Q1 2024 Public Storage Earnings Call

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Operator: Greetings and welcome to Public Storage's First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. To access the queue at that time, please press star one on your telephone. If anyone should require operator assistance during the conference, please press star zero on your telephone. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ryan Burke, Vice President of Investor Relations and Strategic Partners. Thank you. You may be

Greeting and welcome to the public storage first quarter 'twenty 'twenty four earnings conference call.

At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation.

To access the Q at that time, Please press star one on your telephone keypad.

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 I would now like to turn the conference over to your host Ryan Burke, Vice President of Investor Relations and strategic partnerships. Thank you you may begin.

Ryan C. Burke: Thank you, Rob. Hello, everyone. Thank you for joining us for our first quarter 2024 earnings call. I'm here with Joe Russell and Tom Boyle.

Ryan C. Burke: Thank you Rob Hello, everyone. Thank you for joining us for our first quarter 2024 earnings call I'm here with Joe Russell and Tom Boyle before we began we want to remind you that certain matters discussed during this call may constitute forward looking statements within the meaning of the federal Securities laws. These forward looking statements are subject to certain economic risks and uncertainties.

Ryan C. Burke: Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, May 1st, 2024, and we assume no obligation to update, revise, or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial matters we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports, and an audio replay of this conference call on our website at publicstorage.com.

Ryan C. Burke: All forward looking statements speak only as of today May <unk> 2024, and we assume no obligation to update revise our supplement statements to become untrue because of subsequent events a.

Ryan C. Burke: A reconciliation to GAAP of the non-GAAP financial matters. We provide on this call is included in our earnings release, you can find our press release supplement report SEC reports and an audio replay of this conference call on our website at public storage Dot Com. We do ask that you initially limit yourself to two questions of course, if you have additional questions. After those two feel free.

Ryan C. Burke: We do ask that you initially limit yourselves to two questions. Of course, if you have additional questions after those two, feel free to jump back in queue. With that, I'll turn it over to Joe.

Ryan C. Burke: You to jump back in queue with that I'll turn it over to Joe.

Joseph D. Russell: Thank you, Ryan. And thank you all for joining us today. Tom and I will walk you through our recent performance and updated industry views, then we'll open it up for Q&A. Our first quarter performance was in line with our expectations. However, as we anticipated, the new move in the customer environment remains challenging.

Joseph D. Russell: Thank you Ryan and thank you all for joining us today.

Joseph D. Russell: Tom and I will walk you through our recent performance and updated industry views then we'll open it up for Q&A.

Joseph D. Russell: Our first quarter performance was in line with our expectations as we anticipated the new move in customer environment remains challenging.

Joseph D. Russell: However, we are encouraged by positive trends across our business, which include: Industry-wide customer demand improved sequentially through the quarter; the ability to raise our moving rates as we enter the peak leasing season; strong in-place customer behavior, including longer-than-normal lengths of stay and lower delinquency rates; moderating move out volume, improving occupancy, and waning development of new competitive supply, a trend we expect will continue. As mentioned on last quarter's call, we were encouraged by month-over-month revenue growth reacceleration in certain markets, including Washington, D.C., Baltimore, and Seattle.

Joseph D. Russell: However, we are encouraged by positive trends across our business which include.

Industry wide customer demand improved sequentially through the quarter.

Joseph D. Russell: The ability to raise our move in rates as we enter the peak leasing season.

Ryan C. Burke: Strong in place customer behavior, including longer than normal lengths of stay and lower delinquency rates.

Ryan C. Burke: Moderating move out volume, improving occupancy and waning development of new competitive supply a trend we expect will continue.

Ryan C. Burke: As mentioned on last quarter's call. We were encouraged by month over month revenue growth reacceleration in certain markets, including Washington, D C Baltimore and Seattle.

Joseph D. Russell: That momentum has continued, and additionally, we see accelerating trends in markets including San Francisco, New York, Chicago, Philadelphia, Detroit, and Minneapolis. We anticipate more markets will be added to this list across our portfolio over the next few quarters. These bottoming to improving trends are particularly important for two reasons. First, they are in stark contrast to 2023, when all markets were decelerating as we normalized from record performance in 2021 and 2022. And second, they put us on track for improving company-wide financial performance in the back half of this year, as embedded in our guidance.

Ryan C. Burke: That momentum has continued and additionally, we see accelerating trends in markets, including San Francisco, New York, Chicago, Philadelphia, Detroit and Minneapolis.

Ryan C. Burke: We anticipate more markets will be added to this list across our portfolio over the next few quarters.

Ryan C. Burke: These bottoming to improving trends are particularly important for two reasons.

Ryan C. Burke: First they are in Stark contrast to 'twenty twenty-three when all markets were decelerating as we normalize from record performance in 2021 and 2022.

Ryan C. Burke: And second they put us on track for improving companywide financial performance in the back half of this year is embedded in our guidance.

Joseph D. Russell: Additionally, our high-growth, non-same-store pool of assets comprises 538 properties and 22% of our overall portfolio square footage. With NOI growth approaching nearly 50% during the first quarter, these properties remain a strong engine of growth. Overall, we are encouraged by what we are seeing on the ground. The team is very focused on capturing new customer activity as we approach the busy season, which will help drive our performance for the remainder of 2024 and into 2025. With that, I'll turn the call over to Tom to provide additional detail. Thanks, Joe.

Ryan C. Burke: Additionally, our high growth non same store pool assets comprises 538 properties and 22% of our overall portfolio square footage.

Ryan C. Burke: With NOI growth approaching nearly 50% during the first quarter. These properties remain a strong engine of growth.

Ryan C. Burke: Overall, we are encouraged by what we're seeing on the ground.

Ryan C. Burke: The team is very focused on capturing new customer activity as we approach the busy season, which will help drive our performance for the remainder of 'twenty 'twenty, four and into 2020 five.

Ryan C. Burke: With that I'll turn the call over to Tom to provide additional detail.

Tom Boyle: Thanks, Joe.

Tom Boyle: Shifting to financial performance, we reported first quarter core FFO of $4.03, representing a 1.2% decline compared to the first quarter of 2023. Looking at the same store portfolio, revenue increased 0.1% compared to the first quarter of 2023. That was driven by rent growth offset by modest occupancy decline. Move-in rates, adjusting out our winter promotional sale activity, were down 11% in the quarter. Positive net move-in volumes led to a modest closing of the occupancy gap at quarter end to down 60 basis points.

Tom Boyle: Shifting to financial performance, we reported first quarter core F F O $4.03, representing a one 2% decline compared to the first quarter of 2023.

Tom Boyle: Looking at the same store portfolio revenue increased 0.1% compared to the first quarter of 'twenty three.

Tom Boyle: That was driven by rent growth offset by modest occupancy declines.

Tom Boyle: Move in rates adjusting out our winter promotional sale activity were down 11% in the quarter.

Ryan C. Burke: Positive net move in volumes led to modest closing of the occupancy gap at quarter end to down 60 basis points.

Tom Boyle: On expenses, same store costs of operations were up 4.8% for the first quarter, largely driven by increases in property taxes and marketing spend to drive movement activity. In total, net operating income for the same store pool of stabilized properties declined one and a half percent in the quarter.

Ryan C. Burke: On expenses same store cost of operations were up four 8% for the first quarter largely driven by increases in property tax and marketing spend to drive move in activity.

Ryan C. Burke: In total net operating income for the same store pool of stabilized properties declined one 5% in the quarter.

Tom Boyle: Our performance in the stabilized same-store pool was supplemented by very strong growth in our non-same-store pool, as Joe highlighted. With the non-same store assets at 81% occupancy in the quarter, we have confidence in outsized growth from that pool this year and into the future, which is a segue to our Outlook for 24. We reaffirmed our core FFO guidance for the year with a $16.90 midpoint on par with 2023. The first quarter was in line with our internal expectations.

Ryan C. Burke: Our performance in the stabilized same store pool was supplemented by very strong growth in our non same store pool as Joe highlighted.

Ryan C. Burke: With the non same store assets at 81% occupancy in the quarter, we have confidence in outsized growth from that pool to come this year and into the future.

Ryan C. Burke: Which is a segue to our outlook for 'twenty four.

Ryan C. Burke: We reaffirmed our core F F O guidance for the year with a $16.90 midpoint on par with 2023.

Ryan C. Burke: The first quarter was in line with our internal expectations.

Tom Boyle: And, as we discussed on our last quarterly call, we anticipate a deceleration of financial performance into the second quarter and with improvement in the second half. Outlook for capital allocation remains intact, with $450 million of development deliveries anticipated, which will be a record year for public storage, and $500 million of acquisitions in the second half. The transaction market for acquisitions remains subdued with limited volumes given the volatile cost of capital environment year to date.

Ryan C. Burke: And as we discussed on our last quarterly call, we anticipate deceleration of financial performance into the second quarter and with improvement in the second half.

Ryan C. Burke: Outlook for capital allocation remains intact with $450 million of development deliveries anticipated, which will be a record year for public storage.

Ryan C. Burke: And $500 million of acquisitions in the second half.

Ryan C. Burke: The transaction market for acquisitions remains subdued with limited volumes, given a volatile cost of capital environment year to date.

Tom Boyle: We're optimistic that there is a pent-up level of transaction activity likely to come, and we're eager to participate when that does occur. Finally, our capital and liquidity position remains strong. We refinanced our 2024 maturities in April with a combination of a three-year floating rate note, a 15-year Euro note, and a 30-year reopen. Our leverage of 3.9 times net debt and preferred to EBITDA puts us in a very strong position heading through the year. So with that, I'll turn the call back to Rob to open it up for our Q&A session.

Ryan C. Burke: We're optimistic that there's a pent up level of transaction activity likely to come and we're eager to participate when that does occur.

Ryan C. Burke: Finally, our capital and liquidity position remains strong we refinanced our 'twenty 'twenty four maturities in April with a combination of a three year floating rate note 15 year Euro note and a 30 year reopening.

Ryan C. Burke: Our leverage of 3.9 times net debt and preferred to EBITDA puts us in a very strong position heading through the year.

Ryan C. Burke: So with that I'll turn the call back to Rob to open it up for Q&A session.

Ryan C. Burke: Okay.

Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. As a reminder, we ask that you please limit your questions to two.

Rob: At this time, we'll be conducting a question and answer session.

Operator: And, of course, feel free to jump back in the queue for any questions or follow up. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Rob: We'd like to ask a question. Please press star one on your telephone keypad as a reminder, we ask that you. Please limit to two questions and of course feel free to jump back in the queue for any questions or follow ups.

Rob: A confirmation tone will indicate your line is in the question queue. You May press star two if he like to remove your question from the Q.

Rob: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: One moment, please, while we poll for questions. Our first question comes from Samir Khanal with Evercore ISI. Please proceed with your question.

Rob: My first question comes from Samir Khanal with Evercore ISI. Please proceed with your question.

Samir Upadhyay Khanal: Hey, Yeah. Good morning, everyone I guess, Joe you talked about <unk> being in line with expectations.

Samir Upadhyay Khanal: Maybe talk around April kind of what you're seeing on.

