Q4 2020 National Storage Affiliates Trust Earnings Call
Greetings and welcome to the National storage affiliates fourth quarter, 'twenty 'twenty conference call.
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It is now my pleasure to introduce you to your host George Hoglund, Vice President of Investor Relations for National storage affiliates.
Mr. Hoglund you may begin.
We'd like to thank you for joining us today for the fourth quarter 2020 earnings conference call of National storage affiliates of trust.
This is our first earnings call of the bite and presidency I'd like to quote our new President, let's say to all of the potential investors that haven't yet purchased NSA stock come on man.
Additionally for the press release distributed yesterday, we filed an 8-K with the SEC containing our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at national storage affiliates Dot com on today's call management's prepared remarks and answers to your questions may contain.
Forward looking statements that are subject to risks and uncertainties, including uncertainty related to the scope severity and duration of the COVID-19, pandemic and the actions taken to contain or mitigate the direct and indirect economic impact.
Company cautions that actual results may differ materially from those projected in any forward looking statement for.
For additional detail concerning our forward looking statements. Please refer to our public filings with the SEC.
We also encourage listeners to review of the definitions and reconciliations of non-GAAP financial measures such as <unk> core <unk> of net operating income contained in the supplemental information package available on the Investor Relations section on our website and in our SEC filings.
On the line with me here today are Nsa's CEO Tamara Fischer.
Oh, Oh, Oh, Dave Cramer and CFO Brandon the Gotcha. Following prepared remarks management will accept questions from registered financial analysts I will now turn the call over at the Tami.
Thanks, George and thank you everyone for joining our call today before we discuss 2020 results and our outlook for 2021 I wanted to acknowledge all of those who have been affected by recent severe weather related events. We are and will continue doing our best to support our team members and communities as they recur.
Over from these difficult challenges.
Now moving on to results. We ended 2020 with the bank delivering strong same store NOI growth closing, our busiest quarter ever in terms of wholly owned the acquisition volume and to top it off we announced in December. The addition of a significant new pro Blue Sky self storage.
Occupancy is near record highs street rates are up year over year on growing and our revenue management strategies are largely back to normal.
Positive momentum in fundamentals is making for a strong start the 'twenty 'twenty, one and Brandon will elaborate further on that later in the call.
Overall, I'm very proud of our team for delivering a stellar fourth quarter, which positions us well for 'twenty and 'twenty one.
We continue to benefit from the resilience of the self storage sector, the diversification of our portfolio and the strength of our pro structure Custer.
Customer demand for storage is stronger than ever and has altered the seasonality that we normally experience in the winter months.
Usually the self storage sector experiences a seasonal decline in occupancy during the fall and winter months propping in January or February.
But in 2020, we experienced unusual demand towards the end of the third quarter and beginning of the fourth.
Occupancy rose through October and that's held relatively stable since then for growing the normal seasonal decline.
Well, we always knew the self storage business to be resilient, we've been amazed at how well our business has performed over the past several months.
We've discussed recent healthy consumer demand for storage is driven by a number of factors, which we think will continue to support occupancy at least near term, including work from home, which is causing people to clear out of room for a home office and spending more time on household projects in general.
Remote learning, which is driving the need to clear space for home classrooms.
Booming housing market.
Businesses storing inventory in furniture as they create open space for social distancing purposes, and finally, what I'll call. The Triple S. Migration that is migration to the sunbelt suburban and secondary markets. It's the.
Abstention the benefits our portfolio.
Our core F F O per share increased 15% in the fourth quarter compared to the fourth quarter last year, driven by a combination of strong same store growth healthy acquisition volume and the internalization of our secure care of pro in April of 'twenty 'twenty.
For the full year core F O for share increased 11% I think it's quite notable it despite the pandemic and associated recession, we were still able to deliver double digit earnings growth for the year, what's really of tests to the benefits of our pro structure, our secondary market exposure and the.
Of the self storage sector.
Our outstanding performance and strong trends gave us the confidence to increase our fourth quarter dividend for 35 per share representing growth of six 1% year over year and continuing our record of increasing dividends twice per year since going public.
Turning to new supply, we've seen completions trending down on a year over year basis, well an increase in abandoned project is reducing the forward pipeline.
But we've also seen delays pushed deliveries into 2021 in some cases.
We believe new supply in our markets. This year will be similar the 'twenty 'twenty and expect the steady decline thereafter.
We will continue to face headwinds from new supply in Portland, Phoenix, and certain Submarkets in Dallas, Atlanta, and West Florida.
Fortunately, though the current boosting demand is alleviating some of that pressure, especially in Portland and Phoenix.
On the acquisitions front, we had our busiest quarter ever in terms of wholly owned acquisitions investing $260 million and 33 properties and two expansion projects.
For the full year, we acquired 77 wholly owned properties valued at $543 million and had investment activity of about $22 million and our jv's.
