Q1 2025 CubeSmart Earnings Call
Okay.
Operator: Thank you for standing by.
Eric: Thank you for standing by my name is Eric and I'll be conference operator today at.
Eric Wolfe: My name is Eric and I will be a conference operator today.
Operator: At this time, I would like to welcome everyone to the CubeSmart First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise.
Eric: At this time I would like to welcome everyone to the cube Smart first quarter 2025 earnings call.
Eric: Lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Eric: After the Speakers' remarks, there'll be a question and answer session.
Eric: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Eric: To withdraw your question Press Star one again.
Joshua Schutzer: I would now like to turn the call over to Josh Schutzer, Vice President of Finance. Please go ahead. Thank you, Eric. Good morning, everyone.
Speaker Change: I would now like to turn the call over to Josh <unk> Vice.
Eric: President of finance.
Speaker Change: Go ahead.
Speaker Change: Thank you Eric Good morning, everyone welcome to <unk> first quarter 2025 earnings call.
Christopher Marr: Welcome to CubeSmart's first quarter twenty twenty five.
Joshua Schutzer: Participants on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the investor relations section of the company's website at www.cubesmart.com. The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties, and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8K we filed this morning, together with our earnings release filed on the Form 8K, and the risk factors section of the company's annual report on Form 10K.
Speaker Change: It just depends on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin Chief Financial Officer.
Speaker Change: Prepared remarks will be followed by a Q&A session.
Speaker Change: In addition to our earnings release, which was issued yesterday evening supplemental operating and financial data is available under the Investor Relations section of the company's website at Www Dot cube smart Dot com.
Speaker Change: The company's remarks will include certain forward looking statements regarding earnings and strategy that involve risks uncertainties and other factors that may cause the actual results to differ materially from these forward looking statements.
Speaker Change: The risks and factors that could cause our actual results to differ materially from forward looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission specifically the form 8-K, we filed this morning together with our earnings release filed on the form 8-K, and the risk factors section of the company's annual report on Form 10-K.
Joshua Schutzer: In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the first quarter financial supplement posted on the company's website at www.cubesmart.com.
Speaker Change: In addition, the company's remarks include reference to non-GAAP measures a reconciliation between GAAP and non-GAAP measures can be found in the first quarter financial supplement posted on the company's website at www Dot keeps smart dot com I will now turn the call over to Chris. Thanks, Josh. Thank you everyone for joining us this morning.
Christopher Marr: I'll now turn the call over to Thank you, Josh. Thank you, everyone, for joining us this morning. Our performance in the first quarter was strong. Our key performance metrics all trended towards the higher end of our expectations. We expected, we experienced, I'm sorry, we experienced solid top of funnel demand. Rental rates for new customers continue to improve, narrowing their year over year gap and our existing customer health remains solid. Muted operating expense growth reflects the continued optimization of our platform, while not losing focus on providing our renowned best in class customer This positive operational performance resulted in 64 cents of FFO per share, a penny beat to the high end of our guide.
Chris: Our performance in the first quarter was strong.
Chris: Our key performance metrics, all trended towards the higher end of our expectations.
Chris: We expected we experienced I'm, sorry, we experienced solid top of funnel demand.
Chris: Rental rates for new customers continued to improve narrowing their year over year gap in our existing customer health remains solid.
Muted operating expense growth reflects the continued optimization of our platform.
Chris: Not losing focus on providing our renowned best in class customer service.
This positive operational performance resulted in 64 cents per share a penny beat to the high end of our guidance.
Christopher Marr: as previously discussed during the quarter.
Chris: As previously discussed during the quarter.
Christopher Marr: We close on the acquisition of our joint venture partner's interest in a high-quality portfolio, expanding our presence in several key markets. Our strong markets, the New York City boroughs, Chicago, and the Washington, D.C., Maryland, and Virginia suburbs all continue to exhibit their strength. And our supply impacted markets, northern New Jersey, Phoenix, and Atlanta are exhibiting signs of stabilization or recovery.
Chris: We closed on the acquisition of our joint venture partner's interest in a high quality portfolio expanding our presence in several key markets.
Chris: Our strong markets, the New York City boroughs, Chicago, and Washington, D C, Maryland, and Virginia suburbs I'll.
Chris: I'll continue to exhibit their strength and our supply impacted markets or their new Jersey, Phoenix, and Atlanta are exhibiting signs of stabilization or recovery.
Chris: Through four decades of operating in the self storage industry I remain impressed by its resilience.
Christopher Marr: Through four decades of operating in the self-storage industry, I remain impressed by its resilience. The quality and geographic diversity of our portfolio. The economic diversity of our need-based customer and the ever-increasing sophistication of our platform provide great confidence in the long-term health of the industry and in our performance as a leading operator.
Chris: The quality and geographic diversity of our portfolio.
Chris: Economic diversity of our need based customer.
Chris: And the ever increasing sophistication of our platform provide great confidence in the long term health of the industry and in our performance as a leading operator.
Timothy Martin: Now I'd like to turn the call over to Tim Martin, our Chief Financial Officer, for his comments on the quarter. Tim? Thanks, Chris. Good morning, everyone. Thanks, as always, for taking a few minutes out of your day to spend it with us. First quarter results, as Chris mentioned, were strong, coming in a little bit better than our expectations, giving us a nice positive start to the year. Same store revenue growth was down 0.4% over last year, a nice improvement from down 1.6% in the fourth quarter. Our average occupancy for our same store portfolio was down 50 basis points to 89.5% during the first quarter, again, a gap that narrowed from down 120 basis points during the fourth quarter.
Speaker Change: Now I'd like to turn the call over to Tim Martin, Our Chief Financial officer, or his comments on the quarter Tim. Thanks.
Thanks, Chris Good morning, everyone and thanks as always for taking a few minutes out of your day to spend it with US first quarter results as Chris mentioned were strong coming in a little bit better than our expectations, giving us a nice positive start to the year same.
Speaker Change: Same store revenue growth was down 4% over last year, a nice improvement from down one 6% in the fourth quarter.
Speaker Change: Our average occupancy for our same store portfolio was down 50 basis points to 89, 5% during the first quarter again, a gap that narrowed from down 120 basis points during the fourth quarter.
Timothy Martin: From a rate perspective, our move-in rates during Q1 were down about 8% year-over-year, and that was an improvement on Q4 when we were down about 10% year-over-year. So while we're not back to an inflection point where we're seeing growth over prior-year levels, we are seeing improvements on all of these. Same store operating expenses grew only 0.6% over last year, a result that was better than we had modeled for the quarter. We had a little bit of good news versus our expectations across a number of line items. Some of those are more timing-related, like marketing and repair and maintenance, while others, like personnel and weather-related costs, were good results versus expectation that lead to an improvement in our outlook for full-year expense growth.
Speaker Change: From a rate perspective, our move in rates during Q1 were down about 8% year over year.
Speaker Change: And that was an improvement on Q4, when we were down about 10% year over year. So while we're not back to an inflection point, where we're seeing growth over prior year levels. We are seeing improvements on all of these key metrics.
Speaker Change: Same store operating expenses grew only <unk>, 6% over last year. A result that was better than we had modeled for the quarter.
Speaker Change: We had a little bit of good news versus our expectations across a number of line items. Some of those are more timing related like marketing and repair and maintenance, while others like personnel and weather related costs were good results versus expectation that lead to an improvement in our outlook for full year expense growth.
