Q4 2022 National Storage Affiliates Trust Earnings Call
Greetings and welcome to the National storage Affiliates' fourth quarter 2022 conference call.
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Brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host George Hoglund, Vice President of Investor Relations for National storage affiliates. Thank you. Mr. Hogan you may begin.
We'd like to thank you for joining us today for the fourth quarter 2022 earnings conference call of National storage affiliates Trust on the line with me here today are Nsa's CEO , Tamara Fischer, President and C. L O, Dave Cramer and CFO , Brandon Gushy Arlen prepared remarks management will accept questions from registered fine.
All analysts please limit your questions to one question and one follow up and then return to the queue. If you have more questions.
In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at national storage affiliates dotcom.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements that are subject to risks and uncertainties and represent managements estimates as of today February 28 2023 the.
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.
The company cautions that actual results may differ materially from those projected in any forward looking statement for additional details concerning our forward looking statements. Please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as <unk>.
Poor S F O and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings I will now turn the call over to Tammy. Thanks, George and thanks, everyone for joining our call today, we're very pleased with our fourth quarter results capped off another impressive.
Year delivering growth in core F N O per share for the year of over 24% the second highest year of growth for us since our IPO in 2015.
Our same store growth for the year of almost 15%, culminating in a record three year period, where same store NOI is now more than 40% and that's oh per share is now more than 80% higher than the pre pandemic levels of 2019.
During the year, we acquired 53 stores valued at nearly $800 million comprised of 45 wholly owned properties valued at $570 million and eight properties valued at $215 million that we acquired with our joint venture partners.
I think it's worthwhile to note that this transaction volume was our third largest year since our IPO based on wholly owned acquisitions activity.
To top it off we also delivered 35% growth in dividends paid in 2022 compared to the prior year.
Not only are we proud of being able to deliver record levels of financial growth for our shareholders. We're also proud of the 2022 was our biggest year in supporting our communities since our IPO.
Through our partnership with feeding America, we were able to provide a million and a half meal to assist in ending food and security in America.
Our properties continue to support their local schools and children's charities and our corporate teams thoroughly enjoyed our holiday toy drive for children's hospital here in Denver.
We were pleased to again step up our support of the self storage Association College scholarship program. We also continue to enhance our diversity at MSA, where more than 40% of our senior management are women or minorities.
Turning to the current acquisitions environment, we're seeing fewer deals come to market and there remains a pretty significant gap between buyer and seller price expectations.
Continue to evaluate deals where it makes strategic sense and remain both disciplined and very selective in the face of today's increased cost of capital.
Of course, just like we refused to buy at prices that are not accretive for our shareholders.
Sellers, often refuse to sell given the healthy cash flow they generate so.
So it's not uncommon for sellers to just pull together off the market and if they don't like the pricing.
Overall, the volume of transactions in the market is definitely slowing.
In our case, though we do have the unique benefits of our captive pipeline of assets, which our stores managed by our pros, but that we don't yet know.
Because we're on the same team as buyer and seller in these cases, we can cooperate to you're structuring it is accretive for our shareholders well also beneficial to the sellers.
To that end, we recently entered into an agreement to acquire 15 properties in Florida owned generationally by one of our pros and family members.
The transaction is valued at about $145 million and we expect the first year first year yield will be in the low sixes.
In this case, we've negotiated to fund the transaction with the issuance of a new series of preferred equity.
Ficials to the pros family, but still accretive to NSA we.
We expect the transaction will close sometime in March.
This deal demonstrates one of the many benefits of our pro structure and our ability to continue to grow while being creative with capitalization.
We began 2023 with another accretive event and the retirement of move itself storage one of our I P O pros.
Move it managed over 70 properties for NSA concentrated in Texas, and the South East.
As most of you know, we've discussed and anticipated pro retirements over time and.
And we expected at the time of our IPO and as many as half of our six pros at the time, we choose to retire within 10 years.
Move it is the third of our pro retirements Halloween northwest last year and secure care in 2020.
We will continue to operate the stores under the move its flag.
The internalization of move it increases the number of stores managed within our corporate portfolio to almost 800 stores or over 70% of our total 1100 stores at the end of the year.
We estimate this retirement will be one to two pennies per share accretive to core F. S O.
I'd like to thank the move it team for their partnership over the years, they've been a key contributor to N S. A success.
Finally, today's call will wrap up my final year as Nsa's CEO I'd like to congratulate Dave on stepping up the CEO effective at the end of this quarter.
