Q3 2024 Public Storage Earnings Call
Reigns and welcome to Public Storage, Third Quotters, Third Quotter 2024 earnings conference call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation.
and I would like to ask a question at that time. Please press star 1 on your telephone keypad.
If anyone needs operator assistance during the conference, please press star zero on your telephone keybed.
As I remind you of this conference has been recorded, I would now like to turn the conference over to your host, Mr. Ryan Burke. Thank you, you may begin.
Ryan Burke: Thank you Rob, hello everyone. Thank you for joining us for our third quarter, 2024 earnings call. I'm here with Joe Russell and Tom Boyle
Speaker Change: Before we begin we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meeting of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties.
All four looking statements speak only as of today October 31, 2024 and we assume no obligation to update, revise, or supplement statements to become untrue because of subsequent events.
A reconciliation, two gap of the non-gap financial measures we provide on this call is including our earnings release.
You can find our earnings release supplement report, SEC reports, and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourselves to two questions. Of course after that if you have more, feel free to jump back and cue. With that, I'll turn it over to Joe.
Thank you Ryan and thank you all for joining us today.
Tom and I will walk you through our recent performance and updated views, then we'll open the call for Q&A.
Joe: As we anticipated, operating fundamentals are stabilizing across our portfolio and the broader industry.
Joe: We started the year with sequential revenue growth acceleration in a handful of markets.
We are now achieving acceleration across most markets and expect the trend to continue.
The improvement will be gradual and takes some time to be fully reflected in our reported financial results.
Joe: But as we'll discuss today, many things are moving in the right direction for public storage.
In particular, pricing for new customers is stabilizing with moving rents down 9% year over year in the third quarter and down 5% in October.
Joe: This is a meaningful improvement from the first quarter of this year when moving rants were down 16%.
Our in-place customers are also behaving very well.
Payment patterns are strong, average length of stay is long, and move outs are down year to date.
All of this speaks to the convenience and affordability we provide to our customers.
Joe: with Move-In Rents down nearly 30% 6 2022. We have become even more affordable relative to other space alternatives, including moving into a larger home or apartment just to get the incremental space.
Joe: South Storage is the affordable and convenient choice.
The supply environment is also on a favorable path with deliveries of new competitive properties slowing further over the next couple of years.
Joe: Less New Competition will support operating fundamentals on top of the improving demand trends.
We continue to focus on growth enhancing initiatives that are unique to us as well.
Public Storage customers are fully embracing the new and modern experience we've created by putting a full slate of digital engagement options in their hands.
Joe: and the CISC, these options complement the service provided by our fantastic property managers, local teams and customer care center representatives.
The ability to choose between interacting digitally and in person is a major draw to customer-seeking cell storage today.
I am proud of the entire team's efforts in creating the industries, most comprehensive, hybrid digital operating model that cohesively connects our customers, team, and systems across field and corporate operations.
and we're tracking ahead of schedule on our transformation with now 75% move ends using e-rental or digital online lease.
We have nearly 2 million PS app users.
Joe: and on a daily basis, tenants across our entire portfolio using our digital property access and remote customer service.
The transformation is amounting to a win-win-win. Across our customers, team members and financial performance.
Through it, we have created more specialized and career advancing roles across the company.
New Opportunities for our property managers have been particularly well received as they now have career paths that aren't available elsewhere in the industry.
Joe: Do in part to these efforts we are proud to have received the great place to work designation for a third year in a row.
Joe: Another area focus is utilities.
We have reduced usage by 30% through conversion to LED lighting across the portfolio.
Joe: and installing solar power at more than 800 properties so far.
We recently increased our solar goal to 1,300 properties by the end of 2025.
The team has innovated and implemented at a rapid pace over the past few years.
We are fully in gear and are excited about more to come.
Joe: Now, Tom will provide additional detail.
Tom Boyle: Thanks Joe.
with Fundamentals Improving and the team keenly focused on transformation and optimization initiatives. We are very well positioned with signs that the acquisition market is picking up.
Tom Boyle: We see more one-off deals, more portfolios and evidence of convergence around buyer and seller expectations following a quiet couple of years.
Tom Boyle: A growth-oriented capital and liquidity profile is strong. Industry-leading leverage, balance sheet capacity, and cost of capital have us poised to execute on pent-up seller dialogue in combination with our operational and acquisition integration advantages.
Schifting to our third quarter financial performance, we achieved Core FFO of $4.20 per share, representing a 3% decline compared to last year.
Tom Boyle: Revenue in our same store portfolio of stabilized properties declined 1.3% compared to last year, with a relatively even balance between rent and occupancy.
A couple important things to note regarding the stabilization that Joseph spoke to.
