Ronald Kamdem: Great. And then, my second one, you talked about sort of the macro assumptions in the guidance, which was super helpful. Just wondering, you guys are operating the business. Are there sort of any leading indicators that you would see in, first, maybe before sort of the macro turns, whether it’s move-in volumes or whatever? Are there sort of leading indicators that you guys are tracking to sort of get a handle on this from the ground?
Joe Russell: Yes. I mean, obviously, we’re running a month-to-month lease business. We move in 80-plus-thousand customers on a monthly basis and we have a healthy amount of move-outs as well. So with that continuous flow of activity, we’re constantly monitoring things like payment patterns to the degree of either change or what might be happening market to market relative to other macro events, et cetera. But, one of the more obvious metrics that we look at relative to just the stress of maybe the evolving nature of the economy at large is payment patterns. And as Tom just mentioned, those continue to be actually quite good. There’s some elevated level of stress but it’s, on a relative basis, still below what we saw pre pandemic.
We’re keeping a very close eye on it. We’ve got new and different ways to actually track this now that so much of our business is tied to digital interaction with customers, et cetera. So, we’ve got good tools to stay ahead of that and to guide us relative to whatever stress points might be evolving.
Operator: Our next question will come from Smedes Rose with Citi.
Smedes Rose: I just wanted to ask you if you have — if you’ve seen any changes kind of in the supply outlook and if you maybe just have any insight into kind of developers’ ability to access capital these days.
Joe Russell: Yes. Smedes, I mentioned that in my opening remarks. We’ve had the benefit nationally where deliveries have been somewhat static for the last two years, and we’re looking at 2023 in very similar fashion relative to likely not an elevated uptick in overall deliveries. That ties to the amount of complication from a cost standpoint. There’s more risk with many of the unknowns coming into the economy. And the complication is tied to just getting approvals as you go through step-by-step development processes. So, the overall supply picture is actually very good, meaning we’re not seeing a rush to new development. Our lens through our third-party development platform gives us a little bit more validation of that as well where the majority of those opportunities are tied to development.
And we’re keeping even a closer eye on that beyond what our day-to-day development team and our real estate team is seeing as we’re out either acquiring or looking for development opportunities. So hopefully, fingers crossed, we’re going to continue to see that amount of deliveries through 2023 and going forward, again either in the same range or it could actually be a slightly downtick, but we’ll continue to track that.
Smedes Rose: Okay. And then I’m just wondering sort of big picture, when you just look back over your long history at other periods of economic weakness and recessions, so maybe as we potentially head into one now, are there like kind of two or three things that you would — you might do differently from a strategic perspective of what you had done in prior recessions, like either on the occupancy or the pricing front, or are there maybe more people on AutoPay now than there were then, which I would think kind of helps. But I’m just kind of interested in any kind of color you have, given the Company has been around 50 years now, I guess.
Joe Russell: Well again, cycle to cycle, we continue to take away best practices, different strategies, different ways to buffer and build upon not only our strengths, but it goes to the core of our platform and the resiliency that we see relative to those types of ebbs and flows of overall economic stress, et cetera. So, the things that we’re constantly doing is running the business on a very fluid basis. We’ve got more data now than clearly we’ve ever had. I mentioned our move-in and move-out volume for instance. And then the amount of, again, testing that we do relative to pricing, whether it’s marketing, whether it’s promotions, all the tools that we have that are far more tied to analytical processes that can again guide us to optimization.
So, we’ve got great tools. We’ve got great reconnaissance, and we think that we’ve got even deeper technologies that we continue to make very strong investments into it, have served us well. We’ve actually, in a whole variety of different ways, been able to test those in and out of, again, economic cycles, so we’re going to continue to do just that.
Operator: Thank you. Our next question will come from Keegan Carl with Wolfe Research.
Keegan Carl: Yes. So maybe starting off with a bigger picture question here. When we think back to your May 2021 investor deck, you guys forecasted a long-term growth range of 6.7% to 9.2% on FFO. Just kind of curious, is that still in play going forward or do you anticipate growth to continue to moderate?
