Q2 2024 National Storage Affiliates Trust Earnings Call

August 6, 2024

Operator: Greetings and welcome to the National Storage Affiliates second quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Greetings and welcome to the National storage affiliates second quarter 'twenty 'twenty four conference call. At this time, all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

George Hoglund: Once you require operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host George Hoglund, Vice President of Investor Relations for National storage affiliates. Thank you. Mr. Hoglund you may begin.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund. You may begin.

George Hoglund: We'd like to thank you for joining us today for the second quarter 2024 earnings conference call of National Storage Affiliates Trust. On the line with me today are NSA's president and CEO, Dave Cramer, and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions.

Speaker Change: We'd like to thank you for joining us today for the second quarter 2024 earnings conference call of National storage affiliates Trust on the line with me here today are NSA as president and CEO, Dave Cramer and CFO brands into Gushy. Following prepared remarks management will accept questions from registered financial Anil.

George Hoglund: We'd like to thank you for joining us today for the second quarter 2024 earnings conference call of National Storage Affiliates Trust. On the line with me today are NSA's President and CEO, Dave Cramer, and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions.

Speaker Change: Lists please limit your questions to one question and one follow up and then return to the queue. If you have more questions.

George Hoglund: In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, August 6, 2024. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call.

Speaker Change: In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website and national storage affiliates Dot com.

Speaker Change: On today's call management's prepared remarks and answers to your questions may contain forward looking statements that are subject to risks and uncertainties and represent managements estimates as of today August six 2024.

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.

George Hoglund: The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, Core FFO, and Net Operating Income contained in the Supplemental Information Package available in the Investor Relations section on our website and in our SEC filings. I will now turn the call over to Dave. Thanks, George.

Speaker Change: The company cautions that actual results may differ materially from those projected in any forward looking statements.

Speaker Change: Additional details concerning our forward looking statements. Please refer to our public filings with the SEC.

Dave: We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as <unk> core <unk> and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings I will now turn the call over to Dave.

Dave Cramer: Thanks, George, and thanks, everyone, for joining our call today. Our results for the quarter reflect continued pressure from a very competitive operating environment. Similar to other operators, we're seeing reduced customer demand for storage due to a muted housing market and the absorption of new supply, which is being felt most prominently in our Sunbelt market. Rental activity slowed in the back half of June and into July, with same store occupancy ending in June at 87% and July at 86.6%.

Dave: Thanks, George and thanks to everyone for joining our call today.

Dave: Our results for the quarter reflect continued pressure from a very competitive operating environment.

Dave: Other operators, we're seeing a reduced customer demand for storage due to immediate housing market and the absorption of new supply, which is being felt most probably in our sunbelt markets.

Dave: Activity slowed in the back half of June and into July, but the same store occupancy ending in June at 87% in July at 86, 6%.

Dave Cramer: Pre-rates grew sequentially each month during the second quarter but declined 1.7% in July and are down 14% from last year. Historically, occupancy rates peak in July, so the spring leasing season did not play out as a typical season.

Dave: Street rates grew sequentially each month during the second quarter, but declined one 7% in July and are down 14% from last year.

David Cramer: Historically, occupancy and rates peaked in July, so the spring leasing season did not play out as a typical season. Given these headwinds, we have adjusted our full-year expectations accordingly, which Brandon will detail further.

Speaker Change: Berkeley occupancy rate peaked in July so the spring leasing season did not play out as a typical season.

Dave Cramer: We continue to be pleased with our existing customer behaviors. Payment activity, length of stay, and ECRIs all remain within our expectations. We believe that the current operating environment will remain throughout the back half of the year.

Speaker Change: Continue to be pleased with our existing customer behaviors.

Speaker Change: Activity length of stay and ECR is all remained within our expectations.

Speaker Change: We believe that the current operating environment will remain throughout the back half of the year.

Dave Cramer: Given these headwinds, we have adjusted our full-year expectations accordingly, which Brandon will detail further. You're starting to see more acquisition opportunities in our core market, and we started to deploy capital from JV 2023, closing on the purchase of a five-property portfolio in the Rio Grande Valley for $72 million. These are high-quality properties in lease-up with an average occupancy in the mid-70s, with 100% equity, and we plan to place long-term financing on the assets following stabilization.

Speaker Change: These headwinds we've adjusted our full year expectations, Accordingly, which Brandon will detail further.

Brandon: We are starting to see more acquisition opportunities in our core markets, we started to deploy capital from JV 2023.

Brandon: Closing on the purchase of a five property portfolio in the Rio Grande Valley for $72 million.

Brandon: High quality properties in lease up with an average occupancy in the mid seventies.

Brandon: Portfolio was purchased with 100% equity and we plan to place long term financing on the assets following stabilization.

Dave Cramer: We also have a 13-property portfolio totaling $75 million under contract and another attractive core market to be purchased by the same JV. These two deals improve our overall portfolio quality, adapt to our existing markets, and increase our operational efficiency. We've made significant progress on our strategic initiatives over the past few quarters, culminating with the internalization of our PRO structure, which exists and does well when the operating environment improves. Transition of the PRO managed storage to the NSA's platform is on schedule, and we are encouraged by the opportunities to further enhance the performance of these properties. Here are some highlights for progress to date, currently out of the 333 ProMany stores. Seventy percent of the files are on the NSA web and operating platforms, with the remaining to be completed by the end of the year.

Brandon: They also have a 13 property portfolio totaling $75 million under contract and another attractive core market can be purchased by the same JV.

Brandon: These two deals improve our overall portfolio quality and depth of our existing markets and increase our operational efficiencies.

Brandon: We've made significant progress on our strategic initiatives over the past few quarters, culminating with the internalization of our pro structure.

Which positions us well when the operating environment improves.

Brandon: Transition of the pro managed stores to the <unk> platform is on schedule.

Brandon: And we are encouraged by the opportunities to further enhance the performance of these properties.

Brandon: I'll provide some highlights of our progress to date.

Brandon: Currently out of the 333 pro many stores.

Brandon: 70% are on the Yenisei web and operating platforms with the remaining to be completed by the end of the year.

Brandon Togashi: Of the 172 stores to be rebranded, 40% have been completed. Once the transition is complete, we expect that approximately 94% of our portfolio will be managed by our corporate team. While the remaining 6% of our properties will be managed by former pros due to geographic and future relationship considerations. As previously discussed, we expect accretion related to the pro-internalization in three key areas. $0.03 to $0.04 of accretion, primarily from G&A savings, beginning in 2025.

Brandon: The 172 stores to be rebranded 40% have been completed.

Brandon: The transition is complete we expect that approximately 94% of our portfolio will be managed by our corporate team.

Brandon: The remaining 6% of our properties will be managed by former pros due to geographic and future relationship considerations.

Brandon Togashi: Eliminating the cash flow split from the pro structure effectively adds $0.50 to every dollar of NOI growth, and we expect $0.02 to $0.04 of accretion and changes in revenue management and operations to be sufficient. As an example, currently, there's a 300 basis point difference in occupancy between pro-managed stores and corporate-managed stores, which we expect to close going forward. Additionally, there are differences in ECRI and marketing strategies, which we're in the process of commonizing.

Brandon: As previously discussed we expect accretion related to the pro internalization in three key areas three to four cents of accretion primarily from G&A savings began in 2025.

Brandon: Eliminating the cash flow split from the pro structure effectively adds 50 on every dollar of NOI growth.

Brandon: And we expect two to four cents of accretion from changes in revenue management and operations efficiencies.

Brandon: As an example, currently there is a 300 basis point difference in occupancy between pro many stores and the corporate many stores, which we expect to close going forward.

Speaker Change: Finally, there are differences in ECR and marketing strategies, which we're in the process of communism.

Brandon Togashi: Although we face near-term headwinds, we remain optimistic about the longer-term outlook given all the steps we've taken to improve our platform, optimize our portfolio, and generate access to growth capital via joint ventures. Now, I'll turn the call over to Brandon to discuss our financial results. Thank you, Dave.

Speaker Change: Although we face near term headwinds, we remain optimistic on the longer term outlook, but all of the steps we've taken to improve our platform optimize our portfolio and generate access to growth capital via joint ventures.

Now I'll turn the call over to Brian to discuss our financial results.

Brian: Thank you Dave.

Brandon Togashi: Yesterday afternoon, we reported core FFO per share of 62 cents for the second quarter of 2024, representing a decrease of approximately 9% over the prior year period, driven primarily by the decline in same-store NOI. Additionally, we had a few casualty events resulting in approximately $1 million of losses, or almost a penny per share, which impacted second quarter results.

Brian: Yesterday afternoon, we reported core <unk> per share of <unk> 62 for the second quarter of 2024.

Brian: Representing a decrease of approximately 9% over the prior year period, driven primarily by the decline in same store NOI.

Speaker Change: Additionally, we had a few casualty events, resulting in approximately $1 million of losses were almost a penny per share which impacted second quarter results.

Brandon Togashi: For the quarter, revenue growth declined 2.8% on a same-store basis, driven by growth in rent revenue per square foot of 60 basis points, offset by a 320 basis point year-over-year decline in average occupancy. The expense growth was 4.8% in the second quarter, with the main drivers of growth being R&M, marketing, and insurance, partially offset by a decline in property taxes due to successful appeals. Marketing expenses remain higher due to increased competition for customers, while insurance expense growth will moderate going forward to the single digits. Now, speaking to the balance sheet. Our current revolver balance is roughly $400 million, giving us $550 million of availability.

Speaker Change: For the quarter revenue growth declined two 8% on a same store basis, driven by growth in rental revenue per square foot 60 basis points.

Speaker Change: Offset by a 320 basis point year over year decline in average occupancy.

Speaker Change: Expense growth was four 8% in the second quarter with the main drivers of growth being R&M marketing and insurance, partially offset by a decline in property taxes due to successful appeals.

Speaker Change: Marketing expenses remain higher due to increased competition for customers all insurance expense growth will moderate going forward to the single digits.

Speaker Change: Now speaking to the balance sheet.

Speaker Change: Our current revolver balance is roughly $400 million.

Speaker Change: Giving us $550 million of availability.

Brandon Togashi: Our plan coming into 2024 was to be patient until the back half of the year before terming out debt to address maturities and the revolver balance. With interest rates starting to move in our favor, over the next few quarters, we will opportunistically seek to push out maturities and create a little more capacity on the line of credit. We are comfortable with our leverage, which was six and a half times net debt to EBITDA at quarter end, and we expect it to remain relatively flat for the remainder of the year, with capital deployment biased to our joint ventures, as Dave touched on earlier. During the quarter, we fulfilled our share repurchase program, buying 1.9 million shares for $72 million.

Speaker Change: Our plan coming into 2024 was to be patient until the back half of the year before terming out debt to address maturities and the revolver balance.

With interest rates starting to move in our favor over the next few quarters, we will opportunistically seek to push out maturities.

Speaker Change: A little more capacity on our line of credit.

Speaker Change: We are comfortable with our leverage which was six five times net debt to EBITDA at quarter end and we expect it to remain relatively flat for the remainder of the year with capital deployment bias towards joint ventures, as Dave touched on earlier.

Speaker Change: During the quarter, we fulfilled our share repurchase program buying $1 9 million shares for $72 million.

Brandon Togashi: Additionally, on July 1, all of the subordinated performance units associated with our pro structure were converted into 18 million OOP units, and we bought out the management contracts and tenant insurance economics related to the pro-managed stores. This included the payment of $33 million of cash and 1.5 million OP units. Elimination of the SP units simplifies our capital structure and financials for all stakeholders.

Speaker Change: <unk> on July one all of the subordinated performance units associated with our pro structure were converted into $18 million of op units.

Speaker Change: And we bought out the management contracts in tenant insurance economics related to the pro managed stores.

Speaker Change: This included the payment of $33 million of cash and one 5 million op units.

Speaker Change: The elimination of the SP units simplifies our capital structure and financials for all stakeholders. This results in higher gross F. O dollars since there will no longer be any distributions on the SP units.

