Extra Space Storage Inc (EXR) — Q1 2018 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Extra Space Storage Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. And instructions will be given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Jeff Norman, Vice President, Investor Relations. Sir, you may begin. Thank you, Chelsea. Welcome to Extra Space Storage's First Quarter 2018 Earnings Call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, Wednesday, May 2, 2018. The company assumes no obligation to revise or update any forward-looking statements because of the changing market conditions or other circumstances after the date of this conference call. I would now like to turn the call over to Joe Margolis, Chief Executive Officer.

Hello, everyone. Thank you for joining us for our first quarter call and for your interest in Extra Space Storage. Four months into the year, 2018 is progressing as planned. We held occupancy through the winter months and ended the quarter with over 92%, 10 basis points ahead of 2017. The steady demand for our need-based product, together with our ability to capture customers, not only allowed us to maintain occupancy but also gave us pricing power. This pricing power drove same-store revenue growth of 5.2% in the quarter and positions us well heading into the summer leasing season. We continue to see new supply, which has an impact on performance in certain submarkets. However, our digital marketing platform is doing a great job driving qualified traffic, and our proprietary revenue management systems are optimizing price and promotion to convert the traffic to rentals. Our technological advantage over smaller operators, together with our diversified portfolio, has led to steady performance. In periods of elevated supply and heightened competition, the advantages held by the larger operators become more apparent, and we see that in the market today. We continue to have success acquiring properties through off-market transactions. In the quarter, we invested $71 million in six acquisitions and completed a $40 million development. All but one of these acquisitions were from existing relationships where we did not have to compete on the open market. Subsequent to quarter-end, we closed a buyout of a joint venture partner's interest in a 14-property portfolio for $204 million. While the cap rate for the portfolio was at market, the sale resulted in Extra Space realizing an embedded promoted interest in the joint venture of $14 million. After crediting the promoted interest to Extra Space, the effective first year cap rate was approximately 6%. We continue to explore opportunities to enhance shareholder returns through mutually beneficial partnerships. We also continue to see significant growth in our third-party management platform. In the quarter, we added 41 stores and we expect to add a similar amount in the second quarter. Additions to our third-party platform continue to be a mix of newly constructed and existing properties, bringing high-quality stores into our system as well as additional income. Between our third-party program and our JV stores, we have 672 managed stores, which continues to be the largest in the business.

Thank you, Joe, and hello, everyone. Our core FFO for the quarter was $1.09 per share, exceeding the high end of our guidance by $0.01. The beat was primarily due to better-than-expected property performance and lower-than-anticipated interest expense due to the timing of acquisitions. As Joe mentioned, our same-store revenue growth was 5.2% for the quarter. This was primarily driven by new customer rate growth, which was up 4% to 5% year-over-year. Discounts were down a percentage of revenue in Q1. However, we project discounts to increase in upcoming quarters as we expect to use them more heavily in the summer months. Same-store expenses were up 6.9%, which is a significant increase from the low expense levels we have seen in the last several quarters. However, it was not a surprise. Due to a very difficult Q1 2017 expense comp of negative 2%, we expected higher expense growth in the first quarter. The increases can largely be attributed to property taxes, which, while elevated, were on budget; and outsized snow removal and utility expenses. Snow removal and utility overages were driven by weather events in the Northeast and came in approximately $1 million over budget and $1.1 million over last year's numbers. We've revised our guidance and annual assumptions for 2018. We raised the bottom end of our same-store revenue guidance by 25 basis points to 3.5% to 4.25%. We have done the same for the same-store expense growth, which is also revised at 3.5% to 4.25%, resulting in same-store NOI growth of 3.25% to 4.5%. We also increased our acquisition guidance to $600 million to reflect the JV buyout we just closed. Of the $600 million, $482 million is closed or under contract. The $118 million that is not closed or under contract is projected to close towards the end of the year and won't have a material impact on our earnings. Seller pricing expectations are still high and we are committed to being disciplined. While we expect additional opportunities throughout the year, we will only transact the prices that will create value for our shareholders even if that means investing less than our guidance. Our full year core FFO is estimated to be between $4.57 and $4.66 per share. In 2018, we anticipate $0.06 of dilution from value-add acquisitions and an additional $0.15 of dilution from Certificate of Occupancy stores for a total dilution of $0.21. Our investments in our Certificate of Occupancy stores and value-add acquisitions continue to improve the quality of our portfolio and generate long-term growth for our shareholders. With that, now let's turn it over to Jeff to start our Q&A.

