Q1 2023 Extra Space Storage Inc Earnings Call

Speaker 1: and welcome to the Extra Space Management first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone.

Speaker 1: To remove yourself from the queue, simply press star 1 1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Jeff Norman. Please go ahead, sir.

Speaker 2: Thank you, Jonathan.

Speaker 3: Welcome to Extra Space Storage's first quarter of the year.

Speaker 3: In addition to our press release, we have furnished unaudited supplemental financial information on our website.

Speaker 3: Please remember that management's prepared remarks and answers to your questions may contain four different statements as defined in the Private Securities Litigation Reform Unit.

Speaker 3: Actual results could differ materially from those stated or implied by our four routine statements due to risks and uncertainties associated with the company's business.

Speaker 3: These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the FCC, which we encourage our listeners to review.

Speaker 3: Four looking statements represent management estimates as of today, May 3, 2023.

Speaker 3: 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.

Speaker 3: I would now like to turn the call over to Joe Margolis, Chief Executive Officer.

Speaker 4: Thank you, Jeff, and thank you everyone for joining today's call.

Speaker 4: We have had an exciting couple of months and a lot has happened since our fourth quarter earnings call in late February .

Speaker 4: Operationally, occupancy remained very strong through the first quarter, ending March at 93.5%, our highest first quarter result outside of the COVID years.

Speaker 4: Our strategy to maintain high occupancy through the winter allowed us to sequentially increase rates to new and existing customers through the first quarter, driving same store revenue growth of 7.4%.

Speaker 4: Same store expenses were lower than expected due to normalizing payroll expense growth, as well as year-over-year savings from repairs and maintenance and property taxes.

Speaker 4: As expected, our same store NOI growth rate moderated sequentially from the fourth quarter due to an exceptionally difficult 2022 comparable and was modestly ahead of our internal projections at 8.7%.

Speaker 4: We have also been busy on the external growth front.

Speaker 4: We continue to grow our third-party management platform with net additions of 44 stores.

Speaker 4: We acquired six stores primarily in joint venture structures.

Speaker 4: We originated $53 million in bridge loans.

Speaker 4: We started our external growth phase of our remote storage strategy, approving three remote model acquisitions.

Speaker 4: two of which are in our primary markets.

Speaker 4: Subsequent to quarter end, we closed the second preferred investment with an affiliate of SmartStop in the amount of $150 million.

Speaker 4: And of course, on April 3rd, we announced a strategic merger with Life Storage through a leverage neutral all stock deal.

Speaker 4: We believe this combination will produce an even more formidable portfolio, team, and platform.

Speaker 4: with over 3,500 stores across 43 states.

Speaker 4: We anticipate that there are at least $100 million in annual run rate synergies with this transaction.

Speaker 4: that neither company could have created on their own.

Speaker 4: So far, everything is on track to successfully complete the merger in the second half of the year.

Speaker 4: And as we continue to refine our integration plan, we are even more confident that we can achieve at least our stated synergies.

Speaker 4: Further, there are additional potential growth drivers and synergies not captured in the minimum target of 100 million.

Speaker 4: These include additional expense savings due to increased scale, a lower cost of capital.

Speaker 4: a 50% increase in data, which could further improve property performance.

Speaker 4: A larger pool of properties to evaluate opportunities such as expansion, redevelopment, and solar installation. And finally, broader industry relationships.

Speaker 4: which will provide greater reach and scale to offer potential products and services and build our acquisition pipeline.

Speaker 4: We are working hard to complete the pending merger and I appreciate the efforts of the teams from both companies.

Speaker 4: and the way they have remained focused on driving the existing business as we enter the busy leasing season.

Speaker 4: I would now like to turn the time over to Scott.

Speaker 4: the time over to Scott. Thank you, Joe. And hello, everyone.

Speaker 3: As Joe mentioned, we had another good quarter, beating our internal FFO projections by four cents.

Speaker 3: The BEEC was driven by better than expected property net operating income, lower G&A, and higher management fees and tenant insurance.

Speaker 3: Interest income and interest expense both came in modestly lower than modeled, generally offsetting each other. Achieved rates to new customers have been improving.

Speaker 3: have been improving sequentially since bottoming out in November . In January , year-over-year rates improved to approximately negative 14 percent.