Samir Upadhyay Khanal: Move in trends sort of general trends Youre seeing in April and I guess, how is April sort of.

Samir Upadhyay Khanal: Played out versus your expectations. Thanks.

Joseph D. Russell: Sure, Samir. Yeah, I would put April in the same context of sequential improvement that we saw through the first quarter, where, again, we've seen overall expected top-of-funnel demand and expected move-in activity. We've been pleased by that. It's matching our expectation, as Tom and I have outlined, the way the year's likely to play out. So, no surprises, and I would say a validation of the re-acceleration in a number of markets that I pointed to in my opening comments. Yeah, and Samir, maybe it's Tom here, maybe I'll just provide a couple of data points on April as well. Similar trends, as Joe mentioned, on moving.

Joseph D. Russell: Sure Samir Yep I would put.

Joseph D. Russell: Put April in the same context of sequential improvement that we saw through the first quarter, where again, we've seen overall expected a top of funnel demand expected move in activity. We've been pleased by that it's matching our expectation as you know Tom and I are out.

Joseph D. Russell: Blind the way the year is likely to play out so no surprises and I would say a validation of the reacceleration in a number of markets that I pointed to in my opening comments.

Tom Boyle: Yeah, and Samir, maybe, it's Tom here, maybe I'll just provide a couple data points on April as well. Similar trends, as Joe mentioned, on move-in rents into April; we are starting to increase those rents, as Joe highlighted, as we move into May in the peak leasing season. Existing customers are performing quite well, something that Joe highlighted in his remarks. However, move-outs were again down year over year in the month of April. Occupancy finished the month down 50 to 60 basis points. So, a pretty consistent April, and obviously, we're eager to get into May, June, and July here, the peak leasing season of the year. Got it. And I guess this should do it.

Joseph D. Russell: Yeah, and and Samir maybe it's Tom here, maybe I'll just provide a couple of data points on April as well similar trends as Joe mentioned on move in rents in the April we are starting to increase those rents as Joe highlighted as we move into may in the peak leasing season.

Speaker Change: Existing customers performing quite well and it's something that Joe highlighted in his remarks move outs were again down year over year in the month of April occupancy finished the month down 50 to 60 basis points.

Speaker Change: So at a a pretty consistent April and obviously, where we're eager to get into May June and July here. The the peak leasing season of the year.

Speaker Change: Got it and I guess, just shifting over to the transaction market I know you'd mentioned it was subdued.

Speaker Change: Possibly it was rates spiking here in March and April I guess, what gives you the confidence that you'll start to see sort of it.

Speaker Change: Or transaction or opportunities in the second half.

Joseph D. Russell: Yes, Samir, there's likely to be a range of motivations that bring a seller to market. The fluctuation in those motivations has been up and down, obviously, as we've seen over the last few quarters with the volatility, with interest rates, etc. But having said that, we've been in active dialogue with a number of owners that will likely transact sometime in 2024. I think they're trying to gauge, you know, more precise timing based on what may or may not be coming, you know, through the discussion the Fed may be indicating relative to the change in interest rates between now and the end of the year, etc.

Speaker Change: Yes, Amir there's likely to be a range of motivations, that's going to bring a seller to market. The fluctuation in those made at motivations has been up and down obviously as we've seen over the last few quarters with the volatility.

Speaker Change: With interest rates et cetera, but having said that we've been in active dialogue with a number of owners that will likely transact sometime in 'twenty 'twenty four.

Speaker Change: They're trying to gauge you know more precise timing based on what may or may not be coming.

Speaker Change: Through the discussion the fed may be indicating relative to change in interest rates between now and into the year et cetera, but on one end of the spectrum. There are a number of situations that will require an owner to bring an asset to market whether individually or in some level of a portfolio. So we do still anticipate.

Joseph D. Russell: But on the one end of the spectrum, there are a number of situations that will require an owner to bring an asset to market, whether individually or at some level of a portfolio. So we do still anticipate some activity beginning to percolate. As Tom mentioned, it's been a pretty quiet couple of quarters, but the conversations that we've been having with a number of owners are giving us confidence that there is likely, you know, some pending trading activity that we may be able to capture, thus not changing our outlook for 2024 relative to the amount of acquisition activity we're likely to capture.

Speaker Change: Paid some activity are beginning to percolate. Its Tom mentioned, that's been a pretty quiet a couple of quarters, but the conversations that we've been having with a number of owners are giving us confidence that there's likely.

Speaker Change: Some pending trading activity that.

Speaker Change: We may be able to capture a that's not changing our outlook for 'twenty 'twenty four relative to the amount of acquisition activity were likely to capture.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Operator: Our next question is from Keegan Carl with Wolf Research. Please proceed with your question.

Speaker Change: Our next question is from Kagan Karl with Wolfe Research. Please proceed with your question.

Tom Boyle: Thanks for your time, guys. Maybe first, just curious about your expectations for the housing market that you currently have embedded in your guidance and if this has changed at all since your initial guide and commentary a few months ago.

Keegan Grant Carl: Yeah. Thanks for the time guys, maybe first just curious for your expectations in the housing market that you currently have embedded in your guidance and if this has changed at all since your initial guide and commentary a few months ago.

Keegan Grant Carl: Yeah.

Tom Boyle: Yeah, sure, Keegan, this is Tom. So I wouldn't edit any of the commentary that we had in February around any of the assumptions really heading into the peak leasing season here. You know, we obviously just provided that outlook a little over 60 days ago. And as Joe mentioned, and probably not surprisingly, providing that outlook two thirds of the way through the first quarter, the first quarter played out very similar to our expectations.

Speaker Change: Yeah sure Keith This is Tom so I wouldn't at any of the commentary that we had in in February around.

Speaker Change: Any of the assumptions really heading into the peak leasing season. Here. You know we are obviously just provided that outlook a little over 60 days ago, and as Joe mentioned and probably not surprisingly are providing that outlook two thirds the way through the first quarter. The first quarter played out very similar to our expectations and I think.

Speaker Change: The range of outcomes are very much intact, there as well and specifically to the housing market and we.

Tom Boyle: And I think that the range of outcomes is very much intact there as well. And specifically, to the housing market, we are not anticipating in any of the ranges a robust housing market, and based on where interest rates have moved, I think that's the right place to be as we sit here today as well.

Speaker Change: We aren't anticipating or not anticipating in any of the the range is a robust housing market and based on where interest rates have moved I think that's there were the right place to be as we sit here today as well.

Joseph D. Russell: And again, just as a reminder, certainly that demand factor is one, but it's one of a number that, particularly at this time of year, can provide momentum and a higher level of top of funnel demand. The view of a different customer cohort, i.e., renters, continues to be quite strong. So we're very pleased by the activity that's also coming from that type of customer. And with that, and as your question alludes to a more subdued housing market at the moment, we still feel that we've got good demand factors that are going to drive the business going into the busy leasing season.

Speaker Change: And you know again, just as a reminder.

Speaker Change: Certainly you know that demand factor is one but its one of a number that are particularly at this time of year. It can provide momentum and you know a higher level of a top of funnel demand are.

Speaker Change: View of a different customer cohort I E. Renters continues to be quite strong. So were very pleased by the activity. That's also coming from.

Speaker Change: That type of customer.

Speaker Change: And with that and then as your question alludes to a more subdued housing market at the moment, we still feel that we've got good demand factors are going to drive the business going into leasing season busy leasing season.

Tom Boyle: Got it. And then, shifting gears, maybe just a big picture question. I guess I'm just trying to figure out what it would take in the broader environment, if we think about our upcoming NARATE meetings in a handful of weeks here, like what will it take for you guys to have a more positive or optimistic tone? In other words, we're trying to figure out what can go right in storage given it feels like everyone's just focused on where we are. Sure, Keegan, I'll preface

Speaker Change: Got it and then and then shifting gears, maybe just a big picture question.

Speaker Change: I'm just trying to figure out what would it take in the broader environment. If we think about our upcoming NAREIT meetings and in a handful of weeks here like what will it take for you guys for more positive or optimistic tone.

Speaker Change: In other words I'm trying to figure out what can go right in storage given it feels like everyone's just focus on where weakness is going to persist.

Tom Boyle: Sure, Keegan, I'll preface some NAIRE meetings then. So I would highlight maybe two elements that we would be pleased to be discussing at NAREIT and that I think would give us a positive tone. One of them, going back to Joe's commentary, is adding more markets to that list of markets that are reaccelerating, right? As we think about the bottoms that are occurring in many of these markets and reacceleration, we're a collection of 90 markets around the country, not a one-stop moving portfolio.

Speaker Change: Chad sure kicked at all.

Speaker Change: Preface some NAREIT meetings, then so I would I would highlight maybe two two elements.

Speaker Change: That.

Speaker Change: We would be pleased to be discussing at NAREIT and I think would give us a positive tone one of them going back to Joe's commentary.

Speaker Change: Is adding more markets to that list of markets that are re accelerating right. As we think about the bottoms that are occurring in many of these markets and reacceleration.

Speaker Change: We're a collection of 90 markets around the country not a.

Speaker Change: 111 stop moving portfolio and so adding more markets to that list gives us more and more confidence in terms of the outlook and the performance of the portfolio as a whole clearly.

Tom Boyle: And so adding more markets to that list gives us more and more confidence in terms of the outlook and the performance of the portfolio as a whole. Clearly. The second thing I'd maybe highlight would be... more dialogue, I think, on the questions we were just discussing around capital allocation. More dialogue with sellers and not necessarily more transactions over the next 30 days, but more dialogue, and more underwriting activity as we set up for what is traditionally a busier time period for self-storage transactions in the second half of the year. We'll start to have some of that dialogue here over the next 30 to 60 days. Joe, I don't know if there's anything you'd like to add.

Speaker Change: The second thing I would maybe highlight would be.

Speaker Change: More dialogue I think to the questions. We were just discussing around capital allocation more dialogue with with sellers and not necessarily more transactions over the next 30 days, but more dialogue more underwriting activity as we set up for what is traditionally a busier time period for self storage transactions in the second half of the year and we will start to.

Speaker Change: Have some of that dialogue here over the next 30 to 60 days.

Speaker Change: And Joe I don't see anything you'd add.

Speaker Change: Okay.

Speaker Change: Okay.

Joseph D. Russell: Thanks Keith.

Operator: Our next question comes from Eric Wolf with Citibank. Please proceed with your question.

Speaker Change: Our next question comes from Eric Wolfe with Citibank. Please proceed with your question.

Joseph D. Russell: Yeah, thanks. Maybe just to follow up on your last answer, you mentioned that you're seeing a re-acceleration in revenue growth and an increasing number of markets. You talked about those markets, but I just wanted a clarification on that. Does that mean that your year-over-year revenue growth is accelerating in those markets, or does that mean that as your occupancy kind of goes up due to normal seasonal patterns, you're seeing sequential month-over-month growth in revenue, which I think you would probably expect just given normal seasonal patterns? Yeah, very much so.

Eric Wolfe: Yeah. Thanks, maybe just a follow up on your last answer you mentioned that Youre seeing a reacceleration in revenue growth an increase.

