Q1 2024 National Storage Affiliates Trust Earnings Call
Greetings and welcome to National storage affiliates first quarter 2024 conference call.
Operator: Greetings. Welcome to the National Storage Affiliates first quarter 2024 conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund. You may now begin.
Operator: At this time, all participants are in listen only mode.
Operator: Brief question and answer session will follow the formal presentation.
Operator: If anyone should require I prayed assistance during the conference. Please press star zero on your telephone keypad.
Operator: Minder This conference is being recorded.
Operator: It is now my pleasure to introduce your host George Hoglund, Vice President of Investor Relations for National storage affiliates.
George Andrew Hoglund: Thank you Mr. Hogan you may now begin.
George Andrew Hoglund: We'd like to thank you for joining us today for the first quarter 2024 earnings conference call National storage affiliates Trust on the line with me here today are NSA as president and CEO, Dave Cramer and CFO Brandon <unk>.
George Andrew Hoglund: We'd like to thank you for joining us today for the first quarter 2024 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer, and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up, and then return to the queue if you have more questions.
George Andrew Hoglund: Following prepared remarks management will accept questions from registered financial analysts.
George Andrew Hoglund: Please limit your questions to one question and one follow up and then return to the queue. If you have more questions.
George Andrew Hoglund: In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, May 2, 2024. The Company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call.
George Andrew Hoglund: In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website and national storage affiliates Dot com.
George Andrew Hoglund: On today's call management's prepared remarks and answers to your questions may contain forward looking statements that are subject to risks and uncertainties and represent managements estimates as of today may 2nd 2024.
George Andrew Hoglund: The company assumes no obligation to revise or update any forward looking statement because of changing market conditions or other circumstances. After the date of this conference call.
George Andrew Hoglund: The Company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, Core FFO, and Net Operating Income contained in the Supplemental Information Package available in the Investor Relations section on our website and in our SEC filings. I will now turn the call over to Dave.
George Andrew Hoglund: The company cautions that actual results may differ materially from those projected in any forward looking statement for additional details concerning our forward looking statements. Please refer to our public filings with the SEC.
George Andrew Hoglund: We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as <unk> or F O and net operating income contained in the supplemental information package available on the Investor Relations section on our website and in our SEC filings I will now turn the call over to Dave.
David G. Cramer: Thanks, George, and thanks, everyone, for joining our call today. During the quarter, we completed many of our strategic initiatives that we've been discussing on previous calls. These initiatives enable us to leverage our balance sheet for access to growth capital, increase earnings per share, and ultimately position our company for future growth, continue our focus on enhancing our operating platforms, and ensure a better customer experience. These initiatives are still ongoing, but we're starting to see improvements in rental activity and conversions from our advanced web presence and upgraded call center operations.
Dave: Thanks, George and thanks, everyone for joining our call today.
David G. Cramer: During the quarter, we completed many of our strategic initiatives that we've been discussing in previous calls.
David G. Cramer: These initiatives enabled us to deleverage our balance sheet and access to growth capital increase.
David G. Cramer: Increased earnings per share ultimately position our company for future growth.
David G. Cramer: Given your focus on enhancing our operating platforms ensure a better customer experience.
David G. Cramer: These initiatives are still ongoing but we're starting to see improvements in rental activity and conversions from our advanced web presence and upgraded call Center operations.
David G. Cramer: On the rental front, we experienced three months of positive net rentals through the end of April.
David G. Cramer: On the rental front, we experienced three months of positive net rental through the end of April, contributing to a seasonal uptick in occupancy, which ended April at 86 percent, up 50 basis points from the end of February. During the quarter, we experienced a meaningful year-over-year increase in leases being fully executed online, large part due to improvements made to the lease signing experience. Additionally, our call center answered over 30% more calls during the quarter compared to last year.
David G. Cramer: Pivoting to a seasonal uptick in occupancy which ended April at 86% up 50 basis points from the end of February.
David G. Cramer: During the quarter, we experienced a meaningful year over year increase in leases being fully executed online.
David G. Cramer: In large part due to improvements made to the lease signing experience.
David G. Cramer: Digitally our call center answered over 30% more calls during the quarter compared to last year.
David G. Cramer: As we continue to enhance and simplify our customer journey by leveraging intelligence in our customer acquisition strategies, we expect to see continued improvements in the customer experience we offer and overall performance. We're also being more aggressive with our pricing strategy. While this is helping to drive rental volume, it is putting pressure on our move-in rates, which averaged down about 14% year-over-year for the quarter. ConsumerBase remains healthy, with 65% of our tenants having stayed with us for over a year, while 49% have been with us over two years. Our ECRA program remains largely consistent with the past couple of quarters in terms of frequency and magnitude.
David G. Cramer: Continuing to enhance and simplify our customer journey by leveraging intelligence in our customer acquisition strategies, we expect to see continued improvements in the customer experience, we offer and overall performance.
David G. Cramer: We're also being more aggressive on our pricing strategy.
David G. Cramer: It is helping to drive rental volume it is putting pressure on our move in rates, which averaged down about 14% year over year for the quarter.
David G. Cramer: Consumer base remains healthy with 65% of our tenants having stayed with us over a year.
David G. Cramer: 49% would have been with us over two years.
David G. Cramer: Our CRA program remains largely consistent with the past couple of quarters in terms of pregnancy and magnitude.
David G. Cramer: Ultimately the quarter played out as we expected. It is still early in the spring leasing season, but the peak months ahead of us.
David G. Cramer: Ultimately, the quarter played out as we expected, but it's still early in the spring leasing season with the peak months ahead of us. That said, looking across our different Sunbelt markets, we continue to face many challenges due to several factors, including absorption of new supply, the commuted housing market, and a very competitive pricing environment. Results were mixed in these markets, with revenue in Phoenix, Sarasota, and Las Vegas all coming in below the portfolio average, while markets like Oklahoma City, Savannah, and Corpus Christi were better than average for the quarter.
David G. Cramer: That said looking across our different sub markets.
David G. Cramer: Did you do you to face many challenges due to several factors, including absorption of new supply.
David G. Cramer: The housing market.
David G. Cramer: Very competitive pricing environment.
David G. Cramer: Results are mixed in these markets with revenue in Phoenix, Arizona, and Las Vegas, all coming in below portfolio average markets like Oklahoma City, Savannah, and Corpus Christi were better than average for the quarter.
David G. Cramer: Continue to work hard in these markets to deliver a superior customer experience.
David G. Cramer: Continue to work hard in these markets to deliver a superior customer experience. Recognize that some of our markets are gonna be slower to recover. It is important to point out that we have markets that are currently healthy and delivering solid results. We remain very confident in the growth prospects of our sellable markets due to tractive population and migration trends.
David G. Cramer: <unk> similar markets are going to be slower to recover.
David G. Cramer: It is important to put out there we have markets that are currently healthy and delivering solid results.
David G. Cramer: I'm very confident in the growth prospects of our sub markets due to Jackie population in migration trends.
David G. Cramer: I'm very pleased with our strategic positioning heading into this next phase of growth, we're starting to see opportunities on the acquisition spread.
David G. Cramer: I'm very pleased with our strategic positioning heading into this next phase of growth. We're starting to see opportunities on the acquisitions front. We're finding a variety of deals in many of our strongest performing markets where we have good insights into rental demand and street rates, allowing us to be more precise in our underwriting. These are deals that make sense for us to pursue as they improve our overall portfolio quality and depth in our existing markets and increase our operational efficiency.
David G. Cramer: A variety of deals many of our strongest performing markets, where we have good insights into rental demand in street rates.
David G. Cramer: It should be more precise in our underwriting.
David G. Cramer: These are deals that makes great sense for us to pursue as they improve our overall portfolio quality.
David G. Cramer: The depth of our existing markets.
David G. Cramer: And increase our operational efficiency.
David G. Cramer: We currently have over $25 million under contract and approximately $200 million of properties in various stages of negotiation. We expect to fund these acquisitions through a combination of 1031 proceeds, joint venture capital, and debt. We won't comment on pricing until the deals are closed, but these transactions make economic sense for us and our JV partners. We represent the start of us putting the dry powder to work that was generated from our portfolio optimization strategy. I'll now turn the call over to Brandon to discuss our financial results. Thank you, Dave.
David G. Cramer: Currently have over $25 million under contract and approximately $200 million of properties at various stages of negotiation.
Brandon: Vic to fund these acquisitions through a combination of 2031 proceeds joint venture capital and debt.
Brandon: We won't comment on pricing until the deals are closed these transactions make economic sense for us and our JV partners represent the start of us putting the dry powder to work it was generated from our portfolio optimization strategies.
David G. Cramer: I'll now turn the call over to Brandon to discuss our financial results.
Brandon S. Togashi: Yesterday afternoon, we reported core FFO per share of 60 cents for the first quarter of 2024, representing a decrease of approximately 9% over the prior year period. This was driven primarily by a decline in same-store NOI, an increase in GNA, and a decline in contribution from our JVs. Overall, our results for the quarter were in line with our expectations, except for a few casualty events resulting in an aggregate $1 million loss, or almost a penny per share.
Brandon: Thank you Dave yesterday afternoon, we reported core <unk> per share of <unk> 60 for the first quarter of 2024.
Brandon S. Togashi: Representing a decrease of approximately 9% over the prior year period.
Brandon S. Togashi: Driven primarily by the decline in same store NOI and increase in G&A and a decline in contribution from our Jv's.
Brandon S. Togashi: Overall, our results for the quarter were in line with our expectations, except for a few casualty events, resulting in an aggregate $1 million loss, where almost a penny per share.
Brandon S. Togashi: For the quarter, revenue growth declined 1.5% on a same-store basis, driven by growth in rent revenue per square foot of 2.4%, offset by a 380 basis point year-over-year decline in average occupancy during the quarter. Occupancy ended the quarter at 85.9%, down 350 basis points year over year. The expense growth was 4.5% in the first quarter. Similar to the past couple quarters, the main drivers of growth were property tax, marketing, and insurance, partially offset by payroll efficiencies that resulted in lower spend versus the prior year period.
Brandon S. Togashi: For the quarter revenue growth declined one 5% on a same store basis, driven by growth in rental revenue per square foot of two 4%.
Brandon S. Togashi: I'll start by a 380 basis point year over year decline in average occupancy during the quarter.
Brandon S. Togashi: Occupancy ended the quarter at 85, 9% down 350 basis points year over year.
Brandon S. Togashi: Expense growth was four 5% in the first quarter.
Brandon S. Togashi: Similar to the past couple of quarters. The main drivers of growth were property tax marketing and insurance, partially offset by payroll efficiencies resulted in lower spend versus the prior year period.
Brandon S. Togashi: Marketing expenses remain elevated due to increased competition for customers and a tough comp, while insurance expense growth will moderate going forward in the low single digits given our policy renewal that occurred on April 1st. As Dave mentioned earlier, we had a busy start to 2024 on the asset sales and joint venture front, all of which was discussed on our last call. Although we did not complete any acquisitions during the quarter, we remain active underwriting and evaluating potential transactions.
Brandon S. Togashi: Marketing expenses remain elevated due to increased competition for customers and a tough comp.
