Extra Space Storage Earnings Call Insights: Same-Store Revenue Expectations and New Supplies
Same-Store Revenue Expectations
RJ Milligan – Raymond James: Question on your same-store revenue expectations for the rest of the year, you guys increased your guidance and I am just curious what you think that mix is going to look like in terms of where is that revenue growth coming from is it an increase in expectation for Street rates, lower discounting, increases to existing customers – if you could just talk about that mix?
Karl Haas – EVP and COO: This is Karl. Yes. This is going to be all those things. We anticipate rate is – we were seeing good ability to hold Street rates up, our occupancy is holding nicely the delta will continue to slightly decrease because we don’t expect to get – the delta is not going to be above 3% and chances are it will continue to do decline so by the end of the year probably less than 2% but we will continue to have existing customer rate increases, discounts we will see some decrease probably the decrease will get less and less because like with occupancy we have squeezed that pretty hard.
RJ Milligan – Raymond James: So, versus two months ago when you gave 2013 guidance which one of those levers do you think has more upside versus two months ago?
Karl Haas – EVP and COO: Probably the occupancy, but rate also is – we are pleased with the ability to be able to hold our Street rates up a little higher than we expected.
Nicholas Joseph – Citi: Spencer, you mentioned that the new supplies de minimus right now, but can you put some numbers around that and compared to what you’ve seen historically?
Spencer F. Kirk – CEO: At the expense of repeating statistics that we’ve talked about many time from 2003 through 2007, a five-year period, 13,011 self-storage facilities were built in the United States, that’s an average of 2,600 year. The last numbers that we saw reported by FW Dodge showed 196 total assets either under development or permits being pulled for significant redevelopment. So, if you look at 200 versus an average of 2,600 a year, it’s de minimus.
Nicholas Joseph – Citi: Do you expect that to tick up in the future or when do you think supply could begin to return?
Spencer F. Kirk – CEO: I do expect it to tick up. I think supply is starting to already show. In levels of interest, we just came back from the self-storage show in Philadelphia and there was quite a bit of talk of development and new supply coming, but this is a property type. It typically takes one to two years to get an entitlement, about 9 to 12 months to build and then 2 to 4 years to lease up and even if you opened up the spigot fully today before you had meaningful supply that would be challenging this statement that supplies de minimus today. I think we’re 1, 2, 3 years out before we see anything that’s pronounced.
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