Speaker 3: In February , they were negative 11 percent, and in March, they were negative 3 percent.

Speaker 3: We did see lower rental volume in March at those rates and in April our pricing algorithms dropped rates modestly with average achieved rates in April closer to negative 7% year-over-year contributing to higher rental volumes in April .

Speaker 3: Turning to the balance sheet, we completed a $500 million bond offering of five-year notes with a coupon of 5.7%. We used the proceeds to reduce our revolver balances to less than $100 million at the end of the quarter, leaving over $1 billion in revolving capacity.

Speaker 3: We reduced our floating interest rate exposure to 22% of total debt, net of variable rate receivables.

Speaker 3: Shortly after the announcement of our proposed merger with Life Storage, S&P Global updated our rating to credit watch positive, confirming its view that the proposed transaction is credit enhancing given the increase in scale and potential synergy opportunities. We reaffirmed our guidance ranges for same-store growth expectations and core aspects of the

Speaker 3: insurance and GNA.

Speaker 3: Property net operating income in the first quarter was modestly ahead of our expectations. As we progress through the leasing season, we will monitor achieved rates to new customers, rental and vacate trends, web traffic, and top of funnel demand before revisiting these guidance ranges after the second quarter.

Speaker 3: As mentioned on our fourth quarter call, our guidance assumes positive same store revenue growth for and throughout the full year.

Speaker 3: It assumes the growth rate moderates more quickly in the first half of the year due to exceptionally difficult first half comps.

Speaker 3: troughs in the summer, and modestly re-accelerates late in the year.

Speaker 3: Much of our NOI growth is offset by the first year headwind of our investment in non-stabilized properties, which carry approximately 23 cents of dilution, the modification of the next point preferred investment, and higher interest rates. While each of these headwinds slows our 2023 growth, the next point preferred investment is offset by the first year headwind of our investment in non-stabilized properties, which carry approximately 23 cents of dilution, the modification of the next point preferred investment, the modification of the next point preferred investment, and higher interest rates.

Speaker 3: We believe they will result in stronger long-term growth rates over a multi-year period for our shareholders. We are off to a great start in 2023. We believe storage as an asset class is among the most resilient in the REIT space and that the sector will continue to produce healthy, sustainable, and sustainable food.

Speaker 3: albeit moderating year-over-year growth. We believe our operating platform and highly diversified portfolio will become even stronger through the life storage merger and are well positioned for another solid year.

Speaker 3: With that operator, let's open it up for questions.

Speaker 1: Certainly, and as a reminder, if you have a question at this time, please press star one one on your telephone. One moment for our first question.

Speaker 1: And our first question comes from the line of Todd Thomas from KeyBank. Your question, please.

Speaker 5: Yeah, I thanks. I just wanted 1st to ask about occupancy in April . If you could talk a little bit about any post quarter updates there where you stand year over year and just talk about rental demand coming out of.

Speaker 3: out of March a little bit in greater detail. Our occupancy at the end of April increased about 30 basis points. At the end of April , we were 93.8, so we actually are in a good position moving into the rental season. We saw good rental activity during the month of April .

Speaker 5: Okay, and within the guidance framework, where would you expect to see occupancy kind of peak in June ? July seems like. The.

Speaker 5: quarter-end occupancy, which was about 10 basis points below the quarter average, was a little unusual from a seasonal standpoint....

Speaker 5: You know pleased with you know, the occupancy improvements that you're seeing is it a little bit you know below what you were anticipating and Yeah, if you could just talk about what you expect in terms of the peak during the the rental season

Speaker 3: So as we did our guidance, we focused obviously on revenue, but in that number we do assume that occupancy is a negative delta compared to last year. Less than 1%, you're up against two of the toughest years the last two years with the COVID peaks, but there is a slight negative headwind with occupancy.

Speaker 5: throughout the entire year. It's pretty consistent. Okay. And last question. In terms of the guidance, so you updated the dilution that you expect from C of O and value add acquisitions was 25 cents initially. It's 23 cents. Does that unit Accordingly,

Speaker 5: Um, you know, what's what's driving that? And is that is that related to. The the guidance going forward for the balance of the year, or, I mean, that is that the full year. Delusion that's actually been increased and decreased and is an improvement relative to the initial guidance.