Brandon S. Togashi: Insurance expense growth will moderate going forward, although low single digits, given our policy renewal that occurred on April one.
Brandon S. Togashi: As Dave mentioned earlier, we had a busy start to 2024 on the asset sales and joint venture front, all of which was discussed on our last call.
Brandon S. Togashi: Although we did not complete any acquisitions during the quarter, we remain active underwriting and evaluating potential transactions.
Brandon S. Togashi: With the majority of our revolver available to us today and $1 billion of buying power within our 2023 joint venture, we are encouraged by the opportunities for external growth that lie ahead of us. Turning to the balance sheet, during the quarter, we completed just over $200 million of common share buyback, and subsequent quarter ends exhausted the remaining $72 million of our program. We believe this strategic initiative is beneficial to our shareholders and will ultimately provide more FFO per share to them over the long run.
Brandon S. Togashi: The majority of our revolver available to us today and $1 billion of buying power with our 2023 joint venture.
Brandon S. Togashi: We're encouraged by the opportunities for external growth that lie ahead of us.
Brandon S. Togashi: Turning to the balance sheet during the quarter, we completed just over $200 million of common share buybacks and subsequent to quarter end exhausted the remaining $72 million of our program.
Brandon S. Togashi: We believe this strategic initiative is beneficial to our shareholders and will ultimately provide more <unk> per share to them over the long run.
Brandon S. Togashi: Our current revolver balance is roughly $200 million, giving us approximately $750 million of remaining availability. Lastly, our leverage was 6.2 times net at the quarter end. Now, moving on to 2024 Outlook. As we said earlier, the quarter played out largely as expected, and it's still early in the spring leasing season. We are reaffirming our previously provided guidance, which is detailed in the earnings release. One item I want to mention on the balance sheet is that we have $250 million of interest rate swaps that fix Bailey Simple Sofa at 1.59%, which mature in Q3.
Brandon S. Togashi: Our current revolver balance is roughly $200 million, giving us approximately $750 million of remaining availability.
Brandon S. Togashi: Lastly, our leverage was six two times net debt to EBITDA at quarter end.
Brandon S. Togashi: Now moving on to 2024 outlook as we said earlier the quarter played out largely as expected and it's still early in the spring leasing season, where.
Brandon S. Togashi: We are reaffirming our previously provided guidance, which is detailed in the earnings release.
Brandon S. Togashi: One item I want to mention on the balance sheet.
Brandon S. Togashi: We have $250 million of interest rate swaps that fixed daily simple sulfur at 1.59%, which mature in Q3.
Brandon S. Togashi: $145 million of this relates to the term loan that matures in July. So effectively, $250 million of fixed-rate debt will adjust to the market rate starting August 1. This impact was factored into the guidance we provided in February, but I wanted to point it out since the swap expirations aren't exactly aligned with the underlying debt maturities.
Brandon S. Togashi: $145 million of this relates to the term loan that matures in July.
Brandon S. Togashi: So effectively $250 million of fixed rate debt will adjust to market rate starting August one.
Brandon S. Togashi: This impact was factored into the guidance, we provided in February but I wanted to pointed out since the swap explorations aren't exactly aligned with the underlying debt maturities.
Operator: Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator?
Speaker Change: Thanks again for joining our call today, let's now turn it back to the operator to take your questions operator.
Operator: Thank you at this time, we'll be conducting a question and answer session if.
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
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Operator: One moment, please, while we poll for questions. Thank you. Our first question today is from the line of Samir Khanal with Evercore ISI. Please answer your question.
Operator: One moment. Please can we poll for questions. Thank you.
Operator: Our first question today is from the line of Samir Khanal with Evercore ISI. Please proceed with your question.
Samir Upadhyay Khanal: Hey, Dave can.
Samir Upadhyay Khanal: Hey, Dave, um, can I ask you to give me another call around April? I know, I know, I believe you said moving rates were down 14% in the first quarter. Maybe give us an idea of kind of what you're seeing in April so far.
Samir Upadhyay Khanal: Can I ask you to get more color around April.
Samir Upadhyay Khanal: I believe you said move in rates were down 14% in the first quarter.
Samir Upadhyay Khanal: Maybe you can give us an idea of kind of kind of what youre seeing in April so far.
Dave: Yes, Amir thanks for your thanks for joining our call today certainly April we saw positive net move in activity in the month of April which we were pleased with we're able to generate the activity at the top of the funnel.
David G. Cramer: Yeah, Samir, thanks for joining our call today. Certainly, you know, April. I saw another positive net move in activity in the month of April, which we're pleased with. We're able to generate activity at the top of the funnel.
David G. Cramer: We certainly are in a very competitive market; most of our markets are in pretty competitive markets around street rate or asking rent to get started. And so I would tell you, April got slightly worse than where the quarter finished. It wasn't a large number, but it got slightly worse as far as street rate to street rate and move in activity to move in rate. So we saw a decline in both.
Speaker Change: We certainly are.
David G. Cramer: Very competitive most of our markets in a pretty competitive market around street rater, asking rent to get started and so I would tell you April about slightly worse than where the quarter finished it wasn't a large number but it got slightly worse as far as street rates history right in move in activity and moving rates and move in rate. So we saw a decline in both.
Brandon S. Togashi: I'm Samir, and this is Brandon. On the year-over-year move-in rate worsening that Dave's referring to, that's in part because last year, you know, we moved rates up some in April, and so that's also affecting that comp.
David G. Cramer: Sameer This is Brandon on the on a year over year move in rate worsening that Dave's, referring to that's in part because last year we.
Speaker Change: <unk> moved rates up some in April and so that's also affecting that comp.
Speaker Change: Okay got it and I guess on the transaction side.
Samir Upadhyay Khanal: Okay, got it. And I guess on the transaction side, it sounds like you have some opportunities on the acquisition front. But, you know, last quarter, you were active on the sales front of the non-core assets. Is there more, like, like, is there more in that bucket of non-core at this point? Or is that pretty much done, you think? You know, I think we'll continue to look.
Samir Upadhyay Khanal: Yeah. It sounds like you have some opportunities on the acquisition front.
Samir Upadhyay Khanal: But.
Samir Upadhyay Khanal: Last quarter, you were active on the sale of the noncore assets as Theyre more like is there more in that bucket of non core at this point or is that pretty much done you think.
Samir Upadhyay Khanal: Yeah, I think we will continue to look at it our portfolio and scrubbed through the portfolio. You know we did the large portion of the asset sales last year in that in that tranche, we worked through and and we were pleased with that activity.
David G. Cramer: I think we'll continue to look at our portfolio and scrub through it. We did a large portion of the asset sales last year in that tranche we worked through, and we were pleased with that activity. I know we're still scrubbing through particular markets and particular assets, and I think that'll be a part of our program as we go forward in our future as we look at optimizing our efficiencies and optimizing our portfolio.
David G. Cramer: No we're still scrubbing through particular markets in particular assets.
David G. Cramer: That'll be a part of our program as we go forward in our future as we look at optimizing our efficiencies at optimizing our portfolio.
David G. Cramer: So I think you could see sales in the future. I don't think you're going to see the large chunks that we've done recently. I think we're shifting our focus to looking for opportunities, and when opportunities persist or present themselves, we'll go out and look to start acquiring properties.
David G. Cramer: So I think you could see sales in the future I don't think youre going to see the large chunks that we've done recently.
David G. Cramer: I think we're shifting our focus to looking for opportunities and when opportunities persist. We'll present themselves. We will look to start acquiring properties.
Speaker Change: Okay. Thank you.
Samir Upadhyay Khanal: Okay, thank you. Thank you. Thank you.
Samir Upadhyay Khanal: Thank you.
Samir Upadhyay Khanal: Our next question is from the line of Jeff Spector with Bank of America. Please proceed with your questions.
Jeffrey Alan Spector: Our next question is from the line of Jeff Spector with Bank of America. Please proceed with your question. Hello, this is Dan Bionoff with CHEF. Thanks for having me. Um, when it comes to allocating funds
Dan Bionoff: Hello, This is Dan byun on for Jeff.
Brandon S. Togashi: Yeah, Dan, I'll take that. This is Brandon.
Brandon: Thanks for having me when it comes to allocating capital how are you thinking about leverage versus buybacks.
Brandon S. Togashi: Yeah, Dan I'll take that this is Brandon. So look we completed the $275 million share repurchase program that we mentioned in the earlier remarks and I'll also details in our release.
Brandon S. Togashi: So look, we completed the $275 million share repurchase program that we mentioned in the earlier remarks and also details in our release. And also, as mentioned, pretty light on the acquisition volume, everything we've done over the past few quarters, very pleased with accomplishing what we set out to do leverage, you know, in line with our targeted range of five and a half to six and a half times.
Brandon S. Togashi: And also as mentioned you know pretty light on the acquisition volume everything we've done over the past few quarters.
Brandon S. Togashi: Pleased with accomplishing what we set out to do.
Brandon S. Togashi: Leverage in line with our targeted range of five five to six five times. So what it does right now is it really positions us with.
Brandon S. Togashi: So what it does right now is it really positions us with, you know, the majority of our revolver is available to us to take advantage of some of those opportunities that Dave referred to earlier, no different than what we talked about in our February call. I think if there's a slight bias, it'll be to deploy capital through the joint venture platform. And that allows us to obviously do that in a capital lightweight way, manage leverage, and, you know, put to work some of that money that we worked hard to get ready with our JV partners. Thank you.
Brandon S. Togashi: The majority of our revolver available to us to take advantage of some of those opportunities that Dave referred to earlier no different than what we talked about in our February call I think if theres, a slight bias it'll be to deploy capital through the joint venture platform and that allows us to obviously do that in a capital light way manage leverage and.
Brandon S. Togashi: But put to work some of that money that we worked hard to get ready with our JV partners.
Speaker Change: Thank you.
Jeffrey Alan Spector: And then just to follow up on leverage, could you provide your rationale for including the hypothetical liquidation at book value for your 2024 JV to adjust EBITDA? Yeah, good question and good observation. That was a new thing this quarter.
Brandon S. Togashi: And then just to follow up on leverage could you provide your rationale behind including the hypothetical liquidation at book value for your 2024 JV to adjust EBITDA.
Speaker Change: Yes, good question and good observation that was.
Brandon S. Togashi: So, that joint venture, that's the one that we put the 56 assets into. I would tell you the arrangement there is quite similar to the existing two joint ventures we have in that we're a 25% money partner managing the assets. However, the one nuance is that there is an arrangement where, based on certain performance metrics, the split of cash may be something different than 75-25. In some cases, we may get an outside share. In other cases, our partner may. And that drives us to this, the term you used, a gap-specific methodology for allocating earnings. And we're basically removing the effect of that and just showing a more straightforward 75-25 split.
Brandon S. Togashi: A new thing this quarter so.
Brandon S. Togashi: That joint venture that's the one that we put the 56 assets into I would tell you the.
Brandon S. Togashi: The arrangement there is quite similar to the existing two joint ventures, we have and that we're 25% money partner in managing the assets.
Brandon S. Togashi: However, the one nuance is there is an arrangement where based on certain performance metrics.
Brandon S. Togashi: Split of cash may be something differently $75 25 in some cases, we may get outsized share in other cases, our partner Mayne and that drives us into this.
