Q3 2021 CubeSmart Earnings Call

Hello, and welcome to the Cube Smart third quarter of 2021 earnings call. My name is Elliot and I will be COVID-19, New cool thing if you would like to register a question. During the presentation. You may do so by pressing star followed by one no telephone keypad now.

100 mutual host Josh Josh. Please go ahead, when you're ready.

Thank you Elliot and good morning, everyone welcome to keep Smart third quarter 2021 earnings call participants on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin Chief Financial Officer.

Our prepared remarks will be followed by a Q&A session.

In addition to our earnings release, which was issued yesterday evening supplemental operating and financial data is available under the Investor Relations section of the company's website at Www Dot keeps smart dot com.

Company's remarks will include certain forward looking statements regarding earnings and strategy that involve risks uncertainties and other factors that may cause the actual results to differ materially from these forward looking statements.

The risks and factors that could cause our actual results to differ materially from forward looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission specifically the form 8-K, we filed this morning together with our earnings release filed with the form 8-K, and the risk factors section of the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures a reconciliation between GAAP and non-GAAP measures can be found in the third quarter financial supplement posted on the company's website at www Dot keeps smart dot com I will now turn the call over to Chris.

Yes.

Thank you Josh and good morning.

We are pleased to wrap up a very successful quarter for the self storage industry operating fundamentals continue to maintain their positive trajectory supported by our sophisticated systems and solid consumer demand.

We have been able to leverage that demand by growing occupancy and maximizing rate for both new and existing customers.

The benefit of the positive consumer demand backdrop is evident in our same store metrics.

The impact of the solid operating environment is also being experienced in our non same store and recently developed properties physical.

Physical occupancy realized rent revenue and net operating income in our non same stores and development properties well exceeded our expectations during the quarter.

We are particularly pleased with the accelerating same store revenue performance, we have experienced when considering the positive same store revenue growth. We had produced in the back half of 2020 in the teeth of the challenges created by the pandemic.

Our same store revenue growth during the quarter and our outlook for the full year reflect our strategy of balancing marketing occupancy rental rate and discounting to produce the maximum sustainable revenue growth over the long term.

Looking forward, we ranked we remain bullish on fundamentals as evidenced by our increased guidance, which Tim will get into more detail in his commentary.

Our thesis on supply for the balance of 'twenty, one and 22 remains intact.

Our current data supports our expectation that supply in our top 12 markets peaked in 2019.

We continue to expect new supply in those markets will decline in 2022 compared to the 2021 expected deliveries.

Specific to the outer boroughs of New York, We expect new deliveries to contract significantly from what we've experienced over the past three years.

Currently are.

Our data suggests three openings across Brooklyn, and the Bronx, and Queens in each of the first and second quarter of next year dwindling, but one in the third quarter of next year and no further openings. After Q3 of 2022 currently on our radar.

I wanted to take this opportunity to thank our store teammates for their dedication to customer service and tremendous resiliency in the face of what seems to be multiple once in a lifetime events are.

Our team continues to navigate through the pandemic with grace flexibility and genuine care for our customers.

I want to especially thank our team and the New York MSA for their customer service during and after tropical storm item.

We experienced significant water intrusion at several of our stores in Queens, The Bronx, North Jersey in Westchester County.

Our teams did an outstanding job assisting our customers and navigating the operational challenges created by the flooding.

I also want to recognize the collaborative efforts of our third party management and information technology teams, who introduced smart view during the quarter Smart view as our first of its kind proprietary mobile app designed to connect our third party customers seamlessly to key performance metrics for their stores yet.

Yet. Another example of how we are serving our third party management client in innovative ways. So that we may continue to keep ahead of the fast pace of change.

Spotlight shining on our industry has increased investors interested in owning self storage. This.

This has had a positive impact on our third party management business as our pipeline of future opportunities remain solid.

This wonderful operating environment has also had a positive impact on the acquisition environment and our deal flow is quite robust we continue to evaluate our external growth opportunities with a focus on achieving attractive risk adjusted returns and maintaining our position as the highest quality portfolio in our business.

Our balance sheet is well positioned to capitalize on opportunities.

Finally, I wish to point out that we published our inaugural sustainability report this morning.

