Good afternoon, ladies and gentlemen, and welcome to the Extra Space Storage Inc Q4 and 2024 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, February 26th, 2025. I would now like to turn the conference over to Mr. Jared Conley. Thank you. Please go ahead. Thank you, Rina. Welcome to Extra Space Storage's fourth quarter 2024 earnings call. In addition to our press release, we have posted 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, February 26th, 2025. 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 call over to Joe Margolis, Chief Executive Officer. Thank you, Jared, and thank you, everyone, for joining today's call. To begin the call, I would first like to address the impact the recent California wildfires have had on our people and properties. I am happy to report that all of our teammates are safe and that none of our properties suffered physical damage from these fires. I recognize that some of our peers in the industry were directly and personally impacted by the fires, and everyone at Extra Space wishes them and their families the best. Turning to the fourth quarter, results were slightly ahead of our internal expectations. Core FFO in the quarter was $2.03 per share, and full-year core FFO was $8.12 per share. Operationally, demand was steady, allowing us to maintain near-record occupancy and to compress the year-over-year rate gap to new customers from negative 9% in the third quarter to negative 6% at year-end. While we are still experiencing a headwind from lower new customer rates, we are seeing an improvement on a year-over-year basis, a trend that has continued into the first quarter. The net effect of occupancy growth, less the headwind from lower rates, resulted in a same-store revenue decrease of 0.4% in the quarter, which was in line with our expectations. Expenses exceeded our expectations, driven by higher-than-estimated property taxes, resulting in same-store NOI of -3.5%. Revenues for the LSI same-store pool finished the year slightly above the midpoint of our guidance, and like the Extra Space same-store pool, benefited from strong occupancy growth, partially offset by lower rates. As previously announced, we have concluded our dual-brand test and have moved all of our stores to the Extra Space brand. We are starting to see the positive and still developing benefits of this move, including savings in marketing and increased rental activity. We expect the former Life Storage stores to continue to outperform the legacy Extra Space properties in 2025. Turning to external growth, our diverse growth strategies and channels are firing on all cylinders. In 2024, we invested $950 million in various joint venture, structured, and wholly-owned investments at attractive yields, with more than $610 million occurring in the fourth quarter. Nearly all these investments were generated off-market through our existing industry relationships. We also originated $224 million in bridge loans in the fourth quarter, bringing total bridge loan origination to $980 million for the year. Our industry-leading third-party management program grew by 114 net new stores in the fourth quarter, bringing total net new managed stores for the year to 238, our best third-party growth year ever, excluding managed store gains from the Life Storage merger. Overall, it was another solid year for Extra Space Storage, and I would summarize our performance in 2024 as follows: we were able to maintain industry-leading occupancy and generate modest same-store revenue growth despite an environment marked by new customer price sensitivity. Outsized non-controllable expenses, particularly real estate taxes, were a headwind, leading to modestly negative same-store NOI. Yet we were able to offset this through strong growth in our other storage-focused business lines of tenant insurance, bridge lending, and third-party management, allowing us to generate positive year-over-year FFO growth. This reinforces our strategy of growing diverse ancillary revenue streams, as well as prudent expense control and capital allocation to supplement investors' returns during all cycles in the market. We expect these additional revenue streams to continue to supplement property returns in the future as the market recovers. We are confident that our higher portfolio occupancy positions us well to capitalize on the demand that is in the market, and we are looking forward to improving core business fundamentals as we progress through 2025. We will continue to leverage our scale to find efficiencies in other areas of the business to drive outsized FFO growth relative to our sector. I will now turn the time over to Scott. Thanks, Joe, and hello, everyone. Our fourth quarter results were slightly ahead of our expectations, with one uncontrollable exception. We had outsized increases in property taxes in Illinois, Georgia, and Indiana, causing Extra Space same-store expenses to come in at 9.5% for the quarter. These increases were partially offset by lower G&A, higher tenant insurance, and interest income. Turning to the balance sheet, we completed a $300 million reopening of an existing bond in the fourth quarter and another $350 million reopening in the first quarter of 2025. We have used the proceeds from these offerings to repay maturing loans and to fuel recent growth. We also initiated a $1 billion commercial paper program in the fourth quarter, which enables us to borrow at interest rates that are 30- 50 basis points less than our lines of credit. In last night's