Eric Wolfe: An increasing number of markets you talked about those markets, but just wanted a clarification on that I mean does that mean that your year over year revenue growth is accelerating in those markets or does that mean that your as your occupancy kind of goes up due to normal seasonal patterns, you're seeing sequential month over month growth in revenue, which I think you would probably expect just given normal seasonal patterns.

Joseph D. Russell: Yeah, very good question, Eric, to clarify what we're meaning by that. So, specifically, what we're speaking to is month-over-month improvement in year-over-year revenue growth. So, if you pick a market, it's growing 1% in the month of February. In the month of March, it's growing 1.5%. That would be a reaccelerating market. So, not a seasonal thing or revenue on an absolute basis going higher because of higher occupancy or things like that, but actual year over year growth improvement.

Speaker Change: Yeah very good question, Eric to clarify what were meaning by that so specifically what we're speaking to is a month over month improvement in year over year revenue growth. So if you think about it you know pick a market it's growing 1% in the month of February.

Eric Wolfe: In the month of March it's growing a 1.5% that would be and excel it reaccelerate market.

Speaker Change: So not a seasonal thing or revenue on an absolute basis going higher because of higher occupancy or things like that but actual year over year growth improvement.

Joseph D. Russell: And, you know, contextually, and, you know, it's part of the opportunity that continues to play out in many, many markets. We mentioned waning supply. So we're also going into an environment where the competition factor in the vast majority of our markets continues to decrease. Again, as we're starting to see this reacceleration, that's also, for the most part, in many markets with very little new supply coming in. That's, too, an additive factor relative to the amount of demand that we continue to see as an opportunity to drive more customers into the portfolio.

Speaker Change: And you know contextually and it's part of the the opportunity that continues to play through in many many markets. You know we mentioned waning supply. So we're also going into environment, where the competition factor and the vast majority of our markets continues to decrease.

Speaker Change: Again as we're starting to see this reacceleration. That's also for the most part in many markets with very little new supply coming in that's two and additive factor relative to the amount of demand that we continue to see an opportunity to drive more customers into the portfolio.

Speaker Change: Yeah.

Tom Boyle: And then I just had a question about sales activity. You talked about the impact on your move-in rents for the quarter, but I was just curious about what criteria you look at in order to determine why you should increase that sales activity. So if we look at last October or this March, why did you decide to increase sales versus the other month, especially given some of the recent, you know, positive demand indicators that you were just talking about? Yeah, that's a good question, Eric.

Speaker Change: Got it that's helpful. And then I just had a question on the sales activity. You know you talked about the impact on your move in rents.

Speaker Change: For the quarter.

Speaker Change: But was just curious you know what criteria you look at in order to determine why you should increase that sales activity. So if we look at last October This March is.

Speaker Change: Why did you decide to increase sales versus the other months, especially given some of the recent positive demand indicators that you were just talking about.

Tom Boyle: Yeah, that's a good question, Eric. So we've run these sales consistently over time. And last year, we ran them for a number of different time periods. And in the month of February, at the tail end of February and beginning of March, we ran one as well. The primary reason is that we had some inventory that we felt like we could move. And so, at different points in the year, we'll try different promotional tactics, sales tactics to drive customer activity, pairing that with advertising and the like.

Speaker Change: Yeah. That's a good question Eric So we've run these sales.

Eric Wolfe: Consistently over time and last year, we ran them a number of different time periods.

Speaker Change: And in the month of February at tail end of February beginning of March we ran one as well.

Speaker Change: The primary reason is we had some inventory that we felt like we can move and so the different points of the year will try different promotional tactics sales tactics to drive customer activity pairing that with advertising and and and alike tend.

Tom Boyle: We tend to see good traction there. We saw good traction during the winter season here, as we talked about, and we'll likely use – continue to use promotional activity, sale activity, and the like through the year this year, not dissimilar to what we did last year.

Speaker Change: We tend to see good traction there we saw good traction during the winter season here as we talked about and we'll likely use continue to use promotional activity sale activity and alike are through the year. This year not dissimilar to what we did last year.

Speaker Change: Thank you.

Operator: Our next question is from Jeff Spector with Bank of America. Please proceed with your question.

Speaker Change: Our next question is from Jeff Spector with Bank of America. Please proceed with your question.

Joseph D. Russell: Thank you. Yeah, Jeff.

Jeffrey Alan Spector: Great. Thank you.

Jeffrey Alan Spector: And in the markets that you talked about where you're seeing these these accelerating trends I guess can you talk about that a little bit more like what's driving that.

Jeffrey Alan Spector: From your view in and tie that into the comments that you did say.

Jeffrey Alan Spector: So that the new move ins do remain challenging so I'm just trying to tie those two together. Thank you.

Joseph D. Russell: Yeah, Jeff, maybe to start with the second part of the question, yeah, challenging on a year-over-year basis, but sequentially, we're seeing a good trend upward. So we, you know, hope to continue to see that build as we go into, you know, further months into the year, and our confidence grows month by month, even through the month of April, as we've talked about. So, you know, that's one powerful component.

Speaker Change: Yeah, Jeff.

Speaker Change: Maybe to start with the second part of the question, yes challenging on a year over year base, but sequentially. We are seeing a good trend up so we hope to continue to see that build as we go into you know further months into the year and our confidence grows month by month even through them.

Joseph D. Russell: Thematically, many of the markets where we're starting to see this re-acceleration on the early side were typically markets that were not the high flyers in, you know, the peaks of the pandemic era, so they haven't had to reset relative to the more dramatic rate increases and overall demand increases that we saw during the pandemic. So on the flip side of that, you know, you're not hearing us talk about Florida, for instance.

Speaker Change: Month of April as we've talked about so you know that that's one powerful component.

Jeffrey Alan Spector: Thematic lead many of the markets, where we're starting to see this re acceleration on the early side. We're typically markets that we're not the high fliers in the peaks of the pandemic era. So they.

Jeffrey Alan Spector: We haven't had to reset relative to the more dramatic rate increases and overall demand and increases that we saw through the pandemic. So on the flip side of that you know you're not hearing us talk about Florida. For instance, so you know, Florida has got a ways to go before I think we'd add them into that re accelerating bucket, but.

Joseph D. Russell: So, you know, Florida's got a ways to go before I think we'd add them to that re-accelerating bucket. But on a more active level and more dominant level across the portfolio, as we've listed out, you know, market by market, we're starting to see that improvement, particularly where, you know, we've got markets that weren't those high flyers but have seen more consistent performance. And we're starting to see, you know, that re-acceleration as we speak.

Speaker Change: On.

Speaker Change: A more active level and more dominant minimal level across our portfolio as we've listed out market by market, we're starting to see that improvement, particularly where we've.

Speaker Change: We've got markets that Werent those high Flyers, but have seen more consistent performance and we're seeing to see you know, we're starting to see that reacceleration as we speak so theres more to come as we've also talked to so we're confident as the year plays out we're likely to you know add to this list of re accelerating markets are.

Joseph D. Russell: So there's more to come, as we've also talked to. So we're confident as the year plays out, we're likely to, you know, add to this list of, you know, re-accelerating markets. And again, as I just mentioned, with many of these markets not dealing with, you know, an abundance of new supply as well.

Speaker Change: And again as I just mentioned with many of these markets not dealing with you know and abundance of new supply as well.

Operator: Thank you. My follow-up then... They've revised their numbers a couple of times now.

Speaker Change: Thank you my follow up then.

Speaker Change: They've revised revise their numbers a couple of time, Jeff how alright, you cut out can you repeat I'm sorry, you cut out for a second.

Operator: Jeff Howell. Sorry, you cut out. Can you repeat that? I'm sorry.

Operator: Yes, can you hear me now? Yes. Great, thank you. Sorry about that.

Jeffrey Alan Spector: Yes can you hear me now.

Jeffrey Alan Spector: Yes.

Speaker Change: Great. Thank you sorry about that I was just my follow up with.

Joseph D. Russell: I was just, my follow-up with Joe is on supply. I said that, you know, we subscribe to Yardy, and I think they've updated that now a couple times where this year is higher than last year, but they are expecting a decrease into next year. I guess can you provide a little bit more on your supply forecast? Like, you know, are you seeing something different or the same for this year, let's say, and then for 2025 at this point? Yeah, Jeff, if you step back, I mean, I appreciate it.

Jeffrey Alan Spector: Joe is on supply I was saying that we subscribe to Yardy and I think they've updated that now a couple of times, where this year is higher than last year, but.

Jeffrey Alan Spector: <unk> a decrease into next year I guess can you provide a little bit more on your supply forecast that you know you are.

Jeffrey Alan Spector: Are you seeing something different or the same for this year, let's say and then for 2025 at this point.

Joseph D. Russell: Yeah, Jeff, if you step back, I mean, I appreciate the way that Yardi attempts to track nationally both development activity and, more precisely, what I think can be more difficult is the reality of how many of those projects actually get put into production and then are likely to be completed on a year-by-year basis. So we've been very consistent now for the last two to three years where we, in our own development activity, have seen the competitive factor of supply taper down. It's tapering down to zero in 2024.

Speaker Change: Yeah, Jeff if you step back I mean, I. Appreciate you know the way that you're already attempts to track nationally both development activity and then more precisely what I think can be more difficult as the reality of how many of those projects actually get put into production and then are likely.

Jeffrey Alan Spector: To come pleat on a year by year basis. So we've been very consistent now for the last two to three years, where we in our own development activity have seen the competitive factor of this supply taper down its tapering down in 2024. So I think I would say we have a bit of a difference of opinion, if there are plenty of them.

Joseph D. Russell: So I think I would say we have a bit of a difference of opinion if they're pointing to some type of an uptick this year. What we see, and it's been very commanding on a day-to-day basis, and if you're actually doing development as we're doing on a national basis, the amount of headwinds, the amount of timing delays, the amount of complications market-to-market has Again, we've been very consistent about that.

Jeffrey Alan Spector: Some type of an uptick this year, what we see and it's been very commanding them on a day to day basis, and if you're actually doing development as we're doing on a national basis, the amount of headwinds the amount of timing delays the amount of complication market to market has not.

Jeffrey Alan Spector: [noise] eased at all again, we've been very consistent about that and then you layer on a the cost of capital that you know, Tom and I've been talking to as well as you know the unpredictability in certain markets relative to demand et cetera, there's more headwinds that any developer on an individual basis is facing and by virtue of that.

Joseph D. Russell: And then you layer on, A, the cost of capital that, you know, Tom and I have been talking about as well as, you know, the unpredictability in certain markets relative to demand, et cetera. There are more headwinds that any developer on an individual basis is facing. And by virtue of that, you're seeing a downdraft in the amount of deliveries, which we think are going to continue going into next year and the year after that.

Jeffrey Alan Spector: Youre seeing a downdraft in the amount of deliveries, which we think are going to continue going into next year and the year after.

Joseph D. Russell: We're frankly looking at development. If you're starting fresh in any given market, it could take anywhere from two to three years just to get through the entitlement process right now. So just think about that from a calendar standpoint. That puts you out into 2026 and 2027.

Jeffrey Alan Spector: We're frankly looking at development if.