We've remained active in the new year and have invested nearly $85 million and the acquisition of 13 properties to date.
And we also currently have another 10 properties valued at about $70 million under contract.
In summary, we're currently firing on all cylinders as fundamentals continue to strengthen we remain busy on the transaction front and we recently added another pro well, we're confident will help drive strong external growth results.
I'll now turn the call over to Brandon to discuss operating results and balance sheet activity.
Thank you Tammy.
Yesterday afternoon, we reported core of for full per share of 46 cents for the fourth quarter of 2020.
Which represents an increase of 15% over the prior year period.
Fourth quarter same store NOI increased by six 1% over prior year, driven by four 8% revenue growth and of one 6% increase in property operating expenses.
Same store occupancy averaged 92, 1% during the fourth quarter, an increase of 400 basis points compared to 2019.
For the full year core of for full per share was $1 71, an 11% increase over 2019, primarily driven by the integration of prior acquisitions additional strong acquisition volume during the year and same store growth.
We also realized three pennies of accretion in 2020 from the internalization of senior care in line with expectations.
Full year same store NOI grew two 2% driven by 1.7% revenue growth of 5% growth on Opex.
Both the same store NOI and core of for full for share results were ahead of the top end of our reinstated guidance largely due to occupancy remaining higher than expected and property taxes coming in lower than forecasted.
Same store Opex growth benefited from diligent cost control as we've discussed in recent quarters, specifically in the fourth quarter personnel costs declined 80 basis points year over year, while utilities declined five 3% due to a milder starts for the winter as well as the benefits from our led lighting initiative.
These favorable expense controls were partially offset by property taxes. The grew eight 7% from the prior year period, and R&M, which grew five 3%.
Although property taxes were up we had expected an even larger increase given the challenging comp from 2019, we saw favorable appeals and final bills in Texas, Georgia and Oklahoma.
I'd like to highlight a few notable markets, which are driving our performance for.
First our largest market Riverside San Bernardino delivered above portfolio average revenue growth of five 5% in the fourth quarter driven.
Driven by of 700 basis point increase in average occupancy as the inland Empire benefits from any migration in a quicker recovery in employment.
Portland, which is our second largest market generated revenue growth of six 4% driven by of 600 basis point increase in average occupancy despite the ongoing pressure from new supply.
And our Oregon, Submarkets, we're seeing all of the trends the Tammy mentioned earlier.
Lagging markets for us on Atlanta, and Dallas, where revenue growth was roughly flat to prior year of during the fourth quarter due to impacts of new supply in our submarkets.
I'd also like to provide some color on the overall positive trends that have continued into 2021.
For January moving volume continued to be higher year over year, while move outs continues to be lower which resulted in same store occupancy at the end of the month of 92, 1%, which is up 540 basis points compared to 2020.
At this point our occupancy levels do not include any inflated effect of stemming from delayed auctions.
As for street rates, the increased to just over 6% year over year for the month versus up about two 5% in Q4.
Now moving onto guidance.
We expect the positive momentum that we are currently experiencing combined with an easy revenue comp in the second quarter.
And the very strong first half of 2021 however.
However, comps become more challenging in the second half as we expect seasonal occupancy trends are likely to return, especially in the fourth quarter.
We're also factoring in the elevated economic uncertainty due to the rollout of the COVID-19 vaccine and any potential changes to state and local regulations would impact the self storage industry.
Taking all of this into consideration we introduce full year 2021 guidance as follows.
Core <unk> per share of $1 81 to $1 86, or seven 3% growth over prior year at the midpoint.
The same store pool of 560 properties with revenue growth of three to four 5%.
Opex growth of three and a half of the 5%.
And the NOI growth of 2.5% to 5% we.
We also assume acquisitions of 400, the $650 million.
Additional guidance assumptions are outlined in our earnings release.
Now turning to the balance sheet.
At the end of the December we settled the portion of our $160 million forward equity offering that we had entered into in September.
We issued 185 million shares for net proceeds of $60 million.
We have approximately 3 million shares remaining from the forward representing an additional $100 million of equity proceeds we plan to settle over the next month the pay down our line of credit balance and fund acquisitions.
In October we funded our previously announced $250 million private placement.
Our balance sheet is well positioned with only $4 million of debt maturing through 2022.
Plenty of capacity on the revolver healthy access to multiple sources of capital and the net debt to EBITDA ratio of six two times at the end of the fourth quarter.
The strength and flexibility of our balance sheet will allow us to take advantage of the healthy acquisition activity were seeing the.
<unk>, our investors outsize the external growth in addition to another year of strong organic growth.
Thanks again for joining our call today, let's now turn it back to the operator to take your questions operator.
Okay.
Okay.
Operator.
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One moment, please while we poll for questions.
Our first question today comes from Samir Khanal of Evercore. Please proceed with your question.
Hi, good morning, everyone.
