EXR - Earnings call transcript Q1 2019 | Extra Space Storage Inc.

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Operator

Hello, and welcome to Q1 2019 Extra Space Storage Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce your host for today's call, Jeff Norman.

You may begin.

Jeff Norman

Towanda. you, Thank Space Extra Quarter Earnings XXXX Welcome Storage's Call. to First

prepared our In qualified website. uncertainties have These by SEC, management's from forward-looking defined to in listeners press Reform statements statements furnished Securities filings Actual contain are to and or forward-looking questions Please risks business. company's and implied may latest our review. your unaudited the to that the a we contained as associated on results release, stated which addition could forward-looking materially answers information supplemental remember statements Litigation the Private remarks those to with company's our cautionary in Act. by statements financial due we the encourage the differ with

as circumstances May company today, of represent the Forward-looking Executive to statements X, revise update Joe estimates Officer. other statements Margolis, no Chief this assumes call. turn of now any management's or after over The because conditions or like call forward-looking to to obligation I'd the date conference market XXXX. changing of

Joe Margolis

supply top joining new growth and of despite for resulting same-store Hello, our season. good This of growth, continues into you we for contributed revenue the be the good of a We X.X%. Extra $X.XX positioned same-store positive and heading steady above end leasing growth which guidance. NOI Space interest occupancies, us to everyone. are Storage. better-than-expected was summer FFO had call to well Performance and our first with first X.X% quarter and for Thank high your rate quarter in growth in

several XXXX the of watermark XXXX impact likely supply due quarter unchanged. only be remain it the very results, XXXX expect from cumulative deliveries, are in lower. deliveries pleased high better-than-expected We we with total still development. in our XXXX was views on of expect to Further, elevated XXXX total the we years first greater the we for to balance and of new impact While believe for to be was modestly generally than the performance

in this are XXXX our that slowed impact of 'XX up above challenging trends formas today in from to of seeing hard stores. lease norms said, operating That historic up more people are We systems working maximize our O line in and and environment. has with a pro performance that being with pace to our a in to was our Lease the are well C underwriting.

drive traffic Our digital marketing stores. continues our platform to qualified to

quarter, supply, a ensure maintained the Space, have Extra environment new order current cost. We comes advertising it pull to invested and the due a to with above are Cost-per-click at occupancies in lever are and on are MSAs environment, acquisitions. but web the elevated the in we bidding success web. market harder averages large choosing we In In best million to $XXX the operators, for positioned visibility. like competitive

We properties off continue to transactions. have acquiring through market success

example, the properties and bought partner's for quarter, Angeles mentioned and a XX venture as in interest Area million. $XXX we joint in Bay For last we Los

shareholder enhance partnerships. mutually to returns We opportunities continue to through explore other beneficial

newly third-party also We due both we the In property third-party in significant XX third-party like of Additions we continue turn added would to system strong stores, mix platform. and our sale. while the remaining now our our well as program Between constructed JV have to left platform X see additional be with existing I bringing properties, high-quality our growth pipeline to year. XXX to management a managed to stores stores and time as over Scott. the for continue only the stores, our to a income. quarter, stores into platform

Scott Stubbs

everyone. hello, and Joe, Thanks,

same-store property beat core high exceeding end tax by The our lower-than-anticipated to of and and the was $X.XX. share, $X.XX per performance guidance stronger-than-expected G&A FFO the for Our expenses. primarily quarter income was due

We continue providing quarters. street in were primarily achieved necessarily expect growth. markets. our in driven to that tailwind also growth Discounts future was of a see modest don't in by revenue majority percentage rate QX, of Revenue we the down performance solid as a

pool year. revenue provide XX same-store growth benefit Our basis that anticipate to and XX points the of a includes for basis quarter change in it benefit the in of we will points a XX full

same-store spend, to payroll This This expense. quarter, pool we've which disclosure added utilities increases third-year of should financial with differences a in same-store by and help industry. supplemental partially offset mixed reconcile bag, Same-store the were in performance. in tax savings expenses and an in our marketing additional pool disclosure definitions further were showing property

