Q2 2024 Extra Space Storage Inc Earnings Call

Good day, everyone, and thank you for standing by. Welcome to the second quarter 2024 Extra Space Storage Inc. Earnings Conference Call.

Operator: earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star-one-one on your telephone. You will then hear a message advising you to withdraw your questions, simply press star 11 again. Please note that today's conference is being recorded. I will hand the call over to the Vice President of Investor Relations, Jared Conley. Please go ahead.

Unknown Executive: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star-1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your questions, simply press star-1-1 again.

Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised.

Unknown Executive: Please be advised that today's conference is being recorded.

Speaker Change: To withdraw your questions, simply press star 11 again. Please see advice that today's conference is being recorded. I will hand the call over to the Vice President of Investor Relations, Jared Conley. Please go ahead.

Unknown Executive: I will hand the call over to the Vice President.

Jared Conley: As President of Investor Relations, Jared Conley, please go ahead.

Jared Conley: Thank you, Carmen. Welcome to Extra Space Storage's second quarter 2024 earnings call. In addition to our press release, we have provided unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements, as defined in the Private Security Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review.

Joe Margo: Thank you, Carmen. Welcome to Extra Space Storage's second quarter, 2024 earnings call. In addition to our press release, we have furnished an audited supplemental financial information on our website.

Jared Conley: Thank you, Carmen. Welcome to Extra Space Storage's second quarter 2024 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements.

Joe Margo: Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management estimates as of today, July 31, 2024.

Speaker Change: As defined in the Private Securities Litigation Reform Act, actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business.

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

Jared Conley: Forward-looking statements represent management's estimates as of today, July 31st, 2024. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. I would now like to turn the time over to Joe Margolis, Chief Executive Officer.

Speaker Change: Forward-looking statements represents management's estimates as of today, July 31st, 2024.

Joe Margo: The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference.

Speaker Change: The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. I would now like to turn the time over to Joe Margolis, Chief Executive Officer.

Joe Margo: I would now like to turn the time over to Joe Margo, as Chief Executive Officer.

Joseph Daniel Margolis: Thanks, Jared, and thank you, everyone, for joining today's call. We had a great quarter, exceeding our internal FFO per share projections due to our performance in multiple areas of our business, allowing us to increase our 2024 FFO out. We experienced steady improvement in extra space same store occupancy for the second quarter, ending at 94.3%, and we continue to see occupancy gains in July. Our second quarter occupancy represents a 110 basis point sequential gain over our first quarter and a 30 basis point improvement year over year.

Joe Margo: Thanks, Jared, and thank you, everyone, for joining today's call. We had a great quarter, exceeding our internal FFO per share projections due to our performance in multiple areas of our business, allowing us to increase our 2024 FFO outlook. We experienced steady improvement in extra space, same-star occupancy for the second quarter, ending at 94.3%, and continue to see occupancy gains in July. Our second quarter occupancy represents a 110 basis point sequential gain over our first quarter occupancy and a 30 basis point improvement year over year. In the same period, the average moving rate improved by approximately 12%.

Joe Margolis: Thanks Jared and thank you everyone for joining today's call.

Joseph Daniel Margolis: We had a great quarter, exceeding our internal FFO per share projections due to our performance in multiple areas of our business, allowing us to increase our 2024 FFO outlook.

Speaker Change: We experienced steady improvement in Extra Space Same Store occupancy for the second quarter, ending at 94.3%, and continue to see occupancy gains in July .

Speaker Change: Our second quarter occupancy represents 110 basis point sequential gain over our first quarter occupancy.

Joseph Daniel Margolis: In the same period, the average move-in rate improved by approximately 12 percent. However, it is still about 8% below last year's average rate. The combination of the increased moving rate and occupancy gain contributed to a 0.6% increase in Extra Space same store revenue year over year. Same store expenses increased by 6% for the quarter compared to the same period last year, marginally better than internal projections. As expected, we saw significant gains in occupancy for the life storage same store pool, finishing the quarter at 93.8%. This represents an increase of 400 basis points year over year and a 200 basis point improvement over the first quarter level.

and a 30 basis point improvement year over year.

Speaker Change: In the same period, the average move-in rate improved by approximately 12 percent.

Joe Margo: However, it is still about 8% below last year's average moving rate. The combination of increased moving rate and occupancy gain contributed to a 0.6% increase in extra space, same-star revenue year over year. Same-star expenses increased by 6% for the quarter compared to the same period last year, marginally better than internal projections. As expected, we saw significant gains in occupancy for the life storage same-store pool, finishing the quarter at 93.8%. This represents an increase of 400 basis points year over year and a 200 basis point improvement over first quarter levels. The occupancy gains drove revenue growth for the Life Storage same-store pool of 1.8% year over year.

However, it is still about 8% below last year's average moving rate.

Speaker Change: The combination of increased move-in rate and occupancy gain contributed to a 0.6% increase in Extra Space same-store revenue year-over-year.

Speaker Change: Same store expenses increased by 6% for the quarter compared to the same period last year, marginally better than internal projections.

Speaker Change: As expected, we saw significant gains in occupancy for the life storage same-store pool, finishing the quarter at 93.8 percent.

Speaker Change: This represents an increase of 400 basis points year over year and a 200 basis point improvement over first quarter levels.

Joseph Daniel Margolis: The occupancy gains drove revenue growth for the life storage same store pool of 1.8% year over year. Given the occupancy gains, we expected to generate significant pricing power at the life storage property. Midway through the quarter, we eliminated the move-in rate discounts and placed new customer pricing for the life storage properties on par with comparable extra space.

Speaker Change: The occupancy gains drove revenue growth for the life-storage same-store pool of 1.8% year-over-year.

Joe Margo: Given the occupancy gains, we expected to generate significant pricing power at the life storage problem. Midway through the quarter, we eliminated the move-in rate discounts and placed new customer pricing for the life storage properties on par with comparable, Extra Space stores. However, the pricing improvement at the life storage stores has been below our internal projections. We are confident our approach is maximizing revenue at these stores. However, progress has been slower than anticipated. We remain convinced that we will continue to close the rate gap between Life Storage and Extra Space stores over time. Life Storage, same store property expenses increased by 0.8% year over year, significantly better than our internal projections.

Speaker Change: Given the occupancy gains, we expected to generate significant pricing power at the life storage properties.

Speaker Change: Midway through the quarter, we eliminated the move-in rate discounts and placed new customer pricing for the life storage properties on par with comparable extra space stores.

Joseph Daniel Margolis: However, the pricing improvement at the life storage stores has been below our internal projection. Nevertheless, we are confident our approach is maximizing revenue at these stores. However, progress has been slower than anticipated. We remain convinced that we will continue to close the rate gap between life storage and extra space stores over time. Life Storage's same store property expenses increased by 0.8% year over year, significantly better than our internal projection. The team has done a great job finding additional expense efficiency. We can now project lower expenses, particularly with respect to property taxes, and in the controllable areas of R&M, utilities, and payroll for the second half of the year.

Speaker Change: However, the pricing improvement at the life storage stores has been below our internal projections.

Speaker Change: We are confident our approach is maximizing revenue at these stores.

Speaker Change: However, progress has been slower than anticipated.

Speaker Change: We remain convinced that we will continue to close the rate gap between life storage and extra space stores over time.

Joe Margo: The team has done a great job finding additional expense efficiencies.

Joe Margo: We can now project lower expenses, particularly with respect to property taxes and in the controllable areas of R&M, utilities, and payroll for the second half of the year.

Joe Margo: Turning to growth while the transaction environment remains muted, our capital light external growth programs continue to make gains. In the quarter, we added 77 third-party managed stores, netting 14 stores after factoring in the expected departure of a large portfolio that internalized management. Year to date, we have added 86 net stores to the platform, one of the strongest first halves of the year ever. Additionally, our bridge loan program expanded with $433 million in new loans originated in this quarter. Our greater scale and sophisticated operating platform have led to meaningful wins in other areas of the business, including GNA and Tenet Insurance.

Joseph Daniel Margolis: Turning to growth, while the transaction environment remains muted, our capital-light external growth programs continue to make gains. In the quarter, we added 77 third-party managed stores, netting 14 stores after factoring in the expected departure of a large portfolio that internalized managed. Year to date, we have added 86 net stores to the platform, one of the strongest first halves of the year ever. Additionally, our bridge loan program expanded with $433 million in new loans originated in this quarter.

Speaker Change: In the quarter, we added 77 third party managed stores that.

Speaker Change: Adding 14 stores after factoring in the expected departure of a large portfolio that internalized management.

Speaker Change: Year to date, we have added 86 net stores to the platform one of the strongest first halves of the year ever.

Speaker Change: Additionally, our bridge loan program expanded with $433 million in new loans originated in this quarter.

Joseph Daniel Margolis: Our greater scale and sophisticated operating platform have led to meaningful wins in other areas of the business, including GNA and tenant insurance. We're working hard to continue to find efficiencies in all areas of the business to drive FFO growth. Now, I will now turn the time over to Scott.

Speaker Change: Our greater scale and sophisticated operating platform have led to meaningful wins in other areas of the business, including G&A and tenant insurance. We are working hard to continue to find efficiencies in all areas of the business to drive <unk> growth. Despite the dip.

Joe Margo: We are working hard to continue to find efficiencies in all areas of the business to drive up FFO growth, despite the difficult operating environment at the stores.

Speaker Change: <unk> operating environment at the stores.

Scott: I will now turn the time over to Scott.

Speaker Change: I will now turn the time over to Scott.

Scott: Thanks, Joe. And hello, everyone.

Scott: Thanks, Joe, and hello everyone. As Joe mentioned, we had a good quarter driven by occupancy and steady revenue growth. In addition to GNA savings, we have experienced better-than-expected property operating expenses, specifically property taxes, utilities, and repairs and maintenance. The GNA and property level savings have come from a broad range of categories as we continue to find efficiencies and capitalize on our greater scale. Due to the steady extra space same store performance through the leasing season, we are raising the bottom end of our revenue guidance by 100 basis points, bringing the midpoint to negative 0.25%. We have also reduced our expense guidance, dropping the midpoint by 25 basis points to 4.5%.

Scott: Thanks, Joe.

Scott: Hello, everyone.

Scott: Joe mentioned, we had a good quarter driven by occupancy and steady revenue growth. In addition to G&A savings, we have experienced better than expected property operating expenses, specifically property taxes utilities and repairs and maintenance.

Scott: As Joe mentioned, we had a good quarter, driven by occupancy and steady revenue growth. In addition to G&A savings, we have experienced better than expected property operating expenses, specifically property taxes, utilities, and repairs and maintenance. The GNA and property level savings have come from a broad range of categories as we continue to find efficiencies and capitalize on our greater scale.

Scott: The G&A and property level savings have come from a broad range of categories. As we continue to find efficiencies and capitalize on our greater scale.

Scott: Due to the steady Extra Space Same Store performance through the leasing season, we are raising the bottom end of our revenue guidance by 100 basis points, bringing the midpoint to negative 0.25%. We've also reduced our expense guidance, dropping the midpoint by 25 basis points to four and a half percent. Accordingly, the bottom end of our net operating income guidance is being raised by 125 basis points to a negative 1.75% at the mid. Regarding the life storage same store pool, the lower than expected pricing power has led to a reduction in our revenue expectations for the year.

Scott: Due to the steady extra space same store performance through the leasing season.

Scott: We are raising the bottom end of our revenue guidance by 100 basis points, bringing the midpoint to negative two 5% we.

Scott: We have also reduced our expense guidance dropping the midpoint by 25 basis points to four 5%.

Scott: Accordingly, the bottom end of our net operating income guidance is being raised by 125 basis points to a negative 1.75% at the midpoint.

Scott: Accordingly, the bottom end of our net operating income guidance has been raised by 125 basis points to a negative 175% at the midpoint.

Scott: Point. Regarding the life storage Samstore pool, the lower than expected pricing power has led to a reduction in our revenue expectations for the year. We have reduced our annual Samstore revenue guidance by 200 basis points at the midpoint. Fortunately, this is partially offset by lower-than-expected expenses for these properties. As a result, we are also revising our expense guidance by 200 basis points at the midpoint, and consequently, we have adjusted Life Storage Samstore NOI guidance to a range of negative 1.5% to positive 1% for the year. Given the recent demand and volume of bridge loans, we have raised the 2024 average outstanding loan guidance and increased our expected interest income.