We are proud of our work to date and are committed to continuous improvement is sustainability efforts play a key role in our long term value creation.

Thank you and I will now ask him to share his comments on our quarterly results and outlook Tim.

Thanks, Chris and thank you to everyone on the call for your continued interest and support as a as Chris touched on results in the third quarter continued to reflect incredibly strong operating fundamentals across our portfolio.

Leading to another quarter of results that were better than expectations and again lead to a meaningful raise in our earnings guidance going forward.

Same store performance included headline result of $15, 6% revenue growth three 9% expense growth yielding.

Yielding NOI growth of 21, 1% for the quarter.

Same store occupancy levels remained unseasonably strong averaging 95, 6% in the third quarter, which is up 150 basis points year over year.

And we ended the quarter with physical occupancy at 94, 8%.

Strong demand continued to be evidenced not only a high level of physical occupancy, but also strong pricing power.

Higher net effective rates to new customers existing customer rent increases and elongated length of stay and.

All contributed to the 15, 6% growth in same store revenue.

Same store expense growth of three 9% for the quarter was in line with our expectations driven by continued pressure on real estate taxes.

Pretty insurance.

And and opportunistic marketing spend offset by efficiencies in personnel and lower utility costs.

Similar performance drivers drove results across our non same store portfolio and our third party management business and combining all of that internal growth, we reported <unk> per share as adjusted of 56 cents for the quarter.

Representing 27% growth over last year.

Our continued meaningful growth in cash flows led to our announcement earlier this week of a 26, 5% increase in our quarterly dividend.

Resulting in an annualized $1 72 per share.

And that's up from the previous rate of $1 36 per share.

We remain active in our pursuit of external growth opportunities and continue to be busy underwriting a lot of potential deals. We continue to find select transactions that we find attractive that fit our disciplined investment strategy.

During the quarter, we acquired two stores on balance sheet for $33 million and another three stores in J B's for just under $90 million.

We have $85 $8 million of on balance sheet stores under contract.

And $66 $3 million of stores on the under contract through through joint.

Venture investments.

During the quarter, we were active on selective dispositions, we sold four stores for $38 6 million and have another store in a contract to sell for just over $5 million.

Additionally, subsequent to quarter end, we sold seven stores from a joint venture for $85 million.

On the third party management front, we added 33 stores in the quarter and ended the quarter with 706 third party stores under management.

Our balance sheet position remained strong as we continue to focus on funding our growth in a conservative manner, that's consistent with our triple B W. Two credit rating.

We continue to raise equity capital through our at the market.

QWERTY program during the quarter, raising net proceeds of $57 9 million.

Our conservative leverage levels and revolver capacity, you have us well positioned to pursue external growth opportunities.

Details of our 2021 revised earnings guidance and related assumptions were included in our release last night.

Based on the strong operating fundamentals we've discussed we've increased our guidance range for full year <unk> per share by four 2% at the midpoint.

Much of that guidance increase is based on an improved outlook for our same store revenue growth for the year, which expanded to a revised range of 12, 5% to 13, 5% growth.

2020 levels.

As Chris mentioned again I'd like to also thank our teams across all functions of the company as they continue to work hard and ensure that we're maximizing all of the opportunities that the current environment is presenting and our results continue to validate the strength of the cube smart brand and the cube smart platform.

So thanks again for joining us on the call. This morning.

At this time Elliot, let's open up the call for some questions.

Yeah.

Thank you for our Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad.

When preparing to ask your question. Please ensure your devices on mute locally.

Our first question comes from Smedes Rose from Citi.

Your line is now open.

Alright, thank you.

Actually I wanted to ask just a little bit I guess about how youre thinking about occupancy at this point.

The peak to trough and then kind of what's in your revised guidance.

Yes me this Chris welcome to the call I'll take that.

And Tim Kevin can pile on so.

What we're saying is.

Is that the.

The demand is there vacates from students certainly were there in August and September as school returned to its more normal schedule. So we saw that in.

Some of our student markets such as Boston.

And what we're seeing now as we get into the post Labor day time frame is that was a bit in certain markets of the return to return to work returned to home type visa. So we would see the gap to last year.