earnings release, we provided our 2025 outlook for the Extra Space same-store pool. The pool is now 1,829 properties and includes the Life Storage same-store properties from 2024, plus additional properties that now meet our same-store definition. Our same-store revenue guidance assumes a 50 basis point benefit from the change in pool. Our guidance does not assume a material improvement in the housing market during the summer leasing season and includes a 20 basis point headwind due to state of emergency restrictions in Los Angeles County. We are encouraged by our strong occupancy levels and the potential benefits of moderating new supply. We are confident that we can hold occupancy, but we believe it will be difficult to drive a meaningful re-acceleration in revenue growth until we regain pricing power with new customers. We are seeing some positive signs with new customer rates that indicate we are getting closer, but we still have not seen enough progress to date to feel confident that a forthcoming inflection point will have a significant impact on the 2025 leasing season. Therefore, we have not included a meaningful acceleration in pricing power in our guidance. For the same-store pool, our revenue guidance is -0.75% to +1.25%. Our expense growth range is 3.75%-5.25%, driven by expected increases in property taxes and property insurance increases expected in the latter half of the year, resulting in an NOI range of -3% to +0.25%. Our core FFO range for 2025 is $8.00-$8.30 per share, which implies a 2% growth rate at the top end and a 0.4% growth at the midpoint. We continue to find ways to expand our other lines of business and grow FFO per share. With our occupancy levels at near-record highs, we are confident that we are very well positioned to push rates quickly when pricing power returns. With that, let's open it up for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star 4, button 1 on the telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star 4, button 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Ki Bin Kim from Truist. Please go ahead. Thank you. Good morning. Just going back to your comments around guidance and not assuming much pricing power acceleration, maybe you can just flesh that out for us a little bit more. For example, what were the rates year-to-date so far, and what are you assuming for the rest of the year? Thank you. Yeah. So maybe just to give you a little more color on that, our rates in the third quarter of last year were down about 9% average, and we ended the year closer to being down about 6%. And as of today, our rates are essentially flat. So we have seen a sequential improvement. In terms of assumptions for the remainder of the year, we would assume that rates continue to improve moderately as we move through the year, and we would assume a slight benefit from occupancy through the year. But again, we don't assume a big improvement from the housing market or big recovery there. So kind of just more of the slow growth as we move through the year. Okay. Great, and on the LA wildfire impact on guidance, can you just provide some more details around how you got to that 20 basis points headwind? Ki Bin Kim. So we have 73 stores in our same-store pool in LA County. It accounts for about 7% of our new pool same-store revenue, so that's less than the old pool. And we're modeling about a 20 basis points decrease in the same-store pool revenue from the state of emergencies, which we are assuming are in place for the entire year. Okay. And I know it's not your job to look at other companies' conference calls, but it's different than your other peer. I'm just curious what the difference is besides just market exposure. Yeah. It's hard for me to comment on others' calculations, so I'm not sure I can give you an answer for that. Okay. Thank you. Thanks, Ki Bin. Thank you. And your next question comes from the line of Jeff Spector from BofA. Please go ahead. Great. Thank you. Joe, I thought it was interesting. I think in your opening remarks, you said you still expect LSI to outperform EXR in 2025. And again, tell me if I'm wrong. When I think about the LSI portfolio, I think of maybe weaker demographics than the EXR portfolio. And we are starting to see some continued weakness, let's say, on the lower demographics. So it's interesting your comment. What are you seeing? What gives you confidence that the LSI will continue to outperform? Maybe what lessons are you learning there? Thank you. So a store in a primary, secondary, tertiary market, weak or stronger demographics, improvement is relative, right? So we're not saying that the LSI stores in a $15 market are going to get to $30. We're just going to say they are going to improve in the market. So when we look at those markets and look at the performance of the LSI stores and the Extra Space stores in those markets, we still have some gap that we feel we can close. Okay. That's fair. And then I guess just to summarize, listening to both you and Scott's comments, it sounds like 25 right now, the setup into peak leasing is very similar to last year. Is it fair to say laser-focused still on housing as a key driver of demand? Anything you would add to that, or is that an incorrect summary? Thank you. So I would say we're laser-focused on a lot of things. Housing is certainly an important component. Our customers who tell us they're in the process of moving, which is all moves, not just housing moves, apartment moves, move back home, is at around 