Q1 2021 Public Storage Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the public's tours for first quarter 2021 earnings call. At this time, all parties and have been placed in a listen only mode and the floor will be opened for questions. Following the presentation.
You have a question and that's it and if you have a question and at that time. Please press star on your Touchtone phone, if you wish to remove yourself from the queue. Please press. The pound key is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations Ryan you may begin.
Thank you Angela Hello, everyone. Thank you for joining us for our first quarter 2021 earnings call I'm here with Joe Russell and Tom Boyle before we begin we want our mind you that certain matters discussed during this call may constitute forward looking statements within the meaning of the federal Securities laws. These forward looking statements are subject to certain economic risks and uncertainties all forward looking.
Statements speak only as of today April 29 for 2021, and we assume no obligation to update and revise or supplement and these statements they become untrue because of subsequent events.
A reconciliation to GAAP of the non-GAAP financial measures. We provide on this call is included in our earnings release, you can find our earnings release and supplemental report.
<unk> reports and an audio replay of this conference call on our website at public storage Dot Com. We do ask that you initially limit yourself to two questions of course, if you have more beyond that please feel free to jump back in the queue with that I'll turn the call over to Joe.
Thanks Ryan.
Good morning, and thank you for joining us before we begin and we continue to wish everyone. Good health as we all face from any impacts from the pandemic.
This morning, Tom and I will begin the call by covering a few areas tied to Q1 performance along with our inaugural guidance for 2021.
As you know on May 3rd we are hosting an investor day, virtually and hope you can join us.
And we'll share our key strategies and introduce you to the executive leadership team that will drive our growth and the coming years.
Looking at Q1, a number of historic metrics played through.
Customer demand for self storage has remained elevated.
We continue to see consistent customer behavior across all markets with increased moving rates.
Standard customer length of stay and more latitude to resume traditional rate increases to existing customers.
The band has been tied to both historic drivers coupled with a longer lasting impacts from more consumers needing storage.
This includes work from home study from home.
Elevated home sales and remodeling and the migration and and out of Metropolitan markets.
With the economy, improving and additional government stimulus.
<unk> balance sheets are healthy and our customers' payment patterns remained strong.
Both same store and non same store assets are performing well with lease ups, particularly in non same store assets outpacing our projections as NOI grew by 46%.
Two investments 2021 is shaping up to be a robust year of acquisition activity.
With the addition of the recently announced easy storage portfolio, our year to day 2020 acquisition activity either closed or under contract, it's $2 5 billion.
Of note since 2019, we have acquired developed and Redeveloped, approximately 22 million square feet and have expanded our portfolio by 13%, having invested $4 3 billion.
And regards to the easy storage acquisition I would like to mention a few highlights of this significant transaction and how it matched for specific areas tied to our unique capabilities.
First.
The integration of the assets into the public storage brand and operating platform will be seamless as we already had a broad presence and these markets with a 115 assets.
We now enjoy even stronger presence with now 163 assets with unmatched brand presence across submit Atlantic region.
Second.
Eight of the easy storage assets are poised for expansion along with one that has begun ground up development.
The public storage development team has taken lead on these opportunities and is ready to execute on each one of them.
Allowing us to expand our portfolio by approximately 10% over the next 24 months.
As you know public storage has the only development team among the self storage rates and is well poised to unlock more value from this portfolio by virtue of our unique development capabilities.
Third.
Our ability to fund a large acquisition and clothes and a very short timeline and this case six weeks from selection to close.
And was due to our efficient and primed capital structure.
This transaction is immediately accretive to <unk> and NOI.
And fourth our well earned reputation of being a buyer of choice and the investment community.
I want to thank them and Janiero family and the easy storage team for choosing public storage and the great work they put into this outstanding portfolio over the last two plus decades.
We appreciate their assistance and integrating this outstanding portfolio into our platform and welcome many of their employees and customers to public storage.
Looking to fall 2021, we are encouraged by core customer demand.
Our well located portfolio.
The strength of our balance sheet and the quality and dedication of our 5000 plus team members that public storage all of whom are committed to enhancing the leading brand and the self storage industry.