1. The second derivative of growth continues to improve. Revenue growth in the quarter decelerated 30 basis points sequentially relative to the growth in the second quarter of this year.
This is significant improvement from the 380 basis points of deceleration reported from the second to third quarter of last year.
Secondly, as implied by our guidance midpoint, we expect our nominal same-store revenue growth to begin improving due to the positive trends that Joe described.
At the midpoint, the fourth quarter would be the first sequential growth improvement in more than two years.
Moving now to the Outlook.
We reiterated our core FFO guidance of $16.50 to $16.85 per share.
Rolling through higher third quarter GNA and lower third quarter Ansularian come while lifting our same store revenue outlook for the year.
The strong performance of our non-same store pool continues. We increased the outlook for incremental NOI from this pool of assets in 2025 and beyond through stabilization to 120 million in total to come from this pool.
Currently at 23% of our total square footage, the pool will be an engine of growth for the remainder of this year and into the future.
with that I'll turn it back to you, Joe. Thanks Tom.
at Public Storage, our team continues to enhance the industries Strongest Brand.
Highest Quality Portfolio.
Best Revenue in Hawaii and N.O.I. Margin.
Leading Acquisition, Development and Integration Platforms.
the lowest leverage in best cast cost of capital.
Tom Boyle: the Highest Free Cacheful Conversion and Strongest FFO in dividend growth over the past few years.
Tom Boyle: With many things moving in the right direction, including improving operating fundamentals, transformation efforts that are further enhancing our advantages, and a reinvigorated transaction market, we are excited about public storage's trajectory over the near, medium, and long-term.
Tom Boyle: And finally, I'd like to make a call out to the full operations and asset management teams at public storage during the two significant hurricanes.
Tom Boyle: Fortunately, our employees and properties were well prepared with safety as the top priority, and we are grateful to have had relatively minor impact.
Speaker Change: with that. I'll turn the call back to Rob to open it up for Q&A.
Thank you. At this time we'll be conducting a question and answer session.
If you like to ask a question, please press star one on your telephone keypad.
As a reminder we ask that you please limit to one question and one follow-up and recue if necessary.
Tom Boyle: A confirmation tone windowgate you're on is in the question queue. You may press star 2 if you like to remove your question from the queue.
One moment please while we pull for questions.
Our first question comes from Jeff Spector with Bank of America. Please proceed with your question.
Great, thank you. Then we will start just a big picture I consider you guys did.
Be conservative, especially with your outlook. So just given the time of the year, November, you've made a few comments here, not just about stabilization, but actually improvement, which
Speaker Change: I mean, it seems like you're saying, you're going to end the year strong again, Boads Well for 25. I guess, can you talk about that a little bit more of the decision not just to talk about Okay, as you said, it's clear you see signs of stabilization.
But, you know, it does seem like you're messaging pretty strongly here that you expect improvement into 25. And I guess is that regardless of improving housing, etc.
Speaker Change: So yeah, Jeff, there's, you know, a few things obviously that give us confidence that, you know, 20, 24 has become the year as we predicted of stabilization, where we've seen as Tom and I noted in our opening comments.
the progression of better and higher degrees of market improvement that we're seeing across more of the portfolio than we've certainly seen at the beginning of the year. That continues to trend now in the fourth quarter of 2024.
Stabilization should fundamentally lead to improvement. So we're pleased by the continued trajectory we're seeing as we've spoken to Stabilization and with that we're going to be in a better position going to the 2025 then we were going into 2024.
Speaker Change: and many things are trending well, additively, and then we'll see what impacts other effects could have to, whether it's an improved housing market, change an interest rates, continue growth in the economy, etc.
But again, we're very pleased by what we continue to see through 2024.
Thanks and just to clarify, you know, again, improvement, you don't really need to, if the man just continues as is, or you talked about improving demand, but that demand has improved, if it stays as is.
First, the backdrop you described, including lower supply pressure in 25, that ties into your thoughts on improvement.
Yeah, I mean I think there's a couple things there, Jeff. We've been talking about stabilization.
of Demand throughout this year and in Joseph's prepared remarks he commented on that, including industry wide.
Demand, but we've been speaking all year to the fact that we've actually seen some improvement.
Tom Boyle: in a number of different markets. So some of the early markets we called out, like Seattle, for instance.
is still actually negative on revenue growth for the third quarter, but is consistently improved quarter by quarter throughout this year.
and so that's been a leading market that we've been observing and there are other markets like that and frankly more that doesn't mean
that overall we're seeing significant growth obviously our outlook.
Tom Boyle: is still calling for St. Sorevenu growth to be down for the year, just a touch better than 1%. So as Joe spoke to in his remarks, the stabilization will take a little bit of time to roll through our financial metrics.