Speaker Change: So revenue growth of negative <unk>, 4% combined with 6% growth in operating expenses yielded negative <unk>, 8% same store NOI growth for the quarter.
Timothy Martin: So revenue growth of negative 0.4% combined with 0.6% growth in operating expenses yielded negative 0.8% same-story NOI growth for the quarter. We reported FFO per shares adjusted of 64 cents for the quarter, which was a penny higher than our guidance entering the quarter. On the external growth front, we closed on the previously announced acquisition of the remaining 80% interest of one of our unconsolidated joint ventures known as HBP4. As we discussed on last quarter's call, this was a portfolio of 28 early stage lease up stores that were acquired between 2017 and 2021 predominantly in top 30 MSAs.
Speaker Change: We reported <unk> per share as adjusted of 64 cents for the quarter, which was a penny higher than our guidance entering the quarter.
Speaker Change: On the external growth front, we closed on the previously announced acquisition of the remaining 80% interest of one of our unconsolidated unconsolidated joint ventures known as <unk>.
Speaker Change: As we discussed on last quarter's call. This was a portfolio of 28 early stage lease up stores that were acquired between 2017 and 2021 predominantly in top 30 Msas.
Timothy Martin: Our investment of $452.8 million included $44.5 million that represented our portion of repaying the venture level debt. So we now wholly own the portfolio on an unencumbered basis. Another successful venture for us creating meaningful value for both parties and resulting in an accretive transaction and attractive basis in a geographically diverse recent vintage portfolio with perfect underwriting and still yet a little bit of outsized growth on the horizon as some of the assets fully stabilize. On the third party management front, we added 33 stores to the platform in the quarter and ended the quarter with 869 third party stores under management.
Speaker Change: Our investment of $452 8 million included $44 5 million.
Speaker Change: That represented our portion of repaying the venture level debt. So we now wholly own the portfolio on an unencumbered basis.
Speaker Change: Another successful venture for us, creating meaningful value for both parties and resulting in an accretive transaction and attractive basis in a geographically diverse recent vintage portfolio with perfect underwriting and still yet a little bit of outsized growth.
Speaker Change: On the horizon at some of the assets fully stabilized.
Speaker Change: On the third party management front, we added 33 stores to the platform in the quarter and ended the quarter with 869 third party stores under management.
Timothy Martin: balance sheet remains in excellent shape with net debt to EBITDA at 4.8 times We have a bond maturity later in the year that we will address either with existing capacity or through accessing the debt markets opportunistically here in the coming quarters. Details of our 2025 earnings guidance and related assumptions were included in our release last night. As I opened with, performance in the first quarter was strong, with most metrics near the higher end of our expectations, with narrowing year-over-year declines in move-in rates and occupancy throughout the quarter, while our existing customer metrics remain strong. That said, we've all seen the headlines.
Speaker Change: Balance sheet remains in excellent shape with net debt to EBITDA at four eight times.
Speaker Change: We have a bond maturity later in the year that we will address either with existing capacity or through accessing the debt markets opportunistically here in the coming quarters.
Speaker Change: Yes.
Speaker Change: Details of our 2025 earnings guidance and related assumptions were included in our release last night as I opened with performance in the first quarter was strong with most metrics near the higher end of our expectations with narrowing year over year declines in move in rates and occupancy.
Speaker Change: Throughout the quarter, while our existing customer metrics remained strong that said, we've all seen the headlines starting in April there has been quite a bit of uncertainty throughout the economy, which results in volatility for the large consumer decisions, which can be drivers for storage demand.
Timothy Martin: Starting in April, there's been quite a bit of uncertainty throughout the economy, which results in volatility for the large consumer decisions, which can be drivers for storage demand. At this point, we do not foresee any improvement to the frozen housing market given the current rate environment and market uncertainty, and so our base case remains for gradual improvement and operational metrics in 2025, but without a catalyst for sharp reacceleration. The recent uncertainty around the consumer leads us to maintain our prior range of expectations for top line growth. We did see better than expected performance on expenses, which allowed us to narrow that range slightly providing a modest improvement to the midpoint of our FFO per share range.
Speaker Change: At this point, we do not foresee any improvement to the frozen housing market given the current rate environment and market uncertainty and so our base case remains for gradual improvement in operational metrics in 2025, but without a catalyst for sharp reacceleration.
Speaker Change: The recent uncertainty around the consumer leads us to maintain our prior range of expectations for topline growth.
Speaker Change: We did see better than expected performance on expenses, which allowed us to narrow that range slightly providing a modest improvement to the midpoint of our <unk> per share range.
Operator: That concludes our prepared remarks. Thanks again for joining us on the call this morning.
Speaker Change: That concludes our prepared remarks, thanks again for joining us on the call. This morning at this time, Eric lets open up the call for some questions.
Operator: At this time, Eric, let's open up the call for some questions. At this time, I would like to remind everyone in order to ask a question, please press star followed by the one on your telephone keypad.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star followed by the one on your telephone keypad.
Samir Kanaal: Your first question comes from the line of Samir Kanaal with Bank of America. Please go ahead. Yeah, good morning, everybody. I guess maybe Chris, you mentioned, you know, when I looked at the press release yesterday, you talked about solid demand, right? You kind of characterize the environment that way, just maybe expand on that comment. Help us understand what the drivers are to demand at this time that you certainly saw in the first quarter. Thanks.
Speaker Change: The first question comes from the line of Samir <unk> with Bank of America. Please.
Speaker Change: Please go ahead.
Speaker Change: Yes, good morning, everybody I guess, maybe Chris you mentioned you know when I looked at the press release yesterday, you talked about.
Speaker Change: Solid demand right you kind of characterize the environment that way just maybe expand on that comment helped.
Speaker Change: Help us understand what the drivers are to demand it.
Speaker Change: At this time that you certainly saw in the first quarter.
Speaker Change: So the beauty of our business and why it's so resilient is that our customer.
Christopher Marr: So the beauty of our business and why it's so resilient is that our customer can be everyone. so the drivers of demand. In the quarter, given what's going on in the housing market, clearly, that that customer who is selling, buying a single family home continues to not be at the levels that we would have experienced historically. And that's been the situation now for a few years. So within that demand, it's the everyday life events plus our business customers who find us as a solution to whatever their need is for storing their possessions for a defined period of time.
Speaker Change: N b, everyone and so the drivers of demand.
Speaker Change: In the quarter.
Speaker Change: Given what's going on in the housing market clearly that that.
Speaker Change: Customer who is selling buying.
Speaker Change: Single family home continues to not be at the levels that we would have experienced historically.
Speaker Change: And that spend the situation now for a few years so within that demand, it's the everyday life events, plus our business customers who.
Speaker Change: Find us as a solution to whatever their their need is for <unk>.
Speaker Change: Storing their possessions for a defined period of time, so nothing new it's just an incredibly resilient business with a very very diverse customer base with a very diverse.
Christopher Marr: So nothing new. It's just an incredibly resilient business with a very, very diverse customer base, with a very diverse a set of needs. And as a result, you know, we've proven over over time to be a very, very resilient, resilient business. And that's what's so great about self storage. Got it.
Speaker Change: Set of needs and as a result.
Speaker Change: We've proven over time to be.
Speaker Change: A very very resilient resilient business and that split so great about self storage.
Speaker Change: Got it and then I guess Tim.
