Good day, ladies and gentlemen, welcome to the Q3 2018 Extra Space Storage earnings conference call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. If anyone should require operator assistance, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Jeff Norman. Sir, you may begin.
Thank you, Lisa. Welcome to Extra Space Storage's third quarter 2018 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, Wednesday, October 31st, 2018. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call.
I would now like to turn the call over to Joe Margolis, Chief Executive Officer.
Thank you, Jeff. Good morning, everyone. Thank you for joining us for our third quarter call and for your interest in Extra Space Storage. 2018 is playing out as we expected as we move into the last couple months of the year. Revenue, NOI, and FFO growth are all solid and remain within guidance and expectations. Occupancy continues to be strong, ending the quarter at 93.9%, 20 basis points above 2017's mark. This is especially encouraging because last year's quarter end occupancy benefited from the hurricanes. We continue to have solid rate growth, which was partially offset by increased but expected discounts, resulting in same-store revenue growth of 3.2%. The year-over-year impact from discounts should taper off in the fourth quarter. We project higher same-store revenue growth. External growth was also strong in the quarter.
We continue to be selective and disciplined in our acquisition efforts, but have been able to find acquisitions with acceptable risk-adjusted returns, primarily through existing relationships. By year-end, we expect to have acquired over $1 billion in properties, with Extra Space investing approximately $600 million. Between acquisitions and third-party management contracts, we have added 140 stores through the quarter. We have more than 500 third-party properties and a total of 734 stores, including joint ventures. Our report related to new supply remains generally unchanged. We are seeing an impact from new supply in certain sub-markets, and its impact varies by locations. New starts appear to be down in many MSAs already saturated with new development, and activity is migrating to markets where there may be a better yield. We continue to see delays in deliveries and see many proposed projects being abandoned.
Our highly diversified portfolio, while certainly not immune to the effects of new supply, reduces volatility, and our sophisticated platform is better prepared to respond to competition than ever before. At this time last year, we were reporting the impact hurricanes had on our customers, our employees, and our properties. Unfortunately, the Southeast experienced severe weather again, but I am happy to report that our portfolio was relatively unscathed. We did not have any material disruption with customers or employees and damage to our properties was minimal. I would now like to turn the time over to Scott.
Thanks, Joe, and happy Halloween, everyone. Last night, we reported Core FFO for the quarter of $1.20 per share. Rental rates to new customers continue to be solid. Throughout the quarter, our achieved rental rate was up approximately 3%-4% year-over-year. As expected and as discussed on our last call, discounts as a percentage of revenue were also up, partially offsetting revenue growth. As Joe mentioned, we anticipate the impact from discounts to decrease in the fourth quarter, resulting in an increase in same-store revenue growth. We saw expense growth normalize in the third quarter, and we were successful in minimizing increases in our controllable expenses. Property taxes, while elevated, were in line with our expectations. The increase in insurance premiums was not a surprise due to the elevated level of property claims caused by last year's hurricanes.
We also chose to invest more in marketing in the quarter, allowing us to grow rates and keep our stores full heading into the fall and winter. We continue to execute our leverage-neutral balance sheet strategy. During the quarter, we increased the percentage of unsecured debt and the size of our unencumbered pool and further laddered our maturities. We are also in the process of increasing and extending our credit facility. In the quarter, we sold $34 million on our ATM at an average price of $99.75 per share. We also disposed of one property in California for $40.7 million. The property was sold at a below-market cap rate for an alternative use, and we anticipate the reinvested proceeds will produce a significantly higher yield.
