Good morning. Thank you for attending today's CubeSmart Q4 2022 earnings call. My name is Alicia, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to your host, Josh Schutzer, Vice President of Finance with CubeSmart. You may now proceed.
Thank you, Alicia. Good morning, everyone. Welcome to CubeSmart's Q4 2022 earnings call. Participants on today's call include Chris Marr, President and Chief Executive Officer, and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com. The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties, and other factors that may cause the actual results to differ materially from these forward-looking statements.
The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K, and the Risk Factors section of the company's annual report on Form 10-K. In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the Q4 financial supplement posted on the company's website at www.cubesmart.com. I will now turn the call over to Chris.
Thanks, Josh. Good morning, everyone. Thanks for joining. Our Q4 results capped off another excellent year of performance by our CubeSmart platform, and I thank all of our teammates for their dedication and outstanding customer service. Same-store revenue growth for the year came in at the high end of our guidance. Our focus on operational excellence contained expense growth to an annual rate of 3%, resulting in same-store NOI growth at 16.7% for the year, coming in above our guidance. As we have performed our business planning and the related financial forecast, each of these last three years, we certainly have had to do so facing significant uncertainties surrounding the impact of COVID and the resulting change in consumer behaviors.
Entering 2023, while many aspects of our business, such as seasonality and delinquency, have returned to more typical historical patterns, we certainly are faced with domestic economic uncertainty and the potential for geopolitical shocks. We believe that our strategy of owning a high quality portfolio in the best markets, maintaining a high-quality balance sheet with conservative leverage and well-staggered fixed rate maturities, and the fact that we foster an innovative culture consisting of high-quality people and systems will, over the long term, produce above average risk-adjusted returns throughout economic cycles. My message today will therefore sound familiar to those of you who have been valued stakeholders in Cube over these last few years of robust outperformance. We believe our high quality stores located in submarkets with sector leading demographics have us in an excellent position entering 2023.
The New York MSA, our largest market, is beginning to positively experience the waning impact of new supply. Operational performance remains steady. We are starting to see the green shoots from recent supply deliveries leasing up nicely. The new delivery pipeline has almost been exhausted. Our expectation is for absolute levels of growth to remain steady. By the back half of the year, the New York City boroughs will be performing above the portfolio average. We're one year on from the Storage West transaction. We couldn't be more pleased with the assets and the strategic fit on our platform. As expected, despite the stabilized occupancies of the assets, there was significant upside to rents on our platform.
These properties saw accelerating growth through the back half of 2022. They are well positioned for continued growth into 2023 and beyond, with an expectation that they will be achieving a mid-4s yield by the end of the year and generating meaningful accretion, given that we were able to lock in long-term capital at exceptional low rates, including our billion-dollar bond deal, which had a weighted average yield of 2.45% and an average tenure of 8.4 years. We enter 2023 with 98% of our debt being fixed rate, with a weighted average maturity of just over 6 years and net debt to EBITDA of 4.3 times. We have and will continue to focus on being operationally excellent.
We entered 2022 with a thesis that businesses that operate lean and agile will be best positioned to succeed during a period of economic uncertainty. Our sector low expense growth and margin expansion in 2022 and our outlook for 2023 are reflective of that focus on operational efficiency. Such heady times as we've experienced over the last few years can make many strategies appear clever. We are seeing the benefit of our strategy as our sector leading portfolio demographics continue to generate stable growth. While secondary and tertiary markets may generate elevated growth in boom times, there is increased risk and volatility to those cash flows. During times of uncertainty, we believe our focus on a high-quality portfolio in top markets will generate the most attractive long-term risk-adjusted returns.
There is no doubt that when viewed through a historical lens, 2021, 2022, and in my opinion, 2023, will be judged among the best years for our business. In spite of uncertainty in the world, I believe that the industry and CubeSmart specifically are well-positioned entering 2023 to produce operating metrics above the historical 20-year average. We think this makes us an attractive option for investors, and we appreciate our valued stakeholders' support. With that, please allow me to turn it over to Tim Martin, our Chief Financial Officer, for additional commentary on the quarter and on the year ahead.