I'd also like to congratulate Tiffany Kenyon on recently being elevated to chief legal officer, and Derek burst young our current senior Vice President of operations and his upcoming move to Chief operating officer.
I look forward today's leading NSA through its next phase of growth and continuing to deliver outstanding results for all of our stakeholders.
I'll now turn the call over to Dave <unk>.
Thanks, Tammy I'd.
I'd like to congratulate you on your upcoming transition tax executive chair.
Appreciate all that you've done to the NSA and I'll, let you will continue to do in your new role.
I would also like to thank our pros and their teams along with the NSA team for achieving great results in 2022 now.
Without their efforts, we would not be able to accomplish although we have this year.
As we reflect on the fourth quarter and how 2022 played out well.
Really experienced normal seasonal trends occupancy peaked in Q2 at 95, 3% and finished in December at 95%.
Contract rates grew every month in 2022.
$12, 7% higher than 2021.
Our rent roll down on average, 12% in the quarter, which was in line with our expectations.
Rental activity, followed historical patterns, peaking in the summer months and declining in the back half of the year.
As a reminder, our current tenant base has an average length of stay of over 40 months.
Our team did a wonderful job in the quarter driving revenue, which was up seven 4%.
Controlling expenses up only one 6%.
Leading to an increase in NOI of nine 4%.
Thus, improving our NOI margin by 140 basis points.
As we look to 2023, we're encouraged as our portfolios following typical seasonal trends occupancy in street rates have bottomed here in February .
Expect them both to pick up as we head into the spring leasing season.
We believe we are on track to stabilize above pre pandemic levels.
January month in same store occupancy was over 250 basis points higher than January 2019, implying that we are settling in well above pre pandemic levels.
Our sunbelt markets continue to outperform with states, such as North Carolina, Florida, Georgia, and Texas, all generating above portfolio average revenue growth.
Several of our secondary market, such as Brownsville, Macallan, Oklahoma City, Fayetteville, and Wilmington are also outperforming the portfolio average.
Reinforces our strategic market focus on sunbelt secondary and suburban markets and continued emphasis on geographic diversity.
Our focus on people process and platforms in 2023 will enable us to deliver strong results and continued success.
I'll now turn the call over to Brandon to provide more detail on our financial results and balance sheet activity.
Thank you Dave.
Yesterday afternoon, we reported core for full per share was <unk> 71 for the fourth quarter 2022.
Which represents an increase of 11% over the prior year period.
For the full year core for full per share was $2 81.
44, 3% increase over 2021.
Driven by strong same store performance.
<unk> 12, 1% revenue growth and healthy acquisition volume in the back half of 2021 and throughout 2022.
Dave spoke to the drivers impacting revenue.
Let me give some color on fourth quarter operating expenses.
Our fourth quarter growth of one 6%.
Fitted from lower than expected property taxes due to some successful challenges.
Patient sees and personnel.
Partially offset by inflationary pressures on utilities and increased marketing expense.
Turning to the balance sheet.
During the quarter, we entered into swaps to fix interest rates on $410 million of floating rate term loans.
The weighted average effective interest rate on these loans at September 30 was four 6%.
And pro forma with swaps was five 2% as of December 31.
In early January we announced the recast of our credit facility.
Putting an expansion of our revolver capacity to $950 million.
$230 million increase to our existing term loans.
And the retirement of $300 million of 2023 maturities.
This execution during an evolving bank lending environment.
Demonstrates the appeal with self storage is a property type and the strong relationships, we have with our bank group.
The end result was an extension and our weighted average maturity to five seven years from $5 one increase flexibility.
Annuity and about a five basis point increase in weighted average effective interest rate.
At quarter end, our leverage was six times net debt to EBITDA right in the middle of our targeted range of five five to six five times.
Pro forma for the financing activity I've mentioned at year end, approximately 17% of our debt is subject to variable rate exposure.
Down from 24% at September 30.
Nearly all of that exposure from the outstanding balance on our revolver.
We're committed to maintaining a conservative leverage profile and healthy access to multiple sources of capital.
Now moving onto 2023 guidance, which we introduced in yesterday's release.
Same store growth is reverting to long term averages we.
We estimate same store revenue growth of four 5% at the midpoint of the range. We've provided which is in line with our average annual growth over the three years pre pandemic we.
Estimate same store expense growth of 5.25%.
NOI growth of 4.25% each at the midpoint we provided.
Our same store pool increases to 834 stabilized stores and 52 million square feet and.
