Brandon Togashi: We ended 86% flat, Todd, intra-month, we were higher than that and then not uncommon to lose 10 basis points to 30 basis points near the end of the month. So we were pleased with, I was pleased with some of the gross rental volume. It also meant there was a little bit higher move-out volume versus last year. So it’s early to start making too many conclusions, but I think there’s — April there was just more mobility generally than what we saw last April. And maybe that portends for the next few months of a little bit more activity, but we’ll have to wait and see.
Todd Thomas: Okay. Yeah. Got it. And then Brandon, with — you — I appreciate the comments on the swap expiration, but can you just remind us or give us an update on the plan related to both the 2024 and the 2025 term loans, the Tranche B in July and Tranche C next year. It’s $470 million in total, what the plan to refinance at it looks like?
Brandon Togashi: Yeah. Sure. So we’ve got the near-term, we’ve got the Tranche B that’s $145 million. So we can — we got capacity on our line, we can obviously seek to place some refinance debt out there as well. We do have a six-month extension option on Tranche B. So that would stack it on top of the January 2025 tranche C that you’re referring to. All that debt is with our banks. So, we’re — in this environment, you got to stay close and in constant dialogue with your bank groups. So we’re certainly doing that and we’ll continue to do that throughout the year. And then, base case is to put some replacement debt out there, be it with our bank group or we’ve been very successful accessing the debt private placement market.
So that remains an option for us. Our secured debt as a percent of our total debt stack, there’s opportunity to return that to levels that it’s historically been, that’s called the 10% to 12% range. We’re 6% currently. So, a lot of opportunity there and I expect we’ll probably address the majority of that in the second half of 2023, 2024, excuse me.
Todd Thomas: Okay. And then just back to the acquisition discussion here. So, in terms of acquisitions, it sounds like the majority of what you intend to acquire is expected to be through the joint venture that you announced last quarter. Will there be any acquisitions on balance sheet that we should anticipate? And then what happens to the assets that were in the Captive growth pipeline that the PROs had sort of in the pipeline that NSA had been executing on since the IPO in 2013?
Dave Cramer: Well, yeah, good three-parters there. I’ll try to make sure I cover them all. I think, probably the majority of our acquisitions will be weighted towards the JV, because that is a good passive capital for us and it’s a good way for us to purchase properties in today’s environment. I would not rule out that you’ll see stuff on balance sheet. We do have some 1031 activity we want to take care of as some of the properties we sold last year, we’re going to want to redeploy in a 1031 mechanism this year. So you’ll see those come through. And we’ll try to balance the opportunity, the type of property, what we think is the right place for that property to sit and we’ll put it in the right bucket. As far as the pro Captive pipeline, it’s still out there.
We’re still evaluating, obviously, with today’s cost of capital and finding the bid-ask between seller and buyer. We’ve had a tougher time bringing stuff in from the Captive pipeline. It doesn’t mean we’re still not working it. It doesn’t mean there’s still not opportunities. It’s just been a little slower for us to work off that Captive pipeline in today’s environment. And then there was a third part that, I’m sorry, Todd, if I missed.
Todd Thomas: No. That was it really about the Captive pipeline. But I guess, what’s the latest there, in terms of the size, and if I recall, these assets, a lot of them had debt, there was leverage or maturities that, I think were sort of the catalyst for NSA being able to acquire them at maturity. What’s the latest there? What are the PROs, I guess, sort of executing around that in the meantime, while NSA has been sort of less active, bringing those, the Captive pipeline properties onto the balance sheet?
Dave Cramer: Understood. I think if you look at — if we look at this top of the stack, there’s probably 110 to 115 properties in the Captive pipeline, depending on how you want to value it, north of a $1 billion, $1.2 billion. I think that — if you think about most of the folks that are in that Captive pipeline and they’re looking for some kind of tax deferred transaction and so the preferred method they’d want to have is some type of OP unit, right? And so I would tell you the Captive pipeline is not shrinking, they’re not outselling it to third parties, there hasn’t been a lot of transactions around that. Amount of debt coming due, we haven’t felt a lot of that pressure in that group. They’ve been fine and so I think the opportunities still exist. I think we’ve had a lot of discussions around it, but at this point in time, it’s just been hard for us to find a place where it works for most parties.
Todd Thomas: Okay. All right. Thank you.
Dave Cramer: Sure.
