Q4 2023 CubeSmart Earnings Call

Operator: Good morning, ladies and gentlemen. All right. Thank you, Joanna. Good morning, everyone.

Good morning, ladies and gentlemen, and welcome to the <unk> fourth quarter 2023 earnings Conference call. At this time all lines are in a listen only mode.

Following the presentation, we will conduct a question and answer session. If at any time. During this call you need assistance. Please press star zero for the operator.

This call is being recorded on Friday March 2024, I would now like to turn the conference over to Josh <unk> Vice President of Finance. Please go ahead.

Josh: Thank you Joanna and good morning, everyone.

Joshua Schutzer: Welcome to CubeSmart's fourth quarter 2023 earnings call. Participants on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the investor relations section of the company's website at www.cubesmart.com.

Welcome to keep its March 4th quarter 2023 earnings call participants on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin Chief Financial Officer, our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which we issued which was issued yesterday evening supplemental operating and financial data is available under the investor.

Josh: <unk> section of the company's website at Www Dot cube Smart dock.

Joshua Schutzer: The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties, and other factors that may cause actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to, or files with, the Securities and Exchange Commission, specifically the Form 8K we filed this morning, together with our earnings release filed with the Form 8K, and the risk factors section of the company's annual report on Form 10K. In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the fourth quarter financial supplement posted on the company's website at www.cubesmart.com. I will now turn the call over to Chris. Thanks, Josh. Good morning, everybody.

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

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

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

Thanks, Josh Good morning, everybody last evening, we provided.

Christopher P. Marr: Last evening, we provided our solid operating results for the fourth quarter of 2023 and introduced our expectations and guidance on our key metrics for 2024. Tim Martin will provide more color and insight on both of those in his prepared remarks. At a very high level, operating trends have stabilized when compared to the volatility that we experienced in the first three quarters of 2023. However, price sensitivity for new customers remains elevated, given the tight housing market and a particularly challenging competitive environment. Once customers enter the portfolio, they remain strong as they have elevated lengths of stay and continue to accept ECRIs, and our customer credit metrics remain in line with pre-pandemic levels. Our urban markets have outperformed the faster deceleration of our sunbelt markets, as the lower beta nature of these markets has continued to support steadier performance.

Chris: Our solid operating results for the fourth quarter of 2023 and introduced our expectations and guidance on our key metrics for 2020 for Tim Martin will.

Timothy M. Martin: Provide more color and insight on both of those.

Chris: His prepared remarks at a very high level operating trends have stabilized.

Chris: When comparing to the volatility that we experienced in the first three quarters of 2023.

Timothy M. Martin: But price sensitivity for new customers remains elevated.

Timothy M. Martin: Given the tight housing market, and a particularly challenging competitive environment.

Once customers enter the portfolio.

Timothy M. Martin: They remain strong as they have elevated lengths of stay and continue to accept ECR is in.

Timothy M. Martin: And our customer credit metrics remain in line with pre pandemic levels.

Our urban markets have outperformed the faster deceleration of our Sun belt markets.

Timothy M. Martin: The lower beta nature of these markets.

Timothy M. Martin: Has continued to support steadier performance.

Christopher P. Marr: The strong demographic profile for our portfolio should support performance through any phase of the cycle. New York City remains the bright spot in our portfolio with strong performance over the last year, now making it our highest growth market. The transaction market remains quiet, as the recent rise in rates has kept the cost of capital elevated, and we continue to have a bit of a bid-ask spread between seller expectations and our expectations. Our investment grade balance sheet is in excellent shape.

Timothy M. Martin: The strong demographic profile for our portfolio should support performance through any phase of the cycle.

Timothy M. Martin: As New York City remains the bright spot in our portfolio with strong performance over the last year now.

Now, making it our highest growth market.

Timothy M. Martin: The transaction market remains quiet as the recent rise in rates has kept the cost of capital elevated.

Timothy M. Martin: And we continue to have a bit of a bid ask spread between seller expectations and our expectations.

Timothy M. Martin: Our investment grade balance sheet is in excellent shape.

Christopher P. Marr: No material maturities, minimal exposure to floating rate debt, and Significant Leverage Capacity, which we believe positions us to transact as attractive opportunities return. Thanks for joining the call today, and I will turn it over to Tim for additional commentary.

Timothy M. Martin: No material maturities minimal exposure of floating rate debt and.

And significant leverage capacity, which we believe positions us to transact.

Timothy M. Martin: Attractive opportunities returned to the market.

Timothy M. Martin: Thanks for joining the call today, and I'll turn it over to Tim for additional commentary Tim Alright. Thanks, Chris Good morning, everyone and thanks for taking a few minutes out of your data spend it with US I'll provide a quick review of fourth quarter results and then jump into some additional color on 24 expectations and guidance.

Timothy M. Martin: Thanks, Chris. Good morning, everyone. And thanks for taking a few minutes out of your day to spend it with us. I'll provide a quick review of fourth quarter results and then jump into some additional color on 24 expectations and guidance. Same store NOI growth for the fourth quarter was 1.2%. Driving that were same store revenues growing 0.4% for the quarter, with realized rents per square foot growing 1.8% compared to last year, offset by occupancy levels dropping 110 basis points on average compared to last year. Same store expenses declined 1.8% during the fourth quarter, driven largely by the real estate tax line item as we received some significant refunds and tax reductions in the fourth quarter.

Timothy M. Martin: Same store NOI growth for the fourth quarter was one 2%.

Timothy M. Martin: Driving that were same store revenues growing 4% for the quarter with realized rents per square foot growing one 8% compared to last year offset by occupancy levels, dropping 110 basis points on average compared to last year.

Timothy M. Martin: Same store expenses declined one 8% during the fourth quarter driven largely by the real estate tax line item as we received some significant refunds and tax reductions in the fourth quarter.

Timothy M. Martin: We reported FFO per share adjusted of 70 cents for the quarter, representing 4.5% growth over last year. During the quarter, we also announced a 4.1% increase in our quarterly dividend up to an annualized $2.04 per share. At yesterday's close, that represents a 4.7% dividend yield. On the external growth front, in the fourth quarter, we acquired one store for $22 million. We partially opened one of our JV development stores, and we added 43 stores to our third-party managed portfolio, bringing us to 167 stores added for the year and 795 third-party stores on the platform at year-end. As Chris mentioned, our balance sheet position remains strong; all of our debt, except for our revolver, is fixed. So less than 1% of our outstanding debt was at a variable rate as we started 2024. We face no significant maturities until November 25, and we have a weighted average debt maturity of 5.4 years.

Timothy M. Martin: We reported <unk> per share as adjusted of <unk> 70 for the quarter, representing four 5% growth over last year.

Timothy M. Martin: During the quarter, we also announced a four 1% increase in our quarterly dividend up to an annualized $2 <unk> per share.

On yesterday's close that represents a four 7% dividend yield.

Timothy M. Martin: On the external growth front in the fourth quarter, we acquired one store for $22 million with partially opened one of our JV development stores and we added 43 stores to our third party managed portfolio, bringing us to a 167 stores added for the year.

Timothy M. Martin: 795 third party stores on the platform at year end.

Timothy M. Martin: As Chris mentioned, our balance sheet position remained strong all of our debt except for our revolver is fixed so less than 1% of our outstanding debt was variable rate as we started 2024.

Timothy M. Martin: We face no significant maturities until November of 'twenty fives and.

Timothy M. Martin: And we have a weighted average debt maturity of five four years.

Timothy M. Martin: We further reduced our leverage levels during 23 and ended the year at 4.1 times debt to EBITDA, giving us ample capacity and liquidity to finance future growth when attractive opportunities present. Looking forward, details of our 2024 earnings guidance and related assumptions were included in our release last evening. Our 2024 same store property pool increased by just six stores.

Timothy M. Martin: We further reduced our leverage levels during 'twenty three and ended the year at four one times debt to EBITDA, giving us ample capacity and liquidity to finance future growth when attractive opportunities present themselves.

Timothy M. Martin: Looking forward details of our 2024 earnings guidance and related assumptions were included in our release last evening our.

Timothy M. Martin: Our 2024 same store property pool increased by just six stores this year.

Timothy M. Martin: Consistent with prior years, our forecasts are based on a detailed asset-by-asset ground-up approach and consider the impact at the store level, if any, of competitive new supply delivered in 2022 and 2023, as well as the impact of 2024 deliveries that will compete with our stores. Embedded in our same store expectations for 24 is the impact of new supply that will compete with approximately 27% of our same store portfolio. For context, that 27% is down from 30% of stores impacted by supply last year and down from the peak of 50% of stores impacted back in 2019. The midpoint of our revenue guidance range assumes that the housing market improves marginally off of 30-year lows, but remains well below historical norms. This would lead to negative year-over-year gaps in both occupancy and rate, reaching parity in the fall and then growing slightly from there.

Timothy M. Martin: Consistent with prior years, our forecasts are based on a detailed asset by asset ground up approach and consider the impact at the store level, if any of competitive new supply delivered in 'twenty two 'twenty three as well as the impact of 2020 for deliveries that will compete with our stores.

Timothy M. Martin: Embedded in our same store expectations for 'twenty four is the impact of new supply that will compete with approximately 27% of our same store portfolio.

For context at 27% is down from 30% of stores impacted by supply last year and down from the peak of 50% of stores impacted back in 2019.

Timothy M. Martin: The midpoint of our revenue guidance range assumes that the housing market improves marginally off a 30 year lows, but remaining well below historical norms.

