Good day, and thank you for standing by. Welcome to the Q2 2022 Extra Space Storage Inc Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during that session, you will need to press star one one on your phone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jeff Norman. Mr. Norman, please go ahead. Thank you, Chris. Welcome to Extra Space Storage's second quarter 2022 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, August 3, 2022. 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. With that, I'd now like to turn the time over to Joe Margolis, Chief Executive Officer. Thanks, Jeff, and thank you everyone for joining today's call. Before I report on our performance, I am happy to announce that we recently published our annual sustainability report. We are proud to be a sector leader, not only operationally, but also in sustainability. I encourage you to review our report, which is posted on our investor relations website. Turning to results, the strong trends we experienced in the first quarter continued into the leasing season. Year-over-year same-store revenue growth in the quarter was 21.7%, matching our first quarter growth rate. This is an all-time high for Extra Space Storage. Despite expense pressure on several line items, NOI growth remained very strong at 26%. This was achieved primarily through year-over-year rental rate growth, partially offset by a modest decrease in year-over-year occupancy due to elevated vacate activity. With manageable new supply and durable customer demand, we continue to operate at high occupancy with strong rates. Despite inflation and the potential effects of recession, we believe we are well positioned to continue to produce strong results due to our resilient need-based asset class, diversified portfolio, strong balance sheet, and best-in-class team and platform. We were active in each of our external growth channels. During the quarter, we invested $289 million in property acquisitions, and we invested an additional $92 million in July, bringing year-to-date totals to $610 million. We have continued to focus on acquiring non-stabilized properties and as we outlined last quarter, have started closing more transactions in joint venture structures. We started to see the market shift late in the quarter with increasing interest rates, reducing the number of bidders at the table and the bid-ask spread widening between buyers and sellers. We are being selective with our acquisitions, and we are focused on transactions and structures that will be accretive for our shareholders. In the quarter, we closed $70 million in bridge loans, and we added 40 additional stores gross to our management platform. We also made a creative storage investment, purchasing an existing storage company named Bargold Storage Solutions. This company has a different model than traditional storage. It is focused on leasing space in apartment buildings, primarily in New York, and subleasing storage spaces to residential tenants. The acquisition of Bargold added over 17,000 units to our portfolio with an occupancy rate over 97%. Due to the unique nature of its operations, we have retained their team and are keeping the entity running as a separate organization. We view this transaction as another creative investment in the storage sector, which came to us through deep industry relationships. Our strong property NOI, plus our external growth efforts, resulted in core FFO growth of 29.9%. Our growth allowed us to raise our annual FFO guidance for the second time this year. It has been another great quarter, and we are well on our way to another strong year. Storage fundamentals remain solid. While we expect our rate of growth to moderate in the back half of the year due to very difficult comps, we expect it to remain well over historical averages with modeled year-over-year revenue growth remaining in the double digits through 2022. I would now like to turn the time over to Scott. Thanks, Joe, and hello everyone. We had a strong second quarter ahead of our own internal projections. Our outperformance was driven primarily by strong property performance, which benefited the same-store pool, joint ventures, and management fees. As Joe mentioned, we were active on the external growth front. Our investments were capitalized primarily by draws on our revolving lines of credit. We issued $22 million in operating partnership units as part of the Bargold transaction, bringing year-to-date issuance of equity to approximately $60 million. In the second quarter, we repurchased approximately $63 million of shares at an average price of $165 per share. Due to the wide spreads in the investment grade bond market, we've been active with our banking relationships. Last week, we completed an accordion transaction in our credit facility, adding $600 million of unsecured debt within the facility across two tranches. Our plan to term out debt using the investment grade bond market has not changed, and we expect to utilize this market again once conditions normalize. Our leverage remains low, with net debt to EBITDA of 4.4x, and our unencumbered pool is over $13 billion. We continue to have access to many types of capital, and we have significant debt capacity to support future growth and maturities, albeit at higher interest rates. Due to our year-to-date outperformance and improved outlook for the second half of the year, we updated our 2022 full- year guidance. We have increased our same-store revenue guidance to 16%-18%, driven primarily by rental rate growth. We strive to be efficient with expenses, and we believe our continued investment in our people and our properties are contributing to our top line growth. Consequently, we experienced same-store expense increases across several line items, and we have increased our expense guidance to 7.5%-9% for the full-year. Our increased revenue far outweighs our increased expenses given our high margin business. As a result, our same-store NOI growth range increased to 18.5%-21.5%, the highest NOI growth guidance in our history. Given our