Tom Boyle: and I'm going to talk about the first step. But stabilization is the first step. And we've seen that across the number of markets. And obviously update you on a path to recover as we move from here.
Speaker Change: Great thank you.
Tom Boyle: Mr.
Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.
Good afternoon. Thanks a lot for taking my question. Seems like there's been an improvement in the movement ran down, 9% in the third quarter, down.
5% in October, is there any, you know, what do you think is driving that and then also can you provide the October occupancy update just to provide a little bit more context around the influence on street red.
Speaker Change: Yes, sure, happy to. So as you noted, we've continued to see improvements on moving rants.
and through the year.
Speaker Change: the October number is encouraging.
and I would call out that it's driven by improving demand trends. When we started this year, industry wide.
Speaker Change: Demand was down still 20% and we're in a point now in September, October, where it's roughly flat year over year. And so some make all that comps, but again...
You need to laugh those comps without setting fresh new lows to stabilize and that's what we're starting to see here.
Speaker Change: We've got some markets as I highlighted earlier that have proven rank growth as we sit here today But some are certainly still setting fresh lows. So the dynamic there it is a stabilization trend as we've been anticipating heading in through the fourth quarter of this year
Speaker Change: in terms of further October updates.
Occupancy is down about 90% or 90% down 90 basis points.
Speaker Change: As we sit here today, the move in rents again down 5% for the month. Existing customers are performing well, move out so again down year over year in the month.
So, continuing encouraging trajectory from the existing customer base and really strengthen the consumer overall.
Speaker Change: and you've talked a little bit about demand.
Proving and recognize it, some of it is comparisons, but is there any other factors that are describing demand?
in particular whether it's, are you seeing a better, are you housing turnover, are you seeing a better demand from apartment renters, just trying to get a sense of, who is using the facility is more. Thanks.
Yeah, that's a great question Michael. I think the demand picture has shifted over the last several years, right? We've talked about how the existing home sales driven demand has often
Speaker Change: The apartment rent her activity is continued to be strong and at the same time we've seen more customers that are using storage that have ran out of space at home, frankly record usage of that through this year. And overall levels of demand are pretty consistent year-vehres we sit here entering into the fourth quarter.
Speaking to housings specifically, there is some encouraging.
Pending Home Sales numbers that came out yesterday, you know, we watched that all closely, but at this point. What we're looking for again is stabilization and we're looking for not setting fresh lows. I mean, not demand going a lower from here, and that's what we're starting to see across the portfolio.
and maybe Michael Tad on one other thing, you know, again no different but consistent.
and Lincoln State are still longer than pre-pandemic levels we've seen.
with many of the things that Tom just spoke to, customers continuing to retain space on average higher than what we saw certainly pre-pandemic and again with the stabilized
Speaker Change: Set a metrics around the linkancy and payment patterns, et cetera, no different view relative to the stable customer base that we are very pleased to have here at Public Storage.
Thank you very much for looking at the fourth quarter.
Great, thank you Michael.
Our next question comes some smear canal with Evercore IIs I. Please proceed with your question.
Speaker Change: Hi, Tom. As it relates to the movement rates, you mentioned down 5% in October.
Speaker Change: I mean, is there a way to kind of think about the trajectory of that blue and racer of the next, I don't know, let's call the next several quarters, do we need the housing market to pick up to see that trend-turn positive or help us think through that a little bit more, please.
Sure, so as we've noted a number of times in the call already, we're looking for as a stabilization and level of demand as that stabilization occurs, you should see a stabilization in things like moving rants and customer activity.
Speaker Change: and so in our outlook for the year, we've expected that moving rants are down mid-single digits at the end of the year so it feels like we're heading that direction based on October performance.
But then we're likely to hit the trough of the year just seasonally. And so without getting into specifics around assumptions for 2025 would expect it, we probably would start the year clearly at that sort of zip code and would take.
the the list of demands seasonally in the spring to meaningfully improve that number from that point.
Okay, and then just on the shifting gears a little bit on the expense side, you know, payroll has been down this year.
in the quarter and even for the nine months in the September.
is that just a function of sort of higher e-rantles you're doing that dynamic, so I don't see how much.
Further in terms of savings, there is kind of an internet year.
Yeah, I talked about the many advantages that we continue to
Lee in the industry relative to our digital platform, you know, one key being the one you noted our e-rental, our digital leasing platform.
Now with 70 to 75% of our customers using that channel.
We continue to use that as
One way of optimizing the way in which we're using employees and properties relative to their optimization and skill sets and the things that they can do even on a more.