Tammy can you walk us through the the cadence of revenue growth over the next few quarters, just trying to get a better understanding of how much of a deceleration you are baking in the <unk>.
Third quarter or for the second half of the year as things start to normalize.
Hey, Sameer, it's Brandon I'll take that one.
We historically have not given quarterly guidance you know not doing so here now, but certainly the first half as I mentioned in the opening remarks is going to be very strong.
Q3, you start to get a little more challenging, but we were still emerging from some of the restrictions in place.
Of processing rate increases in certain fees being charged so Q3, I think still has the first part of it has an element of easy as well and then Q4 is the is the.
Really tough comp right.
And so on what I will tell you is the back half of 'twenty, one we still expect to be positive.
But very modestly in the first half we expect to be quite strong.
Got it and then I guess the switching over to the the expenses.
And Brandon can you provide a little bit more color on kind of the breakdown of maybe your property operating expense lines, maybe property taxes payroll what are you assuming as per guidance this year.
Yeah sure Samir so.
I would say for property taxes, specifically, that's the one line items that our assumption for growth was 5% to 6% and thats outside of the three 5% to 5% total Opex range. We gave all of the other categories personnel for the next biggest but everything else down the line from <unk>.
And then the utilities.
<unk> each of those categories is within that 3% to 5% range for the property taxes are the primary one that I would say falls outside of on the high end.
Got it and my last question here is given.
Given the the weather disruption we've seen in Texas right recently, I mean are there any.
Early reads into the impact of rental the ban I mean, I guess for you it'll be primarily of the Dallas market, but just wanted to ask the case there is any kind of early reads.
Yeah. This is Dave good question.
Fortunately the weather is starting to clear and now everybody is assessing the damaging and we had very minimal damage from our properties and from our perspective, a couple of frozen water pipes of steps of fortunate there.
They really just pause you know all of the rental and move out activity for four of five days and so as we look at it it'll probably be an uptick in demand is being done on people need some storage to move stuff around and make some repairs and so it didn't really have an impact to us of the immediate time, and we think long term and short term. It has some positive effect for us because we do think in the first quarter.
Probably see slightly elevated snow removal costs and maybe at one of the higher acquiring them and then than we might have otherwise expected, especially since we were off to such of a light winter, we actually don't plan for snow removal on Texas.
Right.
No that's it for me thanks, so much.
Thank you.
The next question is from Neil Malkin of capital One Securities. Please proceed with your question.
Hey, good morning, everyone fantastic quarter.
Our first question Yeah sure. Our first question is on the acquisition.
Can you just kind of talk about what you're seeing out there.
On the I guess I guess on balance sheet of consolidated died on.
In terms of the mix and kind of what you know at kind of cap rate look like for the for the transactions for the fourth quarter and what are the kind of looking like right now that'd be great.
Sure I'll start and I and Dave might want to take on some of my comments, but really.
Really what we saw was the combination of small and midsized portfolios and so a big part of what we did on the fourth quarter frankly, it was one portfolio and.
And yes, we were super busy on the on the one off transaction side of things.
And in a lot of it happened towards the end of December.
I think we saw the sellers, who are a little anxious about upcoming potential changes to tax regulations on potential tax reform and a cap rates I would tell you are in the five and a half the six range.
The portfolio premiums still exist and you know you might call them the man.
The 50 to 75 basis point range for us in the markets, where we like to acquire assets, we're still a little bit of cap rate compression, but it's not.
Of that over you know over the top at this point in time and in the activity continued into 'twenty and 'twenty. One we continue to be very busy.
Looking at transactions. We are all we also look at as you know we look at almost every portfolio that hits the market, but but we just keep on with our blocking and tackling and taking these properties down one asset. It has the right to the extent that's what that's what we need to do and the nice thing about our structure.
It is frankly is or multiple pros all all represent acquisition teams for us around the country and and they're all very busy at it it's really not singled out to one team or another or one geographic location or another.
Do you have anything to add to that no I agree I think particularly the geographic area. We saw properties in all of our markets across the country and that was pleasing to see in the right.
Really good pace of activity so yeah.
I would add.
Okay.
The kind of a add on to that.
Several companies across real estate asset types have talked about I really put their there are you know.
Put forward in terms of either JV or alternative.
You know structures to augment growth and in a in an aggressive cap rate environment and I'm just kind of wondering.
If you are thinking about that maybe talk to the board about you know other things could be different parts of the capital stack investing in also your stock price. The obviously very strong I. Just wondering if that you know what dictates where you allocate your capital or what you're focused on maybe even third party management.
If you could just kind of give us an outline for how you look at all of those things this year that'd be great.
Sure. So you.
We have historically been successful and closing larger portfolio transactions with joint venture capital and we have we have great relationships with our with our joint venture partners and we'd like to continue to deploy capital with them, where we also see it as a very valuable component of our capital stack.
