Smedes Rose: Great, thank you. And then I just wanted to ask you, you mentioned that I think in the past that renters tend to have a longer length of stay. So are you seeing that in the portfolio now? Could you just talk a little bit more about where length of stay is and the changes you might be seeing?
Tom Boyle: Yes. In terms of length of stay overall, continues to be quite strong. So we’ve spoken a lot over the last couple of years in terms of how that’s extended from, call it, 32, 33 months on average. If you take a snapshot of all of our tenants in place pre-pandemic to more like 35, 36 and that persists today. And that’s persisting in an environment we’re obviously adding more new tenants, which brings that average down. So continue to see strong trends there. Customers that have been with us for longer than 2 years continues to punch well above where we were pre-pandemic in the 40s as a percentage of the total tenant base and that continues to be the most stable and important component of the tenant base.
Smedes Rose: Thank you.
Operator: Our next question comes from Eric Luebchow with Wells Fargo. Please proceed with your question.
Eric Luebchow: I appreciate the question, guys. I wanted to go back to the ECRI discussion from earlier. I think you talked about higher cost of replaces somewhat moderated your ability to push through ECRIs to some degree. But does that dynamic shift at all, given you’re loading more new customers now at lower rates? Can you push ECRIs harder and faster with this cohort given the cost to replace presumably for them is slightly lower than your in-place customer?
Tom Boyle: That’s spot on, Eric. That’s spot on, Eric. So, as we talk about the tenant base overall, right, the cost to replace has gone higher. But those new tenants that have moved in this year, right, don’t have that same dynamic and are more like customers in prior years with a lower cost to replace and are likely to receive higher magnitude and frequency of increases, which is supportive as we move more customers in through 2023 into ‘24 and ‘25.
Eric Luebchow: Okay. Great. And then just one last one, maybe you could touch on the cost side. You have seen marketing expenses, payroll, utilities continue to increase, especially with an uncertain demand backdrop into next year, how – maybe you can talk about how effectively you will be able to manage your costs and any cost line items that we should be aware of that will be pressure points in your NOI growth outlook for next year.
Tom Boyle: Yes. So, I guess starting with marketing, right, marketing is the one that this quarter was up most notably. We continue to get very good returns on the marketing spend that we are utilizing. And that is a process that we manage dynamically at the local level in conjunction with promotions and rental rates, as Joe highlighted earlier. If you look at marketing spend over time, we have historically been in a range of, say, 1% to 3% of revenue spent on marketing. We got all the way down to 1% or so in 2021. And I think this quarter, we sat right around 2%, 2.1%. So, there continues to be a room at least from a historical lens for us to continue to increase that and see good return associated with that and we will do that.
I would think about marketing spend on the expense line item certainly will create higher levels of expense growth, but that’s going to be an NOI positive investment given the returns we are seeing. The other line items, utilities as well as property payroll continue to be areas that are strategic initiatives that we outlined at Investor Day continue to bear fruit. So, as we close 2023, we will meet our 25% payroll hour reduction that we highlighted at Investor Day. That’s helped to offset as we have gone through initiatives around technology as well as specialization and centralization of property roles that are leading to career advancement opportunities and as well as good efficiencies and good customer experience. So, that’s one side that will continue through 2024 to benefit us.
And the other is our solar power programs, we would like to put solar on over 1,000 rooms. And today, we are sitting with solar. We will finish the year with around 500 of those complete and we think there is more to go there, which will help offset utility pressure. And in addition to that, be good for the environment and our carbon emissions.
Eric Luebchow: Alright. Thank you, guys. Appreciate it.
Joe Russell: Thanks Eric.
Operator: Our next question is from Keegan Carl with Wolfe Research. Please proceed with your question.
Keegan Carl: Yes. So I hate to leave [ph] the point on ECRI, but maybe just on 4Q in particular, when do you guys typically stop sending rates for the year? And does the current operating environment change that plan at all various historical levels?
Tom Boyle: No. As I have noted, the existing customer base continues to perform as expected, and frankly, very stable versus the prior several years. which is encouraging. So, our program continues. It’s part of how we manage revenues. And that’s not going to change. It won’t change in the fourth quarter and don’t anticipate it to change into ‘24 barring any significant shock or change. So, that continues to be a strong point as it relates to the overall customer base and I wouldn’t point to anything significant there.
Keegan Carl: I guess just to clarify though, you are comfortable sending increases throughout the entire year. Like the quarter, you are not going to stop around the holidays. I thought that was a trend that’s typically present in storage.
Tom Boyle: No, we send increases throughout the year.
Keegan Carl: Okay. And then just shifting gears here, so you guys obviously over on your interest income in the quarter just given the hold on to cash prior to closing on simply, just curious what a good run rate for this would be going forward.
Tom Boyle: Yes, that’s a good question. So, as everyone is aware, we announced the Simply transaction on Monday in July. We did the financing associated with that transaction on the same day, which was meant to match fund both the acquisition as well as the financing associated with it. In hindsight, that looks pretty good because interest rates are up over 100 basis points since that time period. But the other benefit was we obviously sat on that cash for a period of time. And believe it or not, we actually – we eked out a positive spread on that cash versus our financing costs given where you can earn on cash, about 3 basis points, so nothing to write home about. But it certainly led to both higher interest income for the quarter as well as higher interest expense because we were sitting on that cash, and we had raised it for a period of time.