Brandon S. Togashi: The term you used a gap specific.
Brandon S. Togashi: Methodology for allocating earnings and we're basically removing the effect of that and just showing a more straightforward 70 525 split.
Speaker Change: Awesome. Thank you for your time.
Speaker Change: Sure thing thanks.
Michael Goldsmith: Our next question is from the line of Michael Goldsmith with UBS. Please proceed with your question.
Brandon S. Togashi: Our next question is from the line of Michael Goldsmith with UBS. Please proceed with your questions.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my questions.
David G. Cramer: We've heard from some of your peers that a number of markets are starting to bottom out and reaccelerate. Are you seeing that across your portfolio? Maybe what percentage of your markets are accelerating? Or any specific markets to call out?
Michael Goldsmith: Good afternoon. Thanks, a lot for taking my questions. We've heard from some of your peers had a number of markets are starting to bottom out and Reaccelerate are you seeing that across your portfolio, maybe what percentage of your markets are accelerating or any specific markets to call out.
Speaker Change: And Michael Thanks for the thanks for the question Thanks for being here.
Michael Goldsmith: And Michael, thanks for the thanks for the question. Thanks for being here.
Michael Goldsmith: No.
Speaker Change: I think as we think about it we believe that the first half of our year was going to be the toughest part of our year as we think particularly from a year over year comp.
Michael Goldsmith: We look sequentially, we're happy that we had the move in volume and the net rental activity that we had over the last three months and it was tougher sledding I would tell you in the South East, Florida. Some of the Sun belt markets Phoenix, We mentioned and we mentioned Sarasota Las Vegas.
Michael Goldsmith: Markets have been slower to respond.
Michael Goldsmith: And those markets are also facing supply like markets like Atlanta, as well and so I think as you look at it and look at as we look at some of those markets. The markets that have the most supplier slower to recover but we've had good success in the Midwest. We've had good success through the Texas markets.
Speaker Change: As we called out I think we call that Corpus Christi in our opening remarks.
Speaker Change: And so those I think did not also have some of that.
Michael Goldsmith: The pandemic highs and they've been a little bit.
Michael Goldsmith: More stable I think as we went through this last cycle and those those are performing well for us.
Michael Goldsmith: Again, I think more of that some of that sunbelt exposures with the housing and immediate transition in some of the other factors that go out it can be a little bit slower for us to recover.
Michael Goldsmith: Thanks for that Dave and my follow up is you did a number of transactions at the start of the year with the sale and then that's helpful.
Michael Goldsmith: <unk> provided an influx of capital what would the transaction market seemingly pause for the time being how are you thinking about redeploying. These proceeds and when do you think you can put them to work.
David G. Cramer: And those markets are also facing supply like markets like Atlanta as well. And so I think as you look at it, and as we look at some of those markets, the markets with the most suppliers are slower to recover, but we've had good success in the Midwest, and we've had good success in the Texas markets, as we call that, I think we call that Corpus Christi in our opening remarks. And so, you know, those, I think, did not also have some of the, you know, the pandemic highs, and they've been a little bit more stable, I think, as we went through this last cycle, and those, those are performing well for us.
David G. Cramer: You know, I think as we think about it, we believe that the first half of our year was gonna be the toughest part of our year, we think, particularly from a year over year comp. If we look sequentially, we're happy that we had the increase in volume and the net rental activity that we had over the last three months. And it was tougher sledding, I would tell you in southeast Florida, some of the Sunbelt markets, Phoenix, we mentioned, Sarasota, Las Vegas; those markets have been slower to respond.
Michael Goldsmith: Yeah. Good question I touched on a little bit in the opening remarks, we do have we have 25 million under contract right now in existing markets.
David G. Cramer: But again, I think, you know, more that some of the Sunbelt exposures with the housing and muted transition and some of the other factors going on are gonna be a little bit slower for us to recover.
David G. Cramer: Where we're adding properties to our portfolio that will certainly help us in our efficiencies in the way, we operate and scale and density and really things that we're looking to drive in those markets. We have about 200 million that were in negotiations with right now and so I would tell you we're starting to find opportunities that we like and we thought for sure as we looked at this year.
Michael Goldsmith: Thanks for that, Dave. And my follow-up question is, you know, you did a number of transactions at the start of the year with the sale and then the sale to the JV. It provided an influx of capital. But with the transaction market seemingly paused for the time being, how are you thinking about redeploying these proceeds? And when do you think you can? Yeah, good question. You know, I touched on that a little bit in the opening.
David G. Cramer: Yeah, good question. I touched on it a little bit in the opening remarks. We do have, you know, we have $25 million under contract right now in existing markets where we're adding properties to our portfolio that will certainly help us in our efficiencies and the way we operate and, you know, scale and density and really things that we're looking to drive in those markets. We have about $200 million that we're in negotiations with right now.
Speaker Change: The back half of the year, we continue to see more opportunities.
David G. Cramer: And so, I would tell you, we're starting to find opportunities that we like. And we thought for sure, as we looked at this year, that in the back half of the year, we would continue to see more opportunities. I think the fact that we found some opportunities earlier in the year is a positive sign for us. And again, these are in markets that we operate in and have great scale in and have great efficiency in, and we are a good logical buyer for these properties.
David G. Cramer: I think the fact that we've found some opportunities earlier in the year is a positive sign for us and again. These are in markets that we operate in have great scale in and have great efficiency in and we are a good logical buyer for these properties.
Speaker Change: Thank you.
David G. Cramer: Uh huh.
David G. Cramer: Our next question is from the line of Juan Sanabria with BMO capital markets. Please proceed with your questions.
Juan Carlos Sanabria: Our next question is from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Juan Carlos Sanabria: Hi, just wanted to continue with the same line of questioning with regards to acquisitions.
Juan Carlos Sanabria: Hi, I just wanted to continue with the same line of questioning with regard to acquisition. I guess, where are your targeted yields or cap rates, and do you think that would be indicative of some kind of the current market for your types of assets, and this is a subset of that. Should we assume or not that you re-upload? Buy Back Now That It's Been Fully Depleted.
Juan Carlos Sanabria: I guess, where.
Juan Carlos Sanabria: Are you are your targeted yields or cap rates do you think that would be indicative.
Juan Carlos Sanabria: Kind of the current market for your types of assets.
Juan Carlos Sanabria: The subset of that should we assume or not you re up.
Juan Carlos Sanabria: Buyback.
Juan Carlos Sanabria: And it's been fully depleted.
Speaker Change: Now I'll jump in in Miami, We ran and finishes on this I think as we look at assets that were looking to purchase we're targeting mid six is probably a range that we're looking at today, obviously each property one when you start talking cap rate.
David G. Cramer: I'll jump in and maybe do some random finishes on this. I think as we look at assets that we're looking to purchase, you know, we're targeting mid six is probably a range that we're looking at today. Obviously, each property one, when you start talking cap rate, it's, you know, where is the property? And how old is it? How seasoned is it?
David G. Cramer: What's the opportunity? Is there a value add? Is there, you know, a component of management from who you're buying it for where you think you may have a better opportunity versus you would with a different type of property or a different owner? And so I think it's hard to really pin down cap rates, but we certainly internally have been modeling around that mid-six range. As you remember, the assets we sold were towards the six cap itself.
David G. Cramer: Whereas the property units how old is it how season does it what's the opportunity is there a value add is there.
David G. Cramer: A component of manager from who you are buying it for where you think you may have a better opportunity versus you would on a different type of property or a different owner and so I think it's hard to really pin down cap rates, but we certainly internally have been modeling around that mid six range as you remember the assets. We sold were towards the six cap itself and so we are certainly thinking.
David G. Cramer: And so we are certainly thinking, redeploying this capital when we sold it at six and redeploying it to six and a half makes a lot of sense to us. And we get some growth opportunities on these assets that we're buying. As far as shares are concerned, we were obviously able to fulfill the current authorization on our share repurchase program. I think that share repurchase is part of our investment activity. I think that we look at several ways to deploy capital from this company, and buying our shares back makes sense. And so we don't have anything authorized at this time. But again, I think we would use that as a tool in our investment opportunities if we thought it was appropriate, and more.
David G. Cramer: This capital when we sold it to six and redeploying at a six five makes a lot of sense to us and we get some growth opportunity on these assets that we're buying.
David G. Cramer: As far as the share we were able to obviously fulfill the current authorization on our share repurchase program I think that share repurchase is part of our investment activity I think that we look at several ways to deploy capital from this company and buying our shares back makes sense and so we don't have anything off.
David G. Cramer: At this time, but again I think we would use that as a tool in our investment.
David G. Cramer: <unk>, if we thought it was appropriate.
Brandon S. Togashi: And Juan, this is Brandon. I'll just jump in. So the other thing I would comment on the share repurchase is just to reiterate my earlier remarks about leverage. I mean, we'll obviously do everything that we're talking about here, capital deployment, acquisitions, repurchases, you know, and maintain the range of comfort, five and a half to six and a half times on that EBITDA that we've had for a long time now and are in currently.
David G. Cramer: This is Brandon I'll just jump in so the other thing I would comment on the share repurchases just to my earlier remarks about leverage I mean, we'll obviously do everything that we're talking about here capital deployment acquisitions.
Brandon S. Togashi: Repurchases and maintain the.
Brandon S. Togashi: Our range of comfort five five to six times on net debt to EBITDA.
Brandon S. Togashi: We've had for a long time now and are in currently.
Brandon S. Togashi: And then the only other thing I would add to Dave's remarks is just on the year-one yield and acquisitions, also to my earlier point about some bias towards using those JVs. That gives us some management fees and allows us to stretch on deals that might be on the lower end of the yield target.
Brandon: And then the only other thing I would add to Dave's remarks is just on the year one yield in acquisitions.
Brandon S. Togashi: So to my earlier point about.
Brandon S. Togashi: Some bias towards using those jv's.
Brandon S. Togashi: It gives us some management fees and allows us to stretch on deals that might be on the lower end of the yield target.
Speaker Change: Okay, great. Thanks, and then.
Juan Carlos Sanabria: Great, thanks. And then just on the slope of seasonality, both in occupancy and rate. Could you just comment on how that's trending? It seems like rate maybe is disappointing. You called out a tough comp from the increase you saw last April, so just curious on your commentary there and how that stacks up relative to your initial thoughts.
Juan Carlos Sanabria: Just on the slope of seasonality both in occupancy and rate.
Juan Carlos Sanabria: Could you just comment on how thats trending I mean, it seems like maybe it's disappointing you called out a tough comp from the increase you saw last April so just curious on.
Juan Carlos Sanabria: On your commentary, there and how that stacks up relative to your initial thoughts.
Speaker Change: Yes, I think what we're trying to balance and Ed can we we always talk about we're solving to revenue and so occupancy is a piece of that asking rate as a piece of that discount is a piece of that what type of customer, we're attracting what type of unit or renting.
David G. Cramer: Yeah, I think what we're trying to balance, and we always talk about, we're solving the revenue. And so occupancy is a piece of that, you know, asking rate is a piece of that, discount is a piece of that, what type of customer we're attracting, what type of unit we're renting, you know, it's, it's, it's hard to have a, you know, a global comment to that, because there's so many things that we're looking at, as we work hard and navigate, you know, what we're trying to do.