Brandon Togashi: This results in higher gross FFO dollars since there will no longer be any distributions on the SP units and a denominator share count of $135 million, or an estimated 127 million weighted average shares for full year 2024. Now, moving on to the 2024 Outlook. Let me give some color on the key drivers of change in our guidance. When we introduced our same-store growth guidance in February, we talked about the following assumptions. On the high end, a return to typical seasonality due to a normalization of the housing market. On the low end, continued downward pressure on rates and occupancy due to muted customer demand. And at the midpoint, a modest level of seasonality with occupancy and street rates remaining relatively flat throughout the year.

Speaker Change: And a denominator share count of $135 million.

Speaker Change: We are an estimated 127 million weighted average shares for full year 2024.

Speaker Change: Now moving onto 2024 outlook let.

David Cramer: Let me give some color on the key drivers of change in our guidance.

Speaker Change: Let me give some color on the key drivers of change in our guidance.

Speaker Change: When we introduced same store growth guidance in February we talked about the following assumptions.

Speaker Change: On the high end are returned to typical seasonality due to a normalization of the housing market.

Speaker Change: On the low end continued downward pressure on rate and occupancy due to muted customer demand.

And at the midpoint, a modest level of seasonality with occupancy in street rates remaining relatively flat throughout the year.

Brandon Togashi: As we progressed through June and July, it became clear to us that sufficient customer demand was not materializing, and competitive pressures were persisting, such that the upper half of our revenue and NOI ranges was not realistic. The difference in operating dynamics across our portfolio was also observable, with the Sunbelt markets more challenged than others. For example, the assumption I mentioned earlier that informed the midpoint of our guidance that occupancy and street rates are relatively flat throughout the year has largely played out in our non-summed-out market.

Speaker Change: As we progress through June and July it became clear to us the sufficient customer demand was not materializing and competitive pressures, we're persisting such that the upper half of our revenue and NOI ranges was not realistic.

Speaker Change: The difference in operating dynamics across our portfolio has also been observable with a sunbelt markets more challenged than others for example, the.

Speaker Change: The assumption I mentioned earlier that inform the midpoint of our guidance and occupancy in street rates are relatively flat throughout the year.

Speaker Change: As largely played out with our non sunbelt markets. The sequential occupancy gain in these markets has been about 180 basis points from January to the end of July.

Brandon Togashi: The sequential occupancy gain in these markets has been about 180 basis points from January to the end of July, and street rates are up about 2% in that time. But for our Sunbelt markets, occupancy is only up 50 basis points, and street rates are down 9%. This diversion in results has weighed heavier on our portfolio given a higher concentration of Sunbelt markets. Looking back over multiple years, these Sunbelt markets have still outperformed the rest of the portfolio, and over the long term, we expect them to outperform. In the near term, due to tougher multi-year comps, elevated competitive pressure, and softer demand due to housing, these markets will be more challenged.

Speaker Change: Street rates are up about 2% in that time.

Speaker Change: But for our Sunbelt markets occupancy is only up 50 basis points and street rates are down 9%.

Speaker Change: This diversion and results as weight heavier on our portfolio given a higher concentration of sunbelt markets.

Speaker Change: Looking back over multiple years.

Speaker Change: <unk> markets are still outperformed the rest of the portfolio and over the long term, we expect them to outperform.

Speaker Change: Near term due to tougher multiyear comps elevated competitive pressure and softer demand due to housing these markets will be more challenged.

Operator: These revisions to same-store growth are the primary driver of our guidance change in core FFO per share, which we now project to be $2.36 to $2.44 for 2024. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator? Thank you. We will now be

Speaker Change: These revisions the same store growth are the primary driver of our guidance change in core <unk> per share, which we now project to be $2 36 to $2 44 for 2024.

Speaker Change: Thanks again for joining our call today, let's now turn it back to the operator to take your questions operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Thank you we will now be conducting a question and answer session.

Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Thank you.

Sean <unk>: First question comes from the line of Sean <unk> with BMO capital markets. Please proceed with your question.

Dave Cramer: Hi, good morning. Just hoping you could talk a little bit about the pro-internalization you mentioned, the opportunity with an occupancy gap there relative to the corporate. Managed Stores and what do you think that would entail kind of going forward or what's assumed in the back half of guidance? Are you assuming you're going to have to drop rates? incrementally to stimulate more demand? Or how should we think about that evolving in a time frame to close that gap?

Sean <unk>: Hi, good.

Sean <unk>: Good morning, just hoping you could talk a little bit about the <unk>.

Speaker Change: Pro Internalization, you mentioned the opportunity with.

Speaker Change: And occupancy gap there relative to the corporate.

Speaker Change: Managed stores.

What do you think that would entail kind of going forward or what's assumed in the back half of guidance.

Speaker Change: Are you, assuming you're going to have to drop rates.

Speaker Change: Not only to stimulate more demand or how should we think about that evolving at the timeframe to close that gap.

Dave Cramer: Hey Juan, thanks for joining us and for the good question. You know, I think we're going to look at that in several ways. I think we'll look at, as we bring the stores onto our platforms, bring them onto the customer acquisitions platform around the website, how we deploy marketing dollars, use the AI tools around our Google Analytics to get the right paid search metrics built into those stores. Looking at price and discounts certainly will be a part of that equation as we try to drive to a revenue number we're seeking but really close the gap, closer to that corporate portfolio.

David Cramer: Hey, Juan, thanks for joining us and for a good question. You know, I think we're going to look at that in several ways. I think we'll look at as we bring the stores onto our platforms, bring them onto the customer acquisitions platform around the website, how we deploy marketing dollars, use the AI tools around our Google Analytics to get the right paid search metrics built into those stores. Looking at price and discounts certainly will be a part of that equation as we try to drive to a revenue number we're seeking but really close the gap closer to that corporate portfolio.

Everyone. Thanks for joining and good question.

Speaker Change: We're going to look at that in several ways I think we will look at as we bring the stores onto our platforms I bring them onto the customer acquisitions platform around the website, how we deploy marketing dollars use the AI tools around our Google analytics to get the right paid search metrics built into those stores.

Speaker Change: Looking at price and discount certainly will be a part of that equation as we tried to drive really to a revenue number we're seeking but really close the gap.

David Cramer: We've had good success in the first half of this year around the corporate portfolio with the new tools that we have and the new data analytics that we have, effectively driving occupancy holding rates very close to where we want to be and just had success. So we think the professional stores will benefit from coming onto our platforms, and we'll be able to, really, through the back half of the year and the first part of next year, be able to close that occupancy gap to a level that we're anticipating.

Dave Cramer: We've had good success in the first half of this year around the corporate portfolio with the new tools that we have and the new data analytics that we have, effectively driving occupancy, and holding rates, very close to where we want to be. We just had success. So we think the professional stores will benefit from coming onto our platforms, and we'll be able to, really, through the back half of the year and the first part of next year, be able to close that occupancy gap to a level that we're anticipating, market-specific, store-specific, of course, but we should see success around occupancy gains there.

Speaker Change: Closer to that corporate portfolio.

Speaker Change: We've had good success the first half of this year around the corporate portfolio with the new tools that we have and the new data analytics that we have.

Speaker Change: Secondly, driving occupancy holding rate very close to where we want to be and just had success. So we think the pro stores will benefit from coming onto our platform similar levels relates to the back half of the year and the first part of next year be able to close that occupancy gap to a level that were anticipating.

Speaker Change: Market specific store specific of course.

Speaker Change: But what we should see success around occupancy gains there.

Dave Cramer: Okay, and then switching gears, you talked about becoming more acquisitive, you talked about a 13-asset portfolio with the new Naveen Managed One. I was just hoping you could talk a little bit about cap rates and kind of what you're underwriting for that deal, if maybe you could get the dollar size as well, and just where asset values are today.

Speaker Change: Okay and then.

Speaker Change: Switching gears, you talked about becoming more acquisitive, you've talked about a 13 asset portfolio.

Speaker Change: They're doing they're being managed where I'm just hoping you could talk a little bit about cap rates.

Speaker Change: What you're underwriting for that deal is make sure you get the dollar size as well.

Speaker Change: Sure.

Speaker Change: Just where asset values are today.

Dave Cramer: Yeah, sure. You know, we were very, I thought, successful on a couple of fronts in the second quarter. We did buy three assets on balance sheet for about $25 million using 1031 proceeds. So we were able to effectively redeploy capital on assets that we had sold and put it to work in markets where we wanted to target and intensify our portfolio. Of the $25 million, two of those assets were stabilized assets in very key markets that just added to our portfolio.

Speaker Change: Yes sure.

Speaker Change: We were very successful in a couple of fronts in the second quarter, we did buy three assets on balance sheet for about $25 million.

Speaker Change: Using 10 31 proceeds so we were able to effectively redeploy capital on assets that we had sold and put it to work in markets, where we wanted to target and densify our portfolio.

Speaker Change: The $25 million to those ads were stabilized assets in very key markets. It just added to our portfolio. Those are purchased in the mid <unk> as far as a cap rate look we were able to also acquire one property in a very target market for us It had a little more lease up component. So that one was probably a little closer to the low four's expected here in the next 12 to 18 months to two.

Dave Cramer: Those were purchased in the mid-sixes, as far as a cap rate look. We were able to also acquire one property in a very target market for us that had a little more lease-up components. So that one was probably a little closer to the low fours, but we'll expect it here in the next 12, 18 to 24 months to be in the high sixes when it returns to stabilization.

Four months to be in the high six percents when it returns to stabilization so from a reuse.

Dave Cramer: So from a reuse of capital and use of 1031 proceeds, the team did a really good job finding assets to satisfy that. The JV that we mentioned in the Rio Grande Valley is still in lease-up, very high-quality assets. We have a large presence there. This has a lot of climate control products that benefit our portfolio that we have in the Rio Grande Valley. That portfolio itself, because it's a little more stable, is higher than the mid-fives.

Speaker Change: For use of capital and use of $2 31 proceeds the team did a really good job finding assets to satisfy that JV that we mentioned in the Rio Grande Valley.

Speaker Change: It's still in lease up very high quality assets, we have a large presence. There. This has a lot of climate control product that benefits our portfolio that we have in the Rio Grande Valley. It's.

Speaker Change: It's in the mid seventies right now.

Speaker Change: Well positioned very well located for us and the markets are really fills in a market nicely.

Speaker Change: Yield on that was in the mid fives, we expect that to be in the high sevens as we stabilize that portfolio throughout and then we also added another portfolio of <unk> assets in a very key market for us that due diligence is just.

Speaker Change: Completed on and we're looking forward to bringing that in it's again more stabilized product 13 properties in a very nice market for us it will improve our portfolio position and our operational efficiencies.

Dave Cramer: It's closer to the six as we go into it, and it does have some lease-up opportunities with it because they just added some new expansion to it, so that occupancy is in the low eighties right now. So I think the team did a really good job in the second quarter getting back to smart growth, deploying funds in markets where we want to intensify our portfolio and build operational presence and efficiency. Thanks, David.

Speaker Change: That portfolio is up again, just a little more stabilized is higher than the mid fives is closer to the six as we go into it it does have some lease up.

Speaker Change: Opportunities with it because they just added some new <unk>.

Speaker Change: Expansion into it so that occupancies in the low <unk> right now so.

Speaker Change: So I think the team's done a really good job second quarter getting back to <unk>.

Speaker Change: Smart growth.

Speaker Change: <unk> funds in markets, where we wanted to.

Speaker Change: And densify, our portfolio and build operational presence and efficiencies.

Operator: Thanks, Dan. I appreciate the thoughts. Absolutely. Thank you. Our next question comes from the line of...

Speaker Change: Thanks, Dave I appreciate the thoughts.

Speaker Change: Absolutely thanks for joining us.

Operator: Thank you. Our next question comes from the line of Samir Khanal with Evercore ISI. Please proceed with your question. Thank you. Hey, Brandon. I guess what are you baking in for eCRIs in your

Brandon Togashi: Samir, ECRI assumptions, you know, we plan for the balance of this year to continue to be as assertive as we have been recently. But all of the data that we have tells us that we're not really making that much of an impact on customer behavior. Customer response has been really strong and good regarding the pushes on those rate increases. And so right now, you know, we plan to continue to push those out.