48%. That peaked out at 63% in the third quarter of 2021. So there certainly is some decline in housing demand. But our systems are able to capture more than our share of the demand, as evidenced by our very high occupancy, industry-leading occupancy, at very similar rates to our competitors. We're not capturing that demand by undercutting rates. We're doing it through our customer acquisition and pricing system. So housing is important. Supply is certainly something we're keeping an eye on. We're continuing to see a reduction in new deliveries, not to zero, but continuing year-over-year reduction, and we're also laser-focused on the consumer. And we see that the existing customer remains very strong: increasing lengths of stay, acceptance of rate increases, very low default rates. And we see price sensitivity in the new customer. But as Scott mentioned, in our trends of year-over-year rates, that seems to be improving somewhat too. Sorry for the long answer. Thank you. Thank you. And your next question comes from the line of Michael Goldsmith, UBS. Please go ahead. Good afternoon. Thanks a lot for taking my question. First question is on the dual-brand strategy, dual to the single-brand strategy. Can you talk a little bit about sort of the uplift that you're seeing from stores that have been converted? Is that tracking in line with your expectations, and is that kind of on track for the expected results as you head into the peak leasing season? Yeah. So the first result we saw was a reduction in paid search spending. We had a reduction of $2 million in the fourth quarter in paid search spending for the LSI stores. That should continue throughout 2025. We're seeing an increase in conversions in those stores, better SEO rankings, somewhat better local rankings, not as good as the SEO, but also improving. And all of that is leading to a 5.5% increase in rentals in the LSI stores that are in the same markets as the Extra Space stores. So we're encouraged by what we've seen. We have not included in our forecast, in our guidance, any additional improvement other than what we've experienced to date. And hopefully, if these trends can continue, we'll have some upside. Thanks for that, Joe. And as a follow-up, I'd like to talk about the bridge loan book. It's gotten a little bit larger, and you're guiding for that to continue to increase. So can you just talk a little bit about how you envision how big you can envision that debt getting and maybe the interplay between bridge loans and acquisitions and how that can support your earnings growth algorithm this year and in the future? Thanks. Yeah. Thank you for that question and recognizing that the Bridge Loan program has interplay with both the acquisitions and the management business, right? We manage all of these stores that we make loans on, so it helps increase that business. We've bought almost $600 million worth of deals out of the bridge loans. And frankly, this is a little softer benefit, but just the relationships, industry relationships we form with these new parties helps us do more business, right? The more people you've done successful business with, the more future business you get. So that being said, the Bridge Loan business is a capital allocation play. And in 2024, frankly, up until the fourth quarter, given our cost of capital and what we saw in the market, we thought a good place to put our capital was into the Bridge Loan program. And we did increase our balances. We've given guidance that we're going to continue to increase our balances in 2025. But that's somewhat subject to properties being sold, and we may buy them or get a prepayment penalty. It's also subject to we have the flexibility to sell A-notes. So we can control the amount of capital we have allocated to this program. And if we have other or better uses of capital, we can certainly shift directions. Thank you very much. Sure. Thank you. And your next question comes from the line of Brendan Lynch from Barclays. Please go ahead. Great. Thanks for taking my questions. It looks like vacates were down about 4.4% year-over-year. Maybe you could talk a little bit about what you're doing differently to improve that retention? It's mainly about trying to identify the customer, the type of customer, not the individual, who is more likely to be a long-term customer and make efforts to attract those customers and get them in the door. Our pricing and customer acquisition strategies are focused on attracting those customers, even if we have to sacrifice a little revenue upfront to do so, because over the long term, that will produce higher customer value, higher long-term revenue. Maybe related to that, when we look at the ECRI opportunity for the coming year, perhaps you have some fertile ground just because of the increase in new customers that you've brought in over the past couple of months or couple of quarters. Can you talk about the opportunity that you see there? I think the opportunity is the same that we see in prior years where we want to have a fair and sustainable program where we get customers to the market rate, to the street rate within a reasonable period of time. Okay. Very good. Thank you for the call. Thank you. And your next question comes from the line of Ronald Kamden from Morgan Stanley. Please go ahead. Hey, just two quick ones for me. One, just on the expenses, I know you mentioned in the opening comments the surprise, but can you sort of say a little bit more what sort of happened? Clearly, that's not