Greetings, welcome to the National Storage Affiliates second quarter 2023 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund. You may begin. We'd like to thank you for joining us today for the second quarter 2023 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer, and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up, and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, August eighth, 2023. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, Core FFO, and Net Operating Income, contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I will now turn the call over to Dave. Thanks, George, and thanks to everyone for joining our call today. I would like to start by acknowledging and thanking all of our team members here at NSA and our PROs for their continued dedication and hard work. It is the significant contributions from our team members that drive our success, and we appreciate everyone's efforts. Our continued focus on people, process, and platforms is allowing us to improve our performance as we navigate very challenging comps and unusual environment for our sector. Our teams did a good job balancing the changing demand environment by effectively using all levers available to create rental opportunities and drive conversions. Our customer base remains very healthy. Our portfolio is well positioned for long-term success, and our focus on key initiatives will enhance our ability to remain a leader in the self-storage sector. Looking at the second quarter, we had a number of operational data points that we were pleased with, including street rate growth of 3.4% over the first quarter. Contract rate growth increased 1% sequentially and 7% year-over-year. Our existing customer base remains resilient, with average length of stay remaining well above historical norms. 50% of our customer base has now been with us for greater than 2 years. To put that in perspective, on average, our current tenant base has now been with us for over 40 months. Our ability to implement ECRIs remains strong at above pre-pandemic levels, and insurance penetration continues to improve, increasing over 10% year to date. Bad debt was 2.1% of revenue, and concessions were 2% of revenue, both below pre-pandemic levels. Overall, our operational performance is strong in many areas, and our customer base remains stable over the quarter. It's worth pointing out that street rates in July were still 18% above 2019 levels, and contract rates in July were 30% above 2019 levels. We had a couple areas that did not meet our expectations. The spring leasing season was weaker than we originally forecasted, resulting in occupancy levels that were below our initial projections. Move-in activity was below the levels we'd anticipated due to several external factors. First, we experienced a disappointing change in the amount of move-in demand due to the slowing housing market. Home sales were down across most of our markets. This change in volume of housing sales has temporarily decreased the demand for self-storage, which impacted our spring leasing season. Although we expect this housing trend to eventually subside, it has put short-term pressure on our business. We also had a very competitive environment for the acquisition of new customers. Our teams were navigating a dynamic street rate environment along with elevated marketing spend across the sector. The number of rental opportunities generated was below our expectations. Not only did the rising interest rate environment put pressure on storage demand, it also put pressure on our interest expense, leading to less than expected Core FFO for the second quarter. We expect interest rates to remain a headwind for the remainder of the year. These factors have led us to revise our guidance, which Brandon will discuss later in the call. As we cycle past the historically tough comps in the back half of the year, we are confident our portfolio remains well-positioned for future success. I want to highlight a few areas where we are focused on delivering both internal and external growth going forward. First, we remain focused on enhancing our customer acquisition and revenue management process and platforms. We continue to strengthen our team, and we're excited about the initiatives underway to optimize the online customer experience and front-end pricing. Second, our investment in an improved data warehouse and the use of AI technology will continue to improve our ECRI program, which drives our revenue growth once the customer is in the door. Third, we are actively working on repositioning our balance sheet. We're exploring the various capital sourcing strategies that will enable us to become more opportunistic when the time is right.... We are confident in our strategies will position the NSA to deliver healthy growth, as we have demonstrated since our IPO. I will now turn the call over to Brandon. Thank you, Dave. Yesterday afternoon, we reported Core FFO per share of $0.68 for the second quarter of 2023, which represents a decrease of 4.2% over the prior year period. The year-over-year decline, despite 3.4% growth in same-store NOI, and 7.4% growth in Adjusted EBITDA, was due primarily to elevated interest expense, given the rising rate environment. We delivered positive revenue growth of 2.8% on a same-store basis, driven by 7% contract rate growth. Occupancy ended the quarter at 90%, up 20 basis points from Q1 and down 450 basis points year-over-year. Similarly, July occupancy finished relatively unchanged at 89.9%, which is also 450 basis points below last July. Our team did a tremendous job controlling expenses, such that our growth in the second quarter was just 1.4%. Payroll declined 3.4% from the prior year period, while property taxes were down 1.5%. These cost savings were offset by marketing expenses that grew 34% and insurance that grew 41%, due to the policy renewal we had on April first in a tough market, which we discussed on our last call. We will continue to