And again, we don't we don't guide specific to the occupancy relative to rate or other levers, but but broadly we would envision that occupancies continue to move back towards last year's level that the gap to last year will continue to shrink and I think by the time, we get to the end of <unk>.

December here, our expectation is that we will be plus or minus.

A few basis points to where we ended 2020 and physical occupancy.

Then as we move into next year again, we would consider.

Gradual return to a more typical pattern to continue up until the beginning of the busy season and then.

Given where we are in the housing market in particular, we would envision quite a robust busy season for the industry. Starting Guy you know in a typical March April timeframe of next year.

Okay.

Can you share what October ended October occupancy was.

Ah I can share what the end of October occupancy was.

At the end of October.

I see.

Hi, Ed here.

<unk>.

Yeah.

Chris you were at point right.

94%.

Thank you for for thank you that's great Okay.

Okay. Thanks, and then I just wanted to ask one sort of bigger picture question I mean, all of the other.

Public storage REIT significantly.

Overall acquisitions outlook for the year you guys maintained yours and I was just wondering is it just a function of.

Was pricing or kind of what you know maybe why are you may be a little more hesitant to up your overall.

External growth expectations.

Hey, Smedes good morning can't speak to what others are doing what I can tell you is that.

You have likely grown too to expect and should continue to expect that we will.

Remain incredibly consistent.

And our external growth strategy.

Focus on opportunities that complement or enhance.

Our high quality portfolio, both in asset quality in market quality.

And we do continue to find stores and transactions that debt.

That fits strategically at risk adjusted returns that create long term shareholder value in our view.

If you think about our growth over the past four quarters Rolling four quarters. We've we've acquired about $1 billion of real estate. So we've been pretty busy and have transacted on things that fit our strategy.

As we mentioned in the opening remarks, our balance sheet is well positioned we continue to underwrite a lot of opportunity.

At this point.

What we've provided in our guidance is what we found it makes sense for us.

Okay. Thank you.

Thanks.

Our next question comes from Elvis Rodriguez from Bank of America. Your line is now open.

Good morning, and thank you for taking the question, Tim you mentioned opportunistic marketing spend and if you look at the year over year same store marketing spend for Q versus peers. It increase while others decreased can you just talk a little bit about what youre doing on the marketing side and where the benefits will come.

From.

I would love to try to answer your question, Chris Chris really wants okay. So I'm going to let him do I really want to take it though Alex I'll take that question.

Yeah, I mean, obviously there is some differences in how folks are.

Our thinking about.

Balancing the levers of of marketing investment relative to price.

I'll, let Tim to discounting.

And when we look at.

Our incremental spend which is which is almost entirely in the in the paid search channels.

We look at at our incremental spend.

The rates then that we are able to get.

And so where we're looking at it to say, we're getting somewhere between eight and 10%.

Higher rates based on the incremental spend and if you look at in our view what that will generate over a projected length of stay.

For.

For those customers who came in from that incremental spend we look at it over the long term to say that return is 450% to 500% of the investment and will produce.

Low.

Hi, low double digit revenue over that timeframe. So.

From our perspective, and the data that we compile it is giving us that rate that we're getting.

The issue really.

And we appreciate that says that that's hard to look at quarter to quarter, but if you look at it over over a over a longer timeframe. We believe that the return that we're getting on that marketing spend over the longer term.

Creating those higher rental rates, which again, assuming the customer is length of stay is what we believe it will be will continue to produce very attractive returns and higher revenue over the next couple of quarters.

Thanks, Chris and then you touched a little bit on supply in your expectations here specifically in the boroughs.

Can you speak more specifically to.

You mentioned only one store in <unk>.

'twenty one I believe you mentioned and then no. None after can you speak to what's going to happen over the next six months.

Yeah, So again to clarify my commentary was that.

We only see one store in Q3.

2022 and then those stores thereafter, so if you look at our if you look at expectation that we would have and again. These are our based on openings projected as of now they may they may happen sooner. They may happen later.

But the.

The the reality is that we are looking at.

You know, we're looking at supply where there are.

Let's say to two.

Hi.

Three stores I think it is and.

In in Brooklyn.

Two or three in Queens coming in the first and second quarter of next year, one store in Brooklyn, and in the third quarter of next year, and then right now zero thereafter.