Thank you, Scott. In order to ensure we have adequate time to address everyone’s questions, I would ask that everyone keep your initial questions brief. If time allows, we will address follow-on questions once everyone had an opportunity to ask their initial questions. And with that, Chelsea.

Hi, thanks for the time. I was just hoping you can comment on the strength of demand. It seems like you had more vacates than move-ins this quarter and last quarter. So just curious if you can give broader comments as to what that is and just your view on demand. And how should we think about that, given the fact that your occupancy went up? I'm not sure if it was just the size of the units.

So demand continues to be very steady. We don't see any turndown in demand across any of our channels. Our net rentals were actually up in the first quarter, and we're very positive on that in the winter months.

Was there any impact from the weather, though? Because it looked like move-ins versus move-outs were kind of negative, and this is the second quarter in a row.

I think if you look at move-ins in the first quarter versus move-outs in the first quarter, you'll see we were positive and very consistent with our eight-year average.

Okay. And then just on street rates. I was just hoping you could give us any color on the net effect of street rates throughout the first quarter and into April, and how you're seeing things trending.

Yes. During the first quarter, we saw new customers come in at rates that are 4% to 5% above last year, and April continues to be pretty consistent with the first quarter.

Thanks. I guess, question on the guidance. I mean, even though you did have a modest raise to the guidance, it seems that the first quarter was well ahead of the full year guidance range. So could you just explain what factors we should be thinking about in the back half of the year that create some slow in growth?

So we project, as Scott mentioned in his remarks, that we’re going to use the discounting tool more in the summer and that will provide a little bit of a drag. We're continuing to face the development cycle, new supply, and that affects certain of our properties. That being said, we feel we're putting up good numbers and performing well in the face of the new supply. And we have increasing interest rates, which also be an effect.

Nick, if you look at the big changes in guidance, they’re primarily related to interest expense, which obviously increases due to the $200 million acquisition which we financed all with debt. And then, also, we increased interest expense slightly due to a change in the LIBOR curve, which you've seen recently. In addition to that, we had a slight adjustment in our tenant insurance and a couple of other items. But those are the big kind of puts and takes, and then also the benefit of the $200 million acquisition we just did.

What are your thoughts on the supply impact this year compared to last year or over the past three years? How do you view the current supply cycle, and which markets in your portfolio are experiencing the most competition from new supply at this time?

We're certainly right in the heart of the development cycle and more of our stores are being impacted this year than last year. And the markets that are problematic continue to be some of the markets that we've talked about in the past, New York City, Dallas, we see South Florida. And then we're starting to see markets like Tampa or Portland, Phoenix that we're actually doing very well in now, but we feel there is some supply coming in those markets. Again, and I don't feel like I want to repeat myself, but even in the face of this development cycle, we're coming out of the winter months at 92% occupancy with positive rent growth. And we have many markets that we're not facing similar supply challenges. We have a broadly diversified portfolio and we have highly developed proprietary systems that maximize revenue in the face of new competition. So we're not ignoring new supply; we understand what it is, our guidance reflects it, but we're able to operate pretty well in the face of these conditions.

Just to follow up on that. I wanted to ask you. You mentioned that seller pricing hasn't really changed; your expectations are still high. So are facilities transacting? Or are people just waiting and thinking that at some point they'll get the price they want? It just seems surprising that pricing wouldn't have come down somewhat given deceleration that leaps across all of the public companies in terms of same store. And I guess along with that, are you seeing any changes in the availability of capital for developers in terms of either from lenders or our shrinking returns, then changing their thoughts about new development?

