Q4 2020 Extra Space Storage Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the extra space storage fourth quarter earnings Conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please note that today's conference is being recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker today, Jeff Norman Vice President of the capital markets. Thank you. Please go ahead Sir.
Thank you Cindy welcome to extra space storage is fourth quarter, 'twenty and 'twenty earnings call and.
In addition to our press release, we have furnished unaudited supplemental financial information on our website.
Please remember that management's prepared remarks and answers to your questions.
It may contain forward looking statements as defined in the private Securities Litigation Reform Act.
Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business.
These forward looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review.
Forward looking statements represent managements estimates as of today February 23 2021 the.
The company assumes no obligation to revise or update any forward looking statement because of changing market conditions or other circumstances. After the date of this conference call I would now like to turn the call over to Joe Margolis, Chief Executive Officer.
Uh huh.
And Joe you may be on mute or operator, do we have Joe's line connect question can.
Can you and me.
Yes, we hear you now thank you sorry, everyone. Thanks, Jeff. Thank you everyone for joining today's call.
I hope everyone and your families remain healthy and the <unk> 2021 is off to a good start.
And my 35 years, and real estate I can't remember and another year, which has many positive and negative twist and turns and such a short period of time as we saw in 2020.
The range of emotions I felt from March when I was worried about the daily safety of our employees and customers to April one of one.
Rental demand and our sector would return to.
The September when we saw some of the strongest occupancy and rental rate fundamentals and our company's history and hard to describe.
I am proud of our team's resilience and how well they've responded to 2000 twenty's unprecedented challenges.
And our team's efforts together with our balanced portfolio sophisticated platforms and innovative external growth efforts yielded great results and the fourth quarter.
We ended the year with same store occupancy of 94, 8% and all time of year and high for extra space.
Our elevated occupancy has given us significant pricing power.
Which we have experienced since August and the rich.
Turn to positive same store revenue growth in the fourth quarter of two 3%.
The 380 basis point acceleration from the third quarter.
We also had excellent expense controls with the 6% decrease from the same store expenses, resulting in a three 4% NOI growth and the quarter.
Our return to positive NOI gains coupled with strong external investment activity.
The core <unk> growth of 16.5% and the quarter.
Despite the challenges of the year the fourth quarter was full of accomplishments, including completion of two preferred equity investments totaling $350 million.
$147 million and acquisitions of 100.
Third $68 million and bridge loan closings.
The addition of 44 stores to our management platform.
And receipt of NAREIT leader in the Light award recognizing the extra space storage.
<unk> ability efforts. This is the first time of storage company has received this award.
While we are excited about the accomplishments of 2020.
Even more optimistic about how our efforts have positioned us for 2021.
Rentals continue to be steady and <unk> continued to be muted.
We are heading into 2021 with the highest occupancy we have ever experienced at this time of year and.
And we expect rental rates to remain strong.
We have already added 51 third party management stores, and 2021, and our acquisition management and bridge loan pipelines are robust.
But we are also mindful of the risks we face with <unk>.
Recognize the current or potential government regulations could impede same store revenue and expense performance.
We believe the Vacates may eventually return to more normal levels and we recognize that the challenges related to new supply have not subsided completely and we will continue to suppress rate growth and many markets.
And in the past our team is procured to use all of our available tools to optimize performance and the face of any risks which materialized.
In short despite significant turbulence, we had a very successful 2020 and look forward to an even better 2021.
We continue to execute on the strategy to maximize shareholders' long term value and to deliver the results our shareholders of come to expect from extra space storage.
I would now like to turn the time over to Scott.
Thank you, Joe and Hello, everyone.
As Joe mentioned, we had a great fourth quarter with re accelerating same store revenue growth driven by all time high occupancy and strong rental rate growth to new customers.
Late fees and other income continued to be lower year over year, and partially offset rental income, but we saw improvement and both line items from levels experienced in the third quarter, we lowered expenses and all controllable expense categories and the quarter and despite property tax increases of six 4%.
And we still delivered a reduction and same store expenses. Overall. This resulted in same store NOI NOI growth of three 4%.
