Q1 2024 U-Haul Holding Company Earnings Call
<unk> likely expand.
Our repair spending on trucks and trailers continues to rise.
Of course, there is always some waste and I'm working to eliminate the waste, but the fundamental drivers of repair.
Our two few replacement units.
Leading to increased mileage per unit and.
And parts and labor inflation.
We have not resorted to large scale discounting in self storage. Unlike some of our major competitors.
We are continuing to build and buy at a rate of.
Above our rate of unit rent up.
This doesn't disturb me greatly and I plan to continue adding units and drive on increasing the room of the rate of room rent ups.
The new box.
Our total revenue was down for the quarter due to <unk>.
Decreased pricing.
Freight cost finally went down and we lowered some rates due to that.
Our margins however are holding transactions are up.
This should continue to be an expanding market for us.
I look forward to speaking with at our upcoming Investor and Analyst video conference.
And Jason will now address the numbers in greater specifics, thanks, Jeff Yes.
Yesterday, we reported first quarter earnings of $257 million thats compared to $338 million for the same quarter last year.
Presenting our company's third best first quarter results.
Looking at it from the perspective of earnings per share, we reported a $1 31 per nonvoting share this quarter compared to $1 68 per nonvoting share in the first quarter of last year.
Starting off with equipment rental revenue results.
Compared to the first quarter of last year, we had a $92 million decrease that's about 884% down.
To put it into context over the last four quarters, we've had a nearly $230 million decrease in <unk> revenue.
And the eight quarters before that so starting with the second quarter of fiscal 2021.
We've experienced a $1 $428 million increase.
So in the last 12 months, we've given back a small portion of the gains.
The trends that we've seen in the past several quarters continued declining transactions and reduced miles per transaction.
Revenue per mile growth has remained positive.
And July results trended down compared to last year.
Capital expenditures for new rental equipment in the first quarter were $454 million, that's $103 million increase compared to <unk> last year.
The majority of this increases in our box truck fleet.
And we have increased our fiscal 2020 for full year net capex projection from $685 million to approximately $820 million.
I would say about three quarters of this increases from the addition of more units onto our manufacturing schedule with the remainder being projected decreases in sales proceeds from from what we initially thought was going to happen.
Speaking of proceeds from the sales of retired rental equipment increased by $34 million to a total of $193 million for the first quarter.
Sales volume increased while average proceeds per sale declined.
Sales choice continues to be positive.
Storage revenues were up $26 million Thats, 15% up for the quarter average revenue per foot continued to improve across the entire portfolio up nearly 6%.
Our occupied unit count at the end of June was up a little over 42000 units compared to the end of June last year.
During that same 12 month timeframe, we've added nearly 64000 new units to the portfolio.
This Jeff this differential led to the average occupancy ratio coming down for all of our own locations by about 170 basis points.
Sure.
And average occupancy rate of just under 83%.
The same moderation in occupancy was also seen in our same store grouping of these properties. We saw about an average decrease again of 170 basis points.
Bringing the occupancy level to 95 just over 95%.
We continue to fine tune, our new self storage disclosure in the press release.
During the first quarter of fiscal 2024, we invested $294 million in real estate acquisitions, along with self storage and <unk> box warehouse development.
That's a $16 million increase over the first quarter of last year.
During the quarter, we added just over $1 1 million, new net rentable square feet about 73000 of that was in the form of existing self storage acquisitions.
We currently have just under $7 1 million new square feet being developed across 159 projects.
Operating earnings in our moving and storage segment decreased $95 million to $387 million for the quarter.
Operating expenses.
We're up $28 million for the first quarter fleet repair and maintenance led the way with a $30 million increase.
Work continues on increasing capacity shifting repair work to company operated shops and rotating the truck fleet, but we are we.
We have fallen behind.
Personnel costs increased $11 million about half of that coming from.
Increased health plan costs.
Compared to the last two years personnel cost as a percent of revenue are elevated however over a longer term view.
They're not out of line on a percent of revenue basis.
Some other expenses, including accident liability costs, the cost of freight and shipping and payment processing costs all decreased during the quarter.
We continue to place a premium on having access to cash and liquidity at June at the end of June .