Thanks, Chris. Good morning, everyone. Thanks for taking a few minutes out of your day to spend it with us. Piling on to Chris's commentary, results in the Q4 reflected a continuation of what we've seen throughout the year, a steady return to more normal seasonal patterns and overall solid operating fundamentals. Headline results included same-store revenue growth of 9.5%, expenses grew 2.3%, and NOI growth was at 12.1% for the quarter. Same-store occupancy levels remained very healthy, down 120 basis points compared to last year as we expected, given the continuing return to more normal seasonality. Same-store occupancy averaged 92.8% in the Q4 and ended the quarter at 92.1%.
Our consistent focus on managing what we can control on the expense side showed up in our results all year, and the Q4 was no exception. Same-store expense growth at 2.3% for the quarter was better than expected, with the main drivers being continued efficiencies in personnel costs and some nice wins from all the work we do to challenge our property tax assessments across the country. We reported FFO per share as adjusted of $0.67 for the quarter, representing 16% growth over last year. During the quarter, we also announced a 14% increase in our quarterly dividend, up to an annualized $1.96 per share. On yesterday's close, that represents a 4.4% dividend yield.
On the external growth front, in the Q4 , we saw a continuation of what we talked about last quarter, a slowdown of transaction activity and a lack of attractive opportunities for us. Our team remains busy looking to find deals that fit our model at pricing that works. Our disciplined investment strategy has naturally resulted in us being less transactional over the last year, where the return profile of available opportunities does not meet the necessary risk-adjusted returns required in today's elevated cost of capital environment. On the third-party management front, we added 28 stores in the Q4 and ended the quarter with 668 third-party stores under management. Our balance sheet position remains strong as we continue to focus on funding our growth in a conservative manner that's consistent with our BBB, Baa2 credit ratings.
As discussed last quarter, in October, we closed on a new expanded revolving credit facility. The size of the revolver grew to $850 million. The maturity was extended to February of 2027. The pricing improved by 17.5 basis points based on our current credit ratings and leverage levels. Our conservative balance sheet and financing strategy has really paid dividends as we entered into the current volatile capital market environment. All of our debt, except the revolver, is fixed. As Chris mentioned, that's only 2% of our outstanding debt was variable rate as we started 2023. We face no significant maturities until November of 2025 and have a weighted average maturity of 6.3 years.
Our leverage level is very low at 4.3 times debt to EBITDA, and we have ample capacity and liquidity to finance future growth opportunities when attractive ones present themselves. Looking forward, details of our 2023 earnings guidance and related assumptions were included in our release last night. Our 2023 same-store pool increased by 73 stores, including 57 stores from the Storage West portfolio acquisition that we closed in late 2021. Consistent with prior years, our forecasts are based on a detailed asset-by-asset ground-up approach and consider the impact at the store level, if any, of competitive new supply delivered in 2021, 22, as well as the impact of 23 deliveries that will compete with our stores.
Embedded in our same-store expectations for 2023 is the impact of new supply that will compete with approximately 30% of our same-store portfolio. For context, that 30% is down from 35% of stores impacted by supply last year and down from the peak of 50% of impacted stores back in 2019. Our FFO guidance does not include the impact of any speculative acquisition or disposition activity, as levels of activity and timing are difficult to predict. Wrapping up, thanks to all of our hardworking, talented teammates who helped lead us to the successful execution of our business objectives throughout 2022. As a team, we're in a great position to continue our pursuit of operational excellence and to maximize on the opportunities we see in 2023. Thanks again for joining us this morning on the call.
At this time, Alicia, why don't we open up the call for some questions?
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one.
As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We'll pause here briefly as questions are registered. The first question comes from the line of Jeff Spector with Bank of America. You may now proceed.
