time.
In we're seeing that in through July and August.
Okay. One other thing to add is.
Auction activity as I mentioned in through the phases, we hit pause on auction activity for.
Chunk of the second quarter, we are doing auctions again, we do have a few minutes of holidays, where weve being held back but our auction overhang is actually quite limited.
Accounts for only about 20 basis points of our overall occupancy so.
Two talks to the way that we continue to be optimized around our entire collection process, our customer engagement process and we've been able to calibrate that very efficiently even in an environment, where there's been a number of hurdles.
It had limited us, particularly at the beginning of the pandemic to do options and we are.
Basically back in the auction business in many parts of the portfolio, we're certainly abiding by areas, where we're unable to do auctions, but.
The meaningful chunk of that part of our business has returned.
And maybe keep that I'll just.
Respond to that to to provide with the real benefit of that is.
As we move through the quarter it really allowed us to re rent that space as we got it back and so as we move through the quarter we spoke.
Earlier around how average occupancy was up about 20 basis points.
We ended the quarter up 50 basis points and again that that east delinquency really represented about 20 basis points. There so call it up 30 basis points on that basis.
That's really continued to improve and at July 31, our occupancy was up 140 basis points.
And again about 20 basis points impact.
Delayed auction activity, so net up about 120 basis points in occupancy and Thats really related to the operating trends that Joe highlighted.
As we moved through the different phases, and improving trends and move ins and continued lower move outs, coupled with the fact that.
Our delinquency process was was underway allowed us to re rent that space and move occupancy higher as we move through July.
Okay. Thanks, that's all helpful. Thank you.
Thank you.
Our next question comes from line of Ronald Camden of Morgan Stanley.
Hey, just two quick ones from me one, yes, just trying to get a better understanding we're hearing a lot about.
Migration out at urban into sorted.
Suburban areas with the pandemic, whereas a little bit less density and the question is really are you seeing sort of anything in your portfolio that would suggest that's true.
So our properties, maybe better so it sort of more suburban markets have they seem better activity that you know say your your new Yorker, California or something like that.
Brian.
Too soon to really tell if there is going to be a material and.
Longstanding shipped around suburban versus urban we track.
By both areas. We look at density from a population standpoint, our properties are performing.
You mentioned, New York Ironically at the moment, New York's actually been a huge beneficiary of the amount of demand that we've seen over the last quarter. So San Francisco's the same.
But again we are.
Not stepping back and.
Basically putting any kind of a label on suburban versus urban it's way too soon to tell.
We have good diversification across all of our markets again, whether they're in suburban or urban markets and we will continue to track in seat.
The.
Lingering impact from the pandemic.
And again, just a shift in overall.
Patterns about where people choose a live it's way too soon to tell one thing that has been pronounced that we see from a demand standpoint in both markets is the work from home impact.
We see many more of our customers coming to us because they are not going to a traditional office.
They need more space at home.
And by virtue of that they are putting more stuff and our facilities. So that's been a meaningful additional demand factor that we've seen both in urban and suburban markets.
Got it that's helpful. And then the second question was just on just the July operating trends I Wonder if you mentioned it already but just what are what the occupancy sitting at and what.
The change in pricing. Thank you.
Yes, sure. So I hit on that just a moment ago, but I'll give a little bit more context on operating trends in July move in volumes.
We're better in the month of July move in volumes were down about 2%.
Move out volumes were actually down about 15%, which led to an increase in occupancy through through the month and I just highlighted in July 30th or occupancy was up around 140 basis points.
Year over year.
Note that about 20 basis points of that is related to delayed auction activity.
But overall July we saw continued improving operating trends as Joe mentioned earlier.
One area I would also add on is our non same store portfolio in particular has been quite vibrant.
We have a fair amount of both new development acquisition.
Opportunities for customers to move in and we've seen an inordinate amount of move in activity, which has been quite.
Quite a good surprise or a good benefit based on a number of things we're seeing from a trend standpoint, so I mentioned that.