Jeffrey Alan Spector: If you're starting fresh in any given market that could take anywhere from two to three years just to get through an entitlement process right. Now. So just think about that from a calendar standpoint that puts you out into 2026, and 2027 and there's really not.

Joseph D. Russell: And there's really not an easy way to combat that. So the risk factors tied to development continue to increase for all the reasons. And we're pretty confident that our lens into that activity is far more accurate than others.

Jeffrey Alan Spector: An easy way to combat that so the risk factors tied to development continued to increase for all the factors I just mentioned and we are pretty confident that our lens into that activity is far more accurate than others.

Jeffrey Alan Spector: [laughter].

Speaker Change: Thanks very helpful.

Speaker Change: Thank you.

Operator: Our next question is from Todd Thomas with KeyBank Capital Markets. Please proceed with your question.

Speaker Change: Our next question is from Todd Thomas with Keybanc Capital markets. Please proceed with your question.

Tom Boyle: Hi, Tom. I just wanted to go back to the guidance, which you affirmed, you know, and it sounds like the quarter was relatively in line overall. You know, I'm wondering if you are still anticipating moving rents to cross the zero threshold later in the summer and occupancy to remain down about 80 basis points a year? Or has the mix shifted around a little bit following this quarter and the April performance that you discussed?

Todd Michael Thomas: Hi, Thank you.

Todd Michael Thomas: Tom I just wanted to go back to the guidance.

Todd Michael Thomas: Would you affirmed you know and it sounds like the quarter was relatively in line overall.

Todd Michael Thomas: I'm wondering are you still anticipating a move in rents to cross the zero threshold later in the summer and occupancy to remain down about 80 basis points on a year or has the mix shifted around a little bit I'm. Following this quarter's end and in the April performance that you discussed.

Tom Boyle: Yeah, Todd, no, I'd point you to all of that commentary that we had on the February call is as intact as it relates to the assumptions that underlie the range there. And, as you would anticipate, the next three months are going to be important as to which direction we head on certain of those metrics. We've been encouraged by performance to date, and we will have more to talk about ranges and things like that as we move through the year.

Speaker Change: Yeah, Todd No I'd point, you to you know.

Speaker Change: All of that commentary that we had on the February call us as intact as it relates to the assumptions that underlie the range there.

Speaker Change: And as you would anticipate the next three months are going to be important as to which direction. We're heading on certain of those metrics. We've been encouraged by performance to date.

Jeffrey Alan Spector: And we will have more to talk about ranges and things like that as we move through the year.

Tom Boyle: Okay, and then, you know, following up on that, is there a scenario in which rents remain, you know, a little bit weaker than you anticipated, you know, down double digits or, you know, high single digits, but occupancy continues to improve, and you end up closing that gap entirely? And if so, what would that look like? What would the sensitivity around the model look like for guidance purposes? You know, there was an outcome, you know, in that sort of direction.

Speaker Change: Okay and then following up on that is there a is there a scenario.

Speaker Change: And which move in rents remain.

Speaker Change: A little bit weaker than you anticipated you know down down double digits or high single digits, but occupancy continues to improve and you end up closing that gap entirely and if so what would that look like what would the sensitivity around the model look like for guidance purposes, if there.

Speaker Change: There was an outcome and that sort of direction.

Tom Boyle: Sure, there's definitely a range of outcomes and assumptions that you can make in the revenue modeling. I think what you're highlighting is if you have better occupancy performance but worse rate performance, but if you end up in the same spot, could you end up in the same places you otherwise would have anticipated? Absolutely.

Speaker Change: Sure. There is I mean, theres definitely a range of outcomes and assumptions that you can make on on the revenue modeling I think you're highlighting is.

Speaker Change: You have better occupancy performance, but worse rate performance, but if you end up in the same spot. This could you end up in the same places you otherwise would have anticipated absolutely.

Tom Boyle: Okay. And just last question, then, one of your peers saw a slight uptick in vacant activity and, you know, sounded like there was an expectation that there'd be some sort of continued normalization around vacant properties and in the length of tenant stays. Your vacate activity was lower in the quarter, you know, versus last year. And I'm just wondering if you expect that to continue or do you see potential for vacate activity and, you know, the length of stay trends to normalize a bit more going forward?

Speaker Change: Okay.

Speaker Change: And just last question then you know one of your peers saw a slight uptick in vacate activity.

Speaker Change: It sounded like that there was an expectation that there'll be some.

Speaker Change: Continued normalization around Vacates and then the.

Speaker Change: The length of tenants days Youre vacate activity was lower in the quarter.

Speaker Change: Versus last year, and and I'm just wondering if you expect that to continue or do you see potential for vacate activity in.

Speaker Change: The length of stay trends to normalize a bit more going forward.

Tom Boyle: So I think there are a couple parts to that question, Todd. I think the first one is around length of stays and what we've seen trend-wise. And we've been really pleasantly surprised over the last several years at how sticky the length of stay has been. You know, when we were sitting here on calls in 2021, we were concerned that maybe there'd be a pretty quick return to normal or, quote unquote, pre-pandemic length of stay. And we're now sitting here in 2024 still talking about longer lengths of stays compared to pre-pandemic levels, but we're certainly off of those 2021 and 2022 peaks. And so there has been a quote unquote normalization.

Speaker Change: So I think Theres a couple of parts to that question Todd I think the first one is around length of stays and what we've seen trend wise.

Speaker Change: We've been really pleasantly surprised over the last several years at how sticky are the length of stay has been when we were sitting here on calls in 2021, we were concerned that maybe there'd be a pretty quick return to normal or quote unquote pre pandemic like this days and we're now sitting here in 2024 still talk.

Speaker Change: <unk> about longer length of stays compared to pre pandemic levels, but we're certainly off of those 2021 and 2022 peaks.

Speaker Change: So there has been a quote unquote normalization.

Tom Boyle: But I think some of the factors that have led to longer length of stay are durable. For example, we've talked about customers that are using storage because they ran out of space in their home. Less housing turnover likely leads to longer length of stays. All those things can be positive as it relates to length of stay. And so while we're off the peaks, we still remain encouraged by customer behavior and the length of stays that we're seeing in the portfolio today.

Speaker Change: But I think some of the factors that.

Speaker Change: Have led to longer length of stay or durable we've talked about customers that are using storage because they ran out of space in their home.

Speaker Change: Housing turnover likely leads to longer length of stays all of those things can be a positive as it relates to the length of stay and so while we're off the piece, we still remain encouraged by customer behavior and the length of stays that were seeing in the portfolio. Today. So maybe the first part the second part is how are we thinking about move out activity.

Tom Boyle: So that may be the first part. The second part is, how are we thinking about move-out activity? And move-out activity, I think in the midpoint case, is for basically flat year-over-year move-out activity. So we're not anticipating a spike in that midpoint case, and then maybe just a third component.

Speaker Change: And move out activity I think at the midpoint cases for basically flat year over year in move out activity.

Speaker Change: So yeah, we're not anticipating a spike in that that midpoint case.

Tom Boyle: And then maybe just a third component, you know, from a macro standpoint. Health of customer standpoint, you know, with plus or minus 85% of our customers being consumers, employment trends continue to validate the economies and, you know, in very strong shape. We're not seeing any elevated level of stress play out that even takes us back to pre-pandemic levels, either better payment patterns, delinquency patterns, etc. We are still in a very good zone.

Speaker Change: And then maybe just a third component you know from a macro.

Speaker Change: Our health of customer standpoint.

Speaker Change: With plus or minus 85% of our customers being consumers employment trends continue to validate the economies in very strong shape, we're not seeing any elevated level of stress play through that even takes us back to pre pandemic levels I E. They're better payment patterns delinquency patterns et cetera are.

Speaker Change: Still in a very a good zone, we're not seeing any new an undue stress it's coming through on the customer environment as a whole. So we continue to be very pleased and confident about our ability to.

Tom Boyle: We're not seeing any new undue stress that's coming through on, you know, the customer environment as a whole. So we continue to be very pleased and confident about our ability to achieve that level of stability with our existing customer base.

Speaker Change: See that level of stability with our existing customer base.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Operator: Our next question is from Eric Luebchow with Wells Fargo. Please proceed with your question.

Speaker Change: Our next question is from Eric Lube Chow with Wells Fargo. Please proceed with your question.

Tom Boyle: Thank you, I appreciate your time today. Um, I just wanted to touch on same store expenses a little bit. I saw slightly, you know, elevated growth and property taxes. I think you had guided that being up about 5%. So maybe, kind of, is there any kind of seasonality to think about throughout the year and property taxes and also marketing expenses? You know, up significantly. How should we think about, you know, how those trends throughout the year given the unique dynamics of this year with spring leasing coming up?

Speaker Change: Thank you I appreciate the time today.

Speaker Change: Wanted to touch on same store expenses, a little bit I saw slightly elevated growth in property taxes. I think you had guided to that being up about 5%. So maybe kind of is there any kind of seasonality to think about throughout the year and property taxes and then it also marketing expenses.

Speaker Change: Up significantly how should we think about.

Speaker Change: You know how those trended throughout the year given the unique dynamics of this year with with spring leasing coming up.

Tom Boyle: Yep, that's a great question. So, as you highlighted, operating expense for the quarter was above our full-year outlook. And so we are anticipating that overall operating expense trends will improve. And so you've hit on a couple of the drivers of that, and I'll elaborate on a couple others.

Speaker Change: Yes, that's a great question. So as you highlighted operating expense for the quarter was above our full year outlook and so we are anticipating that overall operating expense trends will improve and so you've hit on a couple of the drivers of that and I'll elaborate on a couple of others.

Tom Boyle: The first one, property tax, we still are anticipating property tax to be plus or minus 5% year-over-year growth for the year. The first quarter did have some reassessments that were earlier in the year this year, so that was kind of one-time related. On the marketing topic, similarly, if you look at marketing spend in the first quarter, it was pretty consistent with the fourth quarter, which is a little bit higher seasonally. We'd anticipate marketing spend both on an absolute basis but also on a year-over-year basis to moderate a little bit as we move through the year, obviously depending on customer demand activity and the like, but that's another driver. But I would also add two others.

Speaker Change: The first one property tax we still are anticipating property tax to be plus or minus 5% year over year growth for the year.

Speaker Change: The first quarter did have some reassessment that were earlier in the year. This year that was kind of one time related.

Speaker Change: On the marketing topic. Similarly, if you look at marketing spend in the first quarter. It was pretty consistent with the fourth quarter, which is a little bit higher seasonally we'd anticipate marketing spend both on an absolute basis, but also on a year over year basis to moderate a little bit as we move through the year, obviously, depending on customer demand active.

Speaker Change: <unk> and alike, but that's another driver, but I would also add two others. One is our capital investments that we're making in solar power on our rooftops, which has a myriad benefits for us obviously the environment our customer base.

Tom Boyle: One is the capital investments that we're making in solar power on our rooftops, which has myriad benefits for us, obviously the environment and our customer base. And one of the factors there will be lowering utility expenses. We had that in the first quarter, but that's going to continue as we move through the next couple of quarters. And then also the technology investments that we made around our customer interaction. Now, over two-thirds of our customers are coming to us and renting digitally before they ever show up at a property.