With that let me hand, the call over to Tom.
Thanks, Joe.
Start with financial performance.
Our financial performance has improved steadily through the second half of 2020 into the first quarter of 2021.
In the same store.
Our revenue increased three 4% compared to the first quarter of 2020, which represents a sequential improvement and growth of two 6% from the fourth quarter.
There were two primary factors contributing to that improvement first and foremost moving rates were up double digits, while move out rates were roughly flat year over year, leading to improving in place rents.
And secondly, occupancy also increased through the quarter with move in volume down but move out volume also lower.
Now onto expenses the.
And the team did a great job driving same store cost of operations down and the first quarter lower expenses were driven by property payroll utilities marketing and a timing benefit on property taxes.
Property tax specifically, we will expense our estimate ratably through the year, leading to a benefit and the first three quarters and reversing to a headwind and the fourth quarter.
This will lead to more stable quarter over quarter property tax and the future.
The benefit this quarter was worth <unk> <unk>.
Some of the technology and operating model evolution, we will discuss on Monday at our Investor day showed up and our first quarter numbers with property payroll down 13% and the quarter given efficiency improvements, we look forward to share more on Monday.
For the first time, we included 2021 core <unk> guidance and our earnings release and supplement and.
In conjunction with a line by line commentary and our supplemental it's a guide to our outlook and the key drivers of our business.
And as we started 2021, we've seen continued strength as Joe mentioned and customer demand with occupancy is up 260 basis points and in place contract rent per occupied square foot turning into positive year over year territory and January.
We anticipate same store revenue to grow from four to five 5% and 2021.
That outlook is supported by good customer demand and moderating supply.
That said, we do see risk to move outs going higher as we move through the year Comping against what was really extraordinary existing tenant performance in 2020.
Our current expectations are for occupancy to be down 100 basis points, plus and the fourth quarter compared to 2020.
We expect continued strong expense control and the same store and 2021, our expectations are for 1% to 2% same store expense growth.
Property tax expense growth will pick up this year with our expectations around a 5% increase for the year against again recognized ratably through the year.
Our guidance includes the acceleration of our external growth initiatives with easy storage and will add to <unk> growth through our non same store portfolio. This year indexed.
In total our outlook is for core <unk> per share of $11 35 to.
To $11 75 for 2021.
I'll now shift gears for the balance sheet as Joe mentioned, we used our growth oriented balance sheet to fund the purchase of easy storage entering the bond market. The day after announcement and having fully funded the transaction within two days.
The offering comprised of $3 seven and 10 year tranches for the weighted average cost of about one 6%.
After effects of the transaction, we have the longest duration balance sheet and the REIT industry with one of the lowest cost profiles.
And we remain and a great position to continue to use the balance sheet to fund our growth initiatives and we'll share more at our Investor day on Monday.
With that I'll turn it over to Angela to open the lineup for questions.
If you would like to ask a question at this time. Please press star one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question is from the line of Jeff Spector with Bank of America Merrill Lynch. Please go ahead.
Great Good afternoon, and thanks for the additional disclosures.
Disclosures and guidance very helpful. First question is just really the main incoming investor question, we get and it's around the.
And the customers demand drivers and Joe you discussed this I guess in your opening remarks a bit.
But and then again you talked about a decrease in occupancy and the fourth quarter can you just I guess dig in a little bit more on why you feel the customer.
Some of the drivers we saw last year may feed and can you confirm the 100 bps drops and the fourth quarter is that just normal seasonality how does that compare to.
Normally what you see in the fourth quarter.
Yeah, Jeff one of the things that is hard to predict even going out. Another couple of quarters is what could revert to some degree to what you would call normal seasonality so to Tom's point, we're looking at that as a potential.
Vance, but still to be determined as we've seen now for the last several quarters, the sustainability of consumer and business demand for that matter has been quite elevated and as I noted there are <unk>.
Consistent market trends.
Literally in every area that we operate and the business right now and consumers continue to look for and need storage for a whole host of both traditional and I would say new and different.