being baked into the guidance for this year. Just a little bit more color there and would love some thoughts on insurance as well for this year. Yeah, so property taxes in the fourth quarter were higher, partly. At a state level, the one state that was consistently higher across the board was Georgia. We saw more aggressive reassessments there. We also saw individual properties in the states of Illinois, Indiana, New Jersey, where you saw very large increases on specific properties that caused a large variance. Our assumption going into 2025 is that some of the property tax increase pressure, it's still there in 2025. We budgeted between 6% and 8% increase for 2025 for property taxes. We have not budgeted a lot of successful appeals, but that's to be seen. We're going to appeal many of these, and hopefully, we win, and hopefully, we're able to keep that lower than that. But I think based on the current environment, we think that it's the proper thing to do to budget it at 6%-8%. In terms of property and casualty insurance, you've seen a pretty heavy year in terms of natural disasters this past year. You saw the hurricanes in Florida. You saw the wildfires in California. And I think it's really a to-be-determined type item here. And so we felt like it was prudent to budget a higher number there. We budgeted close to 20% increase in our when we re-up our insurance in June. Great. That's helpful. And then my second one, obviously, it's early to talk about AI, but you guys have always been sort of front-footed on the technology front. Just curious if there's any sort of low-hanging fruit opportunity, whether it's lease signing, whatever, that you guys are attacking or see as an opportunity near term. Thanks. So we want to be cautious with AI applications and not necessarily be a pioneer. There's certainly some applications around the office and with data analytics that are pretty straightforward and easy. With respect to customer-facing applications, we are testing and walking into those to make sure that they are, in fact, beneficial and do not hurt our overall operations. That's it for me. Thank you. Thanks, Ron. Thank you. And your next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Please go ahead. Hi, thanks. First, I just wanted to go back to the topic of property tax increases you cited in Georgia, Illinois, Indiana. Sounds like that's recurring, at least for the first three quarters. Is this a trend that you see becoming more widespread in other markets? And is there anything else in that 6%-8% property tax budget outside of what you've mentioned and already experienced? So we've seen states be aggressive over the past several years. You've seen Florida, Texas reassess. When we go back and compare revenue growth over the last five years to property tax growth, the values of the properties have gone up. So states typically lag in terms of how they reassess. And so we're hoping this is the back half of that, but it's still somewhat what we're seeing as a result of the revenue growth that we saw in these states and across the board for the last five years. Okay. But it sounded like you commented that it was specific to individual properties. So it wasn't necessarily specific to certain counties or municipalities. It was just on an individual property basis. Is that right? It is. And then it also has to do with some of the LSI property reassessments. So if you look at growth in the two pools, which we're no longer going to talk about in the upcoming year, we won't break them out separately. We have seen larger property tax increases in the LSI pool as some of those stores were reassessed. Okay. And then, Scott, you mentioned that you expect a slight contribution to revenue growth from occupancy throughout the year. The EXR portfolio ended the year about 120 basis points higher. Year-over-year, the LSI segment was a little over 200 basis points higher year-over-year. Can you just flesh that comment out a bit in terms of what the revenue growth forecast is, including maybe at the high and low end of the range in terms of occupancy gains during the year and how we should think about the occupancy build during the height of the rental season? Whether you expect it to be similar to 2024, or do you expect a little bit more seasonality, similar to longer sort of historical averages? Yeah. Let me talk maybe a little bit on how we model and then come back a little bit to occupancy. Maybe we're a little different in that we're not giving assumptions on rates and exact assumptions on occupancy, partly because those variables really you push one and the other one moves. And so I think it's difficult to do. So we typically model revenue and then increase on a month-over-month basis based on the current economic conditions and what we're seeing at the property level. Now, that being said, we do recognize that the front half of this year is going to have an occupancy delta. So you're starting the year 120 basis points ahead. We are 120 basis points ahead on the new same- store pool as of the end of February. So we would expect that occupancy delta to burn off somewhat as you move throughout the year and become less important in the back half of the year. Okay. All right. Thank you. Thanks, Todd. Thank you. And your next question comes from the line of Juan Sanabria from BMO Capital Markets. Please go ahead. Hi. Good morning. Just hoping you could talk a little bit about the pricing dynamic. You noted some early signs of an uptick, but nothing