Speaker Change: And one of the factors there will be lowering utility expense, we had that in the first quarter, but that's going to continue as we move through the next couple of quarters.

Speaker Change: And then also.

Tom Boyle: The technology investments that we've made around our customer interaction now over two thirds of our customers are coming to us and renting digitally before they ever show up at a property that number continues to grow.

Tom Boyle: That number continues to grow, and we've been very clear about some of the opportunities to utilize that for specialization and centralization of roles and lower payroll expenses as we move through the year. And we'll see more of that heading through 2024 as well.

Tom Boyle: And we've been very clear around some of the opportunities.

Speaker Change: To utilize that for specialization and centralization of rolls and lower payroll expense as we move through the year and we'll see more of that heading through 2024 as well.

Operator: Great. I appreciate it.

Speaker Change: Great I appreciate it.

Speaker Change: Just for a follow up you mentioned some of the rest of the development right now you're seeing longer lead times for things like entitlement higher construction costs higher interest expense.

Speaker Change: So it seems like PSA is really leaning and now a lot of your competitors may be coined back but.

Joseph D. Russell: And just on a follow-up, you mentioned some of the risks to development right now. You're seeing longer lead times for things like entitlement, higher construction costs, and higher interest expense. So it seems like PSA is really leaning in now; a lot of your competitors may be pulling back, but Do you have any change in your outlook to get to kind of an 8% NOI yield bogey within three to four years, which I think was your historic underwriting? Anything you can call out specifically about the markets you're developing today, the supply conditions, the competitive intensity, what gives you the confidence you can get those types of returns?

Speaker Change: Do you have any change in your outlook to get to kind of an 8% NOI yield bogey within three to four years, which I think was your historic underwriting anything you can call out a specific where the markets are developing today to supply conditions, the competitive intensity, while you're there what.

Speaker Change: What gives you the confidence you can get to those type of returns.

Joseph D. Russell: Yeah, I mean, we take a, you know, clearly a multi-year view of that hurdle rate. It hasn't changed even in some of the pressure points that we've spoken to, so we continue to see the opportunity to find, you know, very good land sites. Assets that will, from a competitive standpoint, not be burdened relative to any, you know, undue risk. That's another thing that we factor in with the amount of data and the knowledge we have sub market to sub market that gives us that level of confidence.

Joseph D. Russell: Yeah, I mean, we take a look.

Speaker Change: Yeah, I mean, we take a clearly a multi year view of that hurdle rate it hasn't changed even out of some of the pressure points that we've spoken too. So we continue to see the opportunity to find very good land sites.

Speaker Change:

Joseph D. Russell: Assets that will from a competitive standpoint, not be burdened relative to any undue risk. That's another thing that we factor in with the amount of data and the knowledge, we have submarket to submarket that gives us the level of confidence we can get to that hurdle, if not higher so really havent changed any of our.

Joseph D. Russell: We can get to that hurdle if not higher so really haven't changed any of our Hurdle expectations and or the risk that you know that might convey relative to what could play out in a market by market basis To your point. Yeah, there's definitely more things that we're evaluating relative to the costs timing Rent level achievements, etc That go into our underwriting, but we're still confident that we're adding to and finding You know very good sites to continue to grow our scale in many many markets nationally So development teams working very hard to uncover those opportunities Frankly and maybe another point to your question We have a different and more advantageous competitive advantage we're seeing more land sites that might be further into entitlement processes that we are You know interested in to relative to potentially accelerating some of those delivery hurdles that I talked about So, you know many factors in this environment actually played to play to our platform quite well, and we continue to You know one by one take advantage of those

Speaker Change: <unk> expectations and or the risk that that might convey relative to what could play out on a market by market basis.

Speaker Change: To your point, Yeah, there's definitely more things that we're evaluating relative to the cost timing rent level achievements et cetera that go into our underwriting, but we're still confident that we're adding to and finding very good sites to continue to grow our scale in many many markets nationally so development teams working very hard.

Speaker Change: To uncover those opportunities frankly in may.

Joseph D. Russell: Another point to your question, we have a different and more advantageous competitive advantage, we're seeing more land sites that might be further into entitlement processes that we are interested into relative to potentially accelerating some of those delivery hurdles that I talked about so many fab.

Speaker Change: Actors in this environment actually play to play to our platform quite well and we continue to one buy one take advantage of those.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

Operator: Our next question is from Michael Goldsmith with UBS. Please proceed with your question.

Speaker Change: Our next question is from Michael Goldsmith with UBS. Please proceed with your question.

Tom Boyle: Good morning. Thanks a lot for taking my question. Given what you've started to see in some of the markets, you know, turning, bouncing off the bottom and starting to reaccelerate, does that mean that ECRIs in this market could also start to pick up?

Speaker Change: Okay.

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

Michael Goldsmith: Given what you've started to see in some of the markets.

Michael Goldsmith: Turning bouncing off the bottom and is starting to Reaccelerate does that mean that you see or is in this market could also start to pick up.

Michael Goldsmith: Yeah.

Tom Boyle: Yeah, certainly. I mean, as you see momentum in the market, we've talked consistently about how we think about existing customer rent increases. One of the factors is certainly the cost to replace a tenant. And as we see moving rates and demand activity percolating in those markets, that will feed into our thinking about, well, should a customer maybe receive a higher magnitude or higher frequency of increase? So absolutely. And I think the second piece of our existing customer rate increase model is around customer performance, and we've been speaking in a couple of previous questions around how we continue to be encouraged by that behavior.

Michael Goldsmith: Yeah, certainly I mean as you'd see momentum in the market, we've talked consistently about how we think about existing customer rent increases.

Michael Goldsmith: One of the factors is certainly the cost to replace that tenant and as we see move in rate and demand.

Michael Goldsmith: Activity percolating in those markets that will will feed into our thinking about what should a customer may be receive a higher magnitude or higher frequency of increase so absolutely and I think the second piece.

Michael Goldsmith: Of our existing customer rate increase model is around customer performance and we've been speaking in a couple of previous questions around how we can continue to be encouraged by that behavior.

Tom Boyle: Thanks for that, Tom. And my second question is about the type of customer that's acquired through the sale process that you did. Does that generate – does a sale generate incremental demand, or does it help you take market share? Does that customer have a different demographic profile or length of stay? What I'm guessing I'm trying to get at is it would seem that this would be a higher customer acquisition cost for this customer, trying to determine if there is a – how does that customer lifetime value look for them? Yeah, Michael, I'd say.

Speaker Change: Thanks for that Tom.

Speaker Change: And my second question is around the type of customers acquired through the.

Speaker Change: The sale process that you did does that generate.

Tom Boyle: Does the sale generate incremental demand or does it help you take market share does that customer have a different demographic profile or length of stay customer I'm guessing I'm trying to get at is.

Speaker Change: It would seem that this would be a higher customer acquisition cost for this customer trying to determine if there is a how.

Speaker Change: How does that custom customer lifetime value for that customer.

Tom Boyle: Yeah, Michael, I'd say across the board that different pricing, promotion, and advertising tactics will lead to drawing more, a little bit different mixes of customers and the like to our stores. And so we pull those different levers throughout the year, looking to try to maximize NOI, ultimately, so revenue less the advertising expense associated with it. And so, you know, as you look at a sale, for instance, it will attract more customers. And we'll use some different tactics around pricing, promotion, and advertising to try to optimize that overall lifetime value of the customer.

Speaker Change: Yeah, Michael I would say.

Tom Boyle: Across the board different pricing promotion and advertising tactics will lead to drawing more a little bit different mixes of customers.

Speaker Change: And the like to to our stores and so we pull those different levers throughout the year looking to try to maximize NOI ultimately so revenue less the advertising expense associated with it and so we're we're toggling those levers trying to maximize that outcome and so.

Tom Boyle: As you look at.

Speaker Change: Our sale for instance, it will draw more customers and we'll use some different tactics around pricing and promotion and advertising to try to optimize that that overall lifetime value of the customer.

Speaker Change: Thank you very much.

Michael Goldsmith: Yeah.

Operator: Our next question comes from Spenser Allaway with Green Street Advises. Please proceed with your question.

Michael Goldsmith: Our next question comes from Spenser <unk> with Green Street Advisors. Please proceed with your question.

Joseph D. Russell: Consumer health continues to be topical, just given the economic backdrop, but I was just wondering specifically about the commercial tenant. Can you comment on the health or appetite of the business consumer and how that has changed, if at all, in the last year?

Spenser: Thank you consumer health continues to be top call just given the economic backdrop and I was just wondering specifically about the commercial Kenny can you comment on the health or appetite or the business consumer and how has that changed at all in the last year.

Joseph D. Russell: Yes, Spencer, I would say, in like fashion, no stress points or any other headwinds that we're seeing from that type of customer. You know, there's obviously a very broad range of user types, different industries. Some are product-oriented. Some are service-oriented. Some are very specific to certain locations.

Kenny: Yeah, Spencer I would say in like fashion, no stress points or any other headwinds that we're seeing from that type of customer. You know there is obviously, a very broad range of user types different industries of summer product oriented some are service oriented.

Joseph D. Russell: Some are very specific to certain locations, but I wouldn't in any way to characterize what we're seeing any elevated level of stress actually still very good consistent.

Joseph D. Russell: But I wouldn't, in any way, characterize or see any elevated level of stress. Actually, you know, still very good, consistent use of storage. Particularly, as I mentioned, there may be certain factors that pull a commercial customer configuration into one property at a higher or lower level than another. But again, there's nothing that we've seen that indicates there's an elevated level of stress or concern. You know, the economy continues to be quite good. You know, we're actually still seeing good demand factors coming from business users overall.

Michael Goldsmith: Use of storage, particularly as I mentioned, there may be certain factors that pull a commercial customer configuration until one property at a higher or lower level than another but again nothing that we've seen that indicates there's an elevated level of stress are concerned you know as the economy continues to be quite good.

Tom Boyle: You know, we're seeing actually still good demand factors coming from business users overall.

Tom Boyle: Okay, and then on the marketing front, just curious if the dollars being spent on advertising are fairly comparable across markets or other regions or particular, sorry, or other regions like a particular focus, where you guys are either trying to push occupancy or where you're seeing greater top of the funnel demand that might, you know, entice you to spend more. Yes, Spencer, that's a good question.

Speaker Change: Okay, and then on the marketing front just curious if the dollars being spent on advertising are fairly comparable across markets.

Tom Boyle: Other regions or particular, sorry are there regions particular focus when he got here they are trying to push.

Michael Goldsmith: Can see or where you're seeing greater top of the funnel demand that might entice you to spend more.

Tom Boyle: Yeah, Spencer, it's a good question. And maybe a follow-up to Michael's question on how we're managing pricing, promotion, and advertising; all three are being utilized really at a local level to drive a combination of either traffic in the form of advertising or conversion rates related to pricing and promotion activity. And advertising is something that we can use either nationally, or what we typically do is much more locally, to support top of funnel demand in local markets where we're getting both a combination of good return on that ad spend and also supporting properties that would benefit from incremental top of funnel demand. So it varies pretty widely.