David G. Cramer: It's hard to have a.
David G. Cramer: A global comment to that because theres. So many things that we're looking at as we work our navigate what we're trying to do but what I would tell you is the reason we're being a little more sharp on right. It's a competitive environment, but what we're finding and the team has done a good job finding is conversion rate and that's what we're really looking at as far as what's coming through our opportunities and how we're converting those opportunities into.
David G. Cramer: But what I would tell you is the reason we're being a little more sharp on rate; it's a competitive environment, but what we're finding, and the team has done a good job finding, is the conversion rate. And that's what we're really looking at, as far as what's coming through our opportunities and how we're converting those opportunities into rentals. And so, you know, from the seasonal profit in February to where we finished in April, we were very pleased with the rental activity and what we were able to achieve.
David G. Cramer: Our rentals and so from the seasonal trough in February to where we finished in April we were very pleased with the rental activity.
David G. Cramer: And what we're able to achieve in it some of that came at a little bit sharper.
David G. Cramer: Price point that maybe we'd wanted I can tell you we're backing that up with ECR I program, which is stronger than ever in our ability to really work through our existing tenant base and so we're looking at the offset of what we have to give maybe on from rage on upfront discounts and how we make it up quicker in the ECR I cycle.
David G. Cramer: And some of that came at a little bit of a sharper price point than maybe we'd wanted. But I can tell you, we're backing that up with the ECRI program, which is stronger than ever, and our ability to really work through our existing tenant base. And so we're looking at the offset of what we have to give, maybe on an upfront rate or an upfront discount, and how we make it up quicker in the ECRI cycle.
Speaker Change: Thanks, Dave.
Speaker Change: Thank you.
David G. Cramer: Our next question is from the line of Eric Wolfe with Citi. Please proceed with your question.
Eric Wolfe: Our next questions are in the line of Eric Wolfe with Citi. I'm pleased to see you with your questions.
Eric Wolfe: Yeah I just wanted to follow up on your last answer there I mean last quarter you talked about the documents based models and you were just talking about a second ago. I was just wondering how that testing has gone thus far and is it providing any type of outperformance versus comparable comparable areas of your portfolio.
Eric Wolfe: Yeah, I just wanted to follow up on your last answer there. I mean, last quarter you talked about the occupancy-based models that you were just talking about a second ago. I was just wondering how that testing has gone thus far and whether it is providing any type of outperformance versus comparable areas of your portfolio.
Speaker Change: Yes, thanks, and thanks for joining and good question, we are seeing success in areas.
David G. Cramer: Yeah, thanks. Thanks for joining us.
David G. Cramer: Good question. We are seeing success in some areas. And it's not, again, that's the advantage of testing. And again, as we talk about our business unit size, it goes down to the unit size.
Speaker Change: And it's not again thats the advantage of testing and again as we talk about our business unit site goes down to the unit size and so yes, we've seen some success we have.
Speaker Change: Expanded the program in areas that we thought we would have success in I can tell you. We've had some areas where it was not successful and we pulled right back and said that tested did not work for us, but I would tell you as a whole we as.
David G. Cramer: And so, yes, we've seen some success. We have, you know, expanded the program in areas that we thought we would have success in. I can tell you we've had some areas where it was not successful, and we pulled right back and said that that testing did not work for us. But I would tell you, as a whole, we, around the commentary and being a little sharper in pricing, we have found activity we like. And so we're expanding the program, and that's putting a little bit of pressure on street rates for us.
David G. Cramer: Around the commentary and being a little sharper on pricing we've found activity, we like and so we are expanding the program and Thats put a little bit of pressure on street rate for us.
Speaker Change: Got it and your occupancy.
Brandon S. Togashi: And your occupancy came down a bit this quarter. Sounds like a trough in February. I was just wondering, in a typical year, sort of what you would expect in terms of occupancy increases in the second quarter into the third quarter, and then sort of what's baked into your guidance for this year?
Brandon S. Togashi: Came a bit this quarter it sounds like a trough in February I was just wondering in a typical year sort of what you would expect in terms of occupancy increases in the second quarter into the third quarter, and then sort of what's baked into your guidance for this year.
Brandon S. Togashi: Eric Katz, Brandon I mean, it wouldn't be uncommon for us to gain.
David G. Cramer: Eric, yeah, it's Brandon. I mean, it wouldn't be uncommon for us to gain 250 to, some years, 350 basis points from, you know, the valley to the peak. What was baked into guidance for this year at our midpoint was really more like flat-ish occupancy as we went. I mean, maybe a little bit of seasonal uptick in the spring and summer, but by and large, sequentially flat for most of the year. And what that means on a year-over-year basis is that, you know, as you saw in our first quarter numbers, you're starting off, you know, 350, 380 basis points negative over the prior year, but the comp gets easier in the back half. So that gap, you know, narrows as you go throughout the year.
David G. Cramer: 250 to 350 basis points.
David G. Cramer: From.
David G. Cramer: The value to the peak.
David G. Cramer: What was baked into guidance for this year at our midpoint was really more like flattish occupancy as we went I mean, maybe a little bit of seasonal uptick in the spring and summer, but by and large sequentially flat for most of the year.
David G. Cramer: And what that means on a year over year basis is that as you saw in our first quarter numbers Youre starting off.
David G. Cramer: 350, 380 basis points negative over prior year.
David G. Cramer: But the comp gets easier in the back half so that that gap narrows as you go throughout the year.
Brandon S. Togashi: I think I would add to that, to Brandon's point, we're also not very assertive on rent growth either, and so, you know, as we're testing these models, anything we're trying to trade off on rent, we're certainly trying to pick back up in occupancy, and so what moves that initial guidance, you know, to the occupancy level you're talking about around, you know, if we move the occupancy number up and we have Right?
Speaker Change: I would add to that it to Brendan's point and were also not very assertive on rent growth either and so.
Brandon S. Togashi: We are testing these models.
Brandon S. Togashi: We're trying to trade off on rent were certainly trying to pick back up in occupancy and so it moves.
Brandon S. Togashi: Initial guidance.
Brandon S. Togashi: The occupancy level, you're talking about around if we move the occupancy number up when we have to give a little bit on street rate. That's the balance we're trying to find.
Eric Wolfe: Right. And the thesis on occupancy, Eric, was really just expecting, like we experienced last year, more muted demand related to housing. And so far, you know, that's played out. I mean, nothing wildly better or worse than how we thought about things back in February.
Brandon S. Togashi: And the thesis on the occupancy Eric was really just expecting like we experienced last year more muted.
Eric Wolfe: Muted demand related to housing and so far as you know.
Eric Wolfe: <unk> played out I mean, nothing wildly better or worse than how we thought about things back in February.
Speaker Change: That's helpful. Thank you.
Eric Wolfe: That's helpful. Thank you. Yeah, thank you.
Speaker Change: Yes. Thank you.
Eric Wolfe: Our next questions are from the line of Todd Thomas with Keybanc capital markets. Please proceed with your questions.
Todd Michael Thomas: Our next questions are from the line of Todd Thomas with KeyBank Capital Markets. Please proceed with your question.
Todd Michael Thomas: Hi, Thanks first just a quick follow up so 86% at the end of April.
Todd Michael Thomas: Hi, thanks. First, just a quick follow-up.
Todd Michael Thomas: Talking about the comps getting a little easier.
Todd Michael Thomas: Sorry, if I missed it but what's that look like on a year over year basis has the gap continues to narrow.
Todd Michael Thomas: Yeah.
Todd Michael Thomas: It stayed fairly flat in April Todd.
Todd Michael Thomas: The hard part about it when you look at it at a month.
Todd Michael Thomas: Monthly snapshot, we were talking earlier this week and other was five Saturdays in April last year Theres four Saturdays this year.
Todd Michael Thomas: Mondays and moving stuff around and so you start talking about it it's really we have to look at through the second quarter before we really know the amount of occupancy gain in amount of momentum we're picking up but we did see rental activity. We're happy with April but again. There is there is some some noise around the moving pieces of rental days in there.
Todd Michael Thomas: So 86% at the end of April, you know, talking about, you know, the comps getting a little easier. What did, sorry if I missed it, but what did that look like on a year-over-year basis? Has the gap continued to narrow?
Todd Michael Thomas: We ended at 86 flat.
Speaker Change: Intra month, we were we are higher than that and then not uncommon to lose.
Todd Michael Thomas: 10 to 30 basis points to near the end of the month. So we were pleased with I was pleased with some of the gross rental volume. It also meant there was a little bit of higher move out volume versus last year or so.
David G. Cramer: It stayed fairly flat in April, Todd. You know, the hard part about it, when you look at it a month at a time, you know, that monthly snapshot, you know. We were talking earlier this week about how there were five Saturdays in April last year, there are four Saturdays this year, five Mondays and moving this stuff around. And so you start talking about it, it's really we have to look through the second quarter before we really know the amount of occupancy gain and the amount of momentum we're picking up. We did, you know, we did see rental activity. We're happy with April. But again, there's, you know, there's some noise around the moving pieces of rental days in there.
David G. Cramer: It's early to start making too many conclusions, but I think there is April there was just more mobility generally than what we saw last April and maybe maybe that portends for the next few months of a little bit more activity, but we'll have to wait and see.
David G. Cramer: And we ended 86 flat, you know, interim month; we were higher than that, and then it was not uncommon to lose, you know, 10 to 30 basis points near the end of the month. So, we were pleased with, I was pleased with some of the gross rental volume.
Brandon S. Togashi: It also meant there was a little bit higher volume of move out volume versus last year. So, you know, it's early to start making too many conclusions, but I think there was just more mobility generally than what we saw last April. And maybe, you know, maybe that portends for the next few months of a little bit more activity, but we'll have to wait and see.
Speaker Change: Okay got it and then Brandon with.
Speaker Change: U P. I appreciate the comments on the swap expiration, but.
Speaker Change: Can you just remind us.
Speaker Change: Or give us an update on the plan related to both the 2024 and the 25 term loans that tranche B in July in tranche C.
Brandon S. Togashi: Next year, it's $470 million in total what's the plan to refinance at it looks like.
Speaker Change: Yeah sure. So we've got near term, we've got the tranche B, that's $145 million. So we can now.
Todd Michael Thomas: Okay, yeah, got it. And then, Brandon, you appreciate the comments on the swap expiration, but, you know, can you just remind us or give us an update on the plan related to both the 2024 and the 2025 term loans, the tranche B in July and tranche C next year? It's $470 million in total. What does the plan to refinance it look like?
Brandon: We got capacity in our line, we can obviously seek to place some refinance debt out there as well we do have a six month extension option on tranche b. So that would stacking on top of the January 25 trunk C that you're referring to all of that debt is with our banks. So we are.
Brandon S. Togashi: Yeah, sure. So we've got near-term, we've got the tranche B, that's $145 million. So we can, you know, we have capacity on our line, and we can obviously seek to place some refinance debt out there as well. We do have a six-month extension option on tranche B, so that would stack it on top of the January 25 tranche C that you're referring to.