Scott: Regarding the life storage same store pool, the lower than expected pricing power has led to a reduction in our revenue expectations for the year.

Scott: We have reduced our annual same store revenue guidance by 200 basis points at the midpoint. Fortunately, this is partially offset by lower than expected expenses for these properties. As a result, we are also revising our expense guidance downward by 200 basis points at the midpoint, and consequently, we have adjusted our life storage, same store NOI guidance to a range of negative one and a half percent to positive one percent for the year.

Scott: We have reduced our annual same store revenue guidance by 200 basis points at the midpoint.

Scott: Fortunately this is partially offset by lower than expected expenses for these properties.

Scott: As a result, we are.

Scott: We're also revising our expense guidance downward by 200 basis points at the midpoint and consequently, we have adjusted life storage same store NOI guidance to a range of negative one 5% to positive 1% for the year.

Scott: Given the recent demand and volume of bridge loans, we have raised the 2024 Average Outstanding Loan Guidance and increased our expected interest income. We've also lowered our estimates for GNA and increased our management fees and tenant reinsurance income. Additionally, we adjusted interest expense and income tax expense guidance to reflect the current business environment. These revisions have contributed to a raise of the lower end of our FFO guidance from $7.85 per share to $7.95 per share, a five percent increase at the midpoint. And with that, let's open it up to questions.

Scott: Given the recent demand and volume of bridge loans, we have raised the 2024 average outstanding loan guidance and increased our expected interest income.

Scott: We have also lowered our estimates for GNA and increased our management fees and tenant reinsurance income. Additionally, we adjusted interest expense and income tax expense guidance to reflect the current business environment. These revisions have contributed to a raise of the lower end of our FFO guidance from $7.85 per share to $7.95 per share and a 5-cent increase at the midpoint.

Scott: <unk> also lowered our estimates for G&A and increased our management fees and tenant reinsurance income.

Scott: Additionally, we adjusted interest expense and income tax expense guidance to reflect the current business environment.

Scott: These revisions have contributed to a raise at the lower end of our <unk> guidance from $7 85 per share to $7 95 per share a five <unk> increase at the midpoint.

Scott: And with that, let's open it up for questions. Thank you. In a sorry reminder, that is star 11 to get in the queue and wait for your name to be announced. To withdraw the questions, simply press Star 11 again.

Operator: Thank you. And as a reminder, that is Star 11 to get in the queue and wait for your name to be announced. To withdraw the question, simply press Star 11 again. Our first question is from Michael Goldsmith with UBS. Please proceed.

Speaker Change: Thank you and as a reminder, that is star one one to get in the queue and wait for your name to be announced to withdraw your question simply press Star one again.

Michael Goldsmith: Our first question is from Michael Goldsmiths with UBS.

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

Michael Goldsmith: Please proceed.

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

Michael Goldsmith: Good morning, guys. Thanks a lot for taking my question. My first question is about the adjustment of the life storage guidance. You talked a little bit about the lack of pricing power in order to push rates. You know, what are you seeing there? Like what is weighing there? And then also is the, you know, can you talk a little bit about the geographical footprint of that portfolio and how that may also be influenced by the results from that.

Michael Goldsmith: Good morning, guys. Thanks, a lot for taking my question. My first question is on the.

Michael Goldsmith: My first question is on the adjustment of the life storage guidance. You talk a little bit about the lack of pricing power in order to push rates. What are you seeing there? What is weighing there? And also, can you talk a little bit about the geographical footprint of that portfolio and how that may be also influencing the results from that segment.

Michael Goldsmith: Adjusted.

Speaker Change: <unk> storage guidance.

Speaker Change: And you talked a little bit about the lack of pricing power in order to push rates.

Speaker Change: What are you seeing there like what is weighing there and then also is the can you talk a little bit about the <unk>.

Speaker Change: Geographically footprint up that portfolio and how that may be also influencing the results from that segment.

Joe Margo: Sure, Michael. So when we took the portfolio over, we had a significant 420 basis point occupancy gap. And that was the first thing we worked on. And the main tool we used over the last year was discounting the new customer rate at the Life Storage stores below the Space stores. And we made good progress. And by mid quarter, you know, we were closing up the occupancy parity; that we removed that extra discount at the Life Storage stores. We then thought we would gain pricing power. And we just didn't gain as much as we did; the customers, new customers remain price sensitive.

Michael Goldsmith: Sure Michael.

Joseph Daniel Margolis: So when we took the portfolio over, we had a significant 420 basis point occupancy gap, and that was the first thing we worked on.

Speaker Change: So when we took the portfolio over we had a significant 420 basis point occupancy gap and that was the first thing we worked on in the main tool we used over the last year.

Joseph Daniel Margolis: And the main tool we used over the last year was discounting the new customer rate at the Life Storage Stores below the Extra Space Stores, and we made good progress. And by mid-quarter, you know, we were close enough to occupancy parity that we removed that extra discount at the Life Storage Stores. We then thought we would gain pricing power. But we just didn't gain as much as we thought we would.

Speaker Change: Was discounting there.

Speaker Change: New customer right at the life storage stores below the extra <unk> stores and we made good progress in by mid quarter, we were close enough to occupancy parity.

Speaker Change: We remove that extra discount at the life storage stores.

Speaker Change: We then thought we would gain pricing power and we just didnt gain as much as we as we did the customers.

Joseph Daniel Margolis: The customers, new customers remain price sensitive, and we haven't been able to move new customer rates at the life storage stores or the extra space stores as much as we would have liked. So that is certainly a factor in our projected revenue for the life storage business for the rest of the year. Another factor is geography, as you pointed out.

New customers remain price sensitive and we haven't been able to move new customer rates, the life storage stores or the extra space stores as much as we would have hoped so that is certainly a factor in our projected revenue for the life storage stores for the rest of the year.

Joe Margo: And we haven't been able to move new customer rates at the Life Storage stores or the Extra Space stores as much as we would have hoped. So that is certainly a factor in our projected revenue for the life storage stores for the rest of the year.

Joe Margo: Another factor is geography, as you pointed out. When we close this merger, one thing we were excited about was the effect on our portfolio foot. By merging with Life Storage, we reduced our proportional exposure to California and increased our proportional exposure to Sunbelt markets, including Florida, for example. And we still are happy about that. We think long term; we believe in the Sunbelt; we believe in Florida. We're happy to have greater exposure in those growth markets.

Speaker Change: Another factor is geography as you pointed out.

Joseph Daniel Margolis: When we closed this merger, one thing we were excited about was the effect on our portfolio footprint. By merging with Life Storage, we reduced our proportional exposure to California and increased our proportional exposure to Sunbelt markets, including Florida. And we still are happy about that.

Speaker Change: When we close this merger one thing we were excited about was the effect on our portfolio footprint.

Speaker Change: By merging with life storage, we reduced our proportional exposure to California and increased our proportional exposure to Sunbelt markets include Florida for example.

Joseph Daniel Margolis: We think long term, we believe in the Sun Belt, and we believe in Florida. We're happy to have greater exposure in those growth markets, but it worked against us this year.

Speaker Change: And we still are happy about that we think long term we believe in the Sunbelt, we believe in Florida, we're happy to have greater exposure in those growth markets.

Joe Margo: But it worked against us this year. We have new coming from California, Life Storage has 7% and California is an outperforming market this year. And conversely, Extra Space has 10% of our same star revenue coming from Florida; Life Storage has 16%, and Florida is an underperforming market this year. So I think it's timing; long term, we like where we are, we think we'll close the rate gap, and we like our geographical footprint.

Joseph Daniel Margolis: Extra Space has 23% of its same store revenue coming from California. Life Storage has 7%, and California is an outperforming market. And conversely, Extra Space has 10% of its same store revenue coming from Florida, Life Storage has 16%, and Florida is an underperforming market. So I think it's timing long-term. We like where we are. We think we'll close the rate gap, and we like our geographic location.

Speaker Change: But it worked against US this year.

Extra space has 23% of its same store revenue coming from California life storage has 7% in California, as an outperforming market this year and.

Speaker Change: And Conversely extra space is 10% of our same store revenue coming from Florida life storage has 16% and Florida is an underperforming market this year.

Speaker Change: I think its timing long term, we like where we are we think we will close the rate gap and we like our geographical footprint.

Michael Goldsmith: Thanks for that.

Joseph Daniel Margolis: Joe, thanks for that. And my follow-up question, I think the natural follow-up question is, you know, what has to change in the environment in order for things to get better? You know, does demand need to pick up from the housing market? Does competition need to kind of moderate from here? Like, what are the catalysts that you're looking for? That would be an indicator that, you know, the return of pricing power and closing the gap on street. Yeah, I mean, clearly a pick.

Speaker Change: Okay. Thanks for that.

Joe Margo: And my follow-up, I think the natural follow-up question is, you know, what has to change in the environment in order for things to get better? You know, is it, is it demand needs to pick up from the housing market? Is it competition needs to to kind of, uh, moderate from here? Like, what are the tell us that you're looking for that would be an indicator that, you know, return of the pricing power and closing the gap on three rates? Thanks.

Speaker Change: I think the natural follow up question is.

Speaker Change: What has to change in the environment in order for things to get better.

Speaker Change: Is it demand needs to pick up from the housing market is it.

Speaker Change: Petition needs to to kind of.

Speaker Change: Moderate from here like what are the catalysts that you're looking for that would be an indicator of that.

Speaker Change: The return of the pricing power and closing the gap on street rates. Thanks.

Joseph Daniel Margolis: Yeah, I mean, clearly, a pickup in demand would be positive, you know, whether that's going to come from the housing market or otherwise. I think it's probably a little of both, right? We'll probably have a slow and steady improvement in the housing market, not a hockey stick. I think continued moderation of new development is a positive that will help us, as well. So, you know, we can't control market conditions, but we can control how we react, and I'm highly confident that our systems will optimize performance given whatever market conditions we're presenting.

Joe Margo: Yeah, I mean, clearly a pickup in demand would be positive. You know, whether that's going to come from the housing market or otherwise, I think it's probably a little both. Right, we'll probably have a slowing, steady improvement in the housing market, not a hockey stick. I think continued moderation of new development is a positive that will help us as well.

Speaker Change: Yes, I'll be clear.

Speaker Change: Nearly a pickup in demand as would be positive.

Speaker Change: Whether that's going to come from the housing market or otherwise I think it's probably a little of both right, we'll probably have a slow and steady improvement in the housing market not a hockey stick.

Speaker Change: I think continued moderation of new development is a positive that will help us.

Speaker Change: As well.

Joe Margo: So, you know, we can't control market conditions, but we can control how we react to them. And I'm highly confident that our systems will optimize performance given whatever market conditions we're presented with. And when I look at our, you know, occupancy, which is 94, and Extra Space sinks to a full 94 and a half in July and 93.9 for the Life Storage. In July, I'm very confident our systems are capturing the demand that's out there and maximizing revenue.

Speaker Change: So we can't control market conditions. So we can control, how we react to them and I'm highly confident that our.

Speaker Change: Our systems will.

Speaker Change: Optimize performance given whatever market conditions, we are presented with.

Joseph Daniel Margolis: And when I look at our, you know, occupancy, which is 94, Extra Space sinks to a pool of 94 and a half in July and 93.9 for life storage. In July, I'm very confident our systems are capturing the demand that's out there and maximizing revenue.

Speaker Change: When I look at our.

Speaker Change: Occupancy, which is 91 extra space same store pool, 94, and a half in July at 93 nine for the life storage.

Speaker Change: In July.

Speaker Change: I'm very confident in our systems are capturing the demand thats out there and maximizing revenue.

Michael Goldsmith: Thank you very much. Thank you.

Speaker Change: Thank you very much.

Stephen Thomas Sakwa: Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed.

Speaker Change: Pete.

Steve Sapwat: Our next question comes from the line of Steve Sapwat with Evercore ISI.

Speaker Change: Thank you.

Our next question comes from the line of Steve <unk> with Evercore ISI. Please proceed.

Steve Sapwat: Please proceed. Yeah, thanks. I guess good morning still out there.

Stephen Thomas Sakwa: Yeah, thanks. I guess good morning is still out there.