Tom Boyle: Yes. So, looking back at that investor presentation, we broke out the different engines of growth, as I recall. And there’s a number of them that I’ll talk through here and it’s worth. And I appreciate the question. I mean, the first one around longer term storage growth rates and the building blocks. Certainly, we’ve had a couple of years of really incredible strong growth. We’re talking about a year now where we’re getting back towards — trending towards those longer term averages. But one of the components of that engines of growth formula was the operational improvements and enhancements that we walked through. So, I spoke earlier around operating model transformation and the energy efficiency things that we’re doing today that are benefiting our same-store NOI growth.
The investor community got to hear from our revenue management and data science team, which to Joe’s point just a moment ago, we continue to test and implement new systems and new approaches. And we have over 1 million move-ins and over 1 million rental rate increases a year. That is an ability to continue to fine-tune those processes. So, we think that’s certainly intact. I think going through the other ones, the portfolio growth, there’s no question that cost of capital has changed from the time when we walked through that deck. And so, I think that there’s certainly some components of that that are going to change from one year to another. Certainly, we’ve allocated a significant amount of capital over the last several years. Last year was more in line with our expectations that were set out at Investor Day.
Complementary growth and leverage and other were the other components that led to that FFO growth outlook, and I think those are still absolutely intact as we continue to grow our tenant reinsurance platform, the third-party management business that Joe spoke to, our investment in Shurgard and the benefit that we received from that on down the list. So in summary, many of those factors are very much still in play and continue to push on our competitive advantages to drive that growth. I think the portfolio growth is the one that’s going to ebb and flow more from one year to another.
Keegan Carl: Got it. And I’ll throw another tough one out here. But if we just think through the pandemic and the subsequent demand tailwind, how many first-time users do you think utilize self-storage? And how sticky do you guys expect these customers ultimately to be? I’m just trying to sit here and reconcile where demand could level out, given your prior commentary where you don’t necessarily anticipate any meaningful occupancy gain.
Tom Boyle: Yes. So, the first part of the question around new first-time users. No question, there was a significant influx of new storage users through the pandemic. And we’ve spoken a lot around different use cases as well, right? The combination of surge in home sale activity during a part of the last several years, now a decline in home sale activity, a change to hybrid work and a big pickup in home improvement activity that drove new first-time users of storage and, frankly, the fact that people are spending a lot more time in their homes. And we do think that’s a tailwind as we move forward over time. And so, as you think about the adoption of storage has continued to grow from a smaller base in the 1970s to where it is today. And we’re encouraged by those first-time users, the younger users that continue to seek storage as a good value to store their goods and do think that that is a tailwind for the industry moving forward.
Operator: Thank you. Our next question will come from Michael Mueller with JP Morgan.
Michael Mueller: Yes. Hi. I think you mentioned the record length of stay. And I was wondering, first, can you just throw out the stats in terms of the percentage of customers there over a year and over two years?
Tom Boyle: Sure. First, I’ll mention the metric that we like to communicate, which is the average tenure of the in-place tenants. That’s sitting right around 37 months today. And we’ve spoken in the past around how that’s up from, call it, 32, 33 months going back several years. And so, no question, a continued benefit of the longer length of stay as we sit here today, and Joe highlighted that in his prepared remarks. And then specifically to your question around, well, segmenting the different tenure bands, we still, today, have over 60% — I think it’s 61%, 62% of the customers are over — have been with us for longer than a year. And longer than two years is a very healthy, call it, 43%, 44% as we sit here today. So, we continue to see pretty healthy trends there from the sticky existing tenant customer base. And that’s something we’re obviously watching closely and continue to be encouraged by.
Michael Mueller: Got it. Okay. And then I guess going to not drilling down on the same-store guidance but you talked about the recession scenario versus soft landing. If you do head down that recession scenario, would you envision taking the foot off of the gas on development starts at all or probably not?