Different reasons, we're encouraged by the fact that there's even generationally entirely new pool of customers coming to storage for the first time, we think that can be additive as well.
And as we've seen with home sales as I mentioned.
The additional pickup and the economy.
Overall demand has been quite healthy and we feel it's sustainable but could be impacted for more seasonality reasons closer to the end of the year, but to be determined.
Okay.
Thank you and then my second question just on on acquisitions and new facilities.
Should we think about I guess specific target markets for you and how that fits in with your current portfolio plus the easy storage portfolio.
Well one of the benefits that we clearly have had over time and this isn't new to the way that we're uniquely positioned nationally as we have deep presence literally in every major metropolitan market across the United States. We're on the ground for dealing with.
A lot of very vibrant data relative to knowledge of other owners the traction that we're seeing and markets. The way that we balance the focus that we've got on going deeper and any particular market and looking at the easy storage acquisition as I noted, we already had a top ownership.
<unk> position and that market by quite a large margin.
And the easy storage portfolio was highly regarded and was no nationally as a very top tier national operator by virtue of pulling those 48 assets on top of what we already had which was a very strong presence and that market, we were able to magnify our presence there quite dramatically and.
That could play through and many other markets nationally, whether it's on something as sizable as easy storage or something more limited from a specific asset base, whether it's a single or a smaller portfolio or one that could be more widespread.
Give you. Another example, and the fourth quarter of 2020, we bought the beyond storage portfolio. Unlike the easy storage portfolio beyond storage portfolio was a multiple markets, but again very easy for us to integrate.
Very easy for us to underwrite.
And we had very good ability to move quickly which leads to the fact that we are without question a preferred buyer and with that the team continues to see a very strong collection of different opportunities nationally.
We're seeing good.
Quality of assets come into the markets I would say about half of them come to us privately off market and the other half or more through traditional means but we've got very good relationships deep seated by virtue of the fact that we've been and operate and these markets.
And have a very strong reputation as and it is a per.
Efird buyer.
Thanks, Joe very helpful looking forward to Monday.
Great. Thanks, John Thanks, Jeff.
Your next question is from the line of one Thanos <unk> with BMO capital markets. Please go ahead.
Hi, good morning, and thanks for the time.
Just wanted to ask a little bit more about the same store revenue growth and maybe if you could just give us any more.
Context with regards to the cadence as you built in through the year your assumptions for the full year.
Maybe if you can provide some color on the low versus high end and.
What's assumed that those two extremes and what the benefit is from easier comps on the <unk> business, which has been a drag for the last few quarters.
Yes, sure one there's a lot there to unpack so let me let me pays through that.
Starting with the last one first which is fees so that has been a drag.
And each of the quarters since the onset of the pandemic and so you're starting to see that really take hold and the second quarter of last year and so we will have lapped that comp we do anticipate as Joe mentioned continued strong payment activity. So we don't think that those those fee collections will earn those fees will be charged or collected for the remainder of the year.
But we won't be comping against the previous year, where we had been collecting them. So that should go away from a comp standpoint, the next three quarters.
In terms of the <unk>.
Cadence through the year I mentioned.
The occupancy point and the fourth quarter and in our base case, and I think that that is really driven as Joe mentioned by typical seasonality as we get into the second part of the year, we'd anticipate that is.
The economy starts to open up we see more governor was talking about getting back to normal through the summer period, and and employers encouraging folks to get back into the office as we move through the summer and into the fall, we would anticipate a more seasonal pattern to reemerge and occupancies to fall like they do and any <unk>.
All year.
As we move into the third and fourth quarter.
In terms of any other items I'd highlight.
As we talked about last year, one of the drivers of the drop and in place rents last second quarter. In particular was the fact that we had paused on our existing tenant rate increase program and as Joe mentioned in his prepared remarks.
We are executing on that plan throughout the year. This year. So we will have easy comps from an existing tenant rate increase program standpoint, and the second quarter, but then we did resume those last year and the third and fourth.
Great. Thanks, and then I was just hoping for.
If you could provide any color on what youre seeing on street rates for new customers in terms of net effective and how that's trended.