total investment activity year to date of $790 million, we have increased our acquisition investment guidance to $1.2 billion, only $250 million of which is unidentified. Our preferred investment in NexPoint remains in place, and bridge loan volume and interest rates are higher than anticipated. As a result, we have increased our interest income guidance by approximately $3 million. Due to the increase in interest rates as well as our higher acquisition volume, we have increased our interest expense guidance by $13 million at the midpoint. The sum of these adjustments result in an increase in core FFO, which is now estimated to be between $8.30 and $8.50 per share. We anticipate $0.20 of dilution from value add acquisitions and CFO stores in line with last quarter's estimate. We're having a great year, and we are positioned for continued steady growth. With that, operator, let's open it up for questions. Thank you, sir. As a reminder, to ask a question, you'll need to press star one one on your phone. Please stand by as we compile the Q&A roster. One moment. Our first question will come from Todd Thomas of KeyBanc Capital Markets. Sir, your line is open. Hi. Thanks. Good morning. I had a couple of questions, I guess, on the Bargold acquisition. I was wondering if you were able to share, you know, sort of the initial yield on that $180 million investment or put some parameters around the anticipated return that you're expecting on your investment. Sure, Todd, and thanks for your clever title to your note. We all got a chuckle out of that. We underwrote the existing business. We didn't underwrite any extraordinary growth. We didn't underwrite any synergies. We threw our G&A on top of it. Just underwriting what exists today, the first year yields in the low fours, and it grows to the mid- to high fives. Kind of similar to, you know, urban property investments, I would say. Then our hope is, of course, you know, we're going to first try to institutionalize the business, introduce things that they haven't done in terms of technology. They don't charge administration fees. They don't offer insurance. That's kind of the first step of the plan is to institutionalize it and bring some of Extra Space's expertise and procedures, processes to it. Then we'll see about growing it. We'll try to grow it in New York City, and if that works, then we'll take it outside of New York City. It's kind of one step at a time for us. Okay. Can you speak to, you know, some of the. I mean, you characterized it as a creative investment, but can you speak to some of the fundamental differences in that business, maybe compared to the traditional storage business, whether you know price increases and maybe restrictions around raising rents to customers and the magnitude and frequency of increases and, you know, things of that nature as you know, have continued to, you know, potentially roll this out and look to grow the platform? Sure. Great question. The business is leasing space in apartment buildings, and it's primarily basements and garages, building those spaces out, so if you walked into them, they would look exactly like the interior of one of our modern self-storage facilities, and then leasing that only to tenants in the apartment buildings. Because of that, your customer acquisition and marketing costs are almost nothing. Your incremental cost to grow the business is very, very small because you're not buying any real estate. It's all leases. We bought the business, we bought the platform, and now it's capital light going forward. The tenants are different. They stay for a long time. The average length of stay of in-place customers in this portfolio is eight years. The churn is less than 0.5% a month compared to our churn of 6%-7%. It's incredibly stable. They operate at occupancy of over 97%, and they have over 1,000 people on the waiting list. That's a good example of synergies that we're gonna experiment with: do we get those people on the waiting list into an Extra Space store until a unit opens up for them? It also tells me their pricing might not have been as sophisticated as ours is. You are right. The rate increases are limited in some instances and coordinated with the landlord because the landlord doesn't want a tenant to be unhappy or be using money he could for increased apartment rent for increased storage rent. So there is a difference there as well. Okay. That's helpful. One last question, if I can just switch over to the leasing environment and rental activity. You know, occupancy is at a very healthy level, but rentals were up, you know, pretty big year-over-year. We've seen the housing market cool off a bit and, you know, I wouldn't have thought that, you know, there'd be, you know, significant incremental demand, I guess, from some of the pandemic drivers that, you know, we saw earlier, during, you know, the latter part of 2020 and 2021. You know, any sense where the demand is coming from today? It seems to be fairly strong, you know, perhaps stronger than expected. Just curious if you have any, you know, sort of information around, you know, where the customers are coming from and where the demand's really coming from. Yeah, Todd, if you look at kind of our surveys and the questionnaires we give our customers, it's gone back to pre-COVID, you know, answers. It's largely coming from people moving. Lack of space obviously is needed, but not what it was in COVID. Our rentals and vacates have moved much more to pre-COVID numbers. Our vacates are elevated slightly now, partly due to, you know, the existing customer rate increases that have gone through over the last year as we've moved people quickly to street rates because these state of emergencies have been removed. While vacates have been elevated slightly, rental activity's been really good. It's been strong, so we've been able to backfill those. We have moved people quickly to street rate. Okay. All right, great. Thank you. Thanks, Todd. Thanks, Todd. Thank you. One moment, please, for our next question. Our next question will come