Cash along with availability from existing loan facilities at our moving and storage segment.
Totaled $2 $792 million.
During the quarter interest expense, it moving and storage increased $11 million, while interest income that we earned on our cash and short term investments was up $22 million.
During the quarter, we implemented accounting standards update 2018, 12, the targeted improvements to the accounting for long duration contracts.
This affects most of the products that we have on the books at our life insurance subsidiary.
While this new rule has increased the amount of life insurance disclosures that you see in our filings.
And it's going to lead to some additional earnings or comprehensive earnings shifts between years. It does not have any effect on the underlying economics of our book of business there.
With that I would like to hand, the call back to our operator, Dave to begin the question and answer portion of the call.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Steven <unk>.
Often with Zacks. Please go ahead.
Hey, good morning.
Obviously, the moving equipment rental business is being driven by some macro economic factors that are added.
Out of your control.
Looking down deeper it seems like the one way market as being especially affected.
I'm wondering how the.
Your effort to reposition the fleet from the <unk>.
Situation that it was created by Covid a couple of years ago.
Given that slowdown in the one way traffic measures.
Okay. This is Joe I'll speak to a per minute.
So at least three times in my career Ive seen.
In a time of consumer confidence decreasing.
People short.
Entire mileage that that model and that also results in a shift of.
Longer mileage, one way rentals into shorter model rentals.
The vast majority of our moves are.
Driven by necessity People's family grow or.
Spouse dies are.
People retire these life events, they kind of continue.
Just in a.
Pretty even right, but people's optimism and their willingness to.
So a long distance and the move we've seen.
Decline I believe that's what we see going on here.
Our.
Fleet.
The issues are that were.
Not able to purchase at quite the rate.
So we would like to to get the optimum balance of repair costs versus depreciation.
Any time, you buy a car truck, it's just like in your personal life.
Decline of trading off.
Vehicle cost.
Repair.
Fixed costs, which is capital cost.
So we would rather hear to debut a little bit heavier on our fixed costs and we think that.
Balance our experience says the balance would favor.
<unk>.
Just don't have available.
Many units yet.
Does that answer your questions.
I was more thinking about how the equipment has migrated let's say from New York and.
California towards Florida.
That.
The equipment is not equally dispersed.
Yes, we of course, we always have some equipment in balances.
Actually.
Florida and Texas.
Which you would think with Barrington equivalent or not.
And.
We're.
Seeing more.
Localized.
Nicole unproductive or what we call unproductive areas.
More around.
Retirement communities.
Simple shift.
From the north and the east to the South.
So there's a lot of factors go into that.
Part of it as well.
Where my team does a better job if they do a better job.
We rent more equipment out.
I think we've got teams in Florida.
Right now that on balance we're doing a pretty good job so they.
You've kind of alleviated that but we have other imbalances in this just as a constant juggling.
Thank you.
Looking at something more under your control, but theyre not completely.
<unk> expenses.
Different components and some interesting dynamics in the different line items, but it looks like there is.
About a three 5% to 4% inflation.
The costs.
Can you.
<unk> mentioned anything specific.
That youre using to address this these increased expenses.
Well of course, we're trying to purchase smaller group business.
There is an end to that everything is inflating and our experience from electricity to steel.
Okay.
And we've seen a little catch up there's probably a little more catch up in wage rates because that's just the truth.
Point of sale, which is where the bulk of our people exist.
There's a lot of pressure on wages as you see people.
Other people again retail areas that there.
Seeing wage pressure, we're seeing it too and so people are getting paid more.
Which normally you would kind of celebrate but it's inflationary index along.
I don't we don't have any.
Spin on the ball as far as.
Controlling what we can control, while we work very hard on.
Yes.
Simplifying processes, and making them less labor intensive.
So.
To a certain degree of truck rental just simply is very physical trailer rentals sandwiches.
So tremendous physicality.
We have.
Several initiatives one with VR.
<unk> 2007, which I.
I think just recently broke its $6 million a transaction now that program to date, so but it means we're getting that process working pretty good.
We also have.
We.
<unk> I would say our focus much more on the U haul app in the U haul app.