Core <unk> for the quarter was $1 48, a year over year increase of 16, 5% and well above consensus estimates.
Our same store performance was the primary driver of the outperformance with additional contribution from growth and tenant reinsurance income management fees and interest and investment income.
We continue to evolve our balance sheet to reduce secured debt and increased the size of our unencumbered pool. Our efforts resulted in moodys issuing extra space of <unk> credit rating on January 28, our second investment grade credit rating now providing us access to the public bond market.
We're excited to add another capital option to finance future growth reduce total cost of debt and further ladder our maturities.
At yearend, we had higher than normal revolver balances and variable rate debt due to the elevated capital activity that took place and the fourth quarter, including settling our convertible notes completing preferred equity investments and closing substantial bridge loan and acquisition volume.
A significant portion of these transactions were temporarily funded by draws on our revolving lines were comfortable doing so we were comfortable doing so knowing we were actively issuing non our ATM had patent pending bridge loan sales and of recapitalizing stores into a JV, which bring our revolver balances down to historical levels.
Last night, we provided guidance and annual assumptions for 2021 with ranges that are wider than previous than in previous years to address some of the uncertainty related to COVID-19, and its impact on customer behavior and government regulation.
Our new same store pool includes a total of 860 stores, which is essentially flat with last year. The number of new stores added to the pool was generally offset by sites removed due to disposition or redevelopment, we anticipate the changes and the same store pool will benefit our 2021 same store revenue grew.
And by approximately 20 basis points.
Same store revenue is expected to increase $4, two 5% to five 5% driven by higher occupancy and the first half of the year and elevated rates and new and existing to new and existing customers.
Same store expense growth is expected to be three 5% of four 5%, primarily driven by by higher property tax expense, our revenue and expense guidance results and same store NOI growth range of four to five to $6 two 5%.
The acquisition market continues to be expensive and we will remain disciplined but opportunistic we expect to do significant acquisition volume and plan to close the number of transactions with joint venture partners, our guidance assumes $350 million and extra space investment approximately of $180 million of which is <unk>.
<unk> or under contract.
We also expect to close approximately $400 million of bridge loans and plan to retain 20% to 25% of those balances were approximately of $100 million in 2021.
We have plenty of capital to invest if we find additional opportunities that create long term value for shareholders and we will be creative as we deploy capital and the sector.
Our full year core <unk> is estimated to be between $5 85, and $6 and <unk> per share. We anticipate 16 cents of dilution from value add acquisitions or C of O stores down <unk> from 2020, we also added additional guidance related to our expected interest income for 2000 and <unk>.
'twenty, one as well as nodes clarifying the recognition the recognition of our preferred investments and smart stop and next point, which can be found and the outlook tables of our earnings release as Joe mentioned 2020 has been a memorable year for extra space. We are excited to turn the page and are already on our way to a very strong 2021.
And with that let's turn it over to Cindy to start our Q&A.
As a reminder, if you would like to ask a question. Please press star one on your telephone to withdraw your question press, the pound or hash key and.
Our first question comes from of Louis <unk> with Bank of America.
Thank you for taking my questions and congrats on a great quarter and it looks like 2021 and that would be great for your assets.
And so I just wanted to start off and ask a little bit more on.
What are you guys are expecting for revenues and see yourself. How are you thinking about occupancy for the first half versus the second half and a little bit more on the rental rate assumptions.
Yes, Hello. This is Scott I can give you a little bit of more detail in terms of what our guidance assumes we are assuming that our occupancy stays strong so in January and into February or our GAAP has actually expanded to be just over 300 basis points. So what's happened is January and February typically have lower occupancy.
Mining occupancy we haven't seen that so we moved from 240 basis point Delta and occupancy to over 300 basis points, where we are today. So we're assuming that occupancy holds at this high level through the end of the summer at which point, we expect occupancy to fall more to historical levels. So.
Last year, and the fourth quarter of third and fourth quarter, we saw occupancy two to 300 basis points higher than the normal. This year, we expect that to be of 1% to 200 basis point headwind for us. So we expect it to be lower in the fall back more to historical levels. We expect the first quarter to be strong in terms of revenue growth continuing.