sustained quite as of yet. But at the same time, if I look at the move-in versus move-out spread, that hasn't necessarily compressed. So hoping you could flesh out why you think that's the case, that although the year-over-year move-in rates, that year-over-year decline is compressed, that move-in versus move-out hasn't necessarily moved. If anything, it's gone slightly the other way. Yeah. Some of that's the seasonality in the business, Ron. So third quarter to fourth quarter, you're typically worse in the fourth quarter than you are in the third quarter. I think you've seen that with some of our peers. So that's not unexpected. We would expect that roll down to be less in the summer months than it is right now. So over time, that should tighten up some as rates get better. And any incremental tidbits on the, you said, early signs of improving pricing power? Just hoping you could flesh that out a little bit. That is based on our comment. You went from negative 9% in the third quarter to negative 6% at the end of the year to now being flat year-over-year. You are seeing those as incremental increases. Just month-over-month, it is getting better, and we would expect to see that as this is the time of year when rates start ramping up as you move into your leasing season. When you go from January to July, you always see rate increases during that time period, and we would expect, based on our occupancy and where it is today, to be in a position to move rates up again. Okay. And then just as my second question, you noted a 50 basis points benefit to the same-store assumptions this year from the inclusion of the Life portfolio. I'm just curious if you can give some context around that versus comments you've made historically that in a normal year, you add 100 and 120, and it's not too dissimilar of a benefit. Is it just a product of kind of a flattish at-best market that's causing that benefit from the Life inclusion to the pool, or any incremental thoughts would be appreciated? Historically, we have seen improvement as we've changed the same-store pool. Typically, it's not all the way up to 50 basis points. This year, if you look at the performance in the fourth quarter of the Life Storage stores compared to the Extra Space stores, they're not that dissimilar in terms of performance at that point. However, as Joe mentioned, we do expect some upside there. We just haven't necessarily modeled really, really strong rate growth. Then also the fact that you're moving a large portion of properties in, we do see incremental increase, but it is weighted a bit to that group of properties in terms of the increase. Thank you. Thanks, Juan. Thank you. And your next question comes from the line of Eric Wolfe from Citi. Please go ahead. Hey, thanks. For the LA rent cap of 10%, I guess what does that cap pertain to? What's the initial rate from which you can only grow at 10%? Is that the existing rate that your customers are already paying? Is that the discounted rate that you offer on a move-in? I'm just trying to understand what that sort of rate is within a dynamic pricing model and how you determine that. Yeah. It's an excellent question. And I'm not sure it's 100% clear in the state of emergency, but we are not increasing rates over existing rates that are paid by the customers. So whether that's street rate, web rate, or whatever, those are the base rates we're using. Okay, so I can't just look at what's in the Supp and say, "Okay, this is what the average customer is paying right now," and it will never be 10% above that. It's a different process of looking at what the street rate, the web rate is, and other things, and it's a bit more dynamic than just taking that average of what your customers are paying right now. I think that's true, but I also think that would get you pretty close. Got it. Okay. And then second question, you said that. I appreciate that you don't guide to rate and occupancy and the dynamic. One goes up, it's inversely correlated. The other one goes down. But I thought I heard you say that moving rent growth was sort of flattish year-over-year. It's expected to turn positive, get a little bit better as the year goes on. And then occupancy, to your point, is up year-over-year and probably should be a positive contributor. So I was just curious how you're getting the kind of flattish revenue growth within that. Is there an offset that I'm missing, whether it's higher churn, lower ECRIs? I guess, why wouldn't it be more positive if you're already flat on moving rents and it's going to get better, and then your occupancy is a positive contributor? So obviously, it depends on where you are in the range. So you're making those assumptions on the midpoint there. As you move through the year, you get more benefit in the back half of the year than the front half. So we ended in the fourth quarter, you were down 4%. The Life Storage stores were also down. So moving forward, you're starting on a lower number, and then it obviously gets better as you move through the year. So a lot of your assumptions are somewhat based on where you are in that range. Got it. All right. Thank you. Thanks, Eric. Thank you. And your next question comes from the line of Keegan Carl from Wolfe Research. Please go ahead. Yeah. Thanks for the time, guys. I guess before I get into my questions, just a clarification. When you say street rate delta year-over-year, is that commentary for both the Extra Space and Life Storage pools together, or would that hold true for