Great. Good morning. Thank you. Can we talk about, I guess, you know, what you're seeing through February, Chris? Tim, you're clearly, you know, there's a lot of confidence here as you've started 23. You know, your approach to guidance does seem to be a bit different than a couple of your peers. Just trying to figure out if that's, you know, more company specific, industry specific, or again, just recognizing, you know, you're not seeing right now any signposts of recession?
Yeah. Thanks, Jeff. I can't comment on others' portfolios or how they're viewing, you know, their outlook. I think from our consumer perspective, we continue to see pretty good signs of strength. I think our portfolio and its construct, you know, the lengths of stay continue to elongate. Pattern of vacates has been relatively muted. We're encouraged by that. I think the outlook, you know, obviously, as I said in my, in my opening remarks, the outlook as you get past the Q2 is a little bit less certain. We're certainly trying to think about what the back half of the year may look like, same challenge we had in 21 and 22.
I think our guidance ranges, you know, capture the expectation of how our consumer will react in the back half of the year. I think from a more macro perspective, we don't really, you know, do our planning by thinking about whether we're gonna enter into a recession or we're not at a macro level. I think we look more at how will our consumer respond throughout the year in terms of their need for our product, which, you know, as we all know, is created by a whole host of life events that may or may not have anything to do with what the broader economy is doing at that time. I think our process is a bottoms-up process. I think we've kind of captured a range of outlook for the year.
I think, certainly I'm sure everybody is looking at it to say the H1 is a little bit more clear and the back half a little more cloudy, but we feel good about where we are today. In February and January, the results were at or better than what our expectations were when we started the year. That's encouraging. Off to a good start. We'll see how the quarter evolves and really looking forward to the beginning of the busy season, which I think will tell us a lot about how we think the balance of the year will unfold.
Thank you. That's very helpful. My second question, Chris, can we dig in a little bit more on your comments about, you know, demographics versus, let's say, tertiary, secondary markets? We get lots of questions on that, the importance of demographics versus market positioning. Can you talk a little bit more about, you know, what you were referring to in terms of the strength of your demographics versus, let's say, tertiary, secondary markets? I guess, are you seeing or hearing of issues in tertiary or secondary?
Yeah. When we look at, you know, long-term risk-adjusted returns, markets with, you know, significant populations, lower levels of supply of self-storage on a sq ft per capita basis, good household incomes, and a, you know, good percentage of our customers living in rental housing versus homeownership. You know, those tend to create a backdrop of stable cash flow over a longer period of time. Again, I think you could use as an example, when you think about as we sit here today of our major markets, the market where we have physical occupancy higher today than where we were at this point last year is the New York City assets.
When you think about a market that has, net effective rents on new customers that are higher than where we were at this point last year, that's New York City. You can contrast that with, you know, some of the markets in the Southwest, where you're just seeing that shift as the COVID demand had waned, and you're seeing, you know, a bit lower occupancy than where you were last year and a bit, you know, lower asking rents than we were last year. I think you then delve into secondary and tertiary, and our expectation is over time, they're more susceptible to new supply, and they're just more volatile markets. As, you know, as we expect, you know, things to more normalize, I think the strong demographic markets will outperform.
Thank you.
Thank you, Mr. Spector. The next question comes from the line of Michael Goldsmith with the UBS. You may now proceed.
Good morning. Thanks a lot for taking my question. You know, just digging into New York a little bit more sequentially, the MSA underperformed the portfolio average on same store revenue growth, but maybe outperformed sequentially on same store NOI growth. As you think about the outlook for this market in the upcoming year, you know, Are you thinking that this is gonna be an outperformer due to the stability of the market as trends sort of moderate or is there another thought process that you have on this key MSA for you?
I think as we look out, I think the strength of the New York market is a combination of waning supply impact. The positive demographics, as I answered in response to the previous question, you know, create a customer profile that is stickier than in other parts of the country. I think you've got a good backdrop in terms of demand drivers. I think, you know, the portfolio is obviously best in class and is well-positioned to capture the demand that exists in that market. I think it's going to continue to get better.