This store, as well as three other stores with large expansions or redevelopment projects, were removed from our same-store pool, consistent with our same-store definition, changing our total same-store number to 783 properties. We've updated our guidance and annual assumptions for 2018. Our same-store revenue guidance remains unchanged. We have increased the bottom end of our same-store expense growth by 25 basis points. We have tightened our same-store NOI guidance by 25 basis points at both the top and bottom end of the range, with the midpoint unchanged. We increased our Core FFO guidance by a half penny at the midpoint. FFO guidance includes $0.06 of dilution from value-add acquisitions and an additional $0.14 of dilution from C of O stores for a total dilution of $0.20. The lease-up of these properties continues to exceed underwriting expectations as a portfolio and will generate long-term growth for our shareholders.
With that, let's turn the call back over to Jeff to start our Q&A.
Thank you, Scott. In order to ensure that we have adequate time to address everyone's questions, I would ask that everyone keep your initial questions brief. If time allows, we will address follow-on questions once everyone has had an opportunity to ask their initial questions. With that, Lisa, we'll start our Q&A.
Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. One moment for questions. I have the first question. It's coming from Jeremy Metz of BMO Capital Markets. Your line is open.
Hey, good morning, guys. Joe, on the supply front, in your opening remarks, you mentioned delays in deliveries and some projects being abandoned, but you also noted no change to your expectations. Just trying to reconcile those because it sounds like some of the items you're pointing to would leave you arguably feeling better about the supply outlook for next year if there are deals starting to fall out.
Thanks for the question, Jeremy. I think generally our view is unchanged, that we're in a supply cycle, a development cycle, and that it's having an impact on our operations in stores. There's some new supply being added and there's some falling out. I would say, last quarter, I was asked about 2019, and I said that subject to what is scheduled for 2018 getting pushed into 2019, I said we thought 2019 would be flat to moderately down in new deliveries. Now based on the data we have now and what we're seeing, I would say 2019 is going to be down. We are seeing a slowing in the development cycle. It's not a material change. We're still going to have impact on our operations from new supply in 2019.
You have the cumulative effect of what's being delivered, I do see the delivery slowing.
Can you tie that into maybe just some of your bigger metros in terms of where you maybe see supply pressures getting worse, even just from deliveries or ones where you maybe see it abating more than others and feeling a little better?
The Florida markets, I think, are going to get worse before they get better. We've seen de-acceleration in Dallas. Portland, I think, is going to get worse. Washington, D.C., may get worse. Chicago is a market that's on the other end of the spectrum, where we're seeing some improvement.
Great. Last one from me. Scott, you mentioned the achieved rates holding in that mid-single-digit range. I think you said 3%-4% this quarter. Discounting has been a drag, which you noted. If you factor all that in, where are your net effective rates? How has that been trending?
Our achieved rates for the quarter were 3%-4%. If you look at the impact of discounts in the quarter, discounts decreased our revenue by about 80 basis points in the quarter. Without discounts, had discounts been flat year-over-year, our revenue would have been 80 basis points higher.
Great. Thanks, guys.
Thanks, Jeremy.
Next question is coming from Todd Thomas of KeyBanc Capital Markets. Your line is open.
Yeah. Hi, thanks. Scott, Joe, your comments about the discounts being lower year-over-year in the fourth quarter and revenue growth being higher. It seems like the comps overall beginning in late Q3 after the hurricanes last year and over the next couple of quarters would be a little bit more difficult. I understand the discounting dynamic, but I was just hoping you could provide some additional context around that comment and maybe provide some insight around some of those factors heading into 2019.
Yes. The discounting strategy is just part of our overall revenue maximization strategy. Discounts are the lever that we have chosen to pull this year. The difference this year versus last year is last year we did not discount as heavily in the third quarter. During the summer months of last year, our discounts were low. This year, they were high as we chose to keep rate and use discounts. It was more of a comparable from last year than kind of a change in what we're doing overall. We expect this year's discounts to be comparable to last year, a portion of that 80 basis points that we saw discounts impact our revenue by about 80 basis points this last quarter. We expect a big portion of that to not be there in the fourth quarter.
While overall revenue year-over-year or sequentially continues to get tougher, the rate of growth slows, the impact of discounts will lessen in the fourth quarter.
