Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Second Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen only mode, and the floor will be open for your questions following the presentation. If you have a question at that time, please press star one on your touch tone phone. If you wish to remove yourself from the queue, please press the pound key. It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Ryan, you may begin. Thank you, Tamika. Hello, everyone. Thank you for joining us for a second quarter 2021 earnings call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, August 4th, 2021, and we assume no obligation to update, revise, or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplemental report, SEC reports, and an audio replay of this conference call on our website at publicstorage.com. We do ask that you initially limit yourself to two questions. Of course, after two, if you have further questions, please feel free to jump back in queue. With that, I'll turn the call over to Joe. Thanks, Ryan. Good morning, and thank you for joining us. Tom and I will walk you through some highlights from Q2, as well as our perspective on the second half of the year, and then we will open up the call for questions. I'd like to start by stating the obvious, business is excellent. Move-in rates are up 27% from where they were in 2019, and there is little evidence that pricing strength is abating. A meaningful wave of new first time customers are using storage based on a combination of traditional and non-traditional reasons. In 2021, we have welcomed nearly 700,000 new customers to our platform, many having never used self-storage before. Demand has been strong for several quarters, with upward pressure tied to vibrant home sales up 34% year-over-year. In addition, a hybrid work home environment is being planned by 68% of companies, according to a recent Deloitte survey. This certainly gives us confidence that overall adoption of self-storage will continue to grow and is looked upon favorably by consumers and businesses as a cost-efficient alternative to storing goods in residential or commercial space. I'd like to step back for a moment and reflect on our May 3rd investor day. The Public Storage leadership team took you behind the orange door and outlined several strategic initiatives. I am pleased to say many of these strategies are taking hold in 2021, and I'd like to highlight three areas that were particularly evident in our Q2 results. First, organic growth powered by innovation. Our multi-year and continued investment in technology has allowed us to give customers what they want, an efficient and more consistent leasing experience with the support of a knowledgeable and helpful property manager when needed. Our industry leading online eRental platform opened up an entirely new channel for customers to rent a self-storage unit, and adoption has been impressive. Nearly 50% of our customers now select this option. It's fast, intuitive, and simple. What's even better, the quality of the customers using this option has been excellent, and our employees have embraced it as well. We are already seeing the impact this new channel will have on labor utilization while improving customer satisfaction. This has clearly been a win-win for customers and our operations team. In 2021, we also launched the PS Storage App, giving customers a new tool to access their property via smartphone, along with the ability to manage their account, including automatic payment of rent. Second, our four-factor growth platform. Public Storage is uniquely positioned to drive growth through acquisitions, development, redevelopment, and third-party management. All areas took steps forward in Q2. Acquisition volume is robust. Year to date, we have closed or are under contract on nearly $3 billion of assets. The $1.8 billion ezStorage portfolio closed 90 days ago, and the integration and performance of those assets has exceeded expectations. Our development and redevelopment pipeline continues to grow, up $150 million this quarter, as we are seeing good opportunities to expand the largest development program in the industry. Third party management is growing with assets under management to 131 properties, along with a deepening pipeline of assets under review. Our goal is to reach 500 assets by 2025. Overall, our non-same store assets added $0.20 of FFO this quarter with NOI up 138%, driven by improving yields on both development, redevelopment, and acquisitions. This 34 million sq ft base of assets is now 86% occupied, compared to the same-store portfolio at 96.5%, with strong momentum to drive additional shareholder value. Third, the utilization of our exceptional balance sheet. This quarter, we funded $2.3 billion in transactions through bond issuances, driving down our blended cost of leverage to 3.1%. Public Storage has the longest duration balance sheet in the REIT industry, with one of the lowest cost profiles, with room to fund significant additional growth. Overall, we remain optimistic about the core drivers in our business, along with the commanding capabilities tied to the Public Storage brand. Our industry-leading ownership position in core national markets, all led by a talented and committed team of professionals in every part of our business. Now I will hand the call over to Tom. Thanks, Joe. Our financial performance