Joseph Margolis: There’s two things, I think, to think about. One is maybe 3 things. One is job growth. Job growth is maybe the #1 indicator of storage performance. And those Sunbelt markets still have job growth, and that’s an important factor. On the flip side, when a market has a couple of years of 20%, 30% plus revenue growth, it’s really difficult to keep up. So it may look like it’s giving back because it’s not growing as fast, but it’s still a healthy market, and it’s just coming up against a tough comp. And then lastly, which is a little bit of the wildcard is the housing market. I firmly believe the housing market will come back. It’s got two people can’t stay in their houses forever, life events happen, just when and how quickly is going to be a factor that will inform our performance next year.
Samir Khanal: And then just as a follow-up from prior questions. You mentioned the 15% gap I think, between rents for the LSI and the XR portfolio on underwriting. And I just want to clarify, did you say the gap is about 7% today?
Joseph Margolis: No, I said we underwrote 7% to achieve our underwritten synergies. So we underwrote not closing the occupancy gap at all and only closing about half of the rate gap and that if we can do those 2 things, that will give us our $65 million synergies from the properties.
Samir Khanal: And then finally, on just maybe ECRIs. I mean, how much has that pace of, I guess, increases moderated at this point? I mean I’m just trying to think if you have macro conditions that sort of stay similar as it is, I mean, do you think that moderates further in ’24. How are you thinking about that?
Joseph Margolis: Maybe not as much as might be — we might assume because one of the big drivers of ECRI is the gap between the discounted web rate. The customer comes in and the actual market rate for that unit. So while we’re in a period of time now where we’re offering significant discounts for customers to come into the web that gives us the opportunity to catch them up to ECRI and get them to what the true market rate is.
Operator: Our next question comes from Michael Mueller with JPMorgan.
Michael Mueller: I’m curious, what are the early observations on operating 2 brands versus 1 brand so far?
Joseph Margolis: So it’s very early. We don’t have any firm conclusions. I think the most important thing that we see is we have increased our digital footprint. So when you’re in one of those saturated markets where we’re operating 2 brands and you search for storage near me or whatever generic storage starts to use. You will find both Extra Space and Life Storage branded stores come up on the search, sometimes also a Storage Express store. So we are getting more digital real estate. That’s kind of the main assumption to the success of the program, but it’s very early, and we have quite a ways to go before we can draw definitive conclusions.
Michael Mueller: And then maybe one other quick expense question. And I know this isn’t a huge line item in the grand scheme of things. But the growth in insurance expenses, how should we think about that over the next few years in terms of how outsized they could be or relative to the overall expense pool?
Scott Stubbs: I think it will bend a little bit on claims. You had a really rough year in Florida this past year. Overall, if you had — anything wind related in Florida saw a 100-plus percent increase in lots of areas. So I think it will depend some on events that happen but you’ve also seen a rise in interest rate caused those pools not to be as deep as they found other sources to put other places and put that money. So making sure that we have competitive bids, adding the Life Storage properties will help us because we have a new group of insurers that we haven’t used in the past. And so hopefully, we should be able to bring that down and not see the kind of increases we’ve seen in this year.
Operator: Our next question comes from Keegan Carl with Wolf Research.
Keegan Carl: I guess maybe first on occupancy, where do you expect your year-over-year occupancy delta various last year to trend for the balance of the year?
Scott Stubbs: We’re assuming about a 100 basis point gap through this year. And then obviously, moving into 2024, I think that gap gets easier.
Keegan Carl: And then shifting gears here, I feel like these 2 platforms have kind of gotten shuffle just given the Life Storage. I’m just curious if you could provide any update on the Bar Gold and storage Express platforms. What are you guys seeing as far as internal and external growth opportunities?
Joseph Margolis: Sure. So Bar Gold, I would say, is glasses half full and half empty. The half full is we’ve done a really, really good job of institutionalizing and integrating the operations there. We’re significantly outperforming budget on the expense side, where I think we have more wood to chop is the growth side of that. We are growing bar gold at historical rates at the rates that bar gold grew before we bought it. and we really want to turn some attention to that and try to grow it at a faster rate. Some of that, I think, is just us getting to know the business, getting to know the people and understanding it and some of it is, frankly, attention on Storage Express and then Life Storage. Storage Express is — I think we made a lot of progress.
It was actually, in some ways, harder to integrate Storage Express because it was a different platform, a different way of doing business. I mean we got all of the 1,200 Life Stores on our operating platform breeze in 19 days. It took us 6 months with 107 Storage Express stores because it’s a different way of operating. There’s just different software systems procedures. So we’re doing very well on the integration front. We have bought several small remotely managed stores in our traditional markets, not in the more rural markets they operate in. They trade at 7% yield. So we feel they’re good purchases. And we’re learning a lot. We’re learning about exactly what should be a remote store partially manned. What are the various attributes, distance from an Extra Space store population, rent per square foot saturation that makes it work and makes it doesn’t work.
We have opened up our third-party management platform. We’ve just signed up a 60-property portfolio to be run remotely. We have a large, large pipeline of remotely managed stores for our Management Plus platform. So I think similar to Bar Gold, the growth of that platform was slowed by our attention to the Life Storage deal. We used that time to learn things, which I think is good. And as we move forward, I expect that growth to accelerate.
Operator: I’m not showing any further questions at this time. I’d like to turn the call back over to Joe Margolis for any closing remarks.
Joseph Margolis: Great. Thank you, everyone, for your time today. I hope the message was clear that things are going as expected. Our integration is realization of synergies are proceeding very well, and we look forward to seeing many, many of you in Los Angeles next week. Thank you very much.
Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day.