To accelerate from the fourth quarter and the second quarter should be the peak and that is mainly due to some easy comps from last year and then.
Continued good into the third quarter with at the end of the third quarter and fourth quarter being challenging.
Got it Okay makes sense and then I guess, just a little bit more on the third party management for 2021, you mentioned that you already added 51, new storage can we expect.
The large acceleration and.
Third party management and compared to 2020 and 2000 2019.
So the this is Joe the and thank you for your kind words about our performance, it's not Scott the silver 4000 employees, who.
Every day and your best of War, and we've really done outstanding job.
Respect to third party management.
Our activity in January and February was 51 stores out of it is a little elevated because we took 37 stores on in connection with the J cap and transaction. So I would expect our 2021 activity to be similar to our 2020 activity in <unk>.
Arms of games.
Okay got it thank you so much.
Thank you Louis.
Your next question comes from Spencer Alloway with Green Street.
Thank you and can you just provide a little bit of color on how existing customer rate increases have been trending just relative to your historical norm and.
Do you suspect that youre going to be able to continue pushing the is pretty aggressively and in 'twenty one.
So we're still subject to restrictions on existing customer rate increase and <unk>.
Many markets across the country.
And that we abide by all of those regulations and that of course is the limit to us absent that are.
ECR I increases average high single digits, 10% about the same and as always and and.
And interestingly, we continue the monarch move out rates.
In response to the Shanghai, and we have seen no increase and move out rates.
Hopefully at some point those regulations.
<unk> are lifted and we can get back to fully normal behavior.
We are and limited now we understood that and took that into accounts and our guidance and.
And.
Hopefully, we can get back to normal sooner rather than later.
Yes.
Okay. Thank you and then and.
And just to make external growth from all of you guys currently seeing more opportunity and.
The stabilized assets or with assets and some sort of lease up right now.
I'm, sorry, more opportunities with what type of assets I Couldnt understand Inc.
The stabilized versus the <unk>.
And in some form of Lisa yes, Thank you very much.
So.
And sorry about that so what we bought is more lease up assets stabilized the pricing on stabilized assets and is very hard for us to make sense of.
We will probably be more active on that front in 2021 and with joint venture partners just to make the pricing makes sense to us but.
And we bought in 2020 once the lease up.
And you kind of average and we were in the mid threes first year and stabilized on average and 17 months and the mid sixes.
I think thats the best use of our acquisition dollars today.
Thank you.
Sure.
Your next question comes from Rick Skidmore with Goldman Sachs.
Hi, Good morning, Joe and Scott.
Question on Joe for the on the supply growth how are you seeing supply across your markets. You mentioned kind of flattish, but are there any particular markets, where you're seeing outsized supply growth.
Or how are you thinking about supply in 2021 and into 2022. Thank you.
Sure. Thanks, Great question, so supply still an issue that's the short answer we did see.
<unk> pulled back in 2020 due to Covid week Im going to speak to our same store pool, not national statistics I'll speak to what matters to US we had projected in 2000, Twenty's and about 30% of our same store pool would be impacted by new supply and when you look at the actual numbers. So it was only around 21% so almost a third cash.
Pushed or canceled because of COVID-19.
And in 2022, we project 22 percentage of our same store total will be impacted by new stores and I think that will be like there is every year from number of those stores get delayed or maybe even canceled. So we are seeing.
And the incremental decrease and new supply.
And Thats good news, but I would caution you on two fronts. One is we still have significant supply delivered in many markets over the last several years and we're working through that and that affects our ability to push rate.
And secondly, with the performance of storage, particularly in comparison to other asset classes.
And would not be surprised of that attracts more capital of more developers to the market. So new supply isn't going away, it's not and any every market, but in the markets where it is it's something we need to deal with.
Okay.
Thank you and then Joe just maybe one other follow up on the bridge loan program.
Mentioned, I think 400 million targeted for 2021 is that sort of in the pipeline or is that an aspirational goal maybe help us frame that and then how you think about the path forward from some of these bridge loan and other investments that you're making to help.
With the <unk> growth.
So we have about $196 million and the pipeline so.