It gets the customer to participate in some of this activity and reduces.
Hours needed to work.
At the point of sale.
Perfect equation, but overall it works.
And where we're driving on that and I think that will continue to yield.
Results for two or three more years, there's a lot of room to refine that.
So I think our best chance of countering.
Increased cost is not in but we're going to get a better deal on.
Or something of that nature are building materials, so we're going to.
Eliminate.
Some processes.
It can be better done.
Technology lens something to that.
Get some.
Increases in efficiency, which will result in.
Less labor man hours per transaction.
And just one last question in the self storage area.
You mentioned.
Yeah.
Interesting.
But you said that you looked at that subset.
The occupancy has stabilized at 80% for at least 24 months and show that the decline was consistent with the overall number.
I assume.
The purpose of that was to show that the decline is consistent across most of the segments. There and therefore, it's just general industry trend.
And there's nothing specific.
To worry about there other than what the market is weakening.
Yes that was the.
The general thrust of that comment this Jason.
Alright, Thank you very much for taking my questions.
Thank you.
The next question comes from Keegan Carl from Wolfe Research. Please go ahead.
Yes. Thanks for the time guys. So first on the moving business being down eight 4%. Obviously includes locations that were added over the last 12 months I'm just kind of curious on a true like for like basis, what do you think you'd actually would've been down year over year.
I don't have that number but I think that's a.
A fair question.
Hello.
Yeah.
It's more it's more complicated.
What it is.
How many new locations you brought them because it also we do have.
About half of our.
Moving business through independent dealers and always when we add a new location, we have to be careful that we're not cannibalizing.
Those dealers.
Okay.
There had been some cannibalization of that by these new stores. So if they hadn't been bill we've still got that part of the revenue.
If you want to assume theirs.
And our 15% cannibalization and I don't have a firm number on that it is very location specific.
Okay.
And then the rest of it is new business.
That might be fair I don't know, Jason if you have any more specific on that.
Yes.
I don't think that thats going to be a material part.
If we would have seen in.
Bigger decrease on that.
Sure.
That's interesting question Keith.
No that's super helpful way to think about it.
I guess shifting gears to storage. So obviously occupancy was down 170 basis points and that makes sense to us just given the challenging market.
In the opening remarks, you said you are not lowering your street rates like the broader peer group is but I guess I'm curious what would it take for you to see it actually starts to lower street rates.
While we analyze.
Every location.
And every.
Room size <unk>.
By location and Thats, how we manage rates.
<unk>.
You're unlikely to see us do something like say put in a 10% rate decrease.
If we did a rate decrease it would more likely be in a certain size so let's see.
Bye Bye 10, non air conditioned rooms.
<unk>.
10 by <unk>.
Air conditioning Rumsey R. More specifically 10 by 15.
Air conditioning rooms on the upper floors.
There is a very very specific.
We don't.
Have in our bag of tricks or whatever you want to call it.
Normally in a normal.
Maneuver to simply drop rates.
And.
I mean of course there is.
You probably saw the nice article in the Wall Street Journal recently that said basically anybody with a little bit of capital can get rich of storage.
Well, it's a little bit more to it that as you might imagine.
Yeah.
Mostly I see people when they drop rates there.
Sir on the drop rates across the board, there and a very uncomfortable situation.
Once in a great while a competitor will literally move next door or across the street.
And they'll drop rates to as an introduction.
Not an uncommon phenomenon.
I'll lose tenants at that location because of that but we typically don't drop the rate.
Because our competitor will come up with a rate increase 90 days later.
And some of those customers and I'll bounce back because now will be cheaper.
In the meantime, it disrupts everybody.
Yeah.
Dropout rate overall so.
That's a specific.
<unk> competitive situation and that would be our typical responses.
All tight.
And wait for them to get a little bit of occupancy.
Increased rates greater than the decrease so.
That's just about what are our strategy typically has a CAGR.
Got it and I guess on the topic of storage just curious if youre seeing any change in your average length of stay and then.
That helps you guys determine what sort of rate increases you are sending out to your existing customers.
This is Jason.
Just looked at that this last quarter and compared to a year ago. It looks like each one of our duration stratification has maybe moved out a percent so.