both individual pools? So I'm not sure I'm following where you're saying street rate delta. When we're giving rates here or giving assumptions, it's the average rate to our new customer. So it's the move-in rate. Yeah. But you're saying it was flat year-over-year, right? Does that hold true for the combined same- store pool? Was that only for the Extra Space pool? Was that only? I guess I'm just trying to figure out how the Extra Space and Life Storage pools fit in that. That is the new same-store pool. Okay. No, that's super helpful. So I guess getting to the questions, first, just how should we think about the curve of moving rates versus typical seasonality? Are you expecting anything different in 2025 relative to what you normally would have expected or what you experienced last year? I think that's to be determined kind of at the strength of what demand looks like as you move through the season here. You would expect it to move up. It always does during the summer months. Kind of that June timeframe is really our peak rate timeframe, and then you start moving them back down as rentals start slowing as you move through the summer, so we would expect that again this summer, and then the degree of those increases is going to depend on how rentals, vacates turn out, and how your occupancy stands. Got it. And then maybe one for Joe. Just how should we think about capital recycling this year, just given your LSI portfolio becomes 1031- eligible? So we sold a handful of properties last year. The majority of them were LSI properties. We have a modest list of properties that we're looking some to bring to the market, which would be 1031 eligible. Some we may offer to joint venture partners. But we constantly want to improve the overall quality and market exposure, market diversification of the portfolio through dispositions. And this year will be no different. Great. Thanks for the time, guys. Sure. Keegan. Thank you. And your next question comes from the line of Nick Yulico from Scotiabank. Please go ahead. Thanks. First question, I guess, for Scott. Can you just talk about why the G&A and guidance is up about 10% this year? Yeah. So we've experienced a lot of growth over the past couple of years. We had a very strong fourth quarter as we added properties. We're forecasting growth this year in terms of acquisitions as well as the third-party management. So our biggest increase really comes from the headcount that's required to manage those properties, both in the field as well as back office. If you think about the properties, they're managed by regional managers. It's not completely linear. This is one of those years when we have to take one of those stair steps up as we add additional support level that's supporting the regional managers. So that's the largest one. And then to a lesser degree, we've also gone back. We've increased our technology spend as we have focused the last couple of years on integrating the LSI properties and put a few things on hold. So we've really tried to move those items back up. So it's really to support the properties and support the technology spend. Okay. Thanks. And then second question is just as you think about the pricing strategy, which has been in place for a while now of some discounting on the front end and then getting ECRI benefit for the customer to get up to a street rate. Can you talk a little bit about whether you're seeing any differences in regions or maybe in testing on pricing strategies about where you feel you have ability to kind of remove some of that discounting on the front end? And I guess the second question on that is, at what point is there maybe a risk here that the entire industry is moving to this heavily discounted front-end pricing, and it becomes hard to get the consumer to be untrained from that type of pricing? Yeah. Good question. So to answer the first one, we really don't look at it by region or market. Our algorithms, our systems will reprice every unit type in every store every night. And to the extent that conditions in the market, rentals, vacates, whatever, dictate a change one way or another, that will automatically happen on a very, very granular basis. So different behavior in different buildings, not necessarily markets or regions or demographics. Different behavior in different buildings is addressed on a nightly basis. So I'm not overly concerned about what others do in the market for a couple of reasons. One is customers shop very, very few alternatives when they're looking for storage. It's not that important of a purchase. They're not buying a house or a car. So almost 85% of our customers shop two, one, or zero alternatives before they rent with us. So what's most important is to be visible to that customer when they look, and most of them look online, to be in one of those top positions on the search page, on the first page of the search page. So what others are doing who are not that visible to customers is not that much of a threat to us. But again, we're going to try to lead the industry in our pricing and customer acquisition strategies. And to the extent we need to change and adapt and innovate, we will. Okay. Thanks, Joe. Thank you. And your next question comes from the line of Michael Mueller from JP Morgan. Please go ahead. Yeah. Hi. I guess first, can you talk a little bit about acquisition pricing and where you think returns need to be to see a lot more on-balance sheet activity compared to JV activity? Sure. So we try to be and are very faithful