I think we talked about on the Q3 call, we had a relatively easy comp in 2021 in the Q3 , so the third to Q4 , slight deceleration was not, it was 100% everything we expected it to do. I would say the portfolio in Q4 in the New York MSA more broadly, exceeded our expectations just a bit. Ended on a high note, starting in a real good spot here, for January and February and just again, think about, you know, as other high-flying markets return to more normalized levels, New York will bubble up to the top of our performers.
That's really helpful. You kind of noted that the percentage of your portfolio impacted by supply is expected to be down 5 percentage points this year. Is there a good benchmark of how much this could add to same-store revenue growth? Is that a, you know, does 5 like, you know, if there's 500 basis point, As that moves down, does that translate to like 50 or 100 basis points of same-store revenue growth? Do you have the number of the change in supply impacting your locations in the New York Metro? Thanks.
Okay, that was a lot to unpack. Let me try some of these. The impact of that decline from 35% exposure to 30% is difficult to quantify in any way. When we think about doing it from a budgetary perspective, you know, it's a range. It can go from. Frankly, it's such a wide range. We have some properties that have the impact of new supply that actually outperform for, you know, market, sub-market, local market reasons, and then we have other properties that are more directly impacted. It's largely also dependent upon the brand of the competitor and their pricing strategy as they try to lease up assets, so that can have an impact positively or negatively. It's hard to put a, you know, specific number of basis points on that, on that impact.
When you think about, when you think about New York City and the, you know, and the impact of... You know, I'll answer it by just focusing in on the expectation in 2023. I think by borough, the Bronx, the impact of new supply has been and is in the rearview mirror. We don't expect any of our Cube stores to be impacted by new supply in 2023. In Brooklyn, you know, we're getting closer to the end, and I think that's part of the narrative of continued improvement throughout 2023. I think there's 1 new opening in 2023 that will compete with an existing Cube. Then Queens, you know, I think will continue to have a declining, but there'll be an impact in 2023 on our stores.
I think there are 2 new openings in Queens that will, that we expect to have an impact on an existing CubeSmart. As I said in the opening remarks, that's really starting to wane, and we're very excited about, you know, the future there.
Thank you very much. Good luck in 2023.
Thank you.
Appreciate it.
Thank you, Mr. Goldsmith. The next question comes from the line of Spenser Allaway with Green Street Advisors. You may now proceed.
Thank you. Can you provide a little color on what's being underwritten for occupancy at both the high and low end of guidance?
Spencer, we don't normally, we don't normally, you know, again, a broken record, guidance, you know, occupancy rather is the output, not the input. I think we got browbeat last year into throwing out a number as to where we'd finish the end of the year, and as Tim noted, we beat that by a pretty good amount. It will depend. I think the expectation for the new pool is that, you know, we'll range from, you know, occupancy being down 150 basis points to what it was in the prior year, and then that will narrow as we go throughout the year. I think we'll end the year within, you know, 50 basis points or so of where we ended 2022 on that new pool.
Okay. Thank you. Maybe just circling back to supply again for a second, maybe without focusing on NOI expectations, but can you just comment on whether there are any markets that stand out as more concerning due to current pricing power in those markets or current occupancy levels, utilization?
Yeah, I think the impact of supply, both the volume of new stores and then the brands of those new stores and their, you know, their approach to how they wanna lease those stores up will likely be felt the most in our portfolio in the greater Philadelphia area, where it is in fact sunny today in Malvern, the Washington D.C. area, and then pockets of Northern Virginia. I'm sorry, pockets of Northern New Jersey.
Okay. Thank you so much.
Thanks.
Thank you, Ms. Allaway. The next question comes from the line of Juan Sanabria with BMO Capital Markets. You may now proceed.