Steve: Yeah. Thanks, I guess good morning still out there, maybe Joe or Scott can you, maybe maybe I missed it did you touch on the July trends at all and if you haven't could you just kind of provide where July trends are on some of the key metrics like occupancy in the.

Steve Sapwat: Maybe Joe or Scott, can you maybe, maybe, maybe I missed it. Did you touch on the July trends at all? And if you haven't, could you just kind of provide where July trends are on some of the key metrics like occupancy and how the revenue growth or kind of move in rent. Thanks. Yes, so starting with the extra space pool occupancy at the end of July or as of yesterday is 94.5 percent. So 94.5. So sequentially, we increased by 20 basis points. The life storage pool is now 93.9, sequentially up 10 basis points. No, that came at a bit at the expense of rate.

Speaker Change: The revenue growth or kind of move in rents. Thanks.

Scott: Yeah, so starting with the extra space pool occupancy at the end of July, or as of yesterday, is 94 and a half percent. So, 94.5.

Scott: Maybe Joe or Scott, can you maybe I maybe I missed it? Did you touch on the July trends at all? And if you haven't, could you just kind of provide where July trends are on some of the key metrics like occupancy and revenue growth or any kind of move in rents? Thanks.

Speaker Change: So starting with the extra space for occupancy at the end of July or as of yesterday is 94, 5% to $94. Five so sequentially. We increased by 20 basis points at the life storage pool is now 93 nine sequentially up 10 basis points now that came at a bit at the expense of rate.

Scott: So, sequentially, we increased by 20 basis points. The life storage pool is now 93.9, sequentially up 10 basis points. Now, that came at a bit of an expensive rate. So, during the second quarter, our achieved rates to new customers were down 8%, and during the month of July, they were down 12%. Pretty similar for the life storage pool also.

Scott: So during the second quarter are achieved rate to new customers. We're down 8 percent, and during the month of July, they were down 12. Pretty similar for the life storage pool also. Okay, great, thanks.

Speaker Change: So during the second quarter, our achieved rates to new customers were down 8% and during the month of July they were down 12%.

Stephen Thomas Sakwa: Okay, great. Thanks.

Speaker Change: Similar further the life storage pool also.

Joseph Daniel Margolis: And then Joe, maybe just going back to this EXR LSI and the pricing, and you know, a little disappointing that you didn't get the rate. I'm just wondering, is it possible that, you know, the customer mix was different? And, you know, before the merger, if LSI had lower, you know, street rates and charged less, that attracted one type of customer, and the fact that you're trying to bring them up to parity with the EXR just kind of pushes them out of the system?

Speaker Change: Okay, great. Thanks, and then Joe maybe just going back to this ESR LSI and the pricing and a little disappointing that you didn't get the right.

Steve Sapwat: And then, Joe, maybe just going back to this EXR LSI and the pricing, a little disappointing that you didn't get the rate. I'm just wondering, is it possible that the customer mix was different? And before the merger, if LSI had lower street rates and charged last, that attracted one type of customer, and the fact that you were trying to bring them up to parity with the EXR just kind of either pushes them out of the system, or I guess I'm just trying to think, is everybody at the same pricing level, or do you have to fully turn that customer mix to get them back up to parity on the EXR website?

Speaker Change: I'm just wondering is it possible that the customer mix was different and.

Joseph Daniel Margolis: Before the merger if LSI had lower.

Joseph Daniel Margolis: Street rates and charge last.

Speaker Change: <unk>, one type of customer and the fact that you were trying to bring them up to parity with ESR, just kind of either pushes them out of the system or I guess I'm just trying to think as everybody at the same pricing level or do you have to fully turn that customer mix too.

Joseph Daniel Margolis: Or, you know, I guess I'm just trying to think, is everybody at the same price level? Or, you know, do you have to fully turn that customer mix to get them back up to parity on the EXR LSI? That's it.

Speaker Change: Get them back up to parity on the <unk> side.

Joseph Daniel Margolis: It's a good question, Steve, but I don't think so. And the reason I don't think so is, you know, when we track the move out as a result of ECRI.

Joe Margo: Yeah, it's a good question, Steve, but I don't think so. And the reason I don't think so is, you know, when we track, move out as a result of ECRI, the life storage customers are actually moving out at a slightly lower level than the customer and the extra space. So they're, and it very, very slightly, so they're basically behaving the same. So I think a storage customer is a storage customer and they, they, they act the same whether they're behind yellow doors or green doors.

Speaker Change: Yes, it's a good question, Steve, but I don't think so and the reason I don't think so is.

Speaker Change: We track.

Speaker Change: Move outs as a result of the Cri.

Joseph Daniel Margolis: The life storage customers are actually moving out at a slightly lower level. [inaudible] So they're, and it's, very, very slightly. So they're basically behaving the same. So I think a storage customer is a storage customer, and they act the same whether they're behind yellow doors or green doors. Steve, we would point a little bit more to this being a new customer issue.

Speaker Change: The life storage customers are actually moving out at a slightly lower level.

Speaker Change: And then the extra space customers, so they're very very slightly so that basically behaving the same.

Speaker Change: So I think our storage customers the storage customer.

Speaker Change: At the same whether theyre behind yellow doors or green doors.

Scott: Yes, Steve, we would point a little bit more to this being a new customer issue, meaning, you know, the existing customers are still behaving quite well. We're seeing strength with those customers, but the new customer has been price sensitive, and this came at a time when we are trying to increase occupancy.

Joseph Daniel Margolis: Yes, Steve, we would point a little bit more to this being a new customer issue, meaning, you know, the existing customers are still behaving quite well. We're seeing strength with those customers, but the new customer has been price sensitive, and this came at a time when we were trying to increase occupancy.

Speaker Change: Steve We would point a little bit more to this being a new customer issue, meaning the existing customers are still behaving quite well, we're seeing strength with those customers, but the new customer has been price sensitive and this came at a time when we are trying to increase occupancy.

Steve Sapwat: Great, thanks, guys. Thank you.

Speaker Change: Great. Thanks, guys.

Speaker Change: Sure.

Nick Joseph: Our next question comes from the line of Nick Joseph with City.

Speaker Change: Thank you.

Joseph Daniel Margolis: Our next question comes from the line of Nick Joseph with Citi.

Speaker Change: Our next question comes from the line of Nick Joseph with Citi.

Nick Joseph: Hey, it's Eric Wolfskir, Nick. Sorry if I missed this in the last question, but did you say where LSI rates are compared to EXR? I am just curious whether you took it back down to that sort of 10% gap that was in place before. So we have put them on parity with extra space, where they compete with extra space stores. So we've not dropped them back down. Okay, so you haven't dropped them back down. And so the guidance reduction of 200 basis points isn't due to pricing. It's due to less moving customers, less occupancy. Like I'm trying to understand what sort of specifically drove that 200 basis point, that 200 basis point reduction.

Eric Wolfe: Hey, it's Eric Wolfe here with Nick. Sorry if I missed this in the last question, but did you say where LSI rates are compared to DXR? I was just curious whether you took it back down to that sort of 10% gap that was in place before.

Speaker Change: Hey, it's Eric will scale with Nick.

Eric: Sorry, if I missed this in the last question, but did you say, where LSI rates are compared to the <unk>. Just curious whether you took it back down to that sort of 10% gap that was in place before.

Joseph Daniel Margolis: So we have put them on parity with Extra Space, where they compete with Extra Space Storage. So we have not dropped them back down.

Speaker Change: So we have put them on parity with extra space, where they compete with extra space stores. So we have not dropped them back down.

Joseph Daniel Margolis: Okay, so you haven't dropped them back down. And so the guidance reduction of 200 basis points isn't due to pricing, it's due to less moving customers, less occupancy, like I'm trying to understand what sort of specifically drove that, that 200 basis point, that 200 basis point reduction.

Speaker Change: Okay. So you havent dropped back down and so the guidance reduction of 200 basis points is it due to pricing, it's due to less move in customers less occupancy like I'm trying to understand what.

Speaker Change: Specifically drove that that 200 basis point.

Speaker Change: 200 basis point reduction.

Speaker Change: So.

Scott: So there's, you know, each unit is priced, but then is adjusted every night. Every unit type and every store is adjusted based on the models, historic data of vacates and rentals, and then projected data vacates and rentals. So, while we set a price, it's not a fixed price for any period of time that's charged. That's the base price, if you will, and then the model will adjust that price going forward, and we produce projections based on how we think that's going to work out. and resulting in what type of revenue gain?

Joseph Daniel Margolis: There's... You know, each unit is priced, but then it is adjusted every night. Every unit type in every store is adjusted based on the models, historic data on vacant units and rentals, and then projected data on vacancy.

Speaker Change: There is.

Speaker Change: Each unit is priced but then is adjusted every night.

Speaker Change: The unit type in every store is adjusted based on.

Speaker Change: Models.

Speaker Change: Historic data Vacates and rentals, and then projected data on vacation rentals, so while we set our price.

Joseph Daniel Margolis: So while we set a price, it's not a fixed price for any period of time that's charged. That's the base price, if you will. And then the model will adjust that price going forward. And we produce projections based on how we think that's going to work out and result in what type of revenue.

Speaker Change: It's not.

Speaker Change: A fixed price for any period of time Thats charge. That's the base price. If you will and then the model will adjust that price going forward.

Speaker Change: We produce projections based on how we think thats going to work out.

Speaker Change: Result, and what type of revenue gain.

Joseph Daniel Margolis: Eric, you've effectively brought more customers in at lower prices, so you're starting off at a lower price. And that takes some time to work through. We expect those customers to accept rate increases similar to other customers, but it does take time to work through if they came in at lower rates.

Scott: Eric, you've effectively brought more customers in at lower prices, so you're starting off a lower base. And that takes some time to work through. We expect those customers to accept rate increases similar to other customers, but it does take time to work through if they came in at lower rates. And then the second question, you know, if I look at your same stored net rental income, it was up 70 bits. Your occupancy was up 40 bits, and your net rents were down 10. So it looks like there's a bit of a gap there, like 40 or 50 basis points.

Speaker Change: Eric you've effectively brought more customers in at lower prices, So you're starting off a lower base and that takes some time to work through we expect those customers to accept the rate increases similar to other customers, but it does take time to work through it that came in at lower rates.

Eric Wolfe: Got it. Okay.

Speaker Change: Got it Okay and then just second question.

Speaker Change: If I look at your same store net rental income was up 70 bps.

Speaker Change: She was up 40 bps from your net rents or downturn. So it looks like theres a bit of a gap there like 40 or 50 basis points is that extra gap, just sort of expansion or renovation activity and would you say that's sustainable that benefit would be sustainable through the rest of the year.

Scott: Is that extra gap just sort of the expansion or renovation activity? And would you say that sustainable that benefit would be sustainable through the rest of the year? So some of that can't be timing on the numbers you just gave and exactly where they are. And then some of that is expansion or, you know, changing units. We are constantly modifying our units in terms of converting them large to small or small to large, but there is some degree of expansion in our portfolio. Okay, thank you.

Scott: And then the second question, you know, if I look at your same stored net rental income, it was up 70 bps, your occupancy was up 40 bps, and your net rents were down 10. So it looks like there's a bit of a gap there, like 40 or 50 basis points. Is that extra gap just sort of an expansion or renovation activity? And would you say that's sustainable? That the benefit would be sustainable through the rest of the year? So some of that can be

Speaker Change: So some of that can be timing on the numbers you just gave and exactly where they are and then some of that is expansion or a change in units. We are constantly modifying our units in terms of converting them large to small or small to large but there is some degree of expansion in our poor.

Speaker Change: Folio.

Speaker Change: Okay. Thank.

Speaker Change: Thanks.

Scott: So some of that can be timing on the numbers you just gave and exactly where they are, and then some of that is expansion or, you know, changing units. We are constantly modifying our units in terms of converting them from large to small or small to large, but there is some degree of expansion in our portfolio.

Eric: Thanks, Eric.

Ronald Camden: Our next question comes from the line of Once and Avia with a BMO Capital Markets.

Our next question comes from the line of Juan Sanabria with BMO capital markets.