Cross the portfolio I'd say, there hasn't been a general move to a little bit longer.
<unk>.
Longer stays.
And I would say while that seems paradoxical, it's not because a little bit less moving activity a lot of the storage as people are moving in or out and so theyre going to store for.
30, or 60 days because they are waiting for a place to be firmed up are these kind of just little timing difficulties in this overall moving declines.
See that real short stays.
Not as frequent.
Got it and then just one final one here on the topic of storage. So if we think about supply in general it's often what causes storage underperform over a short time period.
You mentioned in the opening remarks, you don't necessarily plan on stopping grow your footprint right now so I guess I'm just curious from the operational side of things, what you would need to see for that to change.
So I would have to be discouraged on the long term prospects and Covid broke out in March I think of 2020.
Got a little bit.
Uncertain slide stopped whole bunch of projects.
And.
It took me at least 24 months to recover and get momentum back again.
And while Covid was a first time deal for me.
Let's say that same event.
I Wouldnt backhaul.
I would say no.
U S economy is going to roll through this.
I'll have a little dip, it's better than being under supplied so I was under supplied.
The last half of Covid, which I lost opportunity there.
No certainty.
Is there overbuilding, certainly and I've said that for a couple of years at least of course, there's overbuilding. The beauty of it is the markets are local.
It could be overbuilding on the north suburb in underserved in the south suburbs.
All of these things exist and of course, Florida. This is can you find.
Replace that still needs more supply.
We are as you probably are aware we operate.
In all 50 states. So we make some different chain choices and some of our competitors and so.
Which are just that just kind of our strategy is to be all 50 states. So.
We will be expanding in a market, maybe they're not even in because they just don't it's not got enough masks are not interested in being there.
That's what I would try to do if I saw things.
Quarterly it with what's.
I have been doing which is well let's.
But search out some different markets that we have.
Long term.
Competence in but aren't really on the radar of a lot of people because.
That market will never have five stores five stores for one supplier, it's always going to.
A smaller market than we do fine in those smaller markets in our management structure works good for it.
And some of our competitors it doesn't work for them, which is just a slight difference in strategy, Bob one's better than the other.
The slight difference.
And one final one for me here just from a capital allocation standpoint, you guys are sitting on a ton of cash I'm. Just curious how we should be thinking about the deployment of that over the next several quarters and years and where you're currently finding the best risk adjusted returns because it looks like it might be through short term treasuries.
This is Jason.
We were fortunate to lock in a rate on a large piece of this cash going in into this rising rate cycle and we've benefited from that I mentioned the increase in interest income is as were in short term government securities and we've gone out and.
Opportunistically purchased some treasuries here and there.
I think our sense is that.
We are going to be going into a credit tightening cycle.
We've already seen some small anecdotal evidence of that within our own lending group.
And since that is the primary way that we raised capital.
We are sitting on a bunch of cash and that will give us the ability that that should we not should we want to buy more trucks and not have access to debt financing at that point in time, where as much as we would like it gives us some flexibility at that point so.
Our target goal for bringing cash down as well.
Closer to the $500 million Mark is going to take US a few years to get back to that point.
But we have in the pipeline of development, we're still looking at potential spending of up to $2 billion in that along with it.
Increasing fleet purchases over the next several years.
Super helpful. Thanks for the time guys really appreciate it.
The next question comes from Steve.
Karl with Oppenheimer. Please go ahead.
Good morning, how are you.
Great. Thanks, I appreciate you're logging on.
Yes, Thanks for having me a quick question on that Capex are you expecting the remaining spend to be spread out over the rest of the year more weighted towards the next quarter or two.
It'll be weighted a little bit heavier to the next two quarters.
And has it been an easier it again supply from.
The manufacturers at Ford and then.
Yes, it's loosening up but that's it.
Snail's pace and it has me biting my fingernails.
They just the.
It's a political question you probably know as much about a society wishes.
Sure trying to reconfigure the automotive industry, that's causing them.
Fits in being able to do their fundamental job, which is manufacturing.
Automobiles.
Okay.
They've made progress on it budgets.
They have their hands full.
We're on good terms with everybody we're getting.