Speaker 3: It's actually an improvement of two cents compared to initial guidance, and it's from two things. Lease up properties are filling up faster, and then it assumes that the timing on a couple of the CFOs and acquisitions is bumped back slightly.

Speaker 6: Okay, all right, thank you.

Speaker 1: Thanks, Doug. Thank you. One moment for our next question.

Speaker 1: And our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Speaker 7: Michael, you might have your phone on mute.

Speaker 7: Moving on, one moment. Our next question then comes from the line of Juan Sanabria from VMO. Your question, please.

Speaker 4: Thanks for the time. Joe, I think you mentioned at the top the remote storage.

Speaker 4: Joe, I think you mentioned at the top the remote storage.

Speaker 4: Could you just talk a little bit about what you're seeing early days there and what the opportunities set? Yeah, it's

Speaker 3: could be going forward and any thoughts about how that could tie in with the pledge towards recognizing its early days there?

Speaker 6: Oh.

Speaker 4: I don't know if everyone's having this problem. We have a very bad connection. Could you repeat the question, please? We couldn't hear it here.

Speaker 8: Sure. Is that better?

Speaker 8: Is that better? A little bit, yes.

Speaker 4: Just curious, Joe, you talked about the remote storage investments in the first quarter. We can't hear. We can't hear. We can't hear.

Speaker 4: Yep, we need to.

Speaker 4: dial in somehow.

Speaker 3: Juan, give us just one minute where it's just that. Sure. Is this any better? Better. Okay.

Speaker 9: Okay, Juan, go ahead and try that again.

Speaker 3: Sure, no problem. Just curious, Joe, you mentioned remote storage acquisitions in the first quarter. Just curious on what early learnings are and what that opportunity set is and if there's any tie-ins or expansion opportunities to that opportunity. on the other hand, well, yeah, anyone with a mobile voice, do me a favor. I don't know if you can listen to this.

Speaker 10: with the life storage pending transaction. Just curious on bigger picture thoughts of what that could represent for you guys.

Speaker 4: Sure, it's a great question. So with respect to the opportunity set, I think it's massive, right? The number of small.

Speaker 4: stores in our markets that we traditionally would not look at for acquisition because we could not efficiently manage them without permanent, 100% on-site management is huge. Not only existing stores, but just vacant space we can turn into stores that is

Speaker 11: Small.

Speaker 4: And then we will undertake an effort to go through the life storage portfolio and see which of their stores would be candidates for this type of different management model.

Speaker 4: So it is an exciting opportunity set that we will look at.

Speaker 10: And is there a different margin that these remote storage spaces are capable of generating?

Speaker 4: I think the margin is not different, but.

Speaker 4: I think the margin is not different, but the

Speaker 4: efficiencies gained by managing them through the remote platform makes the margins acceptable. You can get to the right margin because you have the reduced expenses.

Speaker 10: if that makes sense. And yeah, it does. And then just curious, you talked about, seemingly are very confident on the synergies.

Speaker 10: from the pending LSI transaction. I was hoping maybe you could just unpack a little bit.

Speaker 10: from the pending LSR transaction. I was hoping maybe you could just unpack a little bit what's driving that increased enthusiasm.

Speaker 10: post the transaction being announced.

Speaker 4: Well, we're certainly learning more about the opportunities within the life storage portfolio and the synergies we could gain by combining that portfolio with ours. I'll give you just one simple example in our underwriting.

Speaker 4: We assumed we would need to have six new regional offices. We've now gone through everything and we're going to end up with four new regional offices.

Speaker 4: So that's just one example of many kind of incremental savings that we think we can achieve. And we also have become more and more confident on the revenue synergies as we learn more and more.

Speaker 12: I appreciate the time. Thank you guys.

Speaker 7: Thanks, Juan. Thank you one moment for our next question.

Speaker 7: And our next question comes from the line of Samir Kanal from Evercore ISI. Your question, please. You've implemented.

Speaker 13: Whether it's markets, regionally, anything you've seen, clearly we've had the headline risk out there with.

Speaker 13: with the banks, the regional banks. I'm just wondering, is there any signs that you're seeing at all at this point?

Speaker 9: So we only picked up about the second half of your question. Could you repeat the full question? Okay, so we only picked up about the second half of your question.