Through April and just to give us a sense as how it.
Seasonality is trending to date.
Yeah, well, we continue to see very strong demand trends as Joe mentioned earlier, the move in rates and the first quarter were up nearly 16% year over year and those were Comping pre pandemic 2020, as we moved into April. We obviously are now comping the onset of the pandemic last year, where we did see.
Reduced customer demand and lower move in rates, so moving rates year over year through April are up 40% plus.
And I think the most encouraging thing as we start to look at a typical seasonal pattern and we're looking at 2019 as a benchmark and our April move and rents are up double digits versus AP.
April 2019, as well, indicating that continued positive trajectory of rents and and good performance. There. So we continue to be encouraged by customer demand and frankly, we we have limited inventory within the same store pool, so rates rates are going higher.
40% sounds pretty good for me.
Thank you.
Thanks, Ron.
Your next question is from the line of Todd Thomas with Keybanc. Please go ahead.
Hi, Thanks, good morning out there.
First question, just circling back to investment and so I'm just trying to tease through some other comments that you've made Joe and the $200 million of incremental acquisitions that are embedded in our guidance. It seems a little bit light relative to the pace you Ron even excluding that the easy storage deal are you are you expecting a slowdown and.
And the near term because you have to hit the pause button to digest, a little bit or is there just a lack of visibility at this time based on.
What's in the market with maybe last coming to market. After a flurry of activity here can you can you comment on that yeah, Todd there, it's a little more related to the ladder and nowhere well primed and you continue to add assets to the platform very easily and.
And the acquisition team is seeing good opportunities as I talked about a few minutes ago. So it's just again a hard.
<unk>.
Metric to look at it from a continued elevation and elevated level of activity, but we're seeing.
Good quality assets, we've got a lot of activity going on it's competitive.
And still focusing on quality assets quality markets and properties that we know that can be accretive and additive to the overall platform, but we're confident that we're going to continue to see good activity. There. It's just the predictability and from a competitive standpoint, what we're going to face as we go deeper into the year.
And as Tom has noted.
Balance sheet is.
More than <unk>.
Well primed to continue to support our acquisition and development activity and with that we'll continue to seek out and find and pursued many different types of opportunities, whether they're portfolio related or on a one off basis. If you look at the.
Fifth.
The 500, or so million that we've got and our acquisition pipeline as we speak it's more oriented toward.
Neither one off for smaller.
Concentrations of assets that's the.
Consistent playbook that is always in our mix and then what can be on more unpredictable is just what can come through and the larger portfolios. So.
We still think we're in very good shape to continue to pursue opportunities, but we'll see how that plays through as the year goes on but very pleased by the amount of volume certainly that we've been able to capture not only in Q1, but you know going through 2020 as a whole and then as I mentioned off to a very good start this year.
Okay, and then just thinking geographically obviously, the easy storage deal was a little bit more concentrated is is there a focus looking out on adding exposure and in certain markets or regions.
Whether because of maybe certain demographic changes or accelerated accelerating trends in certain markets.
Or is it more a base.
Based on core.
Quality of asset and.
Whats generally.
<unk> for for transaction purposes, yes.
Obviously, you can't manufacturer.
Sales opportunities and and of itself, but we are very intentional and where we're putting priorities, where we're looking to either expand.
Each area of the business based on the trends that we see where we continue to see very strong advantage by enhanced scale looking at the easy storage portfolio as I mentioned, we already had a commanding size portfolio. There just made it even more attractive from a scale.
And present standpoint, but we're also looking to ink.
To increase our presence.
And in other markets as well, we recently went into Boise, Idaho, we've never been and Boise before we were able to capture a very nice six asset portfolio and that market. So were looking deepened and the markets that we've been and traditionally and we're looking at markets that we see good growth opportunities as well.
Okay and just a quick last question you haven't sold and <unk>.
And really previously.
Really at all.
Over the course of the last.
And decades.
So we're three and normal.
Surround dispositions, but some.
And some strategic changes and.
And certain parts of the business and capital allocation strategy and requires and I'm just curious if.