An increase of over 200 stores due to our record acquisition volume in 2021.
Approximately 68% of our same store portfolio was in the Sunbelt and we expect revenue growth from these stores to outpace our non sunbelt stores and about 100 basis points.
We are very pleased with our core operating fundamentals.
However, higher interest rates will be an earnings headwind in 2023.
Based on our debt in place currently and using the assumption that sulfur average is four 6%.
We expect interest expense of over $150 billion for the year.
All of this results in our 2020 344 per share guidance of $2 78 to $2 86, with a midpoint of $2.82.
Lastly, before taking questions regarding move it all offer a reminder, on the mechanics of our pro retirement.
The S. P units associated with the move it pro were converted the old P units on January one.
At a conversion ratio of 275.
Therefore distributions to SP units will be reduced accordingly, all the outstanding common shares and units outstanding increased by two and a half million dollars.
NSA will no longer pay a management fee. So there will be a reduction in supervisory and administrative expenses within G&A.
Which will be partially offset by an increase in other G&A as the properties will now be managed by Msa's corporate property management platform.
All of these items are factored into our additional guidance assumptions.
The earnings release.
Thanks again for joining our call today, let's now turn it back to the operator to take your questions operator.
Thank you.
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Our first question comes from the line of one Santa Maria with BMO Capital markets. Please proceed with your question.
Hello, Good morning.
Just hoping you could talk a little bit more about the acquisition environment you talked about I think it was a oh.
A low 6% yield on some of the pro assets you acquired in Florida.
From the family just hoping to get an update on kind of where you see yields today and kind of how how we should expect that to maybe evolve over the course of 2023, given what you're seeing in the markets today.
Yeah.
Ah. Thanks, one nice to speak with you. This morning, I would say as it relates to the pro assets that we're acquiring here, sometimes and we hope in the next months.
So you know those assets come in on appraisal and and as we said, it's just over a six cap in general and then in the marketplace I would say that cap rates have not increased our it.
Commensurate way and they're probably in the mid fives is where we're seeing things I think more importantly, what we're seeing is fewer deals come to market.
I generally a gap in expectations between seller and buyer.
And not unusual for us to see seller sellers pulling a transaction when they're not I'm not getting the pricing that you know everyone was seeing in 'twenty 'twenty. One early part of 2022. So I think people are generally just pulling back a little bit.
And then just as a follow up on the move it pro retirement.
Curious on the decision to keep the flags in and how you think about the opportunity from an efficiency standpoint.
To have everything on one pad or versus keeping the disparate.
Brand names out there across the P&L.
Yeah, that's it platform.
Yeah. Juan this is Dave good question nice to talk to you. This morning.
As we look at the movement retirement, we will keep the brand in place in most of the markets. There are a few markets, where we have overlap as we look at maybe some of the other brands. We run in those markets, where we may selectively look at a group of stores, where its more powerful for us to have a maybe a brand that had more flags in one of those markets and we may move in the morale within the brands, we have but we still.
I believe very strongly in these regional brands, we believe very strongly that our platforms do not limit us in and having multiple brands across the country. We've proven it out through the years in and we're pretty committed to it we build tools that make it easy for us to be efficient and those tools can be deployed.
<unk> deployed across multiple brands very easily and so we looked at it and we will continue to look at it in the future on any further retirements or any branding across our markets. We think we can get a better scale by having a single brand and maybe one of these markets, where we had multiple we would change but at this point in time are pretty comfortable where everything says.
And just want to thank you follow up if you don't mind could you just give me the January occupancy and street rate spot numbers. Please.
Yeah I wanted this is Brandon So street rate year over year that was down about seven little over 7%.
And you know we're switching to a new same store pool as we mentioned in the opening remarks so.
The new pool at the end of January .
Is 89 seven.
And that's down like 20 bps sequentially from December .
Which is kind of in line with typical seasonality.
Thank you guys appreciate it.
Thank you Juan.
Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
Hi, Thanks, I just was wondering if you could just talk a little bit more I guess why are these 15 properties in Florida are available to you in a low six.
Cap.
Range and kind of how do you think about.
Their performance I guess over the next couple of years that seem sort of a pretty.
I guess sort of without knowing more like good pricing to your right 15 properties in Florida I mean, it's since it's been generally strong market. So I'm just wondering if you could talk about a little more and maybe what this sort of special issuance of preferred equity.
To this to this family kind of any more details around that.