accelerated into the second quarter, driven by both strong demand from customers and execution from the team. Our same-store revenue increased 10.8% compared to the second quarter of 2020. That performance represented a sequential improvement in growth of 7.4% from the first quarter, driven by rate. Two factors led to the acceleration in realized rent per foot. First, about half came from strong demand and limited inventory, which allowed us to achieve move-in rates that were up 48% versus 2020, and as Joe mentioned, 27% versus pre-pandemic 2019. Secondly, existing tenant rate increases also made up about half of the improvement, comparing against a period when we did not send increases at the onset of the pandemic in 2020. Now on to expenses. The team did a great job executing in this environment. Lower expenses were driven by property payroll, utilities, marketing, and a timing benefit on property taxes. On property payroll, we discussed at our Investor Day the operating model transformation underway. About half of the year-over-year decline in payroll expense was attributable to those initiatives that use technology and role specialization to drive improvements in customer experience, employee experience, and our expense levels. The other half of the payroll decline is comparing against the onset of the pandemic last year, when we put in place a program that we called the PS Cares program to provide additional support to our operations team, including a $3 per hour incentive for property managers. On property tax, we will expense our annual estimate ratably through the year, leading to an approximately $0.05 benefit in each of the first three quarters of the year and reversing to a $0.15 headwind in the fourth quarter. This will lead to a more stable quarter-over-quarter expense profile in the future. In total, net operating income for the same-store pool of stabilized properties was up 21.7% in the quarter. In addition to the same store, as Joe mentioned, the lease-up and performance of recently acquired and developed facilities was also a standout in the quarter, adding $35 million in NOI, or $0.20 of FFO. As we sit here today at the peak of the leasing season, customer demand remains robust and business is good. Let's shift to the outlook. We raised our core FFO guidance by $0.55 at the midpoint, or 4.8%. Looking at the drivers, we increased our outlook for same-store revenue to grow from 7%-8.5% in 2021. That outlook implies a faster rate of growth in the second half compared to our 7.1% growth in the first half. Our current expectations are for occupancy to moderate from here by about 300 basis points from peak now to trough at the end of the year. This would generally reflect a return to typical seasonality of the business, albeit at higher occupancies than historically achieved. Big picture, the baton has clearly been passed to rate growth in the second quarter, which will be the driver of performance in the second half. We also expect continued strong expense control throughout 2021. Our expectations are for 0%-1% same-store expense growth. We also increased our guidance for non-same-store performance, given the acceleration of acquisitions and the strong lease-up of our unstabilized facilities. The balance sheet, as Joe mentioned, is poised for incremental activity in the second half of this year. To wrap up, business is good, and the strategies we discussed at our Investor Day in May are evident in this quarter. With that, I'll turn it over for questions. At this time, if you would like to ask a question, please press star one on your telephone keypad. Again, if you'd like to ask a question, press star one. Your first question is from the line of Jeff Spector with Bank of America. Great. Good afternoon. My first question, I guess I'm trying to tie a couple of the comments you made. I think, Joe, I know that you've been positive, of course, on the sector, your opening remarks about the vibrant home sales, hybrid work environment, steadiness and overall adoption of the business to continue versus the guidance of occupancy dropping 300 basis points in the slower months ahead. How do we tie those two comments together? Yeah, Jeff, the business itself is, as we noted, quite strong. We're seeing additive momentum from different drivers and traditional drivers, as I mentioned. The thing that's questionable, but could play through as a reversion to some degree of what we would say normal seasonality and some of the metrics that we've seen historically, which have gone into our guidance for the second half of the year. Clearly, if the momentum that we've seen for the last several quarters continues to be as strong as it has, that could soften or not be as typical as what we see from a seasonality standpoint, but that's to be determined. We're very pleased by the continued level of demand that we're seeing from customers and our pricing abilities based on that demand, clearly across all markets. To some degree, we're seeing a little bit of shifting in markets that may not have quite as pronounced in migration or overall movement, but still on a relative basis, very healthy demand. Thank you. My follow-up question is again on the opening remarks. Joe, you commented on adaptation of business customers, and I guess, can you talk about that a little bit more? Are you starting any new initiatives to grab that