Q1 2022 Extra Space Storage Inc Earnings Call
Excuse me this is Peter.
Today's conference is scheduled to begin momentarily.
Until that time your lines, where they can be placed on hold.
Thank you for your patience.
[music].
Good day and welcome to the Q1 'twenty two extra space storage, Inc earnings Conference call.
At this time all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
If we acquire any further assistance please press star zero.
I would now like to hand, the conference over to Jack <unk> Senior Vice President capital markets. Please go ahead.
Thank you Ashley.
Welcome to extra space storage is first quarter 2022 earnings call in.
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 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 may four 2022.
The company assumes no obligation to revise or update any forward looking statements 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.
Thanks, Jeff and thank you everyone for joining today's call.
We are off to a great start in 2022.
Year over year same store revenue growth in the quarter was 21, 7% a new all time high for extra space.
<unk> same store NOI growth of 27, 6%.
This was achieved primarily to year over year rental rate growth, partially offset by a modest decrease in year over year occupancy.
Industry fundamentals continue to be strong operational performance has been exceptional in all markets and we are well positioned for another strong summer leasing season.
A few weeks ago, we met with over 220 of our third party management and joint venture partners in Austin, Texas for a few days of company updates and industry news.
Most importantly, it provided a forum to explore opportunities for extra space and our great partners to grow together. These.
These partnerships and relationships continue to be an important part of our external growth strategy as shown in our first quarter results.
Like last year, most of our acquisition activity consisted of non stabilized stores acquired from existing relationships.
Total first quarter investment by extra space was ahead of our expectations at $229 million.
We also closed $138 million and bridge loans, and we added 37 additional stores gross to our management platform.
All of our various internal and external growth channels are working.
We continue to find opportunities despite the competitive market and we have strong pipelines for each of these platforms.
Our property NOI plus our external growth efforts resulted in core <unk> growth of 34%, which allowed our board to increase our first quarter dividend to $1 50 a share.
20% over the previous quarter's dividend and 50% over the first quarter 2021 dividend.
<unk> continues to be a great time for the storage sector and particularly for extra space.
All aspects of the machine are working really well and we are looking forward to a very successful 2022.
I'll now turn the time over to Scott.
Thanks, Joe and Hello, everyone.
As Joe mentioned, we had a great first quarter with our same store performance and <unk>, both coming in above our expectations, our outperformance relative to our guidance was driven by stronger property performance and higher than expected interest income.
Our external growth in the quarter was capitalized by draws on our revolving lines of credit and we issued $41 million in common stock as part of an acquisition.
During the quarter, we termed out $400 million of revolving balances through our third public bond offering further ladder, our debt maturities and freeing up additional revolver capacity our balance sheet has never been stronger our unencumbered pool is now approximately $13 billion and our net debt to EBITDA.
Four four times.
We have access to many types of capital and we have significant debt capacity to support future growth.
In addition to our first quarter results. We also updated our 2022 full year guidance. We've increased our same store revenue and NOI forecast based on our first quarter outperformance and improved outlook heading into the summer leasing season.
Same store revenue guidance increased to 13% to 15% driven primarily by rental rate growth same store expense increases in the quarter were driven primarily by payroll credit card fees and snow removal as a result, we have increased our expense guidance to six five.
Percent to 8% for the full year our.
Our revenue and expense guidance results in our same store NOI growth range of 15% to 18%.
As Joe mentioned acquisition activity in the sector remains elevated and we are ahead of our original guidance for both year end closings as well as our full year pipeline.
While still competitive it appears that the number of bidders pursuing any given deal is lower.
Essentially due to the increasing interest rates.
As a result, our capture rate has improved especially on non stabilized one off stores, we expect to continue to acquire through joint venture partnerships and we have increased our 2022 guidance to $800 million in extra space investment.
We also expect higher bridge loan activity and we have increased guidance to $150 million in retained new balances in 2022.
We've increased our interest income guidance by approximately $7 million since our preferred investment in next point remains in place and due to higher bridge loan volume and interest rates.
Due to the increase in interest rates as well as higher acquisition volume, we've increased our interest expense guidance by $13 million at the midpoint.
The sum of these adjustments results in an increase in core <unk>, which is now estimated to be between $8 five and $8 30 per share.
We anticipate <unk> <unk> of dilution from value add acquisitions, and CFO stores down <unk> <unk> from our original guidance due to stronger than expected performance at these properties.
We're having a great year, and we look forward to another great leasing season, and with that operator, let's open it up for questions.