Getting units, but they just their total overall productions.
Has been short of demand.
Stay that way for a while.
And how do you think that affects the fleet moving forward should we be expecting.
<unk>.
Longer age of the fleet and less Capex and turnover there.
Well that may happen, if it does that basically increases are.
Effective cost per mile.
And we're trying to manage the cost per mile which is the trade off of repair.
Variable cost.
Capex, which is basically get a fixed cost.
The balances a little bit too much on the repair of variable cost side right now in our judgment.
And we're trying to of course.
At more towards the optimum spot so.
What you describe happens it won't be because it was our choice.
Because.
Market has constrained us now we can.
Go through that and we've done that before but.
We think a more optimal tradeoff with b.
Larger number annually.
Annual replacement vehicles.
And how should we be thinking about.
Thats from me.
The increase in Capex this year.
That will have on maintenance and repairs and the timing of those benefits.
Slow the increase but it's not enough to stop.
In my judgment.
And.
Do you think.
Spend from the first half of this year.
Start to.
Slow the pace more in the first half of next year second half.
I'll, let Jason take a stab at that.
Stephen on this one.
The pace of new acquisition is coming in reasonably well if we finish out this year on new acquisitions, the way that it looks like we could make a dent in maybe picking up 2500 units over a normal pace.
We started off the year about a year behind in rotation from the last few years, so that would still put us.
Over four years out from fixing at that pace.
<unk>.
The bigger piece is going to affect.
Maintenance is how fast we were taking the old trucks out so the new trucks coming in I think our team is feeling a little bit more.
<unk> has more confidence that the new trucks will be there for them now we need them to start removing the older trucks that have the higher maintenance costs attached to them and on that one I would say, we're at least a quarter behind I don't think we've made a lot of progress in this first quarter and getting older trucks pulled out of the fleet. So that's going to delay.
Some of the benefits to repair and maintenance here at least another another quarter.
Until we can really start to pull old trucks out of the fleet. So we can stop fixing them.
Thank you for that and then.
Moving to self storage.
And the other self storage REIT Sir.
We reported then pretty big price per square foot drops on move ins versus move outs are you seeing the same thing.
Our our move in rates are about 3% higher than than what they were last year and we still have a positive differential.
Between move in and move out rates. So we're moving in people at a higher rate.
What the people are paying or moving out.
And do you think thats because you have some months.
Related they are not as.
Heavily concentrated in the top 25 msas.
That's a benefit for you guys.
I'm not so sure. It is I think it's we've.
You watch our.
Take the REIT competitors.
They will have a good day.
Have a good week they'll jam rates. Thanks.
They could go up 15%.
They are a little bit more.
Oh.
Aggressive on the upside which causes them to be.
Little more prone to retreat if that makes sense.
Yes, good morning.
Yes.
We post rates.
Our competitors don't post rates there.
Next person in line could get a different rate.
So we have a different strategy and we've tried to create.
And expectation with our customer.
And we largely have the kind of understand what our strategy is.
For one reason or another I think that that is.
<unk>.
Works for them.
I think they are all probably aware or not all but many customers can figure out.
Okay.
The REIT down the street just dropped prices.
Do they want to move to save.
$15 a month.
Maybe maybe not.
So.
I think they do a little bit.
The harvest a little bit more on the up and they give away a little bit more on the debt.
But I don't know that either strategy is perfect. It just kind of.
The way, we've built our customer relationships.
And how do you balance rental rates versus occupancy rates, when you're looking at where to set.
Price per square foot.
We do it by location by room type.
So a given location and so here in Phoenix, Arizona, I don't know, we probably have 85 or so stores.
Ann.
There will be.
Certainly 10 different.
Rates out there on a comparable room.
It's pretty specific.
Just because you are in the Phoenix Metro.
There'll be a lot more discerning them that we're going to get right down to the location.
Oh.
We have a staff that that's all.
They do their storage rate.
Heartland and they are looking of course at occupancy and rent up boulders depends on where you are.
Michael if you're filling a new store here.
Got it.
From the sales just ride on a store that has 92% you'd like to be at 95.
Just how are you going to trim the sales to get there.
Okay.