Great. Thank you very much.

Our next question comes from Todd Thomas from Keybanc Capital markets. Your line is now open.

Hi, Thanks, good morning.

First question I wanted to just I guess sticking with New York City.

You know performed well in the quarter, but it was one of the few markets that saw growth decelerate.

A hunter about 430 basis points in the quarter on a revenue basis.

Chris You mentioned the supply in some of the boroughs in New York.

You mentioned the rains in the floods that occurred during the quarter can.

Can you just speak to what you're seeing in the New York City MSA within your portfolio.

Sure. Thanks for the question so.

Yeah, let's do take a look under the Hood at the New York MSA performance during the quarter or so in the back half of last year, New York MSA performed exceptionally well, which made it more difficult to generate outsized growth. This year and then you know as you as you touched on there are few other factors to evaluate we've got the impact of Ida and new supply.

The performance of our non same store pool, and the consumer demand picture.

You start with the rain and the heavy rain from Ita, we had water damage at nine of our stores and the MSA two in Queens three in the Bronx, two in Westchester County, and one each in Brooklyn in North Jersey.

Unfortunately, the nature of that storm led to isolated pockets some water intrusion and it was largely as a result of the of the sewer systems in capability of absorbing that much rain that quickly. So those nine stores, we really experienced no new demand during during about a month or so as we cleaned up but we.

Did experience, the resulting vacates because sadly many of the customers possessions were at a total loss. So we had a bit of an occupancy decline.

Those impacted stores.

That was one factor for the quarter.

On the supply side.

Consistent in our messaging regarding the impact, especially in Brooklyn and Queens.

Which was as expected and factored in our expectations. So you know while our same store results in Brooklyn, and Queens are outperforming are accurate our expectations on occupancy rate revenue much like a Washington D. C. In Nashville, MSA, they're dealing with the headwinds are that we're not experiencing market is not seeing new supply I think the.

Shot to this is that the new development stores than continue to lease up in those markets, particularly in Brooklyn, and Queens well ahead of our expectations. So the customers are there.

We can't accommodate at are highly occupied same stores, we're getting them at the lease up stores in the boroughs and those stores are experiencing physical occupancy revenue higher than planned our acquisition last year in the fourth quarter of the storage deluxe assets are well outpacing our underwriting.

You know those are in the same store pool. So I think you've got to look at this holistically.

And then looking at the consumer demand picture.

Demand remains very solid you know, we obviously have all time high physical occupancy I think it's basically <unk> 95, and a half are in the outer boroughs. We do see the returning population to New York City impact on the Vacates side in our Manhattan store and then some of the immediately adjacent stores, we view that.

It actually is a long term positive near term, we're seeing some vacates from people who would've stored.

At the beginning of the pandemic and that long term that returning population and what we're seeing on the multifamily side.

And particularly in rates on the multifamily side, we view as a long term positive as people return to the city. So I think when you factor in the Dodge and those factors that I described and then the endogenous factors. We're encouraged by the overall results for the quarter and year to date. So hopefully that gives you. Some some helpful context.

Yeah.

Yeah. That's that's helpful are you are you seeing you know occupancy rebound in New York and New York City, you know a bit in October and early November and has there been any change.

Change to your ear ECR ECR I program or has there been any resistance.

Two you know rent increases to in place customers and in that region and then.

You know Tim within the revised guidance do you anticipate growth to continue to moderate and in New York City in the near term.

So I'll take the first part of that.

So when you when you think about trends again occupancy at 95 and a half in the boroughs as a whole.

We're full.

So that that's not the issue.

Again, as I said the occupancy in the AR and the water damage stores I think fell about 170 basis points as a result of those.

And we are recovering from that as the stores have been cleaned.

And the damage has been repaired and the.

There are wide open for business again, and we're seeing demand return there on the as I mentioned on the Manhattan store and then the couple in long Island City and in park slope, most of which are not in the same store pool.

Why you are seeing lower occupancy wikel occupancies that those stores as they returned in New York.

And in the population of returning I think as as has clearly increased vacate that those stores.

The outer borough stores unaffected by that.

And continue to perform.

Continuing to perform well.