Focus basis. So it's just worked well not only for customer interaction, but employee engagement and employee opportunities relative to. As I mentioned, different specializations that we're putting through in different career paths, et cetera, property management.
Speaker Change: and the level as well. So the right news that that leads to our levels of optimization that continues to work well, not only for customers but for employees as well.
Speaker Change: Thank you.
Speaker Change: Thank you.
Our next question is from Eric Wolff with City. Please proceed with your question.
Speaker Change: Hey, thanks. I was just curious in the markets where you've seen the biggest occupancy effort, a couple of them. Are you seeing any greater signs of improved movement pricing there, or is the customer still just very elastic to that movement price? And effectively just wondering if it's improving the occupancy should be viewed as a leading indicator of pricing or if there are other dynamic steps that's programmed.
and you got from happy.
Sure, I would say it's improving demand trends overall, right? We're trying to balance both occupancy as well as rental rate.
to maximize revenue. So occupancy is certainly one thing you can look at.
You know, but...
Speaker Change: and just using Seattle as an example is a market I highlighted earlier, occupancy there.
You know, was up 35 basis points year over year and has positive moving right growth so there's certainly some momentum in that market but it's not purely occupancy based.
and I guess...
Based on the tests that you're doing and I get them assuming that you're adjusting your algorithms, the test varies price points and seeing how the customers responding Like are you seeing any de-creased in that sort of elasticity of demand or when you adjust pricing like you see a big shift in revenue potential from from potential changes in all consistency.
Yeah, so I guess taking a step back we're looking to try to optimize the revenue associated with customers that come in the door and that that's based on our understanding of what our inventory is like to likely to be and so we understand what
What likely rental units we have to offer our customers and so we offer those online and in the store.
At the same time, we have an understanding about what demand is for that sort of unit at the local trade area level.
and to your point around price sensitivity, we're consistently testing and augmenting our understanding of what that customer price elasticity is, but if you have an understanding of what your inventory is to sell.
Speaker Change: and what the demand is for the unit and the price sensitivity, we're trying to optimize that equation to lead to the maximum revenue opportunity for public storage given the amount of inventory we have there to rent.
and what we continue to see as customers are competitive and price sensitive to new customers but place a lot of value on those units once they move in.
and that's been pretty consistent over time.
Speaker Change: God, thank you.
Speaker Change: Our next question comes from Eric Loopchow with Wells Fargo. Please proceed with your question.
Great, appreciate taking the question. You touched on this a little bit about how you were encouraged by the transaction market, picking up a sound like that's more likely into 2025. So maybe you could give us some color on.
We're kind of bid-asked spreads are and what kind of stabilize yields you're seeing on the transaction activity you're under right into today.
Yeah, sure Eric, you know we've spoken to this, you know, for the last few quarters, which
You know there's been a lot of interest on sellers behalf to potentially trade but
Speaker Change: Fapsley, Barry.
if you have indeed done so.
Speaker Change: and we've got almost now a two-year track record where again industry transaction ball volumes have been quite low, you know, in historic level.
Speaker Change: So
Now, you know, rounding out, you know, 2024, differently even then we've seen in prior quarters the volume of not only those inquiries but, you know, again, even some additional assets coming through traditional brokerage channels and otherwise, you know, there's momentum building.
Again, it's tough to say yet what the bid asks for. It's going to be because a lot of those transactions haven't.
I've been completed yet. We've had a lot of inbound calls, both, you know, again from owners that are, you know, looking to us, you know, even on a private basis to potentially transact.
So we're encouraged by the fact that, again, after two years, there's, I think, a landscape of different opportunities, you know, rounding out this year and going into 2025.
will see how that plays out, but you know I...
Speaker Change: would say the unusual for us to go into a third year of the low volume that we've seen.
and with that we're encouraged by the type of assets that are coming to market both small and large and the receptivity in a different way that owners have, I think, settled out relative to their price expectations, etc.
Speaker Change: That's the top four then I guess
Secondly, I think you touched on the...
and the kind of existing customer actively getting a little bit better in terms of ECRIs than you previously expected, so maybe you can provide a little more color on that. Is that your ability to push rents to the newer customers coming in at lower rates or your longer duration customers that are more receptive to that any color that would be helpful? Thanks.
Speaker Change: We sure, yeah, I think it's a number of those factors you highlighted. The existing tenant pool continues to be strong as Joe mentioned really across.
the metrics that we monitor, be it payment patterns and the linkancy, lengths of stays, vacate activity, customer price sensitivity to rental rating increase, all pointing to.
and St. Cussmer Bay, which is encouraging and we've been pleasantly surprised as we've moved through this year and really that was the...
