Extra Space Storage Inc (EXR) — Q2 2024 Earnings Call Transcript

Thank you, Carmen. Welcome to Extra Space Storage's second quarter 2024 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, July 31, 2024. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. I would now like to turn the time over to Joe Margolis, Chief Executive Officer.

Thanks, Jared, and thank you, everyone, for joining today's call. We had a great quarter, exceeding our internal FFO per share projections due to outperformance in multiple areas of our business, allowing us to increase our 2024 FFO outlook. We experienced steady improvement in Extra Space same-store occupancy for the second quarter, ending at 94.3% and continue to see occupancy gains in July. Our second quarter occupancy represents a 110 basis point sequential gain over our first quarter occupancy and a 30 basis point improvement year-over-year. In the same period, the average move-in rate improved by approximately 12%. However, it is still about 8% below last year's average moving rate. The combination of increased move-in rate and occupancy gain contributed to a 0.6% increase in Extra Space same-store revenue year-over-year. Same-store expenses increased by 6% for the quarter compared to the same period last year, marginally better than internal projections. As expected, we saw significant gains in occupancy for the Life Storage same-store pool, finishing the quarter at 93.8%. This represents an increase of 400 basis points year-over-year and a 200 basis point improvement over first quarter levels. The occupancy gains drove revenue growth for the Life Storage same-store pool of 1.8% year-over-year. Given the occupancy gains, we expected to generate significant pricing power at the Life Storage properties. Midway through the quarter, we eliminated the move-in rate discounts and placed new customer pricing for the Life Storage properties on par with comparable Extra Space stores. However, the pricing improvement at the Life Storage stores has been below our internal projections. We are confident our approach is maximizing revenue at these stores. However, progress has been slower than anticipated. We remain convinced that we will continue to close the rate gap between Life Storage and Extra Space stores over time. Life Storage same-store property expenses increased by 0.8% year-over-year, significantly better than our internal projections. The team has done a great job finding additional expense efficiencies, and we can now project lower expenses, particularly with respect to property taxes and in the controllable areas of R&M, utilities, and payroll for the second half of the year. Turning to growth. While the transaction environment remains muted, our capital-light external growth programs continue to make gains. In the quarter, we added 77 third-party managed stores, netting 14 stores after factoring in the expected departure of a large portfolio that internalized management. Year-to-date, we have added 86 net stores to the platform, which is one of the strongest first halves of the year ever. Additionally, our bridge loan program expanded with $433 million in new loans originated this quarter. Our greater scale and sophisticated operating platform have led to meaningful wins in other areas of the business, including G&A and tenant insurance. We're working hard to continue to find efficiencies in all areas of the business to drive FFO growth despite the difficult operating environment at the stores. I will now turn the time over to Scott.

Thanks, Joe, and hello everyone. As Joe mentioned, we had a good quarter, driven by occupancy and steady revenue growth. In addition to G&A savings, we have experienced better-than-expected property operating expenses, specifically property taxes, utilities, and repairs and maintenance. The G&A and property level savings have come from a broad range of categories as we continue to find efficiencies and capitalize on our greater scale. Due to the steady Extra Space same-store performance through the leasing season, we are raising the bottom end of our revenue guidance by 100 basis points bringing the midpoint to negative 0.25%. We have also reduced our expense guidance dropping the midpoint by 25 basis points to 4.5%. Accordingly, the bottom end of our net operating income guidance is being raised by 125 basis points to a negative 1.75% at the midpoint. Regarding the Life Storage same-store pool, the lower-than-expected pricing power has led to a reduction in our revenue expectations for the year. We have reduced our annual same-store revenue guidance by 200 basis points at the midpoint. Fortunately, this is partially offset by lower-than-expected expenses for these properties. As a result, we are also revising our expense guidance downward by 200 basis points at the midpoint and consequently, we have adjusted Life Storage same-store NOI guidance to a range of negative 1.5% to positive 1% for the year. Given the recent demand and volume of bridge loans, we have raised the 2024 average outstanding loan guidance and increased our expected interest income. We've also lowered our estimates for G&A and increased our management fees and tenant reinsurance income. Additionally, we adjusted interest expense and income tax expense guidance to reflect the current business environment. These revisions have contributed to a raise of the lower end of our FFO guidance from $7.85 per share to $7.95 per share, a $0.05 increase at the midpoint. And with that, let's open it up for questions.