More I'm pretty much satisfied with there.
Work and have been for some time.
And on the cost side I know you don't break out.
The cost specifically for self storage.
Locations that share and self storage and equipment rentals.
There are synergies compared to Standalone self storage facility.
NOI margins about the same map.
This is Jason.
It's a complicated.
Implicated question.
From a.
From a asset owner.
It certainly benefits.
The truck product line in the equipment rental product line, the <unk> product line.
You have a blended location.
The the way as a specific measurement would work.
For determining what the storage margin might be.
We do have many locations that are essentially storage only.
And the way that the costs get allocated to those locations those look like they have.
Appear to look like they have a higher margin because there just isn't as much overhead costs going on there and you don't have to split up the profits across multiple product lines. So it.
We think the best.
Returning.
Locations for us.
Our full product line available to all the customers and.
So that would look a lot different than a a self storage.
Income statement by itself.
Got it.
Thank you.
And last question is.
In the release.
Included the chart again.
For the self storage space.
Hey, Ed.
Are the same store numbers comparable year over year.
So the same store numbers that we're putting there represent what the same store calc was at that time right.
So.
Theres a couple of different ways of presenting that the way. We've presented is showing what the same store pool looked like a year ago and two years ago.
Versus taking the same store pool from this year.
Carrying that back two years.
We didn't go that route.
Would it be possible maybe include the bulk of it and then just so that.
You can compare.
Whenever some say youre looking at.
Youre looking at the same group of stores the same cohort.
Yes, Steve and I've been I've been accepting feedback since last quarter on that I would say.
The comments asking for that have been fewer than the ones who have been happy with it we've tried to index against what.
Are used to from our storage competitors.
And we've found this presentation and some of theirs.
But it's an open question so I wouldn't say that that the book is closed.
Alright, well. Thank you very much that's all my questions and I. Appreciate you taking my questions on the call.
Thank you.
The next question comes from Craig Inman with Artisan partners. Please go ahead.
Hey, guys.
Finally on here live for once.
And then questions.
I guess one of the things I was wondering about.
From a strategy perspective, obviously moving.
In household formation and don't have the macro questions but.
Interest rates on housing and all of that or a lot different now than they were two years ago and you've seen that slowdown.
I'd imagine that kind of moving in household formation puts pressure on the truck rental business, but I'm not sure can.
Can you comment on just what.
That means for the business.
How big it should be I know, you want to win and gain transactions, but.
Some thoughts around strategy with this change in.
What the consumer can afford from housing and what we're seeing there.
Sure.
Again, I'd say the total drivers.
Of moving our life events.
Okay and your family grows youre looking for.
Opportunity.
A lot of forces and factors going on there one of them.
Focusing on.
Most recently as the.
Turning towards.
Consolidation of the people on the property housing rental business.
People, who are attempting to.
Foreign large track so.
Rental single family dwellings.
That's.
To me that those are two kind of.
Big changes that we will.
Maybe impact.
Frequency.
People, who rent more.
Maybe not in Manhattan.
This for 30 years.
But in most of the country you see all these four or five story.
Multifamily basically apartment units sprung up.
Nearly on every piece of vacant land.
All of them that's become a.
A growing subset of movers and they have some different characteristics.
We're trying to really understand them fully.
We can make sure that our products and services tailored in a way that's very attractive to them.
So I think thats.
So I want to say, what it was going to be here.
Well, maybe move the needle a little bit over the next 2345 years I think that may be what moves the needle even more than interest rates.
One of these.
Yes.
I'm sure you've heard the pitches, but Thomas.
I understand we're going to get people too.
Rent rather than own.
Uh-huh.
World War II.
Let's get people to own room rent okay.
And I don't.
I don't claim to understand them.
Overall implications of that but you can see that they've put ups I don't have a statistically you see them everywhere qualities.
By store units.
Jumping up three years ago, I would have taken up that they were overbuilt.
And they've continued building and they are building today.
And we've seen customers now that again, the Wall Street Journal reported a bunch of pressure on these people because of rising rates.
Okay, but I think thats going to really just really drive more consolidation of ownership.
<unk>.
Right of use and maybe it will compress our margins for a while but.