We expense, expect marketing comfortable to we within are our continued pressure and guidance. operate our on but property with ability tax

we -- revenue our material made not have which annual not revenue have to growth. made moderating guidance, expense imply changes or We NOI same-store

have share, for As average we our impact in the increased We've performed increased beat the the above result of first supply, moderation per our to core which of with will be in the a -- to that includes FFO the multiple said $X.XX $X.XX full difficult comps last portfolio call, well result will along $X.XX year quarter. years. markets new guidance from

minor our G&A interest changes to expense, guidance. made income share count also tax We and

total believe of for O includes our our not significant has to dilution Q&A. over and our improve these FFO and for $X.XX to of Towanda value that, dilution from acquisitions Our stores, turn long-term which With from guidance shareholders We value-add of an portfolio. initial it of our quality start our dilution $X.XX from $X.XX, guidance. acquisitions changed overall let's additional C the provide of

Operator

Bank of Shirley [Operator Instructions] Our first the of question comes America. with from line Wu

BMO comes with question from Jeremy Metz of next Capital. the Our line

Jeremy Metz

maybe your a relative discounting more about wondering equivalent at through lower from percentage as spend, marketing dollar discuss up XX%. basis the growth revenues a benefit you quarter, may increase look be it there's perhaps between little a on call the It's like the dated, or if marketing. XX but discounting from those it could the and of seeing take carry give in I basis. slide looks year I is and last a is the to first discounting or less revenue point we're was crossover which recognize your to trends to if deck this assume I last

I'm those gets toggling terms same any So to items? wondering, but earnings, X between in you is place NOI there the of just it all and

Scott Stubbs

Yes, Jeremy, It number the during rentals. by quarter, we discounting actually lower little a strategy. a was bit the have didn't change of our in impacted lower -- significant

little had to we bit. a rentals it are your so down a if significant then the of in So change. fewer And wasn't discounts rentals, number door, a slightly gave we fewer discounts coming

marketing marketing, our continue maintain of did move of terms lever pull market and the to to share we In choose as in to terms needle the to rentals.

Joe Margolis

marketing down But maximizing is go They're and one-to-one Jeremy, versa. not this goal of They're achieve vice revenue. goes they're X just our not several if discounts to that of mark Joe. -- all factors together up, -- interplay correlated,

Jeremy Metz

the then, And sheet good right. shape. obviously, Scott, All balance in is

is in think times consensus to raising even Your more you new there for capital where do about high, stuff pipeline? or equity the the standing investments at How in here on all stock out just above whether you hitting there. it's have warehouse well least give active

Scott Stubbs

Yes.

have we it obviously, -- on So where use if will we a that for depend have we -- money.

how sheet an terms versus equity How remain option. our capital stock is a to we us. said we on want then always change. of in interest depend rates neutral deal the we we option it deal an balance is leverage we've underwrite for are, But is doesn't could if where use have trading and So our a capitalize for where a but

Jeremy Metz

and Joe, you that figure right pricing now how can just is front maybe And market talk the just active seeing? that notable you're anything on the for acquisitions about

Joe Margolis

Sure.

So to $XXX invested date, million. we've

there's changes which with have There we are. quiet. and in not lots we as year. more market So had. importantly, And good second keeping relationships, seeking of of market, in is lots will exposure they much flavors, cap we hope still feel pricing. we're success. as pick different first I've the our rates that most were happy to broad the is And is that seen of deals brokered activity say number, in through There's that's And It's been somewhat the up. that's half or that, more last the seasonal. in we're We all either quarter no market absolutely a equity where where opportunities in usually the and a there storage with happy the

Operator

question comes the America. of line Wu next from Shirley Bank with of Our

Shirley Wu

Sorry, about that before, handset wasn't working.

my trends So rate in question is street XQ first on 'XX. of

a You -- you was? on your in Could was much bit that remarks, give little you color of to it that think, I how up. mentioned prepared

Scott Stubbs

Yes.

Our new and average incoming between -- were quarter rates the tenants. achieved in first X% into first on street for the X%

Shirley Wu

how And changed that April? in

Scott Stubbs

but still X%, it's to closer It's solid.