Operator: Our next question is from the line of Ron Kamdem with Morgan Stanley. Please proceed with your question.
Ron Kamdem: Hey. Just two quick ones. In terms of the performance of the portfolio, is there a way to provide a little bit more color on maybe some of the more sort of COVID winners versus the rest of the portfolio or is there any sort of other way to slice and dice performance and thematic buckets that would be helpful?
Brandon Togashi: Yeah. Ron, I mean, I’ll give it a shot. I mean, I think certainly what you have is some of the markets that were red hot during the pandemic, Atlanta, Riverside for us, those have definitely cooled off and to some degree we’re still dealing with the comparison against that cooling off that was happening on the back half of 2022 and all throughout 2023. And so that certainly plays into the year-over-year performance that you see for any given quarter. There’s other markets that maybe didn’t perform, they still perform really strong, but not as strong as those. And so those have been more like steady eddies all throughout and those are going to be your OKCs and PULSOs [ph] and some of the other markets that Dave cited in the opening remarks. Any other comments, Dave?
Dave Cramer: But I’d also probably say, if you think about the lack of movement around single-family housing, we do have some of this portfolio that sits around markets that benefited from people who bought houses in the lower interest rate markets, so maybe they pulled ahead their home purchase, they went ahead and moved into Florida, they moved into some of these markets and until I think we see a meaningful change around that single-family housing environment, some of these stores may be slower to recover versus the rest of our portfolio until you see a little bit more activity around that transition. I would tell you, I think we’re happy with where we’re positioned, we like our Sunbelt exposure, the Sunbelt exposure as we call it, but I also think the positioning of our portfolio and the diversity of our portfolio, to Brandon’s point, we’ve got some markets that are going to away just fine and we’re able to do exactly what we want to do, and these other markets had a red, red hot, unbelievable run for about 18 months to 24 months there and now they’re back to, it’s going to take a little bit for things to come back to what we would call, I don’t know, new normal and new reality.
Ron Kamdem: Great. That’s helpful. And then my second question was just on sort of the guidance basically versus where you are sort of in 1Q. I guess it would assume a little bit of a deceleration on the same-store NOI, same-store revenue line. Is that mostly just because you’re trying to wait and see what sort of the peak leasing season brings or is there sort of something else there? And if you could just quickly comment on just how you’re thinking about demand from sort of home turnover given higher rates? Thanks.
Brandon Togashi: Yeah. Ron, on the first part, you’re correct. I mean, certainly the midpoint of the full year guide that we gave for both same-store revenue and same-store NOI is lower than the Q1 year-over-year growth numbers so that there’s implied deceleration. That’s no different than when we were introducing the guidance in February, we expected to trough in terms of that growth in the middle of the year and then maybe that accelerates, still maybe negative growth year-over-year, but improving in the fourth quarter and that’s just really the dynamic of how we budgeted this year and the quarter-by-quarter comp that you have all throughout last year. On your second part regarding housing, I mean, look, we — how we feel today is probably different than how we felt six weeks ago, but I’m sure four weeks from now we’ll feel different, right?
it’s — mortgage rates felt like they got a little bit of a relief early in the year, late last year and then things have picked back up. But like I said in my response to Todd’s question, some of the general mobility stuff we saw in the data in April was encouraging. So that would be despite the new highs for 2024 that you’re seeing in mortgage rates, obviously, you’ve got apartment renters and other things. So the benefit we have also is just a longer length of stay. If people aren’t moving in as much, there’s also a lot of people who aren’t moving out as much and that gives us power with ECRI and it’s what — as you know, it’s what has allowed us and others in the space to maintain and protect the in-place portfolio rates.
Ron Kamdem: Great. That’s it for me.
Dave Cramer: Thanks, Ron.
Operator: Our next questions are from the line of Keegan Carl with Wolfe Research. Please proceed with your questions.
Keegan Carl: Yeah. Thanks for the time guys. Maybe just first on supply. How should we think about new deliveries in your markets in 2024 and 2025?
Dave Cramer: I think our general tone is we do think new deliveries are slowing nationally. And if you look down into a lot of our markets, we think new deliveries are slowing off the pace they were two years ago and so that’s a positive, excuse me, a positive sign. I think the way we look at it is we really track around amount of fill-up properties, fill-up properties that would be in our 3-mile radius. And I can tell you that number, percentage of stores that are facing pressure of some store in some form of fill-up isn’t moving around much. I mean, so the amount of new entries coming in and the amount of new entries falling off is keeping that percentage pretty similar and that is down from where it was in 2022. And so we see the decline in the amount of our stores feeling pressure from stores and fill-up.
