Ki Bin Kim: Okay. Thank you.
Operator: Our next question comes from the line of Keegan Carl from Wolfe Research. Go ahead please.
Keegan Carl: Yes. Thanks for the time, guys. Maybe first, I know you maintained your outlook on your same-store revenue range, but I’m just curious if there’s any change in your underlying assumptions in occupancy street rate ECRIs given the year-to-date performance.
Christopher Marr: No, really no change at all. The first quarter, as we mentioned, came in right down the middle of the fairway from what we expected. And then again, just to reiterate it again, the expectation for the rest of the year is going to be highly dependent on the next couple of months. We haven’t seen it yet. So really nothing has changed in the guidance range overall or, frankly, on any of the underlying assumptions that support it.
Keegan Carl: Got it. And then shifting gears, supply has been a pretty big focus in our discussion with investors. Just curious what you’re seeing out there for the balance of this year in 2025. And are there any markets in particular that you think your plans or your assets to be impacted in an outsized manner?
Christopher Marr: Yes. As I mentioned on the opening remarks, overall, supply continues to decline and remains pretty constructive in terms of its impact on us. I think when you – again, there is supply, it’s not zero as it shouldn’t be in a healthy economy. But when you think about individual markets, we would expect to continue to see some impact in Philadelphia and the Philadelphia suburbs as one that is seeing it. I mentioned North Jersey. I think when you look out across the rest of the country, there will be pockets here and there in terms of new development deliveries, but nothing that stands out as extremely impactful. Again, we have some markets where those deliveries that are on the docket may or may not actually happen just given how much things have changed in terms of cost of capital and cost of raw materials.
Keegan Carl: Got it. Thanks for the time guys.
Timothy Martin: Thanks.
Operator: The next question comes from the line of Eric Luebchow from Wells Fargo. Go ahead, please.
Eric Luebchow: Great. Thanks for the question. So I know last quarter, you said for potential acquisitions, you were seeing the bid-ask spread narrow a bit versus last year. But just wondering, given the recent backup in interest rates and market volatility. Are you finding it’s still pretty tough to find attractive M&A opportunities in the market?
Christopher Marr: Yes. Certainly, we saw that there was a bit of a head fake. A couple of months back as rates were coming down and brokers were at that point, signaling probably more wishful thinking, I guess, from their perspective that there was going to be a lot of stuff coming to market. And then that turned out to be a little bit of a head fake. I think the challenge right now is that the bid-ask spread is pretty hard to gauge just because there’s so little transaction volume at the moment. I think folks are generally speaking, trying to take a couple of months here and see where things land. All that said, clearly, there are some transactions that need to trade, whether they’re held in closed-end funds or they’re held in a structure where that group need some liquidity.
Something’s got to give at some point. And what we do is continue to work hard to underwrite every deal that we can get our hands on. And ultimately, we want to put the balance sheet to work because we’ve created an awful lot of capacity to fund external growth when we find those opportunities. So if I had to guess, I would say that the bid-ask spread hasn’t got back out, but it’s really difficult to say there’s just so little that’s trading at the moment. We had also spoken to many brokers, some of them would suggest that if you go back to a pre-COVID normal type of year, the things that came across their desk that they would take to market. They would have an expectation that 80% to 85% of those deals would trade. Those same brokers today see that about 25% or 30% of the things that they list actually trade.
So even a lot of the stuff that you underwrite that you end up not being successful on, it’s not that you’re successful and somebody is bidding more than you, it just doesn’t trade at all. So difficult to evaluate from that perspective.
Eric Luebchow: Got you. That’s helpful color. I guess not to harp on the supply question too much. But I think last quarter, you said across your whole portfolio, about 27% of stores have been impacted by supply. And I believe that is looking at like a trailing three-year basis, if I recall correctly. So if you look at actual deliveries this year versus the previous two years and then kind of what’s under construction or new starts, do you think that 27% goes even lower in 2025 and 2026 just based on what you see shovels in the ground on new construction today.
Timothy Martin: Yes. Based on what we see today and certainly in our top 15 markets, which generate about 75% of our revenues, we would expect that, that trend from 40% in 2021 to 35% in 2022, down to 30% and 23%, 27% in 2024, would continue to decline as we get into 2025 and 2026 at this point.
Eric Luebchow: All right. Thank you, gentlemen.
Timothy Martin: Thanks.
Operator: Our next question comes from the line of Juan Sanabria from BMO Capital Markets. Go ahead, please.
Juan Sanabria: Hi. Just wanted to ask about the pace or predictability of demand kind of through April year-to-date, you talked about kind of the back end of last year, being more comfortable about normal customer behavior. But just curious what you would say to some of the privates that said, January and February were stronger, March seems to kind of fall off a bit and whether you experienced that? And if the customer behavior is still “normal” as you see it, which was the case at the end of last year.
Christopher Marr: I think in terms of demand across the portfolio versus our expectations, the first quarter played out, as Tim said, right down the middle of the fairway. There wasn’t an identifiable nor expected catalyst to alter demand trends during the first quarter. So again, versus our expectations, things played out right down the middle. As I mentioned, April month-to-date, I gave you the occupancy info and rentals are flat to last year. So trends, there’s nothing from the trends in the first three months plus the 26 days of April that are giving us any particular insight into what’s going to happen over the next three months. So not to be a broken record, but the next three months are going to be highly enlightening and very impactful on how we think about the year.