Timothy M. Martin: This would lead to negative year over year gaps in both occupancy and rate reaching parity in the fall and then growing slightly from there.

Timothy M. Martin: The high end of our revenue guidance range implies more of an improvement in the housing market, driving seasonality closer to a historical level. This improved demand environment would lead to year-over-year gaps in both occupancy and rates to reach parity in mid-summer and then flip positive in the back half of. And then the low end of our revenue guidance range assumes another year of largely frozen housing mobility, driving another year of muted seasonality throughout the spring and summer. This slower demand environment would mean a continued lack of pricing power, causing the negative year-over-year gaps in occupancy and rate to persist through most of 2024, albeit at narrowing spreads from currently. Shifting to same store expenses, we've had a lot of success in controlling our operating expense growth here over the last two years, averaging only 2.2% compared to 6% expense growth for our storage peers over the same period. That's great news for 2022 and 2023, but it sets us up for some pretty tough competitions in 2024.

Timothy M. Martin: The high end of our revenue guidance range implies more of an improvement in the housing market driving seasonality closer to historical levels.

Timothy M. Martin: This improved demand environment would lead to year over year gaps in both occupancy and rate to reach parity in mid summer and then flip positive in the back half of the year.

Timothy M. Martin: And then the low end of our revenue guidance range assumes another year of largely frozen housing mobility driving another year of muted seasonality throughout the spring and summer.

Timothy M. Martin: This slower demand environment would mean, a continued lack of pricing power, causing the negative year over year gaps in occupancy and rate to persist through most of 2024, albeit narrowing spreads from current levels.

Timothy M. Martin: Shifting to same store expenses, we've had a lot of success in controlling our operating expense growth here over the last two years, averaging expense growth of only two 2% compared to 6% expense growth for our storage peers over the same period.

Timothy M. Martin: That's great news for 2022, and 2023, but sets us up for some pretty tough comps in 2024.

Timothy M. Martin: We introduced same store expense growth in a range of 5.5% to 7% growth in 24. On an absolute basis, there are a few line items that are pressuring expense growth into 24. The biggest driver is real estate taxes. As I mentioned earlier, this quarter's guidance beat was largely driven by some significant refunds and tax reductions. Again, great news for 23, but creates a really difficult comp for 2024.

Timothy M. Martin: We introduced same store expense growth in a range of five 5% to 7% growth in 24.

Timothy M. Martin: On an absolute basis. There are a few line items that are pressuring expense growth into 'twenty for the biggest driver is real estate taxes as I mentioned earlier. This quarter's guidance beat was largely driven by some significant refunds and tax reductions again, great news for 'twenty, three but creates a really difficult comp for 2024 overall were <unk>.

Timothy M. Martin: Overall, we're expecting real estate taxes to grow in the high single digits this year as a result. Property insurance is another line item that will continue to see pressure. Our annual insurance policy resets on May 15th of each year, and we had a 43% increase in cost last year.

Timothy M. Martin: <unk> real estate taxes to grow in the high single digits. This year as a result.

Timothy M. Martin: Property insurance is another line item that will continue to see pressure.

Timothy M. Martin: Our annual insurance policy resets on May 15th of each year, and we had a 43% increase in costs last year. So that continues for the first four five months of 'twenty four and then beyond that we're anticipating another 20 plus percent increase in our renewal again this year.

Timothy M. Martin: So that continues for the first four and a half months of 2024, and then beyond that, we're anticipating another 20 plus percent increase in our renewal rate again this year. The third area of pressure comes from winter-related expenses, primarily snow removal costs.

Timothy M. Martin: The third area of pressure comes from winter related expenses, primarily snow removal costs, we had a very favorable winter in 2023 from that perspective, and our guidance assumes a more normal level of those costs in 2024.

Timothy M. Martin: We had a very favorable winter in 2023 from that perspective, and our guidance assumes a more normal level of those costs in 2024. So overall, expenses are again expected to grow five and a half to 7%, but taking out real estate taxes, property insurance, and snow removal costs. All other expenses combined are expected to grow plus or minus at inflationary levels. Our FFO guidance does not include the impact of any speculative acquisition or disposition activity, as levels of activity and timing are difficult to predict.

Timothy M. Martin: So overall expenses are again expected to grow five 5% to 7%, but taking out real estate taxes property insurance and snow removal costs.

Timothy M. Martin: All other expenses combined are expected to grow plus or minus at inflationary levels.

Timothy M. Martin: Our <unk> guidance does not include the impact of any speculative acquisition or disposition activity as levels of activity and timing are difficult to predict.

Timothy M. Martin: To wrap up thanks to our entire cube smart team for a really productive year in 2023, we're excited about our position to execute our business plan in 2024.

Speaker Change: Thanks again for joining us on the call. This morning at this time Joanna let's open up the call for some questions.

Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.

Operator: To wrap up, thanks to our entire CubeSmart team for a really productive year in 2023. We're excited about our position to execute our business plan in 2024. Thanks again for joining us on the call this morning. At this time, Joanna, let's open up the call to some questions. Ladies and gentlemen, we will now begin the question..., questions. Star, followed by the, You will hear us reach on prompt.

We'll hear with Rachel Duan acknowledging your request.

Rachel Duan: You are using a speakerphone please lift the handset before pressing any case.

Rachel Duan: Our first question comes from Cassandra Steber from Trust Securities. Please go ahead.

Cassandra Steber: Good morning, and thank you for taking my questions.

Cassandra Steber: So you are a Christian acquisition activity was pretty muted in 2023, and your 2024 guidance Youre assuming acquisition.

Cassandra Steber: 102, 200 Melon you touched on this a little bit in your prepared remarks.

Cassandra Steber: Can you share what youre seeing in the acquisition market and then also are there any markets that you're focused on specifically.

Unnamed Speaker: Good morning, and thank you for taking my question. Um, so your acquisition activity was pretty muted in 2023. In your 2024 guidance, you're assuming acquisitions of 100 to 200 million. You touched on this a little bit in your prepared remarks.

Speaker Change: Yeah. Thanks for the question.

Speaker Change: As we sit here today, we don't we don't have a whole lot of visibility and an hour range above in the range above the range as it relates to external growth.

Very little product on the market.

Speaker Change: As we sit here today, although we certainly heard from brokers in recent months that there were there were a number of <unk> on the shelf and there was seemingly some activity that was that was staring up here. When we when we saw rates move downward a little bit I think there was some excitement that there was going to be a wave of potential opportunity that seems dose cooled off.

Christopher P. Marr: Can you share what you're seeing in the acquisition market? And then also, are there any markets that you're focused on specifically? Yeah, thanks for the question. As we sit here today, we don't have a whole lot of visibility in our range above in the range above the range as it relates to external growth. There's very little product on the market.

Speaker Change: The moment.

Christopher P. Marr: As we sit here today, although we've certainly heard from brokers in recent months that there were, there were a number of BOVs on the shelf, and there was seemingly some activity that was stirring up here when we saw rates move downward a little bit. I think there was some excitement that there was going to be a wave of potential opportunity that seems to have cooled off for the moment. So difficult, difficult to predict. What we do know is that our team is ready.

Speaker Change: So difficult difficult to predict what we do know is that our team is ready.

Speaker Change: Still underwriting every opportunity that we can get our hands on.

Speaker Change: Our availability of capital we've never been in a better position from a leverage perspective to take advantage of external growth opportunities should they present themselves.

Speaker Change: With that said, we fully expect to remain patient and wait for the right opportunities for us to jump in.

Christopher P. Marr: We're still underwriting every opportunity that we can get our hands on. With our availability of capital, we've never been in a better position from a leverage perspective to take advantage of external growth opportunities should they present themselves. All that said, we fully expect to remain patient and wait for the right opportunities for us to jump in and start to be more acquisitive than we have been here over the past year and a half. Okay, that's helpful.

Speaker Change: And start to be more acquisitive than we have been here over the past year year and a half.

Okay. That's helpful. And then can you talk about what you're seeing in New York in terms of demand trends in January and February.

Speaker Change: Given that New York is one of your strongest markets I'm curious how.

Speaker Change: <unk> 2020 core prospects clinker to the overall guidance you provided for 2024.

Speaker Change: Yes. Thanks for the question this is Chris.

Chris: Demand trends in January and February were seasonally consistent.

Chris: In the New York MSA as we would have expected.

Chris: Based on historic trends so continues to be.

Christopher P. Marr: And then, can you talk about what you're seeing in New York in terms of the demand trends in January and February? And then, given that New York is one of your strongest markets in Korea, how do New York's 2024 prospects compare to the overall guidance you provided for 2024? Yeah, thanks for the question. This is Chris.

A solid market for us and as we think about.

Chris: New York as an MSA and in each of the individual.

Chris: <unk> of that.

Chris: I certainly expect the boroughs.

Chris: To outperform again.

Chris: And then in 'twenty.

Chris: 24 hour expectations.

Christopher P. Marr: Demand trends in January and February were seasonally consistent in the New York MSA, as we would have expected, you know, based on historic trends, so it continues to be a solid market for us. And as we think about New York as an MSA, and each of the individual components of that. Certainly expect the boroughs to outperform again in 2020. 24, our expectations of the kind of the broader portfolio from a revenue perspective. And that's going to be, you know, the boroughs at one extreme, and then, you know, pressure in North Jersey.

Chris: The broader portfolio.

Chris: From a revenue perspective.