Speaker Change: Thank you. Our next question comes from the line of Samir Khanal with Evercore ISI. Please proceed with your question.

Samir Khanal: Thank you.

Samir Khanal: Hey, Brandon.

Samir Khanal: I guess what are you baking in for <unk> in your guidance at this time and have those assumptions change is due.

Speaker Change: We see lower revenue growth guidance.

Speaker Change: Sameer.

Speaker Change: Cri assumptions, we plan for the balance of this year to continue to be as a sort of as we have been.

Speaker Change: Recently all of the data that we have.

Sameer: Tells us that we're not really making that much of an impact on customer behavior customer response has been really strong and good regarding.

Sameer: The pushes on those rate increases and so right now we plan to continue to push those out obviously your opportunity set based on what you were able to achieve with occupancy in the spring and summer is impacted there and so that's all factored into the into the math, but no changes based on.

Brandon Togashi: Obviously, you know, your opportunity set based on what you were able to achieve with occupancy in the spring and summer is impacted there. And so that's all factored into the NAF, but no changes based on customer behavior or what the data is telling us. And even, I guess, as a follow-up, what about in the markets? You know, when you look at, you talked about Sunbelt being a little bit more challenged.

Sameer: Customer behavior or what the data is telling us.

Speaker Change: And even I guess as a follow up what about in the markets. When you look at you talked about the sunbelt as being a little bit more challenge youre not seeing any.

Brandon Togashi: You're not seeing any changes there from an ECRI perspective either, right? No, nothing specific to ECRI in those markets or the demographics related to those markets that's telling us there's a big difference or delta in that behavior. If anything, Samir, one of the things that's factored in is as we transition the ECRI decisions from the pros who weren't previously kind of fully letting us run those programs, it is going to increase the opportunity set a little bit.

Speaker Change: Changes there from an ECR I perspective, either right.

Speaker Change: No nothing specific to <unk> in those markets or the demographics related to those markets thats, telling us there's a big difference.

Samir Khanal: Difference or delta in that behavior, if anything Samir was one of the things that factored in is as we transition the easier decisions from the pros, who werent previously kind of fully letting us run run those programs. It is going to increase the opportunity set a little bit some of them may not.

Brandon Togashi: Some of the pros may not have pushed that first rate increase to new move-ins as early as we have with our corporate managed stores. But the magnitude of that increase, we've been more competent in being higher on that first increase from a percentage rate change just because of what I mentioned earlier about the data supporting the reception to that. So that is going to be some additive pieces in the back half of the year, which probably benefits maybe the fourth quarter a little bit, but then really going forward into 2025, we should see some benefits there.

Samir Khanal: Push that first rate increase to new move ins as early as we have with our corporate managed stores. The magnitude of that increase we've been more confident in being higher on that first increase from a percentage rate change just because of what I mentioned earlier about the data supporting.

Samir Khanal: The reception for that so that is going to be.

Samir Khanal: Some additive pieces in the back half of the year, which probably benefits maybe the fourth quarter, a little bit, but then really going forward into 2025, we should see some benefit there.

Operator: Okay, thank you. Thanks, Samir. Thank you. Our next question...

Speaker Change: Okay. Thank you.

Samir Khanal: Thanks Samir.

Operator: Our next question comes from the line of Spenser Allaway with Green Street Advisor. Please proceed with your question. Thank you. Maybe just one more on the transaction market. Can you just comment on whether you're seeing more inbound calls today than usual?

Dave Cramer: Sure. Thanks for the question.

Speaker Change: Thank you. Our next question comes from the line of Spencer Alleyway with Green Street Advisors. Please proceed with your question.

Spencer Alleyway: Thank you.

Spencer Alleyway: One more on the transaction market can you comment on whether youre seeing more inbound calls today than normal I'm, just trying to get a sense of how the deals are getting donovan source connector or any more willing sellers in today's market.

Speaker Change: Maybe like six months ago.

David Cramer: Sure. Thanks for the question.

Dave Cramer: I do think we're seeing more deal flow and, I would say, more deal flow that makes sense to us. You know, I think we've seen traffic over the last 6, 12, 18 months, but I think there was definitely a wider spread between sellers' expectations versus where we thought we were going to buy. I would also tell you we're seeing deals come back multiple times. And so, you know, if we saw it 6 months or 12 months ago, we're seeing it again today.

Speaker Change: Sure. Thanks, so thanks for the question.

Speaker Change: I do think we are seeing more deal flow and more I would say more deal flow that makes sense to us I think we've seen traffic over the last.

David Cramer: I do think we're seeing more deal flow and, I would say, more deal flow that makes sense to us. You know, I think we've seen traffic over the last 6, 12, 18 months, but I think there was definitely a wider spread between sellers' expectations versus where we thought we were going to buy. I would also tell you we're seeing deals come back multiple times. And so, you know, if we saw it 6 months or 12 months ago, we're seeing it again today.

Speaker Change: Next 12 to 18 months, but I think there was definitely a wider spread on seller's expectations versus where we thought we were going to buy at.

Speaker Change: I would also tell you we're seeing deals come back multiple times and so we saw six months or 12 months ago, we're seeing it again today and so I think that again back to sellers' expectations are becoming a little more realistic on where they need to transact that and so we're happy with the amount of deal flow. We're seeing we are underwriting a lot of properties.

David Cramer: And so, I think that this, again, back to sellers' expectations are becoming a little more realistic on where they need to transact. And so, we're happy with the amount of deal flow we're seeing. We're underwriting a lot of properties. Again, I was pleased in the second quarter with our team's ability to really get some deals across the finish line and really buy at opportunities we thought were good for us.

Dave Cramer: And so, I think that, again, sellers' expectations are becoming a little more realistic on where they need to transact. And so, we're happy with the amount of deal flow we're seeing. We're underwriting a lot of properties. Again, I was pleased in the second quarter with our team's ability to really get some deals across the finish line and really buy at opportunities we thought were good for us. Okay, great.

Speaker Change: I was pleased in the second quarter of our team's ability to really get some deals across the finish line and really buy it opportunities. We thought were good for us.

Operator: And yeah, your comments on the bid-ask spread are useful. Can you just quantify, if you could, the bid-ask spread today versus maybe on the deals that are coming back around versus where they maybe were first being traded or first being sourced? You know, I would say one average is from a starting point from the mid-outspread; we're probably five to 10% off today, as we start the process with seller and buyer; it was probably five to 10% higher than that a year ago. So we certainly have seen that gap probably cut in half, I would tell you, as we're starting deals underwriting today.

Speaker Change: Okay great.

Speaker Change: Your comments on the bid ask spread or you. Paul can you just quantify if you could the bid ask spread today versus maybe on the deals that are coming back around Brussels, where they maybe were first being.

Paul: Trade at are first being sourced.

Paul: I would say on average from a starting point for the bid ask spread were probably 5% to 10% off today as we start the process with seller and buyer.

Paul: It was probably.

Paul: 5% to 10% higher than that a year ago. So we're certainly seeing that gap probably cut in half I would tell you is we're starting deals underwriting today.

Paul: Okay. Thank you.

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from the line of Todd Thomas with Key Bank Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Todd Thomas with Keybanc Capital markets. Please proceed with your question.

Brandon Togashi: Yeah, hi. Thanks. Good afternoon. First question, just, I was wondering if you could provide an update on the GNA synergy, specifically the three to four cents in total that you mentioned, and whether that has been achieved on an annualized basis now within the revised guidance or, you know, what the timeline to achieve that accretion might look like on an annualized basis going forward.

Todd Thomas: Yeah, Hi, Thanks. Good afternoon first question just I was wondering if you could provide an update on the G&A synergy specifically the three to four cents.

Speaker Change: In total that you mentioned and whether that has been achieved on an annualized basis now within the revised guidance or what the timeline to achieve that.

Speaker Change: Accretion might look like.

Speaker Change: On an annualized basis going forward.

Brandon Togashi: Yeah, Todd. Hey, this is Brandon. Good question. So the G&A savings, you remember the dollars that we expected to realize were in the seven and a half to nine million dollar range. That was a large contributor to the three to four pennies, which incorporated other things like the tenant insurance buyout but also the cost of the consideration to do those buyouts as well as the conversion of the pro SP equity to OP equity.

Speaker Change: Yes, Todd Hey, this is Brandon good question so.

Brandon: The G&A savings, you'll remember the dollars that we expected to realize it was in the seven $5 million to $9 million range and that was the large contributor to the three to four pennies, which incorporated other things like the tenant insurance buyout, but also the.

Brandon: The cost of the consideration to do those buyouts as well as the conversion of pro SP equity the <unk> equity. So that was all incorporated into that math of course.

Dave: The G&A savings, we're picking up a little bit of that but really as Dave touched on earlier in his comments. That's the full realization of that is really going to be in 2025 and beyond.

Brandon Togashi: So that was all incorporated into that math, of course. The G&A savings, you know, we're picking up a little bit of that, but really, as Dave touched on earlier in his comments, the full realization of that is really going to be in twenty twenty five and beyond. You know, all of the professional management agreements as they were in place terminated, but then we immediately turned around and entered into short-term transitionary management agreements with the pros that had a slightly reduced percent of revenue rate.

Speaker Change: All of the pro management agreements as they were in place terminated then we immediately turned around and entered into short term transition Aerie management agreements with the pro is that at a slightly reduced percentage of revenue right and so there is some incremental realization of that benefit. These next two quarters.

Brandon Togashi: And so there is some incremental realization of that benefit, you know, these next two quarters. But really, it's when that transition is complete, and our corporate team has taken over the operations, the accounting, all the back office administration, and oversight of those properties. That's really when we'll realize that benefit, and the accretion then comes at that time, which we project to be the first full quarter of seeing a real run rate is going to be first quarter twenty twenty five.

Speaker Change: But really it's when that transition is complete and our corporate team has taken over the operations. The accounting all the back office administration and oversight of those properties, that's really when we'll realize that benefit and the accretion that comes.

Speaker Change: At that time, which we project to be first full quarter of seeing the real run rate is going to be first quarter of 2025.

Brandon Togashi: Okay, great. That's helpful. And then the two to four cents of accretion from revenue management, is that predominantly the closing of the occupancy gap that you discussed and the ECRIs that I think you just spoke about in a prior question? Or would the changes in ECRI strategies, bringing them on board now to corporate, would that be additional upside?

Speaker Change: Okay, Great. That's helpful and then the two to four cents of accretion from.

Speaker Change: From revenue management is that predominantly the closing of the occupancy gap that you discussed in and the ECR is that I think you just saw.

Speaker Change: Spoke about.

Speaker Change: Due to a prior question or would the changes in ECR I strategies, bringing them onboard now.

Speaker Change: Corporate would that be additional upside.

Brandon Togashi: I think that's in the two-to-four sense as we look at operational efficiencies and really just around the structure of the ECRI program. Occupancy will be part of that factor, but occupancy I think it comes a little bit later as we close that gap, Todd, really in 2025. To Brandon's point, as we transition storage to our platforms, which is well underway, we will implement the ECRI strategy. So we'll start to see some benefits, you know, in the mid part of the back half of the year, obviously the full benefit coming into 2025, but that two to four is really around, you know, some payroll savings as we bring people on as far as hours and structure and because we have, you know, an overlay in markets as we, you know, look at the ECRI program as well.

Speaker Change: So I think thats in the 2% to four <unk> as we look at our operational efficiencies and really just around the structure of the ECR program.

Brad: Occupancy will be part of that factor, but occupancy I think it comes a little bit later as we close that gap really into 2025 to Brad's point as we transition the stores to our platforms, which is well underway. We will implement the ECR strategy. So we will start to see some benefit mid part of the back half of the year, obviously, the full benefit coming into 2025, but that two to four.

It is really around.

Brad: Missing payroll savings as we bring people on as far as ours and structure and because we have overlay in markets.

Brad: As we look at the ECR program as well.

Dave Cramer: Okay, got it. So the ECRI program will have a faster impact on the occupancy gap closing, but it might take a little bit longer, just based on market conditions. Okay, and then the stores that will remain with the pros for management purposes. Can you just provide a little bit more detail there, you know, whether there's an expectation to eventually transition management of those stores in the future? And then are they going to adopt a more centralized ECRI strategy and, I guess, revenue management strategy? Or will they continue to operate, you know, sort of separately from corporate?