Speaker Change: that the primary driver of the lift and revenue outlook for the remainder of the year has just continued strong trends there. In terms of the rental rate program in particular,
It's a combination of the price sensitivity being very strong and frankly it touched better than we expected, as well as the continued follow-through as you mentioned of those newer customers that we moved in over the past year, year and a half.
given our strong move in volumes over that time period that give us more contribution really to the existing customer-writing increased program.
Thank you.
Speaker Change: Thanks. Our next question comes from Nicholas Eulico with Scoshabank. Please proceed with your question.
Nicholas Eulico: Thanks. Turning back to the move in, priming.
We look at the promotional discount they were up.
in the third quarter or year over year. There also looks like at the percentage of revenue.
Nicholas Eulico: and one of the highest...
Nicholas Eulico: Or we're presenting a move in Ryan's one of the higher numbers in the last year or so. So, can you talk a little bit about what's driving that higher promotional discounts in the third quarter and how should think about that?
and Pack going forward maybe in the fourth quarter because then you talk about moves and rounds that delts improving but I'm not sure how we should think about the promotional discounts in the fourth quarter.
Speaker Change: Sure, yeah, promotional discounts obviously have been flowed throughout the year based on really the at the unit level analysis and pricing strategies.
Speaker Change: and we did use promotions a little bit more into the third quarter.
Speaker Change: but again pretty modest still relative to historical trends and so throughout the year.
and the first month.
Speaker Change: Promotion in the third quarter was closer to that 60% number.
Speaker Change: The...
Speaker Change: the Comparison period in say 2019 for instance, would have been closer to 85 or 90%. So there's no question that there's continues to be...
You know, an ability for us to utilize promotions as well as advertising as moving rents to optimize that customer acquisition plan.
Okay, that's a helpful time. I guess it's falling off on that. I can just remind this how that works for the promotional dollars, like the timing and just the accounting treatment, and that's just all the money literally being sort of spent as, and it's a contract revenue account. In the quarters, there's some sort of like, amazesation of the promotions.
Sure, our most popular promotion is the dollar special for the first month rent, and as you just highlighted, that's a contra revenue discount that will be applied in that first month. And so if we move a customer in on September 1st, we're going to recognize one dollar of revenue from that customer in rent.
Speaker Change: Thanks for your time.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Spencer Blimger with Green Street Advisors. Please proceed with your question.
Yeah, thank you. Maybe just a follow-up on the transaction landscape. In terms of what you're seeing marketed today, is it predominantly still the single asset deals or are there any portfolios being marketed today?
Speaker Change: Yes, Spencer, it's a combination, you know, the traditional, you know, smaller deal activities been with us.
and again that's been...
Speaker Change: Still muted, as I mentioned, overall, but you know, there's still, you know, fair amount of, you know, individual or small asset activity in the market, but there are larger portfolios that are starting to surface. Again, that's...
and I know that there are no different than what we've spoken to over the last couple of years where we had a lot of private inquiries, particularly on some larger portfolios, but there are now a few that are starting to come into the market through. I would say both traditional processes and then still some of the, you know, again, off market conversations were continuing to have as well.
Speaker Change: Okay, thanks and then just on the UCRI front, if we do rough back at the envelope math, like just given where a moving wrench for the quarter, it does appear that rump-bumps were maybe a little bit higher than the quarter is that fair to say and are you able to just give us an idea of where you see UCRI's ending year on an annual basis?
Yeah, just given what I had spoken to in terms of the performing better and the third court. I would agree the contribution and the third court was a little bit better year over year, but it would go back to the commentary I just made around.
and a lot of that has driven by those newer customers that we moved in over the last 12 to 18 months and their contribution to that program. I really driving it versus a change in strategy or otherwise.
Speaker Change: I'm sorry, Mr. Thank you so much.
Speaker Change: Thanks Spencer.
Our next question comes from Juan Fenabrea with BMO Capital Markets. Please proceed with your question.
All right, thanks for the time. Just on the acquisitions market, recognizing there hasn't been a ton of actual deals closing, but just curious on your expectations for Cap rates that I believe earlier in the area.
Speaker Change: and looking for a six plus percent initial yield or stabilized yield. So just curious if that's moved down is...
The general market has improved from a reach cost to capital perspective and rates of come down at least for on the unsecured size. It's just curious, on the related expectations on pressing and cap rates are where you've been going to do deals.
Speaker Change: Yeah, thanks. Well, good question. I would generally say that the way you characterize it is pretty consistent and has been for some time Meaning that, you know, we're still looking for stabilized yields that are in the 6%
Speaker Change: sort of zip codes.
and what that typically means is we're acquiring things in the Fides. So that was the case for simply last year, probably the largest private transaction that we've been speaking to, but that's been consistent for the last year or so and that's the current state of play obviously as more transactions occur here over the next.