Chris: And that's going to be.

Chris: The boroughs at one extreme and then pressure in North Jersey, I'm sure you've heard this from others.

Chris: As a result of.

Chris: A greater impact of new supply in some of our North Jersey markets then.

Chris: Then the MSA as a whole so we'll continue to be a top market for us.

Speaker Change: Okay. Thank you for your time.

Speaker Change: Thanks.

Speaker Change: Thank you. The next question comes from Eric Wolfe with Citi. Please go ahead.

Eric Wolfe: You mentioned in your prepared remarks that when we get customers in the door for showing signs of strength.

Eric Wolfe: I was curious when you wouldn't put bigger bigger discounts and place the promotions in place like first month free and 40% off what is usually assumed in terms of getting those discounted tends to market like how long does it take on average what's the probability that the express versus those that are coming in closer to market.

Unnamed Speaker: I'm sure you've heard this from others, as a result of a greater impact of new supply in some of our North Jersey markets than the MSA as a whole. So we'll continue to be a top market for us. Okay, thank you for your time. This comes from Eric Wolf at, Hey, thanks.

Speaker Change: Yes, I think I think if you just look at it because it's kind of a customer specific question, but if you look at it across the portfolio obviously the use of that.

Christopher P. Marr: You mentioned in your prepared remarks that when you get customers in the door, they're showing signs of strength. So I was curious, when you put bigger discounts in place, or promotions in place, like first month free and 40% off, what is usually assumed in terms of getting those discounts to market? Like how long does it take on average?

Speaker Change: Of our first month free.

Speaker Change: There's a lot of put and take there so very attractive to the customer obviously, they get to market in month, two when full rent kicks in.

Speaker Change: They tend to be a more volatile customer because there is obviously an appeal.

Christopher P. Marr: What's the probability that they will accept versus those that are coming in closer? Yeah, I think I think if you just look at it, because it's kind of a customer-specific question, but if you look at it across the portfolio, obviously the use of a first month free. You know, there's a lot of put and take there. So very attractive to the customer.

To having that having that first month.

Speaker Change: Be free and over.

Speaker Change: Over in the entirety of that population or that cohort they tend to be a lower quality customer in terms of length of stay and credit.

When you think about Internet discounting again, there is not a one size fits all it's going to depend upon.

Speaker Change: The behavior, we expect from that specific customer. So typically you may have rate increases that get you all the way back to market within the first.

Christopher P. Marr: Obviously, they get to market in month two when full rent kicks in. They tend to be a more volatile customer because there's obviously an appeal to having that first month be free. And over the entirety of that population or that cohort, they tend to be a lower quality customer in terms of length of stay and credit. When you think about internet discounting, again, there's not a one size fits all; it's going to depend upon the behavior we expect from that specific customer.

Speaker Change: Four months.

Sometimes thats the first six months.

Speaker Change: It really depends upon the customer.

Speaker Change: But that's that's the typical cadence in difference at a macro level between those two cohorts.

Speaker Change: Got it that's helpful. And then there was also just wondering sort of as you look at things today. What do you think are sort of the best leading indicators for street rate, meaning those that have the highest correlation to future changes in the street rates.

Christopher P. Marr: So typically, you may have rate increases that get you all the way back to market within the first few months. Sometimes that's the first six months, really depends upon the customer. But that's, you know, that's the typical cadence and difference at a macro level between those two cohorts. Got it, that's helpful.

Speaker Change: You talked about how you don't expect much improvement.

Speaker Change: The housing market trying to calculate what your street rates are today and kind of looks like they are in the 13. It would seem like you need to see.

Speaker Change: A reasonable amount of improvement to kind of get up to that that level that you discuss where things crossover in the fall. So we're just trying to understand.

Christopher P. Marr: And then I was also just wondering, sort of, as you look at things today, what do you think are the best leading indicators for street rates, meaning those that have the highest correlation to future changes in street rates? You know, you talked about how you don't expect much improvement in the housing market, but if I'm trying to calculate where your street rates are today, it kind of looks like they're in the 13, so it seems like you need to see a reasonable amount of improvement to kind of get up to that level that you discussed where things cross over in the fall, so just trying to understand, you know, what you're looking at today that helps you sort of Yeah, a very nuanced question and nuanced answer.

Speaker Change: What you are looking at today that helps you sort of form that guidance.

Speaker Change: Yeah, very nuanced question nuanced answers. So so part of it obviously is what happened last year right. So when we talk about.

Getting back to parity or crossing over.

Speaker Change: A part of that is what was a very unusual and pretty tepid.

Speaker Change: Demand profile in 2020, especially as we got later into the year and we really did not have a typical.

Speaker Change: Typical busy season last year at all.

Speaker Change: When you think about again.

Speaker Change: Areas.

Speaker Change: Yes.

Speaker Change: Puts and takes as it relates to this year movement. Ultimately is the answer right. We rely somewhat on housing to create that seasonal.

Christopher P. Marr: So, part of it, obviously, is what happened last year, right? So when we talk about, you know, getting back to parity or crossing over, part of that is, you know, what was a very unusual and pretty tepid demand profile in 2023, especially as we got later into the year, and we really did not have a typical busy season last year at all. When you think about, again, the various, you know, puts and takes as it relates to this year, movement ultimately is the answer, right? We rely somewhat on housing to create that seasonal uplift in demand, but there are obviously other drivers that relate to that, as well.

Speaker Change: Uplift in demand, but there are obviously other drivers.

Speaker Change: That relate to that.

Speaker Change: As well so we look for that mobility, which again in the next couple of weeks you start to look for an opportunity just seasonally move rate up and so March 15th.

Speaker Change: June 1st June 15th Theyre going to be pretty telling as we think about.

Speaker Change: How this year is going to play out.

Speaker Change: The health of the consumer.

Speaker Change: It seems really good I mean, our customer metrics are continue to be.

Speaker Change: High quality.

Speaker Change: And we continue to see.

Speaker Change: Our existing customer base be pretty solid so that's.

Christopher P. Marr: So we look for that mobility, which Again, in the next couple of weeks, you start to look for an opportunity to seasonally move rates up. And so March 15 to June 1 and June 15 are going to be pretty telling as we think about how this year is going to play out. The health of the consumer seems really good.

Speaker Change: That's a positive for us really is going to come down to.

Speaker Change: Just that general mobility, and we're going to know a lot more stock.

Speaker Change: Starting mid March through through June to see out 24 has got to play out.

Speaker Change: Got it thanks for taking my questions.

Speaker Change: Thank you. The next question comes from Jeff Spector of Bank of America. Please go ahead.

Christopher P. Marr: I mean, our customer metrics continue to be high quality. And we continue to see, you know, our existing customer base be pretty solid. So that's, that's a positive for us. So really, it's going to come down to just that general mobility.

Jeffrey Alan Spector: Hi, everyone at Lithia on for Jeff.

Jeffrey Alan Spector: I was hoping for more color on your lower performing sunbelt market.

Jeffrey Alan Spector: And primarily Florida.

Christopher P. Marr: And we're going to know a lot more, you know, starting mid March through through June to see how 24 is going to play out. Thanks for taking my question. Thank you. The next question comes from Jeff Spector at Bank of America. Hi everyone, it's Lizzy on for Jeff. For more color,

Jeffrey Alan Spector: That was kind of touched on at the start of the call.

Speaker Change: Can you speak to any common themes youre noticing across.

Speaker Change: Your sunbelt market.

Speaker Change: Really more so on move in rate trends.

Christopher P. Marr: Marilee Lloyd, Can you speak to any common themes you're noticing? For all, more so, and Ray Tran. All right, so taking it from the end of the beginning, if the question was that is there any different behavior in Sunbelt markets for the existing customer base, then the answer is that there is not any different behavior in Sunbelt markets than it is in the rest of the country. Again, healthy consumer, healthy customer, and the rate increase process pretty consistent with what we saw certainly in the last six months of last year. From an occupancy and demand perspective, generally across the Sun Belt, you've just got markets that are higher volatile than the markets that are more urban. You have markets that rely more on housing than you do in the more urban markets.

Speaker Change: And then also curious to hear how the existing customer.

Speaker Change: Ms responding to your ECR I program.

Speaker Change: Good day.

Speaker Change: Yes.

Speaker Change: So taking it from from the end of the beginning.

Speaker Change: If the question was that is there any different behavior in Sun belt markets for the existing customer base.

Speaker Change: Then that answer is there is not any different behavior in the sunbelt markets than it is in the rest of the country again healthy consumer healthy customer and the rate increase process.

Speaker Change: Pretty consistent with what we saw certainly in the last six months of last year.

Speaker Change: From a.

Speaker Change: From an occupancy and demand perspective.

Speaker Change: Generally across the Sunbelt, you've just got.

Speaker Change: Hi.

Speaker Change: You've got markets that are higher higher volatility than than the markets that are more urban you have markets that rely more on housing than you do in the more urban markets.

Christopher P. Marr: West Florida, you have a continued bit of an impact from the benefit from hurricanes that has made comps a little bit more difficult. You've obviously got a little more of an impact on supply in the Sun Belt markets than you do in the more urban markets. I think those are kind of the high-level reasons why you're seeing some difference in performance.

Speaker Change: West, Florida, you have a continued bit of an impact from benefit from hurricanes that has.

Speaker Change: Made comps a little bit more difficult.

Speaker Change: We got a little more of an impact of supply in.