Okay got it so the ECR I program will have a faster impact earlier on the occupancy gap closing might take a little bit longer just based on market conditions.

Speaker Change: Okay, and then the stores that will remain with with the pros for management purposes can you just provide a little bit more detail there.

Speaker Change: Whether there is an expectation to eventually transition management of those stores in the future and then are they going to adopt a more centralized cri strategy and I guess revenue management strategy or will they continue to operate sort of separate from from corporate.

Dave Cramer: Yeah, really good question. And so we have a couple of pros that are with us for the long term. And they are very good performers; their stores will be on the platforms. So all of the platform efficiencies, all of the platform, you know, structure that we have and the implementation, they will be on.

Speaker Change: Yes, really good question and so we have a couple of trials that are with us longer term.

Speaker Change: And they are there.

Good performers there stores will be on the platform. So all of the the platform efficiencies all the platform.

Speaker Change: Structure that we have in the implementation they will be on they will continue to operate the stores from a local piece of it from people management. They will do the accounting they certainly have great insights on markets. They want to continue to grow so I think theres opportunities with these couple of pros to look at future ventures with us where they continue to acquire properties.

Dave Cramer: They will continue to operate the stores from a local piece of it, from people management, they'll do the accounting, they certainly have great insights into markets, and they want to continue to grow. So I think there are opportunities for these couple of pros to look at future ventures with us where they continue to acquire properties. You know, it'll be different than the pro structure to be, you know, so maybe some kind of venture that we can spin up where we can have these two pros continue to build out in the markets they're in.

Speaker Change: It'll be different in the pro structure to be so maybe some kind of venture that we spin up where we can have these two pros continue to build out in markets Theyre in geography played in this as well well performing froze and well positioned in geography, where we didn't have a lot of overlap and so for our standpoint operational efficiencies.

Dave Cramer: Geography played in this as well; well-performing pros were well positioned in geography where we didn't have a lot of overlap. And so from our standpoint, operational efficiencies, you know, would be a little more challenging there because we'd enter markets where we didn't have the overlap. And so we think it's a good benefit. We think they provide a lot of value to us, and we're looking forward to the future with them.

Speaker Change: Would it be a little more challenging there because we'd enter markets, where we didn't have the overlap and so we think it's a good benefit we think they provide a lot of value to us and we're looking forward to the future with them.

Operator: Okay. All right. Thank you.

Speaker Change: Okay alright, thank you.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Kim Bin Kim with Truist Securities. Please proceed with your question.

Speaker Change: Our next question comes from the line of Ken Kim with <unk> Securities. Please proceed with your question.

Operator: Thank you. Good morning.

Ken Kim: Good morning.

Dave Cramer: Just going back to the Revenue Synergy commentary on the pro-internalization, you mentioned the 300 base points gap in occupancy that you might be able to close. I was curious, is that just comparing one portfolio versus the NSA portfolio or is that somehow market-weighted? Meaning, you know, certain markets obviously have a different occupancy profile.

Speaker Change: Just going back to the revenue synergy commentary on a pro internalization.

Ken Kim: You mentioned 300 basis points gap in occupancy.

Ken Kim: That you might be able to close I was curious is that just comparing one portfolio versus the NSA portfolio or is that somehow market weighted.

Kim Bin Kim: Meaning, you know, some certain markets obviously have just a different occupancy profile.

Speaker Change: Meaning some market certain markets, obviously have different occupancy profile.

Dave Cramer: It's a really good question, Keegan. I would tell you that the pure spread is portfolio to portfolio, but in these markets that we're studying, there is a lot of overlap. So we have a high level of confidence within a lot of these markets that we'll be able to adjust that occupancy level smartly. I mean, we're still trying to solve the revenue problem, but through, you know, better marketing practices and better, you know, revenue management practices, we'll be able to close that gap, similar to what the corporate portfolio has done since we instituted the new tools and had success around the new tools. Thank you.

Speaker Change: It's a really good question Keith I would tell you the pure spread as portfolio portfolio, but in the in.

Speaker Change: And these.

Speaker Change: The markets that were steady and there is a lot of overlap. So we have a high level of confidence within a lot of these markets that we'll be able to adjust that occupancy level smartly I mean, we're still trying to solve the revenue, but we just through better marketing practices and better revenue management practices, we will be able to close that gap similar to what the corporate portfolio has done since we've instituted the new tools and had success around.

Neutrals.

Dave Cramer: And as you transitioned, I guess in July, to the internalized structure... Did that at all cause any kind of unusual blip in operating performance?

Speaker Change: And as you transitioned I guess in July two internalized structure.

Speaker Change: Does that at all cause any kind of unusual blip in operating performance.

Dave Cramer: Certainly, you know, as I acknowledged in my comments on the release, you know, the team here, it's a lift. I mean, we've got it well planned. We've got a nice structure around it. The intent of extending the management agreements is to get a nice, smooth transition, but I would be honest with you. We all know every time you transition platforms and you transition marketing platforms and you work through team member transitions, it certainly can be a distraction.

Speaker Change: Certainly as I acknowledged in my in my comments on the release.

Speaker Change: Team here, it's a lift I mean, we've got wells planned we've got a nice structure around it the intent of extending the management agreements as to get nice smooth transition.

Speaker Change: But I would be honest with you. We all know every time you transition platforms in your transition marketing platforms and you worked through team member transition.

Speaker Change: It can be a distraction we are working very very hard and we're very very focused on minimalizing the distraction.

Dave Cramer: We are working very, very hard, and we're very, very focused on minimizing the distractions, but, you know, it's certainly work here. The back half of the year, we weren't thinking about the first half of the year, you know, and so I think we're well positioned. I think we're going to work through it fine. I'm very proud of the team and what they're doing and how they're executing. But again, being honest, we know it's extra work.

Speaker Change: It's certainly work here.

Speaker Change: Half of the year, we were thinking about the first half of the year.

Speaker Change: And so I think we're well positioned I think we're going to work through it fine I'm very proud of the team and what they're doing and how they're executing but again being honest we know it's extra work.

Dave Cramer: Yeah, I mean, the press release language suggested something like that, which is why I asked. Maybe you could just provide... And some of the same sort of NOI performance between NSA's portfolio versus the pros, year-to-date, and just curious if there's been a pretty noticeable change or difference in CMSO&I growth rate. I'm probably not going to get into that this time, Keegan. Obviously.

Speaker Change: Yes, I mean, the press release language.

Speaker Change: Suggested something like that which is why I asked maybe you could just provide.

Speaker Change: Some of the same store NOI performance between SaaS portfolio versus the pros.

Year to date and just curious if there has been a pretty noticeable change or difference in same store NOI growth rates.

Dave Cramer: I'm probably not going to get into this this time, Keegan. Obviously, markets and store specifics, and there's a lot of pieces to it around different strategies that went into it, so I probably won't talk a lot about the NOI differences between the portfolios.

Speaker Change: Yes, I'm, probably not going to get into that at this time, keeping obviously markets and store specifics and theres a lot of pieces to it around different different strategies that went into it. So I'll probably won't talk a lot about the NOI differences between the portfolios.

Speaker Change: Okay. Thank you guys.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Speaker Change: Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Operator: Good afternoon. Thanks a lot for taking my question. My first question is about customer demand and what has to change to get things to get better. You know, we've talked a lot over the last several quarters about the housing market, but are you seeing anything else that could be influencing kind of that new customer demand, any sort of increased customer sensitivity to the macro or economic slowing?

Michael Goldsmith: Good afternoon. Thanks for taking my question. My first question is on just on the customer demand and what hasnt changed to get things to get better.

Speaker Change: We've talked over the last several quarters a lot about the housing market, but are you seeing anything else that could be influencing kind of that new customer demand any sort of increased customer sensitivity to the macro.

Speaker Change: Or economic slowing thanks.

Dave Cramer: It's a good question. We haven't seen a lot of impact from the economic slowdown. Like I say, the existing customer base has been healthy. And so we're pleased with payment activity and all those pieces of it. So that's good.

Speaker Change: It's a good question, we haven't seen a lot of impact from economic slowing like I say the existing customer base has been healthy and so we're pleased with payment activity in all of those pieces of it. So that's good I think the new customer.

Speaker Change: Attracting new customers there are several things going on.

Speaker Change: Obviously, a little less demand transition of the <unk> around the country due to housing due to other other jobs environments.

Speaker Change: Strength of the economy I think has kept people in place.

Speaker Change: I believe we still have new supply that we're cycling in a lot of our markets, particularly in the Sun belt and.

Dave Cramer: I think the new customer, attracting new customers, you know, there's several things going on. There's obviously a little less demand, you know, the transition of the company around the country due to housing, due to other jobs, environments, you know. The strength of the economy, I think, has kept people in place. You know, I believe we still have new supply that we're cycling in a lot of our markets, particularly in the Sun Belt.

Speaker Change: And so that will take time to burn through so if you look at the markets like Phoenix and Atlanta in West Coast of Florida, and some of these markets. We've called out before time is what's going to fix that theres still good population growth Theres still good household formation. There is still good job growth in these markets and long term, we like them. It just takes time to burn through this supply which.

Dave Cramer: And so, you know, that will take time to burn through. So if you look at the markets like Phoenix and Atlanta and the West Coast of Florida, and some of these other markets we've called out before, time is what's going to fix them. There's still good population growth, and there's still good household formation. There's still good job growth in these markets, and we, long term, we like them. It just takes time to burn through this supply, which, you know, I would go back to tell you. We think some of the supply was masked because of the COVID, you know, the success we had around COVID.

Speaker Change: I would go back to tell you we think some of the supply was masked because of the COVID-19.

Speaker Change: The success, we had around COVID-19 in the storage industry and they'll work their way through it.

Dave Cramer: And, you know, they'll work their way through it. I think, you know, as storage goes, I mean, even as things tighten in an economy, storage, you know, has historically benefited from contraction as people are forced to move around the country for jobs, or maybe they're forced to downsize, or maybe there are other transitions in their lives. And so, you know, that's something that hasn't really happened in the last 18 to 24 months.

Speaker Change: Think of storage goes I mean, even as things tightened in an economy storage.

Speaker Change: Historically benefited from contraction as people are forced to move around the country for jobs or maybe they're forced to downsize or maybe there is other transitions in their lives and so that's something that hasn't really happened in the last 18 to 24 months that really the only change has been the interest rate environment, and it's really muted the housing transition so.

Dave Cramer: Really, the only change has been the interest rate environment, and it's really muted the housing transition. So, you know, I think at this point in time, we're happy with the way our portfolio is positioned. We're happy with the diversity of our portfolio. The Sun Belt will come back. You know, we had a really strong run through COVID, and we shouldn't forget that. That was one of the hottest markets in the country down through some of those markets, and we just have to cycle through it.

Speaker Change: I think at this point in time.

Speaker Change: We're happy with the way our portfolio is positioned we are happy with the diversity of our portfolio.

Speaker Change: <unk> will come back.

A really strong run through Covid, and we shouldn't forget that that was one of the hottest markets in the country down through some of those markets and we just have to cycle through it.

Brandon Togashi: Yeah, thanks for that, Dave. And then my follow-up question is for Brandon. The same store expense guidance has moved a little bit higher; we saw a lot of the peers kind of take down the same store expense guidance. So can you walk through what you're seeing on the expense side? What you're seeing on the expense side and your ability to flex expenses in maybe a slower demand environment?

Brandon: Got it thanks for that Dave and then my follow up question is from Brandon. The same store expense guidance have moved a little bit higher we saw a lot of it appears kind of ticked down the same store expense guidance can you walk through like what youre seeing on the expense side.

Speaker Change: What youre seeing at the expense side and your ability to flex expenses, maybe a slower demand environment. Thanks.

Brandon Togashi: Yeah, Michael, on the expenses, yeah, you're right. We increased the low end of the guidance range a little bit just based on what we saw in the first half of the year. Some of that is like our marketing spend. You know, we deliberately chose to spend a little more than we had budgeted just based on all the things that we described earlier, right? Just the muted demand and trying to capture some of the customers that we can in this competitive environment.