to our cost of capital analysis. And given where interest rates are and our stock price, we have what we see as a cost of capital that is not too different than what things are trading for in the market. And therefore, on-market opportunities are few and far between to put on balance sheet. The heavy transaction load that we did in the fourth quarter was structured off-market opportunities. We took advantage of a $74 million embedded promote in one deal that made it accretive. So I think until the market changes, you'll see us lean heavily into the joint venture structure where we can put in a minority of the capital in a very accretive fashion because of the benefit of the structure and the management fees and the tenant insurance and not do a lot of on-balance sheet acquisitions. Got it. Okay. And then I guess second question, going back to the comment about seeing a pickup in rental activity in the LSI portfolio post-moving back to one brand, I mean, what's driving that, do you think? I mean, what was the drag from operating under the LSI banner, or are you doing something different on the rate side again? I mean, what's driving that pickup? Sure. Good question. So the theory of having two brands was that we could get hopefully double the digital real estate. We could get two entries in the paid search section, two entries in the local or map section, and two entries in the organic or SEO section. And when we went to two brands, it was easy to get two entries in the paid section because we bought it. We were spending on an annual run rate $10 million more in paid search to have those two entries. And we had some improvement in the maps, but not as much as we anticipated. And we had significant improvement in the SEO where we went from LSI maybe had an average spot of seven or eight, and we moved them up to closer to four or five. But 70% of the clicks are in the first three entries. You had to be on the first page of the organic section, so although theoretically we were right, we were improving our position, we weren't improving it enough to pay for the cost of the second brand and move the needle. So now everything is branded Extra Space digitally, at least, and we are seeing the customers come to the Extra Space brand, and Extra Space almost always ranks in the top spots in all of those three categories, so we're getting more clicks, more views, higher conversion rate leading to more rentals, and we're saving money because we don't have that extra paid search spend. Got it. Okay. That's super helpful. Appreciate it. Thank you. Sure. Thank you. And your next question comes from the line of Sumit Beniwal from Green Street. Please go ahead. Hi, guys. Thanks for taking my question and congratulations on the quarter. Just got a quick one here kind of on the ECRI front, but can you guys provide some color on how ECRI has trended and where do you guys see them going into the future? As move-in rates, as you said, look to improve in 2025, can we expect to see maybe slightly less aggressive rent increases than what we saw in 2024? And has there been any increased sensitivity as well that you've seen as of the fourth quarter? I'll take those in reverse order. We haven't seen any change in customer behavior. Our NPS scores for departing customers are extraordinarily high. We do have some customers that will call the store manager or the call center and complain about a rent increase or want more information. We give those teammates the authority within a range to address that customer concern. We don't want to lose that customer. We think it's a good customer experience to have those concerns addressed right away. The number of customers who are getting that relief has not changed at all. It's a very small number, and it hasn't increased at all. The number of customers who are vacating stores based on getting an ECRI notice, we keep a control group of folks who don't get an ECRI notice who are supposed to, and compare their move-out rates to those who did get an ECRI notice, is very steady. That hasn't increased at all. So we monitor this very closely, and there's nothing in what we see that would suggest a need for a change in the program. Thank you. And could you just touch on if you see rents improve in 2025? ECRIs look to be pretty aggressive in 2024. Do we expect to see maybe slightly less aggressive ECRIs because of that? I'm not sure I know what the word aggressive means, what an aggressive ECRI is. The ECRI amount is going to be driven by what the market rate of the unit is and what the rate of that customer is and whether it's because they came in at a discount or whatever. And if street rates spike, that will give us the opportunity to send out incrementally larger ECRIs, or if our strategy is to offer even greater discounts on introductory rates, the same thing. But the aggression, as you put it, is just to get the customer to what the current market rate is. All right. Thanks for that. That was all for me. Thank you. Your next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead. Hi. This is Jeremy Kielhorn for Caitlin. You guys touched on it briefly earlier in the call, but for incoming supply reduction, can that really help dramatically improve moving rates while housing turnover remains low? I guess can less competition be a catalyst for pricing while demand remains low? Is kind of what I'm getting at. So it's a factor. I don't think it's a sole factor, but it's certainly a positive factor that helps. And I would also