Shirley Wu

side flip the discounts. And Okay. on for

percentage a don't coming You the expect continue. of to -- you as discounts down revenue being mentioned that

you of So trending kind how throughout do see XXXX? concessions

Scott Stubbs

don't year. compared budgets flat assume last year benefit, any to our and guidance Our for so were where the they year-over-year

Operator

of comes question from Rose Citi. next Our line the with Smedes

Smedes Rose

just provide couple than was which York, well you on to wondering larger up in bit pretty just I of good, very pretty, I be of if the color and maybe of think you achieve. absolute markets were right, New that were little performance like could increase like a I sounds mean, markets look -- the L.A. an could your if good put dollar sort like there sort you may L.A. bumping in against And more it in I'm pricing mature results. remembering you of up thought more

are things in And how trending about too talk surprised first maybe just maybe there? the you could were quarter? So you

Joe Margolis

to Yes. L.A. very continues perform well.

we've concerned, kind an the we're in supply as issue, most L.A. not significantly great above to and only certain where above pretty these be a out but inflationary increases, supply if only you inflationary an L.A. part, And able MSA, where in had to is move the for there's rent pointed markets, rates we that's at -- a in We not -- quarter you sustainable. had there's But of healthy sub-pockets are year-after-year look manner. continuing is issue of

Smedes Rose

York? then sort of New same, same And I observation in guess, Okay.

Joe Margolis

perform in So Jersey. anticipated. York supply, were did particularly I of the Island new Northern the particularly you, better, we and That Long New than we Northern surprised. New Jersey face some in New it will in MSA, And tell

So customers, we marketing than revenue that greater thought our a a our of result rate ability we'd of allowed able increased to systems, attract in at to has be to market. us part that increase spend

Smedes Rose

ask way to in or I supply the between in change players? of going sort just whether you. in that near Any overabundance least just last versus of of pricing driving operators Are I Okay. And they're differences term the then was new behavior any independent sort be the it's at occupancy? may seeing competitors, you question, of -- larger

Joe Margolis

we I more rational are competitive operators pricing would the the I'm consider it's would sure, any think and large there's tell you, significant a I It that small but in change. if do not sometimes been is don't ill-advised, out change. operators I can their things think, there. movements

Operator

comes Our KeyBanc next Thomas question from of Capital. Todd the with line

Todd Thomas

there Os of of months, be commented It's First you the is last you development that like some question. be yields, lease which Joe, would lease And on historical few in that consistent it projects. back C you're know expectation there your some an was opportunity to may norms, around portfolio up underwriting. over is some distressed with up seems the pace now what some slowing.

be So little expectations? opportunity? the Are expecting improving to Or case you prior relative industry a some may not across some broadly it more is so conditions sound doesn't that distress see bad. to still your the in are

Joe Margolis

is future. across quarter, development distress later the didn't full also those opportunities markets I'm the development are will in improving, from that is are a still are force in didn't improving market-by-market that I deals. business that the appear. a hope hoping disappointment them you the but and cycle may many environment in I'm that markets Yes. this hopeful We with for that be our and take and industry. there the cycle there's Obviously, comments some but challenging first see still the will hitting in the anticipate acquisition de-accelerate conditions

Todd Thomas

missed some throughout is year growth and commented little Okay. and bit. growth that And may the know slowing guidance heading implies direction. of balance now, in you right the your on of ins other the I here. But have outs I Scott, the then, a

expecting the you So that of bit of little a in growth just provide may and the around could portfolio maybe you're additional a bit change throughout what little be -- balance the color trajectory to year? what's pressure

Scott Stubbs

Yes.