Timothy Martin: And then I guess, Tim, I'm sorry if I missed this, but where was occupancy in April? I know you mentioned it being 89.7% in March.
Tim Martin: I'm, sorry, if I missed this but what where was occupancy in April I know you mentioned it being.
Speaker Change: 89, 7% in March.
Tim Martin: Yeah. This is.
Christopher Marr: Yeah, this is this is Chris. 89.9% is where we ended April.
Tim Martin: This is Chris.
Tim Martin: 89, 9% is where we ended April.
Tim Martin: And then just as a follow up I know one of your peers had talked about maybe low.
Christopher Marr: And just as a follow-up, I know one of your peers had talked about maybe lowering rates in April to kind of get to the higher occupancy. Is that something you had to do as well in your portfolio? Yeah, so the average rent rate on rentals, if you just think about sort of that sequential move as we've gone over the last couple of quarters, and then into April, move-in rates in the fourth quarter, on average, were down 10% year-over-year. In the first quarter, that then contracted to down 8%, and during the month of April, they were down about 2%.
Tim Martin: During rates in April to kind of get to the dire occupancy that's something you have to do as well in your portfolio.
Tim Martin: Yeah. So the average rent rate on rentals. If you just think about sort of that sequential move as we've gone over.
Tim Martin: Over the last couple of quarters and then into.
Tim Martin: Hi into April move in rates in the fourth quarter on average were down 10% year over year in.
In the first quarter that then contracted to down 8%.
Tim Martin: And during the month of April they were down about 2%.
Tim Martin: Okay got it thank you.
Operator: Okay, got it. Thank you.
Thanks.
Speaker Change: Your next question comes from the line of Eric Wolfe with Citi.
Eric Wolfe: Your next question comes from the line of Eric Wolfe with Citi. Please go ahead.
Speaker Change: Go ahead.
Nick: Hey, good morning, its Nick <unk> on for Eric This morning.
Timothy Martin: Hey, good morning, it's Nick Curran for Eric this morning. You mentioned the strong start to the year, but that you're not adjusting guidance as much given macro volatility. So I guess the question is. We're in a less volatile environment, like when you gave guidance initially, you know, what would have changed? Would same-store revenue have gone up a little bit more? Would Corpo have gone up a little bit more? Just, you know, help us think through, like, what that would have been. Appreciate the question. The thing that is consistent regardless of one's view on on macro volatility is that it's still the date on the calendar, right?
Speaker Change: So I guess.
Speaker Change: You mentioned the strong start to the year, but youre not adjusting guidance as much given macro volatility. So I guess the question is.
Speaker Change: We're in a less.
The less volatile environment like when you gave guidance initially what would've changed with same store revenue has gone up a little bit more of a cork. So have gone up a little bit more just help us think through like what that would've looked like.
Speaker Change: I appreciate the question.
Speaker Change: The thing that is consistent regardless of ones view on macro volatility is that it's still the date on the calendar right. We're still very early on in our leasing season. So even if you were in that environment not sure that you would see us or others in the industry have a dramatic move.
Timothy Martin: We're still very early on in our leasing season. So even if you weren't in that environment, not sure that you would see us or others in the industry have a have a dramatic move on our expectations for the full year based only on the first quarter results. You combine that with the fact that we set our expectations in February, and communicated them. So not all that much has changed. It was a good first quarter, and it was a little bit better than we thought it was going to be. That said, we're still, you know, we still have the whole rental season ahead of us.
Speaker Change: Move on our expectations for the full year based only on the first quarter results and you combine that with the fact that we set our expectations in February and communicated them. So not all that much has changed.
Speaker Change: It was a good first quarter and it was a little bit better than we thought it was going to be that said, we're still we still have the whole rental season ahead of us and.
Timothy Martin: And even in more normal times, it's, it's, it's a little bit easier to predict what might that that might look like. But it's, it's still imperfect until you get a little bit deeper into the rental.
Speaker Change: Even in more normal times.
Speaker Change: It's a little bit easier to predict what might that that might look like but it is still in perfect until you get a little bit deeper into the rental season.
Speaker Change: Thanks for that so I guess that the follow up would be.
Timothy Martin: So that's, I guess, the follow-up. Um, you know, what would you guys consider a good peak leasing season? Like, how can we measure that? Good relative to our expectations, good relative to historical performance, like, what is your good relative to? I guess, I guess, you know, if we were sitting on a second quarter call right now, and you say we had a good peak leasing season, what would that entail? Yeah, good. Well, I would entail that being good relative to what we expect it to be. And so our expectation included in the base, you know, in our baseline scenario is that we are not anticipating a rental season that looks like a pre-pandemic, air quote, normal rental season in that we're not expecting the same gains in physical occupancy that we would typically see seasonally.
Speaker Change: What would you guys consider a good peak leasing season like how can we measure that.
Speaker Change: Good relative to our expectations good relative to historical performance like what what is your good.
Speaker Change: I guess.
Speaker Change: If we were sitting in our second quarter call right now and you say, we had a good peak leasing season, what would that entail.
Speaker Change: Yes, good well.
Speaker Change: That being good relative to what we expect it to be and so our expectation included in the base.
Speaker Change: Our baseline scenario is that we are not anticipating.
Speaker Change: A rental season that looks like a pre pandemic her quote normal rental season and that we're not expecting the same gains in physical occupancy that we would typically see seasonally we're not expecting the same level of rate growth that we historically in a normal time would have would have seen.
Timothy Martin: We're not expecting the same level of rate growth that we historically in a normal time would have would have seen. We're expecting something a little bit more muted. So for us having into this rental season, good would be what we expect. Great would be something that looked a little bit more like normal levels of seasonality. That is great is not our expectation. Thank you.
Speaker Change: We're expecting something a little bit more muted so for us heading into this rental season.
Speaker Change: Good would be what we expect.
Speaker Change: Great would be something that looked a little bit more like normal levels of <unk>.
Speaker Change: Seasonality that is great is not our expectation at this point.
Speaker Change: Yeah.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Spencer Glimcher with Green Street. Please.
Spencer Grimcher: Your next question comes from the line of Spencer Grimcher with Green Street. Please go ahead. Thank you. Just as it relates to market level performance, some of your Texas markets seem to be under pressure in one queue.
Speaker Change: Please go ahead.
Speaker Change: Thank you and just as it relates to market level performance. Some of your Texas markets seem to be under pressure on one <unk> can you just talk about that towards the end of performance, there and kind of higher thinking about.
Christopher Marr: Can you just talk about, you know, what drove the underperformance there and kind of how you're thinking about expectations moving forward for the rest of the year for those markets? Sure. Yeah, when you get into, again, Dallas, Houston, Austin, San Antonio, you know, Austin, a supply impacted market, I think is coming back. And, you know, we see green sheets there and feel pretty good about Austin. When you think about Houston, again, solid, a market that has, again, super resilient theme for the call, absorbed a lot of supply and did so with some pretty good population growth, pretty good job growth, and is, I think, in a good footing and moving in a good direction.
Speaker Change: Expectations moving forward for our CFS markets.
Speaker Change: Sure.
Speaker Change: Yes, when you get into.
Speaker Change: Dallas, Houston, Austin and San Antonio.
Speaker Change: Austin.
Speaker Change: Supply impacted market I think is coming back and we see green shoots there and feel pretty good about.
Speaker Change: Austin, when you think about Houston again.
Speaker Change: Solid.
Speaker Change: A market that has again super resilient theme for the call.