Smedes, I'm surprised as you are that we haven't seen any increases in cap rates. Certainly, deceleration increasing in interest rates and other factors would make you think there should be some price movement. But I think all of that is offset by just a large, large amount of lots and different types of capital seeking exposure to the self-storage space. And deals are transacting, and we see lots of capital from large private equity funds to more regional people who just put together a small pool of money, and they're buying self-storage. On the development side, there are factors that I would expect to slow down the development factor. Construction costs have increased even before the steel tariffs were announced. Steel was up 15%. Construction costs are up. Labor costs are up. Interest rate costs are up. So when you take all of those factors on the cost side and if you do honest underwriting on the revenue side, development yields are starting to shrink. And it's certainly our hope that that will slow down some of the development that should be taking place right now.

Okay. When you mentioned that you acquired your joint venture partner's interest, which was not included in your initial outlook for the fourth quarter, was that something they proposed to you? Or was it something you had been working on but were uncertain about completing this year? How did that change from your last report to this one?

We were working on it at the last report, but it was not in any way firmed up. We did not know about it much earlier than that. This is a single client account of one of our partners that is in somewhat of a drawdown mode and they're liquidating properties to generate cash, and we were able to take advantage of that.

Just one question continuing on the capital interest in the space. With all this demand from private equity looking to get in the space, do you think at some point we see them try to go out to one of the public companies to get a larger portfolio? Or why haven't we seen that happen to date?

Well, that's hard to comment on other than it's a management-intensive business. And if someone was going to make a play for a large company, they would have to have a way to operate it. And I'm assuming if they're going after a public company that means they're not happy with the current operators, so they have to figure that out. I don't know whether that's going to happen or not.

Okay. And then just on the buying out JVs, do you think there's greater interest from some of your JV partners to liquidate sooner rather than later? Or are you noticing any change in sort of desire for your partners to remain invested?

So we have a variety of partners. Some are with perpetual life open-end funds that may never sell, and others are either closed-end funds or IR-driven or have other incentives, and it's truly a case-by-case basis.

Thanks. Scott, acquisition volumes were more than double your initial expectations here. You mentioned earlier funding this with debt. I'm sure it's just a rounding issue, but your share count guidance is down 100,000. The stock today that, call it, 12% to 13% premium to consensus NAV. So can you just talk about your decision here to fund activity with debt, thoughts around using your equity for currency? And then is this something we should look for if you're able to continue to source additional deals from here?

Yes. So our guidance is up from $400 million to $600 million. So we are not quite double. We left the same $50 million in equity in there. We're always looking at the best source of capital. I think that equity is always an option. It's for modeling purposes, we used the $50 million and it doesn't really move your ratios much to go from $400 million to $600 million. In terms of your share count, part of that is timing on when those OP units were issued; they pushed towards later in the year. And again, we're always going to try to use the cheapest cost of capital possible. And equity, if we were to ever issue equity, you'd want to do it when your stock is appropriately valued, and you'd want to do it when you have somewhere to put that money to work. We don't look to issue equity just to pay down debt. We feel like equity is more expensive than debt.

Overall, we aim to maintain a leverage-neutral position. Although we will finance this with debt, our growth in net operating income allows us to sustain that leverage neutrality.

I appreciate that. Continuing with the acquisitions, you mentioned generating a lot of off-market activity. Can you share some insight into what is driving the increased activity compared to your initial expectations? I understand it can be challenging to predict acquisitions, but I'm curious if this uptick is due to sellers who previously held on but are now inclined to sell completely given the rising supply and lower revenue growth expectations.

So all of the increase in our expectations is this one transaction, the JV buyout. Other than that, our acquisition volumes are as projected. But we are seeing folks who have built a new self-storage facility. They're somewhere in the lease-up process. And either it's not going as well as the expected or it's not going as well as the bank's expected, or they're nervous about the future and they want to take their chips off the table, we are seeing some of those opportunities. But again, pricing has got to be right for us to transact, Scott.

And if you look at where our acquisitions are weighted this year, excluding this $200 million transaction, there's a lot of Certificate of Occupancy deals that we've been working on for the past several years and those are just completing this year and will close this year.

So looking at the New York same-store pool, revenues there were up almost 4%, but that was down a little bit from the fourth quarter. And I know that's one of the more supply-impacted markets. But could you just talk about what happened there? Was it just new openings or maybe the properties added this year were responsible for the deceleration? Just trying to understand what happened there because I was expecting that to actually accelerate from the fourth quarter.