Good morning, guys. Thanks a lot for taking my question. My first question is on the adjustment of the Life Storage guidance. And you talked a little bit about the lack of pricing power in order to push rates. What are you seeing there? Like what is weighing there? And then also, can you talk a little bit about the geographical footprint of that portfolio and how that may also be influencing the results from that segment.

Sure, Michael. So when we took the portfolio over, we had a significant 420 basis point occupancy gap. And that was the first thing we worked on. The main tool we used over the last year was discounting the new customer rate at the Life Storage stores below the Extra Space stores. We made good progress, and by mid-quarter, we were close enough to occupancy parity that we removed that extra discount at the Life Storage stores. We then thought we would gain pricing power, and we just didn't gain as much as we anticipated. The new customers remain price-sensitive, and we haven't been able to move new customer rates at the Life Storage stores or the Extra Space stores as much as we would have hoped. So that is certainly a factor in our projected revenue for the Life Storage stores for the rest of the year. Another factor is geography, as you pointed out. When we closed this merger, one thing we were excited about was the effect on our portfolio footprint. By merging with Life Storage, we reduced our proportional exposure to California and increased our proportional exposure to Sunbelt markets, including Florida, for example. We are still happy about that. We believe in the Sunbelt and Florida long-term. However, it worked against us this year. Extra Space has 23% of its same-store revenue coming from California, Life Storage has 7%, and California is an outperforming market this year. Conversely, Extra Space has 10% of its same-store revenue coming from Florida, Life Storage has 16%, and Florida is an underperforming market this year. I think it's timing. Long-term, we like where we are. We think we'll close the rate gap and we like our geographical footprint.

Sure. Thanks for that. And my follow-up, I think the natural follow-up question is what has to change in the environment in order for things to get better? Is it demand needs to pick up from the housing market? Is it competition needs to moderate from here? What are the catalysts that you're looking for that would be an indicator that the return of the pricing power and closing the gap on rate? Thanks.

Yes. I mean, clearly, a pickup in demand would be positive, whether that's going to come from the housing market or otherwise. I think it's probably a little of both, right? We'll probably have slow and steady improvement in the housing market, not a hockey stick. I think continued moderation of new development is a positive that will help us as well. So, we can't control market conditions, but we can control how we react to them. I am highly confident that our systems will optimize performance given whatever market conditions we're presented with. When I look at our occupancy, which is 94.3% in July for the Extra Space same-store pool and 93.9% for the Life Storage in July, I'm very confident our systems are capturing the demand that is out there and maximizing revenue.

Thank you very much.

Thank you.

Yes, thank you. Good morning. Joe or Scott, could you provide an update on the July trends? If you haven't already, could you share the key metrics such as occupancy, revenue growth, and move-in rents for July? Thanks.

Yes. So starting with the Extra Space pool, occupancy at the end of July or as of yesterday is 94.5%. So sequentially, we increased by 20 basis points. The Life Storage pool is now 93.9%, sequentially up 10 basis points. Now, that came a bit at the expense of rate. So, during the second quarter, our achieved rate for new customers was down 8%. During the month of July, they were down 12%, pretty similar for the Life Storage pool as well.

Okay. Great. Thanks. And then, Joe, maybe just going back to this EXR LSI and the pricing and a little disappointing that you didn't get the rate. I'm just wondering, is it possible that the customer mix was different? And before the merger, if LSI had lower street rates and charged less that attracted one type of customer and the fact that you're trying to bring them up to parity with EXR just kind of either pushes them out of the system? Or I guess I'm just trying to think, is everybody at the same pricing level or do you have to fully turn that customer mix to get them back up to parity on the EXR rent side?

Yes, it's a good question, but I don't think so. The reason I don't think so is that when we track move outs resulting from ECRI, Life Storage customers are actually moving out at a slightly lower rate than Extra Space customers. It's a very slight difference, so they're essentially behaving the same. A storage customer acts the same regardless of whether they're using Life Storage or Extra Space.

Yes. Steve, we would point a little bit more to this being a new customer issue, meaning the existing customers are still behaving quite well. We're seeing strength with those customers. However, the new customer has been price-sensitive, and this came at a time when we were trying to increase occupancy.

Great. Thanks, guys.

Sure.