Speaker Change: Absorbed a lot of supply and did so with some pretty good population growth pretty good job growth.
Speaker Change: I think in a good footing and moving in a good direction Dallas is a little bit tough.
Christopher Marr: Dallas is a little bit tough. Part of that is supply. Part of that is, you know, pricing decisions from the competitive set that we face in Dallas. So we're working through both of those. But again, as I said, in my prepared remarks, I think all of these markets are, we're feeling good about and I think are, you know, at one end stabilizing and at the other end, I think moving in a pretty good direction. Okay, great. That's really helpful color.
Speaker Change: Part of that is supply.
Speaker Change: Part of that is pricing decisions from the competitive set that we face.
Speaker Change: Base in Dallas, So we're working through.
Speaker Change: Both of those but again as I said in my prepared remarks I think.
Speaker Change: All of these markets.
Speaker Change: Our we're feeling good about and I think are at at.
Speaker Change: <unk> stabilizing and at the other end I think moving and moving in a pretty good direction.
Speaker Change: Okay, Great. That's really helpful color and then just on the key developments in process.
Spencer Grimcher: And then just on the two developments in process, it seems as though those are trending well in terms of timing and then a total anticipated costs. But I'm just curious if there's been any setbacks or surprises on input costs or labor, just given the broader economic climate.
Speaker Change: As though those are trending well in terms of timing.
Speaker Change: Timing and then it took a total anticipated costs, but I'm just curious if theres been any setbacks or surprises on input costs or labor just given the broader economic climate.
Speaker Change: Thanks, Spencer there have not been any surprises I mean any development has its challenges along the way, but just given the timing of those projects they were in advance of.
Christopher Marr: Thanks, Spencer. There have not been any surprises. I mean, any development has its challenges along the way, but just given the timing of those projects, they were in advance of of being exposed to all of the volatility that we've seen in recent weeks slash months. So from a timing perspective, we were on the fortunate side of not being impacted in any meaningful way on those projects. Okay, great.
Speaker Change: From a raw material standpoint of being exposed to all of the volatility that we've seen.
Speaker Change: In recent weeks slash months, so from a timing perspective, we were in the fortunate side of not being impacted in any in any meaningful way on those projects.
Speaker Change: Okay, great. Thank you so much.
Operator: Thank you so much. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Todd Thomas with Keybanc. Please go ahead.
Todd Thomas: The next question comes from the line of Todd Thomas with T-Bank. Please go ahead. Hi, thank you. Good morning. Chris, Tim, you ran ahead of your budget in the first quarter, and I understand the conservatism, just being it's early in the year and just given all of the uncertainty today.
Speaker Change: Okay.
Speaker Change: Hi, Thank you good morning, Chris Tim You ran ahead of your budget in the first quarter.
Speaker Change: And I understand the conservatism.
Speaker Change: Just being it's early in the year and just given all the uncertainty today, but the <unk> Guide assumes a flat result at the midpoint relative to the first quarter, which I do not believe has has really happened very often going going back to 2005. The first year after the company IPO Ed.
Timothy Martin: But the 2Q guide assumes a flat result at the midpoint relative to the first quarter, which I do not believe. has really happened very often going back to 2005, the first year after the company IPO-ed. It sounds like you're seeing some seasonality, rents and occupancy are trending higher through April. So can you just discuss some of the puts and takes, what causes FFO to hold steady and what's assumed at the lower end? QQFFO guide is 63 cents, that'd be down one penny sequentially.
Speaker Change: Sounds like Youre seeing some seasonality rents and occupancy are trending higher through April so.
Speaker Change: Can you just discuss some of the puts and takes what causes <unk> to hold steady and what's assumed at.
Speaker Change: Lower end of the <unk> <unk> guide of 63 that would be down one penny sequentially.
Speaker Change: Yes. Good question don't don't really spend a lot of time thinking about that sequence.
Timothy Martin: Yeah, good question. Don't don't really spend a lot of time thinking about that that sequence. A couple different things that are that are going on. We have, you know, it was a good first quarter a little bit better. Some of that is on timing of of operating expenses. As you know, on the on the The other income line item, which we are lapping some changes that we made a year ago, and so we will get a little bit less of a contribution from that line item starting in the starting in the second quarter, the timing on some expenses, it's timing of marketing spend this year versus last year.
Speaker Change: Couple of different things that are that are going on there we have.
Speaker Change: It was a good first quarter, a little bit better some of that is on timing of operating expenses.
Speaker Change: As you know on the on the top line growth we have.
Speaker Change: We have.
Speaker Change: The other income line item, which we are lapping some changes that we made a year ago and so we will get a little bit less of a contribution from that line item starting in the starting in the second quarter.
Speaker Change: The timing on some expenses its timing of marketing spend this year versus last year.
Speaker Change: I guess, it's a combination of things nothing nothing meaningful that I can point to that.
Timothy Martin: I guess it's a combination of things. Nothing, nothing meaningful that I can point to that would you know, that would point to that trend being different than it had been historically other than expense time. Okay. That's helpful.
Speaker Change: That would point to that trend being different than it had been historically other than expense timing.
Speaker Change: Okay.
Chris: That's helpful and then Chris you mentioned.
Christopher Marr: And then Chris, you mentioned small business. customer demand in one of your comments or responses. Are you seeing that demand pick up at all? And are there certain markets in particular where, you know, you have seen some evidence of that type of demand materializing a little bit more? Yeah, to some degree, the urban market. So we see a little bit of a pickup in that customer base in, in New York, in some of the more urban areas of, of North Jersey, we see it in the more urban areas of Chicago, a little bit in Washington, DC proper.
Speaker Change: Small business.
Speaker Change: Our customers demand and one of your comments on responses or are you seeing that demand pick up at all and are there certain markets in particular, where you have seen some evidence of that type of demand materializing, a little bit more.
Speaker Change: Yes to some degree the urban market. So we see a little bit of a pickup in that customer base in.
Speaker Change: In New York, and some of the more urban areas.
Speaker Change: North Jersey, we see it in the more urban areas of Chicago.
Speaker Change: A little bit in Washington D C proper.
Christopher Marr: And it's a combination of, you know, folks finding us as a solution to making a commitment. from a growing awareness of self storage. And in this in the more suburban areas, you know, it's really it's really sub market or actually store specific. What we have not seen is any distress. So we have not really seen a pickup in Small businesses that are using us because they have chosen to shut down, which we view in the near term here, at least, as positive.
Speaker Change: And it's a combination of folks finding us as a solution to.
Speaker Change: Making a commitment.
Speaker Change: Two more permanent space, so instead of small warehouse or a portion of the space in a warehouse.
Speaker Change: Not not not necessarily due to any.
Speaker Change: Any particular marketing efforts on our side I think more from us.
Speaker Change: From a growing awareness of self storage.
Speaker Change: And in this in the more suburban areas.
Speaker Change: Its really its really submarket or actually store specifics, while we have not seen any distress. So we have not really seen a pickup in.
Speaker Change: Small businesses that are using us because they have chosen to shut down.
Speaker Change: Which we view.
Speaker Change: In the near term here at least as positive.
Speaker Change: Okay. Thank you.
Operator: Okay.
Operator: Thank you.
Speaker Change: Thanks Todd.
Speaker Change: The next question comes from the line of Michael Griffin with Evercore ISI.