Again balancing Brooklyn, with the supply that is real and and certainly a factor there. So from that perspective. We are also not experiencing any issues as it relates to existing customer rate increases at any of our stores and.

And specifically, we are not experiencing any pushback of any.

Anything outside of the normal pushback.

In our in the New York City stores, specifically and then you know I'll speak for.

<unk> came in and you know I know the answer is got to be we don't get into market epic but.

We are we are expecting continued solid growth on a relative basis as we move through the year.

Okay, Alright, and then just one one question just back to on the acquisitions I hear your comments on on on investments and remaining disciplined.

You know it sounds like there's there's been less of an emphasis on sort of going in yields just.

Because you know of expectations around upsides upside and outsized growth potential in the near term or in the years ahead.

You know either a stabilization in occupancy rates.

Both I suppose.

Are you not seeing that same opportunity do you think when you're running up against folks on on investments do you do you know where you're not seeing that same sort of upside or outsized growth opportunity over the next couple of years.

Relative to what you.

Do you think others might be might be factoring in when went underwriting potential acquisitions.

Yeah, that's it.

Tough question to answer to answer given that I mean, we certainly know what we see I can't speak for what others see in what others baked into their underwriting we're focused in.

As we always are on our all in returns on a risk adjusted basis.

So Unfortunately your question is is multi multi layered and many of those layers have to do with what others are doing and what others are thinking and I can't really speak to that you'd have to ask them.

What we have done and what we have under contract are the result of all of our efforts on where we've landed on things that fit our strategy and it makes sense to us on a risk adjusted basis.

Okay alright, thank you.

Thanks.

Our next question comes from Juan Sanabria from BMO capital markets. Your line is now open.

Hi, good morning.

Just wanted to follow up on the New York City.

The stuff you guys were talking about do you have a sense of what the impact to same store revenues was from Ida.

And a.

The second part of the question.

Should we expect any incremental benefit from the eventual inclusion.

Stores to look up the storage deluxe I think that what happened in the first quarter 'twenty two once it enters the same store pool.

Yeah.

I'll take the first part of that one.

In terms of just broadly.

The impact was negative and it's hard to it.

It's hard to put basis points on what could or could not have happened had those stores not had to.

Closed down and not have to deal with the with the cleanup certainly you know again, we lost occupancy.

We were unable to accept new customers in and it was difficult to accept new customers for a short period of time, So I I don't know how to quantify the basis point impact to it. They certainly were amongst the poor performing stores four for the quarter.

And on the impact of stuff coming in or out of the same store pool next year. I mean, we're not we're not going to get into stuff related to 2022 guidance things that come into our same store pool R. R.

Our stable when they come in so I'm happy to try to provide some color on that.

First quarter, when we get into 'twenty two guidance.

Okay and then just one follow up question for the third party management business do.

Do you expect as you look forward and kind of have a sense of whats either end mark on market today per se or what could be coming based on your discussions there.

We will see continued churn in 'twenty, two or do you expect that to level out in.

To have more net growth going forward.

Yeah. Great question, we certainly expect I think 2021 is as others have said on calls earlier than our 2021, obviously as you know has been an incredibly active and robust transaction environment and we've seen we've seen a lot of stores come onto our platform and we've seen we've seen a lot of us.

Stores come off as many of our owners have.

Monetize a lot of the value that we've helped create for them on our platform would expect that to that trend I think is not a one year trend.

Many of the stores that are on our platform are stores that were newly developed two three or four years ago.

Many of the owners that we manage for our not forever holders. So when the right time comes for them to monetize and sell to us or take it to market and potentially sell to somebody else. I think that that has continued trend that is just the reality of the landscape for the third party management business for us and others who are in it.

So difficult.

Difficult to predict difficult to predict whether there would be net growth or contraction.

We work hard on continuing from a new business development standpoint.

To attract new customers to the platform.

Still seeing great inbound.

Activity on folks who are interested in our in our platform.

And so that part we can control the other part.

The other part candidly is that we're doing a really good job.

Capitalizing on the opportunities that are in the markets and where we're getting the stores lease up for our owners.

And again, helping them create value and monetize which is what they hired us to do.

So hard to predict at this point.

Thank you.

Yeah.

Our next question comes from Joab Dempsey from Jewish Jo Ann Your line is now open.