And I are open to and the frankly almost are always in conversations with one potential JV partner or another so that we will be well positioned to take advantage of opportunities as they present themselves. So so we do see that capital as being an important part of our structure.
Okay. Thank you.
Thanks for the next question. The next question comes from Juan Sanabria of BMO Capital markets. Please proceed with your question.
Hi, good morning.
Just hoping you could delve a little bit deeper into blue sky for new CRO.
Do you think that relationship brings to you and.
Are you assuming any incremental acquisitions beyond the small pit there the came with the initial sign up.
In terms of your 400 of 650 million of acquisition guidance for the year.
Sure. So the the I'll start with the key benefit of of adding Blue Sky is a problem the.
The underlying entities, you know behind Blue Sky or grow your storage development and that entity is led by leaf.
The Frederick and and Lee has a long history of developing high quality self storage assets. In fact, we've been a buyer of some of those assets over the years too.
Two years ago, Mike Perry, our former VP of acquisitions joined Lee to broaden their platform and the and to become their acquisitions person and they've been quite successful at it. They they also partnered with 10 vessel who is a large third party managed.
And frankly, a broker and so what we think they bring to the table is the ability to access some.
But let's just say call it about 30 35 assets.
The that they actually have of controlling ownership interest in that will be contributed to NSA over time, probably the next call. It three to five years I may think about the cadence of a $50 million a year or thereabouts.
And and from somebody like the vessel, we have an opportunity to look at the 150 plus stores that are managed by his platform when a an owner of makes the decision to sell.
Hopefully we have an opportunity maybe ahead of others to two of them.
We have a chance to acquire some of those assets, so and and then just to speak about Mike Perry for for a minute he's been on the business. A long time. He is very highly regarded he has deep relationships in the industry and I think just bringing the whole team onto our team as affiliates.
<unk> is well.
It will be hugely valuable for our company.
Great. Thank you and then maybe I was just hoping you could speak to any insights you've gained from your exposure, which is pretty diverse yes. Some significant weightings in California, which maybe has seen some outflow of people maybe more concentrated in the bay area of that where you are but it's.
It's the big exposures in Texas, which is the net move ins apparently from from where you can gather from the media and new stores, but curious on what youre seeing in terms of demand in end of our move outs given your geographic diversity.
Yeah, It's a good question willingness of Dave.
Across our portfolio, we've seen positive fundamentals I mean rental activities remained strong with move outs of been muted.
If you talk about the California market.
Brandon mentioned Riverside San Bernardino has had really really strong results in and that's part of that is from the employment of bounce back, but we also think it's the migration out of maybe the bigger cities into maybe not out of California, but into some of these more suburban markets for California, but as you look at Texas, We've certainly benefited from the outflow of some of these other markets you know through the whole sunbelt.
Area down through the south eastern in the Texas.
But we haven't really seen of significant shifted any of our communities or any of our msas as far as patterns everything has remained.
Very good very strong and we're very positive about it.
Great. Thank you very much.
Thank you.
Yeah.
The next question is from Todd Thomas of Keybanc Capital markets. Please proceed with your question.
Hi, Thanks, Tammy first question in your prepared remarks, you said revenue management strategies are largely back to normal I was just curious what still has to normalize in your view as you look ahead of further into the recovery.
I'll start and then let Dave tag on to it.
I would say is that.
Oh, we are evaluating.
Rent increases where our existing customers.
The I state by state locale, yeah of municipalities.
<unk> and trying to live within the guidelines and and I you know there for some states where price gouging is prohibited and and the for the.
Most part I would say that we are back on track with our with rent increases on existing tenants in the same cadence we've had historically, but we are keeping an eye on things to be sure that we so that we don't go out of bounds.
What a great day or the other thing I'd add.
Speaking of California, we expect of the restrictions will lift here shortly.
Currently on exploration date here in the next few weeks, but we're mindful of that and we're just making sure. We're following all of the guidelines for.
Like the state of California, or maybe a couple of cities within California to the have even tighter restrictions but.
The damage point for the most part we've been able to resume what we would normally be doing it on a revenue management platform of pretty much across most of our communities and the nice thing about again about our structure and not to beat a dead horse, but but by having our pros located geographically across the country. They are as close as you can point to.
The local rules and regulations and the executive orders and so I think that that does give us an advantage to be able to stay close to what's going on and what the timing is for relief.
Or if you know.
The various governors or thinking about other kinds of restrictions. So I think that gives us the of advantaged in terms of visibility.
Okay. That's helpful. And then you know you talked about you know gaining additional occupancy surged through January and and so you know we're a couple of months now.
A little less actually I guess from the start of the peak leasing season.
Maybe outside of California, or some of these jurisdictions, where there are price gouging rule still on the fact or.
The price increase limitations that are in effect.
Do you have the ability to lean into the strength with.
Sort of a higher rate increases to more customers.
Elsewhere across the portfolio.
