Joe Russell: I mean, we take clearly a multiyear view of that hurdle rate. It hasn’t changed even out of some of the pressure points that we’ve spoken to. So we continue to see the opportunity to find very good land sites, assets that will, from a competitive standpoint, not be burdened relative to any undue risk. That’s another thing that we factor in with the amount of data and the knowledge we have submarket to submarket that gives us the level of confidence we can get to that hurdle, if not higher. So really haven’t changed any of our hurdle expectations and/or the risk that, that might convey relative to what could play out on a market-by-market basis. To your point, yes, there’s definitely more things that we’re evaluating relative to the cost, timing, rent level achievements, et cetera, that go into underwriting, but we’re still confident that we’re adding to and finding very good sites to continue to grow our scale in many, many markets nationally.
So development team is working very hard to uncover those opportunities. Frankly, and maybe another point to your question, we have a different and more advantageous competitive advantage. We’re seeing more land sites that might be further into entitlement processes that we are interested relative to potentially accelerating some of those delivery hurdles that I talked about. So many factors in this environment actually play to our platform quite well and we continue to one by one take advantage of those.
Operator: Our next question is from Michael Goldsmith with UBS.
Michael Goldsmith: Given what you’ve started to see in some of the markets turning, bouncing off the bottom and starting to reaccelerate. Does that mean that ECRIs in this market could also start to pick up?
Tom Boyle: Yes, certainly. I mean as you see momentum in a market, we’ve talked consistently about how we think about existing customer rent increases. One of the factors is certainly the cost to replace a tenant and as we see moving rate and demand activity percolating in those markets that will feed into our thinking about, well, should a customer maybe receive a higher magnitude or higher frequency of increase, so absolutely. And I think second piece of our existing customer rate increase models around customer performance and we’ve been speaking in a couple of previous questions around how we continue to be encouraged by that behavior.
Michael Goldsmith: And my second question is around the type of customer that’s acquired through the sale process that you did. Does that generate — does the sale generate incremental demand or does it help you take market share, does that customer have a different demographic profile or length-of-stay customer? I’m guessing — I’m trying to get at is, it would seem that there would be a higher customer acquisition cost for this customer, trying to determine if there is a — how does that customer lifetime value look for that customer?
Tom Boyle: Michael, I’d say across the board, different pricing, promotion and advertising tactics will lead to drawing more or a little bit different mixes of customers and the like to our stores. And so we pull those different levers throughout the year, looking to try to maximize NOI ultimately, so revenue less the advertising expense associated with it. And so we’re toggling those levers, trying to maximize that outcome. And so as you look at a sale, for instance, it will draw more customers and we’ll use some different tactics around pricing and promotion and advertising to try to optimize that overall lifetime value of the customer.
Operator: Our next question comes from Spenser Allaway with Green Street Advisors.
Spenser Allaway: Consumer yealth continues to be topical just given the economic backdrop, but I was just wondering specifically about the commercial tenant. Can you comment on the health or appetite of the business consumer, how has that changed at all in the last year?
Joe Russell: Spencer, I would say in light fashion, no stress points or any other headwinds that we’re seeing from that type of customer. There’s obviously a very broad range of user types, different industries, some are product oriented, some are service oriented, some are very specific to certain locations. But I wouldn’t, in any way, characterize we’re seeing any elevated level of stress. Actually, still very good, consistent use of storage, particularly, as I mentioned, there may be certain factors that pull a commercial customer configuration into one property at a higher or lower level than another. But again, nothing that we’ve seen that indicates there’s an elevated level of stress or concern. As the economy continues to be quite good, we’re seeing actually still good demand factors coming from business users overall.
Spenser Allaway: And then on the marketing front, just curious if the dollars being spent on advertisement are fairly comparable across markets or other regions or particular — other regions like a particular focus where you guys are either trying to push occupancy, or where you’re seeing greater top-of-the funnel demand that might entice you to spend more?
Tom Boyle: And maybe a follow-up to Michael’s question on how we’re managing pricing, promotion, advertising, all three are being utilized really at a local level to drive a combination of either traffic in the form of advertising or conversion rates related to pricing and promotion activity. And advertising is something that we can use either nationally or what we typically do is much more locally to support top-of-funnel demand in local markets where we’re getting both a combination of good return on that ad spend but also supporting properties that would benefit from incremental top-of-funnel demand. So it varies pretty widely.
Operator: Our next question comes from Nick Yulico with Scotiabank.
Daniel Tricarico: It’s Daniel Tricarico on with Nick. Following up on some of the earlier questions in your commentary, Tom, and sorry to harp on this. I know you’ve talked about ECRIs being a combination of price sensitivity and cost to replace, the latter now increasingly elevated today in relation to the discounted pricing strategy you’re using. So my question is, how do you think about the magnitude and velocity for which move-in rate needs to improve so that the cost to replace or in theory, the roll down effect is offset and revenue growth can reaccelerate again, or is there another way I should be thinking about it?
Tom Boyle: There’s a lot embedded in there. I think the first thing, I would say, is as you look at cost to replace, you all can see some of the elements that go into cost to replace pretty clearly based on our move-in and move-out rates. Some of them are different and related to how long we think a unit will be vacant, what the advertising spend may be associated with the unit, what the promotional activity may be around it and that’s all managed at the individual unit level. And so big picture, one of the things we’ve highlighted this year is that we think overall contribution from existing customer rate increases will be pretty consistent with last year. And you said, well, how can that be if you think cost to replace maybe a little bit higher.