maybe disagree a little bit that demand is low, right? Everything that we're seeing in terms of top-of-funnel activity indicates that maybe demand is low compared to COVID. But compared to historical periods, demand is healthy. Demand is steady. And if you look at our occupancy, we ended the year at Extra Space pool at 93.7%. We're keeping our stores very full. There is price sensitivity in the customers that is leading that demand not to price at levels we want, but there's enough customers out there to keep the stores full. Got it. Thanks for the clarification. That's all for me. Thank you. And your next question comes from the line of Omotayo Okusanya from Deutsche Bank. Please go ahead. Hi. Yes. Good morning out there. Quick question on interest expense. Again, understand you have the new CP line. You did some debt refinancing. But just your 2025 guidance relative to our expectations seemed a little bit high. So curious if there's anything going on in regards to swap maturities or any other kind of less capitalized interest or anything else that might be in that interest expense line that maybe we're not fully accounting for? Not in terms of swaps. We do have some loans coming due. And so some of the, I guess it is indirectly related to swaps where some of those loans are swaps. For instance, we had a $245 million loan come due in January that was swapped, and now you're refinancing it at market rates today. Those rates should be reflected in our supps in the debt detail. You should be able to see those. But otherwise, what we've done to model interest is we've modeled the forward curve, and then we also have increased our debt to account for any investment activity, including the bridge loans. Okay. That's helpful. And then in regards to the insurance program, just kind of given a lot of what we're seeing, whether it's, again, hurricanes in Florida, the unfortunate wildfires in LA, just kind of want to know how you're underwriting that program to whether it changes your appetite to take some of that property risk on through your insurance program. Yeah. So we continue to shop it as much as possible. So spent time in London in the exchanges there in Bermuda, tried to make sure we have a lot of competition. With With the addition of the LSI stores, we actually added some additional vendors there. So we'll continue to do that. We will potentially take some risk. It's possible the vendors require you to take some of that risk. So I think that's to be seen. But we always have them price it multiple ways to see the price of that incremental risk that we're taking. And so it is something we're open to. Thank you. Thanks too. Thank you. And your next question comes from the line of Jon Petersen from Jefferies. Please go ahead. Okay. Thank you. So on the year-over-year change in moving rates, I have two questions on that. One, are you able to give us what that is on the LSI portfolio isolated out? And then I'm just curious about the cadence of that change because you said it was down 6% at the end of the year and we're flat today. Has closing that gap been something that's happened in the last two or three weeks or something that's gradually happened given that we're already two-thirds of the way through the quarter? Yeah. So we've combined the pools. We'll continue to report on the one pool. I can tell you they're not that different. In terms of cadence, it actually took place in January, and part of that is just the comparable for last year. So rates did go down last January. So it was an easier comp compared to December. Okay. All right. That's helpful. And then maybe shifting gears, another question. So there's obviously been some job losses in the D.C. market. Just curious if you guys are seeing anything in that portfolio. And then maybe bigger picture because it's been more than a decade since we've had a "normal recession," I guess, putting COVID aside. Maybe talk about what a job loss-driven recession might look like for the storage business since we haven't seen that in a while. Yeah. So way too soon to see anything in D.C. We haven't seen any increase in vacates or move-out, anything significant there. D.C. is one of those markets historically that's been incredibly steady, both doesn't have the ups and doesn't have the downs in other markets. But maybe we're in a new world. I don't know. A job loss-driven recession is a scary thing, right? The number one kind of correlative factor for storage success is job growth, not housing market, job growth. And we would have to manage through that. That being said, storage is an asset class that has demand generators through all economic cycles, not only good economic cycles. People need to move home. People need to move across the country. People need to get roommates. People need to run their businesses out of a storage facility, not out of a flex space. So we do better than other property types during downturns, but we're certainly not immune. Got it. Appreciate the color. Thank you. Thank you. There are no further questions at this time. I will now hand the call back to Mr. Joe Margolis for any closing remarks. Thank you, everyone, for your interest in Extra Space. The team looks forward to continuing our conversations in the near future. And the team is also very excited to take advantage of improving market and some of the tailwinds that we anticipate in 2025. Thank you very much. Have a good day. Thank you. This concludes today's call. Thank you for participating. You may always connect.