Michael Goldsmith: Yes, Michael on the.

Michael Goldsmith: Expenses, yes, youre right, we lowered the <unk>.

Speaker Change: Our increased the low end of the guidance range, a little bit just based on what we saw in the first half of the year.

Speaker Change: Some of that is like our marketing spend we deliberately chose to spend a little more than we had budgeted just based on all the things that we described earlier right.

Speaker Change: <unk> demand and trying to capture some.

Speaker Change: Some of the customer.

Speaker Change: Customers that we could in a competitive environment.

Brandon Togashi: Property taxes, you know, are obviously a big line item and one that we just still don't have a ton of clarity on yet, just given where our markets are and where you get those final assessments. So the first half of the year incorporates some benefits from successful appeals, as I mentioned in my earlier remarks, but the back half of the year still has our beginning of the year budgets for a lot of markets, which, you know, sometimes we get to the end of the year, and I think we were a little conservative because we are a little more successful oftentimes in the third and fourth quarters contesting those.

Speaker Change: Property taxes is obviously the big line item and one that we just still don't have a ton of clarity on yet just given where our markets are and where you get those final assessments. So the first half of the year incorporate some some benefits two successful appeals as I mentioned in my earlier remarks, but the back half of the year still has our are beginning.

Speaker Change: The year budgets for a lot of markets, which sometimes.

Speaker Change: Sometimes we get to the end of the year and I think we were a little conservative because we are a little more successful oftentimes in the third and fourth quarter contesting those but that's baked into the guide is as what we had projected at the beginning of the year. So as we go through Texas and other parts of the southeast we'll get we'll get final bills on those these next couple of quarters and have more clarity.

Brandon Togashi: But baked into the guide is what we had projected at the beginning of the year. So as we go through Texas and other parts of the Southeast, you know, we'll get final bills on those in the next couple of quarters and have more clarity there.

Speaker Change: There.

Operator: Thank you very much. Good luck in the back.

Speaker Change: Thank you very much good luck in the back half.

Thanks, Michael.

Speaker Change: Yeah.

Operator: Thank you. Our next question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Eric Wolfe.

Speaker Change: With Citibank. Please proceed with your question.

Operator: Hey, thanks. You mentioned that you haven't seen changes in the existing customer piece yet, but I was curious in the past when you have seen signs that ECRI behavior was changing, you know, what do you think caused it? Was it a recession or economic reasons? Just trying to understand what would actually cause a change in behavior.

Eric Wolfe: Hi, Thanks, you mentioned that you haven't seen changes in the existing customer piece, yet but was curious in the past when you have seen signs of ECR I behavior was changing what do you think cost it was a recession or economic reasons, just trying to understand what would actually cause a change in behavior.

Dave Cramer: You know, I think you'd have to go back. I mean, you know, go back to GFC and places like that when the pocketbook got really tight. We've made, you know, we never really stopped the program, but maybe we could have changed the magnitude of the rate increase. You know, we would have set more guardrails around, you know, maybe a total dollar amount of increase versus looking at percentages. And it really had to do, I think, with the health of the consumer around unemployment rates and income levels and really what was going on in the, you know, the environment around that piece of it.

Speaker Change: I think you'd have to go back I mean go.

Speaker Change: Go back to GSE in places like over the Pocketbook got really tight we've made.

Speaker Change: We never really stopped the program, but may we changed the magnitude of the rate increase.

Speaker Change: We would set more guardrails around.

Speaker Change: Maybe a total dollar amount of increase versus looking at percentages and it really had to do I think with health of the consumer around unemployment rates and income levels and really what was going on in the.

Speaker Change: The environment around that piece of it is.

Dave Cramer: It's probably the last time I can think that we really were challenged around, you know, doing, you know, altering the DCRI program. I think today we're smarter, though. We have better data tools, and we have higher levels of confidence. Personally, I would tell you it's less than a gut feeling. It's more about data now, and the tools we've deployed thus far give us, you know, more confidence. You know, if we'd had these back in the GFC, we'd probably have had a different attitude about great changes at that time than we do today.

Speaker Change: It's probably the last time I can think that we really were challenged around.

Altering the CRA program I think today, we're smarter, though we have better data tools, we have higher levels of confidence.

Speaker Change: Personally I would tell you is less than a gut feeling its more about data now in the tools that we've deployed thus.

Speaker Change: Thus far gives us more confidence to add these back in the Dfc, we would have probably had a different attitude about rate changes at that time as we do today.

Operator: That's helpful. And in the past, I think storage companies have said that about 50% of customers knew that before six months. Correct me if I'm wrong on that. But I was just wondering if there have been any changes to that. I know average length of stay went up during COVID, and it's come down a bit, but I didn't know if that's being driven by more short-term customers that are turning over more quickly or long-term customers staying a little less time. I know the average length of stay seems to be staying consistent, but just curious if within that, different cohorts are sort of changing in terms of how long they stay.

Speaker Change: That's helpful and then in the past I think storage companies have said that about 50% of customers knew that before six months and correct me if I'm wrong on that but I was just wondering if there have been any changes to that I know average length of stay went up during COVID-19 and has come down a bit but didn't know if that's being driven by more short term customers that are turning over more quick.

Speaker Change: <unk> are long term customers being a little less time I know average length of stay is seems to be staying consistent but just curious if within that different cohorts are sort of changing in terms of how long this team.

Dave Cramer: It's a really good question, and we do study the buckets you're referring to, you know, less than 90 days, less than six months, places like that. We just haven't seen a lot of movement within those buckets.

Speaker Change: Yes, it's a really good question and when we do study the buckets as you were referring to less than 90 days less than six months places like we just haven't seen a lot of movement within those buckets and I can tell you to your point on move out the average length of stay of people who've been with US over 24 months is still around 19 months.

Dave Cramer: And I can tell you to your point, you know, on move out, the average length of stay of people who move with us over 24 months is still around 19 months. You know, within the same store, the total length of stay for all of our in-place tenants is still north of 40 months. You know, approximately 65% of our tenants have been with us more than a year, and about 50% have been with us more than two years. So if you look back through history, those are still above, you know, some of the historical numbers and are staying very solid. I got it.

Speaker Change: Within the same store the total length of stay for all of our in place tenants is still north of 40 months.

Speaker Change: The approximate 65% of our tenants have been with us more than a year and about 50% of men with his more than two years. So if you look back through history of those are still above some of the historical numbers and staying very solid.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Operator: Got it. Thank you.

Eric <unk>: Our next question comes from the line of Eric <unk> with Wells Fargo. Please proceed with your question.

Operator: Our next question comes from the line of Eric Luebchow with Wells Fargo. Please proceed with your question.

Dave Cramer: Great, appreciate it. You touched on this a little bit, Dave, already in the sunbelt, but in terms of new supply, but is a lot of that supply online now, and as you mentioned, it's just a matter of time about working through it, or are you seeing continued development activity popping up in some of those markets that makes you think the supply overhang could persist for longer? Just trying to get a sense for when we may start to see that supply overhang reverse in an opposite direction, assuming the current demand trends hold going forward.

Eric: Great I appreciate it you touched on this a little bit Dave already on the sunbelt, but in terms of new supply but.

Speaker Change #100: There's a lot of that supply online now and as you mentioned is just a matter of time, but working through it or are you seeing continued development activity popping up in some of those markets that makes you think the supply overhang could persist for longer but just trying to get a sense for.

Speaker Change #100: When do you think we may start to see that supply overhang.

Speaker Change #102: Reverse in an opposite direction, assuming the current demand trends hold going forward.

Dave Cramer: Yeah, thanks for joining us. Good question. It's, we believe that the major amount of supply, you know, is going down as far as new deliveries are concerned. We think a lot of this product was delivered and has been delivered through, you know, 21, 22. And so, you know, I would tell you we're probably on the downhill slope of the maximum impact of new supply. Certainly, there is development. Certainly, there are markets that are seeing new developments.

Speaker Change #100: Yes, thanks for joining good question Mitch.

Speaker Change #103: We believe that the major amount of supply.

Speaker Change #104: Is going down as far as new deliveries, we think a lot of this product was delivered and has been delivered through 'twenty one 'twenty two.

Speaker Change #104: And so.

Speaker Change #104: I would tell you we're probably on the downhill slope of the maximum impact of new supply certainly there is development certainly there are markets that are seeing new development.

Dave Cramer: It's more challenging than ever to develop. It's more expensive than ever to develop. And now, if you're a developer, you're looking at longer fill-up times and a more challenging competitive environment that might change your attitude about developing in the future. But I'd say we're on the downhill slide with the majority of the impact from new supply hitting the market.

Speaker Change #104: More challenging that ever develop it's more expensive than ever to develop.

Speaker Change #104: And now if you're a developer you are looking at longer fill up times in a more challenging competitive environment that might change your attitude about developing in the future, but I'd say, we're on the downhill slide of the majority of the impact from new supply hitting the market.

Kim Bin Kim: Great, I appreciate that. And you've touched on moving rates and been a little more aggressive to get, you know, improve occupancy. So what have the early signs been from customers on the ECRIs? I think you've talked about pushing for, you know, faster rate increases and a larger magnitude with the first ECRI. Has that been successful so far, and how does that compare to any other promotional techniques you've used in the past, things like free rent?

Dave Cramer: Great, I appreciate that. And you've touched on moving rates and been a little more aggressive to get, you know, improve occupancy. So what have the early signs been from customers on the ECRIs? I think you've talked about pushing for, you know, faster rate increases and a larger magnitude with the first ECRI. Has that been successful so far, and how does that compare to any other promotional techniques you've used in the past, things like free rent?

Speaker Change #106: Great I appreciate that and you've touched on move in rates and been a little more aggressive to get.

Speaker Change #107: To improve occupancy so one of the early signs has been from customers on the ECR is I think you've talked about pushing faster rate increases and a larger magnitude with the FERC Cri has that been successful so far and how does that compare to any other promotional techniques you've used in the past things like <unk>.

Speaker Change #108: The rent.

Dave Cramer: Currently, I think that our data would tell us that price is still important in attracting new customers. And so, you know, discounting has come up a little bit, but price is still the main driver to get the rental. And so we are focusing on and being a little more sharp on pricing at the entry point of the customer, you know, for new customers.

Speaker Change #109: Currently I think that our data would tell us that the price is still important on attracting new customers and so discounting has come up a little bit but the price is still the main driver to get the rental.

Speaker Change #109: So we are focusing and maybe get a little more sharp on pricing at the entry point of the customer for new customers.

Speaker Change #109: After that we had better success around the ECR program in timing quicker timing and magnitude and we just haven't done all the testing we're doing.

Speaker Change #109: And all the different levels, we're doing in within that testing, we're not seeing anything thats pushing the <unk>.

Operator: You know, after that, we've had better success with the ECRI program, in timing, quicker timing, and magnitude. And we just haven't, you know, all the testing we're doing and all the different levels we're doing within that testing, we're not seeing anything that's pushing the stats around the acceptance of the ECRI, even though we're increasing the magnitude, and we might be short in the timeframe on when they're getting them. So, so far, again, we talked about that the customer remains healthy, they're accepting the programs that we're implementing, and we just haven't seen a lot of movement. Alright, great. I appreciate it.

Stats around.

Speaker Change #109: The acceptance of <unk>, even though were increase in magnitude than we might be shortening the timeframe on when they are getting them. So so far again, we've talked about the customer remains healthy they're accepting the programs that we're implementing and we just haven't seen a lot of movement.

Operator: All right, great. I appreciate it.

Kim Bin Kim: Alright, great; I appreciate it.

Speaker Change #110: Alright, great I appreciate it.

Speaker Change #110: Thank you.

Operator: Thank you. Our next question comes from the line of Jeff Scepter with Bank of America. Please proceed with your question.

Speaker Change #112: Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.

Kim Bin Kim: Great, thank you. David, I appreciate your opening remarks. You commented that we should expect the current environmental conditions to last into year-end. Is it fair to say and think, just based on seasonality and the current state of the consumer,

Dave Cramer: Great, thank you. David, I appreciate your opening remarks. You commented that we should expect the current environment conditions to last into year-end. Is it fair to say and think, just based on seasonality and the current state of the consumer, the current environment really will last, at least until the peak leasing season, possibly through it, or do you feel like that's really not a fair comment at this point?