Brandon S. Togashi: All that debt is with our banks. So in this environment, you've got to stay close and in constant dialogue with your bank group. So we're certainly doing that, and we'll continue to do that throughout the year. And then, you know, the basic case is to put some replacement debt out there, be it with our bank group, or we've been very successful accessing the debt private placement market, so that remains an option for us.
Brandon S. Togashi: In this environment and you've got to stay close in constant dialogue with your bank group. So we're certainly doing that we will continue to do that throughout the year and then.
Brandon S. Togashi: Base case is to put some replacement that out there be it with our our bank group or we've been very successful accessing the debt private placement market. So that remains an option for us.
Brandon S. Togashi: Our secured debt as a percent of our total debt stack, you know, has, there's opportunity to return that to levels that it's historically been, that's called the 10 to 12 percent range. We're 6 percent currently. So, you know, a lot of opportunity there and I expect we'll probably address the majority of that in the second half of 23, 24, excuse me.
Brandon S. Togashi: Our secured debt as a percent of our total debt stack.
Brandon S. Togashi: There is opportunity to return that to levels that it has historically been at that call it 10% to 12% range, where 6% currently so.
Brandon S. Togashi: A lot of luck.
Brandon S. Togashi: The opportunity there and.
Brandon S. Togashi: I expect we'll probably address the majority of that in the second half of 'twenty three 'twenty four excuse me.
Speaker Change: Okay, and then just back to the acquisition discussion here so in terms of.
Todd Michael Thomas: Okay. And then we'll just back to the acquisition discussion here. So, you know, in terms of acquisitions, it sounds like the majority of what you intend to acquire is expected to be through the joint venture that you announced last quarter. Will there be any acquisitions on the balance sheet that we should anticipate? And then what happens to the assets that were in the captive growth pipeline that the pros had, you know, sort of in the pipeline that NSA had been executing on since, you know, since the IPO in 2013?
Todd Michael Thomas: Acquisitions it sounds like the majority of what you intend to acquire is expected to be through the joint venture that you announced last quarter will there be any acquisitions on <unk>.
Todd Michael Thomas: Balance sheet that we should anticipate in and then what happens too.
Todd Michael Thomas: The assets that were in the captive growth pipeline that the pros had.
Todd Michael Thomas: Sort of in the pipeline that NSA had been executing on since.
Todd Michael Thomas: Since the IPO in 2013.
Speaker Change: Well, yes.
David G. Cramer: Well, yeah, a good three-parter there. I'll try to make sure I cover them all. I think, you know, probably the majority of our acquisitions will be weighted towards the JV because that is good passive capital for us. And it's a good way for us to purchase properties in today's environment. I would not rule out that you'll see stuff on the balance sheet. We do have some 1031 activity we want to take care of as some of the properties we sold last year, we're going to want to redeploy through a 1031 mechanism this year.
David G. Cramer: Good three party there I'll try to make sure I got them all up I think probably the majority of our acquisitions will be weighted towards the JV because that is a good past of capital for us and it's a good way for us to purchase properties with today's environment.
David G. Cramer: I would not rule out youll see stuff on balance sheet. We do have some 10 31 activity, we want to take care of us.
David G. Cramer: The properties, we sold last year, we're going to want to redeploy in a 10 31 mechanism. This year, so you'll see those come through.
David G. Cramer: And you know we will try to balance the opportunities the type of property. What we think is the right place for that property to sit and we'll put it in the right bucket.
David G. Cramer: So you'll see those come through. And, you know, we'll try to balance, you know, the opportunity, the type of property, what we think is the right place for that property to sit, and we'll put it in the right bucket.
David G. Cramer: As far as.
David G. Cramer: The probe.
David G. Cramer: Captive pipeline, it's still out there we're still evaluating obviously with today's cost of capital and finding the bid ask between seller and buyer we've had a tougher time, bringing stuff in from Mcafee pipeline.
David G. Cramer: Doesn't mean, we're still not working it doesn't mean, there's still not opportunities. It's just been a little slower for us to work off that Kathy pipeline in today's environment.
David G. Cramer: The third part that I'm, sorry, if I missed.
David G. Cramer: As far as the pro, you know, the pro captive pipeline, it's still out there. We're still evaluating, obviously, with today's cost of capital and finding, you know, the bid-ask between seller and buyer. We've had a tougher time bringing stuff in from the captive pipeline, but that doesn't mean we're still not working on it. It doesn't mean there aren't still opportunities. It's just been a little slower for us to work off that captive pipeline in today's environment. And then there was a third part that, I'm sorry, Todd, if I missed.
Todd: No that was it really about the captive pipeline, but I guess, what's the latest there.
Todd Michael Thomas: No, that was really about the captive pipeline. But I guess, you know, what's the latest there, you know, in terms of the size and, if I recall these assets, a lot of them had debt, you know, there was leverage or, you know, maturities that, you know, I think were sort of the catalyst for, you know, NSA being able to acquire them at maturity. You know, what's the latest there, what are the pros, you know, I guess sort of executing around that in the meantime, while NSA has been, you know, sort of, you know, less active, bringing those captive pipeline properties on to the balance sheet.
Todd Michael Thomas: In terms of the size and if I recall these assets a lot of them had.
Todd Michael Thomas: Had that.
Todd Michael Thomas: There was leverage our maturities that I think.
Todd Michael Thomas: We're sort of a catalyst for.
Todd Michael Thomas: I'm going to say being able to acquire them at maturity.
Todd Michael Thomas: Whats the latest there what are the what are the pros.
Todd Michael Thomas: I guess sort of executing.
Todd Michael Thomas: Around that in the meantime, while NSA has been sort of.
Todd Michael Thomas: Active bring.
Todd Michael Thomas: Bringing those captive pipeline properties.
Todd Michael Thomas: On to the balance sheet.
David G. Cramer: understood I think if you looked at, if we look at this top of the stack, there's probably 110 to 115 properties in the captive pipeline. And so I think the opportunities still exist. I think we've had a lot of discussions around it, but at this point in time, it's just been hard for us to find a place where it works for both parties.
Todd Michael Thomas: Understood.
David G. Cramer: If you looked at if we look at the top of the stack is probably 110 to 115 properties and the Gaffney pipeline dependent.
David G. Cramer: Depending on how you would evaluate north of $1 billion to.
Speaker Change: Thank you.
David G. Cramer: If you think about most of the folks that are in that cap the pipeline theyre looking for.
David G. Cramer: Some kind of tax differed transaction and so that is the preferred method they'd want to have some type of op unit right and so I would tell you. The <unk> pipeline is not shrinking theyre not out selling it to third parties there hasnt been a lot of transactions around that.
David G. Cramer: The amount of debt coming due we haven't felt a lot of that pressure in that group. They have they've been fine and so I think the opportunity still exists I think we've had a lot of discussions around it.
David G. Cramer: But at this point in time, it's just been hard for us to find a place where it works for both parties.
Speaker Change: Okay alright, thank you.
Todd Michael Thomas: Okay. All right. Thank you.
Todd Michael Thomas: Sure.
Todd Michael Thomas: Our next question is from the line of Ron <unk> with Morgan Stanley. Please proceed with your question.
Ronald Kamdem: Our next question is from the line of Ron Kamdem with Morgan Stanley. Please answer your question. Hey, just two quick ones.
Ronald Kamdem: Hey, just two quick ones. In terms of the performance of the portfolio, is there a way to provide a little bit more color on maybe some of the more COVID winners versus the rest of the portfolio? Or is there any sort of other way to slice and dice performance and thematic buckets? That would be helpful.
Ronald Kamdem: Hey, just two quick ones.
Ronald Kamdem: The performance of the portfolio is there a way to provide a little bit more color on maybe some of the more sort of COVID-19 winners versus the rest of the portfolio or is there any sort of other way to slice and dice outperformance in thematic buckets.
Ronald Kamdem: That would be helpful.
Ronald Kamdem: Okay.
Brandon S. Togashi: Yeah, Ron, I mean, I'll give it a shot. I think certainly what you have are some of the markets that were red hot during the pandemic, Atlanta, Riverside, for us, you know, those have definitely cooled off. And to some degree, we're still dealing with the comparison against that cooling off that was happening, you know, in the back half of 22 and all throughout 23. And so that certainly plays into the year-over-year performance that you see for any given quarter.
Speaker Change: Yes, Ron I mean ill.
Brandon S. Togashi: I'll give it a shot I mean, I think certainly what you have.
Brandon S. Togashi: Some of the markets that were Red Hot.
Brandon S. Togashi: During the pandemic.
Brandon S. Togashi: <unk>.
Brandon S. Togashi: Riverside for us.
Brandon S. Togashi: Those have definitely cooled off and to some degree we're still dealing with the comparison against that cooling off that was happening on the back half of 'twenty, two and all throughout 'twenty three and so that certainly plays into the year over year performance that you see for any given quarter.
Brandon S. Togashi: There's other markets that maybe didn't perform as still performed really strong, but not as strong as as those and so those have been more like steady eddies all throughout and those are going to be euro Casey's in Tulsa. So some of the other markets that they've cited in the opening remarks.
Brandon S. Togashi: There are other markets that, you know, maybe didn't perform as well, they still performed really strong, but not as strong as those. And so those have been more like steady eddies all throughout. And those are going to be your OKCs and PULSOs and some of the other markets that Dave cited in his opening remarks. Any other comments, Dave?
Dave: Other comments, David but.
David G. Cramer: But I'd also probably say, you know, if you think about the lack of movement around single-family housing, we do have some of this portfolio that sits around markets that benefited from people who bought houses in the lower interest rate markets. So maybe they pulled ahead with their home purchase, they went ahead and moved into Florida, they moved into some of these markets. And until I think we see a meaningful change in the single-family housing environment, some of these stores, you know, may be slower to recover versus the rest of our portfolio until you see a little bit more activity around that transition.
Dave: So I'd, probably say if you think about the lack of movement around single family housing we do have.
David G. Cramer: Some of this portfolio that sits around markets had benefited from people, who bought houses and the lower interest rate markets, where maybe they pulled ahead their home purchase. They went ahead and moved into Florida. They moved into some of these markets and until I think we see a meaningful change around that single family housing environment.
David G. Cramer: Some of these stores may.
David G. Cramer: May be slower to recover versus the rest of our portfolio until you see a little bit more activity around that transition.
Speaker Change: I would tell you I think.
David G. Cramer: You know, I would tell you we're happy with where we're positioned. We like our Sunbelt exposure. We took, you know, the Sunbelt exposure, as we call it. But I also think the positioning of our portfolio and the diversity of our portfolio, to Brandon's point, we've got some markets that are tugging away just fine, and we're able to do exactly what we want to do. And these other markets had a red, red hot, unbelievable run for about 18 to 24 months there. And now they're back, you know, it's going to take a little bit for things to come back to what we would call the new normal and new reality.
David G. Cramer: We're happy with where we're positioned we like our sunbelt exposure, we somehow exposures we call it but I also think the positioning of our portfolio and the diversity of our portfolio.
Ronald Kamdem: Great, that's helpful. And then my second question was just about sort of the guidance basically versus where you are sort of in one queue.
Ronald Kamdem: The brand is point, we've got some markets that are not.