Michael Griffin: The next question comes from the line of Michael Griffin with Evercore ISI. Please go ahead. Great, thanks. You know, obviously a good job on the expense controls this quarter, you know, just curious, particularly for the personnel expense going down year over year. I mean, is that more kind of proactive management of staffing at facilities? Is it wage related? You know, how should we think about kind of that line item throughout?
Speaker Change: Please go ahead.
Speaker Change: Great. Thanks.
Obviously, a good job on the expense controls this quarter, just curious, particularly for the personnel expense going down year over year. I mean is that more kind of proactive management of staffing at facilities as the wage related and how should we think about kind of that line item throughout the cadence of the year.
Speaker Change: Yes.
Timothy Martin: Yeah, it's a, thanks for the question. It's a, it's a combination of a handful of things. What it's not is, is wage. Certainly, there's still wage inflation, and we look to be competitive with our teammates in the store. They're a critically important part of our, of our model and our success. That said, we have been able to, over the, over the past several years, find ways to be more efficient in how we're staffing the stores, managing the hours in the stores. And so that's, that's really a, that's really part of the, of the contribution on that line item.
Speaker Change: Thanks for the question, it's a it's a combination.
Speaker Change: A handful of things what is not is as.
Speaker Change: This way, it's certainly there's still wage inflation and we look to be competitive with our teammates in the store. They are critically important part of our of our model and our success that said, we have been able to over the over the past several years find ways to be.
Speaker Change: More efficient in how we're staffing the stores managing the hours in the stores.
Speaker Change: And so that's really a that's really part of the of the contribution on that line item that is that as a line item that that we don't a little bit of it also is what we did in the first quarter of last year versus versus this year.
Timothy Martin: That is, that is a line item that, that we don't, a little bit of it also is, is what we did in the first quarter of last year versus, versus this year. I wouldn't expect to see that type of, that type of number repeat itself throughout the year. Our expectation for the full year is for that number to be more, more flat than negative compared to last year in total for the year.
Speaker Change: I wouldn't expect to see that type of that type of number repeat itself throughout the year, our expectation for the full year.
Speaker Change: As for that number to be more flat than negative compared to last year.
Speaker Change: In total for the year.
Speaker Change: Great that's helpful and then.
Operator: Great, that's helpful.
Christopher Marr: And then just on the acquisition opportunity set, obviously, you bought out your JV partner stake in one venture in in the first quarter. But you know, as you look ahead, are there any opportunities maybe to buy out some of the other existing joint ventures? You know, do you wholly owned acquisitions make sense right now?
Speaker Change: Then just on the acquisition opportunity set obviously you bought out your JV partner stake in one venture and in the first quarter, but as you look ahead are there any opportunities maybe to buy out some of the other existing joint venture.
Speaker Change: Wholly owned acquisition makes sense right now if you can give us a sense of that that'd be helpful.
Christopher Marr: If you can give us a sense of that, that'd be Wholly owned acquisitions would make a lot of sense for us if sellers would sell us their assets at the price we would like to pay. Unfortunately, that's not the way the world works. I think the volatility in the market and head fakes in both directions on where interest rates are ultimately going to land has created an environment that I would have described to you as three months ago being a little bit more constructive where buyers and sellers were starting to converge on valuation. handful of months has probably sent that back in the other direction a little bit, as there's just an awful lot of uncertainty as to where the cost of capital ultimately lands for everyone on both sides of the table.
Speaker Change: Holy It wholly owned acquisitions would make a lot of sense for us as sellers would sell us their assets at the price we would like to pay Unfortunately, that's not the way the world works I think the volatility in the in the.
Speaker Change: <unk> and head fakes in both directions on on where interest rates are ultimately going to land has created.
An environment that I would have described as three months ago being a little bit more constructive where buyers and sellers, where we're starting to converge on on valuation I would say the last.
Speaker Change: Handful of months is probably send that back in the other direction, a little bit as Theyre system, an awful lot of uncertainty as to where is the where cost of capital could ultimately lands for.
Speaker Change: For everyone on both sides of the table so.
Christopher Marr: So, a little bit hazy right now. From our perspective, what we focus our energy on is looking at every opportunity, trying to uncover every opportunity, maintain a healthy balance sheet that gives us the capacity to transact when we see attractive opportunities to do so. But just like some of our other commentary on where we see the rental season and other things, I would say the investments part of the equation is also pretty fuzzy. You would think that there is an increasing line of potential sellers that's building because there hasn't been a high level of transactions here over the past year.
Speaker Change: Little bit a little bit hazy right now from our perspective, what we focus our energy on is looking at every opportunity trying to uncover every opportunity to maintain a healthy balance sheet that gives us the capacity to transact when we see attractive opportunities to do so but just like some of our other.
Speaker Change: Commentary on where we see the rental season and other things I would say the investments part of the equation is also pretty fuzzy.
Speaker Change: You would think that there that there is an increase in line.
Speaker Change: Central sellers Thats building, because there hasn't been a high level of transactions here over the past.
Christopher Marr: gosh, going on now 24 months. So you would think there would become some more and more motivation on the seller side. But that said, if you're a seller and you're not, and you're not, and you're not forced to come to the table, maybe you continue to wait for a little bit better day to bring your asset tomorrow.
Speaker Change: Going on now 24 months. So you would think there would become some more and more motivation on the seller side, but that said, if youre, a seller and youre not and youre not youre not forced to come to the table. Maybe you continue to wait for a little bit better data to bring your asset to market.
Speaker Change: Great. That's it for me thanks for the time.
Operator: Great, that's it for me. Thanks for the time.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Ravi Dahlia.
Ravi Vedia: Your next question comes from the line of Ravi Vedia with Mizzou. Please go ahead. Hi guys, good morning. I hope you guys are doing well.
Speaker Change: With Mizuho.
Speaker Change: Please go ahead.
Speaker Change: Yes.
Speaker Change: Hi, guys. Good morning, Hope you guys are doing well.
Christopher Marr: I just wanted to ask about your ECRI strategy right now, particularly as we're starting to see the second derivative and a number of fundamentals improve. How are you thinking about your ECRI rates? Are they still elevated right now or are you looking to bring them back down and maybe increase movement? Thank you.
Speaker Change: I just wanted to ask about your <unk> strategy right now, particularly as we're starting to see.
Speaker Change: The second derivative and a number of fundamentals improve how are you thinking about your <unk>.
Speaker Change: <unk> is still elevated right now are you looking to bring them back down to maybe increase move in rates.
And thank you so our strategy.
Christopher Marr: So, our strategy has not changed and has been fairly consistent for, you know, over a year now. The actual tactics underlying, you know, do change on a frequent basis because we're completely data-driven, and it's simply looking at the in-place customers who are eligible for a rate increase and thinking about how to balance great customer service and good customer experience with that plan. You know, I think in this environment that's more constructive on price, we'll just continue to, again, let the data drive our decisions. The ECRIs in the quarter were fairly consistent with where they were both last quarter and last year.
Speaker Change: Has not changed.
Speaker Change: And has been fairly consistent for over a year now.
Speaker Change: The actual tactics underlying do change on a on a frequent basis, because we're completely data driven and then it's simply looking at the in place customers who're.
Speaker Change: Who are eligible for a rate increase and thinking about how to balance great customer service a good customer experience with.
Speaker Change: With.
Speaker Change: With that plan and so.
Speaker Change: I think in this environment.
Speaker Change: Thats more constructive on price.
Speaker Change: Just continue to again, let the data drive draw.