As a reminder, if you would like to ask a question you will need to press star one on your telephone to the jewelry question press the pound key.
Your first question comes from the line of Jeff Spector with Bank of America.
Okay.
Hi, good afternoon, and congratulations on the quarter.
I know July consider you to be conservative in your opening remarks, I feel like we are.
Maybe the most positive opening remarks, I've heard and all these years I guess, what's the if there was a number one or two big surprise.
What you were thinking of last year.
How would you describe the environment I guess whats turned more positive in your view of what's been the upside surprise.
Thanks, Jeff I appreciate the comment.
I think the customer is behave differently than we projected when we did our initial guidance both in terms of <unk>.
Longer lengths of stay.
And move.
Move out rate in response to ECR to existing customer rate increase notices both of those things have been.
Better than expected and helped us achieve.
To achieve better than predicted results and increase our forecast for the entire year.
Yeah.
Great. Thank you.
And then just to confirm I guess, if you can characterize the customer I mean, I think stumper summit up but.
So I assume at this point you I think the comment was all the regions or markets are performing well.
Information not seeing pushback on the rental increases you're sending out including I guess at this point to April .
So I won't say, we're not seeing.
Pushback from the rental rates, we are sending out our base case activity in response to rate increases is probably double what it normally is.
Demand is so strong and our ability to backfill those tenants.
Is consistent across the country.
Got it.
It hasnt affected us in terms of results in terms of performance.
Yeah.
Great. Thank you.
Thank you John next.
Your next question comes from Michael Goldsmith of UBS.
Good afternoon. Thanks for taking my question sticking with the topic of ECR eyes.
Relative to your peers I think your occupancy took a little bit more of a hit but you saw your rent growth accelerate further so I guess the question is do you did you push harder on <unk> than you had in the past and then.
<unk>.
Which is generating the greater revenue growth and then as you think of kind of as you head into this period with tougher comparisons.
Does that do.
Does that change how.
How hard you can push on the on the ECL rise.
So we're in a.
Unusual unprecedented situation, where we've had several years, where we've been restricted in many many jurisdictions.
How much we can increase rates and how much we can.
Both to existing customers and to new customers.
Last two those restrictions in California's we just list lifted in February .
So.
<unk>.
We had a greater gap between what many customers were paying and what the market price for our product wise.
And we've tried to make progress towards closing that gap.
In the future I don't expect that gap to be.
Large and.
Consequently, ECR ice won't be as large.
So it's fair to say that the babies.
Maybe the acceleration is just is primarily driven by a step up just based on how you process.
Horizon in California, rather than a change in.
I think the overall program is that fair.
Okay.
I mean, the increase the restrictions were lifted in New York and New Jersey in the fourth quarter of 2021 and that it takes a while to roll through.
To the rent roll so it's not all California.
<unk>.
Your general statement is true.
That's helpful and as my follow up.
You took your guidance up for for acquisitions.
I think in the past you had talked about doing more deals within the JV.
It seems like the transactions being done we're being wholly owned so I'd like to kind of dig into kind of what youre seeing in the acquisition market the competitive nature of it and I guess the impact of rising interest rates and how that has impacted other potential buyers of self storage properties.
And portfolios. Thank you.
Yes.
Great great questions. So it is true we have.
And more properties than we anticipated that met our return.
Met our return requirements for wholly owned properties. So we have been more active on the wholly owned side those are almost exclusively.
Unstable is lease up stores, where we're looking at.
A fairly low initial yield, but we think long term will be very accretive.
Are also very busy on the joint venture side, while we only closed two in the first quarter. We closed one since the end of the first quarter and have 12 <unk>.
To close for the rest of the year in joint venture. If you look at what's been approved and our committee.
For the first quarter we've approved.
21 deals in joint ventures versus wholly.
Wholly owned deals so we're active on both sides.
Turning to your pricing question.
It's been a little bit of a surprise for us as interest rates go up we would have expected cap rates to also go up.
We have not seen a lot of evidence of that yet I think it's because there is so much pent up demand for self storage. So much capital from many many different sources trying to get exposure to this property type.
What we have seen though is.
Either fewer initial bidders who are.
As the process goes on the leveraged buyers seem to drop out.
There is enough other buyers that theres still a lot of interest in the properties prices are pretty consistent with what they've been.
Towards the end of last year and there is a lot of volume.
Theres just a lot on the market.
We don't see the big Mega portfolios, but absent that it's as busy as its ever been in the first quarter.
Yes.
Thank you very much good luck in the second quarter. Thanks.
Thanks, so much.