It's a good question and yes to answer your question. We certainly have seen improvements on street rates, we expect rates to improve through first half of the year, which will obviously hit what used to be the peak leasing season, obviously, we're at record high occupancy right now so.
You know we have the ability to push probably a little harder on the in place rent changes and we are and we'll look across the portfolio and look for those seasonal trends as we see them, but yeah. We like the runway we like what's in front of us and we're going to be our best of to make sure we maximize where we can.
Okay, and then I just wanted the also a follow up I guess on time of your comments around work from home and some other trends that you discussed that you know maybe the pandemic accelerated I you characterized it is the three assays.
And then sort of thinking about investments and.
How you think about allocating capital going forward how does that.
Back to your views around the future investments in the companies.
I'm thinking about the company's geographic footprint. So you know as you think about the pro acquisition teams that are out there looking to source deals do you do you anticipate.
Any changes at all at the margin to you know how the the company's footprint.
It looks going forward in terms of some of the the market exposures that we see today.
So Todd that's a good question I think as you know we've long been committed to the secondary primarily the secondary and tertiary markets.
And that has served us well over time on and I think we remain committed to those markets and that's not to say that we won't look the top 15, Msas, we will of course and I and.
It really opened the growing in markets, where our pros currently operate are continuing to gain scale in those markets and and and so I guess on the whole I would say that's not a huge change to our strategy.
But but if anything I think we're maybe maybe even more committed to the secondary and tertiary markets and then we have done historically.
It has served us well.
Okay. If we if we look at you know, California and Oregon.
You know where you have relatively large concentrations you know how should we.
Do you expect.
You know over time to reduce your exposure to those to those states maybe you know.
Through through throw acquiring assets elsewhere or do you think that you'll continue to maintain.
We maintain that level of exposure to those markets.
I think over time as we grow.
Naturally those those markets will become.
Probably a less significant component of our total but.
The truth is we like Oregon, where like Oregon long term, we may see some good opportunities up there to acquire assets.
Over time and in our pro up there is is actively looking at.
Deals as they become available.
On the California, It's the same thing I mean, it's like the thing its a huge state of the huge economy.
And it may always be huge to us truthfully, but but I would say I am.
We wouldn't turn away from California, I would also say that we're probably not on the one off piece of seeking the to necessarily strategically increased our position there.
Texas is big for Us, but Texas is a huge stayed in the huge to us of storage and will probably remain vague to us as is Florida. So I.
I think we're being in states for self storage is a.
Heavily relied upon by the population and in states, where we are seeing the benefit of significant in migration such as.
As I mentioned, Texas and Florida.
So we haven't yeah, I think David rest of this earlier, we haven't necessarily seen the impact of out migration from California. At this point in time, we were heavily concentrated in Riverside San Bernardino, we like the inland Empire.
And and the inland Empire, frankly has seen a zone in migration so I.
I think when it's all of a sudden done probably not huge changes to our strategy.
Okay. Thank you.
Thank you.
The next question is from Smedes Rose of Citi. Please proceed with your question.
Hi, Thanks.
I Wonder if the follow up just on your question of your comments about supply that you saw in 'twenty, one would be similar to 2020 interest what sort of the percent change for that in the supply.
What kind of gives you confidence I guess that you think it'll it'll sort of trail down the pace of growth thereafter.
So so the comments that we make about supply are informed by you already and they you know we all the way as they do.
The the data that they provide and we find it to be a quite reliable, but our perspective is refined by our pros local knowledge in those markets.
And and so what what I think we can say based on what we're seeing the same probably the same stuff everybody of seeing across the industry on what.
We're seeing is that projects some projects have been just abandoned as some of the new development literally missed pro forma of life years and lenders backed away from from.
From a funding those projects.
And I and and yet there were projects that were also delayed for a variety of reasons labor restrictions on working our inability to get product in and so those deliveries will come to market in 2021. So we used to actually sink of deliveries in our key markets will probably not be that.
Much less than they were in 2021 than they were in 2020.
On the whole I think across the United States, there will be on somewhat of a.
Decline in 2021 and delivery of new product.
And I'm not sure that we have any greater insight than I than most people who are reading the data and talking.
Talking with experts in the field, except for the fact that and I keep circling back to this but I do think our relationships with our pros and their knowledge of our markets and it gives us.
Lately better perspective on what's coming.
Right. Okay. Good and then you you've mentioned on a couple of calls now that one of the things that might be driving.
The more sellers coming to market, even though there hasn't been that much of a change of pricing is expected to change.
Tax structures.
Just wondering is that I mean is that primarily around the concerns around the capital gains or is it the state taxes and I guess, it's sort of as a follow on would you expect any changes in behavior from your from your pros as they consider potential changes to two of the current tax structure.
Maybe in terms of the I didn't hear him for like cashing out sooner or bringing properties to market to your finger or anything along those line.
So starting with the the sellers so the the mom and pop sellers I think that.