Sure I'll start and then and we will probably have a brand and an Dave weigh in a little bit on it but these assets are coming in from our our participating regional operator in Orlando and these assets have been owned for many many years by our pros family and now extended family and.
And as part of their long term planning and I N and M basically a state planning.
They have agreed to contribute these assets to NSA and this has taken a long time, it's just complicated with a number of owners in these 15 properties. So they finally finally, we're able to pull it together and get everybody onboard and and so our history and our agreement with our pros is that assets coming.
Out of the captive pipeline do come in at appraised value and yeah without a portfolio premium and so this has been a longtime coming we're very excited about it I. This is an excellent probably joined us in 2017.
And there their performance is outstanding and we have no doubt that they will continue to operate.
At the top of the at the top of the pack so.
I don't know maybe you want to jump in a little yeah. I mean on that deal. This is Brandon Smith on that deal specifically I think you know another positive it's deepening our presence in the Orlando market is about 25, MSA growing sunbelt market. We've got five stores in the current portfolio right now and so this takes us to 20 assets with the incremental 15, so that's a tremendous pause.
The other thing I would I would tell you just broadly is the deals that we have done recently, we only did two albeit at higher value properties. So $40 million in Q4, those were pro source and all of these are situations, where our pros are working with us helping us solve for the cost of capital side of the equation. So those two properties.
We closed on in Q4, they were done with a good chunk of the consideration in the form of O. P units that we issued at an agreed upon premium $60 a unit and in the case of the personal mini 15 property, Florida deal, where we expect for the vast majority of our consideration to be issued in the form of preferreds as Tammy mentioned so.
Just signed the agreement last week in terms of getting the deal done.
More documents and things to get through over the next few weeks. So I don't have a hard number for you, but we expect the majority of that purchase value to be paid for in the form of preferreds, which are based on the price that we've agreed on will carry a yield very similar to our outstanding preferreds today, it's going to be a six 1% yield.
Okay. Thanks, and then I was just wondering Oh go ahead sorry.
No that was it go ahead Oh, Okay. I was just wanted to ask you on your expense outlook. If you could just talk a little bit more about kind of some of the components, maybe what you're seeing in wages and labor and maybe it's sort of marketing thoughts are in property taxes and any other sort of major line items.
Yeah. So the two biggest line items property tax and personnel. We expect those two line items growth rates in 'twenty three will be in line with that total Opex range. We gave of four 5% to 6% property taxes is probably a little biased to the high end personnel, a little bias to the low end.
That's kind of our base case levels.
That comes off of just.
Just under 5% growth in property tax in 'twenty, two and then for wages, we had essentially flat growth in 'twenty. Two so we're working against that Com. So that's you know very pleased if we end up in that mid single digit growth number.
The other line items that will be above the total range that we gave in terms of growth would be marketing utilities insurance.
<unk> marketing and utilities for sure the first half of the year, we still have a tough comp to work against and then by mid year, we kind of get to the point in time last year, where we were starting to increase that spend.
And then the last thing I would guide you to is just for first quarter 'twenty three.
The growth rate is going to be elevated or probably be high single digits. Because we've got kind of a dynamic I just mentioned with marketing and utilities, but also a tough comp on property taxes, we had a good guy in Q1, 'twenty two and so we're working off that com.
Great I appreciate the detail.
Yep, Thank you Smedes.
Our next question comes from the line of Lindsay Duncan with Bank of America. Please proceed with your question.
Good morning, Thanks for taking my question I was hoping if you could provide some color on maybe the latest demand indicators or English February .
It relates to the consumer.
You know maybe.
There's a read through that could provide into the spring and you know it.
And how how our web traffic trends and doing perhaps that might be a good indicator and how does that compare.
You now see that typical.
Kind of seasonal cadence that you laid out.
Yes, Lindsay this is Dave good question.
We're pleased right now with what we're seeing as far as customer activity.
I thought the team did a really good job the back half of 2022 really managing rate is when you occupancy levels would come back to more historical levels and so we did a really good job around discounting and around what we did with contract rent and what we do with our asking rents are too.
Through the end of 2022.
Towards the end of 'twenty, two we ramped up marketing spend and we really turned that on in November and December .
And so we're seeing the positive effects of that as we come into January and February January as move in numbers were 4% four 2% higher than a year ago in January for this pool and so we were pleased with the amount of move in activity. We had in move outs were fairly close to flat about represent 10% who have you know a point and a half of what historical numbers were in January .
Top of the funnel has been good.