focus on minimizing our controllable expenses, allowing us to slightly lower our guidance range for same-store OpEx growth. On the acquisitions front, the second quarter was fairly quiet, given the wide bid-ask spread and elevated cost of capital. During the quarter, we acquired two facilities totaling $14 million that will be run as annexes to existing locations, and therefore not increase our store count. The larger of these acquisitions was from our captive pipeline. Subsequent to quarter end, we acquired one property for $18 million, also out of our captive pipeline. Going forward, we will remain opportunistic and patient as we look to continue to grow externally. Turning to the balance sheet. During the second quarter, as previously announced, we issued $120 million of 5-year unsecured notes in a private placement with a face coupon of 5.61% and an effective rate to us of 5.75%, inclusive of the impact of pre-issue hedges. Subsequent to quarter end, $175 million of swaps expired. We entered into new swaps with a notional value of $100 million, resulting in a net $75 million of incremental floating rate exposure. Today, approximately 20% of total debt is variable rate, mostly related to our revolver. Going forward, as Dave mentioned, we will take further steps to free up some capacity on our line of credit, which will naturally reduce our floating rate exposure. At quarter end, our leverage was 6.1 times net debt to EBITDA, down sequentially from 6.3 times at the end of the first quarter, and comfortably within our range of 5.5-6.5 times. Now, moving on to guidance. As Dave mentioned, when we initiated full year guidance for 2023, we assumed that occupancy would return to more typical seasonal patterns, with the trough in February and then rising a few hundred basis points until peaking in the summer months. Instead, occupancy has been relatively flat all year. This caused our Q2 results to be below our internal projections and led us to revise expectations for the remainder of the year. Our updated guidance ranges, as outlined in the earnings release, are as follows: Full year same-store revenue growth of 1.5%-2.75%, with a new midpoint of 2.13%. Same-store operating expense growth of 4.5%-5.75%, down modestly from the previous midpoint. We now project same-store NOI growth of 0.25%-1.75%, with a new midpoint of 1%. This leads to a Core FFO per share range of $2.63-$2.69, with a midpoint of $2.66. While the midpoint represents a 5% decline from 2022 results, primarily due to interest expense, it also represents an increase of 73% over our FFO per share in 2019, the year prior to the pandemic-related impacts on our business. Assumptions that we've modeled into the midpoint of our revised guidance is a return to normal seasonality. This includes 250-300 basis points of occupancy loss by year-end and street rate moderation of 8%-10% from the end of the second quarter. Any deviation from these assumptions, up or down, would move us away from the midpoint. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As another reminder, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Michael Goldsmith with UBS. Please proceed with your question. Good afternoon. Thanks a lot for taking my question. In the prepared remarks, you mentioned you were looking to reposition your balance sheet. Can you provide a little bit more detail into what you expect to do and how that's going to free up capital? Good morning, Michael. How are you? Thanks for joining the call. It's Dave. I'd happy to dig into that a little bit. You know, I think of it this way, since our IPO, you know, NSA has been a leader in external growth on a relative basis. You know, much of that has been driven through our multifaceted acquisition strategy, you know, and we've increased the size of our company substantially. With that growth, we've built a, a really nicely diversified portfolio across 43 states in Puerto Rico, with exposure in primary and secondary markets. You know, that external growth has led to obviously attractive FFO and NOI growth, which has benefited all of our shareholders. Currently, the external growth opportunities are limited in the time we're in today, giving us time to really, you know, evaluate our internal asset management. As we look going forward, we intend to look very closely at our portfolio to determine if there are properties or portfolios or even markets that are non-core to our strategic focus. Now, this will give us an opportunity to unlock by selling properties and unlock value, recycle capital into core growth strategies, or even help us deleverage our balance sheet. Also, attractive asset opportunities inside the portfolio. We're studying very hard expansion opportunities, redevelopment opportunities, and really looking at our unit configurations to see if we can find opportunities to creatively grow FFO and, and really push occupancy to higher levels in doing unit reconfigurations. We continue to explore other avenues to capital. You know, we look at joint venture opportunities with private capital partners. We have an abundance of people looking to get into this industry. These ventures would give us access to capital to fund future growth, possibly delever as opportunities present themselves. You know, the portfolio recapitalization is a great access to capital without going into the equity capital markets. We could contribute wholly owned properties in any new joint venture, you know, vehicle with a private institutional investor. We could then redeploy that new capital and opportunities and deleverage our balance sheet if that's the right opportunity. You know, adding these areas to the focus, our focus on people, process, and platform initiatives that we have, we believe will well position us for future opportunities and success. Got it. That's really helpful. And my second question is on ECRIs. As we understand it, street rates play a role in the ECRI strategy as you look to move customers back to