Speaker Change: In the Sunbelt markets than you do in the more urban markets.

Speaker Change: I think those are kind of eye level.

Speaker Change: Reasons, why youre seeing some difference in performance in this stage of the cycle.

Christopher P. Marr: And in this stage of the cycle, you would expect that the Chicago's, New York's, etc. are going to perform a bit better because they just rely less on that housing movement and more on other drivers of demand. Thank you for watching. We'll see you next time.

Speaker Change: You would expect that that the Chicago's.

Speaker Change: New York's et cetera are going.

Speaker Change: Going to perform a bit better because they just rely less on that housing movement and more on other drivers of demand.

Speaker Change: Great. Thank you.

Speaker Change: And I was also curious on <unk>.

Maybe this was touched on earlier.

Christopher P. Marr: Take care. I was also curious about earlier for All that, about the Funnel of Demand. Are you able to quantify how that's impacted your... Conversion, for Yeah, the impact of those changes, you know, improved the conversion rate of customers modestly. Again, it's difficult to isolate that relative to other market forces. Obviously, we continue to see trends in marketing spend that are, you know, bouncing all over the place depending upon who we're competing against in that in those particular markets. And so that puts pressure on us from the other side of the equation, and we're seeing a little bit different customer behavior. But, you know, all these continuous improvements in terms of making the experience for the customer as simple, easy, and intuitive as possible, we believe, and they will continue on as we move into 24 and beyond, continue to drive us towards meeting that customer where they want to be met. You know, our data and our focus groups tell us that a third of our customers are perfectly happy with a self-service model, but equally, we have another third who continue to want an in-store teammate who is going to help them with their storage needs and walk them through the process in a very personalized way.

Speaker Change: <unk> question as well.

Speaker Change: Back in the fall you guys released Q.

Speaker Change: Im sorry to the website upgrades, we're making and how that was translating into top of the funnel demand are you able to.

Speaker Change: Quantify how that impacted your conversion rate.

Speaker Change: For bringing on new customers.

Speaker Change: Into year end and in Q as we said in February.

Speaker Change: The impact of those changes.

Speaker Change: Improved modestly the conversion rate of customers again, it's difficult to isolate that relative to other market forces. Obviously, we continue to see.

Trends in.

Speaker Change: Marketing spend that are bouncing all over the place depending upon.

Speaker Change: Who we're competing against in that in those particular markets and so that puts pressure on us from the from the other side of the equation and we're seeing a little bit different customer behavior, but in all of these continuous improvements.

Speaker Change: In terms of making the experience for the customer as simple easy and intuitive as possible we believe.

Speaker Change: And they will continue on as we move into 'twenty, four and beyond that continue to drive us towards meeting that customer where they want to be met our data would tell us in our focus groups that a third of our customers are perfectly happy with that self service model, but equally we have another third who continue to want.

And in store teammate who is going to help them with their storage needs and walk them through the process in a very personalized way so.

Unnamed Speaker: So, you know, our focus is on how do we capture all those customers at either extreme, you know, in the way that they want to be served and not just try to create kind of a one-stop shop, you know, one way of doing things, because we don't think that will produce the right answer over the long term. Thank you. The next question comes from...................... Apologies from Juan Sanabria from... Hi, good morning.

Speaker Change: Our focus is on how do we capture all of those customers that either extreme and the way that they want to be served and.

Speaker Change: And not just try to create kind of a one stop.

Speaker Change: One way of doing things, because we don't think that will produce the right answer over the long term.

Speaker Change: Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you. The next question comes from Todd Thomas from Keybanc Capital markets. Please go ahead.

Todd Michael Thomas: I apologize from Hawaii.

Todd Michael Thomas: From BMO capital markets. Please go ahead.

Unnamed Speaker: Thank you for your time. Just hoping you could share your thoughts on kind of one big question that we consistently get from investors with regard to the move in, move out spread and how that has been fairly negative and how that should not be a point of concern for an eventual recovery here. You know, there's clearly a benefit from ECRIs that helps offset that negative new lease spread. But if you could share your thoughts and just general views on the offsets and why that isn't a point of concern. Longer term, I guess for the business, given the pricing pressure on new customers. I'll start.

Todd Michael Thomas: Hi, Good morning, Thank you for the time.

Speaker Change: Just hoping you could.

Todd Michael Thomas: Share your thoughts on kind of one big question that we kind of consistently get from investors with regards to the move in move out spread.

Speaker Change: That's been fairly negative and how that should not be appointed concern.

Speaker Change: For an eventual recovery.

Speaker Change: Here.

Speaker Change: There is clearly a benefit from ECR is that helps offset that negative new lease spreads, but if you could share your thoughts and just general views on the offsets and why that isn't.

Speaker Change: A point of concern.

Speaker Change: Longer term I guess for the business given the pricing pressure on your customers.

Christopher P. Marr: I mean, I think I think part of it is, is that if we had our druthers, we'd much rather see that be positive. I think the reality is, is that we're still, We're still adjusting asking rates to pandemic levels and coming off of post-pandemic levels. And then I think you compare those to pre-pandemic levels and overall rates look on a compounded growth rate basis to be here in 23 and heading into 24, kind of where you would think they would have been had you asked us that question pre-pandemic. That said, clearly there are drivers that we've talked about for several quarters and others have talked about that the overall levels of demand due to the housing market are a little bit lower than you would normally expect them to be, so don't know how to answer the question from the standpoint of, of Is There a Concern?

Speaker Change: I'll start I mean, I think I think part of it is is that if we had our druthers, we'd much rather see that be positive I think the reality is is that we're still.

Speaker Change: We're still.

Speaker Change: We're still adjusting asking rates to pandemic levels and coming off of post pandemic levels and then I think you can compare those to pre pandemic levels and overall rates looks on a compounded growth rate basis.

Speaker Change: To be here in 'twenty, three and heading into 'twenty for kind of where you would think they would have been had you asked that question pre pandemic.

Speaker Change: That said clearly there are there are drivers that we've talked about for several quarters and others have talked about the overall levels of demand due to the housing market are a little bit lower than you would normally expect them to be so.

Speaker Change: Don't know how to answer the question from the standpoint of.

Speaker Change: Is there a concern asking rate theres always a roll down and that's just the roll down today is a little bit is a little bit greater than than it typically is when comparing customers who are leaving the platform versus customers who are coming in.

Christopher P. Marr: Asking right, there's always a roll down, it's just the roll down today is a little bit greater than it typically is when comparing customers who are leaving the platform versus customers who are coming in. Can you give a sense of how the move-in... rates are compared to last year for kind of a fourth quarter? The trend, did December end better, and how are January and February going, and maybe juxtapose that with move-in, move-out spreads? Yeah, if you think about rates to new customers, they were down in October, about 18%. When we average out the quarter and kind of the exit, it was around 14%. And then here, the average for the first two months of the year expanded by about 100 basis points. It's around 15% negative. And how about the spreads for new customers? Is that steady or contracted at all?

Speaker Change: Can you give a sense of how the move in.

Speaker Change: Rates are compared to last year for the fourth quarter.

Speaker Change: The trend in December on better an hour January and February are growing and maybe juxtapose that move in move out spreads.

If you are so if you think about rates to new customers they were down.

Speaker Change: In.

Speaker Change: In October.

About 18% when we average out the quarter and kind of the exit it was around 14%.

Speaker Change: And then here the average for the first two months of the year.

Speaker Change: Spanned at about 100 basis points, it's around 15% negative.

Speaker Change: And how about the the spreads for new customers is that steady or contracted at all or.

Christopher P. Marr: Yeah, it stayed relatively steady, and it's about negative 34%. Thank you. The next question comes from... me. Good morning.

Speaker Change: Yes stayed relatively steady and it's about negative 34%.

Speaker Change: Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you. The next question comes from Michael Goldsmith at UBS. Please go ahead.

Unnamed Speaker: Thanks a lot for taking my question. My question is on the same sort of revenue guidance. Can you just talk a little bit about or what is assumed in the guidance in terms of the gap between the urban and more suburban markets and the trajectory through the year? It seems like the New York market has clearly been outstanding relative to the rest of your market. So I'm wondering how you're thinking about kind of like similar urban markets and how the gap is positioned relative to some of the other markets that you have exposure to...

Michael Goldsmith: Good morning, Thanks, a lot for taking my question.

Michael Goldsmith: My question is on the same store revenue guidance can you just talk a little bit about.

Michael Goldsmith: What is assumed in the guidance in terms of the gap between the urban and more suburban markets and the trajectory through the year.

Michael Goldsmith: It seems like the New York market has clearly been outstanding.

Michael Goldsmith: Outstanding relative to the rest of your markets.

Michael Goldsmith: Im wondering how youre thinking about kind of like similar ish urban markets and how how the gap is positioned relative to some of the other markets that you have exposure too. Thanks.

Unnamed Speaker: I think, consistent with some commentary to a previous question, our macro expectation is that those markets that rely less on housing change to drive demand will outperform over the course of the year the other markets that depend more on that customer. So it's going to vary across region and across the portfolio, again, also related to how 2023 played out. But overall, I think the markets that showed strength in the fourth quarter will continue to show strength as we go throughout 2024. And I think some of the markets that had some greater weakness in the fourth quarter have bottomed out and will be better performing, albeit not as strong as the urban markets through 2024 and the other markets somewhere in the middle. I appreciate that, Chris.

Speaker Change: Yes, I think consistent with some commentary to two <unk>.