Applied the right amount of paid spend we've applied around the right amount of market pressures around where we wanted to be in pricing. So we've adjusted street rate pricing to be a little more competitive in these markets and so we're seeing the results of that so top of the funnel is strong our conversion activity is good and so I think the teams have done a wonderful job positioning us for what we think is going to be a pretty typical spring leasing.
Hum.
In this time of year, you usually see the bottom of occupancy you can see the bottom of street and we think we found that we're starting to cycle more towards the spring leasing season, and the pretty positive about where we sit right now.
Great. Thanks, that's helpful.
And as a follow up and it's just wondering if you could talk about okay.
With respect to <unk>.
The acquisitions, you're helping them entering Q3 here.
Pro partnerships I'm just getting in the later.
Florida acquisition.
Other top 25 and is is there more of a focus to them like shifting towards a more prime marine market firsthand, what you've had historically at that secondary tertiary.
More and more I'm sure.
Maybe if you could talk about where you're seeing the best demographics are where what still makes no sense.
In terms of markets from 2023.
Yeah. Good question.
I think our focus on acquisitions and our strategy around acquisitions hasn't changed tremendously I mean, we will fill in markets, where we think it gives us good economies of scale and gives us good to St. Jude your ability to drive revenue, we're certainly focused on the sunbelt and our focus around sunbelt secondary and.
Suburban markets isn't changing the fact that we were able to Abbott pro that had assets in the top 25 market.
Tastic, we like it we were looking for these assets for a long time, and we're happy to have them coming into our portfolio. The rest of our captive pipeline as you know around where the pros operate today and we will look to get more of those captive assets and in the future as timing comes.
The timing around those assets around a state planning around low maturities theres a lot of things, we can't control, but when they do become available.
That's going to bring into our portfolio.
We're balanced we liked our balance we like the markets. We operate in we've had success in these markets and we're really not changing what we're looking for in the future.
Yeah. The only thing I would add this is Brandon is if you looked at our captive pipeline, where we have the biggest geographic footprint concentrations it would be Orlando, which we're now bringing a good chunk of those assets in Phoenix and parts of Southern California. So as we continue to harvest deals out of the pipeline I think you will see some more in those areas but.
No disagreement with what Dave remarked on broadly.
Great. Thank you.
Yes. Thank you.
Our next question comes from the line of Keegan Karl with Wolfe Research. Please proceed with your question.
Hey, guys. Thanks for taking the questions maybe first just give a little more color on what appears to be a slate strategy shift in the quarter. Our prior communication made it sound like you guys were looking to more more or less hold occupancy and give rate, but it seems like that wasn't the case given the steep drop in occupancy so kind of curious you know.
Matt.
Yeah. Good question really I think.
When you look at the occupancy drops we're coming off historic highs and so our spreads look probably a little greater than what our peer group knows but we normally don't operate our portfolios at such high levels. You know I've made pointed to maybe the Atlanta market, where if you look at Atlanta in the fourth quarter. We saw a 700 basis point drop in occupancy, but still delivered nine 1% revenue growth.
You know Atlanta last year was at 97% occupied that's an unsustainable number for our portfolio and we knew we were going to settle back into what was more normal occupancy levels and so I think the back half of the Uva team did a good job holding rates knowing that occupancy would start to come back down to historic levels and once we reach those historic levels. We go back to turning on other lever.
Like where do we want to maintain market rents what do we want to do with discounting.
What do you want to do with our conversion rate and paid spend.
And so I think we've settled in where we wanted to be at an occupancy level and now we're back to driving revenue as we always are really that's our ultimate goals, we're focused on the revenue growth.
Yes, Keegan Brandon the only thing.
The thing I would just add is when we were on our last call I think we have given the spot occupancy at the end of October and we talked about that being a 450 basis point delta negative year over year at that time, and you can see that spreads widen and so that I think speaks to what they've hit on I mean that was part of our strategy is to hold the line there trough here as we typically seasonally.
Due in January February and then kind of see the normal bell curve in occupancy throughout the year that we're accustomed to in normal times.
Got it and then in the markets in the press release, you called out as far as seeing weakness what's driving it is it is it just new supply coming online or is there something else you guys are seeing.
I think I think youre right. There we've talked about poor little at Phoenix, as we called out as well, there's a lot of new supply being built prior to pandemic. The pandemic certainly helped masked some of the new supply pressure and now that some of the pandemic fluff is going away. Those markets are returning back to there is quite a bit of supply coming into those markets.
And we're working our way through it.