Your next question comes from Juan Sanabria of BMO capital markets.
Hi, guys. Thanks for the time, just hoping you could give us an update on.
Any trends you can share on April whether it be occupancy or our move in rates.
And if you can comment on move in rates, how that trend compares relative to what you saw.
Through the first quarter.
Yes, Juan so occupancy at the end of April was just over 100 basis points lower than where it was last year. So down slightly from the end of March but not anything unexpected.
In terms of rate in the first quarter, we averaged about 15% our achieved rate for <unk>.
For new customers was 15% ahead of where it was last year.
Today in the last.
15 to 30 days its been well in the last two weeks, it's been moderating to where it's about mid single digits today low to mid single digits.
Okay, Great and then.
Just curious on.
The rate restrictions coming off if there's any change to the quantum or the size of impact to same store revenue guidance as you've been able to maybe capture some of that sooner given how strong the market's been.
Has that changed at all.
Given the first quarter and what you've seen to date in the second.
Yes, I think youll see that change in our increased guidance.
Okay.
Is the impact I guess just isolating the.
The rent restrictions rolling off the 50 bps, you talked about at the fourth quarter. When you set guidance does that now.
Hundred basis points or is it still.
Yes.
Yes, Chuck didn't understand your question. So we thought that on a portfolio wide basis, we would get a 200 basis points.
Boost from the Cri and Thats, probably now closer to 400 basis points, and California, We said 50 basis points and we as I said earlier underestimated both the move out rate in.
In response to that and then the length of stay of tenants who get it.
And.
So that's considerably higher also.
Thank you.
Just to tie two sir.
The <unk> move in move out rate that you.
Noted on to Jeff's earlier question is that.
More tied to California, because that sounded a little alarming.
The vacuum.
Is that just as a result of California, and moving people closer to market.
Not really a warning sign.
Yes.
No.
It's a function of.
Everywhere, where we have moved people to market.
You know there is there is two factors one is.
The rate restriction, which keeps the existing rate down but the other is the large increase in street rates. So if someone comes in at an Internet special rate and they are paying.
15% distances example, below street rate on day, one and rates are going up.
Scott at 15% in the first quarter achieved rates.
You have a pretty big gap there.
Even in a state without.
Our rate restriction. So we are also.
Experiencing.
The type of behavior that I described in those states.
And one maybe to clarify this isn't a new trend and we saw this in the last year, we saw higher move outs as we.
Executed on higher rate larger rate increases.
Thanks for that Scott I appreciate the time guys. Thanks.
Thanks, Sean.
Your next question comes from Todd Thomas with Keybanc capital markets.
Hi, Thanks.
First question.
Joe or Scott I guess back to investments can you comment on weather.
<unk> changed its return hurdles at all going forward as you underwrite new deals and I realize you increased your guidance for acquisitions by $300 million, but.
Just curious I guess, if your appetite from here.
<unk> has really changed at all just given the increase in debt and equity cost for the company or perhaps in response to your view around the economic growth outlook.
So we haven't changed our underwriting discipline our processes in any way as you point on our.
Average cost of debt has increased slightly our cost of equity.
Has increased slightly so our weighted average cost of capital hurdle, we have to jump over.
<unk> has gone up.
But we've still been able to find deals either do a wholly owned basis are structured to a joint venture to enhance those with those returns.
That makes sense for our shareholders.
Okay and it sounds like.
You talked about utilizing joint venture capital.
Perhaps a little bit more here.
In the near term.
What what's the appetite like from your joint venture partners and are they.
Is there appetite for new deals.
Pretty steady here or are you seeing them.
Sort of pull back a little bit and perhaps changed their return hurdles and expectations.
No we have great joint venture partners, who have significant capital resources and appetite for storage exposure.
And.
In the event, we ever got to the point, where they were full or wanted to take a pause there.
Plenty of folks out there who would be really happy to partner with extra space storage. So we're in a great position now where we have plenty of access to joint venture capital, we have plenty of access to all different types of debt capital.
We feel.
The restricting.
Metric on our growth is availability of good deals, it's not finding the appropriate type of capital to capitalize on with.
Okay.
Last question, Scott within the guidance revision and sorry, if I missed this but.
Can you speak to the increases in interest income and also JV income what the what the drivers. The primary drivers are behind the increases in those assumptions, which totaled about 10 cents or so.
So in the interest income it's a couple of things one is the bridge loan program, just really doing well. It's been successful we're placing lots of bridge loans were keeping more on balance and it's taking maybe a little more time to sell the a piece of that so the assumption is higher from that aspect. It also is higher.