Speaker 13: I was asking about whether you're seeing any pushback from existing customers on price increases, whether it's, you know, we've seen a lot of headlines over the last few months, right? Regional banks having issues. I don't know if you can make some comments around markets where you've seen maybe occupancy drops.

Speaker 4: And to answer specifically your question, we have not. We peaked out at about 800 basis points greater move out from customers who received each our eyes.

Speaker 4: than those who didn't. And that has trailed back down towards the more normal rate and has stabilized in a number that's a little higher than normal, but our ECRIs are a little higher than normal. So still a very manageable number and...

Speaker 4: justifies the program. But we also see signs of health in the customer in our very low bad debt under 2% and

Speaker 4: willingness of customers on the demand side, of this strength of demand which.

Speaker 4: Frankly, it isn't as good as it was during the COVID years, but if you look at demand statistics compared to pre-COVID years, it's pretty comparable. It is still strong in this sector.

Speaker 13: Okay, got it. And I guess for Scott, just as a second question, I know in the last earnings call you spoke about expense pressures that you could face this year. I mean, you're doing about three and a half percent growth.

Speaker 13: the first quarter. Maybe talk us through kind of what you're expecting for expense pressures and maybe what are you seeing so far sort of year-to-date.

Speaker 3: So, if you look at our expenses, payroll is progressing as expected. We expected it to go back to a more moderate pace than what we've seen in the past year. And we saw that at 3.9% in the first quarter, and we would expect that to continue to moderate as we move throughout the year.

Speaker 3: Moving to the other big expense items, payroll property taxes were actually a benefit to us in the quarter. We were negative and we would not expect that throughout the remainder of the year. We would expect that to be an inflationary plus. The other one that was a benefit in the quarter is snow removal, which living in Utah we never would have guessed we had lower snow removal throughout the rest of the U.S.

Speaker 3: sizable bump similar to what I think everybody's experiencing.

Speaker 13: And what's, this is a follow up, what's the size of a, can you sort of quantify that as we think about it from a modeling perspective?

Speaker 3: We're still in the early phases, but it's definitely double digits and could be significant. The other expense item that ran at 11% in the corner is marketing and we'll use that as needed throughout the year if we find that we find positive returns on our marketing spend.

Speaker 7: And we can spend that instead of cutting rates. Obviously, that's the first area we'll look at. Got it. Thank you, everyone. Thank you very much. Thanks. Thank you one moment for our next question.

Speaker 7: And our next question comes from the line of Keegan Carl from Wolf Research. Your question please.

Speaker 14: Yeah, thanks for the time guys. Maybe first, just on your same store pool breakouts, can you help us better understand the outperformance of the 2023 pool relative to the 2022 pool, especially given that occupancy was higher in the 2022 pool?

Speaker 3: Yeah, your benefit comes from adding properties that are finishing the final stages of lease up and those properties either came from CFO properties or acquisitions. And so as they stabilize rates, typically continue to.

Speaker 3: you know outperform the same store pool our Definition goes back to our IPO of our same store pool, and that's 80% occupancy

Speaker 3: or we have to own them for a year. So we do see some benefit if you look at the three pools in our stuff, and each year it gets a little slower.

Speaker 14: Okay, no, that's helpful. And then I guess on the acquisition market, just kind of curious, what are you guys seeing as far as volumes and cap rates and how should we be thinking about it the rest of the year? And I guess as an adjacent one to that, I mean, how is it impacting your bridge lending program? How much can you be Documents and

Speaker 4: Good question. So volumes in the transaction market are significantly down.

Speaker 4: There's not a lot of distress in the self-storage market, so sellers don't have to sell and they don't get the price they want, they don't sell. So there's a significant bid ask spread. The deals we do see trade all seem to have some unique.

Speaker 4: I'm not sure there's enough of a market to tell you what cap rates are because everything seems to be unique. I'm not sure there's enough of a market to tell you what cap rates are because everything seems to be unique.

Speaker 4: And unfortunately, our bridge loan volumes were slower in the first quarter than we expected. Now, that being said, there is some seasonality to this business. If you look back at the three or four years we've been doing this, we always end up closing the most loans or proving the most loans in the second half of the year. We hope we…

Speaker 4: follow the same pattern, but we were a little slower than expected in the first quarter.