Speaker Change: Previous question, our macro expectation is that those markets that.

Speaker Change: Rely less on.

Speaker Change: On housing change to drive demand will outperform over the course of the year.

Speaker Change: The other markets that depend more on that customer.

Speaker Change: So it's going to vary across regions and across the portfolio again also related to how 2023 played out.

Speaker Change: But overall I think the markets that showed strength.

Speaker Change: In the fourth quarter, we would expect to continue to show strength as we go throughout.

Speaker Change: 2024.

Speaker Change: I think some of the markets that add some some greater weakness in the fourth quarter have bottomed out and will be.

Speaker Change: We will be better performing albeit.

Speaker Change: Not as strong as the urban markets through.

Speaker Change: Through 'twenty four.

Speaker Change: The other market somewhere in the middle.

Speaker Change: Alright, I appreciate that Chris and my follow up is last year, you had 70 properties under the same store pool.

Unnamed Speaker: And my follow-up question is, last year, you had 70 properties under the same store pool, and there was a clear benefit with the gap between the 2023 and 2022 same store pools. This year, you only have six properties entering the same store pool.

Speaker Change: There's been a there's been a clear benefit.

To do with the gap between the 2023 and 2022 same store pools. This year you only have six.

Speaker Change: Six properties entering the same store pool.

Unnamed Speaker: But I was wondering, how are you thinking about the new entrances in 2023 that drove a lot of outperformance this year? What is the expectation for 2024 as you kind of do your asset by asset building? So just to be clear, your question is the stores that entered the 23rd poll, what is their continued contribution into 24? Is that the question? Yeah, can they continue to sustain momentum?

Speaker Change: Wondering how are you thinking about that.

The 2020, the new entrants in 2023 that had.

Speaker Change: Sure.

Speaker Change: <unk> drove a lot of outperformance this year what is the expectation.

Speaker Change: For 2024, as you kind of do your asset by asset buildup.

Speaker Change: So just to be clear.

Speaker Change: Your question is the stores that entered the 'twenty three pool what is their continued contribution into 'twenty four is that the question.

Speaker Change: Yes, Ken Kenny continue their sustained momentum or are they still is there still upside in.

Unnamed Speaker: Are they still, you know, is there still upside to it? And, you know, are they still kind of underperforming, kind of like the entire same circle? I think overall they are performing a little bit better than the overall same pool, but it's.

Speaker Change: Are they still kind of underperforming kind of like the entire same store pool.

Speaker Change: I think overall.

Speaker Change: There are performing.

Speaker Change: A little bit better than the overall same store pool, but it's a mix it's.

Timothy M. Martin: It's a mix, so if you think about the Storage West portfolio we have, and that was the biggest chunk of the stores that were added this past year. Overall, for that portfolio, the San Diego and Las Vegas properties are performing really well. The stores in Phoenix, consistent with Chris's commentary earlier, Phoenix is one of the Sunbelt markets that has felt a little bit more pressure due to housing and some supply issues there.

Speaker Change: It's a mix. So if you think about the storage west portfolio, we have and that was the that was the biggest chunk of the stores that were added this past year.

Overall for that for that portfolio, the San Diego and Las Vegas properties are performing really well.

Speaker Change: The stores in Phoenix, consistent with Chris's commentary earlier Phoenix is one of the sunbelt markets that has felt a little bit more pressure due to due to housing and some supply issues. There. So overall the contribution from those stores relative to the portfolio average, it's still a positive or less positive in 'twenty four than it was in 2003.

Timothy M. Martin: So overall, the contribution from those stores relative to the portfolio average is still positive, but less positive in 24 than it was in 2018. And then the six stores that are out of this year are negligible, so they really don't have any impact. Yes. Thank you very much.

Speaker Change: And then the six stores that are out of this year and negligible. So they really don't have any impact.

Speaker Change: Thank you very much good luck in 2024.

Unnamed Speaker: Good luck in 2024. I appreciate it. Thank you. The next question comes from Keegan Carl.

Speaker Change: I appreciate it thanks.

Speaker Change: Thank you. The next question comes from Keegan call at Wolfe Research. Please go ahead.

Unnamed Speaker: Yeah, thanks, guys. I know this one's touched on a little bit, but just curious, one for Tim, how you're kind of embedding your marketing expense growth? as Chris alluded. This is kind of market by market, but we'd love that one. How are we approaching it? Is that your question? Yeah, I guess just what are your expectations for marketing expense growth? I know it can obviously be volatile, at least your initial guidance where you have it set up. Certainly it can.

Keegan: Yeah. Thanks, guys I noticed from such on a little bit, but just curious one for Tim how you're kind of embedding your marketing expense growth and 24 just given.

Keegan: As Chris alluded to it.

Keegan: On a market by market, but would love to add more color there.

Our how were approaching it is that your question Yeah. I mean, I guess, just what are your expectations for marketing expense growth.

Keegan: Obviously, it can be volatile, but at least your initial guidance, where you have it set up.

Keegan: They can be at the midpoint of our expense guidance. It would assume that that marketing expenses plus or minus inflationary type expenses. We tend we tend as you've seen in the past we tend to be a little bit steadier.

Timothy M. Martin: At the midpoint of our expense guidance, it would assume that marketing expenses are, you know, plus or minus inflationary type expenses. We tend, as you've seen in the past, to be a little bit steadier on marketing spend relative to some others. We tend to press the pedal down a little bit when we see great returns on that spend, and we tend to pull it back a little bit when we don't. And so that can create some volatility from, you know, from quarter to quarter. But overall, overall, our expectation is that marketing expenses in that bucket of expenses that is more inflationary in nature, not like the ones that I mentioned in my preamble of taxes, insurance, and snow. Got it. Another one for you, Tim. Just kind of curious about snow removal.

Keegan: On marketing spend relative to some others.

Keegan: We tend to press the pedal down a little bit when we see great returns on that spend and we tend to pull it back a little bit when we don't and so that can create some volatility from quarter to quarter, but overall overall, our expectation is that marketing expenses in that bucket of expenses that that is more inflationary in nature not like the ones that I mentioned in my.

In my preamble of taxes insurance and snow.

Keegan: Got it and then another one for you Tim just kind of curious on snow removal.

Timothy M. Martin: We're now in March, so... What would be driving concern for the rest of the quarter here? The concerns are that it was virtually zero last year and it can snow, and you know, we're a little bit more heavily weighted to the Northeast markets than some others. And there are years that it snows in November and December too.

Timothy M. Martin: Now in March so just what would be driving concerns kind of the rest of the quarter here.

Timothy M. Martin: The concerns are that it was it was virtually zero last year and a 10 it can snow.

Timothy M. Martin: A little bit more heavily weighted to the northeast markets than some others.

Timothy M. Martin: There are there are years that it snows in November and December two so we don't we don't know what those are going to look like here.

Timothy M. Martin: So we don't know what those are going to look like here in the fourth quarter of 24. It doesn't take a lot of snow events for it to add up.

Timothy M. Martin: In the fourth quarter of 'twenty four.

Timothy M. Martin: <unk> taken a lot of snow events for data.

Unnamed Speaker: Thanks for the time, guys. I appreciate it. Thank you. Maybe just shifting back to property taxes for a second, do you have a sense of what percent of the portfolio is currently within tax abatement burn-off? And if so, do you also have a sense of the magnitude of the increase in property taxes that those properties would incur?

Speaker Change: Got it thanks for the time guys.

Speaker Change: Yes, I appreciate it.

Speaker Change: Thank you. The next question comes from sensor.

Green Street: Green Street. Please go ahead.

Thank you and maybe just shifting back to property taxes for a second do you have a sense of what percent of the portfolio is currently within tax abatement burn off and if so do you also have a sense of what the magnitude of the increase in property taxes that those properties would incur.

Unnamed Speaker: Sorry, the percent of the percent of stores that are, Can you just repeat that part of the question? Yeah, yeah, no problem. The percent of the portfolio that would... Some of the portfolio that is currently within like a tax abatement burn off. Yeah, so we have some stores in New York that are in that are in that are in that phase, but that's really the only place that we have it across the portfolio.

Alright, the percent of the percent of stores that are.

Speaker Change: Could you just repeat that.

Speaker Change: Yeah.

Speaker Change: Yes, yes, no problem.

Speaker Change: Percent of the portfolio that way.

Speaker Change: The percent of the portfolio that is currently within like a tax abatement burn off.

Speaker Change: So we have we have some stores in New York that are in that are in that are in that that are in that phase, but that's really the only place that we have it across the portfolio. So overall, it's a really small percentage.

Timothy M. Martin: So overall, it's a really small percentage, as you think about it from the entirety of the portfolio, right, of course, small, small percentage, but do you guys, are you guys, have a sense of like the magnitude of the step up in property taxes is going to be over the next several years? We do. I think we disclosed the impact that we saw from ICAT burnoffs in our SUP, as we always do. I think that number I'm trying to pull out here, but I think it was $600,000, plus or minus.

Speaker Change: As you think about it from the entirety of the portfolio.

Speaker Change: Right, Yes of course, yes, small small percentage, but and then do you guys anyway.

Speaker Change: Sense of like the magnitude of step up in property taxes is going to be over the next several years.

Speaker Change: We do I think we disclosed the impact that we saw from high cat burn offs in our in our <unk> as we always do I think that number I'm trying to pull it here, but I think it was $600000 I believe.

Speaker Change: Plus or minus.