or above street rate. At what point does the pressure on street rates start to weigh on the ECRI strategy, to the point where you may need to reduce the magnitude of rent increases from it? Really, really good question again, Michael. You know, what I'm happy to report, and I think what we're pleased with is, you know, our cadence and level of rate increases that we're giving today still remain above pre-pandemic levels. We haven't had to alter that cadence at all. We're not getting any type of pressure from consumers. Our move-out activity isn't changing as far as the test groups and the non-test groups. We're pleased with that cadence. We're not afraid to be above street rate. I mean, street rates are very volatile, and I think this year they've been more volatile than I've seen in a long time. And, you know, we're hoping the back half of the year, you know, people will find their footing, and the street rate volatility will settle down a little bit, and I think that'll give us strength as we go into the back half of the year as far as that rate volatility. Right now, you know, we have a better platform than we've ever had. We've invested a lot of, a lot of dollars around new team members and additional team members and new platforms. You know, that ECR program is really, really strong for us and paying dividends on our existing customer base. Thank you very much. Good luck in the back half. Thanks for joining today. Appreciate it. Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question. Great. Thank you. On the last call, you discussed some markets that were a bit weaker. I think we talked about Vegas, Phoenix, Portland, Colorado Springs. Again, what are you seeing today in those markets? Are there other new weak markets or maybe even opposite strong markets to discuss? Really good question, Jeff. Thanks for joining. You know, I'll kind of break it down as, as markets you discussed. We actually have found a little bit of traction in Portland, where, you know, we've been talking about Portland for quite a while, having a lot of supply, a number of years of supply, starting before the pandemic, and obviously the pandemic helped, you know, mask some of that supply pressure. As we come out of the pandemic, we've found a little traction around occupancy. We've found a little traction around rate. Portland actually had some positive revenue growth, you know, for the second quarter, which we're pleased with. Still lots of ways to grow, still needs to grow out of that supply piece, but, you know, we think we've found maybe just a little bit of footing of maybe some stabilization, and now we'll have to work through the existing supply. Vegas and Phoenix are really, they were red hot markets during the pandemic. There was a lot of supply coming online in 19, 20, and 21 in both those markets. They're also feeling pressure from the housing slowdown. Both really good markets. We're very happy with those markets. Our portfolios are well diversified in the markets, but they're gonna face some near-term pressure because of the supply and the and really this change in the housing market and around, you know, movement and that's going around in our country. You know, we point out some hot markets. You know, we're really pleased with, you know, South Texas, down around McAllen and Brownsville, and those places, you know, well above portfolio average. Oklahoma City, well above portfolio average. I would also point to Atlanta. It's a market we've been talking about having some supply pressure, Atlanta had, you know, probably one of our largest occupancy decreases at, you know, on an average of well over 710 basis points, still put out a 4.8% revenue growth. I think our teams did a wonderful job balancing occupancy rate, marketing spend, against a very tough occupancy comp in that market. Okay. Thank you. Very helpful. My follow-up then, I guess, is on the occupancy loss and just, you know, confirming exactly what's happening there. You talked about the strength in the existing customers. We heard that from your peers. I guess maybe focusing on Atlanta or pick anywhere, like, what, what exactly is happening with the occupancy loss? It is a bit more severe than what your, you know, peers have seen year-to-date. Yeah, it, it's, it's a good question and, you know, and one we, we, we talk often about it in our shop. You know, if you think about the pandemic, our run-up from an occupancy perspective gain was probably double that of our peer group. I mean, from where our portfolio started pre-pandemic to where it finished, we grew 850 basis points in occupancy, which is uncharacteristic for our portfolio and our markets. As we come out of the pandemic, we've talking about how do we, you know, where are we gonna settle back down, and where do we find our soft landing? We think we've found that occupancy level that we think most of our markets are gonna be comfortable operating in. In some ways, you might think of it as just been a prolonged summer season, where it started in back half of 2020 and ran all the way through 2022, and now we're coming off those highs. For us, I think the occupancy loss looks worse because our portfolios were not as occupied going in, and when we operate in our markets today, we're finding our footing between the revenue goal, 'cause that's what we're trying to solve for, and the balance of occupancy and rate. Most of our markets are you know, we're operating with well within the comfortable levels of occupancy that we think our markets typically operate in. Hey, Jeff, this is Brandon. The other thing I would just add is, you know, for the second quarter, our Sunbelt markets, you know, outperformed the non-Sunbelt. They-- Sunbelt markets, you know, on that revenue growth of 2.8, they were above that portfolio average. The non-Sunbelt markets were below. Similarly, our secondary markets, call it, MSAs, outside the top 25, they were above portfolio average, outperformed the top 25 markets in