We believe $400 million is an achievable goal.
And the bridge loan program is very accretive for us because.
The whole note rates may be and the 5% to 6% book by the time, we sell the a and keep the b.
And the right, we're getting is 90% of 11%.
We're getting management of the stores and the economics there.
We also hope to buy a bunch of these and I think we bought one and half two that we're targeting to buy.
And and immature program, but as we get deeper into it I hope it turns into an acquisition pipeline as well.
Yes.
Thank you.
Sure.
Your next question comes from Naved Rose with Citi.
Hi, Thanks.
And I wanted to ask you. Some migration has been a big topic over the period at the same day and Matt can I was just wondering are you starting to see that at all across the portfolio.
And does it make you sort of total square and you're thinking about where you might want to invest.
And the future of as you look at acquisitions.
Thanks Pete.
So we haven't seen differential in performance between the.
Markets that had been called out as people are fleeing San Francisco or people are fleeing New York and.
And the markets that people are supposedly swing too.
And I don't know if that's because people are storing their stuff and Manhattan before they go out and Maryland, New Jersey and at some point that will unwind, but as of now we don't see performance differential based on that and reported phenomenon.
We do see is performance different based on new supply and go back to the previous question and that's where we have the weakest power.
I would also tell you theres been a number of articles coming out recently that quest.
A question, whether the urban slight.
As widespread as been reported and Covid I just read an article that most of the people, leaving San Francisco are settling and the counties around San Francisco and they're not drawn to Utah, Florida power <unk>.
Texas.
And then lastly, and this is just one man's opinion.
Believe COVID-19 is the depth of New York City, I believe young people like to leave and cities cities have a lot of advantages and.
And.
I don't believe.
This is the depth of the big cities So to answer your question.
We're much more focused on micro market share.
Book to buy things and we're not we have not yet adjusted our investment strategy based on urban sites.
Okay. Thank you. Thank you for that just from the FCC Your net adds in the.
Fourth quarter for third party management or quite a bit lower than the growth additions and I just was one.
Wondering what sort of caused the churn and is that something that you would expect to see.
Going forward.
Perhaps the yes the front.
And the first quarter.
Yeah, Great question. So we had 38 stores and we've our platform and the fourth quarter and 87 of our platform 2020.
Almost all of them were because of the sales very very few.
Change and managers.
We've bought 15 of those 87 stores not a huge percentage.
And the issue is price and we tried to remain.
Disciplined and and.
Net.
Overpaying and our view for things.
Also of some subset of the stores that are not of the quality, we want to own and manage that not all of them.
And.
So.
Given where prices I would expect that we continue to have sales.
I hope, we can do a better job through.
The structures that we buy more of them.
But our number one goal of us not to do something that's dilutive to our shareholders value. So if pricing gets beyond what we think is reasonable.
And do our best to transition and the storage into the new buyer.
Thank you I appreciate it.
Thanks Smedes.
Your next question comes from Todd Todd Thomas with Keybanc capital markets.
Hi, good afternoon.
The question Scott apologies, if I missed this but what were moving rates.
Our move in rate growth, I guess and the quarter and in January and what are you seeing early in February.
And so our achieved rates and the fourth quarter and really for the back half of the year, we're about 10%.
Year over year ahead of where they were of the prior year and and the first quarter of this year January and February we're seeing rates.
At very similar levels about 10% ahead of where they were last year.
Okay, and then just following up on rental rate trends and just given how the industry has tightened up here over the last couple of quarters.
And you've seen a lot of rent growth during the off peak season, which which Joe I think you noted began in August.
As we think about the peak leasing season and ramping up now is the.
Is it possible that we see rate increases similar to what extra space and.
And the industry has experienced historically during the peak periods from from where rates are today and is that factored into guidance.
So we are assuming the the first quarter. We continue these rates that we've been we've been experiencing second quarter. Our achieved rates, we would expect to be very strong because if you remember and the second quarter when things really dropped we dropped rates, 20% to 30% and so when youre looking at a rate that was 20% to 30% lower.
And then it's already 10% above youre going to see some significant rate growth for customers that move in April.
April may and even into early June and those are all factored into our guidance.