from Spenser Allaway of Green Street Advisors. Your line is open. Thank you. Maybe just one or two more just on the Bargold topic. I know you mentioned the 97% occupancy. Just curious, is this, you know, is kind of in line with historic norms for this company, or is this kind of like a peak occupancy level? And then also, are there other operators doing the same thing that you're aware of? And if so, are they potential consolidation targets down the line? This company has historically operated at what we would consider very, very high occupancy levels. Over 97% would be a normal occupancy level for Bargold. I do not know of any other company that does this on the scale that Bargold does, and it's one reason that is exciting to us, is it's the potential growth without a lot of competitors. Okay, great. Maybe just one more on the leasing front. We've recently heard from market participants that there's been a pull forward of peak leasing season. Just curious if that was consistent with what you've seen in the portfolio. Yeah, I'm not sure I fully understand the question. A pull forward. I'm not sure you know that. Yeah. Until the future, right? I mean, yeah, leasing has been strong and demand has been strong, but we Yeah. We haven't seen it diminish to the extent we could say it's leasing from a future period that's been pulled forward. That seems- Okay. Very theoretical to me. Yeah, no, that kind of answers the question, right? Exactly. If you guys aren't seeing just deceleration of, you know, that's material, then that kinda answers the question. We've recently attended a conference in which, you know, there was anecdotes in which some market participants had been seeing such deceleration. The fact that you guys have not answers my question, like you said. Thank you. That's all for me. Thank you, Spenser. Thank you. One moment please for the next question. Our next question will come from Juan Sanabria of BMO Capital Markets. Your line is open. Hi, good morning. Just hoping we could delve a little into the expectations built into occupancy. What's assumed in the second half in terms of occupancy declines with seasonality eventually waning, and how does that compare to history? Joe, maybe what's the exit run rate we should be thinking about with an eye towards the starting point for 2023? Do you see any changes in the consumer behavior that make you think differently about how you're feeling about 2023 relative to where you were maybe at Nareit or a couple months ago? Yeah. Juan, this is Scott. Our occupancy has been pretty consistent over the last four months, where we've run 1%-1.2% below prior year, and we would expect that to continue throughout the remainder of the year and maybe fall off slightly more than that as we get towards the end of the year. We expect to be below where we finished 2021 by 1%-1.5%. I think your second question was on revenue growth pattern. You know, we do anticipate moderation, as Scott said in his remarks. If you look at our guidance, we'll end the year, you know, in low teens positive revenue growth, which is just a fantastic number. It sets us up really, really well to head into 2023. Just the second question on expenses. Normally, the point of contention or the point of stress is taxes, but that's actually a bright spot relative to some of the other increases. Just curious how you're thinking about various kind of more meaningful expense line items and how sticky those could be into 2023. Are you seeing any changes or differences across the regions, maybe more cost pressure in the Sun Belt versus the coastal markets? Just curious on a little more color on expenses. First on taxes. I mean, taxes, we are seeing things get reassessed in that 5%-7% higher. We have been the beneficiary of some appeals, which has offset some of that increase. Overall, we're seeing increases, but the appeals are clearly benefiting us. Those are more one-time. In terms of payroll, we continue to see wage pressure. You know, our payroll wages are up as much as 10%, and our hours are up this year-over-year. That is somewhat a comp from last year. Last year, we had negative expense growth in the first half of the year. As we resume more to normal hours as more normal staffing, that is, you know, an increase year-over-year that we would not expect to go into next year. We would expect some wage pressure but not the hour adjustment. In terms of other things, we also continue to see, you know, pressure, inflationary pressure on utilities, on repairs and maintenance. As your revenues grow, your credit card fees grow. You know, this is the beauty of being in self-storage. It's such a high-margin business. While inflation does impact your expenses, you also have some opportunities on the revenue front with month-to-month leases and, you know, that shorter term lease really is a benefit to us. If maybe I could sneak in a super quick one. What's the average lease duration that Bargold has with the multifamily landlords to actually get the space? The initial lease terms are between 10 and 15 years. Thanks, Joe. Sure. Thank you. Thank you. One moment for our next question. Next, we have Jeff Spector of Bank of America. Your line is open. Great. Thank you, and congratulations on the quarter. Joe, I think I heard you comment quickly on looks like a good setup for 2023, and interestingly, that's kind of been a key debate I've had today with some incoming calls. Again, strong results, lots of skeptics out there, concerns still about weakening demand coming. I think it's interesting that I hear you. The guidance if you achieve the second half, I guess, can you talk about then that setup into 2023, which I think I heard you maybe comment on? Sure. If we end the year at low teens revenue growth and knowing how increases and decreases take time to roll through the rent roll in storage, it takes a while for any weakness, if we see that, if you're looking for a downside scenario, to roll into results. Pick an ending point, right? I mean, storage has only gone negative in revenues during the