our portfolio, which were below that 2.8% rev growth. Just from, like, We've, we've taken questions about how those secondary markets are performing. To your point about relative to peers, I just wanted to point that out because that, that was the case for Q2, very consistent with Q1, and we included some five-year trailing information on same-store performance across those splits in the June NAREIT deck that's on our website. I just wanted to call that out. Thank you. That's very interesting. I know it's two questions, but if I could just then ask, on the occupancy, you're saying, and, and you feel like you have stability today where you stand, let's say, through the rest of the year? It sounds like you have found that stability. Just to confirm. It, it's, you know, we, we are still forecasting. If you look at our guidance at the back half of the year, we're still forecasting a normal seasonality of loss of occupancy in the back half of the year. We did not peak as high as we thought in the summer, and that's around, you know, we discussed, you know, moving around the country and, and all the things around the rate environment and stuff that were going on in the spring leasing season. You know, we think conservatively, we have in our midpoint of our guidance, really forecasted 200 to 300 basis points of occupancy falloff in the back half of the year, which would be consistent to historical trends pre-pandemic. Lower than last year, Jeff. Last year we lost 450 basis points, and that's where we do, you know, at, at that midpoint of the guide projections, we do believe that the, the negative delta on occupancy year-over-year will tighten, but it'll still end negative at the midpoint of what we've guided to. Okay, thanks for clarifying. Thank you. Thanks for joining. Thank you. Our next question comes from the line of Cassandra Fiber with Truist Securities. Please proceed with your question. Hi, thanks for taking my questions. You mentioned in your prepared remarks that street rates were up 3.4% sequentially. Can you tell us what street rates were in the second quarter, year-over-year, and the cadence in July? Yeah, good question. you know, the street rates are down about 9% year-over-year. as, as we've all talked about, you know, school cycling, some really large occupancy comps and, and street rate comps. Street rates are down about 9%. In July, they fell just a little bit more, and that's still around the comp. If you remember last year, we held street rates very steady through the third quarter. So as we look at our comp against street rates this year, I think we're gonna be, you know, show a little bit more negative comp for the next couple of months, and then, we started going back into where we adjusted street rates down at the back half of the year. Really the back quarter of the year. Okay. Okay, got it. Then, can you comment on promotions and marketing dollars in the second quarter, maybe also in July, and what your strategy is there for the remainder of 2023? Good question. Certainly, you know, the, the, the marketing dollars themselves have been elevated. We're seeing that across, you know, the sector. We're seeing it in a lot of our markets. It's very market specific, and the teams have done a good job using marketing dollars to generate lead activity. You know, we've got more sophisticated programs than we've ever had. We've got more team members in that seat than we've ever had, and so we're pleased with the way we deployed marketing dollars really through the first half of the year and, and finding our footing on the balance of spend versus lead generation. The discounting remains muted below pre-pandemic levels, you know, around 2% of revenue right now, and pre-pandemic it was 3.5%-5%. Right now, our information is telling us that rate is a little bit better trigger than discount, and I think that's probably why you're seeing a little bit more muted discounts versus historical, and that's just the fact of having better tools and better information. Okay, that's helpful. Thank you. Thank you. Appreciate you joining. Thank you. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question. Hey, guys, it's AJ on for Todd. Just a couple questions, some to follow up what's already been asked in a sense. Just going back into the marketing and web dollars, were the web hits and phone inquiries, did you see a decrease there, or was the conversion rate lower with the sense that customers were shopping around more and being perhaps a little more rate sensitive? Good question. Hey, thanks for joining. You know, the session activity, the very, very top of the funnel was less than we expected. We were very careful not to over-deploy marketing dollars. You know, it's, it's a big year-over-year increase. Last year you got to consider we weren't spending a lot of marketing dollars, so that large increase looks a little outsized. The team did a good job focusing on conversion rate, as you touched on, and keeping our conversion rate where we felt comfortable with the amount of spend. The top of the sessions funnel, particularly early in the second quarter, April, was probably our sluggish month. It was our sluggish month around movement activity to expectation, and, and we improved through May and June, and July has improved as well, but, top of the funnel is what I would tell you on sessions. Okay, that's helpful. A, a question, just going back to Portland. Should we think about Portland as a bit of a leading indicator or, you know, perhaps a roadmap of sorts for how the other markets of the portfolio, of the portfolio, overall may perform over the next few quarters? Is that a good way to think about it? I think Portland's a tough one because Portland still has an overabundance of supply buildup. We're happy that it's kind of found some traction, so that's good. I would point you more to markets like Oklahoma City, Tulsa, you know, even to some of that South Texas stuff. I mean, if you look at Oklahoma City, relatively low new supply over the past three or four years. You know, in the pandemic, it was not as red hot as some of the other markets because it didn't have the influx of housing. If you look at its performance today, that's what a, a stable market that's, that's really kind of cycled all the, the activity of what's gone on in the last couple of years, and, and then our ability to really implement our revenue management platform. Okay, that's helpful. Then real, real quick, if I could squeeze in one more. Just where was occupancy at the end of July, and what was it year-over-year? I think as Brandon stated, it was 89.9, and it was down still 450 basis points year-over-year. Perfect. Thank you. I appreciate the time. Yeah, thanks for joining. Thank you. Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question. Hi. you've answered a lot of these, but I guess I just want to understand the guidance a little more, because it sounds like, I think if I'm doing this right, your second half, same store NOI, will contract at the high end and then even more at the low end. We've seen downward, you know, downward bias, I think, for the group overall, you know, for a lot of the reasons that people have already talked about. I'm wondering why yours seems more, kind of pronounced, if you're pushing through the same level of rate increases and occupancies are going back to kind of what you saw pre-pandemic levels. I'm trying to figure out, like, what, you know, what piece are we, are we missing that's driving your to see same store NOI contraction in the second half? Yeah, Smedes, it's Brandon. You know, probably a little tough for us to comment relative to the peers. I think you really got to parse the, you know, what was everyone dealing with a year ago and what did that growth look like? Frankly, Dave kind of hit it in his remarks earlier in response to a question in the sense that, I mean, for us, we've really been looking at things on a 3- and 4-year basis because you had so much volatility, especially across certain markets, starting in 2020 all the way through now. I, I think that's, you know, tough to answer relative to the peers. I mean, our, our absolute growth rate in the first half of the year is below peers, right? If we're moderating and decelerating on growth, as everyone is implying, then we're starting lower, I think that's where the back half might fly lower than, than the others. I can tell you, just to give a little more color on, on what we are expecting for the back half, I mean, it's, it's certainly somewhat dependent on whether or not we do experience that 250-300 basis point occupancy decrease that I mentioned in the opening remarks. If we do, you know, when do we experience that? We lost a, a good chunk of occupancy. I said it earlier, 450 basis points last year, a lot of that came in August and September. Dave, Dave mentioned that we didn't see this year that typical spring, summer occupancy uptick that we typically might. I think, you know, naturally, a question we were expecting today and a question we've asked ourselves is: Are we going to lose as much occupancy as historical? It, it is very challenging to predict right now. We've baked that into the midpoint. I think if you ask me, how do we get to the high end, I think it's, well, you know, maybe we're a little conservative and there's opportunity and some optimism that we won't see that 250-300 basis point decline in occupancy. Okay, you had just mentioned increase in insurance penetration in the quarter. I was just wondering, what, what is the, what% of customers are taking tenant reinsurance now? Yeah, good question, Smeeds. You know, over 80% take it at move-in, we have pushed our portfolio to that level as well. We've... Team's done a good job with a lot of initiatives, both those metrics are sitting above 80 today. Thank you. Percent penetration. Yeah. Hey, thanks for joining. Thank you. Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question. Hi, Robin Anglin here with Juan. I want to touch on expenses. Payrolls and R&M were both down year-over-year. What's the expectation for balance over the year, and how many more personnel hours can you take out from here? Yeah, good question. I'll answer the specific line items, but maybe just speak broadly. Operating expenses for the full year, we forecast property taxes to be in the 5%-7% range. Personnel, the next biggest line item, as you point out, was relatively flat for the first 6 months. We expect that to similarly be essentially flat, you know, ±1% on either side in the back half of the year. Then the, I would say the two biggest other line items in terms of growth are going to be marketing and insurance, which you saw in the Q2 actuals up over prior year. To my earlier comments about controlling the controllables, the team is doing a great job with R&M and other, other spend at the store level that we can contain. In terms of, you know, potential incremental efficiencies, I would say that the team has done a tremendous job on a new staffing model that we've been working on for the better part of the past year. I would say we're further along than I would have expected a year ago at this time, and that's credit to the team. That, that goes to what Dave talked about in terms of us focusing a lot internally on operations, be it on all fronts, the tenant insurance penetration we've remarked on, staffing at the stores. Look, the average employee per store is already pretty low, so there's only so much additional room you can make on that. However, I will say, our portfolio, as Dave pointed out at the beginning, is benefiting from the scale that we've added over the last couple of years. Our same-store pool this year is up 13 million sq ft from what it was last year, and that goes to the benefits of scale that we've added over the past couple of years. Cool. A follow-up to that, wondering on the PRO structure, does it in any way act as a deterrence or poison pill in an M&A scenario? What rights, if any, does the PROs have in, in change of control? You know, good question, and then thanks for asking it. You know, our board is keenly focused on adding shareholder value, and, and, and they focus on that constantly. Our PRO structure does not prevent a deal from taking place with the NSA, and we've covered that a lot in previous calls, and so I, I think I'd leave it at that. Thank you. Mm-hmm. Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question. Yeah, thanks. A lot of questions have been asked and answered. I guess following up on that question on the PROs, Dave, I'm just curious, given that, you know, you've gone from being a, a big net buyer to now potentially being a net seller, to what extent does that change the dynamics with the PROs who likely signed up thinking that they would be able to really grow their business in concert with you, and, you know, now you're, you're capital-starved and, and don't have good access to capital. You know, how does that change the dynamic with the PROs? Yeah, really good question, and we've spent a lot of time with our PROs as we really, you know, started this cycle, you know, 12 months ago, when we saw rising interest rates and cost of capital changing. You know, these PROs are very seasoned. They've been at this a long time. They realize there's still a disconnect between seller and buyer. Even though our capital's moved around and, and things have happened, there's also this disconnect where, you know, you wouldn't be buying properties in this environment. Given that, what I would tell you is, what the PROs do a wonderful job is, outside of the REIT, they're out sort of... You know, they're out buying maybe development properties. They're about, you know, out working on development properties. They may be buying less than occupied, you know, or less stabilized properties, and they're growing those outside of the REIT. They still have resources available to them. They're very good at this, and we look at it as they're restocking our captive pipeline. If you notice, the two of the assets we bought, you know, that we talked about in our quarter that we bought, one in the quarter, one thereafter, was came out of the captive pipeline. We think that's a strength of ours. It sits at, you know, almost, I don't know, $1 billion-$1.5 billion of properties that are not in the REIT yet, and the PROs are very actively working outside of the REIT today to find good properties, acquire good properties, or build new properties, which will then eventually come into that captive pipeline. Steve, this is Brandon. I would just add, you know, long term, we're still net buyers. Yes. The PRO model very much allows us to, to do that in an outsized way. I, I think actually the way I would characterize it is the fact that the, the composition of our portfolio and the way it's evolved to be a little more heavily weighted on corporate is what allows us near term to take advantage of some of these asset management opportunities that Dave alluded to. Because, you know, we're talking about, you know, generally corporate-managed stores that we've acquired in portfolios that, you know, one-off assets that we think we could selectively, discard strategically. So I, I think all that hangs together with what Dave said. As he pointed out, pretty much everything that we have acquired, going back to fourth quarter of last year, has been from our PRO captive pipeline or PRO source. They're still very much a part of the story and allow us to, to grow when we can. Okay, just maybe a follow-up on, Dave, your comment about, I guess, kind of pursuing asset sales and dispositions. You know, I don't know if that's more one-off, if that's kind of markets perhaps that, you know, are... I guess, things you're maybe not as enamored with long term? I guess, is all that money that you would take in gonna be redeployed into, A, new acquisition, B, debt pay down, or C, you know, or share buybacks at all on the table? Good question, and, you know, we don't see this as a large scale, when you go through and bought $3 billion worth of properties in the last 24 months, you certainly have picked up portfolios that have assets that aren't in your strategic plan. We certainly have also been around long enough to know that there may be markets that have one or two assets in a market, and we've not been able to grow, and so we may decide to leave that market because we're not able to grow in that market. You may look around where we have a massive amount of scale in a market where we think there's a couple of assets we want to just reposition and you know, re-redeploy that capital into better assets. If I, if I rank how you, I guess, kind of deployed it, I mean, we want to recycle capital. We are, we are buyers. We want to be buyers. Today is not the greatest environment to be buyers in, so we're being smart with our asset management and taking advantage of... You know, there are transactions selling, one-offs. We see quite a bit of one-off activity in some of these markets. We think it's a good time to sell these assets. You pay down your debt now, and you deploy it at a different time. So, we think it's a good time to be doing this. We think it's a smart time to be doing this, and we're gonna be very patient around the external acquisitions activity until we see market conditions really, you know, come our way, and we want to buy properties that are attractive to our return and meet our hurdles that we have set for ourselves. Great. Thanks. That's it for me. Thank you. Thank you. Our next question comes from the line of Keegan Carl with Wolfe Research. Please proceed with your question. Thanks. I mean, just following up with, with Steve Sakwa's question on the share buybacks, just curious what your thoughts are in the current environment. you bought a lot back in Q1, and obviously, the multiple's lower now. Just kind of curious where your head's at? You know, it's certainly