Speaker Change: and couple quarters will have more to talk about on cap rates, but that's the right sort of said code to be thinking about.
Speaker Change: Okay, and then just curious if you could talk a little bit about the strategy you're thinking behind the COO hiring and what you expect.
The seat to bring or the person to bring as result is
Speaker Change: Abietition.
Yes, sure, you know, obviously without question as you
and Cene and Track, the things that we're doing relative to our investment in all the tools, digital optimization, the advantages that we're continuing to deploy through our scale or brand. And everything that, again, drives operations day to day, the leadership tied to that's incredibly critical as well.
So we're excited about Chris Sambar joining us.
Great experience with very solid career at AT&T for over.
Speaker Change: 20 years.
certainly understands many of the components of what drives our business particularly technology and infrastructure related great experience with running large teams within the AT&T platform. You know, in his last role, he had over 25,000 employees reporting to him.
These are all key attributes that we're excited to bring into the senior leadership ranks. And we're very confident he's going to be able to put a strong mark on the business operations and other ways.
Speaker Change: Thank you.
Speaker Change: Thank you.
Our next question is from Todd Thomas with Keybank Capital Markets. Please receive with your question.
Yeah, hi, thanks. I wanted to go back to the promotions in the quarter and some of the commentary there and ask about the use of promotions in October as we think about the down 5% move-in rent and the improvement that you saw there relative to the third quarter and then I think in the past you've previously indicated that the use of promotions.
on some level may have attracted a slightly lower lifetime value customer. Has that change now or are you seeing a better response and sort of stronger customer entering the portfolio with the use of promotions?
Sure, that's a multi-part question there we'll get into. So an October I take year or year promotions pretty consistent.
to prior year, the driver of the promotions in the third quarter was just a different mix of promotion. So we used a little bit less of the 50% off and a little bit more of the dollar special. And that's just more tactically on the ground.
In terms of the promotions, you'd write different promotions, have different profiles, they attract.
Speaker Change: Customers and ultimately are used based on the amount of inventory we have to sell.
the pricing dynamics in the local market.
Speaker Change: and our tune to try to maximize revenue over the medium term in conjunction again with advertising and moving rental rates.
Speaker Change: Okay, and then my second question I wanted to just ask or try to clarify the occupancy update that you provided for October was that.
The Union at De-Crease from September, so down 90 basis points, or do you mean that the year over year, De-Crease at the end of Vot Coburn is down 90 basis points. Can you just clarify and maybe just provide an occupancy rate?
for where in the portfolio sits today.
Yeah, that's good clarification there Todd, the, the what I was speaking to was 90 basis points year over year and as we've talked about through this year we had a little bit more occupancy uptick through the summer and I'm anticipated a little bit more occupancy decline into the fall and we've seen that that play out kind of as anticipated.
Speaker Change: and I'm more anticipating, you know, through the year. Our last outlook update we said down 80 basis points on average, given the increase in the outlook. It's probably down closer to 70 basis points on average through the year from here.
Speaker Change: but continued to see a closing of that gap overall on a year of your basis but some different seasonal patterns through the year.
Speaker Change: and then in terms of
Speaker Change: Coror and occupancy, or month and occupancy, obviously we haven't closed the month of October but it'll be pretty similar to where we ended September.
Speaker Change: I say that's not a number that you often see, but just seasonally you don't see a big move there. So just a touch lower than where we finished September.
Speaker Change: Okay, thank you.
Speaker Change: As a reminder if you'd like to ask a question please press star one on your telephone keypad.
and John Burke. One moment please where we pull for additional questions.
Speaker Change: Our next question comes on, Ron Camden with Morgan Stanley. Please proceed with your question.
Hey, just following up on the stabilization comments. I think you talked about different markets and obviously moving, moving, rents sort of improving. But anything on the website data and the website visits, any other sort of data point that are sort of confirming that story would be helpful.
Yeah, so we've talked about industry-wide demand and that really reaching parity as we moved into September and October that's been really encouraging and we've continued to see good traction.
Speaker Change: from WebVisit through our platform as well. Really a combination of strong web visits that are in positive territory over year, as well as good conversion rates, frankly, online and through our different channels to the store.
Speaker Change: and then just my second one was I think you didn't interesting that on 70 to 75% I think I heard that right through the channel just just wondering is your thinking about it in the next week or five years is that sort of optimal is there is there more room there and what the implication could be on cost savings.
Speaker Change: Yeah, I think.
That's right, so about 75% of our customers are utilizing a digital channel to complete their rental And that's a number that's grown pretty steadily over the last several years
Speaker Change: and just a reminder we're not providing any sort of incentive for customers to utilize that as their way to complete their rental agreement.