I'm not sure the change we saw in one quarter is significant enough to indicate a trend or a major shift in the market. We continue to perform much better outside of the boroughs, with a revenue increase of about 4% there. However, inside the boroughs, our revenue growth is under 2%. It's important to note that we only have eight stores in the boroughs, so our data is based on a very small sample size. Overall, we don’t see any notable changes in the market.

Okay. That's helpful. And then just one more. The boost to revenue growth from the new same-store assets was about 30 basis points in the quarter. And I think, Scott, you mentioned last call, it should be more like 50 basis points at the start of the year. Just curious if that glide will be a less drastic decline or if there was something in the first quarter that led to that being a little less than you discussed in February?

I would say it went pretty much as we anticipated. We expected a boost this year, though not as significant as last year. I don't remember mentioning the 50 basis points. Our expectation was that it would be closer to the current level and then drop to zero by the end of the year. The benefit from changes in our same-store operations is in line with what we anticipated.

Most of my questions have been answered. However, I want to quickly address the growth in expenses related to snow removal and utilities in the Northeast. April was quite poor in terms of weather. I'm curious if the increase in expected expense growth is at all due to the bad weather in April, or if it is solely related to the first quarter. I'm trying to understand if there is any buffer included in those figures.

No. Our expenses did not change materially in April. Anything that's happened is what we built in.

Hi, thanks. Can we hear more on the portfolio that you acquired subsequent to Q1, where it's located, occupancy and why does it make sense to acquire that? I know the partner was stepping aside, but maybe just thinking about your growth expectations.

We have acquired 14 properties across 12 states, providing us with strong diversification nationwide. These properties came from the Storage USA transaction and are well-established, older assets that we are very familiar with. As properties age, they tend to attract more long-term customers, enhancing their stability. Acquiring these from a joint venture partner is a low-risk move for us since we have in-depth knowledge of the assets, including their cash flows and any necessary maintenance. There are no transition costs, branding costs, or broker fees involved. We acquired them at a market cap rate in the mid-5s, which is fair; we didn't acquire them under any unusual circumstances. A key advantage of this venture is the traditional promote structure, which allows us to earn a disproportionate share of returns above a certain threshold during liquidation, amounting to $14 million in this case. This amount wasn't reflected in our books prior and wouldn't have been accessible without this transaction. Overall, while this was already a solid deal, the additional benefit makes it even better.

Thanks for the explanation. Do you receive that promote? How is that recorded? Will it appear in Q2? How do you account for that?

So in effect, it reduces the purchase price. So if the 100% purchase price is $225 million, we don't have to pay for our 5%, nor do we have to pay for the $14 million. So it just reduces cash out of our pockets to buy $225 million worth of real estate.

Got it. Are you assuming any mortgage debt? And is the rest going on your line?

So there was about $89 million worth of debt that we assumed and we're currently considering whether to keep that or extend it or do something with that debt. But as of today, we assume that debt and the rest went on our line.

I just want to go back to the discounting that you mentioned. Can you talk about what is causing you to try to test the discounting increase, the discounting across your markets? And can you clarify, is this discount higher relative to last year in the second and third quarter or is it more of a sequential trend?

Yes. I would tell you it's an assumption where discounts will be higher in the summer months. And the assumption is, in order to keep rate, we are going to discount more. You really have the option of cutting rates, increasing discounts, increasing marketing spend. And kind of based on our plan this summer, the assumption is we will increase discounts.

Is the increase compared to last year or is it based on how you finished the quarter?

Yes. It's more relative to last year.

Okay. And then just one more big-picture question. Correct me if I'm wrong. I think on the last call, you had indicated stability in revenue likely to tick up in the back half of the year. I'm wondering if that's still your expectation or any signs that you could see certain markets accelerate.

Yes, we still expect that the summer month discounting might slightly impact those months, but we anticipate an acceleration in the second half of the year.

Can you provide more details about the discount patterns, specifically what percentage of customers received discounts last year compared to this year? Additionally, when you mention using discounts more in the summer, how does that look?