Ronald Camden: I just wanted to follow up on that prior question, but from the perspective of the new customer rates. So how much or how have the new customer rates changed as a result of I guess still having a price sensitive customer get it that it takes a while to move the in place. But how have you changed your thought process after reaching an occupancy parity for that new customer, and how does that compare to extra, I guess, relative to prior guidance.

Juan Carlos Sanabria: Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Eric: Alright.

Speaker Change: I wanted to follow up on that prior question.

Juan Carlos Sanabria: I just wanted to follow up on that prior question. But from the perspective of the new customer rates, how much or how have the new customer rates changed as a result of, I guess, still having a price-sensitive customer? I get it that it takes a while to move the furniture in place, but have you changed your thought process? after reaching occupancy parity for that new customer and how does that compare to extra, I guess, relative to prior guidance? Still a little bit unclear there.

Speaker Change: But from the perspective of the new customer rates.

Juan Carlos Sanabria: So how much or how have the new customer rates changed as a result of.

Speaker Change: I guess still having a price sensitive customer I get it but it takes a while it seems that the in place.

Speaker Change: Have you changed your thought process after reaching occupancy parity for that new customer and how does that compare to.

Speaker Change: To extra gas relative to prior guidance still a little bit unclear there.

Scott: So a little bit unclear there. So we had projected that once we achieved in the life storage pool this level of occupancy, we would be able to have higher new customer rates. And the behavior of the tenants is not allowing us to do that. We still need to be aggressive with rates to capture those tenants, particularly the web tenants. And you haven't just to compare with versus the extra experience. You haven't necessarily had to have stayed as aggressive or new customers on the extra versus LSI.

Speaker Change: No.

Joseph Daniel Margolis: We had projected that once we achieved this level of occupancy in the life storage pool, we would be able to have higher new customer rates. However, the behavior of the tenants is not allowing us to do that. We still need to be aggressive with rates to capture those tenants, particularly the web tenants.

Speaker Change: We had projected that once we achieved in the life storage pool this level of occupancy.

Speaker Change: We would be able to have higher.

Speaker Change: New customer rates.

Speaker Change: And.

Speaker Change: Yes.

Speaker Change: <unk> of the tenants is not allowing us to do that we still need to be aggressive with rates.

Speaker Change: To capture those tenants, particularly the web tenants.

Joseph Daniel Margolis: And you haven't just to compare with versus the extra experience; you haven't necessarily had to stay as aggressive for new customers on the Extra versus LSI. No, sorry, due to geography.

Speaker Change: And you haven't.

Speaker Change: Just to compare with the extra experience.

Speaker Change: You haven't necessarily had to have stayed as aggressive for new customers on the extra versus LSI.

Scott: No, I'm sorry to do the geographies. No, I'm sorry if I gave that impression that the extra space customers, they're the same customers, right? There's the self storage customer is sensitive. Is new self storage customers price sensitive whether they end up, you know, on the LSI website or on the Extra Space website. So we also have been had to be aggressive with the extra space customer. And frankly, that's why we have 0.6% revenue growth. I mean, we're still significantly outperforming extra space at the life story. Cool. It's just not to the extent we expect it.

Speaker Change: And that sorry to create a geography.

Joseph Daniel Margolis: No, I'm sorry if I gave that impression that the Extra Space customers are the same customers, right? The self-storage customer is price sensitive, whether they end up, you know, on the LSI website or on the Extra Space website. So we also have had to be aggressive with the Extra Space customer. And frankly, that's why we have 0.6% revenue growth. I mean, we're still significantly outperforming Extra Space at life storage. Cool. It's just not to the extent that we do it.

Speaker Change: I'm, sorry, if I gave that impression that the extra space customers the same customers right.

Speaker Change: The self storage customer is sensitive as new self storage customers price sensitive whether they end up.

Speaker Change: On the LSI website or on the extra space Web site. So we also have been.

Speaker Change: Had to be aggressive with the extra space customer and frankly, that's why we have 6% revenue growth.

Speaker Change: We're still significantly outperforming extra space at the life storage pool, it's just not to the extent we expected.

Ronald Camden: Gotcha.

Speaker Change: Gotcha.

Joseph Daniel Margolis: Okay, and then just to What should we think of as the exit run rate? for both pools, for same store revenue. I mean, we could do the math on what's implied for the second half, but should we think of the growth rate for same-store revenue improving or being fairly steady between the third and fourth quarters for each of the two pools? So I'll talk about the two pools. So the answer is the.

Scott: Okay, and then just to what should we think of as the exit run rate? For both pools for same store revenue? Just in general, I mean we could do the math on what's implied for the second half that should we think of the growth rate for same store revenue improving or being fairly steady between the third and fourth quarter? For each of the school pools? So I'll talk about the two pools. So the extra space pool is going to be fairly steady. I mean it's not a big swoosh. You're not seeing it drop drastically and then coming back really strong at the end of the year.

Speaker Change: Okay.

Speaker Change: Then just to.

Speaker Change: What should we think of as the exit run rate.

Speaker Change: For both pools for for same store revenue.

Speaker Change: Just in general I mean, we could do the math on what's implied for the second half, but should we think of the third growth rate for same store revenue improving are being fairly steady between the third and fourth quarter for each of the proposals.

Joseph Daniel Margolis: So, I'll talk about the two pools. The extra space pool is going to be fairly steady. I mean, it's not a big swoosh.

Speaker Change: So I'll talk about the tool so the extra space pool is going to be fairly steady I mean, it is not a.

Speaker Change: <unk> not seen it drop drastically and then coming back really strong at the end of the year, it's pretty steady.

Scott: It's pretty steady. Life storage on a year-over-year basis, there obviously is more of a deceleration in the back half in terms of a year-over-year as we're coming up against much more difficult cough as we did a large volume of rate increases as we took over that portfolio last August. Thank you.

Joseph Daniel Margolis: You're not seeing it drop drastically and then come back really strong at the end of the year. It's pretty steady. Life storage on a year over year basis, obviously, there is more of a deceleration in the back half in terms of a year over year as we're coming up against much more difficult costs, as we did a large volume of rate increases as we took over that portfolio last August.

Speaker Change: Life storage on a year over year basis.

Speaker Change: Obviously as more of a deceleration in the back half in terms of a year over year as we're coming up against much more difficult comp as we did a large volume of rate increases as we took over that portfolio last August.

Speaker Change: Yeah.

Speaker Change: Thank you.

Juan Carlos Sanabria: Thank you. Our next question comes from the line of Keegan Carl with Wolfe Research. Please proceed.

Keegan Karl: Our next question comes from the line of Keegan Karl with Wolf Research.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Keegan Karl with Wolfe Research. Please proceed.

Keegan Karl: Please proceed. Yeah, thanks for the time, guys.

Keegan Grant Carl: Yeah, thanks for the time guys. Maybe first, just a two-parter, I guess. How are you thinking about your marketing spend trending for the rest of the year? And ultimately, what's that translating to in your top of funnel?

Keegan Grant Carl: Yeah. Thanks for the time guys. Maybe first just two parter I guess, how are you thinking about your marketing spend trending the rest of the year and ultimately what's that translating to on your top of funnel demand.

Keegan Karl: Maybe first just two-parter. I guess how do you think about your marketing spend trending rest of the year and ultimately what's that translating to in your top of an old demand? So our marketing spend has been up on a year-over-year basis. If you just take the extra space portfolio, it is about 2% of revenues, but it is a 20% increase year over year. So we had very, very low marketing spend during COVID and the periods following that. We would expect it to be pretty consistent through this year. The life storage spend has been slightly more elevated than that as a percentage of revenue.

Scott: So our marketing spend has been up on a year-over-year basis. If you just take the Extra Space portfolio, it is about 2% of revenues, but it is a 20% increase year-over-year. So we had very, very low marketing spend during COVID and the periods following that. We would expect it to be pretty consistent through this year. The life storage spend has been slightly more elevated than that as a percentage of revenue. It's about 3% of revenue, and we would expect it to continue through the year.

Speaker Change: So our marketing spend has been up on a year over year basis. If you just take the extra space portfolio. It is about 2%.

Speaker Change: Revenues, but it is a 20% increase year over year. So we had very very low marketing spend during COVID-19 and the periods followed following that we would expect it to be pretty consistent through this year. The life storage spend has been slightly more elevated than that as a percentage of revenue, it's about 3% of revenue and we would expect.

Scott: It's about 3% of revenue, and we would expect it to continue through the year.

Speaker Change: It to continue through the year.

Scott: And then just on top of funnel demand, I guess just more probably what are you guys seeing and maybe how does that compare to your comments and areas? Very similar. I think demand is measured by kind of generic Google search turns, storage near me, things like that is very similar to 2019. So, you know, kind of hit historical levels, but it is down from last year and the year before when we had elevated demand. No real change in that area.

Keegan Grant Carl: And then, just on top of funnel demand, I guess, just more broadly, what are you guys seeing, and maybe how does that compare to your comments, at any rate?

Speaker Change: And then just on top of funnel demand I guess, just more broadly what are you guys seeing and maybe how does that compare to your comments at NAREIT.

Scott: Very similar, I think demand is measured by kind of generic Google search terms, storage near me, things like that are very similar to 2019. So, you know, kind of historical levels, but it is down from last year and the year before when we had elevated demand. There was no real change in that.

Speaker Change: A very similar I think demand as measured by kind of generic Google.

Speaker Change: Google search term storage near me things like that is very similar to 2019, so kind.

Speaker Change: Kind of historical levels, but it is down from last year and the year before when we had elevated demand.

Speaker Change: No no real change in that area.

Keegan Grant Carl: Got it, and then maybe more broadly within your embedded guide, I guess I'm just curious about a year of your occupancy delta verse last year, any more color and how you expected to trend through the back half and if you've changed any of those assumptions than your guidance.

Keegan Karl: Got it.

Scott: And then just maybe more broadly within your embedded guide. I guess I'm just curious on a year of year, your occupancy delta versus last year, just any more color and how you expect to trend through the back half. And if you changed any of those assumptions, then your guidance range. So, on the extra space pool, we did not change. And again, we're guiding more for revenue than occupancy because revenue is going to be an output of rate, occupancy, all of those things. And so no significant changes in our assumptions on the extra space pool on the life storage pool. Obviously, occupancy is continues to be at the higher levels.

Speaker Change: Got it and then just maybe more broadly within your embedded guide I guess I'm just curious on a year over year occupancy Delta versus last year, just any more color on how you expect that trend through the back half and if you've changed any of those assumptions in your guidance range.

Scott: So on the extra space pool, we did not change. And again, we're guiding more for revenue than occupancy because revenue is going to be an output of rate, occupancy, all of those things. And so, no significant changes in our assumptions about the extra space pool. On the life storage pool, obviously occupancy continues to be at higher levels, more similar to extra space, but again, not big changes in the back half in terms of an occupancy guide, just more of a revenue guide there.

Speaker Change: So on the extra space pool, we did not change and again, we are guiding more for revenue than occupancy because revenue is going to be an output of rate occupancy all of those things and so.

Speaker Change: No significant changes in our assumptions on the extra space pool on the life storage pool, obviously occupancy is continues to be at the higher levels more similar to extra space, but again not big changes in the back half in terms of an occupancy guidance just more of a revenue guide there.

Scott: More similar to extra space, but again, not big changes in the back half in terms of an occupancy guide. Just more of a revenue guide.

Keegan Grant Carl: Great. Thanks for the time, guys.

Speaker Change: Great. Thanks for the time guys.

Joshua Denerling: Thank you. Thank you. Thank you. Our next question comes from the line of Joshua Denerling with Bank of America. Please proceed.

Speaker Change: Thank you.

Joshua Denerling: Our next question comes from the line of Joshua Denerling with a Bank of America. Please proceed. While I mentioned geographical differentiation between the pools, certainly that's one thing. I would also say that we have not gotten the improvement in the life storage, organic strength, SEO strength that we expected. And we've made up for some of that through increased marketing spend, increased paid search.

Speaker Change: Thank you.

Joshua <unk>: Next question comes from the line of Joshua <unk> with Bank of America. Please proceed.

Joshua Denerling: Hey guys, thanks for the time. Joe, I just wanted to follow up on one of your opening remarks. It sounded like the LSI property is just underperforming your internal projections. Is there anything in particular that you think is driving that underperformance?