Timothy M. Martin: For the fourth quarter, that number will continue to grow a little bit into 25 and 26, and then I think it largely levels off. So it has an impact. We have historically disclosed that impact. It's on page 17 of the SUP, and you can see in the fourth quarter it was $678,000 because of the impact of those ICAPs burning off. I'm sorry, 678 for the whole year now.

Speaker Change: For for the fourth quarter that number will continue to grow a little bit into into 'twenty five 'twenty six and then I take that level largely levels off after that.

Speaker Change: So it hasnt it has an impact.

Speaker Change: We have we've historically disclosed that impacts us on page 17 of the summer and you can see in the fourth quarter. It was 678000 was the impact of those of those high caps burning off.

Speaker Change: Oh, I'm, sorry, 678 for the whole year not for them.

Unnamed Speaker: Yes, yeah, no, of course. I was just trying to get a sense of what you guys might be underwriting for what's coming down the pipe here in the next year or two, but I appreciate the color. Thank you. Hi, good morning, everyone.

Speaker Change: Yes, yes, no of course I was just trying to get a sense of what you guys may have been underwriting for what was coming down the pipe here in the next year or two but.

I appreciate the color. Thank you.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Thank you. The next question comes from Samir Khanal Evercore ISI. Please go ahead.

Samir Upadhyay Khanal: Hi, good morning, everyone.

Samir Upadhyay Khanal: Yes.

Christopher P. Marr: Hey, Chris, in your opening remark, I believe you mentioned that operating trends have stabilized. Maybe you could talk a little bit more about that comment as we try to, you know, assess your guidance here. So in the context of 2023, where, if you recall, every quarter, the volatility just seemed to be abnormal. If you think back, we had a relatively normal January of 23. And then February was fine. And then March was really bad. And then we seem to have another repeat in the second quarter where June. It was pretty disappointing.

Samir Upadhyay Khanal: In your opening remarks, I believe you mentioned that operating trends have stabilized I guess maybe.

Samir Upadhyay Khanal: Maybe maybe talk maybe give a little bit more color on that comment as we try to assess your guidance here.

Samir Upadhyay Khanal: So in the context of 2023, where if you recall every quarter.

Samir Upadhyay Khanal: The volatility just seem to be abnormal.

Samir Upadhyay Khanal: If you think back.

Samir Upadhyay Khanal: So we had a relatively normal January of 'twenty three and then February was fine and then March was.

Samir Upadhyay Khanal: It was really bad.

Samir Upadhyay Khanal: And we seem to have another repeat in the second quarter where June.

Samir Upadhyay Khanal: Was pretty disappointing.

Christopher P. Marr: September in the third quarter was pretty disappointing. The fourth quarter was the first quarter during last year where, you know, kind of our expectation of seasonal trends met reality. And then we saw that continue here into January and February. You know, we obviously have the benefit here on March 1st of knowing how those two months went. That gives us some confidence that we're off to a start that matches up with our expectations and guidance for the full year. All that being said, as you know, and I think I answered a previous question, you get into the latter part of this month and certainly into April, May, and the beginning of June. And, you know, that's where the assumptions that Tim laid out at kind of both ends of the spectrum are going to start to materialize. And we'll obviously have a lot more information, you know, just the nature of the business, as you know, from a seasonal perspective. Got it. And I guess just, I wanted to ask you about occupancy and your thoughts on that. I mean, if you go back to 2019, you're about 100 basis points below.

Samir Upadhyay Khanal: September in the third quarter was pretty disappointing the fourth quarter was the first quarter during last year.

Samir Upadhyay Khanal: We're kind of our.

Samir Upadhyay Khanal: Spectation of seasonal trends.

Samir Upadhyay Khanal: Met the reality and then we saw that continue here into January and February.

Samir Upadhyay Khanal: We obviously have the benefit here on March 1st of knowing how those two months went and.

Samir Upadhyay Khanal: That gives us some.

Samir Upadhyay Khanal: Confidence that we're off to a.

Start that matches up with our expectations and guidance for the full year.

Samir Upadhyay Khanal: All that being said as you know.

Samir Upadhyay Khanal: And I think I answered to a previous question you get into the latter part of this month and certainly into April may at the beginning of June.

That's where the assumptions that Tim laid out it kind of both ends of the spectrum are going to start the <unk>.

Samir Upadhyay Khanal: Materialise and we will have obviously a lot more information.

Samir Upadhyay Khanal: Just the nature of the business as you noted from a seasonal perspective.

Speaker Change: Got it and I guess, just I wanted to ask you on occupancy.

Speaker Change: And your thoughts on that I mean, if you go back to 2019.

Speaker Change: About 100 basis points below so just curious on your thoughts as to how to think about occupancy through the year.

Christopher P. Marr: So just curious as to how to think about occupancy through the year. Have we sort of leveled off in occupancy, or do you think there's further sort of movement downward here this year? Thanks.

Speaker Change: We sort of leveled off in occupancy or do you think there's further sort of movement downward here in this year. Thanks.

Christopher P. Marr: Yeah, I think our kind of, you know, midpoint expectations are that we generally bounce around where we are today. There's a modest level of occupancy improvement as we get later into the year at kind of the midpoint. At the more conservative end, that doesn't materialize.

Speaker Change: Yes, I think our kind of.

Speaker Change: Midpoint expectations as we generally bounce around.

Speaker Change: Where we are today, yet so there is a modest level of occupancy improvement as we get later into the year at.

Kind of the midpoint.

Speaker Change: At the more conservative and that doesn't materialize in at the better and we obviously as Tim said, we see.

Christopher P. Marr: And at the better end, obviously, as Tim said, we see a better mobility market for us in the busy season, and then that translates into some stronger occupancy. But clearly, the experience in 23 is that we just didn't see a whole cohort of customers that we expected to get going into the busy rental season. And that trickles through the balance of the year, both from an occupancy and a rate perspective. Supply, as Tim said, is a bit of our friend that continues to come down. Again, market by market, there are parts of the country that are going to continue to experience a little bit of pain from the supply there. You know, I think North Jersey is probably the one that fits into that.

Speaker Change: A better mobility market for us in the busy season, and then that translates into.

Speaker Change: And to some stronger occupancy, but clearly.

Speaker Change: The experience in 'twenty three as we just didn't see.

Speaker Change: And our whole cohort of customers that we expected to get going into the busy rental season and that trickles through the balance of the year, both from an occupancy and a.

Speaker Change: And our rate perspective.

Speaker Change: Supply as Tim said I think as.

Speaker Change: As a bit of our friend that continues to come down again market by market. There are parts of the country.

Speaker Change: We're going to continue to experience a little bit of pain.

Speaker Change: From the supply there.

Speaker Change: North Jersey is probably the one that fits into that and then there are markets like Phoenix, where.

Christopher P. Marr: And then, you know, there are markets like Phoenix, where, you know, I think all the supply that came in got certainly hidden by the tremendous surge in demand from COVID. And then, as things have stabilized out, I think you're just going to naturally have a kind of lower market occupancy for a time until, you know, again, until that population growth backfills that supply. Got it, got it. Thank you. And just one last one, if I may. I think you touched on eCRIs, but I don't know if you gave the magnitude.

Speaker Change: Thank all of the supply that came in got certainly hidden by the tremendous surge in demand from Covid and then as things have stabilized out I think you're just going to naturally have.

Speaker Change: What kind of a lower market occupancy for a time until.

Speaker Change: Again until that population growth back bills in that supply.

Speaker Change: Got it got it.

Speaker Change: And then just one last one if I may.

Speaker Change: I think you touched on <unk>, but I don't know if you gave the magnitude I mean, what are those increases look like today, maybe compare them to.

Christopher P. Marr: I mean, what do those increases look like today? Maybe compare them to last year at this point. Thanks.

Speaker Change: Last year at this point thanks.

Christopher P. Marr: Yeah, if you think about last year, you know, again, we kind of came down in 22 and 23 from those, you know, kind of 20% type increases on average that we saw at the peak of COVID. They've been basically right, averaging around 15% here for some time. And, and again, our kind of expectations as we go through 2024 is that the cadence and magnitude will be pretty consistent. At the midpoint, I think, again, in a more bullish scenario with better mobility, we would think we could maybe extract a little bit more out of it. Thank you. Great, I appreciate the question.

Speaker Change: Yeah. If you think about last year again, we kind of came down in 'twenty, two and 'twenty three from those.

Speaker Change: Kind of 20% type increases on average that we saw at the peak of Covid.

Speaker Change: <unk> been basically right averaging around 15% here for for some time and again, our our kind of expectations as we go through 2024 is the cadence.

Speaker Change: And magnitude will be pretty consistent.

Sure.

Speaker Change: At the midpoint I think again it up.

Speaker Change: At a more.

Speaker Change: And are more bullish scenario with better mobility, we would we would think we could maybe extract a little bit more out of that.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question comes from Eric Loop Chau at Wells Fargo. Please go ahead.

Speaker Change: Alright, great I appreciate the question.

Unnamed Speaker: You touched a little bit on the M&A environment, and you said the bid-ask spread remains pretty wide. I think you talked about it being around 15% or so toward the end of last year; could you update us on that? And I guess given where your current cost of capital is, is there any kind of way to think about which cap rate ranges may be attractive for you to start to do more transactions that fit your investment criteria? Good morning, Eric.

Speaker Change: Talking a little bit on the M&A environment, and you said the bid ask spread remains pretty wide I think you talked about it being.