And so all of that, if I had to wrap it up, I think, we’re feeling better about new supply pressure in the coming years. But certainly that’s market-specific, right? You’ve heard us talk today on the call about Phoenix and Atlanta, and there’s been some product delivered that’s going to put pressure around those markets. We believe in them, we believe they’ll grow out of it, but there are going to be markets that feel more pressure than others.
Keegan Carl: Yeah. And then changing gears, if I think back roughly a year ago, one of the things that came up in our NAREIT meeting was the potential for you guys to start your own third-party management platform. I guess just where are you guys at on that today?
Dave Cramer: That’s a really good question. You’ve heard us talking over the last eight months, 10 months really about really looking at our platform, improving our platform, looking at people processing platforms, our team, our talent. We have done some major lifts in the last eight months to 10 months around our data systems, our operating platforms, our website, our call center, all of these things to position us to really evaluate how we continue to grow this company and look for things that would be added to the company. Certainly today, our PROs do third-party management and so that’s something we’ve had access around. We obviously have JV, so we do a lot of what we would call, even though we have an ownership, we manage for others and we have all the systems, the reporting, all that stuff built out.
I would tell you it’s in our discussion points. It’s something we look at and ask ourselves, is there a right time to dip your toe on the third-party platform? I would tell you we talk about it. I don’t have an exact date for you, but I’d say it’s something that might be on our horizon.
Brandon Togashi: And in addition to the platforms initiatives, Keegan, Dave said I would tie in all the portfolio optimization strategies that we’ve been speaking with, right? So, I mean, the 71 stores that we sold in Q4 and Q1, if you remember our comments from the last call, I mean, that was spread out across 33 different MSAs and so we’re certainly trimming in areas where we don’t have market dominance or strong market presence and we’re densifying in areas where we do, and I think that’s going to — in addition to the systems and platforms efforts, it’s going to provide the path going forward for us to seriously consider the 3 p.m. to your point.
Keegan Carl: Great. Thanks for the time, guys.
Dave Cramer: Yeah. Thank you.
Operator: The next question is from the line of Wes Golladay with Baird. Pleased proceed with your questions.
Wes Golladay: Hey, guys, a quick one on the PROs. Do you get the sense when talking to them, they’re more excited about the current environment with the opportunities they see or do you think you may see some want to retire over, call it, within the next year or so?
Dave Cramer: That’s a good question and thanks for being with us today. I certainly think from the PROs’ perspective, they would like to be, they’d like to see the environment be a little more conducive to external growth. I think as you think about heritage and how long we’ve all been in the business, and part of this business was acquiring and improving performance on properties and finding the value in those acquisitions, and so certainly this has been a time where patience has been at the top of the list, and I think, the PROs have been very, very good at being patient. I would also tell you they’ve also been very good about acquiring properties outside the REIT. They’ve been out. They have found some opportunities.
They’ve found money outside the REIT and then that just puts stuff into our Captive pipeline that we can evaluate and look to move on at a later date. So I — they’ve been great, we appreciate them very much and they’ve been patient, but they’ve also been active. So I think, short answer to your question, sure, they’d love to see it be a little easier to acquire properties within the NSA.
Wes Golladay: Okay. And then you had the comment earlier in the call about the cash flow and the JV may not exactly be 25%. Can you put some sensitivity on that? Are we looking at 2024 or 2026, and what would cause that deviation?
Dave Cramer: Yeah. Sure. Wes, it’s really around like providing a minimum base return to our partner, which the going-in yield, the value at which we contributed the assets, it was all kind of pre-designed to, not guarantee, but strongly assure that we’re going to be at those levels and then if we hit certain metrics and operating performance, we have the ability to earn some incremental fees. That’s not currently — that scenario of us being in the money on those is not a meaningful driver of our 2024 guidance. It’s a possibility, but it’s just not a big needle mover. And then I’ll save comments for the out-years. They’re achievable goals, but I’ll save comments without handicapping the likelihood beyond 2024. And then like our existing two JVs, we have, upon a liquidity event, promote structure where once a certain return has been provided to our partner, then we get kind of a disproportionate share of that upside.