And just given the demand for assets, if youre contemplating any and.
Sales for dispositions.
In order to either sort of call or prune the portfolio at all.
That's an ongoing evaluation that we do Todd I wouldn't point you to any specific.
Area and or type of asset or portfolio that we own. It I would say is a candidate to look for disposition at the.
At this point, but it's something that we continue to evaluate and if circumstances and our own perspective has changed and we think that's beneficial we will certainly execute on that front too, but nothing to speak to you on that.
Alright, thank you.
Thank you.
Your next question is from the line of Metis Rose with Citi. Please go ahead.
Hi, Thanks.
And I wanted to ask you just a little bit on Autopay, which I think you've said, it's one reason why you've seen this decline in late and late fees and it sounds like that's kind of structurally lower going forward, but do people who go on autopay tend to stay longer and is that kind of an opportunity across your portfolio and I know what percentage is already on autopay.
Sure. Thanks Smedes.
One thing I'd highlight is.
And we think it was above and beyond auto pay change as we moved into April or.
Auto pay was pretty consistent through the months of February March April and May last year, but we saw a significant acceleration and payment patterns at the onset of the pandemic. So I wouldn't point to auto pay specifically.
That said Autopay has been trending higher over the last several years and we expect to continue to given our E rental platform, which now comprises about half of our mood and volumes today and that auto enrolls folks into two auto pay if they elect that move and method and so we do anticipate that.
And a paywall will increase but it's not really the main driver of what we've seen on customer payment patterns I think that's more consumer balance sheets being excellent.
And some of the operational processes, we've put around and at the time of the pandemic.
And have you seen any differences flow between folks who are on auto pay who arent in terms of how long they stay or is that not meaningful.
Autopay is certainly one other things we look at it from a customer composition standpoint.
Yes.
People that select Autopay has a certain characteristic associated with them, both demographics and psychographics and the like and so.
It's not necessarily selecting autopay that makes them via customer and a certain type. It's the folks that generally select autopay tend to have certain characteristics, but thats something we watch very closely as we look to understand your customer.
And then I just wanted to ask you you mentioned <unk>.
Restrictions are still in place and some regions is that it meaningfully.
Restricting your ability to really pass along price increases or the upper limits the kind of above where you would normally be anyway, and just trying to think about around your guidance like if some of those got listed is there upside there or is it not all that impactful right now yes. Thank thanks, Smedes and Thats a great question, we've been talking about pricing risk.
<unk> through the pandemic many of those restrictions have started to fade away, which is encouraging so as we think about it on a year over year basis, 2021 is a better pricing.
Pricing regulatory environment in 2020 was.
The one big notable state of emergency pricing restrictions that's in place and it has been for the last several years now is in Los Angeles County.
And several other counties here and in California related to fires that have taken place over the last several years. So Los Angeles is our largest market.
And we've been restricted on pricing because of section 396, and California since the fall of 2018, and so that remains in place it's not scheduled to expire until December 31st So it doesn't factor into our guidance per se, but.
But it remains a headwind and Los Angeles and you can see Los Angeles is doing quite well, but it's certainly not seeing the same level of revenue growth that we are in and some of our other markets given some of the pricing restrictions there.
Great. Thank you.
Thanks.
Your next question is from the line of Samir Khanal with ISI. Please go ahead.
Hi, There Hey, Joe just one more on the acquisition front I know, we talked about sort of the U S and domestically, but I guess internationally. Just just curious what does that opportunity set look like for you guys as well thanks.
Well, we have certainly the bandwidth and the knowledge of thinking outside borders we've talked about this historically relative to our very.
Strong and I would say deep knowledge base that came from.
The platform and Europe, obviously, that's shurgard and the things that we've taken away and learn from.
Portfolio.
Like that and how it's grown over time, and how it's been able to do quite well and.
Throughout the Western Europe European markets. So the skill set is.
Resident here and the company.
We continue to track a number of different.
Markets outside U S borders and when certain opportunities present themselves and we think it's and appropriate.
And on appropriate opportunity for us to expand outside.
And we're well suited to do so.