Those markets like Phoenix is also a very very hot housing market tremendously hot compared to the rest of the country and that is now cooling Austin, so new supply a little bit of cooling economic factors and that's what's driving some of that movement around.
And just one more if you don't I just want to clarify on the interest expense commentary.
Aren't contemplating an additional potential fed rate hike given kind of what you said so far is going to be I, just want to clarify that that's correct.
Well its a range Keegan, we're modeling a multitude of scenarios. So I gave you a kind of a spot number. That's we've used I would say kind of primarily our base, but we're running sensitivity analysis up and down on that.
That corresponds to also what we're doing.
Assuming for the way, we were able to move rates and drive drive revenue on top line as well.
Okay, great. Thanks for the time guys.
Yes. Thank you.
Our next question comes from the line of Todd Thomas with Keybanc. Please proceed with your question.
Hi, Thanks.
Morning, I just had a couple of follow ups I guess on a first on on acquisitions.
M E T.
Tammy you know what what is the gap like today between buyers and sellers as it is in that 75 basis point range, I guess youre comfortable buying at a low 6% cap rate, but it sounds like sellers are in the mid 5% range is that is that the right way to think about the delta between where where you're at and where we're sellers expectations are.
Sure.
So Todd I think I think I think that's right and and honestly a 6% if we werent using this preferred stock as consideration for that this transaction would it still be looking at it would be very very selective and very opportunistic in our and our decisions around investing capital.
And acquisitions this year based on our current cost of capital.
Okay, and then and Brandon so so the six 1% rate on the preferreds that you anticipate issuing to fund the the personal mini.
An investment is that is that similar to is that a traditional preferred or are they subordinated perf.
Performance units or or something else and then is that as that transaction is that is that expected to be funded 100% with with preferred equity.
Yes, so it's not subordinated or anything of that thought it's more traditional preferred stock. There's some tax efficiency reasons to the transaction why we're actually going to issue a new series of preferreds you might be aware, our current existing preferred series five year non call burned off late last year or so.
It makes sense in this deal to kind of stand up a new series with new terms, but I think it'll be more traditional in that sense.
It doesn't have any like subordinated features like our SP equity with pros and as I mentioned earlier, we expect the majority and I said the vast majority of them have a hard number but.
Yeah, the vast majority of the purchase price, we expect to issue the preferred equity on.
Okay, and how about how are you planning to fund incremental acquisitions. During the year are there are there any you know sort of balance sheet initiatives embedded in guidance in order to permanently finance the outstanding balance on the revolving line of credit or or anything else that's contemplated in guidance.
I think well incremental acquisitions I expect us to do what we do.
We talked about doing in Q4 with the <unk> equity at a premium what we're talking about doing in Q1 here with the preferreds certainly our pros can co invest kit bring cash to the table and we issue new SP equity and that that helps solve for the equity portion of any funding.
Other than that because we've done a good job clearing the slate in terms of near term capital needs. We've got.
Very manageable 75 million of mortgage debt maturing in.
In 'twenty three now that we did everything on our balance sheet last month.
And our Capex recurring capex needs I mean, we can pretty much fund all that with with retained cash. So you know were drawn.
600 million roughly today on the revolver still have 350 million of capacity, but we don't have a lot of near term pressing need. So we're not going to do anything he used to Lee will be as Tammy said opportunistic on on both the acquisition side as well as the capital side.
Okay, and what one last one for Dave and apologies if I missed this I. You know you mentioned you know the January occupancy was higher by 250 basis points versus 2019, and I understand the pool changes and I think you you talked about trends sort of loosely but you know.
How does January compared to last year January on a year over year basis, and can you share an update for the end of February just curious if you have started to see occupancy start to stabilize at this point in the year and start creeping higher or if it's still sort of flattish relative to what you said I think.
89, 7% at the end of January .
Yes. Good question, Todd I mean, as I commented, we have found which is traditional seasonal patterns February is where we think we found a bottom and that our trough and we're starting to see things improve and so as we look at February we're happy with where we're at as far as where rates are going and where our occupancy is going so I can't give any more color because months not over and I had a problem.
We will not do that but.
Like I said, we are we think we've really cycled back into what we think is going to be a nice spring leasing season. In February is certainly respond in the way we want it to.
Hey, Todd on the comment about comparing to three or four years ago. That's based on a core group of properties. You know 500 property pool that we can study for a five year period. So it's a true apples to apples.
Okay got it what what's the 89 seven at the end of January looked like again, I realize its a different pool boat, but what's that year over year spread look like.