Speaker Change: Around 15% or so towards the end of last year. So maybe you could.

Speaker Change: Paid us on that and I guess, given where your current cost of capital is there kind of a way to think about.

Speaker Change: Which cap rate ranges may be attractive for you to start.

Speaker Change: To do more transactions that fit our investment criteria.

Speaker Change: Yes, good morning, Erik So your recollection is good we saw the bulk of 2023, we felt like we were generally about 20% disconnected and then.

Christopher P. Marr: So your recollection is good. You know, we saw through the bulk of 2023 that we felt like we were generally about 20% disconnected. And then last quarter we talked about that narrowing a bit, maybe into the 15% off the mark. And now I would say it's probably closer to 10.

Speaker Change: Last quarter, I talked about that narrowing a bit maybe into the 15% off the mark and now I would say, it's probably closer to 10, so we're getting closer.

Christopher P. Marr: So you know, we're getting closer. And again, from looking at it from our cost of capital for the right opportunity, we're looking, generally speaking, for something in the sixth cap or better range. And so, you know, we're starting to find a couple of those opportunities on attractive, attractive properties that fit our criteria, and what we're looking for are returns that make sense to us, but it's a trickle at this point. We're ready for it to be more of a trickle when it starts to open. Okay, I appreciate that. And it's just one more for me.

Speaker Change: And again from from looking at it from our cost of capital for the right opportunity were looking generally speaking we're looking for something in the in.

Speaker Change: In the six cap or better range and so.

Speaker Change: We were starting to find a couple of those opportunities on attractive.

Speaker Change: Attractive properties that fit our criteria and what we're looking forward at returns that make sense to us, but it's a it's a trickle at this point.

Speaker Change: We're ready for it to be more of a trickle when when when it starts to open up.

Speaker Change: Okay I appreciate that and then just one more for me.

Christopher P. Marr: As you think about capital allocation, if it remains a trickle, and you don't see a lot of acquisition opportunities, I guess at one point, at what point would you consider other forms of capital return, like potentially, you know, repurchasing shares, which I know have been a big part of your plan historically, but, you know, given where your leverage is today, you obviously have a lot of room to bring leverage higher for other forms No doubt about that. Great question!

Speaker Change: As you think about capital allocation if it remains a trickle and you don't see a lot of acquisition opportunities I guess, the one point at what point would you consider other forms of capital return like potentially repurchasing shares, which I know has been a bit part big part of your plan historically, but.

Speaker Change: Given where your leverage is today, you obviously have a lot of room.

Speaker Change: To bring leverage higher for other forms of capital return.

Speaker Change: No doubt great question as we think about it our number one objective is to.

Christopher P. Marr: You know, as we think about it, our number one objective is to, if we had the alternative, would be to continue to grow and expand in the markets that we want to be in with assets that are of high quality. If those opportunities aren't there, we tend to double down on our focus on internal opportunities for redevelopments and potentially some developments if they penciled out. But at some point, if that is disconnected and we continue to just de-lever and de-lever and de-lever as we have been, and there's also a disconnect in the value of our shares versus private market valuations, of course, we have that tool to consider share repurchases. And at some point, when the disconnect is big enough and the time period is long enough, then that is certainly something that we would consider.

Speaker Change: As if we had the alternative would be to continue to grow and expand in the markets that we want to be in and with assets that quality if that if those opportunities arent there we.

Speaker Change: Tend to double down on our focus on internal opportunities for Redevelopments.

Speaker Change: And.

Speaker Change: And potentially some developments if they if they penciled out but at some point if that is disconnected and we continue to just delever and de lever and Delever as we have been.

Speaker Change: And there is also a disconnect and the value of our shares versus private market valuations of course, we have that tool.

Speaker Change: To consider share repurchases and at some point the disconnect is big enough.

Speaker Change: And the time period is long enough then that is certainly something that we would consider.

Speaker Change: Yes.

Unnamed Speaker: All right. Thank you. Thank you, guys.

Speaker Change: Alright, Thank you guys.

Speaker Change: Appreciate it.

Speaker Change: Yes.

Unnamed Speaker: Yeah, hi. Two quick ones here. One, just a clarification. Just want to make sure we're using the same terminology.

Speaker Change: Thank you next question comes from Mike Mueller of Jpmorgan. Please go ahead.

Michael Goldsmith: Yes, Hi, two quick ones here, one just a clarification I just want to make sure reason using the same terminology.

Unnamed Speaker: During the guidance discussion, when you talked about, you know, rate parity, hopefully in the fall, you're talking about new move-in rates that you're getting then on a year-over-year basis compared to those new move-in rates from last year. Is that correct? Yes, that's correct.

Michael Goldsmith: During the guidance discussion when you talked about.

Michael Goldsmith: Great parity hopefully in the fall Youre talking about new move in rates that youre getting than on a year over year basis compared to those new move in rates from last year is that correct.

That's correct.

Unnamed Speaker: Okay, and then a second on the expense side. Do you have any visibility as to when I guess insurance growth will moderate? You talked about it being 47%, I think a 20% expectation, you know, after you kind of hit the mid, mid, Mayor, whatever the date was this year, but do you think it stays outsized in terms of growth for the foreseeable future, or do you see a notable drop off in the next year or so? Yeah, hey, Mike, it's Chris. I think I think that I wish I had that.

Michael Goldsmith: Okay, and then second on the expense side.

Do you have any visibility as to when I guess insurance growth will moderate you talked about it being 47%, 20% expectation. After you kind of hit the mid <unk>.

Speaker Change: Mayor whenever the date was this year, but.

Speaker Change: Do you think it stays out.

Speaker Change: Sized in terms of growth for the foreseeable future or do you see a notable drop off in the next year or so.

Speaker Change: Yeah, Hey, Mike, It's Chris I think I think that I wish I had that.

Christopher P. Marr: I wish I had that crystal ball. That would be awesome. I think there are so many variables, right? One is mother nature.

Chris: I wish I had that crystal ball.

Chris: That would be.

Chris: That would be awesome I think I think there's so many variables right. One is mother nature one is.

Christopher P. Marr: One is the investment returns that the insurers are achieving. And another is, you know, the entry or exit of capital into the property and casualty insurance space, particularly from the reinsurers. And I just think we're kind of in a period where we have maybe a little bit less competition. Uh, you know, maybe some concern about how they're matching up their assets and liabilities from a return perspective. And then we've had some events that haven't impacted our sector but certainly have impacted commercial real estate from a mother nature perspective. So, you know, I think we're maybe a little bit optimistic based on what we hear, that a moderating trend over the next couple of years is feasible. But honestly, that's 1 of those things that, you know, really is kind of dependent upon the time of your renewal. Ours is in May, and then what's going on with those other things outside of our control.

Chris: The investment returns that the insurers are achieving and another is the entry or exit of <unk>.

Chris: Capital into that into the property and casualty insurance space, particularly from the reinsurers.

Chris: And I just think we're kind of in a period, where we have maybe a little bit less competition.

Chris: Maybe some concern about how their matching up there their assets and liabilities from a return perspective, and then we've had some events that have an impact in our sector, but certainly have impacted commercial real estate from mother nature perspective. So.

Chris: I think I think.

Chris: Maybe.

Chris: A little bit optimistic based on what we hear that that that a moderating trend over the next couple of years is feasible.

Chris: But honestly, that's one of those things that.

Chris: Really is kind of dependent upon.

Chris: Both the time of your renewal ours is in May and then what's going on with those other things outside of our control.

Unnamed Speaker: Got it. So you find out when you find out. Okay. Okay. That's helpful. Thank you. All right, good morning. Sorry about that. It's been a long earning season. I'll try this again.

Speaker Change: Got it so you find out when you find out okay.

Speaker Change: Okay. That's helpful. Thank you.

Speaker Change: Thank you and the next question comes from Todd Thomas at Keybanc. Please go ahead.

Todd Michael Thomas: Alright, good morning, sorry about that it's been a long earnings season I'll try this again.

Christopher P. Marr: Chris, I guess, I'd like to, I guess, follow up first on Samir's question, and I'm wondering, you know, as you look back, whether you have any sense why operating trends were volatile, like you discussed during much of 23, whether it was, you know, maybe related to pricing strategies that you were employing, customer demand, competitor pricing, if there's any light that you can really shed on that in retrospect. Yeah, I think I think when we look back, I think you have a whole bunch of factors. You really kind of named most of them. I think we had a we had weather.

Todd Michael Thomas: Chris just wanted to I guess follow up first on some mirrors question and I'm wondering as you look back.

Todd Michael Thomas: Whether you have any sense why operating trends, where we're <unk>.

Todd Michael Thomas: All in all like.

Todd Michael Thomas: You discussed during much of 2003, whether it was.

Maybe related to pricing strategies that you're employing.

Todd Michael Thomas: Customer demand competitor pricing if there is any any light that you can really shed on that in retrospect.

Speaker Change: Yeah, I think I. Thank you.

Speaker Change: We look back I think you have a whole a whole bunch of factors you really kind of named most of them I think we had a.

Speaker Change: We had weather so I think to some degree you had some instances.

Christopher P. Marr: So I think to some degree, you had some instances in some of those months that I rattled off as sort of oddly poor, where you just had maybe a deferral of demand in those months. And then for those customers who still had the need, you know, perhaps they showed up in the month following. I think we had that really odd situation in the resale of existing single-family homes where you just saw historical low activity, and I think, you know, that had an impact. I think you saw, you know, other impacts on the housing side in terms of folks willing to relocate from an apartment perspective, given how pricing was moving there. I think competitor pricing certainly came into play to some degree in that. You had weird macro events, right?