Jeff Spector: Great. Thank you David I. Appreciate your opening remarks, you commented that we should expect the current environment conditions to last into year end.

Jeff Spector: Is it fair to say and think just based on seasonality and.

Speaker Change #114: The currency the consumer that the.

Speaker Change #115: The current environment really will last.

Speaker Change #116: At least until 2005 peak leasing season, possibly through it where do you feel like Thats really not a fair comment at this point.

Dave Cramer: It's a really good question. I think there are a lot of things at play that we just don't know yet. I mean, what will free up a little more housing activity and create a little more transition around the country? Will the Fed cut interest rates?

Speaker Change #115: Yes.

Speaker Change #117: It's really it's a really good question.

Speaker Change #118: I think theres a lot of things at play that we just don't know yet I mean.

Speaker Change #119: What will free up a little more housing activity and create a little more transition around the company around the country excuse me.

Speaker Change #119: Will the fed cut interest rates, there's just a lot of unknowns in the back half.

Dave Cramer: There's just a lot of unknowns in the back half. I'm in the camp, but I do think we're going to see some Fed activity as the back half of the year comes along. And the question then becomes, how much pent-up demand is there around the movement of people wanting to buy and sell houses and transition? If that does come to light in the back half of the year, then I would say the spring leasing season of 2025 would be the tell-all.

Speaker Change #119: I'm in the camp, but I do think we're going to see some fed activity as the back half of the year comes along.

Speaker Change #120: And the question then becomes as it is.

Speaker Change #120: How much pent up demand is there around the movement of people wanting to buy and sell houses in transition.

Speaker Change #120: If that does come to light in the back half of the year that I would say the spring leasing season of 2025 would be the tell all well into the first quarter of 2025.

Dave Cramer: We'll enter the first quarter of 2025 similar to the way we probably entered this year, and then hopefully, we'd have a stronger leasing season in 2025 should this demand factor that's a little bit muted right now return. I wish I had a better answer than that.

Speaker Change #120: Similar to the way, we probably entered this year and then hopefully we'd have a stronger leasing season in 2025.

Speaker Change #120: This demand factor, that's a little bit muted right now return.

Operator: I think we're hopeful. I think supply pressures in some markets will ease while other markets will maintain. But certainly, with our internalization and us getting our platforms commonized and some of the things we can do internally, I think that sets us up well to compete in today's environment and then, when it changes, excel.

Speaker Change #120: I wish I had a better answer to that I think.

Speaker Change #120: We're hopeful I think supply pressures in some markets will ease while other markets will maintain but certainly with our internalization and us getting our platforms on carbonized and some of the things. We can do internally I think that sets us up well to compete in today's environment.

Speaker Change #121: And then when it changes excel.

Dave Cramer: Thank you. And then, again, I appreciate all the comments on the existing customer and the strength in the existing customer that you're pushing great. You did respond that historically, when there's an issue, it's when that customer is, you know, I think you alluded to reviewing their, their, their expenses, and we're in that current state. So is that a concern? Do you, are you contemplating shifting that strategy on how much you

Speaker Change #122: Thank you and then again I appreciate all the comments on the existing customer and strengthen existing customer that youre pushing rate.

Speaker Change #123: You did respond that historically when there is an issue it's win that customer.

Speaker Change #122: Is.

Speaker Change #124: I think you alluded to reviewing their right their expenses and we're in that current state. So is that a concern do you are you <unk>.

Speaker Change #125: Contemplating shifting that strategy on how much youre pushing is it just a seasonal thing I think as you discuss that yes over the next few months Youll do that or again, how should we think about that balance. Thank you.

Dave Cramer: Is it just a seasonal thing? I think, as you discussed, that, yeah, over the next few months, you'll do that. Or, again, how should we think about that balance? Thank you. Yeah, good, good question. I don't

Dave Cramer: Yeah, good question. We're not seeing anything today that is probably going to change our course on where we're at with our ECRA program. One thing that I would add is the fact that we're looking at tenants that have had a number of rate increases and asking ourselves the replacement cost of that tenant, the longevity of that tenant, how much do we want to, you know, actively pursue, you know, maybe a fifth or sixth rate increase, if you look at it that way. And so that's the one area I think we're studying harder than ever.

Speaker Change #124: <unk>.

David Cramer: Yeah, good, good question. I don't know.

Speaker Change #126: Yes, good question.

Speaker Change #127: Not seeing anything today that is going to probably change our course on where we're at with our ECR program.

David Cramer: One thing that I would add is the fact that we're looking at tenants that have had a number of rate increases and asking ourselves the replacement cost of that tenant, and the longevity of that tenant.

Speaker Change #128: With one thing that I would add is the fact that we're looking at tenants that have had a number of rate increases and asking ourselves replacement parts of that tenant longevity of that tenant.

Dave Cramer: But the rest of our programs, that's telling us, and our testing is telling us, as we look at different levels and different magnitudes and timing, that the consumer is not having any, you know, change in habits or behaviors because of what we're doing. I will tell you, I still believe this: storage is not a large, large component dollar item of the personal expense line. It's a very convenient, easy-to-use product that people need.

Speaker Change #129: How much do we want to add.

Speaker Change #129: Actively pursue maybe a fifth or sixth rate increase if you look at it that way and so that's the one area, where I think we're steady and harder than ever with.

Speaker Change #129: But the rest of our programs.

Speaker Change #129: That is telling us and our testing is telling us as we look at different levels of different magnitude and timing that the.

Speaker Change #130: The consumer is not having any change in habits or behaviors because of what we're doing I will tell you I still believe this storage is not a large large component dollar item of the personal expense line.

Dave Cramer: And storage has always been a need-based business, and so I believe that also helps us in our strength of confidence around the consumer really having to make a tough choice before they decide to leave their storage unit.

Speaker Change #130: A very convenient easy to use product that people need and storage has always been a need based business and so I believe that also helps us in our strength and confidence around the consumer.

Speaker Change #130: Having to make a tough choice before they decided to leave their storage unit.

Speaker Change #130: Thank you.

Operator: Our next question comes from the line of Emotayo Okusanya with Deutsche Bank. Please proceed with your question.

Speaker Change #131: Our next question comes from the line of.

Speaker Change #131: Tayo Okusanya with Deutsche Bank. Please proceed with your question.

Operator: Yes, good morning over there. Questions around street rates. I believe you mentioned that the quarter was down 9% year-over-year. Just curious what's built into the revised guidance regarding how you think street rates may perform in the back half of 2024.

Tayo Okusanya: Yes, good morning over that.

Tayo Okusanya: Questions around Street rate I believe you mentioned for the quarter was down 9% year over year, just curious whats built into the revised guidance regarding how you think street rates may perform in the back half of 'twenty four.

Dave Cramer: I think, thanks for joining us, and I think what Brandon was talking about was the difference between our Sunbelt markets and our non-Sunbelt markets. And so I think in his comments he was talking about the 9% difference in their decline in street rates in our Sunbelt markets versus our non-Sunbelt markets. You know, I think we entered the quarter on street rates; I think we were down around 14, 15, 14 and a half. 15% is what street rates were down for the quarter.

David Cramer: I think, thanks for joining us. And I think what Brandon was talking about was the difference between our Sunbelt markets and our non-Sunbelt markets. And so, I think in his comments he was talking about the 9% difference in their decline in street rates in our Sunbelt markets versus our non-Sunbelt markets. You know, I think we entered the quarter on street rates, I think we were down around 14, 15, 14 and a half. 15% is what street rates were down for the quarter.

Speaker Change #133: I think.

Thanks for joining us and I think what Brian was talking about was just the difference between our sunbelt markets and our non sunbelt markets and so I think in his comments. He was talking about the 9% difference in the decline in street rates was in our sunbelt markets versus our non sunbelt markets.

Speaker Change #134: I think we entered the quarter.

Speaker Change #135: Right I think we were down to right around $40 $50 14 at 15% is what street was street rates were down for the quarter.

Dave Cramer: You know, I think our comp gets a little easier in the back half of the year, and so as you look at July, you know, if it was 14.5% or so, it got a little better in July as far as, I think we said it was 14, that's where we finished in July. And in the back half of the year, you know, the year-over-year comps get easier, the street rates, you know, the difference I will tell you, you know, it's going to remain competitive, though.

David Cramer: You know, I think our comp gets a little easier in the back half of the year. And so, as you look at July, you know, if it was 14 and a half percent or so, it got a little better in July, as far as I think we said it was 14, that's where we finished in July.

Speaker Change #136: I think I know our comp gets a little easier in the back half of the year and so as you look at July.

Speaker Change #136: If it were is 45% or so it got a little better in July as far as I think we said it was 14.

Speaker Change #136: Where we finished in July and in the back half of the U D.

David Cramer: And in the back half of the year, you know, the year-over-year comps get easier, the street rates, you know, the difference in year-over-year variance in the rate will come and get a little bit closer. I will tell you, it's going to remain competitive though. I think we're going to be smart around driving to a revenue number. I think we'll be smart around driving to an occupancy discount, marketing spend, you know, a street rate environment that gets the overall goal we want, which is a revenue number we're shooting for. And so, you know, competitive environments still exist. They're more competitive where we have new supply. And certainly, you know, some markets are feeling that more than others.

Speaker Change #136: Year over year comps get easier the street rates the difference in year over year.

Speaker Change #136: The variance in our in the rate will come and get a little bit closer.

Speaker Change #137: I will tell you it's going to remain competitive, though I think we're going to be smart around driving to a revenue number I think we will be smart around driving to an occupancy discount marketing spend street rate environment that gets the overall goal, we want which is a revenue number we're shooting for.

Dave Cramer: I think we're going to be smart around driving to a revenue number; I think we'll be smart around driving to an occupancy discount, marketing spend, you know, street rate environment that gets the overall goal we want, which is a revenue number we're shooting for. And so, you know, competitive environments still exist. They're more competitive where we have new supply, and certainly, you know, some markets are feeling that more than others. And it's pretty dynamic right now, I guess that's what I would say.

Speaker Change #137: So competitive environment still exist they are more competitive where we have new supply.

Speaker Change #137: And certainly.

Some markets are feeling that more than others.

Speaker Change #137: And it's pretty dynamic right now I guess is what I would say.

Dave Cramer: So are we thinking about negative single digits or negative double digits? Does it improve to that level given better year-over-year comps in the back half of the year? I'm not sure how much you can kind of nail it down because everything is dynamic right now, but I'm kind of curious if you could give us a little bit more specific guidance around it. Tough to know what the competitive...

Speaker Change #138: So how are we thinking about kind of a negative single digits from a negative double digits does it improve to that level given better year over year comps in the back half of the year or.

Speaker Change #139: I'm not sure how much you can kind of nail it down because everything is dynamic right now, but kind of curious if you could give us a little bit more specific guidance around it.

Dave Cramer: Tough to know what the competitive pressures do. You know, I would say, as we looked at the year in February, we thought we'd be in the single digits, really closing that gap back after the year. I think we're probably not as optimistic that we'll get, you know, low single digits, but I think we'll not be in the teens anymore. I think we're going to get, maybe, high single digits by the end of the year.

David Cramer: Tough to know what the competitive pressures do. You know, I would say, as we looked at the year in February, we thought we'd be in the single digits, really closing that gap back half of the year. I think we're probably not as optimistic that we'll get, you know, low single digits, but I think we'll not be in the teens anymore. I think we're gonna get, maybe, high single digits by the end of the year.

Speaker Change #140: [laughter] tough to know what the competitive pressures do.

Speaker Change #141: I would say is as we looked at the year in February we thought we'd be in the single digits.

Speaker Change #141: Really closing that gap back half of the year I think we're probably not as optimistic that we'll get.

Speaker Change #142: Low single digits, but I think we will believe will not be in the teens anymore. I think we're going to get maybe high single digits by the end of the year.

Speaker Change #143: Sounds good thank you.

Speaker Change #144: Thank you.

Speaker Change #144: Okay.