Speaker Change: Drive our decisions the ECR is in the quarter were fairly consistent with that.
Speaker Change: With where they were both last quarter and last year.
Operator: And I would not envision at this point that we would be making any meaningful change to the program at this time. Got it.
Speaker Change: And I would not envision at this point that we would be making any meaningful change to the program.
Speaker Change: At this time.
Speaker Change: Got it. Thank you that's all for me.
Speaker Change: The next question comes from line of Daniel.
Daniel Tricarico: The next question comes from one of Daniel Tricarico with Scotiabank, please go ahead. Great, thank you. Looking to understand the sequential rate trends so far this year, you know, how much are street rates, maybe, or you're moving rates up from the seasonal trough in late January, early February through April, and how does that compare to 2024 or a, you know, pre-COVID, you know, quote unquote normal year? Sure. And so I If you think about it, and I guess I talked about it to a prior question, you know, they've been moving in a very constructive direction.
Speaker Change: <unk> and Truecar recall with Scotiabank. Please go ahead.
Great. Thank you.
Speaker Change: Looking to understand the sequential rate trends so far this year, how much our street rates, maybe or Youre moving rates up from the seasonal trough in late January early February through April.
Speaker Change: And how does that compare to 2024 or a pre COVID-19.
Quote unquote normal year.
Speaker Change: Sure.
Speaker Change: And so.
Speaker Change: If you think about it.
Speaker Change: And I guess I talked about it prior.
Speaker Change: Question <unk>.
Speaker Change: They've been moving in a very constructive direction.
Timothy Martin: Q4 averaged down about 10%, Q1 averaged down about 8%, and then in the month of April, the average was down a little bit north of 2%. If we look at that compared to how rates, you know, just the sequential movement in rates, they're up about mid-teens, and if you compare that to kind of how that sequential curve moved last year, it's better than what we saw in 2021. Great, thanks. I was looking for the latter part of that. So appreciate it. And how does the 89.9 at the end of at the end of April compared to last year?
Speaker Change: Q4 averaged down about 10% in Q1 averaged down about 8%.
And then in the month of April the average was down a little bit north of 2%.
Speaker Change: If we look at that compared to how rates adjust the sequential movement in rates.
Speaker Change: They're up about mid teens, and if you compare that.
Speaker Change: How that sequential curve moved last year.
Speaker Change: It's better than what we saw in.
Speaker Change: In 2024.
Speaker Change: Great. Thanks, I was looking for the latter part of that so I appreciate it.
Speaker Change: And how does the 89 nine at the end of <unk>.
Speaker Change: At the end of April compared to last year.
Speaker Change: Yes, it's a 90 basis point gap to last year.
Timothy Martin: Yeah, it's a 90 basis point gap to last. Great. I appreciate the time. Yep, thanks.
Speaker Change: Great I appreciate the time.
Speaker Change: Thanks.
Speaker Change: The next question comes from the line of.
Kaibin Kim: The next question comes from the line of Kaibin Kim with Truist Security. Please go ahead. Thank you. Good morning. I wanted to ask a couple of questions on the New York City market and D.C. Both markets rebounded nicely. I was curious, is that more along the lines of the rebound you saw nationally in your portfolio? Or are there certain elements about New York City or D.C. that you think are more supportive that might have more sustainability going forward? Thank you.
Speaker Change: <unk> bin Kim with <unk> Securities.
Speaker Change: Please go ahead.
Speaker Change: Thank you and good morning.
Speaker Change: Wanted to ask a couple questions on the New York City market in D C.
Speaker Change: Both markets rebounded nicely.
Speaker Change: I was curious is that more along the lines of the rebound you saw nationally in your portfolio or are there certain elements about New York city or the fee that you think are more supportive that might have more sustainability going forward. Thank you.
Speaker Change: Yeah, Great question came in.
Christopher Marr: Yeah, great question, Keevan. It's, it's, it's as often in our business, a mixture of the two the, the burrows Thanks for watching. Take care. very good performance that you know, is led by, that is led by the Bronx and Brooklyn, both saying, you know, kind of five-ish type percent. same-store revenue growth. very solid. Queens, you know, the the sub markets with the exception of Long Island City doing well, Long Island City is going to face a pretty competitive supply situation here for a little bit, quite close to all of our stores in that market. And then, you know, the opposite when you get to the MSA is northern New Jersey, which is kind of flat in the first quarter.
Speaker Change: It says often in our business.
Speaker Change: A mixture of the two.
Speaker Change: The boroughs.
Speaker Change: Six.
Speaker Change: Seeing.
Speaker Change: Hi.
Speaker Change: Very good performance that.
Speaker Change: <unk>.
Speaker Change: Led by.
Speaker Change: That is led by the Bronx and.
Speaker Change: And Brooklyn, both saying you know kind of five ish type percent.
Speaker Change: Same store revenue growth.
Speaker Change: Very solid Queens.
Speaker Change: The submarkets with the exception of long Island City doing well long Island city.
Speaker Change: Going to face.
Speaker Change: <unk>.
Speaker Change: It's a pretty competitive supply situation here for a little bit.
Speaker Change: Quite close to all of our stores in that market.
Speaker Change: And then the opposite when you get to the MSA is northern New Jersey, which is kind of flat in the first quarter and it's still moving in a good direction with the supply impact, but has a ways to go.
Christopher Marr: And it's still moving in a good direction with the supply impact, but has a ways to go. DC, I think, again, that the suburbs continue to be quite strong and the district, you know, itself is up close to 4% in the quarter, same store revenue and moving in a good direction. So I would say to kind of get more direct, a little bit better than what we're seeing nationally, we're seeing in New York City, Washington and its suburbs and Chicago. And I think, you know, those trends marginally will continue as we go throughout the year.
Speaker Change: D C.
Speaker Change: I think oh.
Speaker Change: The suburbs continues to be quite strong in the district.
Speaker Change: Itself is up close to 4% in the quarter same store revenue and moving in a good direction. So I would say.
To kind of get more direct a little bit better than what we're seeing nationally we are seeing in New York City, Washington, and its suburbs and Chicago.
Speaker Change: And I think those trends marginally will continue as we go throughout the year.
Speaker Change: And do you think the strength in D C, having to do with those or some of the government employee turnover.
Christopher Marr: And do you think the strength in D.C. has anything to do with Doge or some of the government employee turnover? So we asked that question. And we are, you know, grassroots, having the folks in the stores, try to see what kind of color they can obtain from our customers. Nothing obvious yet on that front.
Speaker Change: So we asked that question.
Speaker Change: And we are grassroots having the folks in the stores.
Speaker Change: Try to see what kind of color they can obtain from our customers.
Speaker Change: Nothing.
Speaker Change: Yet on that front.
Speaker Change: Okay. Thank you and congrats on a good quarter.
Operator: Okay, thank you, and congrats on a good quarter.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Michael Goldsmith with UBS.
Michael Goldsmith: Your next question comes from the line of Michael Goldsmith with UBS. Good morning. Thanks a lot for taking my question. Seems like you're seeing a really nice improvement in street rates in April, down 2% versus down 8% in the first quarter. You know, just trying to unpack that a little bit. Is that a reflection of the comparisons? Is that a reflection of a different strategy? Is that just, you know, lowering rates kind of as low as it can be without driving incremental demand, just trying to understand kind of like what is, what are the factors driving that improvement there?