Great Financial Crisis and barely 0.1% during 2020. Pick whatever ending point you want for revenue, and I think we'll end up in 2023, I'm not giving guidance, I'm just doing math, above long-term historical averages in revenue growth. Expenses, you know, we'll continue to try to manage as well as we can, but we're gonna have. You know, we have really hard comps this year, and we're gonna have fairly easy comps next year. You know, moving out of the storage arena, everything else is growing really rapidly. Our bridge loan program is growing rapidly. Our management business is growing rapidly. As the transaction market gets tougher, people tend to seek other solutions than sale, which could be bridge loans. We're seeing less exits from our management business due to sales. You know, some of our other things that we do seem to be shaping up and, you know, hopefully we'll talk more about that later. I'm pretty excited about 2023. Great. Thank you. Very helpful. Is it fair to say that the trends you've seen in the first half of the year are continuing through July into August? The month of August is past. Yes. You know, July continued from June. Rates were reasonably flat June to July. Last year, like I mentioned, the rates really peaked in June, July of last year. As last year's rate comp becomes easier, you know, we hope that August continues to go well, but two days into August, it's all looking good still. Great. My last question, just to confirm, you know, again, are there any signposts of issues? It seems like you're very comfortable continuing to push rate on the customer, the customer's taking it, but any signposts, any issues and maybe in any markets? Yeah. When we talk about the health of the customer, we get a lot of questions about this. You know, we look at things like bad debt. You look at your accounts receivable, you look at, you know, rates where they are today versus where they were. In terms of accounts receivable, they're pretty consistent with where they were last year with the historical norms. Bad debt is very close to the historical average. Haven't seen those elevated over the past quarter. In terms of rate, we compared to 2019, our in-place rents are up 26%-27%. You know, while year-over-year looks really big, like a really big jump, when you go back a few years, it's more affordable and maybe not as extreme as people would think on the surface. You know, Jeff, I would add, we have stronger markets and we have markets that are less strong. We're always looking where performance isn't as good as elsewhere and seeing what tools we can use to try to help those markets. It may be sub-markets or individual stores where we have to do certain things with marketing spend or different things. We are always trying to maximize performance. You know, not everything is as strong as the best performing assets in the company, but everything is good. We have the tools to address individual areas or stores or markets of weakness, and we feel lucky to have a really broadly diversified portfolio. Great. Thank you. Thank you. One moment for our next question. Next we have Ki Bin Kim of Berenberg Capital Markets. Your line is open. Hey, guys. Thanks for the time. I know this was addressed a bit early on in the call, but, you know, acquisition guidance is obviously raised again. Just curious if you could give us a little bit more color on how much competition you're truly seeing for these assets throughout the last quarter and kind of any sort of color on cap rates would be really helpful. I think we're seeing less competition. I think there are fewer bidders. Folks who rely on leverage really heavily have, many of them have gone to the sidelines, but there's still bidders and still transactions are getting done. It's not an open playing field by any means. Cap rates is always a hard thing to tell, right? Because the data lags and, you know, each transaction is kind of unique and on its own. I would say we have seen an expansion of cap rates. Got it. You know, as we think about, you know, what's left of the year, right, what percentage of the portfolio do you anticipate sending another rate increase to? How does that compare to years prior? We haven't made any change in what percent of the portfolio we send a rate increase to. Every customer is eligible for a rate increase after a certain amount of time. Not sure if I understood your question correctly, but we still- Yeah, just in terms of, like, the cadence of increases, right? Like you've Sure. Okay. Yeah. Tended to increase that. I'm just kind of curious, like at this point last year, what percentage of your portfolio was due another increase and how does that compare to this year? Okay. Yeah, sorry, I misunderstood the question. I don't think we can make good year-over-year comparisons because last year we were so constricted by government regulations where we couldn't even if we wanted to, we couldn't send rate increase notices. What I would say is that, you know, pre-COVID, we had a pretty formulaic approach in terms of cadence and amount of rate increase we sent to customers. You know, during COVID, during the period of time, we voluntarily didn't send out rate increase notices. When the governments of the various states told us we couldn't, we kind of were kicked off of that formulaic approach. We have not gone back to it. We are much more tailored now and designed in terms of both cadence and amount of rate increase that we'll send. Yeah, Ki Bin Kim, about 63% of our tenants today are below street rate. You know, obviously they're eligible. We actually push people above street rate. You know, it's a large percentage. That 63% is actually higher than it's been in the past. Got it. Very helpful. Thanks for the time, guys. Sure. Thank you. Thank you. One moment for our next question. Next, we have Smedes Rose of Citi. Your line is open. Hi. Thanks. I just wanted to come back onto the acquisition activity for a moment. You mentioned in your opening remarks a continued focus on non-stabilized assets and also working with joint