I think that this rental phenomena.
<unk> like.
People, who rent that's always been our mantra people rent are more likely to move people along.
And so if they can have a shift in the number of people who brand.
So it's going to change.
Changes move up a little bit.
25 years ago, Phoenix was a crazy market and they would offer six month lease one month free and people moving every six months.
Finally, they quit doing that but it was great for us because they were moving a mile.
Okay. So great.
We got our 995.
Miley juices, maybe seven miles from the whole trip.
We made great money.
But that's how sensitive these people forget and I don't know quite what these.
Big consolidating owners are going to do.
So I know they plan to past customers between their properties. They think they will.
We'll be able to encourage people to move from this property to that property I don't know based I assume on some combination of amenities and rental rate.
So.
I think thats to me that maybe an opportunity for the whole industry.
And if it is a temporary you called it either.
Okay. Yeah. So it's too simple a thought and I think that affordability decreased in new sales are down and that's going to really put a ton of pressure on the <unk>.
Our rental business.
I really think.
My conclusion, yes, Youre exactly right you said it better than.
Okay.
My question was a little too long winded there sorry.
And I hadn't thought about your strategy difference with the Reits in terms of how rate would play through later.
Because your move in rates are higher than in place, which is the opposite of the rights.
How much longer would this trend go on given.
Hi, all.
Operate structurally like how much more.
Is there to go there in rate.
Gains as the in place ages.
Kind of the $64000 question.
My teams still believes they have some running room okay.
Okay.
Probably wrong my brain says.
Over the last 12 months, we saw increases of 30%.
I'm not sure that numbers right yeah much.
It sounds right.
I don't put that in the calculation, but no.
Team.
They kind of have they kind of know what theyre going to do for the next 30 days.
They are familiar with the properties they manage them.
They believe there is still room I've been surprised.
We are seeing pushback from customers, obviously, everybody is in this economy.
So.
But.
Second floor air Conditioner rooms are 100% full.
They're going to look.
A bump in the rate.
And you all almost always find that if you really study it location.
Some class of rooms is full on another classrooms, 80% well did.
Did you make a mistake in your original model mix.
Rates out of line.
Several things to look at of course, my team looks at those things.
They think that the year ahead.
He has some promise for rate increases.
Okay.
Sure.
And then I didn't catch fully on the liquidity.
Talk there.
$2 billion to finish out in place development or is that include possible deals what was the just wanted some clarification on how you are thinking about liquidity.
But that would be a finish everything that we have on the books right now.
The escrow and everything.
The.
Not not including escrow.
Okay.
Okay.
Did that cash is you're effectively.
Pre funding a lot of that development with cash in case market conditions.
Deteriorate and if.
You need to keep buying trucks to catch the fleet up.
Yes.
I think what we've learned over time is it's better to have it than not have it.
With where we're headed.
So.
The.
Spending on real estate last two years now we've been well over $1 billion in spend.
I think I think we'll see that continue for the next couple of years at least.
And then the fleet spend.
Is increasingly as we're starting to get to the increased number of units and the cost for these new units is higher than it used to be so.
In the first quarter of this year I would say if you took.
The units that we purchased this year and if we were to have bought them at last year's prices thats about $25 million of inflation.
We had bought them at the prices from two years ago.
Little over $40 million of inflation so.
With all of those headwinds.
<unk>.
We are being very cautious.
Okay.
Okay, and then on the App.
For the company locations, you said you crossed 6 million.
Transactions can you talk about the trend in terms of some color on the percentage of transactions that are.
Happening in the App.
The company locations versus.
Just because it does seem like <unk> be a labor saving tool, obviously theres always going be a group that is just going to show up and walk in.
But how big a percentage of your business is that.
Well.
Two two separate subjects, one was what we call.
<unk> 2007, which.
And go either through the App or you can go through.
So yes your desktop.
We're transitioning those people to the App.
We're seeing good growth from the App.
I think I can state correctly.
Two weeks ago, we were in the top 10.
And the travel apps adopted on Google.
We got ahead of steam up there and we intend to run with it.
Oh, just where that will go I can't predict that.
We're trying to.
Ponder.