Yes. In the first quarter of last year, approximately 82% of our customers received discounts, compared to 59% in the first quarter of 2018. Last year, discounts accounted for just over 4% of our revenue, while this year, it is just under 4% for the first quarter. During the summer months, around 60% of customers in the second and third quarters received discounts, and we expect that to remain just under 4%. We anticipate that the percentage of new customers receiving discounts will exceed 4% and will be above 60%. Additionally, there is a variation in the type of discounts offered; for instance, last year, we provided half a month free, whereas this year, it's a full month free.

I would tell you that we've had the same goal throughout, which is to maximize revenue, and that we are always testing and trying different things to achieve that goal.

I'm obviously a little bit new to the company, but I'm trying to reconcile your page 19 showing how the acquired same-store pool versus the new same-store pool. There's about a 40 basis point impact to NOI. If I take a look at your past supplements, it looks like the impact should be greater. Can you just clarify how that calculation works? It seems like the impact should be closer to 100 basis points, but just based on what your 2016 wholly owned acquisitions generally looks like, your revenues and expenses for the prior quarters. But I'm hoping you can explain that a little bit further.

It really depends on the number of stores added to the same-store pool each year and the mix of those stores. From 2016 to 2017, we added the SmartStop acquisition, which included 122 stores that had some rate growth and possibly some lease-up, so last year benefited more from this addition. The stores that moved from 2017 to 2018 were more core stores, which were acquisitions from some of our joint venture partners that went back to Storage USA. The impact is influenced by the mix of stores and the potential upside in those stores. We've consistently used the same definition but have aimed to clarify the benefits from these types of stores. This year, the focus is primarily on the mix of stores.

Thank you, that's a great deal. I'll follow up on this later as well. I have another question. Earlier in the call, you mentioned that you work on the Certificate of Occupancy years in advance as these developments progress. Have you considered doing a forward equity issuance if you believe your equity is attractively priced, given that the Certificate of Occupancy deal you would need to close could be 2 or 3 years down the line? Have you thought about structuring your deal in that manner?

Always something we're looking at. Anytime we consider equity, you'll always look at the forward and what the pros and cons are with that. So

Some of the Certificate of Occupancy deals we agree to issue OP units for. So in effect, that is a forward equity issuance.

Hi guys. Want to know, on the markets where there's heavy supply, have you experienced increased turnover from some of your stickier tenants, the ones that have been with you for multiple years? And if not, have you noticed a major variance in your older assets versus your newer assets in markets where there is heavy supply?

We notice that very few customers are relocating by renting a truck to move their belongings to the new supply across the street. The new supply impacts your incoming rentals more than it affects people who are moving. What was the second part of the question?

Yes. So okay, under that logic, would some of your older assets actually fare better in a market where there is heavy supply? Because I assume you'd have a larger component of the mix of tenants there would be those multi-year tenants so they could actually potentially fare better than the newer assets?

Yes. Really two reasons. One is what you point out is the mix of tenants. But the other is, frequently, our older assets are an older generation. They are a lot of single-story drive-up units. And much of the new supply are multi-story interior climate control. And we have a product that they don't have. The older drive-up is very attractive and some of the new supply can't offer that.

Yes. We are currently engaging with lenders regarding the many loans maturing in 2019, 2020, and 2021, and we are open to extending those maturities to 2025. Our focus is on reducing the spreads and addressing some issues related to swaps, as many loans due in 2020, for example, are tied to swaps. We are working through the complexities of these swaps, considering extensions, and potentially modifying some to variable rates, all while aiming to secure favorable rates and lengthen the loan terms. I should mention that accepting some short-term challenges is part of this strategy, which is reflected in the rise in our interest rates. We are actively negotiating the 2020 loans, and if we utilize the contractual extensions along with some refinancing options we are exploring, the total due amount for 2020 will be less than $1 billion. Our objective remains focused on extending the loan terms and locking in competitive rates.

I guess Wes had kind of asked the question on the debt side. But I just was hoping, Scott, you could give a little more detail. You've got to think about two-thirds of your debt when you look at the column with the extension expiring between '20 and '22. So I'm just curious how you're thinking about proactively maybe pulling some of that forward to take some of the risk off the table now. Or is that stuff that you just have to kind of wait until the natural expiration? And I guess, how far out on the curve are you willing to go today between 5 and 10 years on debt terms?