Speaker 7: Great. Thanks for the time, guys. Thank you one moment for our next question.

Speaker 1: And our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Speaker 15: Maybe it's just fun.

Speaker 12: Okay.

Speaker 4: Can anyone hear me? We can hear you now. Okay, great. My first question is just about the keyed-ins through the quarter. You talked about street rates moving from down 14% to down 3% January through March and then kind of returning back down to

Speaker 4: 7% in April . It sounds like from a lot of your peers that March was a particularly challenging month. So I was wondering what you were seeing that you know, are you able to kind of parse out what was going on between the demand side relative to where you

Speaker 4: harder with rates than maybe we should, which is fine, right? That's what the algorithm should do. They should try to find that point of resistance. And we went from minus 11 in February all the way to minus three in March. And we did see that there was some weakness at that level and the systems brought things back and we're recovering. So yeah, March wasn't the best month in our last four months.

Speaker 4: deals may have been falling out, I would think this would be a good environment for bridge lending and sort of related to that there was a nice pickup in the third-party management net stores that you added so can you just talk a little bit about the appetite for independent players looking for third-party management in this

Speaker 4: was in our numbers for pipeline. And the borrower walked on the commitment fee. And then we had a couple that were delayed.

Speaker 4: So, you know, normal, I think, volatility in a business and, you know, we will hope to pick it up in the second half of the year.

Speaker 4: With respect to management, we had a great quarter. We picked up 11 stores from NextPoint as part of our strategic relationship with them. And then when I was also in secret, there was there

Speaker 4: and 37 other stores. And the churn is much less in the management business. We only lost four stores in the quarter because the transaction market is so slow. And one of those we bought into a JV. So we had a great start to our management business. We expect to have a great second quarter as well. And it's. How deep are you in research?

Speaker 4: It's one of the advantages of having multiple growth drivers is that when.

Speaker 4: One might be growing a little more slowly, another one could be growing a little more quickly. And it always allows us to grow the overall enterprise.

Speaker 4: Can you provide a little bit more specifics around why some of the bridge lending deals would be dropped? Is it a reflection of the self-storage environment? Does it reflect the lending environment, the appetite for others to lend? I'm just trying to get a sense of the factors surrounding that bridge loan program.

Speaker 4: So some of our bridge loans are commitments to issue the loan upon completion of construction, because we won't lend until the property has a CO and is operational. And when the

Speaker 9: Keevin Kim from Truist. Your question, please. Thanks. Good afternoon, everyone. So, first question, your New York City metro area, same-scale revenue, decelerated a little bit further than your portfolio average. I'm not sure what was the cause, if it was a comp issue or if you're seeing additional pressures in the new supply deliveries in northern New Jersey, but any kind of color you can share would be helpful. I think those certainly are both important factors to that. I think you circled it, Keevin.

Speaker 9: from the combined company in terms of improving the overall NOI picture, NOI margin picture, and maybe close the gap between you and your larger peer. Close the gap in terms of margin? Yeah. So I think margin is a difficult thing to compare because it's not apples and apples.

Speaker 4: So, for example, if one company has a much larger deductible on their insurance program, they may have a lower insurance cost, but they're taking more risks.

Speaker 4: Neither one is right nor wrong, but they're just different strategies that will affect your margin. Secondly, margin.

Speaker 4: is affected by what you include at a store level cost and what you include at a G&A level cost.

Speaker 4: So I wouldn't look at compare our margin to our largest peers and assume that it's an apples to apples comparison.

Speaker 4: But I really appreciate your question, which is, you know, do we think there are additional synergies in the overall portfolio that aren't in the underwritten number that we've given? And it's absolutely true. I mean, just things like densification, right? If we now

Speaker 4: have a district manager, our district managers cover about 17 stores. And because of our portfolio footprint, there have eight stores in one city and ten stores in another that's inefficient and has travel costs and other negative impacts. As we get more and more stores and those footprints of the district managers get smaller. Isn't it amazing how many of our stores in one city and ten stores in another have truly an increase in our Boss encountered wet maintenance and Exercise errors are really, managing our businessaunches.

Speaker 4: One, they can take on more stores, which reduces the number of district managers we need. And second, it will just become more efficient in their coverage of those stores. So there's a lot of those types of synergies that we absolutely expect to achieve that are not in any of our numbers.