There there isn't as much.
Much of hype around the potential changes in tax law, even though from my perspective, it seems like there should be because it.
It almost seems inevitable.
But but we are still seeing increased activity on a on the part of the potential of mom and pop sellers.
And in part the at least what we're hearing anecdotally is is is that that's part of what's driving it.
As it relates to our pros.
I don't think that we will see any change in behavior on the part of our pros.
At least right now I don't think we see of risks to the to the ability to deferred taxes on the contribution of assets to the REIT and so I think they will continue to.
Make those assets available to us to acquire upon stabilization or when the if there happened to be managing the asset when the third party or when the I'm sorry, when the property owner is ready to.
To sell the asset.
Well, we are seeing increased activity.
I I I I don't know if it's as driven as it was at the end of the year I fear over changes in tax rules.
The regulations okay. Thank you thank.
Thank you for that for sure of it.
The next question is from Ronald Camden of Morgan Stanley. Please proceed with your question.
Hey, two quick ones from me and congrats on a great quarter just on.
Number one following up on the discussion with the pros.
After the looking at sort of the 2020 performance and sort of looking for it about maybe filling out whenever the market you are interested in.
What's the outlook for sort of the conversations with the pro does this make them more likely less likely to be interested in joining the platform. Just curious how you guys are thinking about that.
Going forward.
So I think we have a we have room to add another I'm going to say one to three pros.
And you know opportunistically around the country. If you look at the math in our in our deck. We've had it out there for quite some time now and so we still have geographic areas, where we would I would.
Would like to add an operator of our conversations with operators are they're steady the I wouldn't say the cadence has changed much as we've talked about so many times the predicting the timing is almost impossible.
It is it is possible that some of the large private operators will take some of these potential tax changes into consideration.
And I and the conversations might accelerate this year, but we don't have any line of sight on that at the moment. We are open to bringing on a couple of more pros and we have room for a couple of more pros and so you know the right the right operator in the right place who would be a good fit.
I'd sure like to be able to do that.
This year sometime in the next 12 to 18 months.
Great Mike.
Second question was just kind of need just revisiting this topic of of other income are not always comes out whether it's you know 10 insurance or third party management, just sort of curious.
It stops any updated thoughts are on the company's views changed on that just given all of the occupancy of the performance is that is that sort of an opportunity that maybe looks a little bit more interesting than in the past or what's the updated thoughts there. Thanks.
Hey, Ronald Brandon.
Let me give you a few thoughts on that and see the pits on the question or not so.
Everything you rattled off obviously is the ancillary part of the business.
Things like Senate insurance.
And retail sales most recently given the velocity of the rentals has been a positive year over year fees as has been the case the thing for us as well as the others in the sector were challenged.
Throughout all of 2020 on even in Q4, even though he spoke very positively positively about everything we experienced fees were still down for us roughly 10% for some of that was Oregon was the last of our major geographies, where we were restricted to start the quarter and so we were still emerging from that.
And then you also have just just being working with our customers and then perhaps the in a way.
In some cases on them.
On the assessment of some of those charges.
So it remains a key part of the business on an ancillary basis.
And it will contribute to growth, but let me pause there and just see if there was more of the question.
No I think that makes a ton of sense.
Actually one more if I may not to beat the acquisition questions to death, but can you just comment on who are you guys competing against now in the markets right.
The private equity has come into the space pretty pretty heavily is it still sort of mom and pops as it is.
The private equity just curious what's the competition like.
For for for acquisitions now thanks.
So our peers or are you know across.
Across the board.
Pretty active and acquisitive and so we think about them as being competitors and what we're looking at acquisitions, but certainly Blackstone and other private equity firms are are active and I, it's very competitive.
The the silver lining of of.
The self storage performance is that it's attracted a lot of attention.
And everyone everyone wants to jump in and I jumped on the business and deploy capital here. So it's.
Its okay I think we our idea is to remain disciplined and execute on our strategy I think.
Again, having our pros out there looking at deals for US we haven't strong corporate acquisitions team I believe that gives us a slight advantage and we will.
I think we'll continue to be successful in executing on our strategy. We set a target of 400 million the $650 million invested this year, we hope to be able to do that with our pros in and if something bigger comes along hopefully with the JV partner.
They're an existing one of our new one and I'm.
I'm very optimistic about our ability to deploy that capital this year without losing sight of the importance of remaining disciplined.
Perfect. Many thanks.
Of course, thank you.
The next question is from a key bin Kim of true of Securities. Please proceed with your question.
Thanks, Good afternoon, so obviously, great to see all of the strong demand across most of your markets.
All of those kind of understand how to balance the very near term strong growth first of all of the eventual kind of mean reversion.
I wanted to go back to your comments regarding the three assets from both the Bourbon and secondary markets.
Do you think there's something to say about these markets, perhaps having more resiliency can mean reversion for seeing some of the more urban net migration out of market that some of them, where we saw strong demand in the near term.