Hi. Good morning, and thanks for the time. Just wanted to hit on the cadence of growth, and should we expect as you report the quarters that growth will accelerate or decelerate throughout the year? If you can comment within a subset of that, how New York would fare as part of that answer. Thank you.
Yeah. I think for our portfolio and then as you're trying to look at obviously rates of growth, so comparing to what the cadence was in 2022, we would expect that our same store revenue growth will be at its peak in terms of the growth in Q1 and then a steady deceleration as we go out through 2023. Obviously, we have the most clarity into Q1 and the least clarity into the Q4 results, so we'll see how the busy season starts out and progresses here. New York City, the overall trend would be consistent with that. Just that, you know, again, we would expect that that market will then end up outperforming on a relative basis, the overall pool as we get into the back half of the year.
Thanks. Then I just wanted to switch gears to the investments or acquisitions. You sounded a bit more enthusiastic about opportunities in your press release, and correct me if I'm wrong, I don't want to put words in your mouth. I guess, what's the confidence you can invest capital and what types of opportunities are you looking at? Is it more lease up or stabilizing? Any sense of the geographic focus? You, you seem to be talking up more your existing coastal markets versus at least the Southwest as per some of your comments earlier in the call.
Hey, Juan. I mean, I think from a where are we looking, it shouldn't be any surprise. We've been awfully consistent in the markets in which we're looking to grow and expand. Primary focus in many of the top 40 MSAs continues to be our focus in, you know, in high quality, solid demographic markets. I'm not sure our expectation of that was included in our release is optimistic or pessimistic. I think, you know, I think we think it's achievable, market conditions are awfully volatile out there as you know. If 2022 is an indicator, as I believe it is, we expect to be pretty disciplined.
We hope and expect that we'll be able to find some opportunities here or there. The guidance range or the, you know, the external growth number that we put in the release is not a giant number. It's something that we'll be. You know, team's working hard. We're looking for opportunities that fit our investment strategy at yields that make sense to us relative to our cost of capital. Our hope, if it's maybe more hope than expectation, is that we'll find a little bit more opportunity to have some external growth in 2023 than we did in 2022.
If I could just sneak an extra one in here. Can you just comment on the street rates or net effective rates in the Q4 and what you've experienced year to date?
Certainly. Net effective rents for new customers in the Q4 were down over the same period in 2021, about 10%. They were down in December about 10%. You know, for the month of February as of yesterday, we've been running down just a little bit below 9%.
Thank you, guys.
Thanks.
Thank you, Mr. Sanabria. The next question comes from the line of Smedes Rose with Citi. You may now proceed.
Hey, good morning. This is Madi on for Smedes. Could you talk a little bit about the components of cost increases? How are you thinking about labor and benefits increases, property taxes, other line items?
Thanks for the question. We continue to probably anticipate the most pressure on operating expenses in the insurance area. Property insurance renewal for us comes up in May. We certainly expect there to be pressure on property insurance, probably consistent with most of the real estate industry. Goodness gracious. Easy for me to say. We continue to expect pressure on the utility line item as cost of utilities, electric, gas, continue to be higher than inflationary levels.
I think from a personnel cost standpoint, there's certainly pressure on wage. But we continue to have, you know, a great focus on finding continued opportunities to drive efficiencies and margin improvement primarily in that line item and are doing more with less from an efficiency standpoint as we staff stores. That has helped us a lot from an expense control standpoint in 2022, and we expect many of those initiatives will continue to bear fruit as we get into 2023. Real estate taxes of course are an area that are. It's an awful big line item, and it's difficult to predict at times.
We think that is an area that will continue to be in that range that we've talked about for several years in that, you know, 4% to 7% range of pressure on real estate tax increases.
Great. Thank you.
Thanks.
Thank you. Thank you, Ms. Rose. The next question comes from the line of Todd Thomas with KeyBanc Capital Markets. You may now proceed.