Joshua <unk>: Yeah, Hey, guys. Thanks for the time, Joe just wanted to follow up on one of your opening remarks.

Joshua <unk>: It sounded like the LSI properties just underperforming your internal projections is there anything in particular that you think is driving that underperformance.

Joseph Daniel Margolis: Well, I mentioned geographical differentiation between the pools; certainly, that's one thing. But I would also say that we have not gotten the improvement in the life storage organic strength SEO strength that we expect. And we've made up for some of that through increased marketing spend, increased paid search, Scott just mentioned that. But our thought was, you know, a year or nine months really into running this second brand, second website, the life storage SEO would be closer to the extra space strength than it actually is.

Speaker Change: Well I mentioned geographical.

Speaker Change: Differentiation between the pools certainly that's one thing I would also say that.

Speaker Change: We have not.

Speaker Change: Scott.

<unk>.

Speaker Change: Improvement in.

Scott: The life storage organic strength SCO strength that we expected and we've made up for some of that to increased marketing spend increased paid search Scott just mentioned that.

Joe Margo: Not just mentioned that, but our thought was, you know, a year or nine months really into running this second brand, second website, the Life Storage SEO would be closer to the Extra Space strength than it actually is. Okay. Does that maybe change how you're thinking about the SEO on a go forward basis? Like, would you want to put the make the brands one or, or still keep them separate? So the decision to test dual brand was based on the theory that if we have, you know, twice the digital real estate in the paid section, in the local section, and in the organic section, we would have more clicks and more rentals.

Speaker Change: But.

Speaker Change: So it was a year of nine months really into.

Speaker Change: Running this second brand second website.

Speaker Change: The life storage SCO would be closer to the extra space strength than it actually is.

Joseph Daniel Margolis: Okay, does that maybe change how you're thinking about the SEO on a go forward basis? Like, would you want to put the brands together or, or still keep them separate?

Speaker Change: Okay does that maybe change how youre thinking about.

On a go forward basis.

Speaker Change: Where do you want to put the victim brands one R. R.

Or still keep them separate.

Joseph Daniel Margolis: So the decision to test dual brands was based on the theory that if we had, you know, twice the digital real estate in the paid section, in the local section, and in the organic section, we would have more clicks and more rentals. And that benefit would outweigh the cost of running two brands. And we certainly see that in the paid section, that's easy: you buy it.

Speaker Change: So the.

Speaker Change: The decision to test dual brand was based on the theory that if.

Speaker Change: We have.

Speaker Change: Twice the digital real estate in the paid section in the local section and in the organic section, we would have more clicks and more rentals and that benefit would.

Joe Margo: And that benefit would outweigh the cost of running two brands. And we certainly see that in the paid; that's easy to buy it. We've had progress and are seeing movement in the local section; where we have, we've been most disappointed is in the organic section. And it's something we're looking at. We're looking at the data.

Speaker Change: The cost of running two banks two brands.

Speaker Change: And we certainly see that in the paid Thats easy you buy it.

Speaker Change: Had progress and are seeing movement in the local section.

Speaker Change: There we have we've been most disappointed is in the organic section.

Joseph Daniel Margolis: We've made progress and are seeing movement in the local section, but where we've been most disappointed is in the organic sector. And it's something we're looking at. We're looking at the data. We'll let the test run its course, and then we'll make the decision.

Speaker Change: And it's something we're looking at we're looking at the data we will let the test run its course and then we'll make the make the decision.

Joe Margo: We'll let the test run its course, and then we'll make the make the decision. Okay.

Joshua Denerling: Okay, I appreciate that. Thank you.

Joe Margo: Appreciate that. Thank you.

Speaker Change: Okay I appreciate that thank you Sir.

Ronald Kamdem: Thank you. Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed.

Speaker Change: Thank you.

Ronald Camden: Our next question comes from the line of Ronald Camden with Morgan Family. Please proceed. Hey, just two quick one thing on the different pools between Life Storage and EXR. I guess if we, you know, sort of think about three to five years out, what one should we expect? Sort of both pools behave similarly. I mean, it sounds like the pricing is the same or the average prices are the same. Maybe one has higher occupancy, but at what point does this sort of converge, or will it always sort of be two separate pools? You know, three, four, five years down the road?

Speaker Change: Our next question comes from the line of Ronald Camden with Morgan Stanley. Please proceed.

Ronald Kamdem: Hey, just two quick ones. Staying on the different pools between life storage and EXR, I guess if we think about three to five years out, when should we expect both pools to behave similarly? I mean, it sounds like the pricing is the same, or the average prices are the same, maybe one has higher occupancy.

Ronald Kamdem: Hey, just two quick one staying on the different pools.

Ronald Kamdem: Life storage and <unk> XR I guess, if we sort of think about three to five years out.

Ronald Kamdem: Should we expect sort of both pools to behave similarly, I mean, it sounds like the pricing is the same.

Scott: But at what point does this sort of converge? Or will it always sort of be two separate pools? You know, three, four, or five years down the road.

Speaker Change: Or the average prices are the same maybe one has higher occupancy but at what point.

Speaker Change: Does this sort of converge or will it always sort of be two separate pools.

Speaker Change: Four five years down the road.

Joe Margo: I would expect it to converge at some point. You know, the stores, the pools are slightly different in terms of makeup in terms of... Demographics, things like that, but overall they should behave the same, but I would expect Life Storage to outperform in terms of year-over-year revenue growth in 2025. Got it.

Scott: I would expect it to converge at some point, you know, the store, and the pools are slightly different in terms of makeup in terms of demographics, things like that. But overall, they should behave the same. But I would expect life storage to outperform in terms of year over year revenue growth in 2025.

Speaker Change: I would expect it to converge at some point the store the pools are slightly different in terms of makeup in terms of <unk>.

Speaker Change: Demographics things like that but overall they should behave the same but I would expect life storage to out perform in terms of year over year revenue growth in 2025.

Ronald Kamdem: Got it. Okay, that's helpful.

Ronald Camden: Okay, that's helpful. And then my second commentary question, I should say, is just maybe can you talk about, you know, the that you talked about, there's a lot more sort of competition for pricing. Maybe you just contextualize that. What do you think specifically is driving that? Is that less activity in the housing markets? Is it the consumers more price sensitive? Like what do you think is maybe leading to a little bit more competition that you would have anticipated on the pricing? So I think it's several factors. I think the housing market is a factor. I think sometimes it can be overblown, right?

Speaker Change: Got it Okay. That's helpful and then.

And my second commentary question I should say, it's just.

Speaker Change: Can you talk about.

Speaker Change: You talked about there is a lot more sort of competition or pricing.

Speaker Change: In the market.

Speaker Change: Maybe can you just contextualize that what do you think specifically is driving that is that less activity in the housing market.

Joseph Daniel Margolis: And then my second commentary question I should say is just, maybe can you talk about, you know, you talked about, there's a lot more sort of competition for pricing in the market. Maybe if you could just contextualize that, what do you think specifically is driving that? Is that leading to less activity in the housing markets? Is it Consumers being price sensitive, like what do you think is, may be leading to a little bit more competition?

Speaker Change: The consumer is more price sensitive like what do you think is.

Joseph Daniel Margolis: [inaudible]

Speaker Change: Maybe leading to a little bit more competition that you would have anticipated on the pricing.

Joseph Daniel Margolis: So I think there are several factors. I think the housing market is a factor. I think sometimes it can be overblown, right?

Speaker Change: So I think its several factors I think the housing market is a factor I think sometimes it can be overblown right our pic.

Joe Margo: Our peak percentage of customers who tell us they were in the moving process was in 2021 with 61% of our customers. Now it's about 51% of our customers. So clearly, that's a decline in an effect, but it doesn't explain everything. I think we need to remember that in 2020 we were in the peak of a three-year development cycle, three-year delivers of development. Almost 80% of our same-store pool had new supply delivered in the three years, 18, 19, and 20. And that got masked by COVID. The excess COVID demand kind of masked that new development supply, and now that excess demand is gone in markets that have those new supply, we feel impact.

Joseph Daniel Margolis: Our peak Percentage of customers who tell us they were in the moving process was in 2021 with 61% of our customers. Now it's about 51% of our customers. So clearly, that's a decline in an effect, but it doesn't explain everything. I think we need to remember that in 2020, we were in the peak of a three-year development cycle, three-year delivery of development. Almost 80% of our same store pool had new supply delivered in the three years, 18, 19, and 20.

Speaker Change: Percentage of customers, who tell us they were in the moving process was in 2021, 61% of our customers now it's about 51% of our customers. So clearly that's a decline and in effect, but it doesn't explain everything.

Speaker Change: Think we need to remember that in 2020, we were in the peak of a three year development cycle three year deliveries of development.

Speaker Change: Almost 80% of our same store pool had new supply delivered in the three years 18, 19 and 20.

Joseph Daniel Margolis: And that got masked by COVID. The excess COVID demand kind of masked that new development supply. And now that excess demand is gone, and in markets that have that new supply, we feel the impact. I also think consumers do. Right, we've had several years of inflation outpacing wage growth. Inflation has slowed down, but we haven't had disinflation, right? Prices are still high. The extra money the government threw into the economy is largely gone, right? Savings rates are down from their historic highs, credit card debt defaults, and auto loan defaults are increasing. We have a weaker consumer, and we see that in their shopping.

Speaker Change: And that got masked by the excess cover demand kind of mask that new development supply and now that excess demand has gone in in markets that have those new supply that new supply we we feel.

Joe Margo: I also think the consumers week. We've had several years of inflation outpacing wage growth. Inflation has slowed down, but we haven't had disinflation, right? Prices are still high. The extra money the government threw into the economy is largely gone. Right, savings rates are down from their historic highs; credit card debt defaults, auto loan defaults are increasing. I think we have a weaker consumer, and we see that in their shopping base.

Speaker Change: Impact.

The consumers week we've.

Speaker Change: We've had several years of inflation.

Speaker Change: <unk> wage growth.

Speaker Change: <unk> has slowed down but we haven't had this inflation rate prices are still high.

Speaker Change: Extra money the government through into the economy is is largely gone nice savings rates are down.

Speaker Change: From their historic highs credit card debt defaults auto loan defaults are increasing.

Speaker Change: We have a weaker consumer and we see that and their shopping behavior.

Ronald Camden: Right, that's it for me. Thanks so much. Sure, sure.

Ronald Kamdem: Great, that's it for me. Thanks so much.

Speaker Change #100: Great. That's it for me thanks, so much.

Ki Bin Kim: Thank you. Our next question comes from the line of Ki-Bin Kim with Ruiz.

Sean: Sure Sean.

Unknown Executive: Thank you.

Sean: Thank you.

Keegan Karl: Our next question comes from the line of Keep Being Kim with Druest.

Ki Bin Kim: Our next question comes from the line of keeping Kim could you list.

Keegan Karl: Thank you. Good morning. Just a couple of quick ones here.

Ki Bin Kim: Thank you. Good morning. Just a couple quick ones here. When you talk about some of the additional pricing sensitivity with your customer base, how do you notice that on web traffic, whether it be customers jumping around from your page to a competitive page? I'm not sure if that's trackable, but any kind of metrics that you can share where we are today versus maybe a year ago?

Ki Bin Kim: Thank you good morning, just a couple quick ones here when you talk about.

Keegan Karl: When you talk about some of the additional pricing sensitivity with your customer base, how do you notice that on web traffic, whether it be customers jumping around from your page to a competitive page? I'm not sure if that's trackable, but any kind of metrics I can share where we are today versus maybe a year ago. I think there's a number of ways to observe it, but the best way is we'll pretty continually run a test where we have a series of stores or units, it stores that are priced 5% higher and 5% lower than we think they should then the model thinks they should be.

Kim: One of the additional pricing sensitivity with your customer base.

Speaker Change #104: How do you notice that on web traffic, whether it be customers jumping around your pace to a competitive page I'm not sure. If that's trackable, but any kind of metrics that you can share where we are today versus maybe a year ago.

Joseph Daniel Margolis: You know, I think there's a number of ways to observe it, but the best way is we'll pretty continually run a test where we have a series of stores or units at stores that are priced 5% higher and 5% lower than we think they should than the model thinks they should be. And we can see the consumer reaction to, you know, a 5% increase in prices or 5%. And that really helps us kind of zero in on what the right price is and which combination of rate and Rental Volume and Discount and Marketing Spend Maximizer is the right one.