Speaker Change: but customers continue to embrace it and frankly, more and more year over year. And so we're optimistic that more customers will choose that channel to complete the rental agreement before they arrive at the property over the next several years and that will lead to continued optimization alternatives.
Speaker Change: that Joe spoke to earlier in terms of providing that win-win win-win, both for customers and how they choose to complete their rentals, our employees and how we think about their career opportunities, specialization and centralization that we've utilized as well as the financial impact.
Speaker Change: Yeah, Ron, I'd add to, you know, it's certainly very impactful channel in the infrastructure and...
the effectiveness of our digital platforms, certainly playing through relative speed, effectiveness, et cetera that customers are embracing. We also, as I noted in my opening comments now, have about 2 million.
and the user is on our PS app. That tool is well. Again.
Speaker Change: is additive to the way customers are interacting with us. It's much easier from an account management standpoint, communication standpoint, et cetera.
So, you know, we're, you know, bolting on and, you know, building a very robust environment. The customers is top-mentioned or not being incentivized by us to use these tools. They're telling us these are tools.
Speaker Change: They want
and the gravitating to him very aggressively. So we'll still provide.
when customers require it, face-to-face interaction with, you know, again, our skilled property managers at properties, but this is one additional way for them to have that much more of an effective.
Transaction with us and then from an ongoing relationship standpoint, it's a different level of service we can provide them through the PSAAP as well.
Okay, that's it for me. Thank you.
Speaker Change: Okay, thank you.
Our next question is from Caitlin Burke with Goldman Sachs. Please proceed with your question.
Hi everyone. I don't think this has been talked about yet, but we talked about acquisitions and the volume. It looks like guidance is reduced for the year, but you mentioned the pent-up seller dialogue. So is that just timing and you expect an above average January or have some deal fallen off or on some mixture?
Yeah, you hit it, it's just a timing element which is we have been anticipating that the transaction market would improve throughout the year and it has but just in terms of the level of dialogue it's really picked up over the last 60 to 90 days and so a good bit of the activity that we're speaking about is likely to fall in the start of 25 versus finishing out closing in in 24 but obviously you saw we had under contract pick up in acquisition volumes.
and we have more to come on that front as we close out the year but some of it will slip into 25.
and then maybe just on your own development, I was wondering if you could give a sense of your own pace of development deliveries in 24 and how you think that will end up comparing to 25 and 26 is a pretty consistent increasing decreasing.
Speaker Change: So yeah, Caitlin, you know, this will be a record year of deliveries for us from a development standpoint. So we'll finish out 2024 with about $430 million of development deliveries that includes both ground up new construction as well as redevelopment.
and the
The work and the timing of consistent level of deliveries year to year can be somewhat challenging, particularly with many of the hurdles that we're facing with development across multiple markets, longer and tidalment times.
Speaker Change: More complicated and approve of improvement processes.
You know, different areas of the business from a development standpoint that create more risk and many of much of that time related.
Speaker Change: So we're going to see a bit of a drop going in the 2025.
Speaker Change: and with that we'll continue to work to elevate the amount of deliveries we'll see in 2020.
Speaker Change: 6 and beyond.
So the team's doing a great job developing and redeveloping great new assets, giving us more scale and markets. And with the record amount of delivery this year, it was a great bar to hit and we're going to challenge ourselves to match if not exceed that.
Speaker Change: Subsequent Years, but 2025 will see a slight decrease in deliveries.
Speaker Change: Thanks.
Thank you.
Our next question comes from Brandon Lynch with Barclays. Please proceed with your question.
Brandon Lynch: Great, thanks for taking my questions. Maybe the labor front, how do you balance the labor saving cost savings versus the risk of reducing onsite staff too much? Pure your cognizant of this risk, just how you monitor it and how you think about it.
Speaker Change: Yeah, that's, you know, part of, you know, what we've been very diligent about making sure that we're using a variety of different tools, analytically and otherwise to not only property by property understand, you know, the impacts of the way that we've been changing our operating model that
May give us the opportunities I've spoken about to reset the type of skills and labor that we have with properties to properties, but we've got growing sets of analytics that help.
to predictively look at staffing levels, you know, because sometimes properties are busy for instance.
You know, beginning into the month or it could be because of some seasonality issues that may be different times of the month different times of a week.
Speaker Change: So we've got a lot of very interesting and growing analytics that are helping us optimize.
the Ability to put our own people where we know they're going to be able to serve customers even more effectively.
Speaker Change: Part of that also relates to the specialized roles that our platforms have been able.
to create within our property management ranks. So a lot of great tools.
and the Givets the Confidence that we've got a very good balance.
and as I mentioned earlier, customers are gravitating to this quite effectively as well. We've got a vibrant back channel that's become more and more effective through our care center as well.