Speaker Change: Yes, that's a good question and maybe a follow up to Michael's question around how we're managing pricing promotion advertising. All three are being utilized really at a local level to drive a combination of either traffic in the form of advertising or conversion rates related to pricing and promotion.

Speaker Change: Activity and.

Tom Boyle: Advertising is something that we can use either nationally or tip.

Speaker Change: Typically do as much more locally to support our top of funnel demand.

Michael Goldsmith: In local markets, where we're getting a both a combination of good return on that AD spend but also supporting properties that would benefit from incremental top of funnel demand.

Tom Boyle: So it varies pretty widely.

Michael Goldsmith: Okay.

Michael Goldsmith: Okay.

Operator: Our next question comes from Nick Ulico with Scotia Bank. Please proceed with your question. Hey, good morning out there.

Michael Goldsmith: Our next question comes from Nick <unk> with Scotiabank. Please proceed with your question.

Operator: Hey, good morning out there. It's Daniel Tricarico, along with Nick.

Tom Boyle: Hey, good morning out there, it's Daniel took care of Columbus neck now following up on some of the earlier questions in your commentary, Tom and sorry to harp on this I know you've talked about <unk> as being a combination of.

Tom Boyle: Following up on some of the earlier questions in your commentary, Tom, and sorry to harp on this, I know you've talked about ECRIs being a combination of price sensitivity and cost to replace, the latter now increasingly elevated today in relation to the discounted pricing strategy you're using. So my question is, how do you think about the magnitude and velocity at which the move-in rate needs to improve so that the cost to replace, or, in theory, the roll-down effect is offset, and revenue growth can reaccelerate again? Or is there another way I should be thinking about it?

Tom Boyle: Price sensitivity and cost to replace the ladder now increasingly elevated today in relation to the discounted pricing strategy you're using so.

Michael Goldsmith: My question is how do you think about the magnitude and velocity for which move in rate needs to improve so that the cost to replace or in theory. The roll down effect is offset in revenue growth can reaccelerate again or is there another way I should be thinking about it.

Tom Boyle: There's a lot embedded in there. I think the first thing I would say is, as you look at cost to replace, you can all see some of the elements that go into cost to replace pretty clearly based on our move-in and move-out rates. Some of them are different and related to how long we think a unit will be vacant, what the advertising spend may be associated with the unit, and what the promotional activity may be around it. And that's all managed at the individual unit level.

Michael Goldsmith: Yeah.

Speaker Change: There's a lot embedded in there I think the.

Tom Boyle: The first thing I'd say is as you look at cost to replace you all can see some of the elements that go into cost to replace pretty clearly they sort of move in and move out rates.

Speaker Change: Some of them are different.

Tom Boyle: Different than related to how long, we think our unit will be vacant what the advertising spend.

Tom Boyle: It may be associated with a unit.

Tom Boyle: What the promotional activity may be around it and that's all managed at.

Tom Boyle: The individual unit level.

Tom Boyle: And so, big picture, one of the things we've highlighted this year is that we think overall contribution from existing customer rate increases will be pretty consistent with last year. And you say, well, how can that be if you think cost to replace may be a little bit higher? And I'd say, well, there's another element that I add to what I just highlighted, which is the mix of the tenant base. So, we had success in moving in a meaningful number of new customers last year above and beyond the prior year.

Speaker Change: So big picture one of the things. We've highlighted this year is that we think overall contribution from existing customer rate increases will be pretty consistent with last year.

Tom Boyle: You say well how can that be if you think cost to replace maybe a little bit higher than I would say well. There's another element that I would add to what I, just highlighted which is the mix of the tenant base. So we had success in moving in a meaningful number of new customers last year above and beyond the prior year those customers tend to get a higher frequency.

Tom Boyle: Those customers tend to get a higher frequency of increases earlier on in their tenancy, and that's contributing to performance this year of our ECRI program. And so, I think there are a multitude of different components there. Cost to replace is certainly an important one. But as we look at the year this year, we think overall contribution will be relatively consistent.

Tom Boyle: The increase.

Tom Boyle: Earlier on in their tenancy and Thats contributing to our performance. This year are already Cri program and and so I think there's a multitude of different components. There Costa replaces is certainly an important one.

Tom Boyle: But as we look at the year. This year, we think overall contribution will be relatively consistent.

Tom Boyle: Thank you for that. Maybe a less convoluted follow-up. Could you share how you bucket the demand segments for the business, maybe to give us a better understanding of the current picture? Is the general job and home mover 30 or 40 percent of demand, and then the longer-term business customer 20 percent, and then another cohort to balance?

Speaker Change: Thank you for that maybe you're less convoluted follow up.

Speaker Change: Sure how are you how.

Tom Boyle: Can you bucket the demand segments of the business, maybe to give us a better understanding of the current picture.

Tom Boyle: Is the general like job in home over 30, or 40% of demand and then the longer term business customer 20%.

Tom Boyle: And then another cohort the balance you know any color you could share.

Tom Boyle: Any color you could share from any of your internal data would be great. Thank you. Yeah, sure.

Michael Goldsmith: From an MBR internal data would be great. Thank you.

Tom Boyle: Yeah sure, so I anticipate that overall demand contribution this year is pretty similar to last year and the way we've bucketed the the contribution to move in last year was about 15%, 1.5% of customers that are coming to us because of an existing home sale related move and that was down from about 20% in a more typical year, so a relatively modest contribution. Customers that are moving and they're renters either single-family or multi-family renters tend to make up a larger percentage, call it between 40-45% of the tenant base and then you've got another group that we've consistently spoke of that's been elevated post 2020 and that's customers that have ran out of space at home that's been consistently out punching pre-pandemic levels and is likely to be more like 15-20% and then as you go beyond that I'd call it other, there's a whole host of interesting use cases as well as commercial tenants that will make up the rest and and so we continue to see good obviously moving activity at our stores and as Joe mentioned we've been encouraged by that activity here today.

Speaker Change: Yes sure.

Tom Boyle: So I anticipate that overall demand contribution this year is pretty similar to last year and the way we bucket it.

Speaker Change: The contribution to to move ins last year.

Tom Boyle: It was about 15% one 5% of customers that are coming to us because of an existing home sale related move and that was down from about 20% in a more typical year. So a relatively modest contribution custer.

Tom Boyle: Customers that are moving and their renters, either single family or multifamily renters tend to make up a larger percentage.

Tom Boyle: Call it between 40% to 45% of the tenant base and then you've got another group that we've consistently spoke of that's been elevated post 2020 and that is customers that have ran out of space at home that's been consistently out punching pre pandemic levels and is likely to be more.

Speaker Change: Like 15%, 20% and then as you go beyond that I would call. It other there's a whole host of of interesting use cases as well as commercial tenants that will make up the rest.

Tom Boyle: And so we continue to see good obviously move in activity at our stores and as Joe mentioned, we've been encouraged by that activity year to date.

Speaker Change: Thanks for the time guys.

Tom Boyle: Okay.

Operator: Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Tom Boyle: Our next question it comes from one Santa Maria with BMO Capital markets. Please proceed with your question.

Joseph D. Russell: Good morning, thanks for the time. Just on the acquisition front, can you remind us how much is assumed or baked into guidance for presumably accretion from the acquisition volume highlighted in guidance? And then kind of as a subset of that question, how are you guys thinking about Canada? I know the Hughes family has some assets there. Does that prohibit you from potentially getting involved there, or are there any times that the family may be looking for one reason or another to monetize their stake? Sure.

Santa Maria: Good morning, Tom just on the acquisition front could you remind us how much is assumed are baked into guidance for presumably accretion from the acquisition volume.

Joseph D. Russell: Highlighted in guidance, and then kind of as a subset of that question.

Joseph D. Russell: How are you guys thinking about Canada.

Joseph D. Russell: The family the huge family has some.

Joseph D. Russell: Since there does that prohibit you.

Joseph D. Russell: Potentially getting involved there or is there any time that the family may be looking for one reason or another to monetize their stake.

Joseph D. Russell: Sure, yeah, so to again point to 2024 guidance on acquisitions, you know, we pegged $500 million. Obviously, at this point in the year, it's going to be more back-ended, but some of the commentary Juan earlier in the call relative to what we're likely to see with, you know, a range of different motivations from sellers, we, you know, we've got, you know, I think good perception into, you know, the ways that we can get to that kind of acquisition volume as we sit, you know, as we sit here

Speaker Change: Sure Yeah, so to again point to 2024 guidance on acquisitions, we've pegged $500 million obviously.

Joseph D. Russell: Obviously at this point in the year, it's going to be more back ended but some of the commentary one earlier in the call relative to what we're likely to see with a range of different motivations from sellers.

Joseph D. Russell: We've got you know.

Joseph D. Russell: Think good perception into the ways that we can get to that kind of acquisition.

Santa Maria: Volume as we sit as we sit here today.

Joseph D. Russell: You know, the candidate question, yet to your point, around the Hughes family and their ownership and platform in that market, it does not impede our ability to, you know, go into that market itself, so there are no conflicts on either side for either party to, you know, continue to look at a range of investments in that market. So with that, you know, we have no commentary relative to what the future may play out, but there are no constraints on our part.

Joseph D. Russell: On the Canada question.

Joseph D. Russell: Yet to your point around the Hughes family and their ownership and platform in that market. It does not impede our ability to go into that market itself. So there are no conflicts on either side for.

Joseph D. Russell: Either party to continue to look at a range of investments in that market. So.

Joseph D. Russell: With that we are.

Santa Maria: No commentary relative to what the future may play out, but there there are no constraints on our part.

Joseph D. Russell: Great. And then just a question on labor and FTEs. You guys in your investor day, which is now a couple years back, hit your targets and cut down. I think workforce utilization costs associated with about a quarter from prior levels. I guess, where are you in terms of further ability to reduce FTEs or payroll costs? And could you just give us maybe a sense of how the industry has changed in terms of FTEs per store, maybe five years ago to where you are now to where you ultimately think you can end up going? Yeah, I can speak to that.

Speaker Change: Great and then just a question on <unk>.

Joseph D. Russell: Labor and Ftes.

Speaker Change: You guys.

Speaker Change: Your Investor Day, which is now a couple of years back hit your targets and cutting down.

Speaker Change: I think workforce utilization across associated about a quarter.

Speaker Change: From prior levels, I guess, where are you in further abilities to to reduce ftes or payroll costs and could you just give us maybe a sense of kind of how the industry has changed in terms of ftes per store may be five years ago to where you are now to where you. Ultimately think you can end up going.

Joseph D. Russell: Yeah, I can speak to that and certainly our own platform. Goals that we pointed to in our Investor Day presentation were achieved plus or minus a couple of years ago. So we were very pleased with the opportunity that we saw to optimize labor hours with many of the tools that supported that, particularly tied to our digital platform. But what has played out from, you know, again, the last two years through today and now even going forward, there's actually more to achieve.

Speaker Change: Yeah, I can speak to that and certainly our own platform. So the.

Joseph D. Russell: Goals that we pointed to in our Investor day presentation, where achieved plus or minus a couple of years ago. So we were very pleased with the opportunity that we saw to optimize labor hours with many of the tools that supported that particularly tied to our digital platform.