Speaker Change: And some of those months that I that I rattled off as sort of oddly core.

Speaker Change: Were you just had maybe a deferral of demand in those months and then for those customers, who still add the need perhaps they showed up in the months. Following I think we had that that really odd.

Speaker Change: The situation in the resale of existing single family homes, where you just saw a historical low activity and I think.

Speaker Change: That was an impact I think you saw.

Speaker Change: Other impacts on the housing side in terms of folks willing to relocate from an apartment perspective, given how pricing was moving there.

Speaker Change: I think competitor pricing certainly came into play to some degree.

Speaker Change: On that you had weird macro events right not sure that the banking crisis or other things from a geopolitical perspective, ultimately really impact the storage customer, but to some degree perhaps they do a little bit in terms of mobility. So.

Christopher P. Marr: I'm not sure that the banking crisis or other things from a geopolitical perspective ultimately really impact the storage customer, but to some degree, you know, perhaps they do a little bit in terms of mobility. So a lot of anecdotes, hard to pinpoint to one item. It was, certainly, from my experience doing this for, you know, 30 years, it was a very unusual year.

Speaker Change: A lot of anecdotal.

Speaker Change: Hard to pinpoint.

Speaker Change: One item.

Speaker Change: It was just certainly from my experience doing this or.

Speaker Change: 30 years, it was a very unusual year.

Christopher P. Marr: Okay, in terms of competitor pricing, have you seen that, you know, become a little bit more predictable or just even out a little bit more? Yeah, I'm not sure I could say that it's become any more predictable. You know, again, week by week, in some markets with some of the stores that we compete with, it's becoming a little bit more constructive. And then we have other markets where, you know, quite the opposite is true. So it continues to be a very interesting and competitive environment.

Speaker Change: Okay and in terms of competitor pricing have you seen that.

Speaker Change: Become a little bit more.

Speaker Change: Either predictable or just even out a little bit more.

I'm not sure I can say that has become any more predictable.

Speaker Change: Again week by week, and some markets with some of the stores that we compete with it.

Speaker Change: Become a little bit more constructive and then we have other markets where we're.

Speaker Change: Quite the opposite is true.

Speaker Change: It continues to be a very interesting.

Competitive environment out there.

Christopher P. Marr: Okay, and then and then in terms of investment, it doesn't sound like you're seeing a lot, but some recent activity, you acquired in northern New Jersey and a couple in Connecticut. And as you look ahead, to the extent that the transaction environment loosens up a little bit. I'm just curious how you think about deploying capital between the urban market and the sunbelt and whether there's a preference or not, you know, as you think about investments moving forward.

Speaker Change: Okay, and then and then in terms of investments.

Speaker Change: You know it doesn't sound like you're seeing a lot, but some some recent activity.

Speaker Change: You acquired in Northern New Jersey, and a couple in Connecticut, and as you look ahead to the extent that transaction environment loosens up a little bit I'm. Just curious how you think about deploying capital between.

Speaker Change: The urban markets in the Sunbelt and whether there is a preference or not.

As you think about investments moving forward.

Timothy M. Martin: And we have a pretty wide view Todd across all of our target markets. There's really no preference in the short term to focus energy on some of the top 40 versus other of the top 40; you're really looking for opportunities that present themselves. We wish we could bring people to market exactly where we want them to be, but the reality is you're evaluating the opportunities that present themselves, and there aren't enough out there that you could really target to say, I want to focus on these five MSAs at the exclusion of the others. We're probably pretty wide open across the spectrum of the markets that we're interested in for high quality assets, still interested across the gamut of very low occupied lease up type opportunities versus stabilized opportunities so long as, on a risk-adjusted basis, they make sense to us and are complementary to our strategy.

Speaker Change: And we have a pretty wide view todd across across all of the all of our target markets Theres really no.

In the short term is to focus energy on.

Speaker Change: On on some of the top 40 versus other the top 40, Youre really looking for.

Speaker Change: For opportunities that present themselves, we wish we could bring people to market exactly where we want them to be but the reality is youre evaluating the opportunities that present themselves.

Speaker Change: So there is not enough out there that you could that you could really target to say I want to focus on these five msas at the exclusion of the others.

Speaker Change: We're probably pretty pretty wide open across the spectrum of the markets that we're that we're interested in product quality assets still interested across the gamut of very low occupied lease up type opportunities versus stabilized opportunities. So long as on a risk adjusted basis, they make sense to us and are complementary to our strategy.

Timothy M. Martin: Okay, Tim, Tim, this is 100 to 200 million. That's in guidance, you know, you mentioned that guidance does not include any unannounced acquisitions. Maybe, you know, 100 to 200 million doesn't really move the needle much. I guess, depending on the yields. But does the guidance actually include that assumption, or is that just sort of a range around acquisition activity that you think is reasonable for the year? Our FFO guidance does not include the impact of that $100 or $200.

Speaker Change: Okay, Tim Tim does the 100 to 200 million.

Speaker Change: Sumption. That's in guidance you mentioned that guidance does not include any unannounced acquisitions, maybe $100 million to $200 million doesn't really move the needle much.

Timothy M. Martin: Depending on the yields but does the guidance.

Timothy M. Martin: Actually include that assumption or is that just.

Timothy M. Martin: Sort of a range around acquisition activity that you think is reasonable for the year.

Timothy M. Martin: Our <unk> guidance does not include the impact of that 100 to 200, it's more of what you described it's an indication to try to give you a feel for where we think we can transact as we sit here today, but.

Timothy M. Martin: It's more of what you described. It's an indication to try to give you a feel for where we think we can transact as we sit here today, but frankly, I have zero visibility into opportunities that would add up to that amount other than what we've disclosed. It just feels like it's a year that is not going to be. It's not going to be 2021, feels like that's pretty much a certainty, but it does feel like we're getting a little bit more constructive when we underwrite opportunities. Again, as you mentioned, we found a couple of opportunities that were relationship-driven, one off our third-party management platform, one with a seller that we've transacted with in So those are, I won't say they're completely insider opportunities, but they aren't marketed opportunities.

Timothy M. Martin: But frankly zero visibility into opportunities that would add up to that amount.

Timothy M. Martin: Other than what we've disclosed just feels like it's a year that is not going to be.

Timothy M. Martin: It's not going to be 2021 feels it feels like that's pretty much a certainty.

Timothy M. Martin: But it does feel like we're getting a little bit more constructive alone when we underwrite opportunities.

Timothy M. Martin: Again as you mentioned, we found a couple of opportunities those were relationship driven one off our third party managed platform one with a seller that we've transacted within the past so those are.

Timothy M. Martin: I won't say, they're completely inside or opportunities, but but not not marketed opportunity. So you do think that there likely is a pent up.

Timothy M. Martin: So you do think that there likely is a pent-up group of sellers who are looking for liquidity at some point and have been patiently waiting for that opportunity. And if we have a year from a transaction market that looks like cap rates aren't moving, you would think that at some point, there is a recognition from the seller side of the table to say, "If I need liquidity, this is the market that I find myself in, so I'm going to transact." And if that happens, we could see some opportunities in that gap that we have seen that has been contracting, perhaps that contracts a little bit further, and we find things with return levels that make sense from our perspective. And I would think sitting here today that my best guess is that we could find one, two property, small portfolios that would add up to that $100 to $200 million, but they're not in FFO; they would be incremental to that one way or the other. I mean, if we found some compelling lease-up opportunities, they would be a bit of a drag in the short term on our FFO number at 24.

Timothy M. Martin: Group of sellers, who are who are looking for liquidity at some point have been patiently waiting for that opportunity and if we have a year from a transaction market that looks like cap rates aren't moving.

Timothy M. Martin: You would think that at some point there is a recognition from the seller side of the table and say if I need liquidity. This is the market that I find myself, so I am going to transact and if that happens.

Timothy M. Martin: We could see some opportunities in that and that gap that we have seen that has been contracting perhaps not contracts a little bit further.

Timothy M. Martin: And we find things in.

With return levels that makes sense from our perspective.

Timothy M. Martin: I would think sitting here today that that my best guess is that we can find one two property small portfolios that would add up to that 100 to 200 million, but theyre not in <unk>, they would be incremental to that one way or the other I mean, if we found some compelling lease up opportunities they would be a bit of a drag in the short term on our on our <unk>.

Timothy M. Martin: <unk> 24.

Unnamed Speaker: Right. Okay. I got it.

Speaker Change: Right, Okay got it alright, thank you.

Unnamed Speaker: All right. Thank you. Sure, I appreciate it. Thank you. We have no further questions.

Speaker Change: Sure I appreciate it.

Speaker Change: Thank you we have no further questions I will turn the call back over for closing comments.

Operator: I will turn the call back over to you. Thank you all for participating in our call. We will see some of you, I assume, next week and have safe travels. And we look forward to sharing with you our first quarter results in a couple of months. Have a great weekend. Ladies and gentlemen, this concludes... Thank you for watching! Check out our details on Facebook, Twitter, SnapChannel, Google Play, and www.google.

Speaker Change: Thank you all for participating in our call.

Speaker Change: We will see some of you I assume next week and safe travels and we look forward to sharing with you our first quarter results.

Speaker Change: And a couple of months have a great weekend.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.

Speaker Change: Okay.

Speaker Change: [music].