How should we think about that? You're anticipating your model shows revenue growth being higher in the fourth quarter versus the third quarter here. Any insight into how we should think about 2019, just in terms of maybe setting expectations?
Obviously, we're not ready to give 2019 guidance. We'll give that on the first quarter. I think with the supply cycle, we expect things to continue to moderate. I don't think that we expect things to go negative by any means. We'll give our guidance in the first quarter of this next year.
Okay. Just last question from me. The decrease in net tenant insurance income, I don't know if I missed this in your prepared remarks, was that attributable to the hurricane expenses or is that something else? How much expense that's non-recurring was in that number?
Yeah. It actually was not attributable to the hurricanes. We had some claims from the hurricanes, but not significantly higher. It was primarily due to some water claims from the tough weather during the winter months of this past year.
Okay. How much was that in the quarter?
In the quarter, we were $1 million-$2 million high. Some of those claims were made late and processed late. While they happened in the winter months, they didn't get processed or adjusted until the third quarter.
Okay. Thank you.
Thanks, Todd.
Next question comes from Samir Khanal of Evercore. Your line is open.
Hi, good morning. Scott or Joe, I guess where do you stand on your views on property taxes for 2019 based on where you sit today? If I look at your numbers, you had higher taxes, especially kind of in the first half of this year, primarily in Q2. If that doesn't repeat, comps could be easier, maybe a better NOI growth, and especially kind of in the first half of 2019. It feels like with some of the other companies in our coverage universe, you have these one-time items of higher taxes. They say it's sort of one-time, but then they continue to repeat. I want to kind of get your view as we kind of think about 2019 growth here.
Certain states are pretty fixed in property tax growth. California is relatively fixed. Other states like Texas and Florida reassess quite frequently and are quite aggressive. As those values approach what things are trading for, they typically slow in their reassessment. I think property taxes are potentially your biggest risk on expenses and potentially the biggest benefit in expenses. As year-over-year comps become easier or as some of these states slow down in their reassessment.
Okay. I guess my second question is just looking at your debt maturity. I know you've got roughly $300 million of debt that's sort of maturing between now and 2019. How should we think about that piece? How will you address that?
Yeah, I think we'll continue to do more unsecured debt as we move things forward. 2019, if you look at it with extensions, is actually pretty low in terms of the amount of maturities we have. We'll extend a portion of that, we'll continue to fund things with primarily unsecured debt as we move more towards an unsecured balance sheet.
Okay, thanks, guys.
Thanks, Samir.
Next question comes from Smedes Rose of Citi. Your line is open.
Hi, thanks. I wanted to ask you just for the fourth quarter a year ago, do you have a sense of was there any lingering impact of higher occupancies due to the hurricanes? Maybe what do you think sort of what we should be adjusting for this year? My second question, I just wanted to ask you on the acquisitions front, if you're seeing any changes in pricing in the private market, just given the upward bias in interest rates. If you're not yet, do you have a sense of how long that kind of takes to follow through?
Yeah, Smedes. I'll address the Florida-Houston question. Joe will take the acquisitions one. Florida really provided no benefit for us last year in terms of upside from the hurricanes. What we saw is a lot of people moved in. Most of those people moved in with first month free and then moved out 30 days later. Houston was a little bit different. Houston, we saw a fairly significant benefit. Our occupancy jumped quite quickly, Houston's less than 2% of our portfolio, so I wouldn't tell you it's going to impact it significantly. If you look at our occupancy overall as a portfolio at the end of the third quarter, we are 20 basis points ahead of where we were last year, even though a market like Houston is 400 basis points behind in occupancy, and Florida is actually slightly behind as of the end of September.
Florida will come back in October in terms of occupancy, but we expect Houston to be a tough comp for the year, but a small percentage of our income.
Thank you.