Hey, it's Eric Wolfe here with Nick. Sorry, if I missed this in the last question, but did you say where LSI rates are compared to EXR? Just curious whether you took it back down to that sort of 10% gap that was in place before.

So we have put them on parity with Extra Space, where they compete with Extra Space stores. So we have not dropped them back down.

Okay. So you haven't dropped them back down. And so the guidance reduction of 200 basis points isn't due to pricing; it's due to less moving customers, less occupancy? I'm just trying to understand what sort of specifically drove that 200 basis point reduction.

So each unit is priced but then is adjusted every night; every unit type and every store is adjusted based on the models, historic data of vacates and rentals and then projected data vacates in rentals. While we set a price, it's not a fixed price for any period of time that's charged. That's the base price, if you will, and then the model will adjust that price going forward. And we produce projections based on how we think that's going to work out and result in what type of revenue gain.

Eric, you've effectively brought more customers in at lower prices, so you're starting off at a lower base. That takes some time to work through. We expect those customers to accept rate increases similar to other customers, but it does take time to work through if they came in at lower rates.

Got it. Okay. And then the second question. If I look at your same-store net rental income, it was up 70 basis points. Your occupancy was up 40 basis points, and your net rents were down 10, so it looks like there's a bit of a gap there, like 40 or 50 basis points. Is that extra gap just sort of expansion or renovation activity? And would you say that's sustainable, that benefit would be sustainable through the rest of the year?

Some of that can be timing on the numbers you just gave and exactly where they are. Some of that is expansion or change in units. We are constantly modifying our units in terms of converting them large to small or small to large, but there is some degree of expansion in our portfolio.

Okay. Thank you.

Thanks, Eric.

Hi, I wanted to revisit that previous question. From the standpoint of new customer rates, how have they changed due to the presence of price-sensitive customers? I understand that adjustments take time to implement. How has your perspective shifted after achieving occupancy parity for new customers? How does this compare to previous guidance for Extra? I'm still a bit confused about that.

So we had projected that once we achieved a level of occupancy in the Life Storage pool, we would be able to have higher new customer rates; however, the behavior of the tenants is not allowing us to do that. We still need to be aggressive with rates to capture those tenants, particularly the web tenants.

Just to compare with versus the extra experience, you haven't necessarily had to have stayed as aggressive for new customers on the Extra versus LSI.

No, I'm sorry. If I gave that impression. The Extra Space customers, they are the same customers, right? The self-storage customer is sensitive, new self-storage customers, price-sensitive, whether they end up on the LSI website or the Extra Space website. We also have been aggressive with the Extra Space customer, and that's why we have 0.6% revenue growth. I mean, we're still significantly outperforming Extra Space at the Life Storage pool. It's just not to the extent we expected.

What should we consider as the exit run rate for same-store revenue in both pools? Generally, we could calculate what's implied for the second half, but should we anticipate the growth rate for same-store revenue to improve or remain relatively stable between the third and fourth quarters for each pool?

I'll talk about both pools. So the Extra Space pool is going to be fairly steady. I mean, it's not a big swoosh. You're not seeing it drop drastically and then coming back really strong at the end of the year, it's pretty steady. Life Storage, on a year-over-year basis, there obviously is more of a deceleration in the back half terms of year-over-year as we're coming up against much more difficult costs as we did a large volume of rate increases when we took over that portfolio last August.

Thank you.

Yeah. Thanks for the time, guys. Maybe first, just two-parter, I guess, how do you think about your marketing spend trending the rest of the year, and ultimately, what's that translating to in your top-of-the-funnel demand?

So our marketing spend has been up on a year-over-year basis. If you just take the Extra Space portfolio, it is about 2% of revenues, but it is a 20% increase year-over-year. We had very, very low marketing spend during COVID in the periods following that. We would expect it to be pretty consistent through this year. The Life Storage spend has been slightly more elevated than that as a percentage of revenue. It's about 3% of revenue, and we would expect it to continue through the year.

Then just on top-of-the-funnel demand, I guess just more broadly, what are you guys seeing? And maybe how does that compare to your comments at NAREIT?

Very similar. I think demand is measured by kind of generic Google search terms, storage near me and things like that. It's very similar to 2019. So, kind of historical levels, but it is down from last year and the year before when we had elevated demand. No real change in that area.