We've moved in about 400000 customers in the last four months. If you just look at Q2 of the 300000 or so customers have moved in 60000 of those movements came into our non same store portfolio.
Non same store portfolio content continues to do quite well from an occupancy growth standpoint.
And we're up about 11%.
Continue see very good trends and tractions relative to both Newbuilds redevelopment and acquisitions that we've added in the portfolio that.
Total holds about 13, and a half million square feet and we continue to see very good performance.
And Philips across all markets frankly, we havent seen any of our acquisitions and development going backwards in this environment. They have done the absolute opposite whether filling up pretty dramatically.
Great. Thank you Sir.
Our next question comes from one of bricks get more of Goldman Sachs.
Good morning, John pumps, Joe just to follow up on a previous question on the external growth strong.
I'd like to your focus should be more domestic versus international is that right. We should be thinking about your comment on the acquisition front.
So Rick we're going to continue as we always have to look.
In many markets, both within and outside the U.S.
I wouldn't say that our focus has changed over the.
Long term any differently Theres no question over the last few months Weve.
What particular focus on everything Thats going on right here in the United States, but overtime, we will continue to assess and look at opportunities beyond.
The United States.
Thank you and then one bigger picture question, John the past you've talked about.
Supply growth than supply growth aiding in 2020 can you just talk about what you're seeing some of supply growth standpoint, hence the pandemic load developments, we're financing for new projects and are you starting to see that manifest itself in your markets. Thank you sure.
There is still.
Healthy amount of supply that continues to be delivered into 2020.
Last quarter, we talked about the likelihood that it would be anywhere say, 15% to 20% or so less than what was predicted which would.
I want to plus or minus 5 billion or so level of deliveries in 2020, we think thats, probably closer to 4 billion or less.
There.
Doesn't appear to be any slowdown this year anyway relative to those deliveries taking place although some of them are taking longer no surprise.
Many cities have slowed down their own approval processes whether through inspections.
Again final occupancy permits et cetera. So we still think that theres, a healthy amount of supply kind of goes into the level supply you saw in the 2007 teen or so era.
Now looking out to 21 and beyond I would expect based again on what I mentioned earlier.
There will likely be more constraints around funding that.
Many of these developers look for relative to construction loans and again the investment hurdles that either they added or their partners are going to require to move forward on any particular acquisition or any particular development excuse me. So.
We're likely to see again, another leg down I don't know, how hard and dramatic that might be but it would be a welcome relief, particularly in the markets that we've been pointing to.
Over the last couple of years the have been.
Heavy with new supply so too soon to tell yet the lingering impact into 21 and beyond but we're likely to see again another leg down.
Thanks, Joe appreciate the comments.
Sure.
Our next question comes from the line of Mike Mueller of JP Morgan.
Yes, Hi, just wondering how are the year over year Rubin re comps in July versus Twoq teams down 14%.
Sure.
Very specific question so.
Moving to rate change in the month of July was down a little over 4%.
Moving volumes down about 2%.
Moving on rate down about 4%.
Okay got it and curious the expansion of the third party management business, how does how that trended over the past four months or so with the pandemic.
Yeah, Mike the number of properties, we added to the platform in the quarter was nine we 106 properties now.
The backlog continues to grow.
Still dominated by.
Properties that are going through various phases of construction. Although we are also see.
Stabilized and or lease up assets coming into the portfolio and the platform as well.
So not unlike what we saw in.
The acquisition Arena to some degree it would get got a little quieter for a month or two on the early part of the pandemic, but.
As things have settled down we're seeing good activity and we continue to bring new properties into the platform, whether they're new and we're actually opening them. We opened against several in the quarter and we're bringing more into the portfolios are going through different phases of completion and development the backlogs.
Healthy and we're continuing to add to it.
Got it okay. It was the thank you thanks, Mike.
[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 like Steve Sakwa Evercore ISI.
Thanks, Good morning.
I don't know if you can answer this or maybe talk a little bit about the differences, but you said that youre occupancy was was effectively only inflated if you will by 20 to 30 basis points.