We are currently collaborating with lenders regarding many loans that are maturing in 2019, 2020, and 2021, with a willingness to extend these to 2025. Our focus is on reducing spreads and addressing various swap issues, as many of these loans due in 2022 and 2020 include swaps. We are working through these swap challenges by extending swaps, restructuring them, or shifting to variable rates, aiming for a balance. Our objective is to secure some of these rates and extend terms. As I mentioned, we are prepared to accept some immediate challenges, which is reflected in our current increase in interest rates. We are actively negotiating the loans maturing in 2020, and if we utilize the contractual extensions along with some refinancings we are pursuing, the amount due in 2020 will be under $1 billion. Thus, we are focused on extending terms and locking in rates.

Just first question. I was curious if you could give us an update on occupancy, maybe through the end of April here and where that stands year-over-year?

Occupancy continues to be pretty steady, with perhaps a slight move in the right direction.

So seasonally, it's moving higher. Any comment around where that is sort of on a year-over-year basis?

Very similar to where we ended the quarter.

Okay. I understand. Following up on the discounting you mentioned, could you clarify? It seems you indicated that discounting will be used to maintain rates. Can you explain that? It appears you might be increasing asking rents to compensate for the higher discounts, thereby effectively maintaining or possibly increasing move-in rates. Is that the correct interpretation, or is there something else you’re implying?

I'm not saying that we are looking to increase them significantly more than what we've done in the first quarter, but we feel like we will have to increase discounts going forward in order to maintain that kind of 4% to 5% revenue growth in our new customer rate growth.

Okay. And the changes to the discounting policy here over the next several months here, is that expected to be broad-based across the portfolio or will it be concentrated in some of the supply-impacted markets mostly?

It's across the portfolio. But obviously, our highly occupied property might have different discounting policy than one that has less occupancy.

Okay. That's helpful. Thanks. And then maybe just back on development, Joe, we continue to see, the FTR data isn't really showing much of a letup, and I realize that the data bounces around kind of month-to-month. But just given the private developers continue to make a lot of money on the CO deals and, to our knowledge, there really hasn't been much pain on the development front with these developers. I guess, it sounds like you continue to expect the supply to remain high, although your comments about pricing going up and the yields coming down would suggest maybe that gets dampened. But that just doesn't seem to be showing up in the data just yet. What are we missing?

It's important to analyze the gross data by market. The timing of store deliveries may remain consistent from one year to the next, but if those deliveries are in different markets, the impact will vary. For instance, if construction continues to concentrate in Dallas and Miami, it could create problems. Fortunately, that isn't happening, as people are starting to develop in other areas. There is still significant development taking place, but it appears to be more evenly distributed across different markets. While not every project may seem rational, there are market forces that are directing development where it's needed.

Okay. And can you think of many examples in the markets that you compete in where developers have actually pulled back or not gone forward with projects because costs sort of became prohibitively expensive or the yields just didn't pencil? Or is that just not really happening yet?

So it's interesting. If you talk to the folks who have been in the business for some period of time who are a little more experienced, they absolutely are canceling projects and pulling back. And the folks you see who are more excited about going forward are maybe more of the newcomers to the markets, to the business.

Just one follow-up. I'm not sure if I missed this. The third-party managed properties, they ramped pretty good. Upwards of about 10% growth, it looks like. Is this a reflection of you've got newly built properties out there where the builder requires it from the lender to have it managed or they just literally need a platform to manage it? Maybe any color there on how you ramped it up so quickly.

I think that is one factor, absolutely. A second factor I would tell you is that the performance of the large operators just continues to outpace on a larger and larger basis the smaller operators. And as the market gets tough, even the existing operators realize they need a professional platform. So about 40% of the stores that we're bringing on are existing stores, not new developments. So I think you're right, and then I think it's also the second factor. Thank you all for joining us today. 2018 is shaping up as expected, and we anticipate another strong year for Extra Space. We continue to experience solid property level NOI growth and consistent external growth through acquisitions and third-party management. Our investments in people, technology, and systems have strengthened our operational platform, and we have had excellent execution throughout the organization, resulting in continued peer outperformance. I want to thank you all for your interest in Extra Space and participating, and I hope everyone has a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.