Got it. Then just maybe more broadly within your embedded guide, I guess I'm just curious on a year-over-year occupancy delta versus last year, just any more color and how you expect to trend through the back half, and if you've changed any of those assumptions in your guidance range?

So, on the Extra Space pool, we did not change. Again, we're guiding more for revenue than occupancy because revenue is going to be an output of rate occupancy, all of those things, and so no significant changes in our assumptions on the Extra Space pool. On the Life Storage pool, obviously, occupancy is continuing to be at the higher levels, more similar to Extra Space, but again, not big changes in the back half in terms of an occupancy guide, just more of a revenue guide there.

Great. Thanks for time, guys.

Thank you.

Hey guys, thanks for the time. Joe, just wanted to follow up on one of your opening remarks. It sounded like the LSI property is just underperforming your internal projections. Is there anything in particular that you think is driving that underperformance?

Well, I mentioned geographical differentiation between the pools. Certainly, that's one thing. I would also say that we have not gotten the improvement in the Life Storage organic strength, SEO strength that we expected. We've made up for some of that to increase marketing spend, increased paid search. Scott just mentioned that. But our thought was a year or nine months into running the second brand and second website, the Life Storage SEO would be closer to the Extra Space strength than it actually is.

Okay. Does that maybe change how you're thinking about the SEO moving forward? Would you want to merge the brands or keep them separate?

So the decision to test a dual brand was based on the theory that if we have twice the digital real estate in the paid section, in the local section, and in the organic section, we would have more clicks and more rentals, and that benefit would outweigh the cost of running two brands. We certainly see that in the paid section. We've had progress and are seeing movement in the local section, where we've been most disappointed is in the organic section. It's something we're looking at. We're analyzing the data. We'll let the test run its course, and then we'll make the decision.

Okay. Appreciate that. Thank you.

Sure.

Hey, just two quick ones, staying on the different pools between Life Storage and EXR. I guess, if we think about three to five years out, when should we expect both pools to behave similarly? I mean, it sounds like the pricing is the same or the average prices are the same; maybe one has higher occupancy. But at what point does this converge, or will it always sort of be two separate pools three, four, five years down the road?

I would expect it to converge at some point. The store pools are slightly different in terms of makeup, demographics, and things like that. But overall, they should behave the same. I would expect Life Storage to outperform in terms of year-over-year revenue growth in 2025.

Got it. Okay. That's helpful. And then my second commentary question, I should say, is just maybe can you talk about that you talked about, there being a lot more competition or pricing in the market? Maybe if you could contextualize that. What do you think specifically is driving that? Is that less activity in the housing markets? Is it the consumer being more price sensitive? What do you think is maybe leading to a little bit more competition than you would have anticipated on the pricing?

So I think it's several factors. I think the housing market is a factor. I think sometimes it can be overblown, right? Our peak percentage of customers who tell us they were in the moving process was in 2021, with 61% of our customers. Now it's about 51% of our customers. Clearly, that's a decline and effect, but it doesn't explain everything. I think we need to remember that in 2020, we were in the peak of a three-year development cycle, three-year deliveries of development. Almost 80% of our same-store pool had new supply delivered in the three years of 2018, 2019, and 2020. That got masked by COVID, the excess COVID demand kind of masked that new development supply. Now that excess demand is gone, and in markets that have that new supply, we feel the impact. I also think the consumer is weak, right? We've had several years of inflation outpacing wage growth. Inflation has slowed down, but we have no disinflation. Prices are still high. The extra money the government injected into the economy is largely gone; savings rates are down from their historic highs, and credit card debt defaults and auto loan defaults are increasing. We have a weaker consumer, and we see that in their shopping behavior.

Okay. That's it for me. Thanks so much.

Sure.

Thank you. Good morning. Just a couple of quick ones here. When you talk about some of the additional pricing sensitivity with your customer base, how do you notice that on web traffic? Whether it be customers jumping around from your page to a competitive page, I'm not sure if that's trackable, by any kind of metrics that you can share where we are today versus maybe a year ago?

I think there are a number of ways to observe it. The best way is to consistently run a test where we have a series of stores or units at stores priced 5% higher or 5% lower than we think they should be. We can see the consumer reaction to a 5% increase or decrease in prices. That really helps us to determine what the right price is and which combination of rate and rental volume and discount and marketing spend maximizes revenue.