Operator: Our next question comes from the line of Brendan Lynch with Barclays. Please proceed with your question.

Speaker Change #144: Our next question comes from the line of Brendan Lynch with Barclays. Please proceed with your question.

Brendan Lynch: Great, thanks for taking my questions. I want to ask about the performance of your pricing, occupancy, and marketing algorithms, to what extent they are perfected, for lack of a better term, versus having some upside potential from further adjustments, and maybe just some commentary on how you evaluate whether you are truly maximizing profitability with the algorithms that you have in place.

Operator: Great, thanks for taking my questions. I want to ask about the performance of your pricing, occupancy, and marketing algorithms, to what extent they are perfected, for lack of a better term, versus having some upside potential from further adjustments, and maybe just some commentary on how you evaluate whether you are truly maximizing profitability with the algorithms that you have in place.

Brendan Lynch: Great. Thanks for taking my questions I wanted to ask on the performance of your pricing and occupancy and marketing algorithms to what extent they are protected for lack of a better term versus having some upside potential from further adjustments and maybe just some commentary around how you evaluate whether you are.

Brendan Lynch: Truly maximizing profitability with the algorithms that you have in place.

Dave Cramer: Yeah, thanks for joining. Really, really good thought there. You know, I don't think we're optimized, and I think there are several reasons for that. I think in time situations, a number of data points improve you all the time. If you think about it, I don't think we've operated in this type of environment before. I've been at this for a long time, for a long time, if ever. I mean, we come from a COVID high and this materially high environment, and now we're going into a really highly competitive environment where we've seen some consolidation in the industry, we've seen new supply come on, we've seen machines really be dynamic in the way they price, particularly entry rates, and very, very dynamic movements and rates

Speaker Change #146: Yes, thanks for joining really really good thought there.

Speaker Change #147: If were optimized and I think there are several reasons for that I think time.

Speaker Change #148: <unk> a number of data points improve you all the time, if you think about it I don't think we've operated in this type of environment.

David Cramer: I've been at this for a long time; for a long time, if ever. I mean, we come from a COVID high and this materially high environment, and now we're going into a really highly competitive environment where we've seen some consolidation in the industry, we've seen new supply come on, we've seen machines really be dynamic in the way they price, particularly entry rates, and very, very dynamic movements in rates that I haven't seen before.

Speaker Change #148: I've been at this a long time for for a long time, if ever I mean, we come from a COVID-19 high and this is materially high environment.

Speaker Change #148: And now we're going into a really high competitive environment, where we've seen some consolidation in the industry. We've seen new supply come on we've seen machines really be dynamic in the way they price, particularly entry rate.

Speaker Change #148: And very very dynamic movements in rates that I haven't seen before and so our tools are capable of learning. They are learning everyday we are testing all of the time different strategies within markets within unit sizes within properties.

Dave Cramer: And so our tools are capable of learning; they're learning every day; we are testing all of the time, different strategies within markets, within unit sizes, within properties. But I would tell you, I think time will make us better. I think situations will make us better, what we learn and how we improve and how we tweak will make us better. So personally, from my position, I think we have room to improve.

David Cramer: Our tools are capable of learning; they're learning every day. We are testing all of the time, different strategies within markets, within unit sizes, within properties, but I would tell you, I think time will make us better. I think situations will make us better, what we learn and how we improve and how we tweak will make us better. So personally, from my position, I think we have room to improve.

Speaker Change #148: But I would tell you I think time will make us better I think situations will make us better what we learn and how we improve and how we tweak will make us better. So I personally from my position I think we have room to improve.

Dave Cramer: And somewhat related follow-up, you hired a new chief marketing officer a few months ago. Maybe you could tell me your expectations for the marketing initiative and anything that you might be branching out into, taking on new marketing tactics, and how they're going so far? Thank you.

Speaker Change #149: Great. Thank you and somewhat related follow up.

Speaker Change #150: You hired a new chief marketing officer, a few months ago, maybe what your expectations are.

Speaker Change #151: The marketing initiative and anything that you might be branching out into and to taking on new marketing tactics.

Speaker Change #152: Now theyre going so far thank you.

Dave Cramer: Sure, you know, we actually promoted an internal candidate into that position, so Melissa's been with us for five years, I think, is what she's been now, and so she's been a very integral part of building out our marketing strategies and our customer acquisition strategies. In the last two years, we've spent a tremendous amount of energy and time adding talent and technology around the call center platform, around the marketing website platform, and the introduction of algorithms around our Google paid search platforms, which we have built.

Speaker Change #152: Sure.

Speaker Change #153: Actually promoted.

Internal candidate into that position, so Melissa has been with us.

Speaker Change #154: Five years, I think because of what he has been now and so she has been a very integral part of our building out of our marketing strategies and our customer acquisition strategies.

Speaker Change #154: The last two years, we've spent a tremendous amount of energy and time, adding talent and technology around the call center platform around the marketing.

Speaker Change #154: Website platform the introduction of algorithms around our Google paid search platforms, which we have built.

Dave Cramer: And so we've done a lot of things to improve our position and our footing, setting us up for the future. If you look, we've launched new customer experiences around our website, which she's been the spearhead of. And so we've got, I think, a lot of exciting things that we're just putting the finishing touches on. Data Warehouse, the new data warehouse environment, is up and running and functional. This article introduces machine learning and AI technology.

Speaker Change #154: And so we've done a lot of things to improve our positioning and our footing setting us up for the future. If you look we've launched a new customer experiences around our website, which has been the spearhead of.

Speaker Change #154: And so we've got I think a lot of exciting things that we're just putting the finishing touches on outerwear out the new data warehouse environment is up and running and functional introduces machine learning and AI technology.

Dave Cramer: You know, again, the call center, the amount of team members we have, the amount of technology we have, the number of touch points for that call center service center is very important to us. And so, yeah, I mean, she's doing a wonderful job. She certainly has a lot of vision around this. And with our support, she's been able to develop a really strong program for us.

Speaker Change #154: Again the call center.

Speaker Change #154: All centered the amount of team members, we have the amount of technology, we have touch points for that call Center Service Center is very important to us and so.

Speaker Change #155: Yes, I mean, she is doing a wonderful job.

Speaker Change #155: Certainly.

Speaker Change #156: A lot of vision around this and with our support he has been able to develop a really strong program for us.

Operator: Great, thanks for the call.

Speaker Change #157: Great. Thanks for the color.

Speaker Change #157: Yes.

Speaker Change #157: Okay.

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

Speaker Change #158: Thank you. Our next question comes from the line of Kwon sang <unk> with BMO capital markets. Please proceed with your question.

Dave Cramer: Thanks for the follow-up time. Just curious if you could comment about the differences in place rates between the corporate managed stores and the previously pro-managed stores and how you think about that quantum and the timeframe to close that gap and the levers to do so.

Kwon sang: Thanks for the follow up time, just curious.

Speaker Change #160: If you could comment about the differences in.

Speaker Change #160: In place rates between.

Speaker Change #160: Corporate managed stores in the previous like pro managed stores in.

Speaker Change #162: How you think about that quantum in the timeframe to close that gap and the levers to do so.

Dave Cramer: It's one, it's thanks for the question, thanks for the follow-up. It's hard because of geography. I think each store has, each market has its own different way you look at it. They have a different Unimix, they have a different, maybe, ratio of climate control versus non-climate, and so it varies throughout the markets. And so I think it's hard for us to give a number around the in-place contact rate or the achieved rate by pro.

Speaker Change #163: It is.

Speaker Change #164: It's wanted to thanks for the question. Thanks for the follow up it's hard because of the geography.

Speaker Change #164: I think each store as you know each market has its own different when you look at it they have a different unit mix they have a different.

Speaker Change #164: The ratio of cold climate control versus non climate.

Speaker Change #164: So it varies throughout the markets.

So I think it's hard for us to give a number around in place contract rate or achieved rate.

Speaker Change #164: <unk> Pro what we would tell you as we know there are differences in the way, we can really work on the existing customer base.

Dave Cramer: What we would tell you is that we know there are differences in the way we can really work with the existing customer base. So how we attract customers is one piece of it, but really that existing customer base and the use of data, use of tools, the appetite to use the tools, and acceptance of the data to drive a stronger performance out of that in-place tenant. And so that's where we see an opportunity that will obviously lead to bigger in-place contract rents and an ability to drive revenue.

Speaker Change #164: So how we attract customers is one piece of it but really that existing customer base and use of data use of tools use of appetite to use the tools acceptance of the data.

Speaker Change #164: To drive stronger performance out of that in place tenant and so that's where we see an opportunity that will obviously lead to bigger in place contract rents and an ability to drive revenue.

Dave Cramer: And just one final word for me, I mean, how do you guys think of setting hurdle rates or what the benchmarks are for determining success in the pro-internalization and optimizing that delta to whatever levels you're targeting? Like, how should we, I guess, be able to judge whether or not? What determines success for you?

Speaker Change #165: And just one final one for me how do you guys think of.

Speaker Change #165: Setting.

Speaker Change #166: Hurdle rates or the benchmarks are for determining success and the pro internalization and optimizing that delta.

Speaker Change #167: To whatever levels youre targeting like how should we I guess to be able to judge or not quite.

Speaker Change #167: Determine success for you.

Dave Cramer: Well, I think we've got...

Dave Cramer: Well, I think we've laid out a couple of them around platform transition, acceptance of the way that the platforms work around, you know, rate change technologies and customer acquisitions and use of paid spend and marketing spend and, and our success ratios around conversion rate on the top end of the funnel through the funnel, you know, to rental. I think that those are numbers that we can continue to work on and refine, and then obviously, the occupancy gap is the first one And so I think let us get through, you know, the next couple of quarters of transition, get the platforms done, get the team transition done, and then we'll come back with a few more stats. I think that'll help you understand how we're looking at success.

Speaker Change #168: Well I think we've laid out a couple of them around platform transition acceptance of the platform to work around rate change technologies and customer acquisitions and use the paid spend and marketing spend in and our success ratios around conversion rate on the top end of the funnel through the funnel.

Speaker Change #168: The rental I think that those are numbers that we can continue to work on and refine and then we'll talk about.

Speaker Change #168: And then obviously the occupancy gap is the first one we pointed to as we work through this transition we think theres an opportunity to effectively carefully use.

Speaker Change #168: That occupancy lever to drive additional revenue.

Speaker Change #168: So I think let us get through the next couple of quarters of transition gets platforms don't get the team transition Ben and then we'll come back with a few more stats I think that will help you understand how we're looking at success.

Speaker Change #170: Fair enough. Thank you.

Thank you.

Operator: Thank you. Our next question comes from the line of Keegan Carl with Wolfe Research. Please proceed with your question.

Speaker Change #171: Thank you. Our next question comes from the line of Keegan Carl with Wolfe Research. Please proceed with your question.

Operator: Yeah, thanks for the time guys. Apologies, I think you might have said some of this, but I'm just curious about July in particular, where occupancy and rate both performed versus both 2Q and then also June, and then just on July in particular, I'd love to know how this compared versus your expectations. In other words, just where were you assuming July performance at the midpoint of your prior guidance?

Keegan Carl: Yes. Thanks for the time guys I apologize I think you might have said some of this but I'm just curious on July in particular, where occupancy and rate both performed versus both <unk> and then also June and then just on July in particular, I'd love to know how this compared versus your expectations in other words, just where are you assuming <unk>.

Ally performance at the midpoint of your prior guidance range.

Brandon Togashi: So, Keegan, in July, we did remark that occupancy was 86.6 at the end of the month. That's a negative 300 basis point delta.

Speaker Change #173: So can you again July we did remark that occupancy was 86 six at the end of the.

Speaker Change #173: Into the month.

Speaker Change #173: A negative 300 basis point delta to prior year. So it widened a little bit from the end of June year over year and also the comments that Dave and I gave earlier about just as we progress through June and July and things just being a little weaker than we would've liked to have seen obviously informed everything we put in a report last night.

Brandon Togashi: It's a previous year, so it widened a little bit from the end of June year over year. You know, also, the comments that Dave and I gave earlier about just as we progressed through June and July and things just being a little weaker than we would have liked to have seen obviously informed everything we put in the report last night. So, you know, occupancy down sequentially from June to July. Street rates also started to move downward, as they typically would seasonally, right?