Okay.
So far above.
We're of rates today relative to.
Sort of that March April may timeframe.
So I'll just give you one point of reference and Thats, our achieved I mean, our achieved rate compared to our in place rents and this isn't necessarily the move out rate versus the move in rate. Our in place rents are actually above our achieved rates today now remember this is the time of year when this.
<unk>.
Usually the most negative meaning youre achieved rates and January February and it's the highest your existing customer rates are compared to your achieved rates on an annual basis. So the fact that our rates are up 10% year over year. In February is good so our of our in place rents are about high single digits.
Above where the achieved rates are today.
Okay.
That's helpful. And then just one question the taxes and the Trs that are forecast to be up to about $19 million to $20 million I know in the past you've.
Executed on sort of a variety of different strategies to minimize that tax expenses are there any opportunities that you see today as you look ahead.
So we are continuing to take advantage of some solar opportunities.
We continue to use it from an ESG perspective, and and sustainability perspective, as well as some tax benefits. That's the big one that we have today.
Okay.
And a potential.
Downside to two that the.
The tax expense and the Trs going forward.
So I think it will depend a little bit on where rates tax rates go and then also what happens with solar credits I think that you've seen them burning off I would expect with the change and president they could.
Initiate additional credits.
But those are and will continue to monitor of those.
Okay alright, thank you.
Thanks Scott.
Your next question comes from Kai Bim, Kim with Truest.
Thanks, great quarter and great guidance.
So I'm curious.
Are the cash.
And the rent increase.
Okay.
The feelings that California, and the other studies might have put in place.
What is implicit in your guidance in terms of those policy of loosening up slightly and are you assuming that you can push rates further in the back half and California or is that just on the upside.
So outside of guidance.
So.
We don't assume that.
The.
And get relief from those.
In the first half of 2021.
The back half of 2021, I believe from still are moderating some of those rates. So there is some upside to that but there's also downside if something turns and the wrong direction and the additional restrictions are put into place.
Got it.
And just going back to the supply topic, you talked about the.
The percent of impacting anything sort of pull but I'm curious about the thoughts about impact of not just 30% of them being impacted or two 1% being impacted but.
And the depth of the impact is.
At the end of the day.
When all of the sudden and done if the death of that I'm talking about you can and butter.
Okay.
Not sure I understood the question so.
We've tried to be clear on this call and others that supply is the biggest factor that's impeding our performance and that.
And the.
The markets like.
And the boroughs and northern New Jersey.
Texas markets, Florida markets et cetera.
Ability to raise rents.
And we can fill of the stores up and we can keep them and.
The high occupancy rates and it's our ability to raise rents.
Impacted by the new supply keeping out north of that answer to your question and not a snap and the let.
And let me know and I'll try and Gunnar.
Well, you said I think about 21% of everything and so of course impacted by supply, but that could mean, 10% more supply coming from those markets or at the mean, 2% from more spike metals markets. So thats all kind of gauge assets.
The leaning one way or another.
Yes.
Listen this is the micro market business and that.
<unk> com and it varies widely we've had situations where.
We've had talk to these come in.
Very close to the existing properties, and new development and because of traffic patterns or.
The barriers like bridges of rivers.
And our whenever specific reason, we've had absolutely no impact on our properties.
You also see that.
It's better for storage.
New store to come into a market, where it's 10 square feet per person and then two square feet per person because of the percentage increase on a market. That's full and has 10 square feet per person.
Half the capture <unk>.
And all.
Part of everyone's demand to fill your startup where parts.
Only two square feet per person and you're and increasing supply the 50% that's the more difficult disease and the short term of more difficult problem.
So it is absolutely we get the number is 21% of 30% whatever it is a market by market store by store analysis and Thats, how we do it for our guidance we create individual budgets based on what we know what could happen and the markets for each store, we do our best to project performance and we roll.
And that all up the net becomes our guidance.
Got it thank you.
Sure.
The next question comes from Todd Stender with Wells Fargo.
Hi, Thanks.
Listen into your posture, calling for some moderation and occupancy.