ventures. Are you working kind of consistently with the same joint venture partners? Are you finding new capital that wants to come into the space, you know, so you can forge new relationships? Or just kind of interested in how that's going. Sure, Smedes. Thanks for the question. We have two new joint venture partners this year in 2022. We also are working with some of our older joint venture partners, and the phone rings a lot. There's lots and lots of people who would like to be our partners and invest in self-storage. On the non-stabilized assets, I'm just wondering, are more folks coming to market because they're, you know, just like where the pricing is now? Or are you seeing deals where they're sort of unable maybe to get permanent financing or kind of they're underwater relative to their initial underwriting? Kind of what's bringing those assets to market in this environment? It's certainly asset specific, but I would say, you know, before the interest rate increases happened, you know, pricing was so strong. Well, first let's back up a little bit. 2021, you had strong pricing, you had fear of capital gains tax increase, and you had fear of Section 1031 going away. Getting into 2022, you had strong pricing and low interest rates. Now, I think you have some people fearing increased interest rates and further cap rate compression in the future, so time to get out. Then you always have the asset specific thing. It's a fund that's coming to the end of the life. It's a family where there's been an issue or a death in the family. I think those reasons probably wrap up most of the situations. Okay, great. Thank you. Sure. Thank you. One moment for our next question. Our next question comes from Samir Khanal of Evercore ISI. Your line is open. Hey, hey, Scott. Just curious on the New York MSA. I mean, the region is holding up quite well. I'm looking at the numbers. I think revenue growth even accelerated meaningfully kind of in the second quarter. Maybe talk around sort of the drivers of that. I'm trying to figure out if it's sort of, you know, because the New York MSA will include New Jersey, maybe there's some restrictions being lifted on the rent side. Maybe if there's a way to even sort of look at New York boroughs, you know, Brooklyn and Bronx, kind of what are you seeing in that sort of areas as well? Yeah. When we break it out between the boroughs and New Jersey, our northern New Jersey stores are performing better than our boroughs. Now, we don't have a huge number of stores, so in the boroughs, so it might not be a great comparable, but both markets are performing below the average of the portfolio. New Jersey is definitely performing better than New York. We did see rate increases. The state of emergency is lifted late last year, and so that has benefited us throughout this year. You know, I think November, December is when most of those went out, so that's when you'll have a tougher comp. We did implement many rate increases late last year that have benefited us this year in New Jersey. I guess at this point, there's no more rent restrictions sort of in the portfolio that remains to be lifted, correct? Or is there any more sort of opportunities there as well? Not material state of emergencies in effect anywhere. Okay. I guess, Joe, just maybe as a second question, just provide maybe an updated view on kind of the supply picture, kind of what your most recent thoughts are. Sure. Pretty similar, very similar to what we talked about last quarter. We continue to see and expect a moderation of new supply. There's certainly headwinds in terms of interest rates, cost, entitlements, but it's not going to zero. There still is new supply being delivered, and there's still an awful lot of interest in people wanting to build new self-storage. I'll give you a stat that is interesting. Our management plus team underwrites about 215 deals a quarter for potential management contracts. 75% of those this year have been development. There's still a lot of people out there interested in building self-storage, and you can understand why. The results of the asset class have been phenomenal. Got it. Thanks so much. Sure. Thank you. One moment for our next question. Our next question will come from [audio distortion] of Citi. Your line is open. It's JPMorgan. Hey, guys. First I just have to say as a current Bargold consumer, I'm pretty excited for the opportunity to present you all, but I'm also a little apprehensive about what my monthly rent's gonna look like going forward. I guess on the topic of rent increases, would you be able to share what the average magnitude of rent increases you're currently pushing in your portfolio and how that's changed compared to the first quarter. As I said, tried to reference earlier, it's all over the board, right? Because we have this weird situation or unique situation, excuse me, of folks whose rent was artificially suppressed by government regulation at a time when street rate was increasing. We had some larger than normal gaps between what people were paying at street rates, and we were trying to catch up. There's a wide variation in the amount of rent increase customers are getting, and I'm not sure an average is meaningful because of that. Got it. It sounds like there's no significant areas where the MSAs, the rent in the MSAs materially lower than kind of the average. No. No. I think you saw some that were larger than the average as rate restrict- The MSAs materially lower than kind of the average. No. No. I think you saw some that were larger than the average as rate restrictions were lifted, and we moved them quickly to the current market rates. That benefit, as you move throughout this year, obviously decreases because you were doing many of those late last year and early this year. Got it. On the expense side, how should we think about, I guess, expense growth and personnel and property operating? Year and early this year. Got it. On the expense side, how should we think about, I guess, expense growth and personnel and property operating on a