Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential improvement in customer demand and move-in activity, matching expectations for the year.
- Positive trends in several major markets including San Francisco, New York, and Chicago, with expectations of adding more markets to this list.
- Strong performance from high-growth non-same-store pool assets, with NOI growth approaching nearly 50% during the first quarter.
- Reaffirmed core FFO guidance for the year, indicating stability in financial projections.
- Strong capital and liquidity position, with successful refinancing of 2024 maturities and a leverage of 3.9x net debt and preferred to EBITDA.
Negative Points
- First quarter core FFO declined by 1.2% compared to the first quarter of 2023.
- Challenges in the new move-in customer environment, although improving, remain a concern.
- Same-store portfolio revenue increased only by 0.1%, with move-in rates down 11% after adjusting for promotional activities.
- Increase in same-store cost of operations by 4.8% due to rises in property tax and marketing expenses.
- Subdued transaction market for acquisitions due to a volatile cost of capital environment, although some recovery is expected in the second half of the year.
Q & A Highlights
Q: Joe, you talked about 1Q being in line with expectations. Maybe talk around April, kind of what you're seeing on move-in trends sort of general trends you're seeing in April? And I guess, how has April sort of played out versus your expectations?
A: (Joseph D. Russell - CEO, President & Trustee) April showed sequential improvement similar to the first quarter, with expected move-in activity and demand. This aligns with our projections for how the year is likely to unfold, showing no surprises and validating the reacceleration in several markets.
Q: Shifting over to the transaction market, it was subdued with rates spiking in March and April. What gives you the confidence that you'll start to see transaction opportunities in the second half?
A: (Joseph D. Russell - CEO, President & Trustee) Despite interest rate volatility, we are in active dialogue with numerous owners who may transact in 2024. Various motivations will likely bring sellers to market, and we anticipate some transaction activity to begin percolating, supporting our outlook for acquisition activity in 2024.
Q: Can you discuss your expectations for the housing market embedded in your guidance, and if this has changed since your initial guidance?
A: (H. Thomas Boyle - Senior VP, CIO & CFO) Our outlook, provided just over 60 days ago, remains unchanged. We are not anticipating a robust housing market, and this conservative view aligns with recent interest rate movements.
Q: What would it take for you to adopt a more positive or optimistic tone at the upcoming NAREIT meetings?
A: (H. Thomas Boyle - Senior VP, CIO & CFO) A positive tone would stem from adding more markets to the list of those reaccelerating and engaging in more dialogue with sellers, setting up for a traditionally busier transaction period in self-storage in the second half of the year.
Q: Could you provide an update on April move-in rate trends?
A: (H. Thomas Boyle - Senior VP, CIO & CFO) April's move-in rates continued similar trends as noted earlier in the quarter, with rates starting to increase as we enter the peak leasing season. Occupancy ended the month down slightly, consistent with seasonal expectations.
Q: On the acquisition front, subsequent to the quarter end, you had $34.6 million in acquisitions. Could you talk about how these properties came about?
A: (Joseph D. Russell - CEO, President & Trustee) These were individual deals with small or single assets fitting well into certain markets. We continue to engage in active dialogues with various types of owners, which supports our acquisition strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