customer? I'm sorry, I'm not as aware of that initiative at PSA. Is something changing here to try to do more with that business customer? Jeff, we've always had a blended focus on both consumers and business customers. Property to property, we'll see a varying degree of demand that comes from either cohort. Our business customers too are very active. As you can imagine, with the economy starting to percolate in many different ways, many businesses are coming back to properties that may have not used the space one or two years ago with different economic drivers. With the resurgence and the opening up of many economies, we're just seeing, again, an elevated level of both consumer and business activity. Our spaces cater to both. We have good activity, and we continue to cater to each type of customer, whether, again, it's a consumer or a business. Okay, sorry. If I could just clarify. I knew that. I'm sorry. I should have been more clear. You don't have initiatives like one of your peers has, micro fulfillment initiatives. Are you moving in that direction? Well, I'm not speaking to that. I'm speaking more to the holistic activity levels we're seeing from both types of customers. Okay. Both types of customer demand has been strong, and we continue to see good activity. As I mentioned, in some cases, depending on the location of a property, you might have a higher degree of business-oriented customers compared to another. Very good activity from both types of customer base. Okay. Thank you. Congrats on the quarter. Great. Thanks, Jeff. Your next question is from the line of Juan Sanabria with BMO Capital Markets. Good morning. Just wanted to follow up on the rate commentary. About half of the increase you said came from rate increases to existing customers. I'm talking same-store revenue, sorry. That was helped out by the easy comps with no real bumps being passed through to customers last year due to COVID. How should we think about that, I guess, in the second half of the year? At what point were rate bumps reinstituted last year, if you could remind us? Does that mean that rate growth then decelerates as that easy comp goes away, or not necessarily because you're still having strong kind of rate growth to new customers? You said you're nearly 30% above 2019 levels. If you could just help us think about those two components relative to your experience this year and how that plays out in the second half. Yeah, that's a good question, Juan. Last year, we did send those increases that we didn't send in the second quarter. We sent them in the third quarter. I wouldn't highlight that as a headwind in the second half of this year, and the primary reason is driven by the fact that the magnitude of the increases that we can send this year are more elevated versus previous year. That goes back to really two factors. One, move-in rents being up as significantly as they are, which gives us pricing power with existing tenants as well. Secondly, last year, we were under pricing regulations in many of our markets, with this year, the majority of those having been expired. Those are both tailwinds to existing tenant rate magnitude as we move to the second half. We don't anticipate a big giveback on existing tenants in the third quarter. Just on the occupancy piece of the same-store revenue guide, the 300 basis points that you're assuming comes off of, I'm assuming, the 630 number in sequential deceleration. Can you just give us a sense of how that compares to the historical trend? Is that more or less than your experiences in the past? Yeah, Juan, it's right in the ballpark of the historical. Generally speaking, actually, the middle of July is our peak occupancy. We actually had occupancy up north of 97% in the middle of July. There's a little bit of incremental peak there to be had from June 30 numbers. Overall, generally in line. The real story in the second half, as you highlighted, is rate, though. I think you can talk about occupancy a little bit here or there, but the driver will be how can we keep the pricing strength in play through the second half, both for new customers and existing customers, and that will drive performance more meaningfully through the second half. Just to clarify, you said typically your occupancy peaks mid-July, but that hasn't necessarily come off this year. That's pretty sticky, at least to date, through early August? No, it has started to come off a little bit. Okay. Very modestly. We're still at the peak of the season here. Got you. Thank you very much. Thanks. Your next question is from the line of Steve Sakwa with Evercore ISI. Thanks. I guess first on just kind of the acquisition pipeline. You guys have obviously been extremely busy this year. I'm just curious what the forward pipeline looks like and how are kind of pricing expectations changing for sellers today, just given the amount of capital kind of chasing deals? Sure, Steve. No question, as I noted, yes, we've been busy. We expect to continue to be busy. There's a fair amount of product that's in the market. If you step back and think about how much new product's been delivered to the sector over the last four or five years, with peak deliveries hitting in 2019, ±500 new assets being delivered to the market in 2019, and then tapering down a bit, 10%-15% in 2020, and again, another similar tapering down this year. Again, you take that whole