Joseph Margolis: So an advantage of our scale is how diversified we are and the exposure we have to many, many, many markets. And that’s a purposeful portfolio of construction because all of our data tells us that markets act differently. Not all markets move in the same direction, even if you start to categorize markets by primary, secondary, tertiary, coastal or whatever, they don’t act with any correlation. And the reasons market act differently is because of new supply situations because of job growth and population and because sometimes if the market does really well for a couple of years as revenue growth over 20% like we experienced in Atlanta then the next year it’s not going to be so good. So because we have this wide exposure, we absolutely have markets that are reaccelerating and we have markets that are flat and we have markets that are not doing as well.
And I think we’ll always be in that position. But this broad diversification provides smooth our volatility if you will. And we are big believers in having exposure to as many good growth markets as we possibly can.
Juan Sanabria: Thanks Joe.
Joe Margolis: Sure.
Operator: Thank you. Our next question comes from Samir Khanal with Evercore ISI. Your line is open.
Samir Khanal: Thanks gentlemen. Maybe sticking to the last question here on markets. One market that sort of is lagging here is Florida, look at Tampa, you look at Orlando and I know that looking at the integration of LSI, LSI had a big exposure to Florida. So, I mean that occupancy gap is still about I think 180 to 200 basis points. How do you think about your ability to sort of close that gap given some of the dynamics in sort of Florida?
Joe Margolis: Yes. So, great question. So, yes, Florida — some of the markets in Florida are some of our weaker markets today, that’s a good observation. That’s partially because they did so well during COVID and that’s partially because of supply issues in some of those markets. But we’re in this and we did this merger for the long term. And over the long term the Sunbelt markets the Florida markets and the population growth and the businesses that are moving there we believe those are really good long-term markets. So, yes, this quarter some of those markets and maybe this year some of those markets might be on the weaker side. But long-term we’re really happy to have exposure down there. A market like Houston and Chicago which we also increased our exposure to the Life transaction those markets are doing really well.
They’re kind of on the top of the heat now. So, again, it’s great to have exposure to lots of different markets because they’ll always be moving in different directions.
Samir Khanal: I guess my second question is around ECRIs. That’s still holding up clearly. I guess what does it take for the consumer behavior to sort of shift? Is it — is it job growth at this point? I mean job growth with non-comp [ph] payroll is still pretty strong month-to-month. I mean is that is it really job growth that will sort of crack that? I mean just kind of what your thoughts are?
Joe Margolis: So, when we talk about the ,consumer I think we have to separate the existing tenant consumer and the new tenant consumer. The existing tenant consumer is really strong and really price insensitive. We’re not moving out in the face of ECRI Bad debt is very low lengths of stay are incrementally improving. The storage customer once they become a storage customer is really a strong sticky customer. We see more weakness in the new customer, the customer looking for storage. And that’s where we see more price sensitivity. There’s enough demand out there for us to capture more than our share and keep our stores at optimal occupancy but it’s the pricing strength that is an issue now. And I think we’re at a period of time where we’ve had several quarters where inflation outpaced wage growth and the extra money that was pumped into the economy isn’t there anymore. Savings rates are down you have some weakness in the consumer and that’s what we’re experiencing.
Samir Khanal: Okay. Thank you.
Operator: Thank you. Our next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is open.
Unidentified Analyst: Hi, this is A.J. on for Todd. I appreciate you guys taking the question. But first just to piggyback off that last question. So vacates were down. And – but one of your peers noted that they saw a slight uptick in vacate activity and noted that there might be a normalization in the length of stay. You just noted that length of stay is incrementally improving. I’m curious though if you expect that to continue? Or do you see potential for vacate activity and the length of stay trends to normalize a bit moving forward?
Joe Margolis: Yes. So I’d probably explain that incorrectly. Length of stay is incrementally better than pre-COVID. It’s worse during COVID. We had that period where people just weren’t leaving the stores. So overall, I’m looking at a longer period of time we’re saying length of stay is incrementally improving. But it is clearly normalizing from COVID levels. Sorry, if I wasn’t clear enough on that.
Unidentified Analyst: Yes that clarification is helpful. And then just transitioning just over to the structured finance book as that kind of continues to grow. So it seems like the demand for that product definitely seems strong today. How big are you comfortable with growing that too? And are you starting to see competition from others creating a more competitive environment for the bridge loan and mezz financing?
Joe Margolis: So we do see other people getting into the business. Some of our public peers have announced they want to get into this business. On the ground we don’t see competition yet. We’re not losing loans. We’re not – we don’t hear people saying they’re taking this to someone else to bid. But there’s other lenders. There’s competition for this business just like there’s competition for the management business or any other business we’re in. And our job is to compete well and that’s what we’re trying to do. How big this can get? We have the ability to sell off the A notes in this structure. And that’s a really good tool for us to be able to control how much of the balance sheet, how many of these loans we keep on the balance sheet. So we’ve picked up our guidance a little bit through this year as to what we expect to keep on the balance sheet but we certainly have flexibility to move that number one way or another.