Because of.
The J cap assumptions. So we are assuming now that we keep that through May and then do a blend and extend after may and then that in addition to that you have higher interest rates and so the bridge loans are more profitable as interest rates go up.
So that's kind of what's in the next three quarters in the first quarter. We did have the benefit of some one time type transactions, where we sold.
$103 million note, we unwound in unamortized premium that benefited us and so we had more first quarter was higher than the remainder of the year will be.
And then the second one about the equity.
Equity and earnings piece is primarily getting into the promote on some of the JV with the performance of the properties.
It is going to move us into the promoter some of those those JV budgets were done late earlier than the wholly owned properties and as we've gone back through and looked at the performance of those we feel like they should outperform where we originally estimated.
Okay. That's helpful. Thank you.
Got it thanks.
Your next question comes from Samir Khanal with Evercore ISI.
Hey, Scott.
You talked about sort of the length of stay continuing to expand here can you remind us where that is today and maybe versus lets say, even a year ago or even.
Whats been the trend on that.
Our trend continues to expand if you look at customers that are in our properties today.
The stay is about 42 months is just over 40 months it depends on the period that has.
Gone up through co, but if you look at our customers that are moved in and moved out the average length of stay there is about 16 months I think that you are probably up as much as 10% over the last two years.
Okay.
Got it and then and then Joe I just wanted to get your thoughts on sort of the the business customer I mean has there been any shift in demand.
From that segment I mean, theres clearly been talk about sort of that last mile delivery. I mean are you seeing sort of that segment or increased demand pick up at all.
The last mile delivery is not insignificant part of our business at all I think thats.
Kind of interesting talk but.
Realistically, that's not meaningful to us.
And what about the business customer in general have you seen sort of the pickup in demand from that segment generally.
I think the business demand is steady I wouldn't say, we've seen pickup in it it's an increasingly smaller piece of our business because as we grow the portfolio and add more stores than our.
Current generation storage that are multi story.
The percentage of units that most business customers seek great large outside access units is a much smaller percentage of our portfolio.
So therefore that customer becomes a much smaller piece of our business, but in terms of demand and behavior, there's really been no change.
Okay. Thank you.
Sure.
Your next question comes from Keegan, Karl with Bank Bank.
Hey, guys. Thanks for the time salesperson noted needs based business how much of an impact from the current inflationary pressures, we expect going into your price increases going out.
So with the ability to adjust rates month to month I mean.
Guessing some of our rate increases in the overall economy is going to be attributable to inflation, but ours is more demand base.
So as demand increases you know you have the ability to move up your street rates and move up your existing customer rate. So it's really difficult to attribute what amount is two inflation versus demand.
Don't do very much forward price predicting because we changed the rates on every unit every day.
Based on data that has come in as to what happened. So it really doesn't help us to try to figure out what a 10 by 10 is going to be priced 30 days from now.
The machine and the algorithms and the people who work on that.
Just prices constantly to try to optimize revenue.
I think I asked that poorly.
I guess something more.
The economy could become more of a challenge given what's going on with inflation. So how sensitive are you in factoring what that's going to do to potential consumer balance sheets, when you're sending out these price increases.
So okay.
Every time, we send out price increases.
<unk>.
Keep back <unk>.
The control group. So for example, if we send out a 100000 price increases a month.
We will keep back 500, or 2000 folks who should have gotten a price increase.
And then we will track their move out rate versus the folks who did.
The price increase notice and Thats the way, we can constantly check to see if we are.
Pushing too hard.
And actually harming the business.
Is that helpful.
Yes, no that makes sense.
Shifting gears here I mean, obviously your third party management platforms strong and growing so how much of an uptick a truly seeing for that and what sort of conversion rate do you having on its pipeline versus what you are actually closing one.
So.
Last year was an unusual year right because we had added.
104 properties net we bought 58 properties off the portfolio too, but we added 104 net.
Including a large 59% or 60 property portfolio. So if you look at our activities today.
Versus historically without that large portfolio, we're right on track we did.
187, new property projections.
In the first quarter and approved 52, new contracts that's right in line with our averages over the last couple of years, excluding that large portfolio.
In the first quarter, we added 19 stores net we bought six.
And added 19 net so that's what run.
Run rate of 76 properties. That's a good if we can grow this business by 75 to 100 properties net of year.
That's pretty consistent with what we've done in the past and pretty strong.
Got it thanks for the time guys.
Sure.