Hi. Thanks. good morning. first, I was just wondering, apologies if I missed this, but are you able to share where occupancy in the portfolio is today and what that looks like year-over-year from the new same-store pool?
You didn't miss it. For the new same-store pool, as of yesterday, the occupancy in that portfolio is, at the end of January rather, 91.3, which is down about 130 basis points from that new pool's occupancy at the end of January of 2022.
Okay. All right. That's a little bit of a sequential decrease from where you were at the end of the year. When is occupancy starting to pick up a little bit at this point ahead of the peak rental season? I know the peak rental season doesn't really begin for a little bit longer here, but are you starting to see that uptick in occupancy and also in rents?
Yeah. We haven't really seen the beginnings of the rental season yet. February obviously still dealing with weather and all sorts of other things. I mean, it's hard to say that. I don't think your statement that it is factually correct that sequentially that's 10 basis points different, but you just have an entirely different, a pretty different pool. It's kind of apples to oranges. Yeah, I haven't seen it yet. March, early March, mid-March, I think is when we typically start to see, you know, the spring moving season start to kick in. I think on the rent side, as I think I answered in a prior question, you are starting to see the positive movement in rents as we've moved past January.
Okay. You know, back to New York City, you know, I hear the comments around new supply diminishing a little bit, having a positive impact there on activity. Can you talk a little bit about rental rates in New York City and rental demand and, you know, what you're expecting in terms of occupancy trends there throughout the year?
Yeah. I think again, the answer to some prior question, occupancies are up 150 basis points or so over last year in the New York Citi same stores. It's the, you know, it's the only market with positive occupancy versus prior year. Rents are up to new customers about 3%, and it's one of, you know, a small number and I think the only of the top 5 markets where we've got rents that are in a positive place at this point relative to what we were doing in January and February of 2022. Demand is pretty good. Occupancies are good. You know, vacate pattern there continues to be very constructive.
Will you be able to increase rents to existing customers in the New York portfolio, at sort of an outsized rate relative to the balance of the portfolio this year and also relative, you know, within New York relative to what you did last year?
Yeah. I'm not sure necessarily at any higher rate than what we did in 2022, but I do think relative to other markets, that are seeing a different shift in the way population is moving. I think we have a greater opportunity in the urban markets, New York in particular, than we do in some of the suburban markets.
Okay. All right. Thank you.
Thanks.
Thank you, Mr. Thomas. The next question comes from the line of Keegan Carl with Wolfe Research. You may now proceed.
Thanks for taking the questions, guys. Maybe first one here, just what's your anticipated cadence and magnitude of ECRI throughout 2023, and how's that gonna stack up versus what you guys did in 2022?
Our process there, I would call is quite dynamic. Every day we've got a customer in our portfolio who is having a rate increase proposed to them. From a cadence perspective, Pretty dynamic. Don't expect significant change, but we are testing a wide variety and continue to of both timing and amount throughout the portfolio by market. In terms of the kind of general magnitude of our expectations for those, you know, it will continue to be above the historical average.
Our expectation embedded in our guidance is that we would be passing along on a percentage basis lower than what we did last year, and I think that's just reflective of the fact that we're seeing, you know, that normalization as we described of demand coming out of what was incredible, robust 2021 and H1 of 2022.
Got it. Maybe shifting to your third-party management platform. Just kind of curious where, you know, where you're seeing demand at for it today and kind of what the expectations are going forward? I know one of your peers mentioned that, you know, year to date, their demand's better than expected. Just curious if you guys are seeing the same?
We have a nice pipeline of potential opportunities to add new stores, to add new management contracts. We're certainly continuing to see a shift that as a percentage of those, a little bit less in by way of new developments as I think the development cycle gets, you know, a little further away from the peak. We have a high level of interest from a number of third party owners who are looking for us to be able to come in and add our platform to help create value for, you know, for their, for their storage property.