Speaker Change #105: I think theres, a number of ways to observe it but the best way is.

Speaker Change #106: Pretty continually run a test where.

Speaker Change #107: We have.

<unk> of stores our units at stores that are priced 5% higher or 5% lower than we think they should then the model thinks they should be and we can see.

Scott: And we can see the consumer reaction to a 5% increase in prices or 5%. 100% decrease in prices. And that really helps us kind of zero in on what the right price is and which combination of rate and rental volume and discount and marketing spend maximizes revenue. Got it.

Speaker Change #107: The the consumer reaction to a 5% increase in <unk>.

Speaker Change #107: <unk>, 5% decrease in prices and that really helps us kind of zero in on what the right prices and which which combination of rate.

Speaker Change #107: And.

Speaker Change #107: Rental volume and discount and marketing spend and maximizes revenue.

Ki Bin Kim: Got it. And the second question on your expenses for payroll and utilities, can you just give a broad sense of what we should expect for payroll going forward? Should it be more inflationary, or are there other things that you might reduce, like FTEs at the stores? And on the solar side, I mean, sorry, on the utility side, is that decrease being driven mostly by solar initiatives? And just curious, like how much more room you may have to add more solar if that was the driver?

Scott: And the second question on your expenses for payroll and utilities. Can you just give a broad sense of what we should expect for payroll going forward. Should it be more inflationary, or are there other things that you might redo with like FTEs at the stores and on the solar side. I mean, it's like on the utility side.

Speaker Change #107: Got it and then.

Speaker Change #110: Second question on your expenses for payroll and utilities.

Speaker Change #108: Can you just give a broad sense.

Speaker Change #109: What we should expect for payroll going forward should it be more inflationary or are there other things that you might.

Speaker Change #115: We deal with the Ftes at the stores and on the solar side, sorry on the utility side.

Scott: Is that decrease being driven mostly by solar initiatives, and just curious, like how much more roommate you have to add more solar if that was the driver. So, on the payroll side, first half of this year, it is slightly elevated. Some of that's a comp issue. So last year, we ran fewer hours at the stores as we were basically just a little bit understaffed. So this year, it not only do you have the wage increase, you also have the increase in hours. We would expect that to be less in the back half of the year to become more inflationary.

Speaker Change #111: Is that decrease being driven mostly by like solar initiatives and just curious like how much more room you have to add more solar if that was the driver.

Scott: So on the payroll side, the first half of this year, it is slightly elevated. Some of that's a comp issue.

Speaker Change #113: So on the payroll side first half of this year. It is slightly elevated some of Thats a comp issue. So last year, we ran fewer hours at the stores as we were basically just a little bit understaffed.

Speaker Change #112: This year.

Speaker Change #114: Not only do you have the wage increase you also have the increase in hours, we would expect that to be glass in the back half of the year to become more inflationary.

Scott: In terms of utilities, we've actually been quite aggressive on the solar side for a lot of years. Prior to the Life Storage acquisition, we had about 50% of our holy on stores that had so are on them. So that is clearly benefiting us. We continue to look for opportunities to have a good yield, and we continue to install, so are one of the opportunities with the life storage acquisition is more stores to install install. We've also been focused on our HVAC and getting that to be more efficient. We've also done a lot of LED lighting.

Speaker Change #116: In terms of utilities, we've actually been quite aggressive on the solar side for a lot of years prior to the life storage acquisition, we had about 50% of our OEM stores that had solar on them. So that is clearly benefiting as we continue to look for opportunities to have a good yield and we continue to install solar one of the opportunities with the <unk>.

Speaker Change #116: <unk> acquisition is more stores to answer all installed solar we've also been focused on are.

Speaker Change #116: On our HVA C and getting that to be more efficient. We've also done a lot of led lighting. So solar is obviously, a big component of that and probably the bigger driver, but also some opportunities on HVAC led lighting.

Scott: So solar is obviously a big component of that and probably the bigger driver, but also some opportunities on HVAC and LED lighting.

Scott: I just as a follow-up comment on payroll. I think it could be a mistake to look at payroll expense in a vacuum because we can reduce; anybody can reduce payroll expense, but it's important to also understand what are the impacts of that. Does that mean if you cut store hours, you have to have more calls on our agents. Does it mean that you have to have R&M? We noticed that the fewer number of bodies we have in the store, the more small fires we have, the more mattresses we have left in the hallway. And then, most importantly, what does it do to rentals?

Scott: So last year we ran fewer hours at the stores as we were basically just a little bit understaffed. So this year, not only do you have the wage increase, but you also have an increase in hours. We would expect that to be less in the back half of the year to become more inflationary.

Scott: In terms of utilities, we've actually been quite aggressive on the solar side for a lot of years. Prior to the life storage acquisition, we had about 50% of our wholly owned stores with solar on them. So, that is clearly benefiting us. We continue to look for opportunities to have a good yield, and we continue to install solar panels. One of the opportunities with the life storage acquisition is for more stores to install solar panels.

Scott: We've also been focused on our HVAC and getting that to be more efficient. We've also done a lot of LED lighting. So solar is obviously a big component of that and probably the bigger driver, but also some opportunities for HVAC and LED lighting.

Speaker Change #117: Just as a follow up comment on payroll.

Speaker Change #118: It could be a mistake to look at payroll expense in a vacuum.

Joseph Daniel Margolis: Just as a follow-up comment on payroll, I think it could be a mistake to look at payroll expense in a vacuum because we can reduce, anybody can reduce payroll expense, but it's important to also understand what the impacts are. For example, does that mean that if you cut store hours, you have to have more call centers? Does it mean that you have to have R&M? We noticed that the fewer number of bodies we have in the store, the more small fires we have, and the more mattresses we have left in the hall. And then, most importantly, what does it cost to rent?

Speaker Change #119: We can reduce anybody can reduce payroll expense, but it's important to also understand what are the impacts of that does that mean, if you cut store hours you have to have more call center agents does it mean that you have to have R&M, we noticed that the fewer number of bodies, we have in the store the more small.

Speaker Change #119: Buyers, we have the more mattresses, we have left in the hallway and then most importantly, what does it do to rentals.

Scott: If you lose rentals in a high operating margin business, your efforts to reduce payroll can be counterproductive. So we want to be as careful as we can with payroll, but we don't want to do it at the expense of hurting the store or hurting revenue. That all makes us pay.

Joseph Daniel Margolis: If you lose rental revenue in a high operating margin business, your efforts to reduce payroll can be counterproductive. So we want to be as careful as we can and as efficient as we can with payroll, but we don't want to do it at the expense of hurting the store or hurting revenue.

Speaker Change #119: You lose rentals and a high operating margin business.

Speaker Change #119: Your efforts to reduce payroll can be counterproductive. So we want to be as careful as we can as efficiently can with payroll, but we don't want to do it at the expense of hurting the store or hurting revenue.

Joseph Daniel Margolis: That all makes us three.

Brandon Lynch: That all makes us three. Thank you. Thank you. Our next question comes from the line of.

Speaker Change #120: That all makes sense great. Thank you.

Speaker Change #119: Steven.

Speaker Change #121: Thank you.

Brendan Lynch: Our next question comes from the line of Brand and Lynch with Barclays. Great. Thanks for taking my questions. There's an uptick in acquisition guidance for the year.

Brandon Lynch: Our next question comes from the line of Brandon Lynch with Barclays. Great, thanks for taking my questions. There's an uptick in acquisition guidance for the year. I wondered if you could comment.

Speaker Change #121: Our next question comes from the line of Brendan Lynch with Barclays.

Brendan Lynch: Great. Thanks for taking my questions.

Brendan Lynch: There is an uptick in acquisition guidance for the year I wondered if you could comment on the bid ask spread that youre seeing in the market and where cap rates are trending.

Brendan Lynch: I wondered if you could comment on the bid-s spread that you're seeing in the market and where cap rates are trending. Sure. So our increase of guidance was really the function of us capturing three deals that we didn't expect to, and it's not a reflection that we see the market changing drastically. I think the market is still muted. There's still a bid S spread. There'll likely be a few more transactions at the second half of the year, as there always are in any year. But I don't think there's a material change in market dynamics. Right, leverage buyers are still on the sidelines.

Joseph Daniel Margolis: Sure. So our increase in guidance was really the function of us capturing three deals that we didn't expect to. And it's not a reflection that we see the market changing drastically. I think the market's still muted. There's still a bid-ask spread. You know, there'll likely be a few more transactions in the second half of the year, as there always are in any year. But I don't think there's been a, you know, material change in market dynamics, right?

Speaker Change #123: Sure. So our increase of guidance was really the function of us capturing three deals.

Speaker Change #124: We didn't expect to win.

Speaker Change #125: It's not a reflection that.

Speaker Change #125: We see the market changing drastically I think the market is still muted there is still a bid ask spread.

Speaker Change #125: It will likely be a few more transactions at the second half of the year as there always are in any year.

Joseph Daniel Margolis: Leverage buyers are still on the sidelines. Most storage owners aren't in distress. They don't need to sell. And if they can't get their price, they'll just hold. Or, frankly, what we're seeing, they'll come to us for a bridge loan. And one of the reasons our bridge loan activity is up is because the acquisition market is quiet, and people are looking for other options. Great, that's

Speaker Change #125: But.

Speaker Change #125: I don't think there is a material change in market dynamics right leverage buyers are still on the sidelines most.

Joe Margo: Most storage owners aren't in distress. They don't need to sell. If they can't get their price, they'll just hold. Or, frankly, what we're seeing, they'll come to us for a bridge loan. One of the reasons our bridge loan activity is up is because the acquisition market is quiet, and people are looking for other options. Great, that's helpful.

Speaker Change #126: Storage owners arent in distress, they don't they don't need to sell and if they can't get their price they'll just hold or frankly, what were seeing that come to us for a bridge loan from one of the reasons. Our bridge loan activity is up is because the acquisition market is quiet and people are looking for other options.

Joseph Daniel Margolis: And then on third-party management, you mentioned the internalization of one of your prior customers. Can you just talk about what drove that decision? And if you'd expect more of that to occur?

Speaker Change #127: Great. That's helpful. And then on the third Party management, you mentioned the internalization of one of your prior customers.

Joe Margo: And then on the third-party management, you mentioned the internalization of one of your prior customers. Can you just talk about what drove that decision and if you would expect more of that to occur? This was a owner that we inherited from Life Storage. They were a capital partner. They purchased a self-storage company and operating platform and moved all of their stores. So we lost 63 stores in the quarter; 59 of them were because of this internalization of management. Other than that, we only lost four stores. So, you know, part of having, you know, over 1,400 stores on our third party management platform.

Speaker Change #128: Can you just talk about what drove that decision and if you would expect more of that to occur.

Joseph Daniel Margolis: This was an owner that we inherited from Life Storage. They were a capital partner. They purchased a self storage company and an operating platform and moved all of their stores to that platform. So we lost 63 stores in the quarter; 59 of them were because of this internalization of management. Other than that, we only lost four. So, you know, part of having over 1400 stores on our third-party management platform is that every now and then, you lose them, you lose a portfolio, and we've lost portfolios in the past, but we continue to grow at a very healthy pace. We've added 174 stores gross throughout the year and 86 net.

Speaker Change #129: This was a.

Speaker Change #130: Owners that we inherited from life storage.

Speaker Change #131: We're a.

Speaker Change #132: Capital partner.

Speaker Change #133: <unk>, a self storage company and operating platform.

Speaker Change #133: And moved all of their stores.

Speaker Change #133: To that operating platform. So we lost 63 stores in the quarter 59 of them.

Because of this internalization of management other than that we only lost four scores.

Speaker Change #133: So.

Speaker Change #133: Part of having over 400 stores on our third party management platform.

Brendan Lynch: Is that every now and then you lose a portfolio, and we've lost portfolios in the past, but we continue to grow at a very healthy pace. We've added 174 stores gross throughout the year and 86 net. And that's a very, very healthy year for us. And we see the demand continuing. Great, thanks for the color.

Speaker Change #133: Is that every now and then you lose it you lose a portfolio we've lost portfolios in the past, but we continue to grow at a very healthy pace. We've added 174 stores gross.