Your next question comes from Caitlin Burrows with Goldman Sachs.
Hi, there maybe just a question on the demand side I feel like there is a thought out there that just at the end of life change that's happened over the past two plus years with Covid that there is no way you can kind of stay at this elevated. So I was just wondering maybe if you could give your thoughts on why demand is so high and maybe why it can or cant say so.
The weighted.
And just where we go from here.
So I think demand can stay elevated in a changing economic environment, which is I think what youre asking.
Is because.
The drivers of demand.
There are some drivers that are occurring all economic.
Situations like people still get married they still have babies et cetera, and then theres drivers that occur in bad economic conditions, where I can't afford my apartment I need to move back in with my parents.
I have to downsize my business.
Because of the diverse demand drivers I think we can maintain healthy demand through all economic cycles and thats not just the theory right. We saw in 2008 2009.
We didn't really have a demand problem, we had a vacate problem.
There has been consistent demand through that period with consistent demand through 2020 and 21. So we're bullish on the demand side.
I guess just as a follow up on that vacate issue that was seen in the past would you say then that you're kind of.
Systems have improved that much. Since then so you would be better positioned to address it or how could that play out differently going forward I.
I Couldnt have said it any better.
We just we try to sharpen the tools everyday and become a little bit better.
And optimizing performance in response to what's happening so that I think youre absolutely right.
And then maybe just one on higher bridge loan activity.
I mentioned, a few times, it's it was higher in the quarter than you were expecting and it seems like it could remain high wondering if there was any specific reasons, you could give that might be driving it and how sustainable that is.
I don't think there's a specific reason I think it's just.
Sure.
Largely a relationship business and as our relationships grow and as we do repeat business with borrowers.
It's like a snowball rolling downhill.
<unk> tends to increase and we've seen that.
We really started this business in 2019, we only did nine loans.
And we did 27, the next year and 34 last year and we're on track to continue to just increase this business. So I don't think its a change in the market. It's just a natural growth in the business and relationships and repeat borrowers.
Got it thanks for that.
Sure.
Your next question comes from Kevin Kim with true is.
Thank you good morning.
Just going back to the comments about the mid single digit rate increase in April I was just curious.
It's taking more marketing dollars, our promotional to keep that or is that pretty apples to apples.
So.
Price environment indications.
Yes keep in our demand has been strong enough that our marketing is actually down so.
It's encouraging that we're able to increase rates demand so good and the customer rate increases are sticking.
Okay and in terms of your balance sheet.
Your your.
Your variable rate debt represents about 25% that that effect now.
Now I don't want to Miss the Big picture, that's been a winning formula for the past.
Say forever and that's maybe the first year that may not be a winning formula.
So I'm just curious if you have any kind of larger picture thoughts on.
What do you intend to do with that variable rate debt.
Yes, our variable rate debt has been something that we've had for a long time, we've typically manage that 20% to 30% it gives us the flexibility to.
Buy things typically what we'll do is we'll draw on the line of credit as we have acquisition opportunities and then we'll look to term that out you saw us do that earlier this year.
Clearly you're like variable rate debt more when interest rates are falling and when they are rising, but we will continue to manage that we do have a bit of a natural hedge with our bridge loan program, where those are also variable rate loans going the other direction. So.
Okay. Thank you.
You bet.
Your next question comes from Spenser, <unk> with Green Street.
Thank you I apologize if I missed this but can you comment on how your expectations for supply pressure have changed or not since last quarter. It seems as though the increasing pressure on construction financing coupled with <unk>.
Permitting backlogs et cetera continue to push deliveries out, but just wanted to get your updated thoughts on what you guys are seeing on the ground.
Yes.
We have seen a moderation in our expectations of new deliveries.
When we look at our same store pool, and what's going to be delivered.
This year.
Our estimate now is below 20% of our new of our same store pool is going to have new deliveries and thats down somewhat from from last quarter as we see some of the things. You mentioned is is delays in <unk> and <unk>.
Projects not going forward.
So supply is certainly moderating it's not a non issue there are still things being delivered.
We have a very diverse portfolio, so we'll be able to.
Managed to it is we will have.
Some some properties having to deal with new supply, which we know how to do and in other markets not.
But I still believe even with cost increases.
And.
More difficulty in entitlements that we are going to see more development in the future.
Performance of the project.
The product is very strong is just too good the amount of capital.
As.
Unprecedented and people are going to find ways to build and it may take longer.
But I think it's going to happen and we know this because.
I mentioned, we did a 187 new property projections in the first quarter on the management side 74 of those were for new development.