Speaker 4: The other thing is the testing with running a second brand and whether the revenue uplift from the second brand will...

Speaker 4: more than cover the cost of maintaining a second brand. And we were hopeful and optimistic that we are going to figure that one out as well.

Speaker 9: And Joe, you talked about the benefit of having more data, but there's obviously a diminishing return to that, because 50% more data doesn't mean you're 50% more better. So can you talk a little bit more about that and what the upside looks like from a more tangible standpoint?

Speaker 4: So if you want to talk to our data scientists, I'm not sure they'd agree with that. They can't get enough data. But yeah, I think logically you're right. It's not one for one, but there certainly is a benefit from nothing else than just the speed in which you can get.

Speaker 4: statistically significant results, right? We can run tests faster and then implement whatever the optimized solution is quicker because with more data and a bigger pool, you get this statistical significance quicker.

Speaker 7: Okay, thank you. Thank you one moment for our next question.

Speaker 1: And our next question comes from the line of Ronald Kemen from Morgan Stanley . Your question, please.

Speaker 13: Hey, just two quick ones for me. So one is on the just going back to the tenants that are coming through. Some of the online or the mobile just after a couple couple years, couple quarters removed from now. Any sort of learnings in terms of how they're behaving versus

Speaker 10: sort of tenants that are coming into the store, is it the same, is there sort of any noticeable difference? Thanks. So we've always observed differences of tenant behavior.

Speaker 4: depending on what channel they come through, both in terms of what's an effective tool to capture that tenant and what their behavior is in terms of unit size, length of stay, other factors. and what error-Waiting process for that entire praised that wetland usefull

Speaker 4: constantly refining the differences in our different channels that is the results of those learnings.

Speaker 10: Great and then the. Just going back to the expenses, the property tax being negative, I know you touched on it, but you give a little bit more color. Sort of what happened there on on the negative growth on the property taxes.

Speaker 3: Thanks. That's primarily appeals that were won during the quarter and then revised numbers going forward. It really relates primarily to prior periods as you win those appeals from prior periods.

Speaker 1: Okay, great. That's it for me. Thanks so much. Thank you. One moment. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. And our next question comes from the line of Michael Mueller from JP Morgan. Your question, please.

Speaker 1: Okay, great. That's it for me. Thanks so much. Thank you. One moment. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 1-1 on your telephone. And our next question comes from the line of Michael Mueller from JP Morgan. Your question, please. Yeah, hi.

Speaker 3: I guess a couple questions. First of all, going forward, should we think of the bridge loan program and balances as kind of going up and down based on acquisition opportunities, or should we really be thinking about that business as being completely independent regardless of what you're thinking about the acquisition markets? I think the latter.

Speaker 4: I think our capital position is such, one that we can fund bridge loans that we feel are good deals and do so in a capitalized manner because we can sell the A notes and not restrict ourselves from good acquisition opportunities.

Speaker 3: touch on the percentage of customers that have been in place over a year and over two years and if you're seeing any degradation in that ratio.

Speaker 3: Yeah, so if you look at our customers that have been with us for more than two years...

Speaker 3: That number is now in the upper 40s, about 47%. Customers that have been with us 12 to 18 months, that's in the low 60s. That number has actually come down some. So, long-term customers beyond two years is increasing. That mid-term customer has actually come down a little bit.

Speaker 3: That number is now in the upper 40s, about 47%. Customers that have been with us 12 to 18 months, that's in the low 60s. That number has actually come down some. So long-term customers beyond two years is increasing. That midterm customer has actually come down a little bit. Got it. Okay. Chapter 4, Date and Vs

Speaker 1: Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Joe Margolis-Ferny for the remarks.

Speaker 4: Thank you. Thank you everyone for your time and your interest. I want to thank the LSI team for their great cooperation, professionalism and efforts over the past many weeks. I've been very impressed with every individual we have interacted with, how they've handled themselves and I'm very grateful.

Speaker 4: I also want to assure our shareholders that while we're spending a lot of time preparing for this merger and it's time consuming in a significant effort, everyone at Extra Space Storage remains focused on the fundamentals of our business, which is driving performance at our stores. Thank you very much. I hope everyone has a good day.