sequential basis? Is kind of the level of spend in the second quarter representative of what it's gonna look like for us this year? Or is there a little bit more further to go from here? The wage pressure will be consistent throughout the year, so you're probably around 10% wage inflation year-over-year. Hours should get better as we move throughout the year. Towards the end of last year, we were more appropriately staffed. Second quarter and into the third quarter was kind of the low point in terms of staffing hours and being understaffed due to turnover. Thanks. If I could sneak one last question in. I think in your prepared remarks, you talked a little about potentially cross-selling between Bargold users and your current Extra Space units. Should we take that as a sign that you'd be looking to expand further into Manhattan in the New York MSA? We have lots of ideas for Bargold, but the first thing we're gonna do is absorb the existing business. One of the ideas, you're right, is they have such a long waiting list. Could we provide some option for the Bargold tenants on the waiting lists to store their stuff in Extra Space units and then maybe give them priority to get into a Bargold unit? Would that help Extra Space? We have not instituted that yet. That's just one of many ideas that, you know, we're excited to get to. Yeah, you know, once we digest Bargold and we feel we have it running the way we want, absolutely are gonna try to expand it first in Manhattan and other parts of New York and, you know, possibly then afterwards, other major cities in the country. Got it. Thank you and great quarter. Oh, thanks very much. Appreciate it. Thank you. One moment for the next question. Our next question will come from Ronald Kamdem of Morgan Stanley. Your line is open. Hey, a couple quick ones from me. Just going back to some of the breadcrumbs on the same-store growth, talking about the exit rate for 2023 or for 2022, and thinking about that as a starting point for 2023. I think the earlier comment was suggested that, you know, it could be in sort of the double digits for second half of this year, therefore 2023 double digits is on the table. Just wanna make sure I understood that correctly, or is there anything about the comp that we should be thinking about? I apologize if I implied that because we're gonna end the year in double digits in revenue growth, that means it's gonna be double digits revenue growth throughout 2023. I think it means we're gonna start 2023 with double digits, and then everyone can have their own view of the market and how that will moderate or not moderate throughout the balance of the year. Got it. That's pretty clear. My second question was just on the marking some of the jurisdictions that had been under state of emergencies, like L.A. and so forth. When you think about sort of the same-store revenue growth year to date, is there any way to quantify how much contribution came from marking those jurisdictions to market, just from a high level? I think last quarter we said we expected lifting of the California state of emergencies to add 50 basis points to the same-store portfolio. We now think that's more like 70 basis points. The reason for the difference is we were overly conservative in our length of stay assumptions. We thought that when we increased rates to street rates, that we would push more people out the door. In fact, we've been conservative in that assumption. Seventy basis points is the answer to your question. Great. My last one is just from Bargold, if I could sneak it in. Just you talked about a little bit of the business and then the potential growth opportunity. When you're thinking of the growth opportunity, how much more capital over time could you provide to the company? Or is the capital commitment pretty much done from this standpoint? The capital could grow the business. I don't wanna get in front of ourselves, right? I don't wanna promise huge growth. We're taking this one step at a time and, you know, the first thing is to absorb what we have. We did buy this with the expectation that we will get to a growth phase. Because these are leases and the rent is just a percentage of revenue, there's no fixed rent in these leases, it's very capital light. You just have to build out the space. That's your capital. Now, there also may be capital expended in terms of systems. We believe our systems are better than theirs, and I'm not saying anything negative about the company. It's a very successful, well-run family company or was. We have more capabilities in them. We have better systems, and so we may also put some capital in there, but it's not a lot. This should be generally capital light going forward. Great. That's it for me. Thank you so much. Sure. Thank you. Thank you. One moment for our next question. Next, we have Ki Bin Kim of Truist. Your line is open. Thanks. It's actually Ki Bin. Just a couple follow-ups here. On the Bargold, can you talk a little bit more about how that business is actually run in terms of like how many units per apartment building is the average? You know, what happens when a tenant doesn't pay or needs to move out? Like, does the building manager handle it, or do you have to handle it? Just a little more of the kind of practical elements of running this type of business. Sure. The average number of units in a building is 25, but there's a pretty wide range of that. I think the largest building is 800 units, which is kind of similar to a store, but there's also buildings that just have a handful of units. The reason condo boards or co-op boards or building owners would do this is so they don't have to handle it. Bargold, now Extra Space handles getting the customer in the unit, dealing with payments, dealing with non-payments, and auctioning the units. Out of their 17,000, over 17,000 units, they auctioned about 20 a month last year. The rate is very, very small. It's storage. It works just the laws are the same. It works just like storage. What was the cadence of their revenue growth over the past year? I'm