People are trying to get it done.
And hopefully the industry as a whole will be smart about it.
That's very helpful. Thank you.
Sure.
Your next question comes from Smedes Rose of Citi.
Hi, Thanks, I just wanted to ask you on the joint venture opportunities.
Increasing.
The activity there.
Generally working with the partners in pools of capital are you, bringing in new.
New folks he mentioned a lot of pent up demand and a lot of capital out there.
We do have two new joint venture partners that we have or will close.
Ventures with.
This year I guess ones closed one is about to close it's a juggling act right because we want to be a good partner and be able to satisfy everyone's needs, but we never want to run at a joint venture capital. So we're always trying to.
No.
Have sufficient capital to not have too many mouths to feed.
Okay, and then I mean, just on that do you.
I mean, when you go into the joint venture.
Your view that you would see it.
State joint venture partners.
From very long timeline or do you set up agreements for each didn't have the opportunity to.
Actually exit or.
Just trying to think about I guess, the timeline for the joint ventures, or maybe theres not one.
It's a great question and it's something we focus on a lot.
One of the most important things.
<unk> Stakes to form a joint venture partner is that we have similar investment criteria. So our joint venture partners are.
General accounts of insurance companies Odyssey core Odyssey funds that have kind of.
Unlimited life and unlimited holding periods, we don't want IRR driven partners that are going to want to pull the sale button in three years. We're looking for people who are looking at these assets just like we are.
As quasi permanent holds for cash flow that we can grow year after year after year now that being said.
No one can promise, they're going to hold forever. Some point our partners do want to sell we have rights in all of our joint venture partners.
<unk> exit to two to have an opportunity to purchase.
But much more important than what's in the legal document is that we.
Partner with people, who are like minded with us and have similar investment goals.
That's it thank you.
Sure Smedes.
Your next question comes from Mike Mueller with JP Morgan.
Yes, Hi, I have two quick ones and I apologize if I missed these before but.
Did you comment on what move in versus move out rates were in the first quarter and then for the operating properties that were acquired in the first quarter what was the average occupancy.
Yes, so move in rates versus move out rates.
We're about.
10% below.
Our move in rates were 10% below our existing customers, which is very typical for this time of year. So no concerns there and then our average occupancy we're polling icon at the average occupancy on the wholly owned stores was 76% with the projected 13 13 months to stabilize.
Nation, and Thats economic stabilization not.
Physical occupancy stabilization.
The joint venture Okay.
Okay.
And occupancy.
Okay.
Thank you.
Mike.
Your next question comes from Ken Goldman with Morgan Stanley .
Just two quick ones first on expenses, just looking at property taxes were up 1%.
And in payroll I see 8% just can you comment on both of those line items on the property taxes Friday, Ed how payrolls are trending.
Property taxes were maybe a little lower than maybe some people expected.
That has more to do with timing of appeals than you'd.
We'd like to think Youre doing some type of Jedi mind trick or something to keep those rates low, but I don't think that any.
Other than.
Those appeals coming through when they did in terms of payroll.
We did increase rates for our employees by about 8% at the end of last year. When you take their annual rate increase as well as a onetime adjustment and then our staffing has largely returned to normal. So those are that's a little bit more clarity on those two items.
Great and then my second question was just trying to understand how to think about looking at the entire portfolio.
And what the Mark to market is today.
Did some comments earlier that people are moving and maybe 10% below portfolio brands.
Which is which is helpful, but if I take a step back and try to get it back calculation, where rents are in the portfolio today, where we're at versus the market.
How should we think about that.
So that 10% number is obviously a time of year type of thing. So you have a customer that moves in last summer at a higher rate typically you do see street rates go down in the fall and through the winter and then they go back up in the summer those existing customers that moved in last summer last fall are going to be getting rate increases. So that's going to contribute to your growth going forward. So.
Not uncommon all part of the rate cycle.
Great. Thanks, so much thanks.
Thanks, Ron.
There are no further questions at this time I will now turn the call back to Joe Margolis CEO .
Great. Thank you everyone for taking the time to listen Thank you for your interest in extra space, we're really happy to be able to deliver these types of results for our shareholders.
But it happens because there is.
Over 4000 people at extra space, who are working really hard everyday from in the stores to the data science folks to the accountants to all of the investment people.
The entire team just works hard and works well together and they need they need a lot of credit and shout out for the results. They are delivering thanks, everyone. I hope you have a good day.
This concludes today's conference call you may now disconnect.
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
[music].
Yes.
Yes.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
[music].