Hi, good morning, everyone and thanks for taking the question.

Chris in your prepared remarks, you spoke about supply being manageable going into next year.

Clearly with fundamentals being so strong you know you think you'd start to see some supply coming online.

But is there anything in terms of whether it's the entitlement process or the supply chain disruption, making it harder to source construction materials.

Or keeping a lid on new supply.

Yeah. Thanks for the question. So so I think you'll have I think you have a nice balance at the moment we're.

Operating fundamentals are spectacular.

I can say that.

At least and that will inevitably attract folks to our industry.

And folks who wish to think about participating in this.

<unk> development.

Offsetting that with.

Some some continued trends which is.

In several western markets, particularly in California.

It is incredibly challenging.

For a whole host of reasons to develop new product and therefore, you have seen it be fairly muted and we would expect it will continue to be fairly muted you have the issues. Obviously, we've talked at length in New York City.

The changes in tax law that makes it.

Much fall to develop there and again I've outlined our expectations that that that drives up over time there.

I think you have the new issues as you've described the cost of raw material.

Cost of labor and ability to source raw material and inability to get labor.

And a very you know I think continued constructive meeting.

Rational lending environment.

I think those factors then may make a decision around new development more difficult.

Certainly trying to take today's environment and how do you.

How do you try and forecast what.

345 years from now is going to look like from an occupancy and a rate perspective given that the.

The the Fabulous Ron Ron I think is another challenge. So I think all of that all of those things tend to balance out.

That being said.

You can still generate attractive returns in many markets. If you find the right piece of land or if you've owned that land for quite a while and have a reasonable basis.

And I think if you're a patient.

And delay your start potentially until mid to end of next year and see if some of these supply chain issues work themselves out.

I think that will lead to supply in 'twenty, three or 'twenty four.

Again, I think I think it's manageable I think that tells you the industry is performing quite well.

And I think we've demonstrated is the factor that we can absorb it.

And you know, it's not a doomsday scenario and we'll be just fine. So I think I think there will be supply all other things being equal as fly will continue but it will be it will be manageable.

Okay, Great and then it looks like you sold four properties this quarter.

Cap rate compression across the industry. How do you think about further recycling of assets, you know, possibly putting that capital to work in other areas.

Particularly joint venture structures, where you're focused on you know lease.

Lease up opportunities.

Yes, I mean, maximizing maximize our return on capital and recycling when appropriate has always been part of the playbook.

And what we did here recently was supposed to do just that we had some assets that.

That on a longer term do you think about the next five or 10 years, we thought that we could redeploy that capital into other opportunities and get a better get a better risk adjusted return over time.

We don't have a lot of those opportunities because we've worked hard to assemble a portfolio of really high quality assets and they're not they're not easy to find so so we're we're not.

We're not looking to sell.

Tens of properties, but when we find particular situations, where we think we can we can recycle that capital where we're anxious to do so and we did that as I mentioned on a handful of opportunities on balance sheet and then in the co investment structure.

A similar approach, where we're under contract or how should we subsequent to quarter end, we closed on the disposition of seven stores out of one of our joint ventures.

Okay, maybe I could sneak one one final quick one how did rate growth trend throughout the quarter and in October.

Yeah rates continue to be.

I continue to be very solid.

Over.

Over last year and over.

Over 22019, and I think in October.

We were asking that effective.

Right about.

<unk> 29 per cent or so over 2020.

55% over 2019.

Yeah.

Alright, great. Thank you guys.

Our next question comes from hung Chen from J P. Morgan Your line is now open.

Yeah, Hey, guys.

So you kept a pretty tight lid on <unk>.

Personnel expense so far this year I guess, just looking toward fourth quarter next year.

Do you expect that to kind of reverse and trend up just given where wage pressures are.

Sure.

Hey, Eric Thanks for the question.

Yeah personnel.

It's personal it's been a challenge in terms of certainly up hiring side and yet everybody talked about that in not only our industry but across other.

Service industries.

We are.

We have always been.

<unk>.

A little bit.

More focused on the.

The total reward package for our store teammates and therefore have traditionally paid and offered benefits that are at the higher end of what we see across the rest of the industry. So we haven't yet had to make any.

Article adjustments too.