Ronald Kamdem: I'm going to wait just fine and we're able to do exactly what we want to do in in these other markets had a red Red Hot unbelievable run for about 18 to 24 months, there and now they're back to it's.
Ronald Kamdem: It's going to take a little bit for things to come back to what we would call I don't know new new normal a new reality.
Ronald Kamdem: Great. That's helpful. And then my second question was just on sort of the guidance basically versus where you are sort of in <unk> I guess, it would assume a little bit of a deceleration on the same store NOI same store revenue line is is that mostly just because youre trying and waiting to see what sort of the peak leasing season.
Ronald Kamdem: I guess it would assume a little bit of a deceleration on the same store and wise, same store revenue line. Is that mostly just because you're trying to wait and see what sort of peak leasing season brings? Or is there sort of something else there? And could you just quickly comment on just how you're thinking about demand from sort of home turnover given higher rates? Yeah, Ron, on the first part, you're
Ronald Kamdem: Isn't brands or is there sort of something else are there and if you could just quickly comment on just how you're thinking about demand from sort of home turnover given higher rates.
Speaker Change: Yes, Ron on the first part you're correct I mean, certainly the midpoint of the full year guide that we gave for both the same store revenue and same store NOI is is lower than the Q1 year over year growth number. So that there is implied deceleration that's no different than when we were introducing the <unk>.
Brandon S. Togashi: Yeah, Ron, on the first part, you're correct. I mean, certainly the midpoint of the full-year guide that we gave for both same-store revenue and same-store NOI is lower than the Q1 year-over-year growth numbers, so that there's implied deceleration, you know, that's no different than when we were introducing the guidance in February, we expected to trough in terms of that growth in the middle of the year, and then maybe that accelerates, you know, still maybe negative growth year-over-year, but improving in the fourth quarter, and that's just really the dynamic of how we budgeted this year and the quarter-by-quarter comp that you have all throughout last year.
Brandon S. Togashi: In February we expected to trough in terms of that growth in the middle of the year and then and then maybe that accelerates still still maybe negative growth year over year, but but improving in.
Brandon S. Togashi: The fourth quarter.
Brandon S. Togashi: And that's just really the dynamic of how we budgeted this year in the quarter by quarter comps that you have all throughout last year on your second part regarding housing I mean look we.
Brandon S. Togashi: On your second part regarding housing, I mean, look, we – how we feel today is probably different than how we felt six weeks ago, but I'm sure four weeks from now will feel different, right? So the benefit we have is just a longer length of stay. If people aren't, you know, moving in as much, there are also a lot of people who aren't moving out as much, and that gives us power with ECRI, and it's what – as you know, it's what has allowed us and others in the space to maintain and protect the in-place portfolio rates. Alright, that's it for me.
Brandon S. Togashi: How we feel today is probably different than how we felt six weeks ago, but I'm sure for which now will fill that frame right.
Brandon S. Togashi: Mortgage rates felt like they got a little bit of a relief.
Brandon S. Togashi: Early in early in the year late last year and things.
Brandon S. Togashi: Pick back up but like I like I said in my response to <unk> question some of the general mobility.
Brandon S. Togashi: Stuff, we saw in the data in April was encouraging so that would be despite the new highest for 2024 that youre seeing in mortgage rates, obviously, you've got apartment renters and other things so.
Brandon S. Togashi: The benefit we have.
Brandon S. Togashi: Also it's just a longer length of stay if people aren't.
Brandon S. Togashi: Moving.
Brandon S. Togashi: And this much Theres also a lot of people weren't moving out as much and that gives us power with the cri.
Brandon S. Togashi: As you know, it's what has allowed us and others in the space too.
Brandon S. Togashi: To maintain and protect the in place portfolio rates.
Brandon S. Togashi: Alright, that's it for me.
Speaker Change: Thanks, Ron.
Brandon S. Togashi: Our next questions are from the line of Keegan Karl with Wolfe Research. Please proceed with your questions.
Keegan Grant Carl: Our next questions are from Keegan Carl with Wolfe Research. Please proceed with your question. Yeah, thanks for the time, guys. Maybe just first on supply, how should we think about new deliveries in your markets in 24 and
Keegan Grant Carl: Yes. Thanks for the time guys, maybe just first on supply how should we think about new deliveries in your markets in 'twenty four and 'twenty five.
Keegan Grant Carl: I think our general tone as we do think new deliveries are slowing nationally and if you look down into a lot of our markets. We think new deliveries are slowing off the pace. They were two years ago.
David G. Cramer: I think our general tone is we do think new deliveries are slowing nationally. And if you look down into a lot of our markets, we think new deliveries are slowing off the pace they were two years ago. And, and, and so that's a positive, excuse me, a positive sign.
David G. Cramer: And so that's a positive excuse me a positive sign I think the way we look at it is we really track around amount of fill out properties fill up properties that would be in our three mile radius and I can tell you that number percentage of stores that are facing pressure of some store in some form of fill up isn't moving around much I mean, so the amount of new <unk>.
David G. Cramer: I think the way we look at it is we really track the amount of fill out properties, fill up properties, it would be in our three mile radius. And I can tell you that the percentage of stores are facing pressure of, you know, some stores in some form of fill up aren't moving around much. I mean, the amount of new entries coming in and the amount of new entries falling off is keeping that percentage pretty similar. And that is down, you know, from where it was in 2022. And so we've seen a decline in the amount of our stores feeling pressure from stores to fill up.
David G. Cramer: <unk> coming in and the amount of new entry is falling off is keeping that percentage pretty similar and that is down.
David G. Cramer: From what where it was in 2022.
David G. Cramer: So we've seen a decline in amount of our stores feeling pressure from stores and fill up and so all of that if I had to wrap it up I think we're feeling better about new supply pressure in the coming years.
David G. Cramer: Certainly thats market specific rate you've heard us talk today on the call about Phoenix, and Atlanta, and there's been some product delivered thats going to.
Keegan Grant Carl: And so all of that, if I had to wrap it up, I think we're feeling better about new supply pressure in the coming years. But you know, certainly that's market-specific, right? We've heard us talk today on the call about Phoenix and Atlanta. And there's, there's been some product delivered that's going to, you know, put pressure on those markets. We believe in them, and we believe they'll grow out of it, but there are going to be markets that feel more pressure than others.
Keegan Grant Carl: Put pressure around those markets.
Keegan Grant Carl: Believe in them, we believe they'll grow out of it but there are going to be markets feel more pressure than others.
Keegan Grant Carl: And then changing gears with zinc back roughly a year ago, one of the things that came up in our NAREIT meeting was the potential for you guys to start you on third party management platform.
David G. Cramer: And then changing gears, if I think back roughly a year ago, one of the things that came up in our NAIT REIT meeting was the potential for you guys to start your own third-party management platform. I guess just where are you guys on that today? That's a really good question.
David G. Cramer: Just where are you guys at on that today.
Speaker Change: Oh, that's a really good question you've heard us talking over the last eight to 10 months really about really.
Keegan Grant Carl: You've heard us talking, you know, over the last, you know, eight, ten months, really about, really, looking at our platform, improving our platform, looking at, you know..., people processing platforms, our team, our talent. We have done some major lifts in the last 8 to 10 months around our data systems, our operating platforms, our website, our call center, all of these things to position us to really evaluate how we continue to grow this company and look for things that would be added to the company.
Keegan Grant Carl: Looking at our platform improving our platform looking at.
Keegan Grant Carl: People processing platforms, our team our talent.
Keegan Grant Carl: We've done some major lifts in the last eight to 10 months around our data systems are operating platforms. Our website our call center all of these things to position us to really evaluate how we continue to grow this company and look for things that would be additive to the company.
Keegan Grant Carl: Certainly today, our pros do third-party management, and so that's something we've had access to. We obviously have JVs, so we do a lot of what we would call, even though we have ownership, we manage for others. And we have all the systems, the reporting, all that stuff built out. I would tell you it's on, it's in our discussion points. It's something we look at and ask ourselves, is there a right time to dip your toe in the third-party platform? I would tell you we are talking about it. I don't have an exact date for you, but I'd say it's something that might be on our horizon, and in addition to the Platforms Initiative.
Keegan Grant Carl: Certainly today, our pros do third party management and so that's something we've had.
Keegan Grant Carl: Access round, we obviously have JV. So we do a lot of what we would call even though we have an ownership we manage for others and we have all the systems the reporting all that stuff built out.
Keegan Grant Carl: I would tell you it's on it's in our discussion points, it's something we look at it and ask ourselves is there a right time.
Keegan Grant Carl: To dip your toe in the third party platform I would tell you we talk about it I don't have an exact date for you, but I'd say, it's something that might be on our horizon.
Brandon S. Togashi: And in addition to the platform initiatives, Keegan, they said I would tie in all the portfolio optimization strategies that we've been speaking about, right? So, I mean, the 71 stores that we sold in Q4 and Q1, if you remember our comments from the last call, I mean, that was spread out across 33 different MSAs. And so we're certainly trimming in areas where we don't have market dominance or a strong market presence, and we're densifying in areas where we do.
Keegan Grant Carl: And in addition to the platforms initiatives Keegan that they've said I would tie in all the portfolio optimization strategies that we've been speaking with rights.
Brandon S. Togashi: The 71 stores that we sold in Q4 and Q1, if you remember our comments from our last call I mean that was spread out across 33 different msas and so were certainly trimming in areas, where we don't have market dominance in a strong market presence and we're intensifying in areas, where we do and I think thats going to.
Brandon S. Togashi: And I think that, in addition to the systems and platforms efforts, it's going to provide a path going forward for us to seriously consider, you know, the 3PM, to your point.
Brandon S. Togashi: In addition to the systems and platforms efforts, it's going to provide.
Brandon S. Togashi: Going forward for us to.
Brandon S. Togashi: Seriously considering.
Brandon S. Togashi: <unk> to your point.
Speaker Change: Great. Thanks for the time guys.
Speaker Change: Thank you.
Brandon S. Togashi: The next question is from the line of Wes Golladay with Baird. Please proceed with your questions.
Wesley Keith Golladay: The next question is from the line of Wes Golladay with Baird.
Wesley Keith Golladay: Hey guys, a quick one on the pros. Do you get the sense when talking to them that they're more excited about the current environment, the opportunities they see, or do you think, you know, you may see some want to retire over, you know, call it, within the next year or so?
Wesley Keith Golladay: Hey, guys a quick one on the pros and you get the sense when talking to them. They are more excited about the current environment with the opportunities. They see or do you think you may see some want to retire or I'll call. It within the next year or so.
Speaker Change: Good question and thanks for being with Us today.
David G. Cramer: Good question, and thanks for being with us today. I certainly think from the pros' perspective, they would like to be, you know, they'd like to see the environment be a little more conducive to external growth. I think, you know, as you think about heritage and how long we've all been in the business, and part of this business was acquiring and, you know, and improving performance on properties and finding the value in those acquisitions.
David G. Cramer: I certainly think from the <unk> perspective, they would like to be.
David G. Cramer: The environment would be a little more.
David G. Cramer: Conducive to external growth I think as you think about heritage and how long we've all been in the business and part of this business was acquiring.