Florida impacted the -- decline quarter. a to in our supply. of we but a budgeted, it a lot That's rate first is was quarter slightly. same-store heavily have we that the market. markets had of slow obviously, Throughout to many by store. year. our these actually our it's strong of Our up forward, continue It's assuming a first growth, rate as to of terms it of that throughout exceeded in certain look whether stores a that new or quarter, budget. the their we're We tough And assumption growth lease budget pool think year, our continues continues

We'd thing So overall, or and that quarter that continue sort. to our we like the change guidance and to goes second get slow. doing the our budgets before guidance see into where

Todd Thomas

Okay. occupancy us April that if where could And you tell what just lastly, I year-over-year? wondering XX, looked was like was

Scott Stubbs

XX -- At the occupancy March, points down comparison, end XX of you points, but take about the at end from was down of by the April, year-over-year if of points basis we up was April. slightly was our March XX basis at end were it it basis the

still solid guidance again, big and within month. surprises, was a April but different, So slightly no our

Operator

Wai question comes Goldman the next with Alan of Sachs. Our line from

Alan Wai

of the last the will same-store noticed slow of curious this here. of I for that repeat first bit And this steep to follow-up were pattern quarter. had last a the years the happen? a in do rest on mechanics the year? We the think for down you was couple you Guess question XQ versus what

Scott Stubbs

season, Obviously, somewhat is QX. did into be year-over-year moving prior -- typically leasing of to you the QX than we it's comp it's how and kind better going the year. a So but

you're So bit a that what could be there. potentially seeing little

Joe Margolis

year primarily I was think, last discounting.

Scott Stubbs

then the from in our has is, Correct. same-store pool. more thing And benefit change typically QX other

for XX quarter the we're that very which had it's QX, would assume, XX first So and we points be to estimating little this XX, the year by QX, to benefit. in year, basis

Alan Wai

That's helpful.

reintroduce point has of you or at discounts. You the pricing guidance that your as you to didn't discounts environment attract Do improved mention do benefit any in don't expect for you'll some think from think late? need

Scott Stubbs

No.

-- our the We a to rentals of type well discounts. discount. over are new use discount some coming of rentals continue new going get We get XX% in door most to

Alan Wai

it. Got

announced has complete. which tomorrow to will initiative, significant Your a peer, and investment PSA requires years a property take several of

compares Just newer portfolio with currently generation curious, how do you products your the market? think in

Joe Margolis

we've and And and done to and invest relevant that money keep of job good that. upgrade year do spend properties think, I to continue attractive we'll to we them a customers. our every continuing to doing

Operator

Our next Stender comes Todd the question of Wells from with line Fargo.

Todd Stender

maybe you CapEx guess, the to characterize bought properties, Just from your looking to just partner, inside at share look that properties maybe any JV I that's that look the just you California the in can required? submarkets and portfolio.

Joe Margolis

areas, that were them -- our So San in the X been with years these They've all been own They've area. properties partnership we many built, they're Los we Francisco infill partner. for part halfway XX far. in well been started in more Angeles, every ago. our we that X maintained. X-year program a of portfolio, year. has the They've about X We're been Capital spent through years so that or in rebranding than little

a need that stores of not solid, acquisitions. are these core lot steady They're capital. So great,

Todd Stender

right? that third-party is managing basis, been a you've And on them

Joe Margolis

about on we venture manage We basis, a but joint XX%-X% a No. did basis. on Not a them. partner, third-party were joint venture

Todd Stender

about look this? market Okay. JV this? you pricing you at on What of You take kind how stabilized partner, your And they're ascribe out do do rates. pricing How getting pricing? to obviously then,

Joe Margolis

in in on So we forward gross these types was is assets transaction. the the which embedded yield of in we was for realize market markets value that the a California. purchase $XX.X million without of negotiated capital reassessment XX-month an the had after sub-X, for portfolio, tax couldn't price that promote But venture

yield price, putting after the tax X.X. the first was purchase that So towards reassessment year promote

Operator

comes Ronald next with Stanley. question The of line Kamdem from the Morgan

Ronald Kamdem

ones me. from couple of a quick Just

that? think, every single-digit? marketing I you touched increase could How regions we Is pricing should year. that up double-digit? drove are specific spend? any Just Meaning, if on there that more color really that? also, you that little And bit on bid or think the there spend? quantify markets a provide going are the to Is a high way it Is wondering about

Scott Stubbs

with for need kind pay-per-click spend. inflationary is increase, the we are keep to the XX% are which spend to to were what original thinking we our spend budgets of up Our going year,

number the supply focused to level more assuming it that We an or have spent and at throughout is spend year. first greater It's country, probably additional the a where accelerated in quarter markets we're have across but markets on spend, we'll the higher the than struggling. little we're new