Certainly these are historic highs and it's probably prudent to do so but what drives that move lower are you assuming some housing transactions slowing is it froze and consumer behavior. The begins to thaw and people naturally start to move out after 13 of 14 months.
What are you kind of point to.
The Todd I would tell you and.
Go ahead, Jeff.
Sorry, Scott so our elevated occupancy one of the very important factors is moderation and vacates.
And at some point Covid is going to be in the rearview mirror.
And we believe customer behavior will return to normal now.
Now I don't think that means there's going to be and of Covid day, and someone's going to flip the switch and everyone runs to move out of their storage of right. We know that our customers are a great deal of inertia and that's not high and no less and it may take them some time.
We know that.
The largest increase and reasons for storage we've seen over Covid is de cluttering of the house and I don't think just this covers all of our people are going to want to re clutter of their house right. This may be a more permanent change.
With all of that being said.
We do believe Vacates will eventually get back to more normal levels and that will.
Cause of reduction in occupancy.
Understood. Thanks, Joe one more just and the terms of.
And maybe just sticking with bridge loans.
You did sell some of your bridge loans.
And it looks like you have a little bit more sold already this year.
So it gives you a seat at the table when you want to acquire of property, but now you've sold some does that now limit your ability to acquire on that deal and that's one and then two how liquid.
Is that market. If you guys are trying to lighten up on loans or maybe it's the risk mitigation effort and maybe just some context there.
So the.
And then once we have sold and eight piece and we have sold $76 million of additional eight pieces in 2021.
Does complicate the purchase because we can wave our portion of the prepayment penalty, but the EPS holder snacks and to do that because they're not getting any benefit from our purchase so the.
That is a.
Challenge, obviously as you get closer to maturity and those burn off hits the less of.
The challenge.
The second part of the question.
When we started this program we had a.
Co lending partners that we would co originate the loans and at closing.
Close them with the.
And where we own the health of the Ppas.
And we found that better execution over time was for us to close and hold both pieces package up the age into more meaningful chunks.
And then sell them so that means we hold the age on our balance sheet for some period of time and you saw and the fourth quarter, how having those sold.
Elevated our debt somewhat.
But it gives us better execution, particularly because now we have two buyers of the notes of the reached some competition and redundancy for that and that seems to be working really well for us.
Great. Thank you.
Sure.
Your next question comes from Mike Mueller with JP Morgan.
Yes, Hi, Scott wanted to go back to when you were talking about occupancy being strong.
Up to 300 through the summer and then you made a comment about the headwind down to 100.
Were you implying that by year and the occupancy top of what's going to be of negative 100, or your 300 positive was going to shrink the 100 positive.
So and the back half of 2020, it was two to 300 basis point benefit.
And we are assuming that in the back half of 2021. It is of one to 200 basis point headwind. So it's a negative comp year over year and the back half of 2021.
Got it Okay. That's helpful. And then when you were talking about the portion or the markets, where you still run into rental increase restrictions how significant is that as the percentage of the whole portfolio.
So think of how to measure of that.
Some of some of the rental rate restrictions are at a level that it's not that meaningful and Alabama, you can increase the reach one and 25% the Kansas is 25% zone.
But it gives you the idea.
And the others, like California, where it's 10% and it's a meaningful.
Thanks, Bob.
For us that is much more of a restriction.
So we think the opportunity cost if you will in 2021, because we're not able to research and rich.
And is meaningful.
Like the over $10 million.
But it's it's.
It's all included in our guidance.
Got it okay that was it thank you.
Your next question comes from Ronald Camden with Morgan Stanley.
Hey, congrats on the quarter, just two quick ones from me.
One is just on the same store expense guidance. If you could just if you have and already talk about how should we think about sort of the property taxes and the payroll and what's your sort of the largest items.
In terms of their contribution.
So I can give you our assumptions and our guidance the.
About 55% of the increase actually relates to payroll to property tax increases and we are assuming that there are about five 5% higher than they were in 2020, our payroll increase is about 2%.
Increase year over year and that makes up another 10%.
And then we are assuming R&M is going up we've had a couple of years with the down and we've had some benefit from lower comps with snow removal. So we think thats going to be a tough comp we've seen some of that and the northeast starting to date.