just trying to get a sense of if it was a hyper-growth type of company or more static that you're trying to improve, any kind of color you can provide around that. Yeah, I would say it was neither static nor hyper-growth, that they were a steady growth company growing in the single digits every year. Okay. Just last question on move-in rate. I think you mentioned, it was flat in July year-over-year. It does get tricky looking at these kind of statistics because you have the tough comp from last year, and it's not like everyone moves in, you reprice everything across a single month. Just curious, given your commentary about move-in rates, where is your in-place versus move-in today? And as we get past these tough comp periods, is your expectation that market-led growth, as we get into the second half is still goes back to positive year-over-year? Yeah. Let me clarify one thing first, Ki Bin. The month of July, we were about 5%-7% negative in our achieved rate growth, and that's year-over-year. If you compare to where tenants were moving in last year versus this year, we were slightly negative. Now we forecast all of that. You know, we expected that, and we're not surprised. In terms of the roll down, our in-place leases today are our achieved rates are about 7% below where our achieved rate is today. I'm sorry, they're above. Our in-place rents are higher by about 7% than our achieved rents. Normally this time of the year, they're flat. In terms of cadence of where we expect our rates to go, last year they peaked in June and July, and they came down in August. You know, depending on what happens in August with our current rates, those could be flat again at the end of August. Okay. Thank you. Thank you. Thanks, Ki Bin. Thank you. One moment. We have a follow-up question from Juan Sanabria of BMO Capital Markets. Your line is open. Hi, just a couple follow-ups. Just on Ki Bin's question on the achieved rates. I apologize. Could you just give us a sense of how that trended throughout the quarter? I know you gave the July figures, but just a sense of how that trended and would be helpful. Yeah. April, May, they were slightly positive. June, down about 6%. Average about negative 3% for the quarter. July, you were down that 5%-7% range again. That's year-over-year. Again, last year, you were pushing rates in June and July pretty hard. Great. Just a quick follow-up on the fee relative to your expectations. Any markets you'd call out as the largest source of upside this quarter versus expectations? Things have performed pretty close to our expectations. I mean, the list of properties in, you know, what markets are outperforming, Atlanta continues to be a standout market for us. Most of the Sun Belt continues to be really strong with South Florida, you know, Miami being exceptionally strong in the Sun Belt. Miami and Atlanta. It's a small market, but Charleston is one that has kinda jumped up and was, you know, had a bunch of supply and wasn't on our list earlier. One last quick one, an incoming question. Can you estimate the impact to same-store revenue, I guess year to date, like you did for California? You said the rent restrictions coming off were 70 basis points too, given the higher length of stay for California. Any estimate for what the impact or benefit was from New Jersey restrictions rolling off? I don't have that number, Scott. Do you? No, we don't have that. Can we get that back to you, Juan? Of course. Thank you. Sure. Thanks, Juan. Thank you. One moment, please. We also have a follow-up from Smedes Rose of Citi. Your line is open. Hey, it's Michael Bilerman here with Smedes. Joe, two topics. The first was just on length of stay. You had a really nice slide at Nareit, which broke out length of stay between those greater than 12 months and those greater than 24 months. That showed, you know the data, but showed that you're up to 66% greater than 12 months and up to 48% for greater than 24, up from about 60% and 40%, respectively, pre-COVID. As you dive into those numbers, is there anything that's changed over the last couple of months with those length of stays? Is there anything on a regional basis from a market perspective, you know, that's telling you anything or a customer perspective, just as you sort of disaggregate that aggregate data? We've had elevated vacates in response to our increased rent increases to existing customers. We track that really carefully with every month control group, so we know exactly what percent increase in vacates is being caused by our ECRI rent increase program. That has caused a very slight, you know, moderation or dip in those numbers of that you referenced in terms of long-term stay. They're still very high and elevated from any historical period. Does it reflect, Joe, do you think, you know, all those where you had a significant number of new customers that came to storage? I think over COVID, it was like 50% of the customers were new. Is that potentially driving the higher length of stay? Is there anything on a regional basis that would be different? I guess in reverse order, we don't see anything on a regional basis. It's pretty consistent across all markets. You know, our theory, which I think you're referencing your theory, that the, you know, customers who came to us in COVID for lack of space, you know, because they were doing the home office or whatever, those are the longer stay customers. We do lose some percentage of those. They don't all stay forever, but many of them are sticky. Are you seeing at all with, you know, obviously where rents, apartment rents have gone, but also, you know, threats of a recession where typically you'd see people start to double up or move back home, which would then increase your storage needs, right? Recession is not necessarily totally bad for your business. Have you started to see that in any of the markets where you're starting to see some of that demand, at all? I don't know if we can say yes or no to that yet. You know, some of that data is hard to collect, and you need a good period of time