pool of assets year by year that has been ranging over the last, say, five or six years from three to 500 properties per year, there's a fair amount of very attractive, good quality assets that we've been very pleased to go out and capture at what we feel are good values, many of which has been asset quality that we build to as well. From a value standpoint and a capital allocation standpoint, we've been very pleased with the pool of candidates that we've been able to acquire. Much of this has also been predicated on some of the unique tools that we have, some of which we talked about in our investor day relative to the amount of data that we have market to market that guides us to the targeted parts of markets or new markets that we're entering that may be underserved from a storage standpoint. That too is a different way in which that we're underwriting and choosing to acquire assets. Valuations are competitive, there's no doubt about it. To your point, we're seeing a fair amount of capital that's still anxious to get into self-storage. One of the ways that we've been able to maneuver around that is buying assets that are not as stabilized. More stabilized assets can typically attract far greater levels of competition, tighter yields. If on average you look at the pool of assets that we've bought this year outside of ezStorage, average occupancies ±50%-60%, and those have been great assets for us to put right into our platform, lease them up, see good revenue growth, and very good returns by virtue of that. Going forward, there's continued activity and many sellers are looking at this environment as a good time to bring product to market, whether it's on a one-off basis or there's a few larger portfolios likely to hit in the second half of 2021. Our capital structure is well primed. As I mentioned, we've been able to optimize the cost and efficiency of our own leverage, and we see very good opportunities to continue to allocate capital, and we're continuing to underwrite a fair amount of assets. Well, you sort of touched on capital structure, which kind of leads to my second question? You guys have clearly been willing to deploy leverage and take up and use the balance sheet capacity. As pricing is rising and deals are offering lower yields, how are you sort of balancing the use of the balance sheet today against lower returns? Maybe that means more development, but how are you sort of weighing the deploying the capital and using the balance sheet with rising pricing? Well, I'd maybe comment on a few of your questions embedded there. We do view development as a continued good allocation of capital. Joe mentioned that the pipeline increased by about $150 million this quarter, and we obviously outlined in the investor day in May plans to increase it a good bit further from there. In addition to that, though, we are finding good deals that will meet not just a marginal debt cost of capital, but ultimately our overall cost of capital and provide good returns based on our ability to take properties, as Joe mentioned, lease them up and earn a good return to stabilization and then rent growth from there. Overall, we're still finding good high-quality deals that'll exceed our cost of capital across the board, and we have the balance sheet flexibility to use attractively priced unsecured debt to fund that. Great. Thanks. Thanks, Steve. Your next question is from the line of Michael Goldsmith with UBS. Hey, guys. Thanks a lot for taking my question. Occupancy is elevated, like 97% average for the quarter. Obviously, the math suggests that some are above the average, some are below. Can you help frame how much your same-store pool is at, like 98%-99% occupied or completely full? How are you operating these stores differently than those where there's more upside? As we think forward, should we expect them all to experience seasonality the same, or do you anticipate some differences between them? Thanks. Sure. Maybe looking at market-by-market performance, there's clear differentiation in the market dynamics across the country. We do have many markets, if you look in the supplemental, that highlight 96%-98% occupancies that are really strong versus historical. That's really being driven by the ability of us to attract new customers, but also the fact that our existing tenants are performing quite well. That's something we spent a lot of time talking about last year that has persisted into 2021. It's allowed occupancies to creep higher. At this point, with 97% occupancy or even falling modestly from there, it's about driving rate. As I mentioned, that was really the story in the second quarter and through the second half, versus trying to drive incremental occupancy here. We're trying to balance that occupancy versus inventory, but clearly looking to drive rate. In terms of strength within the markets, there are some standouts. If you look at what's going on, for instance, in the state of Florida, we have particular strength there. Population growth, housing activity, as Joe discussed, we're seeing really strong activity there and really across the economy there. We view that as encouraging as we think about those strong pro-cyclical demand drivers driving our business, which is a counter to last year when we did see some more counter-cyclical drivers that were driving the business at this point in time. We're encouraged