Michael Goldsmith: Please go ahead. Good morning, good morning, Thanks, a lot for taking my question.
Michael Goldsmith: It seems like you're seeing a really nice improvement in street rates in April down 2% versus.
Michael Goldsmith: In the first quarter, just trying to unpack that a little bit is that a reflection of the comparisons is that a reflection of a different strategy.
Michael Goldsmith: Is that just lowering.
Michael Goldsmith: Just kind of as low as we can be without.
Michael Goldsmith: Without.
Michael Goldsmith: Driving incremental demand just trying to understand kind of what is.
Michael Goldsmith: What are the factors driving that improvement there.
Michael Goldsmith: Yes, we saw obviously a very good first quarter.
Christopher Marr: Yeah, we saw obviously a very good first quarter. You know, if you take leap year out, our rentals in the quarter were flat to last year, which in this environment was really, really good. And that was with, you know, a gradual improvement from January to February to March in rate. And as I said, rates moving up sequentially a little bit more than what we would have seen better than what we saw last year. So with that, it continued into April. April is pretty volatile. And again, we'll continue to watch this. There's obviously everything that Tim spoke about that's happening in the world today.
Michael Goldsmith: If you take leap year out our rentals in the quarter were flat to last year, which in this environment was really really good.
Michael Goldsmith: And that was with <unk>.
Michael Goldsmith: A gradual improvement from January to February to March in.
Michael Goldsmith: Right and as I said rates moving up sequentially, a little bit more than what we would've seen better than what we saw last year or so with that it continued into April.
Michael Goldsmith: April is pretty volatile.
Michael Goldsmith: And again, we'll continue to watch this theres, obviously everything that Tim spoke about that's happening in the world today and.
Timothy Martin: And we're carefully watching how that impacts the consumer. So frankly, Michael, we're kind of taking it day to day, week to week here at this point. Got it. Thanks for that.
Michael Goldsmith: And we're carefully watching how that impacts the consumer so.
Michael Goldsmith: Frankly, Michael we're kind of taking it day to day week to week here at this point.
Michael Goldsmith: Yeah.
Michael Goldsmith: Got it thanks for that and just trying to follow up you talked a little bit about some expense timing can you can you provide a little bit more color what's going on there.
Timothy Martin: And just my follow up, you've talked a little bit about some expense timing. Can you provide a little bit more color what's going on there? And I think in particular, you have referenced marketing, but if you can just clarify what moves where and if that's expected to come back later in the year, that would be helpful. Thanks. Thanks, Michael. The two big areas from a time perspective that I would note, one is R&M expense, and that is just one of those things. It's a combination of when things break and when you spend. And when you think about year-over-year comparisons, it can be, you know, we were a little bit heavier last year than we were this year.
Michael Goldsmith: And I think in particular, you have referenced marketing, but if you can just clarify.
Michael Goldsmith: What what moves where in essence expected to come back later in the year that'd be helpful. Thanks.
Thanks, Michael the two big areas from a timing perspective that I would note. One is R&M expense and that is that it was just one of those things.
Michael Goldsmith: So it's a combination of when things break and when you when you spend and when you think about year over year comparisons that can be a little bit heavier last year than we were this year.
Timothy Martin: So timing on that line item. But the bigger one is the one you talked about, which is marketing. And we don't spend to a budget on the marketing line item. We spend to the opportunity to deploy marketing dollars in a way that gets us a good return on that incremental spend. And it's a line item that you've seen for years for us is going to have some volatility in it throughout the year. When you combine that, it was the same way last year, right? If we find compelling opportunities to deploy marketing spend that gets us a good return, when you think about it in conjunction with how we're pricing, there are going to be years where in the first quarter we press on that pedal a little bit more.
Michael Goldsmith: So timing on that line item, but the bigger one is the one you talked about which is marketing and that we don't spend to a budget on the marketing line item, we spend at the opportunity to deploy marketing dollars in a way that gives us a good return on that incremental spend.
Michael Goldsmith: And it's a line item that you've seen for years for us is going to have some volatility in it throughout the year.
Michael Goldsmith: You combine that that it was the same way last year right. If we if we find compelling opportunities to deploy marketing spend that gets us a good return when you think about it in conjunction with how we're pricing.
Michael Goldsmith: They're going to be years, where in the first quarter, we press on that pedal a little bit more of they're going to be years like this year, where we pull back on that a little bit, but our expectation for the year is that while we may have pulled back a little bit on that in the first quarter. Our expectation is there is more likely than not an opportunity for us to press down on the pedal a little bit more later in the year.
Timothy Martin: There are going to be years like this year where we pull back on that a little bit. But our expectation for the year is that while we may have pulled back a little bit on that in the first quarter, our expectation is there's more likely than not an opportunity for us to press down on the pedal a little bit more later in the year. So our expectation for the year in marketing hasn't really changed. It's just we're a little bit late in the first quarter.
Michael Goldsmith: Our expectation for the year and marketing hasn't really changed it's just we are a little bit light in the first quarter.
Speaker Change: Got it. Thank you very much good luck in the second quarter.
Operator: Thank you very much. Good luck in the second quarter. Appreciate it.
Michael Goldsmith: Okay. Thanks.
Hong Zhang: Thanks. Next question comes from the line of Hong Zhang with JPMorgan, please go ahead. Yeah, hey, guys. I mean, it seems like the operating environment is still pretty, pretty mixed.
Hong Zhang: Next question comes from the line of Hong Zhang with Jpmorgan.
Speaker Change: Please go ahead.
Speaker Change: Hey, guys I mean, it seems like the operating environment is still pretty pretty mixed I was just wondering if youre seeing more demand for third party management side from just operators looking to work with you.
Christopher Marr: I was just wondering if you're seeing more demand from the third party management side, from just operators looking to work Um, thank you for the question. I think the short answer is yes, obviously, the mix changes, right? So we've gone from saying, the majority of our pipeline being development stores, new development stores. And as that has become increasingly more challenging, and we're seeing a decline in new supply. It shifted a bit to more of the open and operating stores for a variety of reasons. Some is just stress in this environment, and they recognize the value of the CubeSmart brand.
Speaker Change: Yeah.
Speaker Change: Thank you for the question.
Speaker Change: <unk>.
Speaker Change: Short answer is yes, obviously the mix changes right. So we've gone from saying.
Speaker Change: The majority of our pipeline being development stores, new development stores.
Speaker Change: As that has become increasingly more challenging and we're seeing a decline.
Speaker Change: New supply, it's shifted a bit to more of the open and operating stores forever.
Speaker Change: For a variety of reasons. Some is just stress in this environment and they recognize the value of the cube smart brand some of it is.
Christopher Marr: Some of it is, you know, simply life events that cause an owner or an operator to want to retain CubeSmart. We're seeing a little bit less of the institutional activity, which is, again, no surprise if you've seen a little bit less overall activity on the acquisition front here, given the climate as you described. So that, I think, is the color and the short answer.
Speaker Change: Simply life events that cause an owner and operator to want to retain cube smart.
Speaker Change: We're seeing a little bit less of the institutional activity, which is again no surprises have you seen a little bit less overall activity on the on.
Speaker Change: On the acquisition front here given the climate as you've described so.
Speaker Change: As the color and the short answer.
Speaker Change: Got it and I guess, that's my follow up.
Operator: Got it. And I guess that's my follow up. I understand the self-storage business is relatively more recession resilient than other property types.