In the lack of auctions and one of your peers yesterday talked about that number being closer to 150 that maybe 200 basis points.
And I'm, just really trying to figure out you know is there are differences or what the differences are that would cause such a large delta and then is there anything around maybe the unemployment insurance payments that came into folks over the last four months.
Providing them with more income that might have helped on the collection fraud and therefore your fees are down as you talked about and that helps kind of keep the delinquencies and the auction process down but it just seemed to be a very wide difference between you and your Pierre.
Hey, Steve It's Tom.
We spoken about this I'll reiterate some of the comments I, obviously cant speak to what others are seeing in the industry that I'll comment on what we're seeing which we did see better collection trends.
And that's driving lower fees. It's also as we move back to.
To.
Conducting auctions, that's reduced the amount of backlog so combination of.
Conducting lean sales.
As well as as better collections leading to.
20 basis points of age delinquency.
I would highlight that we obviously worked with customers throughout the second quarter.
On different ways as I highlighted about 7% of our customers requested some form of relief in the second quarter and were very receptive to those sorts of request as we help customers that were having a tough time.
But those really started to moderate as we move through the quarter and as Joe highlighted as we move through the different phases of the second quarter.
We started to see.
Better trends there I think.
Your comment around government support.
He is a good one and I do think that be unemployment benefits or 1200 dollar checks.
There's no question that.
Across the country folks got some support through the second quarter, which.
Likely help collections in our business and in many businesses.
I think were alone to highlight the collections.
Good.
Through the second quarter I think if you would have listened to the two banks or two.
To credit card companies did likely say something similar.
So I think that there is some support there and ultimately we'll see what the trajectory is of that support going forward and that could certainly have an impact on our collection trends and others in the industry as well.
But.
We generally covered most of the different components of it I think.
Maybe one more stat as we just throw stats around this particular topic I highlighted that customers are paying us earlier and that's resulted in.
If you just look at this snapshot at June 30.
Our rent receivable from customers, who are less than 60 days is down about 35%.
So.
Customers or or or paying for their storage space in finding good value in it and we're working with them and obviously working with those that have been impacted by the pandemic to make sure that they receive the the appropriate accommodation as well.
Okay, and then maybe a a twist on on Mike dealers question I think he asked about the kind of the move in rate you said it was down 4%, but if you looked at the July move and rate against the July move out rate, which I know you provide those quarterly in the 10-Q's.
I have an idea or do you know what that spread was in July.
I I don't have that number right in front me I could tell you that the move out rate was down 6% year over year.
In the move in rate was down 4%. So good trends as it relates to year over year comps I don't have at my fingertips have.
Great per square foot, but we can follow up with that.
Thats important DC.
Okay. Thanks, that's it for me.
Our next question comes from the line as Todd Stender of Wells Fargo.
Hi, Thanks, just as we look at your two newly developed properties that you opened in the quarter with the backdrop that you're looking potentially at slowing trends for the second half of the year can you just kind of compare year.
Forecasted lease up period to a stabilized occupancy maybe.
Maybe your current expectations to how they were compared to originally underwritten.
Well, Todd I would just backup and give you maybe a little bit perspective on how.
We traditionally look at lease up periods to begin with which frankly is.
The day no different now than it might have been pre pandemic.
It's typical for a property to take three or four years to go through not only occupancy lease up but the level of stability and stabilization that you're going to see from the maturing of the customer base et cetera. So.
If anything as I've mentioned, we've actually been seeing accelerated lease up in.
Properties that we put into development redevelopment or even acquisition and.
Again, just because again, we're even seeing that acceleration right now we're not stepping back and retooling are resetting expectations will have to see over time, how this demand continues to trend, but it begins with.
The same premise, which it takes up to that three to four years typically for a property to get to that level of stabilization, we're going to look at.
That time period, typically to decide whether or not to put the property in the same store and again look at the stability that typically plays out across different markets et cetera, So no real change yet and the way that we're modeling and looking at the timeframe for stabilization.