by that, and we will see some variation there by market. In terms of your question on occupancy, which markets will fall, which will stay, there's definitely trends in different markets that will influence it. For instance, our colder markets tend to see a bigger seasonal swing in occupancy than our warmer markets. It'll vary. Michael, just to add, our West Coast markets from Seattle all the way down to San Diego are dealing with extremely high occupancy levels. The amount of new supply coming out of those markets, for the most part, is limited. On the other side of the barbell, which is really tight right now, Houston, which has been a poster child for lower occupancy, high supply, Houston is at 95%. That speaks to what Tom just talked about, which is another added driver that we're seeing in different parts of the country, primarily Texas and the Southeast, is amplified levels of activity because of in-migration, and we're even looking for signals because some of that taper down, and it's not at all. Even as many of those markets actually return to some level of normal, again, activity from opening up businesses, et cetera, we really see no degradation in demand and/or occupancy levels. The continued fill-up of even higher supply markets has been quite pronounced, and we're pleased to see that, and we're continuing to look for any signals if there's any reversion. As we speak, the band of very tight occupancy market to market is quite strong. That's helpful. Can you talk about the performance of the ezStorage portfolio since you acquired it? Again, at an 86% occupancy rate. Can you share where it is now? Maybe talk about how some of the lease-up properties within it are performing, if you can break out how much of any growth is reflective of the market versus what you've been able to do with it and what sort of initiative you've been able to put in to generate additional growth. Thanks. Sure. I mentioned we're 90 days into the ownership of that portfolio. We had about 115 properties in the Metro D.C. area, and with the ezStorage portfolio, now we're north of 160. Very good activity from elevated occupancy growth. The portfolio today is at about 94% occupied. If you remember, one of the things that we had talked about is the prior owner was a very good operator, but also didn't have some of the sophisticated tools that we've been able to apply into that portfolio in relation to existing customer tactics or strategies. We're starting to deploy those. Seeing a very good level of transition and integration. We inherited about 43,000 customers. We're seeing good, continued tenancy, good integration with our own existing portfolio, and we've just begun the expansion process. About 10% expansion's possible by, again, magnifying, in some cases, the size of properties in certain markets that had already been pre-entitled. That too is taking place. The properties have, for the most part, gone through the first wave of rebranding. They look great in orange, and we've also seen a very good integration from hiring a number of very strong property managers and district managers that have come into our portfolio as well. Overall, very pleased with what we've seen, and we, as I mentioned, have a very strong presence in that market, far beyond any other operator. The quality of these assets is very additive to what we've continued to do and see from a benefit standpoint in the Washington Metro market. Thank you very much. Thank you. Your next question is from the line of Smedes Rose with Citi. Hi, thanks. I just wanted to ask you a little more about the third-party management platform and the path to get to 500 by, I think, year-end 2024, you said. Is that mostly driven by new properties that are on deck to come online, or are you also adding just converting independent properties or maybe from other brands in the space? Yes, Smedes. The goal it's 2025, so we're definitely on the path to continue driving the size of that program. To your point, it is a process where there's a high level of activity tied to new development. I mentioned that our backlog continues to grow, and we've seen a number of one-off developers and some with multiple properties come to our platform that are in various stages of development. It's a different lens, clearly, that points to the fact that the development part of our industry's still active, and we're seeing the opportunity to grow the platform through that. Now, having said that, we are also finding some good opportunities to bring existing assets into the program as well. Many of the owners have started off with, say, one or two assets and are now starting to give us multiple assets. That's, I think, indicative of the performance that we continue to show to the owners that have come into the platform and the benefit they're seeing by being within the Public Storage brand. The other thing I'd point out is we've now actually acquired 10 assets that have come into the program as well. It's another avenue or channel for us to get closer to many owners who actually are coming back to us and saying, "Would we have interest in actually acquiring these assets?" There's multiple drivers that we're going to continue to focus on as we build the program. We've got a team that's focused nationally. The assets that we've added and have in our backlog are literally widespread across the 39 states that we operate