Joseph Daniel Margolis: And that's been a very, very healthy year for us, and we see the demand continuing. Great. Thanks for the call. Thank you. Our next...

Speaker Change #133: Throughout the year and 86 net and that's a very very healthy year for us and we see that demand continuing.

Speaker Change #134: Great. Thanks for the color.

Speaker Change #134: Sure.

Unknown Executive: Thank you.

Speaker Change #135: Thank you.

Nick Yulico: Our next question comes from the line of home young junk with JP Morgan.

Hongliang Zhang: Our next question comes from the line of Hongliang Zhang with J.P. Morgan.

Speaker Change #136: Our next question comes from the line of home Young Zhang with Jpmorgan.

Joe Margo: Yeah, hey guys, I guess you talked about street rates being down 8% on your viewer faces in the second quarter. I was wondering how you expect that gap trend throughout the rest of the year. So we don't see a catalyst for, you know, a big for us to be able to have a lot of pricing power. I think that's the reality. I think with housing market down, with the consumer where they are, we don't see a strong catalyst, or guidance doesn't imply that. That being said, we are going to street rates are somewhat an outcome of your occupancy, your rentals, the volume, what you're given.

Young Zhang: Yeah, Hey, guys I guess you've talked about.

Young Zhang: Street rates down 8% on a year over year basis second quarter I was wondering how you expect that gap to trend throughout the rest of the year.

Joseph Daniel Margolis: So we don't see a catalyst for, you know, a big enough company for us to be able to have a lot of pricing power. I think that's the reality.

Speaker Change #138: So we don't see a catalyst for.

Speaker Change #139: Big FERC.

Speaker Change #140: For us to be able to have a lot of pricing power I think thats. The reality I think with housing market down with the consumer where they are we don't see a strong catalyst our guidance doesn't imply that.

Joseph Daniel Margolis: I think with the housing market down and the consumer where they are, we don't see a strong catalyst. Our guidance doesn't imply that. That being said, street rates are somewhat an outcome of your occupancy, your rentals, the volume, what you're given. And we're going to solve for occupancy. You know, the first thing we look at is occupancy. I'm sorry, not occupancy, but revenue. Sorry.

Speaker Change #141: That being said we are going to street rates are somewhat in outcome. Your occupancy youre rentals to volume, what you're given and we're going to sell for occupancy yes. The first thing we look at as occupancy I'm, sorry, not occupancy but for revenue.

Joe Margo: And we're going to solve for occupancy. You know, the first thing we look at is occupancy. I'm sorry, not occupancy, but for revenue. Sorry. So, you know, you can use occupancy, you can use street rate, all to solve for occupancy. And as we've always said, we're solving for identity again; we're solving for revenue. We want to make sure that we use these other tools to solve for revenue. I'm going to answer that question. I know. Thanks.

Joseph Daniel Margolis: So, you know, you can use occupancy, you can use street rate, all to solve for occupancy. And as we've always said, we are solving for, I did it again. We're solving for revenue. We want to make sure that we use these other tools to solve for it.

Speaker Change #140: So.

Speaker Change #140: You can use occupancy you can use street rate all to solve for occupancy and as we've always said we are solving for red dead. It again, we're solving for revenue we want to make sure that we use these other tools to solve for revenue I'm going to answer that question.

Joseph Daniel Margolis: I'm gonna answer that question. I know. Thanks.

Joseph Daniel Margolis: And then I guess on just thinking about the magnitude of ECRIs, how do those compare with the EXR portfolio versus the LSI portfolio? Are you doing anything different in terms of increases for other ones? No, now that everything is priced at parity or on the same system, they're on the same VCRI system. So it's, it's

Scott: And then I guess on just thinking about the magnitude of ECRIs, how do those compare and the EXO portfolio versus the LSAC portfolio, are you doing anything different in terms of them increases for other one? No, now that everything is priced at parity or on the same system, they're on the same BCRI. System, so it's the same. Thank you.

Speaker Change #142: Thanks, and then I guess.

Speaker Change #143: Just thinking about the magnitude ECR is how do you.

How did those compare and EXL portfolio versus the LSI portfolio are you doing anything different in terms of any cases for either one.

Speaker Change #144: No now that everything is it is.

Speaker Change #145: Rice at parity or on the same system. They are on the same be cri system. So it's the same.

Speaker Change #146: Got it thank you.

Speaker Change #146: Yes.

Todd Thomas: Our next question comes from the line of Todd Thomas with Keyband Capital Markets. Please proceed.

Speaker Change #146: Thank you.

Todd Michael Thomas: Our next question comes from the line of Todd Thomas with Keeban Capital Markets. Please proceed.

Speaker Change #147: Our next question comes from the line of Todd Thomas with Keybanc capital markets. Please proceed.

Todd Thomas: Hi, thanks. First question, I just wanted to follow up, sorry, in a heartbond, the changes here to the EXR and LSI revenue growth guidance. But, you know, you commented, you moved LSI pricing to parity with the EXR, did not see the improvement in achieved rents that you anticipated, which led to the decrease for LSI. But what caused the increase in the EXR revenue growth forecast? So I think it was really more a function of us taking the bottom end of the guidance off the table, you know, based on where the stores are halfway through the year. We didn't feel like that was a likely scenario.

Scott: Hi, thanks. First question, I just wanted to follow up, sorry to harp on the changes here to the EXR and LSI revenue growth guidance. But, you know, you commented that you moved LSI pricing to parity with EXR, did not see the improvement in achieved rents that you anticipated, which led to the decrease for LSI. But what caused the increase in the EXR revenue growth forecast?

Todd Michael Thomas: Hi, Thanks first question I, just wanted to follow up sorry to harp on the changes here to the ESR and outside revenue growth guidance, but.

Speaker Change #149: You commented you move Dallas side pricing to parity with ESR did not see the improvement and achieved rents that you anticipated, which led to the decrease.

Speaker Change #150: For allo side, but what caused the increase in <unk> revenue growth forecast.

Scott: So I think it was really more a function of us taking the bottom end of the guidance off the table, you know, based on where the stores are halfway through the year. We didn't feel like that was a likely scenario.

Speaker Change #151: So I think it was really more a function of us taking the bottom end of the guidance off the table based on where the stores are halfway through the year, we didn't feel like that was a likely scenario.

Todd Michael Thomas: Okay, and then. Just going back to, I think, Keegan's question a little bit about the web and web traffic, are there any structural differences at this point in the websites or anything related to running separate banners that you're starting to identify or see? I'm just not clear on how the sites and banners have been integrated on the back end, I guess. And I'm just curious.

Scott: Okay, and then just going back to I think Keyband's question a little bit around the web and web traffic, are there any structural differences at this point in the websites or anything related to running separate banners that you're starting to identify or see? I'm just not clear on how the sites and banners have been integrated on the backend, I guess, and I'm just curious if you know, you're seeing differences there, you know, either in terms of levels of web demand or, you know, customers finding you or sort of the overall, you know, execution of leasing on the LSI versus the EXR websites.

Speaker Change #151: Okay.

Speaker Change #151: And then just.

Ben: Going back to I think key Ben's question, a little bit around the web in web traffic.

Speaker Change #153: There are any structural differences at this point and the websites or anything related to running separate banners that your you are starting to identify or I'm, just not I'm not clear on how the sites in banners have been integrated on the backend I guess I'm just curious if.

Todd Michael Thomas: You know, you're seeing differences there, you know, either in terms of levels of web demand or, you know, customers finding you or, sort of, the overall execution of leasing on the LSI versus the XR website.

Speaker Change #153: Youre seeing differences there.

Speaker Change #153: In terms of levels of.

Speaker Change #153: <unk> web demand or.

Customers, finding you or sort of the overall execution of.

Speaker Change #153: Of.

Speaker Change #153: Are you seeing on the <unk> side versus the XR websites.

Scott: No, so we addressed the differences in website, and I'll give you one example. When we closed the transaction, the LSI website was twice as slow, or the extra space website was twice as fast as the LSI website, and that's an important signal to Google. That's one of the factors Google looks in when they decide, you know, who's going to be first in the SEO ranking. So all of those things that we could address, we addressed. So the websites, you know, physically, if you will, are now comparable. The challenge we're having is, you know, if Life Storage average seven or eight, the seven-day spot on the SEO, and we've improved it to five to six, that's not enough to get the results we want.

Joseph Daniel Margolis: No. So we address the differences in the website. And I'll give you one example. When we closed the transaction, the LSI website was twice as slow, and the Extra Space website was twice as fast as the LSI website. And that's an important signal to Google. That's one of the factors Google looks at when they decide, you know, who's going to be first in the SEO rankings. So all of those things that we could address, we addressed them. So the websites, you know, physically, if you will, are now compromised.

Speaker Change #154: No. So we address the differences in web site and I'll give you. One example, when we closed the transaction yet.

LSI website was.

Speaker Change #154: Was twice as slow or the extra space website was twice as fast as the LSI website and Thats an important signal to Google That's one of the factors Google looks in when they decide.

Speaker Change #154: Who is going to be first in the Seo ranking.

Speaker Change #154: So all of those things that we could address we adjust so the websites.

Speaker Change #154: Physically if you will are now comparable.

Joseph Daniel Margolis: The challenge we're having is, you know, if life storage averages seven or eight, the seven to eight spot on the SEO, and we've improved it to five to six. That's not enough to get the results we want. We need to continue to see improvement where we could get that up, you know, into the top three locations to get the benefit we're hoping for. And there are dozens of factors that Google takes into account in determining when someone searches storage near me, who they're going to put first in the organic rankings and who they're going to put second and third. And those are the things that we need to work on and continue to see.

The challenge we're having is.

Speaker Change #155: If life storage averaged seven or eight.

Speaker Change #155: 700, or a spot on the SCO and we've improved it to five to six that's not enough to get the results. We want we need to continue to see improvement, where we could get that up.

Scott: We need to continue to see improvement where we could get that up, you know, into the top three locations to get the benefit we're hoping for. And there are dozens of factors that Google takes into account in determining when someone searches, you know, storage near me, who they're going to put first in the organic rankings, and who they're going to put second and third. And those are the things that we need to work on and continue to see improvement. Okay.

Speaker Change #155: Into the top three locations to get the benefit were hoping for.

Speaker Change #155: And there are dozens of factors that google's takes into account.

Speaker Change #155: In determining when someone searches storage near me, who theyre going to put first in the organic rankings and who they're going to put second and third.

Speaker Change #155: And those are the things that we need to work on and continue to see improvement.

Scott: Okay. And just lastly, normally, I think you'd move the LSI portfolio or you'd move acquisitions into the same store next year in 2025 from when you closed LSI. I think there was some uncertainty about what you would do there. Any sense whether you're going to move them into the same store in 2025 or continue to break out the two segments?

Speaker Change #155: Okay.

Scott: And just lastly, you know, normally, I think you'd move the LSI portfolio or you'd move acquisitions into the same store next year in 2025, from when you close to LSI. I think there was some uncertainty on what you would do there.

Speaker Change #155: And just lastly.

Speaker Change #157: Normally I think you'd move VLSI portfolio, you'd move acquisitions and at the same store.

Speaker Change #156: Next year in 2025 from when you closed Atlas.

Speaker Change #158: There was some uncertainty on what you would do there any any sense, whether youre going to move them into the same store in 'twenty five or continue to break out the two segments.

Scott: Any sense whether you're going to move them into the same store in 25, or continue to break out the two segments. Our plan would be to move them in the same store, but we would still provide the previous years, so you should be able to see it kind of before and after. Okay, all right, thank you.

Scott: Our plan would be to move them to the same store, but we would still provide the previous years, so you should be able to see it kind of before and after.

Speaker Change #160: Our plan would be to move them into the same store, but we would still provide the previous year. So you should be able to see it kind of before and after.

Todd Michael Thomas: Okay. All right. Thank you.

Speaker Change #159: Okay alright, thank you.

Unknown Executive: Thank you.

Doug: Thanks, Doug.

Speaker Change #159: Thank you.

Omotayo Okusanya: Our next question comes from the line of Omotayo Okusanya with Maryland Reed Research.

Omotayo Tejumade Okusanya: Our next question comes from the line of Omotayo Okusanya with Maryland Ridge Research.