Understood. Thank you.
Our next question comes from one to Todd Thomas of capital markets.
Hi, Thanks, Yeah, Joe maybe Tom you talk now about improving trends.
Throughout the second quarter and into July.
A couple of times, including the improvements and move in rates down just 4% year over year in July I understand that the in place contract rents are lower at 3.1% at quarter end versus the down 2% for the second quarter on average so the financial impact to our we'll continue to get worse in the second half but.
How much of a lag would you expect there to be before the in place contractual rents on a year over year basis begin to stabilize and maybe begin to improve if trends in general.
Remain consistent.
Sure that's.
That's a good question. Unfortunately, I don't have a crystal ball in terms of exactly how the environment is going to play out from here, we are absolutely in an uncertain environment and one that.
None of us have lived through in the path to be able to understand what.
The healthcare impact.
The government policy impact would be and where we go from here.
It's hard to predict no questions, starting the quarter with contract rents down 3.1% is a much worse placed in where we started the.
The second quarter.
From a year over year standpoint, the benefits, we have going into the third and fourth quarter or that.
Right now we are sending existing tenant rate increases that were also being mindful of what the local.
Jurisdictions regulations are around that and also the impact to our customer base in what is a tough healthcare environment.
So I.
I think it's hard to projects going forward right now magnitude of those increases as lower year over year, So thats not going to be meaningful contributor to the upside of of rental rate growth.
And move in and move out trends.
We're seeing good demand trends now and lower Moveouts, we've highlighted in the past that.
In the last downturn, we did see elevated move outs, we've seen the exact opposite this time to date, but we're also mindful that the healthcare situation could be having these significant impact on those trends.
And as we move through this year and into next year. The developments on those fronts I think we'll likely impact on moving to move out trends as well so.
I know thats, a long winded way of saying I don't really know when things would change materially, but I gave you a sense of what some of the drivers would be that would move in place rents.
Okay as we as we move further.
Out the year here into the back half of the year and we're looking at I guess potentially a more elongated leasing season do you expect to have a little bit more seasonal pricing power.
In August September maybe October on a year over year basis than you would ordinarily.
In prior years.
I think the one thing I'd remind you there is that we're still facing an environment that we were in the first quarter.
Inefficient new supply being delivered into many of our markets. In addition to navigating through this unique pandemic environment.
I think Joe highlighted the and true improving operating trends if you looked at it on a market by market basis, I would say the healthcare environment and situation was the biggest driver of market variants of operating trends in April but as we move through the quarter ended June and July that.
Biggest differentials from market standpoint on operating trends like move into move out has been more the typical things that we would have been talking about the impact of new supply in many of our submarkets.
I think thats likely to persist here as Joe mentioned future deliveries. So I don't think the operating environment.
Is such that while we've seen improving trends that it's going to get materially better.
In any sort of a base case, but ultimately we'll see where we go we're still dealing with a lot of the headwinds that we spoke about earlier in the year.
Alright, and just a follow up on a prior question just regarding.
Population trends and work from home trends.
No I know.
Publix footprints national in scope and your diversified but you do have larger concentrations in some markets like la and San Fran New York.
How are you, having any discussions or strategic discussions that Ed.
You know around sort of reallocating capital or or thinking about investing differently.
<unk> post pandemic environment or is it is it too too soon.
To think about those strategies.
It's it's still too soon Todd.
We will obviously continue to assess the variety of different impacts this kind of environment puts into different.
Markets and sub markets. The business is still very dominated by their very small trade area that three to five miles on it in an urban environment even much.
Smaller so.
Again, the portfolio is highly diversified.
We enjoy the benefits of the diversification and we'll continue to assess that on an ongoing basis, just like we always out.
Okay. Thank you.
Thank you. Thank you.
And ladies and gentlemen that was our final question I'd like to turn the floor back over to Ryan Burke for any additional closing remarks.
Thank you Mary on thanks to all of you for joining us today take care.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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