Correct indicators on that.
It looks like the App we have.
I said three years of running room.
Okay.
<unk> growth, so I think that that's kind of.
Pay off for us.
Very much I think it will.
The customers, who want to do business that way will increase their satisfaction.
So.
I'm all in on it if you wanted to talk about him work.
I'm all in on it I think it was going to.
Continued to grow how far will it go I have no.
Opinion, but of course.
I can I don't know your habits, but.
I have adult children in there.
They do.
So much on the handheld mobile.
I think thats just that trends here to stay and we are.
We're trying to make sure we're.
Yes.
A big way.
Another group of competitors.
Who are internet savvy people and they want to be.
Industry Disruptors in every industry in the world.
So.
A brief right now we have better <unk>. My plan is to continue to have better check.
So that we don't give ground to those.
Okay.
Last one.
When filling 30000 rooms quarter was pretty good in the summer and now we are.
We're 44 and <unk> been above that.
Anything changed in the last few years in terms of.
The ability to fill rooms faster doing something better.
Obviously, you have more room so that.
So we have more availability, but we.
We have more rooms, they're thoughtfully placed in the present tense.
We could we have stores that are 20 years old we have stores that are 40 years old. So is that location now as hot as it once was you see so if we're doing this right.
There is.
We have good room and newer stores.
Yes beyond what's your whole online move in we have a whole online move in process for those stores that they have.
They have amenities is good at <unk>.
Better than.
Our competition and of course customers.
Want to search services and they want certain levels of customer service.
Where we are.
Largely exceeding their expectations.
The new stores because.
The bathrooms are nicer.
Load unload areas a little better these are all they've seen much small things, but to the consumer they add up.
So.
I think what the real things that changes the percentage of new or newer say, let's say.
24, 36 months old rooms, so that percentage has risen in our in our own portfolio. So I think that that has had a lot to do with this youll see a.
New place come online and it'll start running up at a feverish pace.
So that first.
60, or 70% of occupancy.
Just really.
Impact sure ramped up rate overall for the company.
Okay. So that newer mix so nothing in terms of just getting smarter about marketing.
No big change in strategy, there, but everybody else is getting smarter too.
Normal capitalism rat race, so we learned a little thing and then they learn a little thing and we both are trying to figure out what the other one is doing and just it's normal capitalism. So.
We have a slightly different strategy because of our truck and trailer rental business and so we're more interested in Wyoming, let's say than most people.
<unk> okay.
We're all over Canada. Most of that is just how fast it happened at expanding up so.
We end up in some.
Places our competitor would have no appetite for.
We're making them work in them so.
Okay.
There is.
Everything that is for.
My son likes to call secret sauce is a very tiny increments.
There's a bunch of them and when you execute them all.
Let's say I came upon a new store in the.
The rent up rate wasn't what I would have anticipated.
Believe me I know, we're failing on one or more fundamentals that will go through and just.
We do a top down work up on the store, we'll find out where we're short.
And tune that up rent up goes in the curves.
There's a tremendous amount of volatile sideswipe, you want to get the right site.
We spend a lot of effort.
Money and I think all of that.
Tell me, Jason I think all of that is expense I think.
All our site site selection expense basically just closed through the.
Gosh, we capitalizes little US is we have to yes. So we're not we're not.
If it's a question of which way to push it we push it towards expensing.
And.
I think I just think that there is.
That money comes back to you over time.
You could make an argument for capitalizing it but I just don't want to do it.
And then he did.
I'll defer the 10th.
Better to defer that pay the taxes now.
Okay.
Thank you that's it for me Thank you Bob.
You bet.
This concludes our question and answer session I would like to turn the conference over to management for any closing remarks.
Thank everyone for their support as a reminder, one week from today on Thursday August 17th at nine Am Pacific will hold our annual stockholder meeting and then two hours later at 11 Am Pacific two P. M. Eastern will host our 17th annual virtual analyst and Investor day, both events can be accessed.
On the web at investors Dot <unk> dot com and questions for the Q&A portion of our Investor day can be prior to the meeting at IR at <unk> Dot com or submitted live during the event. We look forward to speaking with you next week. Thank you.
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