On the new pool.
At the end of January was down through a 370% from last year 370 points.
Okay.
Thank you.
Yes, Thank you Doug.
Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Good afternoon. Thanks, a lot for taking my question.
Brent maybe to start with Brandon your same store NOI guidance calls for and stuff and the growth in the low to mid single digits. In your earnings growth range is slightly down to slightly up so.
Can you help provide some clarity in terms of where though let's kind of preventing the flow through on the nice same store NOI growth and is this just kind of a one year type of a headwind from this or is this.
Something that we can expect in future years.
Yeah, Michael it's largely interest expense as I mentioned that the open we've got about $700 million of variable rate debt that we carried in 'twenty two.
Below that on average throughout the year and projecting right around that level in 'twenty three so it's a pretty comparable base.
But the rate on variable rate debt is probably going to be 300 points higher throughout 'twenty three versus 22, and so that right. There you can see $21 million theres some sharing in there with our pros.
Based on how our structure works, but.
That's still a pretty meaningful headwind at the 4% to 5% <unk> growth cannibalization, So I think so.
Forward interest curves play out the way that it looks like we might you know there will be some relief on that in 'twenty four and beyond and so are we're comfortable with our variable rate strategy carry 20% to 25% of total that it's under that right now, 17% I mentioned earlier and youre going to feel it in a year like this but long term, we feel like it gives us some optionality and it.
It correlates to the fact that the fundamentals in our business have some characteristics that provide for inflationary hedge.
Aspects and we can move rates quickly and respond to the current economic environment with our customers quickly. So that's that's kind of the philosophy there.
Thanks for that Brian .
Excellent for Dave.
Are you seeing with the macros kind of softening or are you seeing customers being more price sensitive.
And in the past and I guess, just generally how does the pro structure.
You know what are the advantages and disadvantages of the pro structure.
And the timeline.
It'd be returned or moving as higher moving.
Yeah. Good question. Thanks.
From a customer perspective.
On asking rents we've had to bring our asking rates down a little bit and that's really due to market conditions theres been a lot of competitors moving their rates down I think the consumer as they're shopping today. She is shopping more and there'll be a little more price sensitive to getting the conversion rate and so as we've looked at marketing spend and we've looked at our conversion rates, we have adjusted pricing to find the right blend of what we were.
On conversions of customers for.
For the in place tenants, they've been pretty resilient, we've been able to stay on our cadence on our in place rent changes.
We haven't really had to alter much of what we're looking at as far as what we're modeling in that in place rent change and they're not not noisy I mean things like I said, they've been pretty resilient, we've been stakes to get out our cadence and haven't had a lot of pushback from the pros perspective, very very strong market knowledge very very strong on the ground history in these.
Markets. These pros have 2025 30 years of experience they've seen good times, they've seen tough times and so I think our pro response and how they're modeling their businesses in their local markets has been superior.
They have the tools and our platforms to make them better than they were historically.
And we've had really really good experience around what they're doing to make sure. Their markets are operating on a revenue perspective, if you look at our cost control and our expense control in the fourth quarter.
Really really good expense control and that's also because operators who have long history long experience no what they need to do to pull back when they need to pull back and be smart with some money as we go forward. So I think our pro structure gives us an advantage.
Is this sort of a lot of history and a lot of market knowledge and they're using the new platforms to be better than they were before.
Thank you very much good luck in 2023.
Thank you.
Our next question comes from the line of Ronald Camden with Morgan Stanley . Please proceed with your question Hey.
Hey, just a just digging in on the same store revenue guidance at the midpoint of the range maybe number one how are you guys thinking about that in terms of the first half of the year versus the second half of the year.
Thinking about an exit rate at the second half of the year and that I'd also be curious and whats baked in into the top bed versus the bottom end and are you guys thinking about recession not recession, just how are you guys thinking about that thanks.
Yeah Ronald Brandon Thank you for the questions.
We definitely started out higher on the growth rate year over year, and 23, and then decelerate or moderate on that growth as we progress.
All scenarios, given where we've ended 22 and are starting 'twenty three and all of the scenarios that inform the guidance range. We've given we're still.
Finishing the year with positive growth. So at no point are we projecting flat or even negative growth by any means.
In terms of what's baked in in terms of like the I.
I would say the range we've provided it factors in what we're seeing today with current economic predictions are for all of 'twenty three.
That does assume you know what.
It's a technical recession or just recessionary forces in place.
You know say by mid year.