in, so we're pleased by that as well and look forward to continue to grow the program. Great. Thanks. I wanted to ask you, on your last call, you talked a little bit about the supply outlook with the, I think 2021, you're looking for kind of a 10%-15% leg down in the pace of deliveries relative to 2020. Just over the past few months, have you seen any change in that or kind of any updated sort of thoughts on what the supply picture might look like going forward? Yes, Smedes. The additive color I'd give you, and you're right, that's the view that we've had looking at the amount of volume that is likely to come into 2021. One thing that we're seeing is slow approval processes at multiple cities, that coupled with the fact that component costs are elevated, whether it's steel, labor, concrete, et cetera. That's, I think, stalling some of the development starts that might've been predicted either for 2021 and going into 2022. We're keeping a close eye on it. We're clearly very deep into the development cycle in our own portfolio and understand and see the various headwinds that are playing through right now. Fortunately, we've got different ways to combat some of the cost pressures that are coming through that a one-off developer might not have the advantage to do so, whether it's bulk buying or knowing and understanding how to pre-bid certain assets or components of assets. With that, we're likely to see, again, that leg down that you talked to in 2021. 2022, I would be surprised if it accelerates. It could take either a moderate step down or could be flatline based on the amount of activity that we're seeing in 2021. What's more unclear is what could happen in 2023 and beyond. We'll see. Okay. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star one on your touchtone phone. If you would like to remove yourself from the queue, please press the pound key. Your next question is from the line of Ki Bin Kim with Truist. Thanks. Good morning. You already touched on some of this, but when you look at the market-by-market performance, obviously your portfolio is doing well, but some markets, same-store revenue is up a lot more than L.A., San Francisco, or New York. Is it really just some markets are positive net migration markets and that's driving the relative outperformance, or are there other elements that you're noticing in between these markets? Well, I'd say overall, Ki Bin, no question we're seeing broad-based strength. You look at all of our markets in the second quarter, really strong growth and acceleration from the first quarter. I think what you're highlighting is there's some variation, which is something we see with a strong nationally diversified portfolio. What I highlighted earlier was a shift that I think I'll reiterate because we view it as pretty meaningfully internally, where last year at this time, some of our absolute strongest markets were experiencing some, what I would consider, pandemic-related dislocation. You can put the New Yorks or San Franciscos into that bucket. They were our strongest markets. You fast-forward a year, and our strongest markets now, as Joe and I mentioned earlier on the call, Florida, Texas, Sun Belt markets, as well as some others, Chicago, I would put in there as well. There's some clear relationship between some of the macro drivers in the Florida and Texas and Sun Belt markets, for instance, that are driving demand, housing clearly being one of them, population inflows. We're seeing real strength. To highlight one market as an example, Miami, which is our fifth largest market. We have about 90 stores there in the same-store pool. Move-in rents up 43% versus 2019. A big market being fueled by macro drivers and real strength. In terms of what we're seeing in some of the bigger coastal markets, we're seeing good demand there and still really strong occupancies and the ability to push rate. The year-over-year comps, frankly, are tougher in those markets right now as we sit compared to, say, a Miami, for instance. If you look at performance versus 2019, still quite good, and we're encouraged by the demand trends there. What we're seeing in Los Angeles is really strong. North of 98% occupancy here in Los Angeles, and strong demand drivers across the board. Generally pretty encouraged, but there are some factors that are causing some differentiation. I would add that we're going to continue to see new supply come into some of these markets and impact performance from here, just like we have over the last five years. Got it. The second question, it's been a little bit over a year now since COVID. Are you noticing any difference in the lifetime value of the customers that have moved in over the past year or length of stay versus what a typical customer profile would look like pre-COVID? We spent a good bit of time talking about this through last year. We did see a shift towards longer lengths of stay, and really strong existing tenant performance through the year last year. That's persisted. Tenants that were in-house or moved in last year have continued to perform really well and ahead of pre-pandemic expectations. Customers that have moved in this year have behaved more like our typical storage customers from 2019, for instance. Still performing really well, but not at that market improvement that we saw last year. The one thing I'd highlight from a lifetime value is