David G. Cramer: And improving performance on properties and finding the value in those acquisitions and so certainly this has been a time where patients who is at the top of the list and I think the pros have been very very good at being patient, but also tell you. They've also been very good about acquiring properties outside the REIT.
David G. Cramer: And so, certainly, this has been a time where patience has been at the top of the list, and I think the pros have been very, very good at being patient. I would also tell you they've also been very good at acquiring properties outside the REIT. You know, they've been out, they've found some opportunities, they've found money outside the REIT, and then that just puts stuff into our CAPI pipeline that we can evaluate and look to move on at a later date.
David G. Cramer: They've been out they have found some opportunities they found money outside the REIT and then that is pushed up into our captive pipeline that we can evaluate and look to move on at a later date.
David G. Cramer: So, you know, they've been great. We appreciate them very much, and they've been patient, but they've also been active. So, I think, you know, the short answer to your question: Sure, they'd love to see it be a little easier to acquire properties within the NSA.
David G. Cramer: So.
David G. Cramer: They've been great. We appreciate them very much and they've been patient, but they have also been active so.
David G. Cramer: I think.
David G. Cramer: Short answer your question I'm sure they'd love to see it would be a little easier to acquire properties within the MSA.
Speaker Change: Okay, and then you have the comment earlier on the call about the cash flow in the JV may not exactly be 25% can you put some sensitivity on that are we looking at $24 26, and what would cause that deviation.
Wesley Keith Golladay: Okay, and then you had the comment earlier in the call about the cash flow, and the JV may not exactly be 25%. Can you put some sensitivity on that? We're looking at 24, 26, and you know, what would cause that deviation?
Speaker Change: Yes sure.
Brandon S. Togashi: Yeah, sure. Wes, it's really around like providing a minimum, you know, base return to our partner, which, you know, the going in yield, the value at which we contributed the assets, it was all kind of pre-designed to not guarantee but strongly assure that we're going to be at those levels. And then if we hit certain metrics and operating performance, we have the ability to earn some incremental fees. But currently, that scenario of us being in the money on those is not a meaningful driver of our 24 guidance.
Brandon S. Togashi: It's really around like providing a minimum base returned to our partner, which.
Brandon S. Togashi: The going in yield.
Brandon S. Togashi: The value, which we contributed the assets it was all kind of pre designed to.
Brandon S. Togashi: Guaranteed strongly assure that we're going to be at those levels and then if we hit certain metrics operating performance, we have the ability to earn some incremental fees.
Brandon S. Togashi: That's not currently that scenario of us being in the money on those is not a meaningful driver of our 24 guidance, that's a possibility, but it's just not a big needle mover.
Brandon S. Togashi: It's a possibility, but it's just not a big needle mover. And then I'll save comments for later years. They're achievable goals, but I'll save comments without handicapping the likelihood beyond 2024. And then, like our existing two JVs, we have a promote structure where, you know, once a certain return has been provided to our partner, then we get kind of a disproportionate share of that upside.
Brandon S. Togashi: And then in the I'll save comments for the out years.
Brandon S. Togashi: They are achievable goals, but I'll save comments without handicapping the likelihood.
Brandon S. Togashi: Beyond 2024, and then and then like our existing two JV, we have upon a liquidity event.
Brandon S. Togashi: Structure, where once a certain return has been provided to our partner then we get kind of a disproportionate share of that upside.
Speaker Change: Okay, and then how should we think about call. It the floating rate exposure I think you've mentioned some swap the coming offline you did some buybacks may have some disposition maybe buy some more assets. So a lot of moving parts of the call them the balance of the year, where do you think the floating rate exposure into the year.
Wesley Keith Golladay: Okay, then how should we think about, you know, call it the floating rate exposure? I think you mentioned some swaps are coming offline. You did some buybacks, you may have some dispositions, you may be buying some more assets. So, a lot of moving parts over the calls in the balance of the year. What do you think the floating rate exposure is this year?
Wesley Keith Golladay: Um, well...
Brandon S. Togashi: Well, I guess... Let me say it this way, we're, as I mentioned in the opening remarks, about 200 million drawn on our revolver, which is our only current variable rate exposure. We have the 250 million in swaps that expire in the middle of the year, that could go to floating or, you know, between now and then, we could enter into new swaps and fix that. So, that'll be or, you know, take out place replacement that. So, those are options for us.
Wesley Keith Golladay: Well I guess, let.
Brandon S. Togashi: Let me say it this way we're as I mentioned in the opening remarks about $200 million drawn on our revolver, which is our only current variable rate exposure, we have the $250 million of swaps that expire middle of the year.
Brandon S. Togashi: That could go to floating.
Brandon S. Togashi: Now and then we could enter into new swaps and fixed that so that'll be or take out.
Brandon S. Togashi: Replacement that.
Brandon S. Togashi: So those are options to us.
Brandon S. Togashi: If you factor in the 250 million swaps that burn off, let's just assume that that goes to floating. It puts our total debt that's subject to variable less as a percent of our total, around 13%, 14%. You know, we've been comfortable in the past up to 20%, sometimes 25%. So, I think if I had to tell you, I'd say between 10% and 20% of our total debt stack of a little over $3 billion could be floating rates by the end of the year.
Brandon S. Togashi: If you factor in the $250 million.
Brandon S. Togashi: Swaps that burn off let's just assume that that.
Brandon S. Togashi: To floating it puts our total debt.
Brandon S. Togashi: That's subject to variable loss as a percent of our total.
Brandon S. Togashi: It's around 14 13, 14% we've been comfortable in the past up to 20, something 25%. So I think if I had to tell you I would say between 10 and 20% of our total debt stack of little over $3 billion.
Brandon S. Togashi: Could be floating rate by the end of the year.
Speaker Change: Okay. Thanks for that.
Brandon S. Togashi: Sure.
Brandon S. Togashi: Thank you as a reminder to ask a question as I think you can press star one from your telephone keypad.
Tayo Okosalia: Thank you. As a reminder to ask a question today, you can press star 1 on your telephone keypad. Our next question is from the line of Tayo Okosalia with Deutsche Bank. Please answer your question.
Omotayo Tejumade Okusanya: Our next question is from the line of Tayo Okusanya with Deutsche Bank. Please proceed with your questions.
David G. Cramer: Hi, yes, good afternoon. Quick question: the captive pipeline from the perus, is there any way that it can potentially be acquired by the JVs, or can't you do that legally, or because of tax implications, something like that would not work?
Omotayo Tejumade Okusanya: Hi, yes, good afternoon.
Omotayo Tejumade Okusanya: Quick question.
David G. Cramer: The captive pipeline from the pros.
Omotayo Tejumade Okusanya: Anyway that can potentially be acquired by the Jv's or you can't do.
Omotayo Tejumade Okusanya: That legally or because of tax implications or something like that would not work.
David G. Cramer: Okay.
Brandon S. Togashi: Well, certainly, I think you touched on the point that the captive pipeline people could probably sell it to anybody, they could sell it to, you know, a JV, they could sell it to our JV, they could sell it, you know, if we turn the property down and decide we don't want to move, they could, they could sell it wherever they want. I think they're really looking for tax treatment, and the OP unit is one of the primary drivers behind that captive pipeline and that group of sellers.
Omotayo Tejumade Okusanya: Certainly I think you touched on the point is that the captive pipeline people would probably they can sell to anybody they could sell it to the JV they could sell it to our JV they could sell it.
Brandon S. Togashi: If we turn the property down and decided we will have low they could they could sell it wherever they want I think they're really looking for the tax treatment in the op unit is one of the primary drivers behind that get Gaffney pipeline in that group of sellers and so that makes it hard we can't spend it into the JV in that aspect is the is the answer to that I guess short answer until the only other thing I would say is it pad in his <unk>.
Brandon S. Togashi: And so that makes it hard; we can't spin it into the JV in that aspect. Is the answer to that, I guess, the right answer? And Kyle, the only other thing I would say is Todd, in his question referenced the debt maturities as a driver, which is true, but you know, there's also assets in that captive pipeline that our pros manage, but they don't outright control them, they may just completely manage them, or maybe they have a minority ownership interest and also manage them.
Brandon S. Togashi: Question referenced the debt maturities as a driver which is true but there is also assets in that captive pipeline that our pros manage but they don't outright control. They may just completely manage them only or maybe they have a minority ownership interest and also manage them so to the extent that those other owners.
Brandon S. Togashi: So, you know, to the extent that those other owners, if their business pattern changes, and if they wanted to be a cash seller, you know, the JV could be an option. We haven't seen that yet. And I think it's less likely, as Dave said, but just wanted to provide some additional color on some of the different arrangements.
Brandon S. Togashi: In fact pattern changes and if they wanted to be a cash seller.
Brandon S. Togashi: <unk> could be an option, we haven't seen that yet and I think it's less likely as Dave said, but just wanted to provide some additional color on some of the different arrangements.
Speaker Change: Okay. That's helpful. And then could you also give a general sense on overall tenant credit maybe what you're kind of seeing in regards to.
Tayo Okosalia: That's helpful. And then could you also kind of give a general sense of overall tenant credit, maybe what you're kind of seeing in regards to, you know, increasing auctions, increasing delinquencies, or decreasing auctions, and decreasing delinquencies?
Tayo Okosalia: Increasing auction, increasing delinquencies are decreasing oxonium decreasing delinquency.
Tayo Okosalia: Yes.
Brandon S. Togashi: Yeah, I mean, no real changes in the first quarter from the previous several quarters in terms of delinquencies. You know, we track bad debt as a percent of revenue, and that's historically been, you know, in around the two and a half percent range. So we're very much in line with those levels for Q1. Something we're certainly watching closely, but we haven't seen any significant changes in payment patterns or payment timing from customers. So all the indicators are that the very, very healthy customer base is intact. Great.
Tayo Okosalia: No real changes in the first quarter from the previous several quarters in terms of.
Brandon S. Togashi: Delinquencies, we track our bad debt as a percent of revenue and Thats historically been.
Brandon S. Togashi: Around two 5% range.
Brandon S. Togashi: So we're very much in line with those levels for Q1.
Brandon S. Togashi: It's something we're certainly watching closely but haven't seen any.
Brandon S. Togashi: Significant changes in payment patterns or payment timing from our customers. So all indicators are very very healthy customer base intact.
Brandon S. Togashi: Great solid work on the capital allocation front this quarter.
Tayo Okosalia: Great. Solid work on the capital allocations for this quarter.
Speaker Change: Thank you. Thank you.
Tayo Okosalia: Our next question is coming from the line of Brendan Lynch with Barclays. Please proceed with your questions.
Brandon S. Togashi: Our next question is coming from the line of Brendan Lynch with Barclays. Please proceed with your question.
Brandon S. Togashi: Great, thanks for taking the question. I want to go back to the focus on internal operations and the people, processes, and platforms that are being upgraded and evaluated. I'd imagine this is a perpetual focus to a certain extent, but to the extent you can define, are we reaching the end of that process for certain components of it, and maybe just more broadly where you are in the transition overall?
Brandon S. Togashi: Great. Thanks for taking my question I wanted to go back to the focus on internal operations and the people processes and platform Center.
Speaker Change: Being up.
Brandon S. Togashi: Upgraded and evaluated I would imagine this is a perpetual focus to a certain extent, but.