Yeah, I think you might be on to something there and I'll tell you why I think that the those secondary and tertiary markets, we're not nearly as severely affected in terms of.
The the community shut down.
Small business shut down and then they benefited from.
Some in migration and.
Keep in what we've talked about on in the past as all of those markets for do not perform as well.
Really hot economies really hot times, but they also do not.
Suffer as much and when there's an economic downturn or in this case a.
The health crisis of Pan.
<unk> and <unk> and so I know I think you I think you hit the nail on the head there with.
Thought about the resilience of those markets.
Okay, great and.
You guys changed your website of web site, a little bit this past quarter or two the goal of storage thoughts on website.
Using anymore there isn't a.
The income thinking umbrella website to just kind of search through some of your inventory.
And now as of kind of all different store websites.
Oh, sorry on storage the pro websites.
Right.
Did that did you lose any customers by that change do you think.
And do you have any standard on creating a.
Another umbrella website.
Good question. This is Dave and keeping the yes, we have we do have another umbrella website has launched.
In its first phases, and we'll be working through over the next couple of quarters really building out the more robust product than what we had on the first version of go storage units.
I don't feel we've lost any business with the evolution of our CMS on the tools that the pros of deployed we really felt that the the strength in those particular brands in their local brands was well well beyond what we were getting out of the go the storage units platform and so we've rolled out NSA brand's dotcom and <unk>.
We've got the front facing page of that launch and we'll be building on that as we go in the next quarters with more to come and I think for we're done you'll be very pleased with what you see.
Okay. Thank you and just to follow up on a previous question on cap rates on acquisitions for.
For the $525 million that's in guidance for 2021.
Is it safe to assume the stuff kind of the same five 5% of 6% of stabilized cap rate.
Yes, that's correct Ben.
Okay. That's it thank you.
Thank you.
The next question is from Jason Belcher of Wells Fargo. Please proceed with your question.
Yeah, Hi, I'm, just wondering if you can give us a little more color on the stronger than expected customer demand you're seeing maybe touch on where were your average length of stay is currently and how that's trended over the last year or two.
Yeah. Great question. This is Dave you know our average length of stay continues to increase which we're happy about the its above the above about 16 five months right. Now if you look at it as the whole and it continues to trend on the right direction.
On the demand patterns, it's all over the board all of our communities, we're seeing for what Tammy referenced in her opening comments of a multiple of of factors and a lot of things going on out there and we're seeing strength across the all of our diverse portfolio.
Obviously markets, where we have embedded the pressure maybe not have performed as strong as the rest of our portfolio, but because of this additional demand and they are performing well.
But you know.
Obviously, the sunbelt the properties and the and graduation is a great story and we've seen some strength there.
This is really across the board.
We're pretty pleased everywhere.
Great. That's helpful and then fuck of.
The drill down just a little bit more.
Specifically the college students and business customer segments of your of your base.
Any comments you can offer there and maybe give us some rough idea of what percentage of revenue those two cohorts of makeup.
It's a good question, we've talked a lot of my colleagues students and what's going on with the college students in it.
Really a mixed bag of crossed all of the University of the cross country of some are still in some are still out. So I'm never came back I think as we looked at the spring. The college season may not be as peak as what we've normally seen historically, we do expect some movement. There. We expect that from late March 1st Day April probably in those ranges as you listen to oncologists, maybe moving goods around on there.
The the dormitories, but I don't expect it to be as strong as it normally is because not everything is back to where it used to be as far as head count and who's on the dorms and who's not nor our business tenants. We think it's about 15% to 20% of our overall database. It's hard to tell of course, because when you registered you didnt not everybody talks about them being of business. There's a lot of our business as it runs on.
On the individual operators name so it's a tough metric to track, but we still think it's in the 15% to 20% range and that's about normal it hasn't really shifted one way or the other the we've detected.
Great. That's helpful. Thanks very much.
Yes.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is from Stephen Mead of anchor capital Advisors. Please proceed with your question.
Yes, good morning.
I was struck by the.
The statistics on the comparisons in Portland in Oregon, and I was also in terms of the revenue management side of the equation.
Can you just kind of explain a little bit more sort of what was going on in terms of the pretty big increase in occupancy and then relatively flat rental rates and then I have a follow on question as we get into 2021.
In your guidance in terms of revenue guidance.
What is sort of the trade off in 2021 between occupancy and rental rates.
Both really good questions. So on.
Oregon, and it really stemmed around Portland, I think is where you really saw the biggest occupancy gains and you know the higher Peru up there did a wonderful job really trying to balance occupancy and rental velocities and demand.
And the you know obviously deployed some really smart marketing tactics and revenue management tactics to really focus on getting the rental velocity that they were looking for and wanted to achieve obviously Portland has been a very competitive market. So the pressure on rates will exist and continue to exist until it works its way through the the supply that's come to the market, but the <unk>.