clearly the rate portion of the equation. If we're seeing good length of stays and significantly higher rates, that clearly leads to higher lifetime values. Okay. Thank you. Thanks, Ki Bin. Your next question is from the line of Ronald Kamdem with Morgan Stanley. Hey, a couple of quick questions. Congrats on the quarter. The first is just, you talked about potential restrictions in the portfolio on rent increases. Is there a way to sort of quantify that, the magnitude of that? Is it 5%? Is it 10%? Just big ballpark numbers. Was curious as well, if there's still any sort of restrictions or on the late charges and administrative fees, are you guys back to normal or is it still sort of hampered? Thanks. Sure. The first question around rent regulations. For the most part, those have expired, and there was a big push through the first half of this year in many local governments to move past those state of emergency and pricing restrictions. For the most part, they're no longer in place. The one I would highlight that is meaningful for us is the pricing restrictions from the state of emergency tied to wildfires here in Los Angeles. Los Angeles is our number one market with about 15% of our revenue, and we continue to be constrained here on rental activity. That's one I'd highlight. The others have largely expired. There are a few here and there. That fact is a tailwind as we move to the second half where last year, we were restricted on rent in many markets across the country. It will take time to move existing tenants back up to where they would have otherwise been. Your second question was on late fees. We did see some local jurisdictions put those in place. Some of the restrictions as it relates to our delinquent tenant processes remain in place, but similar to rent regulations, those are expiring and governments are looking to get back to regular business. Nothing material I'd highlight there from a financial impact in the quarter. I know, Ki Bin, we've talked about this throughout last year. [Or Ronald], sorry. The fees were a big drag last year, and we saw it now for the first time. We've lapped that fee drag, and don't anticipate that to continue to be a negative driver as we move through the second half. That was a big shift in the second quarter. Got it. Helpful. The second question was just going to be on just the digging in on the expenses a little bit. Obviously, the marketing makes a lot of sense, but can you just provide a little bit more color on whether it's the on-site property manager payroll, sort of the 34% decline there? What's driving that? Is it eRental? Is it less man-hours? Just a little bit more color on that big drop. Sure, Ron. It's a number of things that you just spoke to. It points to the variety of things that we're doing from the infusion and the digitization of the business. We have a lot of analytics that help us. Look to the optimized level of labor. eRental, as I mentioned, is having a pronounced effect. If you kind of step back and think about the traditional operating model for the entire self-storage industry, historically, it's always been centered on an interaction necessary at the counter with a property manager. In our case, if 50% or so of our customers are choosing to do this electronically and self-directed, that typical 30 minute- 45-minute transaction process that would happen at a counter is no longer necessary for, again, about half the customers that are, at their own election, choosing that option. It's giving us the opportunity to retool and reprioritize levels of labor utilization, while also not preserving but actually enhancing customer satisfaction. As I mentioned, we think that that's working well, both from a customer's perspective and from an operations perspective. We continue to look at a variety of different tools through the amount of data that we collect at properties relative to activity levels, whether it's time of the week, time of the month, and again, using those analytics to put people in the right places at the right times. Good things to come from that, and we're continuing to see different levels of optimization as this, again, plays out from a customer standpoint in a much more optimized way. Got it. Helpful. Thank you. Thank you. Our next question is from the line of Michael Mueller with J.P. Morgan. Yeah. Hi. I'm curious, what do you see as the longer-term margin on the third-party management business? What sort of property count do you have to scale up to hit that? Sure. That margin will vary based on geographic concentration and the like, but there's certainly a path for us to get that margin up to 25%-30%. I think at this point, one of the drags to that margin as we look at our own performance is the fact that many of the properties that we've taken on to manage are in lease-up, and that's going to continue as we look to grow this business. I would anticipate that our margins are a good bit below that for the next several years as we look to increase the size and scope, and in particular with properties in lease-up. Got it. Okay. That was it. Thank you. Thanks, Mike. Thanks. At this time, there are no further questions. I will now hand the call over to Mr. Burke for any closing remarks. Thanks, Tamika, and thanks to all of you for joining us today. We look forward to interacting through the third quarter, and enjoy the rest of your summers.