before you can be confident with it. Right. I just didn't know if there was any early reads that your excellent property managers are seeing from those that are walking in the door and the type of uses that they're bringing in, if anything has changed more recently. I mean, there's always anecdotes, but I don't think I would be comfortable saying that we see a trend or a movement or anything like that. Okay. Just wrapping up on Bargold. You said the average lease length that Bargold has, it was 10-15 years. How much remaining lease term on average do they have with those 17,000 units? I would assume there's some extension options or, you know, I guess if the co-op or condo or rental board decides, then Bargold just, you know, removes all the equipment that they installed, just to better understand sort of what happens upon lease end. On lease end, there are several options. Very, very rare does the building owner ask for the steel to be removed. They can purchase it or more frequently lease it. There's a revenue, kind of a residual revenue stream at the end of the lease term for the leasing of the steel. A portion at the end of the lease term, they automatically convert to month-to-month leases, and we have a portion of the leases that are in that month-to-month category. In looking at the portfolio, we look real hard at, you know, what is the churn rate and how, you know, how long do those last and when do they get, you know, how often do they get terminated and took that into account in our underwriting. Do you sort of see, Joe, this business as being, you know, it's hard to perfectly compare, but do you want to put this into more own like co-op condo buildings? You sort of see this more as a rental building product? Do you see it cannibalizing if you're able to do exactly what you wanna do and grow this business nationally and leverage all the tools and skill sets of Extra Space? Does it become a competitive storage product? I can understand at the same time with the waiting list that this company has, it could also provide you lower customer acquisition costs too. What is your sort of mindset about where this product potentially could go? I think we have a lot to learn. Yeah. One of the things we need to learn is exactly what's the optimal building and what are the differences between putting it in an owned building or a rental building? They have both. It works well in both. How many units per apartment unit is optimal, and what's the best unit mix? You know, we will tend to take a very data-oriented approach to that, you know, probably more so than the prior owner. A lot of the questions that you have are questions that we have, and we're gonna learn about it. You know, on the best case where we can grow this thing to gigantic scale and it's in lots of apartment buildings, you know, then that does become a competitor for traditional urban self-storage. If that's the case, I wanna be the one to be the first mover in that. Yep. Yep. All right. I appreciate all the time, Joe. Thank you. Thank you. Thank you. One moment for our next question. We have a follow-up. Next, we have Jeff Spector of Bank of America. Your line is open. Hi. Thanks. Promise, just one follow-up. Can you just confirm in-place versus achieved difference and how you reconcile that with, you know, earlier you, I believe you commented 60+% of the leases are below street rate, please. Yeah. Our average in-place rent is about 7% above where our achieved rents are today. Now, that's on average. That's just comparing your average versus what the move-in is today. While you could still have slightly negative rents, and you push tenants up. Now, the one thing that, you know, we always look to is you're churning 5% of your customers every month, so a portion of them may move in at slightly lower rents. We then move our existing customers up fairly quickly. You know, we're probably one of the more consistent in our rate increases and how we do that, more programmatic than others. Okay, great. Thank you. Thanks, Jeff. Thank you. One moment please for the next question. We have a follow-up from Todd Thomas of KeyBanc Capital Markets. Your line is open. Hi. Thanks. Appreciate taking the follow-up. Hopefully, quick here also. In terms of street rates, can you talk about those trends during the quarter by month, perhaps, and into July, Scott, like you provided, on the achieved rates? Yeah. Street rates are not that different in terms of year-over-year growth or where they were than our achieved rates. Achieved, your difference there is which channel they came from and that type of thing or discounts offered. Fairly similar trend to our achieved rates. Okay. On that 63% of customers, though, that are currently paying a rate below street rate today, you said that that is higher than it has been historically. What's more typical for that metric? Went incrementally higher. I think it was low 60s, you know, earlier this year. Okay. If you look back, though, over the last, you know, say 10 years, where's that been generally? We don't have it in front of us, Todd, just more recent numbers. Okay. All right. That's fine. All right. Thank you. Thanks, Todd. Thank you. This ends the Q&A session for today. I would now like to turn the conference back to the CEO, Joe Margolis, for closing remarks. Great. Thank you. Thank you, everyone, for your time and interest in Extra Space. You know, if I take a big step back and kind of look at how the company is going, it's really a good time here at Extra Space. Everything is clicking on all cylinders. The growth front, as we talked about, is really strong. We have a number of technological innovations underway that we're excited about. We just got back engagement surveys. Our scores are up very, very much this year. We are in great shape with our employee report. Thank you. Of course, from the operations there. That's what my kids would say they're stupid good. It's just a great time for us at Extra Space, and we appreciate everyone's support. Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.