So we've got many tools, even beyond just the amount of labor that's resident at a particular property that actually enhances the amount of service that we can provide customers.
Speaker Change: Great, thank you, that's helpful. My other question is just on market strength. Tommy Caldott Seattle is being particularly strong. Florida has been weaker in some of the past quarters. Maybe just gives us an update on which ones are performing best, which ones are still struggling a bit.
Yeah, so we provided a good list of markets that have.
started to accelerate earlier in the year, so I mentioned Seattle, but
Speaker Change: the DCs and San Francisco's.
as well, the markets that we've highlighted that are still working through a normalization to continue to be those that were really the highest flyers.
Speaker Change: [inaudible]
That said, even those markets that maybe are having a tougher go at it, if you look at overall changes in same-store revenue growth year over year, you're starting to see some improvement in some of those markets, like in Orlando, for instance.
for the quarter, revenue was down 6.1 percent, but that's frankly starting to improve from there. And so some of those initial indications of stabilization are occurring in in a few of those markets as well, even those that had really strong performance in 21 and 22.
You know, on the west coast of Florida, you highlighted Florida specifically. Joe highlighted the hurricane impact.
we disclosed that that's likely to have.
Speaker Change: about a $7 million impact financially.
but at the same time the customer traffic on the west coast of Florida has impacted and we want to be there to help serve those customer bases as they seek to rebuild on the west coast of Florida and so we've seen an increase in move-in activity and occupancy there related to the storm activity and really the storm rebuilding.
Speaker Change: Great, thank you.
Speaker Change: Our next question comes from Ki-Bin Kim with Truist Securities. Please proceed with your question.
Thank you. Good morning. Just going back to some of the comments on
Ki-Bin Kim: Stabilization, correct me if I'm wrong, but last October I thought you guys cut rates pretty deeply. So when you talk about stabilization
How do you take that into account? And when you look at rent trends sequentially, does that paint a similar story of improvement?
Speaker Change: Yeah, I think there's a few things there. One, I'm giving you a rent number in October that is kind of an apples-to-apples rent number and again we're looking for move-in rents to be in the kind of down single digits towards the end of the year and I think we're on track for that.
Speaker Change: Okay, and on the hurricane impact, how much NOI benefit did you get on the portfolio level from people maybe moving in?
and as I noted we are seeing some some move in activities but I think it's too early to tell to talk about NOI impact.
Speaker Change: overall, but no question, we've had some cleanup work to do.
at a few of our properties that were impacted, and those are getting right back online, frankly most of them are back online, serving customers as we sit right here. And as Joe mentioned,
Speaker Change: relatively modest impact overall and relatively fortunate given where the the storm came through. Okay, thank you.
Speaker Change: Thanks.
Speaker Change: Our next question is from Mike Muller with JP Morgan. Please proceed with your question.
Yeah, hi. Going back to development, can you talk a little bit about your land positioning and the visibility to kind of keep the development engine going? You know, for example, how many years of development starts do you control?
I'll speak in general terms, Mike, as far as our strategy around land holdings and then we can give you a little bit more color more specifically to your question but you know what we more often than not do in a vast majority of the development transactions is we'll take control of a parcel
depending on the timing for entitlements and other permitted
processes you have to go through. We have a contractual option on the land. We don't own the property itself. So that's far more typical than just putting a big land inventory onto our balance sheet.
So, we'll typically acquire a property, and again this would be a vacant parcel once we've gotten through what we feel are necessary and any, you know, risk-related improvements. So once we get to that, that point we'll go ahead and, you know, take ownership of the land site. But frankly, more often than not, we're literally ready to build as we do that.
Tom, I don't know if you've got a specific number to point to relative to, you know, overall holdings. Yeah, we own about $60 million worth of land, for context, given the strategy that Joe just highlighted.
Speaker Change: and at a Kiersey that's 60 million of land that gives you about what in terms of a total expected investment look what's buildable on that
Yeah, that's going to give you ability, obviously part of our Activity is is redevelopment as well So as you think about that 60 million dollars that gives us visibility over the next couple years and as Joe mentioned we've got an ability to See further than that based on the agreements we have in place with landowners
Speaker Change: Got it. Okay. Thank you.
Speaker Change: Great, thanks Mike.
Speaker Change: We have reached the end of the question and answer session. I'd now like to turn the call back over to Ryan Burke for closing comments.
Thank you, Rob. Thanks to all of you for joining us today. Have a great Halloween and we'll talk to you soon.
Speaker Change: This concludes today's call. You may disconnect your lines at this time and we thank you for your participation.