Thanks for that and I guess my second question is just shifting over to the supply picture over the next 12 to 18 months when considering how strong fundamentals are developers are not slowing down and how do you think about.
Supply picture, let's say 12 to 18 months down the road.
And that's something that we're watching closely.
Development nationally peaked in 2019 were plus or minus about $5 billion of new assets were developed and delivered it taper down in 2020 by about 15% or so.
In 2021, we're predicting another leg down and that 10% to 15% range again.
Going into 2020, two it's always a little bit more cloudy to figure out what could play through we do think that this however has been a very good cycle for us to continue to find and source land sites with less competitive activity out there.
Our development team's very busy sourcing those kinds of opportunities. So it's been a good window for us actually to jump in and.
Look for land sites, either that have or have not been through different levels of entitlements and we're going to continue to.
Look for and extract very good value from our development activities, where we typically are able to drive the highest return on invested capital through.
And the investment that we put into development and redevelopment. So we're uniquely positioned to do so as I mentioned, we have the only development platform and the public arena and by far we are the biggest development team and the self storage industry, its national where deep great relationships, just like we're able to tap and.
Two on the acquisition front, and we'll continue to monitor and see what kind of continued activity play through from the development activity, that's going on right down to individual submarkets and and nationally as well.
Thanks for that.
Your next question is from the line of Rick here with Morgan Stanley.
Hi, guys I'm on for Ron Camden today.
I think you're painting, a pretty good picture about growth over the medium term, maybe even long term. So I wanted to maybe take a step back and and unpack internal versus external growth.
And you think about internal growth can you maybe talk through about the demand drivers and it's coming from millennial and Z generation. That's just now entering the household formation years and sort of how that plays into how you think about your ability to continue to push rent growth off record levels and then more importantly.
I shouldn't say more importantly, but similarly could you maybe talk about the external growth and if there is other opportunities to acquire big portfolios like you've done over the past several years.
So Tom and I can kind of toggle.
And answering your questions, but I would say internally.
We definitely do see the opportunity around maturing generational demand, there's been a consistent and core.
Confidently we're.
And we're optimistic about the type of demand factors and now playing through and so.
And again, the newer generation users many of whom are actually coming to use storage for the exact same reasons their predecessors to hit so life events and general needing more space.
Cost of housing.
Working from home and this particular environment.
All the things that play through relative to changes and family dynamics et cetera are very powerful to the use case and continued adoption and absorption of self storage nationally the self storage Association tracks us on an annual basis and it has continued to grow over time and we're confident it will.
And do just that.
And then on the external.
Side there's.
Good population of quality assets, many of which have been delivered and say over the last four or five years in particular by individual developers that we've been able to tap we haven't been shy about.
Buying assets that are less than stabilized our average occupancy of the assets and we have under contract for instance, right now its about 50%. So theres a good pool of assets out there that are far from stabilization that had been good opportunities for us to go out and acquire we're still buying stabilized assets as well, but there is.
Healthy amount of inventory from a group of developers that have come into the self storage sector for the first time werent intending necessarily to be here for the long haul and that has elevated our opportunity set to go out and acquire and be confident about our external growth.
Knowing that that inventory levels quite strong and the quality is quite good too in many cases Tom.
Tom I don't know if you want to add anything to that no and I.
I think you've covered it well and I would highlight that we'll be spending more time on these topics on Monday for our Investor day and so on.
Yes.
Well guys and ultimately what I'm ultimately getting at is we see a really favorable backdrop dropped for the housing market certainly don't don't see any signs of a bubble. Despite some of the media narrative. So of HPA is going to remain called and the mid to high single digits.
What does that mean for your rent growth and certainly there is probably going to be some normalization from the record levels that you've seen but it would seem to indicate that there's no reason you can't continue to capitalize at and above.
Inflation rate over the medium term is that a is that a right characterization.
If your predictions for home price appreciation and rent growth play out storage is definitely linked to that is a space substitute for consumers. So all all nice <unk>.
Tributary to potential rent growth over time.
Great Great guys. That's it for me thanks.