Joseph D. Russell: Has played out from you know again the last two years through today and now even going forward, there's actually more to achieve that comes from the continued improvement in our operating model the digital tools that we're using not only <unk>.

Joseph D. Russell: That comes from the continued improvement in our operating model, the digital tools that we're using not only for one type of day-to-day demand that comes in and out of a property, which is tied to move-in activity, but its overall customer support. We've rolled out, you know, a PS app that now we have about a million and a half customers tied to. That's direct account management that takes the burden off property labor hours and is very efficient for the customer, as well.

Speaker Change: For one type of day to day demand that comes in and out of a property, which is tied to move in activity, but its overall customer support we've rolled out.

Speaker Change: A P. S. App that now we have about a million and a half customers tie too. So that's direct account management that takes the burden off of property labor hours.

Speaker Change: Efficient for the customer.

Joseph D. Russell: So it's a win-win in terms of not only time savings on our end of the spectrum but efficiency and consistency from a customer standpoint. We continue to look at very different and robust digital tools and optimization tools that give us the amount of clarity and trajectory that we're likely going to likely see with continued reduction in FTA hours. I think we're doing that in a very different way than the industry has done. You know, you can look at some metrics that you can benchmark our performance against others.

Speaker Change: As well so it's a win win in terms of not only time savings on our end of the spectrum, but efficiency and consistency.

Speaker Change: Consistency from a customer standpoint.

Joseph D. Russell: We continue to look at very different and robust digital tools and optimization tools that give us the amount of clarity and trajectory that we're going to likely see with continued a reduction F. T. A hours I think we're doing that in a very different way than the industry has done you can.

Joseph D. Russell: So Tom already mentioned that about two-thirds of our customers now transact with us digitally. That's far in excess of not only what the industry is achieving but what level of accelerated performance we're getting from that channel and that level of interaction with customers directly. So a lot of good things that we're continuing to tackle on that front. With the amount of data that we have, we continue to look at different ways of continuing to optimize and bolt on more opportunities to not only drive down labor hours but, as importantly, maintain or increase customer satisfaction levels. So a lot of good things that we're continuing to invest in, and I'm very confident about the trajectory we're on.

Joseph D. Russell: Look at some metrics that you can benchmark our performance to others. So Tom already mentioned that about two thirds of our customers now transact with us digitally that's far in excess of not only what the industry is achieving but what level of accelerated performance, we're getting from that channel and that level of interact.

Joseph D. Russell: And with customers directly so a lot of good things that we're continuing to tackle on that front with the amount of data that we have we continue to look at different ways of continuing to optimize our bolt on more again opportunities to not only drive down labor hours, but as importantly.

Joseph D. Russell: <unk> maintained or increased customer satisfaction levels. So lot of good things that we're continuing to invest in there and very confident about the trajectory we're on.

Speaker Change: Thank you.

Speaker Change: Thank you.

Operator: Our next question is from Ronald Kamden with Morgan Stanley. Please proceed with your question.

Joseph D. Russell: Our next question is from Ronald Camden with Morgan Stanley. Please proceed with your question.

Tom Boyle: Hey, just two quick ones. One is just on Southern California. If you could just provide just updated thoughts. It's still one of your best-performing markets. What's the prospect of that starting to re-accelerate as you're sort of going forward? How are the fundamentals trending on the ground?

Ronald Kamdem: Hey, just two quick ones. One is just on southern California. If you could just provide just updated updated thoughts is still one of your best performing markets.

Ronald Kamdem: What's sort of the prospect of that starting to reaccelerate as as as you're sort of going forward as fundamentals training on the ground.

Joseph D. Russell: Yeah, that's a great question. Southern California continues to be a strong market for us, both in Los Angeles and San Diego. During the quarter, we were impacted by some storm activity and state of emergency restrictions that impacted the quarter's financial performance for a couple months. But those markets continue to see strong customer activity, and we have confidence in those markets heading through the rest of the year.

Ronald Kamdem: Yeah. That's a great question, so southern California continues to be a strong market for us both.

Joseph D. Russell: Los Angeles as well as San Diego.

Joseph D. Russell: During the quarter, we were impacted by some storm activity in state of emergency restrictions that impacted the quarter's financial performance for a couple of months.

Joseph D. Russell: But those markets continue to see strong customer activity and we have confidence in those markets heading through the rest of the year.

Joseph D. Russell: And, you know, just again to bolt on a comment, Ron, that we've made on other questions, again, very, very little competitive new supply. It's one of the most difficult markets to either A, find land sites and, you know, work through entitlement processes, et cetera. Uniquely though, it's the market where, at the moment, we have the most development activity nationally. So we are uniquely finding some interesting opportunities to expand our portfolio right here in Southern California. And to Tom's point, we're still seeing very consistent and good levels of activity.

Speaker Change: And just again to bolt on a comment Ron that we've made another questions again, very very little competitive new supply. It's one of the most difficult markets to either a fine land sites and worked through entitlement processes et cetera.

Joseph D. Russell: Uniquely though it's the market at the moment, we have the most development activity nationally and so we uniquely are finding some interesting opportunities to expand our portfolio right here in southern California.

Joseph D. Russell: And to Tom's point, we're still seeing very consistent and good levels of activity.

Operator: And then my second question was just to follow up on the marketing spend question. Is it fair to say it's at the highest level in five years as a percentage of revenue? And then can you talk about the breakout of that marketing spend inflation between just cost per click going up versus just more marketing being done, if that makes sense? Yeah, so a couple questions.

Speaker Change: Great and then my second one was just to follow up on the marketing spend question is it fair to say, it's at the highest level in five years as a percentage of revenue and the number one and then can you talk about the breakout of that marketing spend and inflation between just cost per click going up versus just more.

Ronald Kamdem: King.

Ronald Kamdem: Being down if that makes sense.

Tom Boyle: Yeah, so a couple of components there. So the first quarter and fourth quarter, we tend to see higher percent of revenue as we think about supporting demand in quarters where we have seasonally more inventory to rent, and we get good returns in those quarters to do that. And then we typically see the second and third quarter marketing spend come down a little bit as a percentage of As you look at the quarter, yeah, it was probably pretty consistent with some quarters we had back in 2018, 2019, maybe a touch under what some of them were, but a comfortable range as we think about the level of marketing support that we're providing the stores.

Speaker Change: Yes, so a couple of questions components, there so the first quarter and fourth quarter, we tend to see higher percentage of revenue as we think about supporting demand in our.

Tom Boyle: The quarters, where we have seasonally more inventory to rent and we get good returns in those quarters to do that.

Tom Boyle: And then we typically see the second and third quarter marketing spend come down a little bit as a percentage of.

Tom Boyle: <unk> of revenue.

Tom Boyle: As you look at the quarter, Yeah. It was probably pretty consistent with some quarters. We had back in 2018 2019, maybe a touch under with some of the more.

Tom Boyle: A comfortable range as we think about the the level of marketing support that we're providing the stores as a mentioned on a previous question. That's dynamically managed around local demand trends.

Tom Boyle: As I mentioned in a previous question, that's dynamically managed around local demand trends and supporting the business. But, as an absolute percentage of revenue, that's likely to decline in the next couple quarters like it did last year before coming up again in the fourth quarter to support higher inventory levels at the lower levels of occupancy we experienced in the fourth quarter. Thanks so much.

Tom Boyle: And in supporting the business.

Tom Boyle: But I would anticipate from a.

Tom Boyle: In absolute percentage of revenue that's likely to decline in the next couple of quarters like it did last year before coming up again in the fourth quarter or two to support higher inventory levels at the lower levels of occupancy we experienced in the fourth quarter.

Tom Boyle: Yeah.

Speaker Change: Thanks, so much.

Operator: Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed with your question. Hi, good morning. Maybe just on acquisitions, it looks like subsequent to the quarter end, you had 34.6 million.

Tom Boyle: Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Caitlin Burrows: Hi, Good morning, maybe just on the acquisition looks like subsequent to quarter end <unk> had $34 6 million in acquisition. So just wondering if you could talk about how these properties came about where they four separate deals what type of seller.

Joseph D. Russell: Yeah, individual sellers, Caitlin, you know, smaller, deal-by-deal opportunities, as typically we see, there's a range of different seller types that were in dialogue very actively. So these were, again, individual owners. I would, you know, tell you, as I mentioned earlier, we continue to have a whole range of different conversations with different owners, owner types, whether family owners, individual owners, institutional owners. But, you know, again, the deals that we've got, either closed or under contract, or, or just those very one-offs, you know, smaller assets that fit well into certain markets that were certainly interested in growing scale, etc. Got it. Okay. And then maybe just one on the move in/move out.

Caitlin Burrows: Yeah individual sellers Caitlin.

Joseph D. Russell: Smaller deal by deal opportunities as typically we see theres.

Joseph D. Russell: There is a range of different seller types that were in dialogue very actively so these were again individual owners.

Joseph D. Russell: Would tell you as I mentioned earlier, we continue to have a whole range of different conversations with.

Joseph D. Russell: Different owners or owner types, whether family owners individual owners institutional owners, but.

Joseph D. Russell: Again, the deals that we've got either closed or under contract or are just that theory, one offs smaller assets that fit well into certain markets that were certainly interested in growing scale et cetera.

Speaker Change: Got it Okay, and then maybe just one on the move in move out spread it looks like it's flattened a bit so give a view on whether we've hit the trough of that spread.

Joseph D. Russell: Given where the move out rates and move in rates are at this point and I guess expectation going forward.

Tom Boyle: Yeah, we would anticipate Caitlin that that spread does narrow in the second and third quarter seasonally before widening out again in the fourth quarter. So, not dissimilar from a seasonal trend standpoint to what I was speaking about related to advertising.

Joseph D. Russell: Yes, we would anticipate Caitlin that that spread does narrow in the second and third quarter seasonally before widening out again in the fourth quarter.

Tom Boyle: Not dissimilar from a seasonal trend standpoint to what I'm speaking about related to advertising.

Speaker Change: Got it.

Operator: Our next question comes from Ki-Bin Kim with Truist Securities. Please proceed with your question. Thanks. Good morning.

Speaker Change: Our next question is from comes from Keybanc, Kim with true Securities. Please proceed with your question.

Tom Boyle: So, I'm not sure if I missed it or not, but did you give an update on April moving rate trends? I did, Keevan. Okay, I'll just go back and, Transcript. When you look at the year-to-date changes in sequential rents, how does that compare to what you would consider a normal seasonal pattern? Has it been better or worse?

Operator: Thanks. Good morning.

Kim: Thanks, Good morning so.

Kim: So I'm not sure if I missed it or not but did you give an update on April moving rate.

Operator: Thanks.

Operator: I did keven.

Operator: Okay I'll just go back to the transcript when you look at the year to date change.

Operator: Changes in sequential rents.

Keevan: How does that compare to what you would consider a normal seasonal pattern.

Keevan: It has been better or worse.

Tom Boyle: I'd say on a year-over-year basis, it's been pretty consistent, a touch better than last year, which is what we'd anticipate. And obviously, we're anticipating that likely to continue through the peak leasing season. We'll update you on that as we move through the next three months or so.