Got it. And regarding your expenses for payroll and utilities, can you provide an overview of what to expect for payroll in the future? Will it lean more towards inflation? Are there any other factors, such as FTEs at the stores? Also, on the utility side, is the decrease primarily due to solar initiatives? I'm curious about how much additional capacity you might have to incorporate more solar if that is indeed the case.

On the payroll side, the first half of this year is slightly higher than before. This is partly due to a comparison with last year when we operated with fewer hours because we were a bit understaffed. This year, there is not only a wage increase but also an increase in hours. We anticipate this impact to diminish in the second half of the year as costs rise due to inflation. Regarding utilities, we have been proactive with solar energy for many years. Before acquiring Life Storage, about half of our fully owned stores had solar panels installed, which is clearly advantageous for us. We continue to seek opportunities for good returns and are actively installing more solar. The acquisition of Life Storage offers additional locations for solar installation. We are also working on making our HVAC systems more efficient and have upgraded to LED lighting. Solar plays a significant role in our energy strategy, but there are also prospects for improvement with HVAC systems and LED lighting.

As a follow-up on payroll, it could be a mistake to view payroll expenses in isolation. While it's possible to reduce payroll expenses, it's important to consider the consequences of those reductions. For instance, cutting store hours might require increasing the number of call center agents or leading to higher repair and maintenance costs. We've observed that having fewer staff in the store leads to more small issues, like mattresses being left in hallways. Furthermore, we need to evaluate how these changes affect rentals. In a business with high operating margins, losing rentals due to payroll cuts can actually be counterproductive. Our goal is to optimize payroll efficiency without negatively affecting store operations or revenue.

All that makes sense to me. Thank you.

Thank you.

Great. Thanks for taking my questions. There’s an uptick in acquisition guidance for the year. I wondered if you could comment on the bid-ask spread that you're seeing in the market and where cap rates are trending.

Sure. Our increase in guidance was really the function of us capturing three deals that we didn't expect to. It's not a reflection that we see the market changing drastically. The market is still muted. There's still a bid-ask spread. There will likely be a few more transactions in the second half of the year as there always are in any year. But I don't think there's a material change in market dynamics. Leverage buyers are still on the sidelines. Most storage owners aren't in distress; they don't need to sell. If they can't get their price, they'll just hold or, frankly, as we're seeing, they'll come to us for a bridge loan. One of the reasons our bridge loan activity is up is because the acquisition market is quiet and people are looking for other options.

Great. That's helpful. And then on the third-party management, you mentioned the internalization of one of your prior customers. Can you just talk about what drove that decision and if you would expect more of that to occur?

This was an owner that we inherited from Life Storage. They were a capital partner. They purchased a self-storage company and operating platform and moved all of their stores to that operating platform. So we lost 63 stores in the quarter; 59 due to this internalization of management. Other than that, we only lost four stores. Part of having over 1,400 stores on our third-party management platform, is that every now and then, you lose a portfolio, and we've lost portfolios in the past, but we continue to grow at a very healthy pace. We've added 174 stores gross throughout the year and 86 net, and that's a very, very healthy year for us. We see the demand continuing.

Great. Thanks for the color.

Hey, guys. I guess you've talked about street rates being down 8% on a year-over-year basis in the second quarter. I was wondering how you expect that gap to trend throughout the rest of the year.

We do not anticipate a significant improvement or an increase in our pricing power. Given the current state of the housing market and consumer behavior, there isn't a strong catalyst for change, which is reflected in our guidance. However, street rates are influenced by occupancy levels, rental activity, and overall volume. Our primary focus will be on improving occupancy, and we will prioritize revenue generation, utilizing both occupancy and street rates to achieve our revenue goals.

I’m going to answer that question.

I know.

How do the ECRIs in the EXR portfolio compare to those in the LSI portfolio? Are you approaching rent increases differently for each?

No. Now that everything is priced at parity, they're on the same system, they’re on the same ECRI system. So it's the same.

Yes, thank you.

Hi, thanks. First question, I wanted to follow up on the changes to the EXR and LSI revenue growth guidance. You mentioned that you adjusted LSI pricing to match EXR but did not see the expected improvement in achieved rents, which caused the decrease for LSI. What led to the increase in the EXR revenue growth forecast?

I think it was really more a function of us taking the bottom end of the guidance off the table. Based on where the stores are halfway through the year, we didn't feel like that was a likely scenario.