Ronald Kamdem

Great. That's then, some And back bigger helpful. sort of on of touching markets. the

looking a in at seeing of projects Just the Dallas, pipeline. we're still lot

maybe how that us assets positioned remind could you about are if and thinking your are versus coming new curious Just guys the supply how in? you

Joe Margolis

challenged. X% if our average. a is which And see than was Dallas revenue our Yes. there, below and that growth look supplements you portfolio at is market is less

North and Our better. on. most South that doing those the areas, are other most challenged Dallas we're slightly area is stores, and we're focused stores the Dallas our In

Ronald Kamdem

I you what between Great. the and maybe rate tenant have us then the during trending And April? was was asking last that's how the in if just, the quarter question could remind rate the existing and spread

Scott Stubbs

was we're actually ask months. the is our of so, and quarter average, our in digits of And are where of rates year. The worse our place year rates. terms time On the winter worse the the time in mid-single

time But it's The is on So mid-single-digit. when of of essentially January, flat. average, February. the summer time kind best they're the months

time so the this the than higher of worse So is year, that.

Operator

line the next Our Jefferies. Tayo question Okusanya of from comes with

Toyo Okusanya

out as very to guys well kind way you You maximize and trying the between best as to interesting volume. typically, profits figure always things, of the pricing do

just about the bit the quarter telling you quarters from done could even if and few curious demand about of be elasticity that Just little of may kind customers? have must the this you talk last maybe a you or of maybe checks some

Joe Margolis

to decisions quarter, make We without testing But month. that. on data analyzed are very not every continue testing. every and you we So having I'm don't that tests what say telling any we're the We're the to things data-driven actually comfortable do shop. based happy

Toyo Okusanya

tell telling you demand you about about customer demand? you Could may be of elasticity what anything us or

Joe Margolis

don't with rent steady our in of a So that see increasing to any we weren't percentage once has you incorrect. same. get if see fear is millennials make going have, Demand to face difference they the folks in to the of stickiness, of population. customers significant do higher Millennials up be behavior. the customer will, in, rate increases that they proven the the than renters We the

So we behavior. changes in don't customer see significant

Toyo Okusanya

you. Got

you to just Okay, about then for demand could regards business And also that's anything helpful. in talk incrementally Storage?

Joe Margolis

demand So steady years for many here. increase significant or don't business business has pretty decrease in any many, been see And demand. we

Operator

Our next question Khanal Samir comes the from Evercore. with of line

Samir Khanal

supply. thanks Joe, view for on your

about high deliveries to but impact 'XX, was sort cumulative on You developments which talked kind the watermark you impact. the from of continue then see of

kind where it 'XX and growth is, this in revenue and doesn't those on you think at your as of out I I of all be mean, pushed of what's delivery have even 'XX people industry, last it generally, do So to generally further think be, but say, impact of trough point mean, the will the -- the that into come do but taken you the for company, gets years? and you part the with the it's couple to

Joe Margolis

requirements going continue know don't know. perfect of its are sticking know future. transparency the or would risk moderating But in So going tolerances ground. lower people to into given expect, We yield development. don't we don't That's economics we We don't we if we higher shovels what have see. to development trend that keep with if the is

don't things occur we So inflection will depends point when currently on the know. that

Samir Khanal

switching gears for just where pricing fairly bit are assets, And sounds are. Considering do little cap you favorable? could rates consider consider is selling And rates like on you -- cap disposition this where a even it side. be well may the market into stabilized Okay. And low.