Two our overall compensation, but we're certainly looking at.

You know, we're looking at trends and difficulty in hiring and disgusting Accordingly, I think as we get into next year and it'll be a balance of.

You know how inflation continues to progress as it transitory or is it here to stay for a while.

Again, those challenges in certain specific markets, but then overall on hiring making sure we're retaining our good teammates and offering them a total rewards package that.

Meet the market and.

And allows us to continue to retain high quality people that we have.

And then offsetting that with continued efficiencies pushing folks too.

Smart rental and self serve is thinking about how we staff and the staffing levels that we have so my my sense. The short answer is that inevitably personnel expense acts to be.

Growing as we move into two.

2022, and then we're just focused on that within what parameters can we.

Can we can we maintain or constrain that I think it's inevitable that it will grow as we as we move through 2002.

Got it and I'm not looking for guidance per se, but just.

Even if you end the year at a flat year over year occupancy compared to 'twenty 'twenty, you're still be called 300 basis points higher than what you were going into Covid, just given we're kind of move in move out trends or do you expect to retain a portion of that through 2022 or do you expect to kind of give it all back.

From a physical occupancy standpoint.

Yes from a physical occupancy standpoint.

Yeah.

Boy, it's hard to answer that question, even with your preamble that you were trying not to get into 'twenty two guidance I'm not sure how to talk about that question. The reality is our.

Occupancies are occupancy has continued to be unseasonably high.

We have been I think as an industry all of us on our side of the table side of the table have underestimated.

Strength.

And the quality of.

The demand of the customer that has come to us.

Here since the beginning of the pandemic.

To date, we've all been too conservative in our expectation as to how sticky that customer is and how robust demand is.

I think all of those are our considerations as to how we think about the sector. How do we think about our projections for next year.

And again from a revenue standpoint, and occupancy is only one part of the equation.

So not sure I'm not sure that I have anything that's particularly helpful. For you other than occupancies are higher than they ever have been and I would I would think at some point in the future I don't know I don't know if it's measured in the next couple of months quarters or maybe years.

There will be some expectation I think that occupancy would trend at least directionally back towards.

Historical levels.

Got it thank you.

Thanks.

Yes.

Our final question comes from Spenser <unk> from Green Street Spencer Your line is now open.

Thank you.

Amongst our peers, we've heard mixed reviews on existing rate compared to market rates. Today I was just wondering if you could provide some color on whether you've caught up with market rates across most of your portfolio or is there still some room to kind of catch up here.

Spencer I guess this is Chris so specifically related to in place customers versus <unk>.

Versus where we are.

Pricing for a new customer.

Yeah Yeah.

Yeah, So I.

So the move in rate continues to be.

And that kind of 6% to 8% range higher than the than the in place customers.

Okay.

And then can you give us an idea of how much.

Other revenue growth during the quarter was driven by the ECR is versus the higher move in rates that you were just speaking about.

Spencer, we don't typically get into trying to get through that the one thing that's fairly predictable as you can see how much of the revenue growth comes from occupancy everything else is in that mix of of a combination of the things that you're talking about we don't we don't we haven't historically broken it out.

Oh, thank you.

Thanks.

We have no further questions I will now hand back to Christopher Maher for any closing remarks.

Alright, thanks, everybody.

For participating in our call and wrapping up the self storage, earning season with us it has been a spectacular.

Earning season to say the least it's been a spectacular year for our industry I was just reflecting that.

This this call of the third quarter call.

I was I.

I was fortunate enough to participate in my first 127 years ago. This month.

And so as I've as I look back over those 27 years I think it's safe to say that that this year has been the.

The best that I've ever had the fortunate to participate in from a self storage perspective, and we're quite.

We're quite bullish on.

On the industry as we move into next year. So thank you all.

For for enjoying this with us and we look forward to talking with you at the end of the year be safe.

This concludes today's call you may now disconnect your lines. Thank you for joining.

Uh huh.

Uh huh.

Hum.

Okay.

No.

Okay.

Okay.

Okay.

Yes.

Okay.

Yeah.

Okay.

Okay.

Okay.

Yes.

Yeah.

Yes.

Okay.

Yes.

[music].

Okay.

Yes.

Yeah.

[music].