Speaker Change #175: So occupancy down sequentially June to July Street rates also starting to move downward as they typically would seasonally right. Both both of those metrics that we typically start to to go lower sequentially. As you go through the back half of the year.

Brandon Togashi: Both of those metrics would typically start to go lower sequentially as you go through the back half of the year. So that's certainly built into our projections. It's just a matter of, you know, how much those competitive pressures and the lack of demand weigh on that dynamic as we progress through? You know, Q2, I would tell you just like the growth rate year over year.

Speaker Change #176: So that's certainly built into our projections, it's just a matter of how much to those competitive pressures and the lack of demand and how much does that weigh on on that dynamic.

Speaker Change #176: As we progress through Q2, I would tell you just like the growth rate year over year, it wasn't too material materially off from.

Speaker Change #176: When we were talking with you in May, but I would say the trajectory of how things were going as we exited June and July is what informed a lot of what we have talked about today and put in a report last night.

Brandon Togashi: It wasn't too materially different from when we were talking with you in May, but I would say the trajectory of how things were going as we exited June and July is what informed a lot of what we have talked about today and what I put in the report last night.

Brandon Togashi: Got it, that's helpful. And then, just shifting gears on the occupancy portion of the guide, I guess I'm just curious, I know you touched on street rate, but how should we think about the occupancy delta on a year over year basis for the rest of 2024? And does your guidance include any inflection in demand for the rest of the year? I know you mentioned that you expect it to kind of trend similarly to how it is now, but is there any sort of embedded, you know, inflection within either the mid or high end of the range?

Speaker Change #177: Got it that's helpful. And then just shifting gears on the occupancy portion of the guide I guess I'm just curious I know you touched on street rate, but how should we think about the occupancy delta on a year over year basis for the rest of 2024 and does your guidance include any inflection in demand for the rest of the year. I know you mentioned that you expect it to kind of trend.

Speaker Change #177: Similarly to how it is now but is there any sort of embedded.

Speaker Change #177: Inflection within either the mid or high end of the range.

Brandon Togashi: Yeah, Keegan, we do expect occupancy to continue to go lower as it normally would seasonally. But that 300 basis point negative delta at the end of July, the midpoint of our guide would assume that by the end of the year, that's probably still negative, but maybe more in like the negative 100 basis point range, such that the average for the back half of the year is a negative 200. And then the other dynamic that we have going on is just our contract rate, which, you know, has been positive year over year, but that, you know, that gap has been narrowing and narrowing and that is likely to inflect and be negative.

Speaker Change #178: Yes, so we do expect occupancy to continue to go lower as it normally would seasonally.

Speaker Change #179: But that 300 basis point negative delta at the end of July at the midpoint of our guide would assume that.

Speaker Change #179: At the end of the year, that's probably still negative, but maybe more on like the negative 100 basis point range such that the average for the back half of the year as a negative 200.

Speaker Change #179: And then the other dynamic that we have going on is just our contract rate.

Speaker Change #179: As you saw in our numbers has been positive year over year, but that gap has been narrowing and narrowing in that not as likely to inflect and be negative. So it's not negative 200 basis point occupancy coupled with a negative year over year on contract rate, which gets you to that implied growth on.

Brandon Togashi: So it's that negative 200 basis point occupancy coupled with a negative year over year on contract rate, which gets you to that implied growth in revenue that you saw in our guidance. The assumptions do not include, you know, material inflection regarding demand, as Dave mentioned earlier, if the Fed moves swiftly, you know, here in September, and maybe there's some pickup we get from what that could do also, if there's countercyclical demand because of, you know, job loss increases and things like that, and some of the transition that Dave described earlier that our business generally benefits from, you know, that those are the types of But at the midpoint, we're not assuming anything material from those events.

Speaker Change #179: On revenue that you saw in our guidance.

Speaker Change #179: The assumptions do not include a material inflection regarding demand as Dave mentioned earlier, if the fed moves swiftly.

Speaker Change #180: Here in September and maybe there is some some pickup we get from what that could do also if theres counter cyclical demand because of.

Job losses increase and things like that and some of the transition that Dave described earlier that our business generally benefits from that.

Speaker Change #181: Those are the types of things that could help us on the high and low end, but at the midpoint, we're not assuming anything material from those events.

Operator: Super helpful caller; thanks for the time, guys.

Speaker Change #182: Super helpful color. Thanks for the time guys.

Speaker Change #182: Thank you.

Operator: Thank you. Our next question comes from the line of Ronald Kamden with Morgan's family. Please proceed with your question.

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

Operator: Hey, just two quick ones for me. Just trying to understand sort of the same store revenue guidance, making sure I get it right. So, if you have it sort of down three for the year, and you're, you know, you're sort of in the down two year to date. So, that sort of implies the back half of the year, leaving the year, it's sort of a down four number, which would be the exit rate for the year going into 2025. Is that sort of correct? And is that the right sort of starting point for 2025 that we should be thinking about? Or am I missing something?

Ronald Camden: Hey, just two quick ones for me just trying to understand sort of the same store revenue guidance. Thank you Shai.

Ronald Camden: I get it right. So if you have it sort of down three for the year and Youre, how youre sort of a down to year to date, so that sort of imply the back half of the year exiting the year at sort of a down four number.

Speaker Change #185: Which which would be the exit rate for the year going into 2025 is that is that sort of correct and is that the right sort of starting point for 2025 that we should be thinking about or am I missing something.

Brandon Togashi: Your number, I've got a high three, call it 3-8 number, Ronald, versus four, but overall, I agree with your commentary. Now, how we get there, that's the back half of the year aggregate. How do we get there across Q3 and Q4, and what does that mean in terms of where you're actually exiting the 2024 year and beginning 2025? You know, that's the crux of your question, right? And I'm not prepared to give you any more color than what we've given here, but that'll obviously be impactful on what we're talking about in February when we talk about 2025 projections.

Speaker Change #186: Your number I have got a high three call. It three eight member Ronald versus <unk>, but overall I agree with your commentary now how we get there that's the that's the back half of the year aggregate, how do we get there across Q3 and Q4 and what does that mean in terms of where you are actually exiting 2024 year and beginning 2025.

Speaker Change #187: That's the crux of your question right.

Speaker Change #186: Im not prepared to give you any more.

Speaker Change #186: Color than what we've given given here, but that will be obviously impactful to what we're talking about in February when we talk about 2025 projections.

Brandon Togashi: Makes a ton of sense and then my second one was just going to expenses a little bit I don't know if you've touched on it but just you got some sounds like favorable appeals on taxes you know sort of labor and stuff just can you provide some high-level commentary on just where should we expect those to trend is this 5% number sort of the right run rate or is there opportunities to do maybe better than that over time?

Speaker Change #188: It makes a ton of sense.

Speaker Change #188: And then my second one was just going to expenses a little bit I don't know if you've touched on it but.

Speaker Change #189: You got some it sounds like favorable appeals on taxes.

Speaker Change #190: Sort of labor and stuff just could you provide some high level commentary on just where should we expect those to trend is this 5% number sort of the right run rate or is there opportunities to do maybe better than that over time.

Brandon Togashi: Yeah, long term, I mean, we've had great success, you know, five, six year averages of three to 4% OPEX growth. More recently, obviously, there's been pressures, you know, wage pressures, property tax pressures, marketing spend, certainly, which, you know, we didn't have to spend a whole lot on or certainly could dial back tremendously when demand was falling from the trees. But going forward for the back half of the year, I mean, I expect the second half growth year over year to be a little bit less, obviously, as implied than what the first half was.

Speaker Change #191: Yes long term I mean, we've had great success.

Speaker Change #191: $5 six year averages of three.

Speaker Change #192: 3% to 4% Opex growth more recently, obviously, there has been pressures wage pressures.

Speaker Change #192: Property tax pressures marketing spend certainly, which we didn't have to spend a whole lot on are certainly can dial back tremendously when demand was falling from the trees.

Speaker Change #192: But going forward for the back half of the year I mean, I expect the second half growth year over year to be a little bit less obviously imply.

Speaker Change #192: Implied.

Speaker Change #192: And then what the first half was and.

Brandon Togashi: And, you know, earlier comments about property taxes, you know, that'll be the big needle mover is whether or not we have some favorable results when it comes to the assessed values and levy rates in, especially, the Southeast markets where we've yet to get those final bills.

Earlier comments about property taxes that will be that the needle mover is whether or not were.

Speaker Change #192: We have some favorable results when it comes to the assessed values and.

Speaker Change #192: And levy rates.

Speaker Change #193: Actually like the southeast markets, where we have yet to get those final bills.

Operator: Great. That's it for me. Thank you.

Speaker Change #194: Alright, that's it for me thank you.

Ralph: Thanks Ralph.

Operator: Thank you. Our last question comes from a line from Eric Wolfe with Citibank. Please proceed with your question.

Thank you our last question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Operator: Hey, thanks for taking the follow-up. I know this call is going long here, but I think you said that around 60 to 70 percent of your stores compete with an LSI store. So I was curious, when they raised prices around late May, did that end up being helpful to sort of move in rents for your competing stores? I guess I would have assumed that it would be more helpful than some of the aggregate numbers you quoted would suggest, but perhaps they just didn't hold the price in long enough, or you saw more competition in other places. So I was just curious sort of what the impact of that was across your competing stores. Yeah, really good question. We were able to move.

Eric Wolfe: Hey, Thanks for taking the follow up into the Cosmo and long here, but I think you said that around 60% to 70% of your stores compete within LSI store. So I was curious when they when they raised pricing around late may did that end up being helpful to sort of move in rents for your competing stores I guess I would have assumed that it would be more helpful than that.

Speaker Change #196: The aggregate numbers you quoted would suggest but perhaps they just didn't hold the price and long enough, where you saw more competition or other places just curious sort of what the impact of that was.

Speaker Change #196: Costs are competing stores.

Dave Cramer: Sure, yeah, a really good question. We, you know, were able to move, particularly in April and May and really into June, street rates up. And so, yes, I think having, you know, a little less competitive pressure around some of the markets and seeing some positive movement in street rates certainly helped. To the point Brandon was describing, by mid-June and into July, we saw a reversal of that improvement in street rates, and certainly that put pressure on, I think, all of us from a competitive set to react to the changing street rate environment that really happened, you know, in the back half of June and July.

Speaker Change #198: Sure Yeah really good question.

Speaker Change #199: We were able to move, particularly April and May It really ended June street rates up and so yes, I think having a little less competitive pressure around some of the markets and seeing some positive movement in street rates certainly helped.

So the branch point, Brian was just driving by mid June and into July we saw a reversal of that improvement in street rates.

Speaker Change #199: And so that put pressure on I think.

Speaker Change #199: All of us from a competitive set to react to.

Speaker Change #199: The changing street rate environment, they really happened back half of June and July so.

Dave Cramer: So, that's, you know, as you look at the second quarter, I think that probably is, you know, when we were talking to you out there in May, we were a little more optimistic about the second quarter. But it certainly changed in the second half of June and July.

Speaker Change #199: That's.

Speaker Change #199: As you look at the second quarter I think Thats, probably is when we were talking to you out there may be a little more optimistic about second quarter. It certainly changed back half of June and July.

Speaker Change #200: Thanks for taking the follow up.

Speaker Change #201: Yeah, absolutely. Thank you.

Speaker Change #200: Yeah.

Operator: Thank you. There are no further questions at this time. I'd like to turn the call back over to George for some closing remarks.

Speaker Change #200: Thank you there are no further questions at this time I'd like to turn the call back over to George for some closing remarks.

George Hoglund: Thank you all for your continued interest in the NSA. We hope you enjoy the rest of the summer, and we look forward to seeing many of you at the upcoming conferences in September. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you for watching!

George Hoglund: Thank you all for your continued interest in the NSA. We hope you enjoy the rest of the summer and we look forward to seeing many of you at the upcoming conferences in September.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Speaker Change #200: Okay.

Speaker Change #200: This.

Speaker Change #202: Todays teleconference. You may disconnect your lines at this time, thank you for your participation.

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