I think what we also expect to see in 2023, which is a little bit of a result of earlier commentary on the transaction market is we do expect to see less churn in the portfolio as there are just fewer sales of properties going on. perhaps stores that are on our management platform will stay on our platform a little bit longer as the transaction market has cooled off a bit.
Great. Thanks for the time, guys.
Thank you.
Thank you, Mr. Carl. The next question comes from the line of Steve Sakwa with Evercore. You may now proceed.
Great. Thanks. Just circling back on the transaction market, Chris, can you maybe just talk about where the bid-ask spread is today? How has pricing changed? I guess how close do you think you are to, you know, finding sellers willing to accept what are presumably, you know, higher expected yields from public companies such as yourself?
Hey, Steve, it's Tim. Yeah, I think there are just fewer overall transactions in the market right now, and there are... of the deals that are out there, the hit rate on how many of those are closing and being able to bridge that gap between buyer and seller expectations, it's a little bit cloudy. Certainly a whole different world today than it was, you know, than it was back certainly in 2021. We tend to find ourselves from where we believe things that trade. Often we're off by 15%-20% on many deals that trade, and it's hard to know for sure whether that's the exact right number. It's also hard to know what's driving that.
Is that a difference in the way somebody's underwriting expectations for that particular opportunity relative to the way we're underwriting expectations? Is it a difference in their cost of capital or return expectations relative to ours? Really difficult for us to, you know, to triangulate through all that. Combine it with, from our perspective, the things that have been in the market frankly just haven't been on average of as high a quality as the opportunities that have presented themselves in, you know, in the couple years that preceded the last 12 to 18 months. It's a combination of a lot of things that led to us being fairly low on our investment opportunities in 2022.
We're, as I mentioned earlier, we're hopeful that we start to see some things that, you know, that fit our strategy and can find those opportunities at pricing that makes sense to us relative to our cost of capital.
Okay. Maybe just circling back, I know there was a question on expense growth, and Chris, you touched a little bit on the employee side, but I'm just curious, you know, from a technological perspective, and as you kind of use more technology, I guess how much more cost savings or FTE savings do you sort of get at the property from here going forward?
Yeah, that's the evolving question. I think it relates on both sides. What and how does the consumer of our product, what do they want to use and how do they want to be engaged with? We are doing an awful lot of work and an awful lot of testing to figure out that balance. You know, it's not surprising and it's not necessarily entirely demographically related, but there's a portion of our customers who are entirely comfortable with a self-service model, no different than, you know, our kids texting from upstairs asking what time dinner is. There's a segment of our population who absolutely want that in-person, in-person service and wanna know that there's a store teammate available to assist them with their storage needs.
To try to find that balance is what we've been really focused in on, and it's a combination of video, it's a combination of chat, and it's using Smart Rental more efficiently. We're gonna continue to navigate through that. To date, you know, we've been able to find some really good operational efficiencies through the testing that we've done, and we're just gonna continue to attack that here in 2023. I just don't think our model ever, you know, ends up being one where it's entirely self-service. I don't think we ever end up in a model where it's entirely, you know, an in-person store teammate. I think ultimately it will vary by market and by property, and we'll find that balance.
I think there's still good opportunity though for us to continue to be more efficient.
Great. Thanks. That's it for me.
Thanks.
Thank you, Mr. Sakwa. The next question comes from the line of Ki Bin Kim with Truist. You may now proceed.
Thanks. Good morning. Just a couple questions on the expense front. In 4Q, your personnel expenses were down 9%. I'm curious if that's a efficiency driven type of metric or were you just not fully staffed? I'm just trying to understand kind of the, the forward path for that line item.
Yeah, I wouldn't overread into that being a forward path. That has a little bit to do with a with the comp issue from last year. I think it's less to do with what we were doing this year and a little bit more to do with what we were doing last year and creating an easier comp.
Okay. Your expense growth in 2023 was, you know, only 3%, beating your guidance. Even for 2023, your expense guidance is lower than your peers. I'm curious if you think that's a little bit of a geographic driven item or going back to your other comments, is it other things you're working on that are keeping those expenses lower?