Omotayo Tejumade Okusanya: Our next question comes from the line of amortize Okusanya with Maryland REIT research.

Scott: Hiya, good afternoon. I just wanted to get for those keep focusing on LSI because, with the big increase in occupancy, it does sound like the lease up you were trying to get in that portfolio has happened. And so when we just kind of think about going forward with ECRI, I think you can average inflation rent in this portfolio, like challenging and change, reflecting kind of like all the lower moving rates.

Omotayo Tejumade Okusanya: Hi Esther. Good afternoon.

Omotayo Tejumade Okusanya: Hi, good afternoon.

Speaker Change #162: Wondering if you can keep it.

Speaker Change #164: Focusing on LSI again, with the big increase in occupancy it does sound like the lease up you were trying to get in that portfolio that's happened.

Omotayo Tejumade Okusanya: I just wanted to, again, keep focusing on LSI. Again, with the big increase in occupancy, it does sound like the lease-up you were trying to get in that portfolio has happened. And so I'm just going to think about going forward with ECRI. I think you get average in-place rents in this portfolio, like 17 and change, reflecting kind of all the lower moving rates. But for your EXR portfolio, it's in the low 20s. I mean, is that the pickup we should be looking for over time and, kind of, what kind of time period to get that average in-place rent from 17 and change to 22, 23 and change?

And so I'm just going to think about going forward with ECA right. I think you can average in place. So ranked in this portfolio <unk> reflect on kind of I call them lower move in rates, but so youre EXL portfolio, it's in the low twenties.

Scott: But for your EXO portfolio, is in the low 20. I mean, is that the pick up we should be looking for over time and kind of what kind of time period get that average in place from 17 and change to 22, 23 and change. Yes, so when you look at the average rent per square foot between the two portfolios, they are structurally different somewhat. You know, that some of them are there in different demographics, different markets. And when the markets where we compete is the markets we refer to, closing the gap. So we would expect them to behave like the extra space properties in the markets they compete, and we would expect them to continue to perform better on the extra space platform.

Speaker Change #165: Is that the pick up we should be looking for over time and kind of what kind of time period to get that average in place around some balancing and changes to $2000 from 22 unchanged.

Scott: Yes, so when you look at the average rent per square foot between the two portfolios, they are structurally different somewhat. You know, some of them are in different demographics, different markets. When the markets where we compete are the markets we refer to as closing the gap, so we would expect them to behave like extra space property in the markets they compete in. And we would expect them to continue to perform better on the extra space platform but not necessarily be on the exact same rent per square foot.

Speaker Change #166: Yes, so when you look at the average rent per square foot between the two portfolios they are structurally different somewhat.

Speaker Change #167: Some of them are there different demographics different markets.

Speaker Change #166: <unk>.

Speaker Change #168: When the markets, where we compete is the markets we refer to closing the gap. So we would expect them to behave like the extra space properties in the markets. They compete and we would expect them to continue to perform better on the extra space platform.

Scott: But not necessarily be on the exact same rent per square foot.

Speaker Change #168: But not necessarily be on the at the exact same rent per square foot.

Scott: Okay, that's helpful. And then on the credit lending side, again, nice pick-up in activity. Again, just kind of curious how much more you can potentially expect that to grow on a going forward basis. And how does one kind of think about the ideal balance between the credit lending platform versus kind of classic acquisitions? So we've grown that pretty significantly.

Scott: That's helpful.

Speaker Change #168: Okay. That's helpful.

Joe Margo: And then on the credit lending side, again, nice pick up activity again. Just kind of curious how much more you can potentially expect back to grow on a going forward basis.

Speaker Change #169: And then on the credit lending side again nice pick up in activity.

Speaker Change #170: Then just kind of curious how much more you can potentially do you expect that to grow on.

Speaker Change #170: Going forward basis.

Joe Margo: And how does one kind of think about the ideal balance between the credit lending platform versus kind of classic acquisitions. So we've grown that pretty significantly this year for a few reasons. One is we had very few maturities this year, and some of those maturities chose to extend. We, you know, I discussed earlier kind of the effect of a muted acquisition market on greater demand for that product. And then we made a capital allocation decision, right. We had, you know, a quiet year on the acquisition front. So we're holding incrementally more of the loans on our balance sheet because that's a good use of capital when we don't have as many acquisition opportunities.

And how does one kind of think about the ideal balance between the credit lending platform breakfast.

Speaker Change #170: Talk with acquisitions.

Scott: So we've grown that pretty significantly this year for a few reasons. One is we had very few maturities this year, and some of those maturities chose to extend.

Speaker Change #171: And so we've grown that pretty significantly this year for a few reasons. One is we had very few maturities this year and some of those maturities chose to extend.

Speaker Change #171: We.

Joseph Daniel Margolis: You know, I discussed earlier the effect of a muted acquisition market on greater demand for that product. And then we made a capital allocation decision, right? We had, you know, a quiet year on the acquisition front. So we're holding incrementally more of the loans on our balance sheet because that's a good use of capital when we don't have as many acquisitions. I would expect, over time, things will change, and maybe when the acquisition market gets more active, we'll sell more loans and hold less on our balance sheet. We certainly have more maturities next year than we do this year, and we'll have to address that.

Speaker Change #171: Okay.

Speaker Change #171: <unk>.

Speaker Change #171: Cost earlier kind of the effect of a muted acquisition market on greater demand for that product.

Speaker Change #171: And then we made a capital allocation decision right, we had a quiet year on the acquisition front. So we're holding.

Speaker Change #171: Incrementally more.

Speaker Change #171: The loans on our balance sheet, because thats a good use of capital when we don't have as many acquisition opportunities.

Joe Margo: I would expect over time, you know, things will change and maybe when the acquisition market gets more active, will, you know, sell more loans and hold less on our balance sheet. We certainly have more maturities next year than we do this year, and we'll have to address that. But I think this is a viable business that serves a number of benefits to the company and increases our management business. It gives us an acquisition pipeline. It increases the number of relationships we have across the business and provides great economics. So I think it's a business we can continue to grow.

Speaker Change #171: I would expect over time.

Speaker Change #171: Things will change and maybe when the acquisition market gets more active will.

Speaker Change #171: Sell more loans and hold less on our balance sheet. We certainly have more maturities next year than we do this year and we'll have to address that.

Joseph Daniel Margolis: But I think this is a viable business that serves a number of benefits to the company. It increases our management business. It gives us an acquisition pipeline. It increases the number of relationships we have across the business and provides great economics. So I think it's a business we can continue to grow.

Speaker Change #171: But I think this is a viable business that.

Speaker Change #171: Serves a number of benefits to the company and increases our management business. It gives us an acquisition pipeline.

Speaker Change #171: Increases the number of relationships, we have across the business and provides great economics. So I think it's a business we can continue to grow.

Speaker Change #172: Thank you.

Speaker Change #172: Sure.

Speaker Change #173: Thank you.

Nick Yulico: Our next question comes from the line of Nick Yulico with Scotia Bank. Please proceed. Thanks. I know you guys gave some of the move-in rate commentary for July. I just wanted to see if it was possible to get sort of like the dollar rate. You know, you give it in the price up for the quarter ended to 133. Is it possible to get what that number is for July? It's 129 moving and a move out of 180. That's extra space. Yeah, that's the extra space book. Okay, perfect.

Nicholas Philip Yulico: Our next question comes from the line of Nick Yulico with Scotiabank. Please proceed.

Nicholas Philip Yulico: Our next question comes from the line of Nick <unk> with Scotiabank. Please proceed.

Nicholas Philip Yulico: Thanks. Yeah, I know you guys gave some of the move-in rate commentary for July. I just wanted to see if it was possible to get sort of like the dollar rate. You know, you give it in the sub for the quarter-ended, the 133. Is it possible to get what that number is for July?

Joseph Daniel Margolis: Thanks, Yes, I know you guys gave some of the move in rate commentary for July I, just wanted to see if it was possible to get.

Speaker Change #175: Sort of like the dollar rate.

Speaker Change #175: Give it in this up for the quarter ended the 133 is it possible to get what that number is for July.

Scott: 129 move in and a move out of 180.

Speaker Change #176: It's $1 29 move in and move out of $1 80, that's extra space, Yes, that's the extra space book.

Scott: That's Extra Space. Yeah, that's the Extra Space book.

Nicholas Philip Yulico: Okay, perfect. Thank you.

Speaker Change #176: Okay perfect. Thank you.

Nick Yulico: Thank you.

Scott: And then I guess the other question is just on the balance sheet. You know, Scott, like what is the line of credit balance going up, or which is related to all the bridge loan activity? What, well, how should we think about just, you know, that, you know, how you're thinking about the debt component, you know, going forward to the balance that has gotten higher.

Speaker Change #177: And then I guess the other question is just.

Speaker Change #177: On the balance sheet, Scott like what.

Speaker Change #178: The line of credit balance going up which is related to all the British loan activity, what how should we think about just.

Scott: And then I guess the other question is just on the balance sheet, you know, Scott, like what is the line of credit balance going up, which I assume is related to all the bridge loan activity? Well, how should we think about it? How are you thinking about the debt component going forward because the balance has gotten higher? Thanks. So we have a few.

Speaker Change #178: Okay.

Speaker Change #179: Are you thinking about the debt component.

Speaker Change #179: Going forward because of that balance.

Scott: Thanks. So we have a few bridge loan sales lined up here in the next month, so they'll bring it down some. And then we will look to turn that out as that volume gets larger or as we have opportunities. So I think that you can see is in the bond market as soon as this quarter or as late as later in the year early next year.

Speaker Change #180: Got it higher thanks.

Scott: So we have a few bridge loan sales lined up here in the next month, so they'll bring that down some. And then we will look to term that out as that volume gets larger or as we have opportunities. So I think what you can see is in the bond market as soon as this quarter or later in the year or early next year.

Speaker Change #181: So we have a few bridge loan sales lined up here in the next month or bring it down some and then we will look to term that out is that volume gets larger or as we have opportunities. So I think that you can see is in the bond market as soon as this quarter or is later later in the year early next year.

Nick Yulico: All right, thanks.

Speaker Change #182: Alright. Thanks.

Unknown Executive: Thank you.

Operator: And as I see no further questions in the queue, I will turn the call back to Joe Margolis for his closing remarks.

Speaker Change #183: Thank you.

Joe Margo: And as I see no further questions in the queue, I will turn their call back to Joe Margulis for his closing remarks. Great. Thank you very much. And thanks everyone for your time and interest in Extra Space Storage.

Speaker Change #183: I see no further questions in the queue I will turn the call back to Joe Margolis for his closing remarks.

Joseph Daniel Margolis: Great, thank you very much. And thank you everyone for your time and interest in extra space storage. We had a lot of questions about life storage and how it's not performing as expected. I truly believe that's a timing factor.

Joseph Daniel Margolis: Great. Thank you very much and thanks, everyone for your time and interest in extra space storage, but a lot of questions about life storage and how it has not performed.

Joe Margo: But a lot of questions about life storage and how it's not performed as expected. I truly believe that's a timing factor. We will get to those rates and that improvement that we want. And when I look across all other areas of the business, whether it's our expense control, our GNA, our ancillary businesses like management, bridge lending. The company is really performing at a very high level, and I'm confident we can continue to do so in the future.

Joseph Daniel Margolis: As expected <unk>.

Speaker Change #184: Truly believed that to timing factor, we will get to.

Speaker Change #185: To those rates and that improvement that we want and when I look across all other areas of the business, whether it's our expense control our G&A, our ancillary businesses like management bridge lending.

Operator: We will get to that, to those rates and that improvement that we want. And when I look across all other areas of the business, whether it's our expense control, our GNA, our ancillary businesses like management, and bridge lending, the company is really performing at a very high level. And I'm confident we can continue to do so in the future. Thank you very much.

Speaker Change #185: The company is really performing at a very high level and I'm confident we can continue to do so in the future. Thank you very much.

Unknown Executive: Thank you very much.

Unknown Executive: And thank you all for participating in today's conference. You may now disconnect. Thank you.

Operator: And thank you all for participating in today's conference. You may now disconnect.

Speaker Change #186: And thank you for participating in today's conference you may now disconnect.

Speaker Change #186: Okay.

Speaker Change #186: [music].

Speaker Change #186: Okay.

Speaker Change #186: Okay.