Okay. Going back to Ki Bin's question about web traffic, are there any structural differences in the websites or anything related to running separate banners that you are starting to notice? I'm unclear about how the sites and banners have been integrated on the back end. I'm curious if you're observing any differences in web demand, customer discovery, or overall execution of leasing on the LSI compared to the EXR websites.

No. We addressed the differences in website, and I'll give you one example. When we closed the transaction, the LSI website was twice as slow, while the Extra Space website was twice as fast. That is an important signal to Google. It's one of the factors Google considers in deciding who will be first in the SEO ranking. We addressed all the physical issues with the websites. The challenge we're having is that if Life Storage was seventh or eighth in the SEO, and we've improved it to fifth or sixth, that's not enough to get the results we want. We need to continue to see improvement to get that into the top three locations to get the benefit we're hoping for. There are dozens of factors that Google takes into account in determining who they will rank first in the organic results when someone searches for storage near me.

Okay. And just lastly, normally, I think you moved the LSI portfolio or you'd move acquisitions into the same-store next year in 2025 from when you closed LSI. I think there was some uncertainty on what you would do there. Any sense whether you're going to move them into the same store in 2025 or continue to break out the two segments?

Our plan would be to move them into same-store, but we would still provide the previous year, so you should be able to see it kind of before and after.

Okay. All right. Thank you.

Hi. Good afternoon. I just wanted to again just keep focusing on LSI. I guess, with the big increase in occupancy, it does sound like the lease-up you were trying to get in that portfolio has happened. When I think about going forward with ECRI, I think you can average inflation rents in this portfolio next balance in change, reflecting kind of, I call the lower move-in rates, but for your EXR portfolio, it's in the low 20s. I mean, is that the pickup we should be looking for over time? What time period will that average increase go from, say, to 22, 23 and change?

Yeah. When you look at the average rent per square foot between the two portfolios, they are structurally different somewhat. Some of them are in different demographics, different markets. The markets where we compete, we expect to close the gap. We would expect them to behave like the Extra Space properties in the markets they compete, and we would expect them to continue to perform better on the Extra Space platform but not necessarily be at the exact same rent per square foot.

Perfect. That's helpful. And then on the credit lending side, again, nice pickup in activity. I'm just kind of curious how much more you can potentially expect that to grow on a going-forward basis. How does one think about the ideal balance between the credit lending platform versus kind of classic acquisitions?

Yes. We have grown that pretty significantly this year for a few reasons. One is we had very few maturities this year, and some of those maturities chose to extend. I discussed earlier kind of the effect of a muted acquisition market on greater demand for that product. We made a capital allocation decision, right? We had a quiet year on the acquisition front. So, we're holding incrementally more of the loans on our balance sheet because that's a good use of capital when we don't have many acquisition opportunities. I would expect over time, things will change and maybe when the acquisition market gets more active, we'll sell more loans and hold less on our balance sheet. We certainly have more maturities next year than we do this year, and we'll have to address that. This is a viable business that serves several benefits to the company, increases our management business, provides an acquisition pipeline, increases the number of relationships we have across the business and offers great economics. I think it's a business we can continue to grow.

Thank you.

Sure.

Thanks. I know you guys gave some of the move-in rate commentary for July. I just wanted to see if it was possible to get sort of like the dollar rate. You gave it in this up for the quarter ended at 133. Is it possible to get what that number is for July?

It's 129 move-in and a move-out of 180.

That's Extra Space.

Thank you. I have another question about the balance sheet. Scott, could you explain the increase in the line of credit balance, which I assume is related to the bridge loan activity? How should we consider the debt moving forward, given that the balance has risen? Thank you.

We have a few bridge loan sales lined up here in the next month that will bring it down some. Then we will look to turn that out as that volume gets larger or as we have opportunities. So, I think that you can see in the bond market as soon as this quarter or later in the year or early next year.

All right. Thanks.

Great. Thank you very much, and thanks, everyone, for your time and interest in Extra Space Storage. But a lot of questions about Life Storage and how it's not performed as expected. I truly believe that's a timing factor. We will get to those rates and that improvement that we want. When I look across all other areas of the business, whether it's our expense control, our G&A, our ancillary businesses, like management, bridge lending, the company is really performing at a very high level, and I am confident we can continue to do so in the future. Thank you very much.