Yeah. Kevin, It's Chris. I can't comment on what our peers are doing. You'd have to ask them for what their focus is. Back to my opening comments, we had a thesis at the beginning of 2022 that those companies that focus in on operational excellence, being lean and agile, are gonna be best positioned to navigate through uncertain economic times. Institutionally, we had a keen focus on just doing things more efficiently, operating smarter. I think you combine that with the answer to the previous question in terms of how do you think about, you know, how do you think about how the customer wants to be served? I think we found ways to continue to be as lean as we possibly can.
I think we've got some continued possibilities there in 2023. We will, as we always do, we will test and try a variety of different techniques. You know, some of them will work, some of them will not. We'll learn and, you know, we'll learn from those that don't and move on. It's for us, it's just a focus. If you focus on something, put the right people on it, you can do great things.
Your repairs and maintenance expenses in your same-store pool account for about 1% of total revenues. That's at the lower end when I look at some other competitors that might be as high as 3%. I'm curious if that's like a weather driven, snow removal cost driven type of item or some other things that you've been working on.
Yeah. Again, don't have any idea what how to answer what other folks do. You'd have to ask them why theirs is, and I'm sure they'll help you out. From our perspective, we have great properties, obviously best in class in our industry. We take great care of them. When things need to be repaired, we repair them immediately, and perhaps that saves us from having to incur incremental costs over the longer term by trying to ignore, you know, those day-to-day things. So it's always been a point of focus. Our facility services team is world-class. Obviously we believe in providing our customer with an excellent product, and part of being an excellent product is making sure you're maintaining your stores in the best way possible.
Okay. Thank you.
Thank you, Mr. Kim. The last question comes from the line of Mike Mueller with JP Morgan. You may now proceed.
Yeah. Hi. Chris, I guess your comment earlier on about New York performance, being a little bit better than the portfolio average, I guess, was that a more of a 2023, you know, comment as you move through 2023, or was that intended to be a little bit more of a multi-year outlook for the next few years?
Yeah. The back half of 2023, the boroughs, you know, as I said in the opening comments, I think will, you know, will outperform. I think that again in, in our expectation for a more normalized environment versus what we saw in 2021 and the first couple months of 2022, I think the low beta, high-quality demographic markets, the more urban markets, will tend to outperform, you know, some of the markets that saw great performance in, 2021 and into the beginning of 2022.
Got it. Okay. Last question, you have a couple of developments coming online beginning of next year. Can you talk about the pipeline? Are we likely to see any starts this year? How do you think that'll evolve?
Hey, Mike, it's Tim. It's, you know, it's an area that we look at. If you look, you know, historically, our development pipeline has been very focused on just a handful of markets. The markets that we have been focused on have seen a fair amount of, you know, new supply, and we think that new supply will continue to diminish. We are focused, though, on trying to find opportunities that are great infill locations for us that are complementary to our existing portfolio, where there, you know, where there is a need or a pocket so that we can expand and enhance, you know, an already dominant position in the handful of markets that we've developed in the past.
Hard to predict whether we'll be able to find opportunities to add to the development pipeline, but clearly it's, you know, it's tapered off here over the past several years. We don't expect it to taper off to zero. We're looking for opportunities and you shouldn't be surprised to see a couple of projects pop up on that list as the year plays out.
Got it. Okay. Thank you.
Appreciate it.
Thank you, Mr. Mueller. There are no further questions registered. At this time, I'll pass the conference back to management team for closing remarks.
Thank you everyone for joining us today. Our high quality properties, balance sheet people, an industry that is just simply wonderful, and the great teams that we have serving our customers and our stores throughout the country have us well positioned for 2023. We look forward to a to another successful year. We appreciate your continued support and look forward to speaking to many of you over the coming weeks and months. Thanks for your participation.
That concludes today's conference call. Thank you for your participation. You may now disconnect your line.