Keevan: I'd say on a year over year basis, it's been pretty consistent to me a touch better than last year, which is what we'd anticipate and obviously, where we're anticipating that likely to continue here through the peak leasing season will update you on that as we move through the next three months or so.

Tom Boyle: Okay, and on your CapEx, you have $150 million for the Property of Tomorrow program that's supposed to wind down next year. But just trying to get a better sense of it. I mean, does it go to zero, or is there, you know, a certain level that you might have to keep for a longer time? No, it's going to go to zero.

Tom Boyle: Okay and on your Capex, you have a $150 million at a property of Tomorrow program, that's supposed to wind down next year.

Tom Boyle: But just trying to get a better sense of it I mean does it go to zero or is there a certain level of that.

Kim: They have to keep for a longer time.

Tom Boyle: No, it's going to go to zero. Probably some of the cash payments on the cash flow statement will continue into the first quarter or so of next year, just as we wrap up the program and make our final payments. But ultimately, that'll go to zero. Okay, thank you. Our next question comes from Teo Acasana with Deutsche Bank. Please proceed with your question.

Tom Boyle: No. It is going to go to zero it probably some of the cash payments on the cash flow statement will continue into the first quarter or so of next year, just as we wrap up the program and make our final payments, but ultimately that will go to zero.

Teo Acasana: Okay. Thank you.

Operator: Our next question comes from Teo Acasana with Deutsche Bank. Please proceed with your question. Good morning out there.

Tom Boyle: Our next question comes from Tayo Okusanya with Deutsche Bank. Please proceed with your question.

Teo Acasana: Yes, good morning out there.

Teo Acasana: Given some of your comments around improving trends and more market, let's talk a little bit tenant January February March.

Operator: Yeah.

Tayo Okusanya: Kind of on a year over year basis, how that was improving throughout the quarter.

Teo Acasana: We kind of thought about like my negative 15, and now wed like that negative pen and heading towards zero that kind of.

Teo Acasana: Some of your guidance going forward.

Operator: Okay, so there's kind of two parts to that question. One is the accelerating markets, and those accelerating markets are driven by a whole host of things, and not just individually moving rents, right? But as we think about that, we highlighted on the previous call two or three markets that were accelerating at the time we were sitting there in February, and we added a handful of markets to that. So we're definitely seeing improving trends across that group of markets.

Teo Acasana: Okay. So there's kind of two parts to that question one is the accelerating markets.

Operator: And it was accelerating markets were driven by a whole host of things.

Operator: And not just individually move in rents alright, because.

Operator: So as we think about that we highlighted on the previous call two or three markets that were.

Operator: Accelerating at the time, we were sitting there in February and we added a handful of markets to that so we're definitely seeing improving trends across that that group of of markets.

Operator: I think your next question was just sequentially as we think about year-over-year declines in move-in rents. And on the February call, I had highlighted that January and February move-ins, move-in rates were down in the 10, 11% zip code, and we finished the quarter and had April right around that same sort of level. Obviously, there are periods of time where it's a little bit better than that, and periods of time where we're lowering rates to drive move-in volume.

Operator: Your next question would just sequentially as we think about year over year declines in move in rents.

Operator: And on the February call I had highlighted that January February.

Operator: Move ins move in rates were down in the 10, 11% ZIP code and we finished the quarter in that April right around that same sort of level, obviously theres a periods of time, where it's a little bit better than that period of time, where we're lowering rates to drive move in volume. So it's been relatively consistent which is what you would anticipate really through the first part.

Operator: So it's been relatively consistent, which is what you'd anticipate really through the first part of the year because you're at the trough point of rents. And as I noted, we're at the point of the year now where we are raising rents now, and that's when we're likely to see some changing activity as it relates to those trends as we've discussed in our outlook. That's helpful. And then for ECRI increases, are they also kind of consistent versus what we've been seeing in recent quarters?

Tayo Okusanya: Of the year, because you were at the trough point of rents and as I noted we're at the point of the year now where we are raising rents now.

Operator: And that's what we're likely to see some some changing activity as it relates to those trends.

Operator: As we've discussed in our outlook.

Speaker Change: That's helpful.

Speaker Change: Yeah, right increases that they also kind of consistent versus what we've been seeing in recent quarter.

Operator: Yes, pretty consistent in terms of trends with the exception of what I highlighted earlier around more newer tenants added to the program given that strong move in volumes last year.

Speaker Change: Okay. Thank you.

Operator: Our next question is from Mike Mueller with J.P. Morgan. Please proceed with your question. Yeah, hi, sorry to drag out the call longer here.

Operator: Yeah, pretty consistent in terms of trends, with the exception of what I highlighted earlier around more newer tenants added to the program given that strong move in volumes last year. Okay, thank you. Our next question is from Mike Mueller with J.P. Morgan. Please proceed with your question. Yeah, hi, sorry to drag out the call longer here.

Operator: Our next question is from Mike Mueller with Jpmorgan. Please proceed with your question.

Michael William Mueller: Yes, hi, sorry to drag out to call it longer here, but what are some of the attributes of the markets, where you're seeing the improvement that you flagged is it just less supply because it seems like that lift that you rattled off was dominated by kind of bigger cities.

Michael William Mueller: And as a follow up to that is the momentum you're talking about is it better momentum in move in rates or is it just more traffic oriented.

Tom Boyle: Sure Mike, I think there's a number of factors, you rattled off some of them, that are contributing to it. We listed a series of markets, each market is a little bit different, certainly supply plays a component in some of those markets, meaning a lack of supply, higher barriers to entry as Joe spoke to on certain of those markets, but I'd also highlight stronger demand trends, better move-in rent trends, better move-out activity, it's really a handful of different drivers that are unique to each market, but as you characterize them all, I would categorize them into markets that didn't have the same really strong levels of growth in 21 and 22, and so don't have the same level of really difficult comps to come off of, and as Joe mentioned earlier, you can put Florida, for instance, as a big winner over the last couple of years, is likely to take a little bit longer to normalize, Got it.

Michael William Mueller: Sure Mike I think there's a number of factors you rattled off some of them that are contributing to it.

Tom Boyle: List at a series of markets each market is a little bit different certainly supply plays a component in some of those markets meeting a lack of supply higher barriers to entry as Joe spoke too uncertain to those markets, but I'd also highlight stronger demand trends better move in rent trends better move out activity, it's really.

Tom Boyle: A handful of different drivers that are unique to each market, but would you characterize them all I would categorize them into markets that didn't have the same really strong levels of growth in 'twenty, one and 'twenty two and so don't have the same level of really difficult comps to come off of.

Tom Boyle: And as Joe mentioned earlier, you can put Florida for instance is a big winner over the last couple of years is likely to take a little bit longer to normalize, but still has been a really strong performer over the last several years for us.

Tom Boyle: That helps a lot. Thank you.

Speaker Change: Got it that helps a lot. Thank you.

Operator: Our next question is from Brandon Lynch with Barclays. Please proceed with your question. Great, thanks for taking my questions. Maybe I could get your thoughts on what's behind the lower delinquency rates that you mentioned.

Tom Boyle: Our next question is from Brendan Lynch with Barclays. Please proceed with your question.

Brandon Lynch: Great. Thanks for taking my questions, maybe I could get your thoughts on what's behind the lower delinquency rates that you highlighted in the script.

Brandon Lynch: Some macro data suggest that consumers are facing some incremental challenges, but that doesn't seem to be what you're saying.

Joseph D. Russell: Yeah, I would say, Brandon, on a macro basis, we still see a very healthy, you know, consumer base. We've got plus or minus about 2 million customers. So, you know, the full spectrum of the economy at large, and not really seeing any undue pressure market by market, or, you know, again, that would indicate that there's some elevated amount of risk that's coming from relative to stress points, etc. I think you're hearing, you know, a fair amount of commentary even now that we're, you know, well into 2024 on consumer balance sheets, employment levels are quite strong.

Brandon Lynch: Yeah, I would say you know Brandon on a macro basis, we still see a very healthy consumer base, we've got it plus or minus about 2 million customers. So full spectrum of the economy at large and not really seeing any undue pressure or market by market.

Joseph D. Russell: <unk> or <unk>.

Joseph D. Russell: Again that would indicate that there's some elevated amount of risks that's coming from.

Joseph D. Russell: Relative to stress points et cetera.

Joseph D. Russell: Youre hearing a fair amount of commentary, even now that we're well into 2024 around consumer balance sheets employment levels are quite strong.

Joseph D. Russell: I think this is, you know, part of the angst that the Fed's having relative to their timing relative to tapering, etc. So employment and behavior from consumers at large continues to be quite good, and we're very pleased by that, obviously.

Joseph D. Russell: I think this is part of the angst that the fed's having relative to their.

Joseph D. Russell: Timing relative to tapering et cetera, so the.

Joseph D. Russell: Employment and behavior from consumers at large continues to be quite good and we're very pleased by that obviously.

Joseph D. Russell: You know, on a day-to-day basis, we're not seeing the type of, you know, range of when you see a customer go into some level of delinquency, etc. The pace and the nature of that pattern aren't as elevated as it was pre-pandemic. So we keep a very close eye on it, but there is no material shift and continues to give us, you know, an outlook that the consumer environment is going to be quite healthy. Great, thanks. That's helpful. And maybe just one more thing.

Joseph D. Russell: On a day to day basis, we're not seeing the type.

Joseph D. Russell: Type of <unk>.

Joseph D. Russell: A range of when you see a customer go into some level of delinquency et cetera, the pace and the the nature of that.

Joseph D. Russell: That pattern isn't as elevated as it was pre pandemic, so keeping a very close eye on it but no material shift in continues to give US you know an outlook that the consumer environment is going to be quite healthy.

Speaker Change: Great. Thanks, that's helpful and maybe just one more you ran some TV ads in the quarter can you just talk about your thought process around when and where to use TV advertisement versus other types of advertising.

Tom Boyle: Yeah, we did a little bit of TV advertising. It's one of the things that we can utilize pretty uniquely in the industry, given our national scale and platform. And so that's something we will use periodically. In this case, we used it to advertise some of our promotional activity, which we saw a good reaction to in the quarter.

Speaker Change: Yes, we did use a little bit of TV advertising, it's one of the things that we can utilize.

Tom Boyle: Utilize pretty uniquely in the industry, given our national scale and platform and so that's something we will use periodically in this case, we use it to advertise some of our promotional activity, which we saw a good reaction to in the quarter.

Speaker Change: Great. Thanks for taking my questions.

Tom Boyle: Thanks.

Ryan C. Burke: We have reached the end of the question and answer session. I would now like to turn the call back over to Ryan Burke for closing comments.

Tom Boyle: We have reached the end of the question and answer session I would now like to turn the call back over to Ryan Burke for closing comments.

Operator: Thanks Rob and thanks to all of you out there for your continuing interest and time, and we'll talk to you soon. Have a good day. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Ryan C. Burke: Thanks, Rob and thanks to all of you out there for your continuing interest in time and we'll talk to you soon have a good day.

Operator: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

Operator: Today's conference has ended. Please disconnect your lines at this time. Thank you.

Operator: Today's conference has ended please disconnect your lines at this time. Thank you.