Thanks Rich.
Our next question is from the line of COVID-19 Kim with <unk>. Please go ahead.
Alright, sorry about that.
So when you look across the portfolio there is probably a good mix of.
Markets that never really shut down from that shutdown, but open up quickly and some are just kind of opening now.
So, we'll just try and call that reopening cohorts.
When you look at those mix of cities is there any lessons to be learned.
That might confirm or I.
Give you confidence that occupancy could decline or maybe is that just being conservative.
It's definitely something we're watching keep in it's.
Something however that hasn't and anyway.
Elevated to a noted change or a reversion to what may have been more normal and prior periods. If you look at Florida or Texas for instance, I would say two markets that have been on the early side.
Quote unquote opening back up we're actually seeing some of our healthiest demand drivers and those two states as we speak so even as.
Either consumers or businesses are coming back into some level of normality.
Demand is still very good in fact, if anything its percolating higher than it was on the early side of the pandemic.
So it is a validation that there are other additive drivers that are going on whether it's with the economy at large home sales and migration.
All the other factors that can drive overall demand for storage and we've really seen no evidence yet that there's any change that would from.
That would point to the fact that Theres something.
Reversing or that we're going to see and any near term any way something that would shift strongly that has on the opposite side been very additive to the overall business metrics. So we're watching closely right down to a sub market basis, but if you even take a look at Texas as a whole, whether it's Houston Austin and Dallas.
San Antonio.
Very good activity and all for cities and we've got big presence and each and every one of them going to South Florida for instance, whether it's Miami or Tampa.
And again very very strong drivers there too so we're tracking and keeping an eye on it but it's.
A validation that the business is not only quite resilient, but it's from a product standpoint consumers and businesses are looking for storage very actively right now.
Okay, that's pretty encouraging for you here.
And the second question you guys provided capex guidance.
A bit higher than what we've been used to on a recurring capex and I'm not sure. If I'm looking at this apples to apples, but wondering if you can provide any commentary around that.
Sure happy to keep in and and we'll go into some of our Capex plans on Monday, as well, but I think it's.
Taking a step back that $250 million to $300 million of Capex that we disclosed for the year.
And is higher than it has been and previous years, and it's really being driven by incremental activity tied to our property of tomorrow program and the acceleration of that program. After we had slowed it down through the pandemic. So if you think about the $2 50 to 300 building blocks, there are about $75 million or so regular.
For maintenance Capex, and additional call it $50 million to $60 million and solar and led investments.
And then call it $120 million plus and property of tomorrow, as we seek to accelerate that program and run it through our portfolio.
Okay. Thank you.
Thanks.
Your next question is from the line of David Gallagher with Green Street. Please go ahead.
Good morning, Thanks for taking my question.
And speaking to development just wanted to focus on construction cost a little bit and looking across property sectors and that's been a topic that seems to have hit most property sectors quite a bit with your development platform. How much have you seen construction cost increase and to what extent could that have an impact on supply and moving forward.
The one component that we're watching closely as steel cost for instance, so there's been some volatility there and some price increases that we're keeping track of.
Market to market and there could be some impacts from a labor standpoint, so it's fluid.
And it can be erratic and some cases and unpredictable as well so it's definitely something that we're keeping a close eye on and I wouldn't say, it's become some kind of a overarching headwind for somebody to either stop.
Our potential development project or.
Sure.
Actually delay one.
And definitely but we'll see how those cost trend over time, but the one area that we're looking at more specifically right now is just steel costs.
Got it thank you and back.
Second call for question.
For the acquisition subsequent to quarter and besides the EV storage acquisition can you give us an idea on occupancy there and general lease up timeline compared to recent.
Our recent acquisition activity over the last couple of quarters.
Yeah again.
Mt.
Occupancy roughly and the 500 million or so that's in our unclosed pipeline of acquisitions hovers around 50 per cent or so so it's a combination of assets some of which are.
Just coming to the market. So a few assets that were going to take very low levels of occupancy two others that are much higher and I would call them more stabilized, but it is a range.