an option that's available to us. We still have additional share backs that the board has approved, buybacks that the board has approved. You know, I, I think it's, I kind of answered the, the previous question. I think we'll look at all the opportunities available to us. You know, I think it's important to make sure that our balance sheet is positioned, should an opportunity come, that we'd have the ability to take advantage of it. I think all the things we just talked about might, you know, lead us a little bit more towards, you know, do we have a little more capacity on our revolver availability? If an opportunity were to come our way, we could exercise that opportunity. Share buybacks, I'm not saying no to it, I just think, you know, as we think about what we're trying to work towards, it may be a little bit lower on our list at this point. Got it. Then shifting gears, at our NAREIT meeting, one of the topics you guys brought up is that you're looking at potentially starting your own third-party management platform. Just curious where you're at in that process today. It's a good question. You know, we, we constantly evaluated it. You know, we've added a member of our team, Will Cowan, to really look at strategic initiatives. This is one that's on his plate, along with Eric, to really evaluate the pros and cons of third-party management. You know, our PROs are doing it today. We do it on a limited scale today. We think it is an opportunity that is worth a lot of evaluation. If we see an opportunity, I would not be surprised to see us enter that market more meaningful than what we do today. At this point in time, still under evaluation. Got it. Thanks for the time, guys. Thank you. Thank you. As a reminder, if you'd like to join the question queue, it's star one on your telephone keypad. Our next question comes from the line of Eric Luebchow with Wells Fargo. Please proceed with your question. Great, thanks for taking the question. I know you're not, you know, providing guidance for 2024 quite yet, but just maybe you could frame some of the puts and takes of the business as we kind of fast forward to 2024. Obviously, based on the new guidance, you'll end the year at a lower run rate. You know, it does seem like supply growth, construction starts getting more constructive in the next year, negative comps and street rates may be lessening from where they've been at. Maybe you could just kind of talk a little bit about, you know, the trajectory of the business and, and how you kind of see things evolving into 2024. Yeah, thanks, thanks for the question. certainly, we're not going to talk about 2024 guidance, but you're on the-- you're on how we're thinking about how we finish the back half of the year. I, I think our comps are getting easier. I... One of the things that we've really been battling for the last 12 months is this elevated occupancy level, some of the best pricing power we've had as far as street rates and, and ability to push on ECRIs. So the back half of the year, if you note-- look at our portfolio, we felt pretty substantial in occupancy. we actually adjusted street rates pretty substantially, so our comps will get better. I-- we think that positions us to the first part of next year to where you're on a little more level playing field as far as occupancy and, and rate. You know, to Brandon's point earlier, what's the unknown right now or, you know, a little foggy for us right now, is are we going to have the occupancy loss that, that you would normally have in a normal seasonality? I think if you don't have that, you know, would bode well as how you start 2024, and then if everybody finds their footing on where they want to land on their revenue projections, maybe the rate environment calms down a little bit as well. That would be things that I think we're looking at, that, you know, as you look towards 2024, better comps and hopefully a little more, less volatility, I guess, is what I would say. Okay, great. I appreciate that. Just to touch on the length of stay topic, it sounds like that's remained, you know, at very healthy levels. Could you talk about whether that's continuing to elongate, or are you starting to see it plateau? Do you think we're kind of at peak levels there, or can you extend it even further, which would give you, you know, more room to run on the ECRI program? You know, as far as the, the people who've moved out, and if you look at that number, it's starting to stabilize, you know, at north of 17 months. You know, there was a time it, it grew a little bit higher than that, but it's not fallen off tremendously. We do believe at this point, we've seen, seen nothing that's changed our opinion on the length of stay changing. You know, as we talked about, the health of our consumer remains very strong, and I think that's the, the positive out of all of this. You know, there may be some housing movement around occupancy, new occupancy demand, but our, our consumer base is very healthy, and all the things that we want to do within that consumer base are, are sticky. At this point, we don't see anything that's disrupting that length of stay in, in any of the buckets we're tracking, whether it be over a year, over two years, total portfolio. Okay, great. Thanks. Thanks for that. Yeah, thank you. Thank you. Our next question comes from the line of Wes Golladay with Baird. Please proceed with your question. Hey, everyone. I just want to go to the part about getting the balance sheet positioned for maybe some opportunities down the road. Are you seeing the potential right now for distress when you look at maybe debt maturities or anything in your conversations with operators? Oh, Wes, good question. We've seen more product come to market. We're certainly underwriting more deals than we have been in the last 6-8 months. The types of deals we're seeing, some of those do represent a little bit of where capital partners deciding whether they want to stay in for the long