So thats some of the larger assumptions and the 2021 guidance.
Got it.
The question was that just on the four assets that were sold just any color around there maybe cap rates or why why was it sold with interest of great offer just curious what the situations where there. Thanks.
I would tell you we thought the pricing was very good otherwise we wouldn't have sold.
And we retain management of the stores.
Certain right of first refusal to buy them.
And everyone in the selling I would tell you it was the tax motivated by.
Buyer.
And we were able to.
Drive what I thought was very attractive terms, because they have that motivation.
Helpful. Many thanks.
I'm sorry.
Okay.
No I said, thank you okay. Thank you very much.
Your next question comes from Michael Lehmann with Evercore ISI.
Hi, guys.
Thanks for taking the question just a quick follow up on all of the supply how much of your outlook includes the possibility of conversions from retail.
The storage with the amount of of kind of reliance on e-commerce that sort of happening.
So when we know about it.
It's absolutely included and.
<unk>, our folks in the field of our.
Sure.
Our charge with knowing what's going on and there are micro market and what can be.
Converted.
That being said I think that is and we've done a bunch of that we have a number of stores that are old retail centers.
There's challenges to that I don't think thats going to be a day.
Giant source of new self storage.
Some of the dark retailers and FERC retail for a reason.
And we wouldn't want to put the storage site there some of these.
As dark retail, but non zone properly for storage and.
And there is lot of other physical issues with doing that.
And there certainly will be some of that and I don't see a wave of.
During the wave of new supply from retail conversions.
Got it okay. That's it from me.
Thank you.
Your next question comes from Kai and then Kim let's truest.
Oh the anywhere.
All of that would be back so quick.
Just wanted to talk Big picture about your bridge loan program.
Not just like Watson and toilet cleaning 'twenty, one guidance, but just longer term.
Should we view this program of.
Going to the in place for the Buckingham and Buffalo future or is it more because of the market opportunity that you are taking advantage of so maybe in three years.
And it really winds down and I'm, just trying to understand the scope of the program long term.
So we don't have a perfect crystal ball our belief is that there will be the demand for what we're doing now.
For the future.
I also believe that.
And the.
And on us to always understand where the capital voids are and the market.
And how we can make good risk adjusted returns based on this capital voids. So if our current program.
The get smaller and the future because the capital need is not as great.
I hope that our team and I expect that our team the fine the next opportunity.
And one thing I think the extra space has done well over the years.
The innovative with the external growth and then.
It means.
And not.
Executing the same strategy, regardless of where you are and the market cycle, just trying to understand that market cycle and see where you can make outsized returns at acceptable levels of risk right now and Thats bridge loans.
I hope it continues forever, but if it doesn't move and something else.
Right and.
Obviously, I'm, assuming that there is a pretty wide funnel and what you and the clothing and its pretty select.
Selective.
Just curious can you just describe like the deals that you've actually.
Turned down and how big that funnel is at the top.
Sure so the.
The.
Two biggest limitations on the funnel of the top because we won't be construction loans and we could we could make lots and lots of loans per willing to make construction loans, but the great thing about the bridge loan program is if it goes bad and we have to take the property over at 75% or 80% of underwritten value we already operated.
Happy to own it and Thats not a bad result.
As opposed to taking over a half built default. The construction project, we have no interest of that.
So thats one limitation on the top of this fall and the second is we have to manage the store.
And some people are self manage and monarch continue that and they don't want us to manage the store and.
And then we won't do it.
After that we get to <unk>.
The quality location underwriting we can't get to the proceeds that the.
<unk> launch.
But.
<unk>.
We have a substantial pipeline and we feel.
The comp that we can hit our guidance of this year.
Okay. Thanks, Scott.
Sure. Thanks Steven.
Im showing no further questions at this time I would now like to turn the conference back to Mr. Joe Margolis, Chief Executive Officer.
Great. Thanks, and thanks, everyone for your interest and extra space and your support over the years, we're really looking forward to a strong 2021 strong double digit core <unk> growth and <unk>.
And your interest out of more and more families of well. Thank you very much.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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