Brandon S. Togashi: To the extent you can define.
Brandon S. Togashi: Define are we reaching the end of that process for certain components of it and maybe just more broadly where you are in that transition overall.
David G. Cramer: Yeah, really good question. I would categorize it as yes. We are reaching the end of the current, you know, development cycle of what we've worked on. And so, it will be done here shortly. We've upgraded the operating platform. We've upgraded our data center and our capabilities around data, AI, and technology. We've upgraded the call center platform, and we've updated the web experience. And so, we've touched all four of those, which was a very big list for this company.
Speaker Change: Yeah really good question and I would categorize it as yes, we are inning, we're in in reaching the end of the current development cycle of what we've worked out and so but it will be done here. Shortly we've upgraded the operating platform, we've upgraded our data center and our capabilities around data and AI and technology, we've upgraded the call Center platform.
David G. Cramer: And we've updated the web a web experience and so we've touched all four of those which were very big list for this company. The teams have worked extremely hard.
David G. Cramer: The teams have worked extremely hard, and they've been extremely diligent in their efforts. I couldn't be more proud of all that we've accomplished. And so, to me, we've got the platform, the foundation really, really solidly built, and this launches us into the next, you know, next chapter of this company's life as we look forward to utilizing that, what we've developed, utilizing the technology we've developed, and really having the tools for the talent to really excel.
David G. Cramer: <unk> been extremely diligent in their efforts.
David G. Cramer: Can be more proud of all that we've accomplished and so.
David G. Cramer: To me we've got the platform the foundation really really solidly built in this launches us into the next chapter of this company's life as we look forward on utilizing that while we've developed utilizing the technology, we have developed and really having the tools for the talent to really excel.
Speaker Change: Great. That's helpful. And then it looks like your you had about a 32% increase in marketing spending can you talk about the components that went into that I'd imagine paying for clicks as part of it maybe some call center.
Brandon S. Togashi: Great, that's helpful. And then it looks like here you had about a 32% increase in marketing spending. Can you talk about the components that went into that? I'd imagine paying for clicks as part of it, maybe some call center considerations as well.
Brandon S. Togashi: Iterations as well.
Brandon S. Togashi: Yes, you you touched on them I mean, our call center is in included in our marketing expense and I think we think about it today you are at a very competitive environment. The marketing spend has come back to a level that we're very comfortable with as a percentage of revenue.
David G. Cramer: Yeah, you touched on that. I mean, our call center is included in our marketing expense. And I think, you know, we think about it today; you're in a very competitive environment, and marketing spend has come back to levels that we're very comfortable with as a percentage of revenue. And, you know, as we continue to implement technology and we continue to look at how we staff our stores and the payroll around our stores, obviously, the call center, the customer touch points change, you know, digitally; we're moving more people to more of a digital experience, and our customers are transacting much more with this digital capability than they have in the past.
David G. Cramer: And as we continue to implement technology and we continue to look at how we staff our stores in the payroll around our stores obviously, the the call center the customer touch points change digitally we're moving more people to have more of a digital experience our customers who are transacting much more with us digitally they have in the past and the call Center volume I was talking about is all.
David G. Cramer: And the call center volume I was talking about is also a function of that where we are meeting the customer and how they want to transact. And so the comp is tougher, because last year, we were not spending at the level from a digital spend, paid search, some SEO work on that piece of it was not as vigorous as it is this year, we'll start to annualize that paid search and some of those marketing costs, you know, the hard costs that go around Google and those things, really, as we head into the, you know, second quarter, third quarter, we really start to annualize that year over year spend and that comp will not look as, as, you know, pronounced as it is today.
David G. Cramer: Also a function of that where we are meeting the customer on how they want to transact and so the comp is tougher because last year, we were not spending at the level from a digital spend paid search.
David G. Cramer: He will work on that piece of it was not as vigorous as it is this year, we will start to annualize that paid search and some of those marketing costs. The hard cost to go round, Google all of those things really as we head into the second quarter third quarter, we really start to annualize that year over year spend in that comp will not look as as pronounced as it is today.
Speaker Change: Okay very good thank you.
Brandon S. Togashi: Okay, very good. Thank you.
Speaker Change: Thank you.
Brandon S. Togashi: Our next question is from the line of Eric <unk> with Wells Fargo. Please proceed with your questions.
Eric Thomas Luebchow: Our next question is from the line of Eric Luebchow with Wells Fargo. Please proceed with your question.
David G. Cramer: Great. Thanks for taking the questions. So, you know, with some of your new revenue management systems you put in place, you're being a little more dynamic in terms of, you know, new rates and offering lower rates to customers to generate some additional occupancy, which is reflected in some of your web scrapes as well. Any early learnings on how that strategy is progressing compared to other types of promotions that you might give, like one month free rent?
Eric Thomas Luebchow: Great. Thanks for taking the questions so at.
David G. Cramer: It sounds like with some of your new revenue management system you put in place you are being a little more dynamic in terms of.
David G. Cramer: New rates and offering lower rates to customers to generate some additional occupancy.
David G. Cramer: As reflected in some of your words groups as well so any early learnings on how that strategy is progressing compared to other types of promotions that you might give like like one month free rent.
Speaker Change: Yeah really good question.
Eric Thomas Luebchow: Yeah, really good question. It's, it's, I would tell you to start at the top of that is what we're discovering. And I don't think it's new to all of us that customer price sensitivity is mattering more now in the rental process than it did a year ago and even six months ago. And so the consumer, from their entry level, is looking for a little bit sharper promotion, discount price reduction, however you want to look at that.
Eric Thomas Luebchow: I would tell you to start at the top of this is what we are discovering and I don't think it's new to all of US is the customer price sensitivity is mattering more now in the rental process than it did a year ago, and even six months ago and so the consumer from there they were entry level.
Eric Thomas Luebchow: Are looking for a little bit sharper promotion discount price reduction. However, you want to look at that.
Eric Thomas Luebchow: We are.
Eric Thomas Luebchow: We are have been primarily focused on lowering entry rate and then trying to make that up, you know, through a little bit more of the ECRI program, but we are finding success now looking a little bit more back to what we used to do as an industry around promotion where it's, you know, maybe 30% off or a third off for the first three months or half off for two months and a little easier to implement that with the consumer, a little more visibility around that piece of it as far as, you know, here's your discount, you know, your rent is this and you get 50% off for the next two months and then it's going to that and, you know, as far as a consumer standpoint, that's a pretty easy point of sale, pretty easy to understand and takes a little bit of pressure off those large increases, you know, after 60 or 90 day period of being with us. And so we are testing and we're finding a path around probably a little bit more promotions use and maybe not as steep, you know, of rate decreases as where we're heading with this.
Eric Thomas Luebchow: Have we have been primarily focused on lowering entry rate and then trying to make that up.
Eric Thomas Luebchow: So a little bit more of the CRA program, but we are finding success now looking at a little bit more back to what we used to do as an industry around promotion, where it's maybe 30% off or a third off for the first three months or half off for two months and a little easier to implement that with the consumer a little more visibility around that piece of it as far as.
Eric Thomas Luebchow: Here's your discount your rent is this and you get 50% off for the next few months and then it's going to that.
Eric Thomas Luebchow: As far as the consumer standpoint.
Eric Thomas Luebchow: Pretty easy point of sale pretty easy to understand and takes a little bit of pressure off those large increases.
Eric Thomas Luebchow: After 60, or 90 day period of being with Us and so we are testing and we're finding a path around probably a little bit more promotions use and maybe not as steep.
Eric Thomas Luebchow: Of rate decreases where we're heading with this and so I would tell you having the technology, having the testing having the testing environment.
Eric Thomas Luebchow: And so I would tell you having the technology, having the testing, having the testing environment, you know, I've been around a long time. I'm really excited about what we can see and the data points we have and how we can test and react and how nimble we can be. We are, you know, much farther down the path of where we ever used to be, and, you know, it's a good thing to be excited about.
Eric Thomas Luebchow: I've been around a long time.
Eric Thomas Luebchow: Excited about what we can see in the data points, we have and how we can test and react and how nimble we can be.
Eric Thomas Luebchow: Sure.
Eric Thomas Luebchow: Much farther down the path of where we ever used to be in.
Eric Thomas Luebchow: It's going to be excited about it's also a good way to learn and hopefully again find the best efficiencies. We can find when we're trying to attract new customers I do want to shift back to also our existing customer base has been very very sticky we had long length of stays and so on the flipside of that technology, attracting we talk a lot about attracting customers with our existing customer base is really <unk>.
Eric Thomas Luebchow: It's also a good way to learn and hopefully, again, find the best efficiencies we can find when we're trying to track new customers. But I do want to shift back to our existing customer base has been very, very, you know; we have long length of stays and so on the flip side of that technology attracting, we talk a lot about attracting customers, but our existing customer base is really healthy, really stable. And it's been very accepting of the ECRI program that we have in place.
Eric Thomas Luebchow: He really stable and thats been very accepting of the ECR I program that we have in place.
Speaker Change: Okay, Great. That's very helpful and I guess, just one follow up.
David G. Cramer: But great, Dave, that's very helpful. And I guess just one follow-up, just to confirm, the midpoint of your same-story revenue guidance assumes we don't have a typical seasonal uplift and move in rents from the troughs of winter to spring and summer. I just wanted to confirm that. And do you think that seems like the right assumption, just based on what you've seen in early spring through late March and early
David G. Cramer: Just to confirm the midpoint of your same store revenue guidance assumes we don't have a typical seasonal uplift in move in rents from the troughs of winter to spring and summer I just wanted to confirm.
David G. Cramer: That and do you think Thats seems like a right assumption just based on what you've seen in kind of early spring through late March early April.
Dave: Yes, that's correct, Eric I mean, maybe model a variety of scenarios. So in some of those that would.
Eric Thomas Luebchow: Yeah, that's correct, Eric. I mean, maybe, you know, we modeled a variety of scenarios. So in some of those, that would incorporate a little bit of an uptick in rate due to seasonality, but not anything like the typical norms that we've had in historical years. And I would agree with what you said. Yeah, nothing that we've seen so far makes us feel like we should or need to change those assumptions.
Eric Thomas Luebchow: Corporate a little bit of uptick in rates due to seasonality, but not nothing like the typical norms that we've had an historical historical years and I would agree with what you said, yes, nothing that we've seen so far makes us feel like we should or need to change that.
Eric Thomas Luebchow: Those assumptions.
Eric Thomas Luebchow: Okay, great. Thanks for the questions. Yes, thank you.
Speaker Change: Okay, great. Thanks for the questions.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you.
George Andrew Hoglund: At this time, we've reached the end of our question and answer session, and I'll turn the call back to George Hoglund for closing comments.
Eric Thomas Luebchow: At this time, we've reached the end of our question and answer session I'll turn the call back to George Hoglund for closing comments.
George Andrew Hoglund: Thank you all for joining the call today. We appreciate your continued interest in NSA and look forward to seeing many of you at REIT week Conference next month.
George Andrew Hoglund: Thank you all for joining the call today. We appreciate your continued interest in NSA and look forward to seeing many of you at the REIT Week conference next month.
George Andrew Hoglund: Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.