Q4 2023 Earnings Summary
- The integration of the Simply Self Storage acquisition is progressing well, with rents improving and occupancy expected to reach the 90% range upon stabilization, indicating successful expansion and enhanced future revenue streams.
- Existing customers are demonstrating strong payment behavior and acceptance of rate increases, with payment patterns better than pre-pandemic levels, suggesting stable and resilient revenue from the current customer base. ,
- The company anticipates reacceleration of financial metrics in the second half of 2024, with operating metrics such as occupancy and move-in rent trends already showing improvement, positioning the company for growth.
- Negative same-store revenue growth is expected in the first half of 2024, indicating a challenging operating environment. Management anticipates a deceleration with potential negative performance year-over-year before a possible reacceleration in the second half. ,
- Move-in rents are down 10-11% year-over-year in January and February 2024, reflecting persistent weakness in new customer demand. Despite expectations for improvement later in the year, the current trend shows move-in rents declining by double digits. , ,
- The low end of the company's guidance assumes prolonged negative move-in rent trends, with move-in rents not reaching year-over-year parity until the end of the year, and occupancy potentially declining by about 120 basis points, suggesting risks to achieving revenue growth targets.
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Revenue Guidance for 2024
Q: What is your same-store revenue growth outlook for 2024?
A: The company expects same-store revenue growth to range from down 1% to up 1% in 2024, with a dip anticipated in the first half before reacceleration in the second half. This outlook assumes that operating metrics will stabilize and improve as the year progresses. -
Move-in Rent Trends
Q: How are move-in rents trending, and what's expected ahead?
A: Move-in rents began the year down 10–11% year-over-year but are expected to cross zero and turn positive by late summer. This improvement is due to both seasonal uplift and stabilizing demand, leading to higher rates by the end of the year. -
ECRI Outlook
Q: What is the outlook for Existing Customer Rent Increases?
A: The contribution from ECRIs is expected to be consistent with 2023, as higher replacement costs from lower move-in rents will be offset by more customers eligible for rent increases. The company anticipates no significant change in customer price sensitivity or behavior. -
Acquisition Environment
Q: What's the outlook for acquisitions and cap rates?
A: The acquisition market remains slow, with limited opportunities due to sellers' high price expectations. The company observes cap rates for stabilized assets in the mid-5% to 6% range, targeting returns over 6%. While no acquisitions are currently under contract, active discussions are ongoing. -
Occupancy Trends
Q: What are the occupancy trends and expectations for 2024?
A: Occupancy is expected to be down about 80 basis points year-over-year at the midpoint of guidance, similar to the end of 2023. Some markets are already showing reacceleration, but overall, a significant increase in occupancy levels is not expected this year. -
Expense Growth and Marketing
Q: How are marketing expenses impacting overall expense growth?
A: Marketing expenses contribute to an overall expected expense growth of approximately 2.75% at the midpoint. The company increased marketing spend to 2.5% of revenue in 2023 and plans to maintain this level to support demand in a challenging environment. -
Development Pipeline
Q: What's the status of the development pipeline and expected deliveries?
A: The company plans to deliver $450 million in developments in 2024, up from $360 million in 2023. Deliveries are expected to be balanced across the year, with a mix of new developments and expansions. The company aims to grow this business despite the industry-wide slowdown in new deliveries. -
Management Platform Acquisitions
Q: Have you sourced acquisitions from your management platform?
A: The company has acquired close to 40 assets from its management platform and expects it to be a significant source of future acquisitions as the platform grows beyond 325 assets.
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