Joe Margolis

joint at look sense. quarter do assets year, make store We we'll portfolio a in markets, when would the into a reduce for to assets And York that to execute and our closed. just closed venture outright it every to the New so sense quarter, those to and this disposition of Upstate exposure continue either we guess, I we, of actually look and or our makes it dispose or after

Operator

comes the Street with Our from Advisors. next question of Green line Ryan Lumb

Ryan Lumb

under just expense disclosure question. same-store the guidance? small venture appreciate one the the you to or But adjustment First, Can on G&A pools. additional elaborate to brief older simple

Scott Stubb

just not that of still are timeliness and the to we and Part to should some did had majority come of that Yes. fruition. it hires of some estimating has expenses consulting do the we then flow with through that

Operator

line from next of Our with James. question Raymond Jonathan Hughes comes the

Jonathan Hughes

broader were but of performance it get sample the just at and larger stabilized Francisco pools like facilities the San in specifically, Looking from sequentially of was L.A. looks those fourth size a storage rental number in your growth to flat data quarter. down

of lose third-party what's I Did bit. same-store going was a think little up curious pool stores? Just maybe on some there? Because you the those managed

Joe Margolis

I'd back that not San look have go and at we Francisco. We could to you. I'm or and down get were sure, look back to because at that, in L.A.

Jonathan Hughes

on York. to And sequential point Okay. growth. XX enough. portfolio and to other I boost to in pool? growth? was nice benefit the from New revenue overall guess, Fair adds revenue similar coast same-store the on guess, saw a pool pretty new the same-store Was what going stabilized basis that then, increase it that the the I And

Scott Stubbs

will have it. in and on market-by-market really it It's properties depend how we many

properties XX a when add So, and impact add you only X, to a very you properties, had will Angeles I more get you larger Los that versus number going impacted X mean, of obviously, it have little. it's market it where

to So market-by-market really basis it's on here. a tough give you

Operator

question next SunTrust. line Bin of from with Our Kim comes Ki the

Ki Bin Kim

you Just What picture. during of do a quarter? you surprised were positively think this the things bigger couple that

Scott Stubbs

were I down, aspect. being us a to I in think, positive tell would a surprise discounts you,

held they the as some that been of hard have. as on fact well hit have these so supply think have markets that I by

to a and our some then, Dallas. try payroll we So, some expected, I one is, to of for that somewhat more continue thing than for through get we've rather And QX think, instance, in so last there an of a expect ongoing the was things lower to a don't the benefit done onetime the little one we year than year. -- but efficiencies, more

Joe Margolis

Atlanta, markets certain we perform better better think performed I thought. certainly we than anticipated. than

Some little of otherwise impacted delivery better. or in performing we were markets to to the either are thought going broader that be delays a

Ki Bin Kim

spend And the you payroll, normalizes Okay. the How maybe marketing comments benefit And make feel to the elevated do higher year. back like said, was guidance, first throughout going expense your your you especially that it about end? higher. and seeing onetime that at in about same-store quarter

Scott Stubbs

So comfortable still we're with our guidance.

I you think that it will depend marketing range. where a little spend bit on on that in your are

Ki Bin Kim

then last question. All right. And just

partnering probably quite You knew Does of value all thought is with change I that long-term but. storage I Mountain. it's MakeSpace efficacy views that companies? that up your the Iron early about know at

Joe Margolis

to people aren't there of would it. customers own service competitive expect segment to be not And whatever It some don't customers, still want piece we doesn't. boxes. that Not going versus choice. we have. mean, current logistical want expected. it's played as been to storage. using pay the It's able it of at look wallet not kind economical to to and when hard to for It's use That -- said, of to to some what pricing of to business with wallet like our who we customer -- who type is think evolves say a move storage make elderly as for their they being out we we I have an or offer seems it, able but

Operator

call at over this would to the Joe I'm Margolis, turn closing remarks. further back CEO time. like to I no showing for questions

Joe Margolis

everyone us for you Thank today. joining

experience supply. discussed, continue we property solid As level we despite NOI new growth to

another day. to good front, the growth expect we're management. to We front, competitive feel a teams have And acquisition third-party encouraging for to performing through that shareholders. and solid external I and you, Thank our systems both I many year very season Extra mostly delivering and forward on very NAREIT. look their going most and off start are the our We're during seeing tested well results a that have you for a our at strong good of they acquisitions on times, are and Space. summer is what's that

Operator

that today's gentlemen, you for participating. concludes and Thank Ladies conference.

a may You have day. Everyone, disconnect. now wonderful

Extra Space Storage (EXR) 2 May 192019 Q1 Earnings call transcript