As I noted, we have not been shy about bringing those kinds of assets and other portfolio frankly, we frankly, we need more space to lease up so it's been a good opportunity for us to pull those assets into the portfolio put them into our operating platform and we're seeing very good and.
And.
I would say better than expected performance based on the environment that we're dealing with so we're we're looking for and finding good quality there and are hesitant to buy assets that have the lease up.
And that maybe others are not as comfortable with so we're.
Seeing good opportunity set there and we'll continue to hunt for those kinds of assets.
Great. Thank you.
Thank you.
Your next question is from the line of Todd Stender with Wells Fargo.
Alright, thanks, and probably for Tom.
The 2 billion and bonds.
Used to fund the billing and eight for easy storage.
And just seeing where you sit right now as far as sources and uses and and what you're budgeting for the remainder of the year as far as external capital.
Yes, sure so we weren't able to get into the bond market pretty quickly post the easy storage transaction for the $2 billion.
And as <unk>.
Joe mentioned, we continue to see good opportunities for acquisition volumes and as Youre hiring with sources and uses if those volumes continue to percolate and we'd anticipate will likely.
Access to bond market and.
Second half of the year and that's embedded into the interest expense guidance that we released yesterday afternoon.
Got it and then when we look at these coupons for the debt across those three tranches does that start to make.
Cost of preferreds.
And not competitive right now is that fair to say.
While the duration of those and the features of them are quite different and so you know as we look at preferred cost of around 4%.
Certainly the three year bond that we did about <unk>, 75%.
Very different and costs, but also very different and and profile and so.
And we'll talk more about balance sheet strategy on Monday, but we continue to like preferred stock as a cornerstone of the capital structure, but we've been adding lower cost and shorter dated duration to spread the maturity profile out overtime and diversify our sources of financing.
Got it alright look forward to it on Monday.
Great. Thanks, Todd.
And your final question comes from the line of Mike Mueller with Jpmorgan. Please go ahead.
Yes, Hi, just two quick ones here one Todd.
Tom I appreciate the Capex breakdown can you talk about like what should the extra components about the non and.
And the normal core stuff the solar property of tomorrow like how many years do you see that stuff recurring.
Sure So property of Tomorrow and will go into some detail on this on Monday, you see continuing over the next several years as we roll that through the rest of the portfolio and then we have a good runway, particularly on solar led and we're moving through the portfolio pretty quickly through last year and this year on and.
Interior basis and the prior three years, we were doing exterior led.
So we've got some more activity maybe for the next year or two but then that'll really subside, but solar.
We see the opportunity to put that on half for more of our portfolio over time, and we're just scratching the surface there.
Got it Okay, and then just in terms of.
Looking at land sites I mean, how are you thinking about infill urban as opposed to more of the first ring suburbs just given the dynamics that are a volatile for COVID-19.
Yeah, Mike Burke.
Betting both you know, we're not seeing really any material or material degradation and urban versus suburban demand factors. So the teams out hunting for sites that have the right dynamics from a competitive standpoint, meaning finding land sites that.
<unk>.
Much more benefited by having less competition.
And out of demographic.
The analysis that we do overall ability to.
Predict and see good demand factors over time based on any particular and new development. So it hasn't really turned and anything I would call. It from a segmentation standpoint that we would be.
<unk> tend to go into urban versus suburban or prioritize one over the other frankly, we have a good and healthy mix of both as it stands and.
Based on even in this environment that kind of trends and the overall demand factors, we're confident that.
Both types of environments are very good for our business. So long as we understand the ultimate dynamics that go right down to that specific trade area.
We've got great data.
We've got the ability to vet those sites very quickly and as I mentioned, and we're seeing some pretty interesting opportunities around land sites with less competition.
Got it okay that was it. Thank you okay. Thanks, Mike.
And Im showing no further questions at this time I would now like to hand, the call back to Ryan Burke for additional or closing remarks.
Thank you Angela and thanks to all of you for joining US today, we very much look forward to seeing you virtually again on Monday at the Investor day have a good weekend.
Ladies and gentlemen. This concludes today's conference call you may now disconnect and have a great day.
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