term or they want to get out now. Some of that's around how mature the properties are, you know, how filled up the properties are. But we've seen some portfolios and some individual properties, where I think people are making a decision. And, you know, I wouldn't call it distressed. I just think it's a decision on, you know, do we ride it out for a few more years and try to fill the property up, or do we try to take our chips off the table and sell the property today? We're seeing quite a bit of transaction activity, particularly in, you know, smaller markets, one-off properties. Transaction activity, we believe, is picking up. We're still as we underwrite, and, and we're still being very patient about what we want to buy and when we want to buy. We still think there's still a little bit of bid-ask spread that, you know, has not materialized yet, and that just will take time. If interest rates stay up, you know, pricing will have to adjust to-... expectations of people's returns, and, and that just takes time. Sometimes sellers just don't sell at all, right? They just say, "All right, enough of that, and we'll, we'll hang on to it. Okay, then you mentioned, competition for new customers. Is this still mainly from some of these aggressive lease-ups, or are you starting to see, maybe owners of legacy assets, as they get more vacancies, start to get more aggressive as well? I think it's market specific. You know, certainly in markets where there's been a lot of product introduced and there's, you know, obviously a lot of product needs to be filled up, we've seen those markets be more volatile than more and more stable markets. So I don't think, you know, I referenced Oklahoma City before, hasn't been a tremendous amount of supply brought in there, and so our pricing power and our occupancy levels have maintained a little bit more reasonable, you know, cadence based on history, and that's because they don't have some of these pressures to fill properties up. So I, I would answer it, I think it's, it's more volatile than markets where supply is really putting pressure in. Okay, thanks for the time. Mm-hmm, thank you. Thank you. Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question. Great. Hey, 2, 2 quick ones. Hopefully, you can hear me. The first one is just going back to sort of the guidance. I think historically, we sort of talked about the end-of-the-year run rate as sort of a good look for 2024, as others have sort of mentioned on the call. I guess the question really is, based on the NOI guidance in the second half of the year, it suggests 2024 should be negative. Can you just remind us what the puts and takes are? With the comps, like, how do you get comfortable that, you know, what are the offsets of that next year that I think you were trying to highlight? Thanks. Yeah, Ronald, I'm not sure if I'll say anything that's too wildly different from what we said earlier, in terms of not speaking too much about 2024, but obviously agree that the exit rate in 23 kind of sets you up for how, how we'll be thinking about 24. Frankly, a lot will be determined as we see how the back half of this year plays out. I mean, that-that's kind of the, the big unknown. I, I don't know if I have too much more to comment, you know, from what we said earlier, unfortunately. Got it. My second question is just taking a big step back, and I think the average portfolio rents are probably at all-time highs. Just trying to get a sense of what you guys are doing internally to get comfortable that you're not at that point where the tenants are not taking any more pricing, right? What sort of tests, rent-to-income ratios, like, what do you look at to get comfortable that there, you know, that there's still sort of a little bit more juice to be had on the pricing side? Yeah, really good question. You know, certainly we have test groups, and each test group is experiencing maybe no rate increases or maybe a mid-level rate increase or maybe a, you know, a little higher level increase, and we're certainly studying the, the effects of those on that consumer base. The more data we gather and the more times we do this, the, the smarter the machine gets. What we're really looking towards is a risk score, and we're looking at the risk score of if we do this, and then we do it at this level, what's the risk that the tenant's gonna react and, and potentially have a move-out to it? You know, thus far, I would tell you, you know, gosh, you know, going-- if I was doing this job 20 years ago, we didn't have the tool, our knee-jerk reaction would be to pull back and don't do the rate increases and don't do some of the things we're doing today. The fact that we have the technology is proving out that we can still, you know, it's, it's a needs-based business. The customer's here because it needs to be here, and we, we need to obviously work the ECRI program effectively during that cycle. Our tools are helping us determine and actually make better decisions, and I think we're having better results out of it. Nothing yet has, has really knocked us off, and except the fact we put guardrails on the top end. I mean, at some point in time, you have customers who've been with you long enough, it may be the third or fourth rate increase, and, and maybe they're elevated above a replacement cost that you do not want to take the risk of running them out the door. So that's some of the guardrails we're, we're reinstalling now. Helpful. Thanks so much. Yes, thank you. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Cramer for final comments. Thanks. As we move past the near-term challenging comps and housing market impacts on demand, we remain confident that our focus on people, process, and platform initiatives, combined with our exposure to attractive Sunbelt markets, position us well for continued success. I wanna thank you all for joining the call today and your continued interest in the NSA. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.