Using all of the tools that they have available to them I thought did a really wonderful job working on things that were available in driving that occupancy percentage up.
As we look at next year than this year and really two parts of this year. We have that same question, where are we going to balance of occupancy versus where we get a balance rate right. Now fundamentals are strong and we're pushing hard on rates on bolt ins current tenant and street rate and we're balancing the rental velocity in that expected rental velocity and move out velocity.
The compared to what we think we can get for driving new demand.
And I think first half of the year it looks really really strong in the back half of the year.
If we talk about maybe what normal might look like towards the back half of that year, maybe we will see a seasonal pattern, where we're asking ourselves how much occupancy. We do you want how much do we want to spend to get it and is it worth it.
That's all of what we're modeling our revenue management teams working on that and the I think we have a pretty good roadmap and we just have to see when the.
The community has changed in the environment changes.
And then one last question just in terms of the historically.
In quote higher.
The inflation environment versus lower inflation environment is there any sort of connection to sort of the overall kind of macro picture in terms of inflation and your sort of ability to push rents.
A good question. The you know the nice part about our products were month to month leases. So we have a great deal of flexibility. We can react very quick in both scenarios up and down for demand looking at overall inflation on.
Obviously balancing consumer spend with the product cost and keeping as.
As much as we can as far as demand, but historically I would say flexibility gives us a really nice ability to really accelerate when we need to accelerate in the maximized when we can.
And you know on an inflation typically means rates go up I mean, that's really what we've seen in the past.
Okay. Thanks.
The next question is from Neil Malkin of capital One Securities. Please proceed with your question.
Oh, Hey, guys. Appreciate you taking the follow up two quick ones first you we haven't seen the the strength in the single family either.
Ownership of rental price since the mid to early.
2000.
How did that.
If you have like historical data or you know do you expect that to change the sort of demand profile customer profile or seasonality of your portfolio of if we were to have.
We continue to have a very robust.
Single family.
Market.
But it certainly creates demand because transition cramps demand as people move across the country and I agree. The single housing market has just been incredible most of our markets.
And so you typically that's more on the summertime, which is interesting is we came out of third and fourth quarter into the first I mean, we're seeing this really strong housing demand right now and so that's what's kind of got us all wondering a little bit about when is our peak leasing season, and what will the summer look like but I would say nearly it drives demand.
Generally benefit from that and I think as long as that of housing market stays Super Hot and a lot of these markets, we're going to of some good results.
Okay.
The other one for me is you know a lot of lot of companies a lot of REIT the pet.
[noise] appears across multiple sectors of really talking about or at least in the shorter term lease sector is talking about how the operating technology in the operating platform is like the next chapter of institutionalization of the asset and sort of revenue management I'm wondering what how you guys kind of fit in that what you see as like the next chapter from them from the <unk>.
<unk> for Tech standpoint, and then do you think.
That any implementation of that will be harder given that all your pros are.
Can can basically run their own Redman systems.
Well.
Good question on good point, we're about a year into our own proprietary revenue management system, it's called store cast.
It was a great year for us to really try as we worked through the new system and it really keeps some controls on is certainly plenty of Twilio was of trying year from a rate perspective on a pricing perspective, and really keeping controls on where the system didn't run wild on us and go too far one way or the other.
I'm really excited at this point in time of what we're doing with that tool.
I have a couple of major initiatives here right now one of them is really looking at discounting of upfront pricing and really maximizing customer acquisition.
On the data science revenue management team, we've really broken into two different sectors. One of 'em studying that upfront dynamic pricing for new customers and then the other ones are obviously studying lifecycle the IPR C.
I think if you look at it for you for this was a baseball game I think we're in the middle innings, and I think we have of runway left and I think we have pricing models to tweak and enhancing get better and.
And in that you know you look for from a customer acquisitions perspective of saves cost on advertising and we certainly maximize rate and discount.
Discounts and I think we have the line of sight on how to improve there and then on the back side of it you know what the in place rent changes.
You can always tweaked that model just a little bit as we go forward. So good stuff. There and then you know we've made some really good enhancements from CMS.
On the management system website, if you on a call it that and there's some really.
Nice changes there and as we look at online rental on how we improve that process on how do we get more on line rentals.
Process on that customer journey better more efficient.
That obviously leads to more efficiencies as we work our way through the customer acquisition process.
Thanks, so much.
Thank you.
Yeah.
There are no additional questions at this time I'd like to turn the call back to Tamara Fischer for closing remarks.
Thank you and I'd like to thank everyone again for your interest in the NSA, we're pleased with our fourth quarter and full year results and the fact that our sector and our unique pro structure allow us to deliver such outstanding results. We are optimistic about 2021, and we look forward to meeting with many of you either virtually near term or maybe even in person later.
This year.
The safe stay healthy thank you bye bye.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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