Feeling some of that and then historically for the sector Theres, a little bit of a lag between when.
Technical recession, maybe officially declared and when you really start to see it flow through some of.
The operating numbers of the storage rates and so we have that all baked in but it kind of begins in the second half of 'twenty three and then.
Kind of continues that impact into early 'twenty four.
Helpful. And then my follow up would just be.
Look as you're sitting here today, and you know you're looking at sort of website visits top of the funnel demand.
The question is have you are you seeing anything that would suggest that same store revenue can go sort of negative number one and then number two what are some of the indicators are going to be looking at.
Figure out if the peak leasing season is coming in better or worse than you anticipated.
Yes, Brian good questions.
I don't see anything yet as we look at the opportunities being presented to us on the website I mean, what.
What we're using the tactics that we're using are working we're getting the responses. We want volume, we want and we're getting certainly the conversion levels. We want so from that aspect right now at this point, we're pleased with what we're seeing.
As you look at the spring leasing season right now we think January February reacted to what I would say pre pandemic patterns right and that's what we've been talking about it at our shop about how do we how do we figure out and we get through this the pandemic stuff and get back to maybe more seasonal trends and I think we have found that.
I think we'll know probably early April or mid mid April to late April by May If we don't start to see the occupancy gains and the rate gains that we're expecting that maybe we saw some.
The consumer change or some kind of macroeconomic pressures put on our business. We're not expecting at this point, we think the spring leasing season is shaping up nicely but.
We will know by May I think that.
Things didn't materialize like we thought.
That's it for me thank you.
Thank you.
As a reminder, it is star one to ask a question. Our next question comes from the line of Wes Golladay with Robert W. Baird. Please proceed with your question.
Hi, everyone I just have a question on the move in numbers and decided I think you said they were up a few percent in January year over year is there a potential that there's a weather benefit there or is it pretty broad based.
It's been pretty broad based.
There's been some really tough weather in some parts of our country and so we.
But were positive over 4% move into January so it was pretty broad based across the country.
Okay, and then can I get one question on the guidance did you have a number for how much the new additions contributed to the same store growth this year.
West This is Brandon on revenue.
The it's about a 20 to 25 basis point lift that the new stores provide.
Okay. Thanks, a lot.
Thank you.
Our next question comes from the line of Spencer Alloway with Green Street Advisors. Please proceed with your question.
Thank you you mean from share repurchases in the quarter I would say is prudent given where your stock is trading just wondering how youre thinking about future repurchases and how that stacks up on your capital allocation priority list.
Spencer this is Brandon.
Certainly an option that will continue to be an option as we go throughout 2023.
It's the.
The easiest single investment underwrite I can tell you that much and it has the highest return.
It's also I would say the least risky relative to individual asset acquisition and it's something that we can do pretty quickly.
So those are all the positives without it.
On the flip side for practical and regulatory reasons, you're also kind of constrained on how much you can actually do in any given quarter or period. So there's a little bit of a lid on it.
And from that perspective, but I think Q4 frankly.
It really good representation of where our heads are at with things with it $40 million of buyback. We also did 40 million of acquisitions and creative ways that included the <unk> equity at a premium that I mentioned earlier. So that's that's kind of how we're thinking about things everything's on the table and we're just going to do what the levers the most long term value.
Okay. That's helpful and just a quick follow up on the <unk> discussion can you just comment on where the most recent if your eyes have been in terms of magnitude and do you expect to be able to push typical ECR is in terms of peak leasing season.
Yeah. Good question Spencer.
Our cadence has remained the same so the timing we're hitting our customers has remained the same the amount of customers were hitting each month is pretty similar to what we've seen over the past six.
Six to 12 months.
As we look at.
Rate movement out of the top end market rate has certainly come down and so we're being a little cautious around our top end and we may put some guardrails around the top end, but overall it hasnt significantly changed as the spring leasing season approaches obviously, we should see some better pricing as we look at street going into the spring leasing season, and that helps take the top lid off a little bit and as we go into the spring we expect at this point in time.
Particular cadence and is this.
Sort of as we've been.
Okay. Thank you.
Thank you.
There are no further questions in the queue I'd like to hand, the call back from this Fisher for closing remarks.
Okay. Thank you. So this wraps it up for the fourth quarter and for the year 2022, we're definitely feeling very optimistic about 2023.
We certainly appreciate your participation in our call today and for your ongoing support of NSA. We look forward to seeing many of you in the coming weeks. Thanks again for your time today.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.