Speaker Change: Understand self storage business is relatively more recession resilient and other property types, but I was just wondering what what how you think the business would react if we really do enter recession later this year.
Christopher Marr: But I'm just wondering how you think the business would react if we really do enter a recession later this year? Well, I think you hit it, hit it spot on and you know through through short ones and the GFC You know, thinking about this since 1993-94, typically you just see, you know, customers who come to self-storage and rent. because they find themselves wanting to cut back on expenses and they may move in with a friend and you know go from a one-bedroom to a two-bedroom and they have duplicative possessions. You may see you know folks moving home with mom and dad to save some money and you know again duplicative possessions.
Speaker Change: Well I think you hit it spot on in through through short ones in the GSE.
Speaker Change: Thinking about this since 1990 394, typically you just see customers, who come to self storage and rent.
Speaker Change: Because they find themselves wanting to cut back on expenses and they may move in with a friend and go from a one bedroom two a two bedroom and they have duplicative possessions you may see.
Speaker Change: Folks moving home with mom and dad to save some money and again duplicative possessions. It may take longer to find that post college employment and that may created demand. So again, the beauty of the business is that.
Christopher Marr: It may take longer to find that post-college employment and that may create a is that through most cycles we perform quite well. And then on the vacate side You know, there's always this misnomer that, you know, you're going to see an increase in vacates because of an economic recession. And, you know, our experience with that is that is just not usually the case in any material way. Got it.
Speaker Change: Through most cycles.
Speaker Change: We performed quite quite well.
Speaker Change: And then on the Vacates side.
Speaker Change: There's always this misnomer that youre going to see an increase in vacates because of.
Speaker Change: Of an economic recession, and our experience with that.
Speaker Change: Is that is just not usually the case in any material way.
Speaker Change: Got it thank you.
Operator: Thank you.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Brendan Lynch with Barclays.
Brendan Lynch: Your next question comes from the line of Brendan Lynch with Barclays, please go ahead. Great, thank you for taking my questions. I think your marketing spend has mainly been for paid search, but you've also commented in the past about testing other channels.
Speaker Change: Please go ahead.
Brendan Lynch: Great. Thank you for taking my questions.
Speaker Change: I think youre marketing spend has mainly been for paid search, but you've also commented in the past about testing other channels can you provided.
Christopher Marr: provide an update on that and any color on the progress with those. Well, you know, the marketing efforts run, again, from SEO, organic to paid. And, you know, different costs associated with each of those. And then, you know, it expands into social media to varying types of other media, advertisements on satellite radio, etc. And then more limited of recent vintage out of home, which would be, you know, advertising in an urban market like New York on bus, you know, kings or tails, etc. So it runs across the gamut, but you're spot on. The highest expenditure tends to be in the form of paid search.
Speaker Change: An update on that and any color on the progress with those initiatives.
Speaker Change: Sure while the marketing efforts run.
Bruce: Again, Bruce from from SCO organic to paid.
Bruce: And different costs associated with each of those and then it expands into <unk>.
Bruce: Social media to a very.
Bruce: Varying types of other media advertisements on.
Bruce: On satellite radio.
Bruce: Et cetera, and then more limited of recent vintage out of home, which would be advertising.
Bruce: In an urban market like New York on.
Bruce: On bus kings or tails et cetera, so it runs across the gamut, but you're spot on the most.
Bruce: The highest expenditure tends to be in the form of <unk>.
Bruce: Paid search.
Speaker Change: Great that's helpful and maybe just.
Christopher Marr: Great, that's helpful, and maybe... Help us understand what leads to more kind of high level brand recognition type marketing on buses or on satellite radio versus the much more targeted search oriented. Yeah, ultimately, right, your your highest brand level recognition is the store itself. And so Just think about you're a consumer and you're going to see, although I don't know why you would, you know, the Brooklyn Nets play basketball, and you're walking down Atlantic Avenue, and you're seeing, you know, three beautiful CubeSmarts as you take your stroll, and so now it's top of mind, right?
Bruce: Help us understand what.
Bruce: Leads to more kind of high level brand recognition type marketing on on buses or on satellite radio versus the much more targeted.
Bruce: Search oriented spend.
Bruce: Yeah ultimately right.
Bruce: Your highest.
Brand level recognition as the store itself and so.
Bruce: Just think about your consumer and Youre going to see although I don't know why you would the Brooklyn nets play basketball and Youre walking down Atlantic Avenue, and Youre seeing three beautiful cube smarts.
Bruce: As you as you take your stroll and so now it's top of mind right. So that's giving you. The most brand recognition and that's why we see a disproportionate amount of SCO given our dominant.
Christopher Marr: And so that's giving you the most brand recognition, and that's why we see a disproportionate amount of SEO, given our dominant New York City presence with those great assets. And so now it's in your mind. Now, you may, because we know where you're walking, and you're listening to one of the satellite radios, you get an ad, that's further reinforcement, etc. But until you have an actual need, right, that's just giving you kind of that back of mind brand awareness. No different than in the 90s, you wanted to build your store on the nicest street halfway in between, you know, the nicest multifamily in town and the most popular shopping center in town.
Bruce: The ORC city presence with those great assets and so now it is in your mind now you May you may because we know where youre walking and Youre listening to one of the satellite radio is you get an AD thats further reinforcement et cetera, but until you have an actual need right. That's just that's just giving you the kind of that back in <unk>.
Bruce: Brand awareness.
Bruce: Different than in the nineties you wanted to build your store on a nice street halfway in between the nicest multifamily in town and the most popular shopping center in town you wanted those cars coming back and forth and seeing your doors. So then when the need occurs right you're top of mind, that's when instead of searching for self storage near me, which would be.
Christopher Marr: You wanted those cars coming back and forth and seeing your doors. So then when the need occurs, right, you're top of mind, that's when, instead of searching for self-storage near me, which would be the most ubiquitous term, you direct the CubeSmart, and then you find us, you know, great customer service, we have the Cube to satisfy your need and your rent. Great.
Bruce: The most ubiquitous term direct to cube smart.
Bruce: And then you find us.
Bruce: Great customer service, we have the cube to satisfy your need in Europe.
Bruce: Great. Thank you for the color.
Operator: Thank you for the call.
Bruce: Yes.
Bruce: I'll now turn the call back over to Chris Marr, President and CEO for closing remarks. Please go ahead.
Christopher Marr: I'll now turn the call back over to Chris Marr, President and CEO, for closing remarks. Please go ahead. Thank you all for listening. I think the themes that clearly you're getting is it's prudent at this point to neither be Pollyanna or Chicken Little. You know, we're going to work through the opportunity set that's provided to us, and what we can assure you is that we will be maximizing that opportunity and focused on delivering shareholder values.
Bruce: Sure. Thank you all for listening I think the themes that clearly you are getting as it's prudent at this point to neither be pollyanna or chicken little.
Bruce: We're going to work through.
Bruce: The opportunity set that's provided to us and what we can assure you is that we will be maximizing that opportunity.
Bruce: And focused on delivering shareholder value. So thank you all very much for taking your time here today and we look forward to speaking to you again after the second quarter take care.
Operator: So thank you all very much for taking your time here today, and we look forward to speaking to you again after the second quarter. Take care.
Bruce: Okay.
Bruce: Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.
Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Bruce: [music].
Bruce: Yes.
Bruce: [music].
Bruce: Yeah.
Bruce: [music].
Okay.
Bruce: [music].