Smedes, on the acquisition question, we really have not seen any material change in pricing. We have not seen cap rates increasing, although you would expect them to as interest rates go up. I guess, as interest rates started to go up, lenders tightened spreads a little bit, and that made up the difference, but that can't go on forever. If there are several rate increases next year, at some point, you would expect the cap rates to react, but we just haven't seen it yet.
Okay. Do you guys remain primarily focused, I guess, on your third-party managed as a potential pipeline of acquisitions? I guess, where do you stand on external growth at this point?
Yeah, great question. Thank you. A little over 80% of the $1 billion of acquisitions gross that we'll do this year came from relationships, either joint venture partners or third-party management or relationships. We've had less than a fifth that were brokered deals where we're competing in the market. I think that's going to continue. We find very few situations where we can be the high bidder in a brokered situation, and we're very lucky and fortunate to have these great relationships and somewhat proprietary pipeline that allows us to continue our external growth.
All right. Thank you.
Thank you.
Thanks, Smeed.
Next question is from Jonathan Hughes of Raymond James. Your line is open.
Hey, good morning. Happy Halloween. Thanks for taking my questions. Joe, just wanted to clarify what you said earlier when you mentioned seeing new supply activity migrating to markets with better yields. Are those secondary, tertiary markets you're talking about, or suburbs of primary markets?
I would say secondary, tertiary markets. A lot of suburbs of primary markets, I think of as secondary markets too. I would include all of those, but yeah, moving out of kind of the main downtown or primary suburbs or exurbs of the main markets and moving to these other secondary type markets.
Okay. Kind of going back to Smedes' question about external growth, your percentage of assets or acquisitions bought out of the third-party platform, you said 80% are already managed. That was maybe, I don't know, 30% a few years ago. Again, underwriting's perfect on those assets, so lower risk, but the strength of your platform is pretty impressive. Why not try to go out and buy more non-managed stores with more operational upside? Of course, assuming you can buy them. I'm just looking at the integration of these third-party assets or third-party managed properties into your same-store pool going forward, and the growth is going to be lower in the future because there's not as much upside. Is that a fair assessment?
For the most part, yes. Not all of that 80% were managed. Some of it is truly from relationships we have with people, and we don't actually manage the properties at the time. Secondly, we've been buying this year more than ever before many of these stores in joint ventures, which even though they are kind of maximized from a management standpoint because we do manage them, we do get outsized returns because we're not investing 100% of the capital, but we get a management fee, we get the insurance proceeds, and we have the opportunity to earn or promote. In a perfect world, I would love to buy more from the mom and pops and from undermanaged properties and get more juice out of the deals. I don't want to pay for it. We'll do that when the pricing is right.
When the pricing isn't right, we need to remain disciplined and patient.
Okay. Fair enough. Then just one more, I'll jump off, could you just maybe give us details on the yields on the operating store acquisitions this quarter and scheduled to close by year-end? I know you said transaction market hasn't seen any change, curious what you paid for those couple stores. Thanks.
Sure. The stores were in different stages of stabilization, with the Fort Lauderdale store was fully stabilized, the other stores we underwrote between 10 and 22 months to get to stabilization. The initial yield was not always the stabilized yield. If you average them all together, first year was in the low fives and stabilized was in the mid sixes.
Okay. Maybe what was the stabilized yield on the Lauderdale acquisition, if that one was fully occupied?
6.5.
6.5. Okay, great. That's it for me. Thanks for taking my questions.
Thanks, Jonathan.
The next question is coming from Eric Frankel of Green Street Advisors. Your line is open.
Thank you. Joe, could you comment a little bit on the cause of some of the supply decreases or the drops in attempted starts?
Sure. Absolutely. One thing is that there is better information out there in the market today now than there was a couple of years ago. There's some third-party providers that are doing a pretty good job of putting together information. When a developer or an equity source or a bank is looking at a proposal to build the next store in North Dallas, it's fairly easy to see there's a lot there already, and that may not be the smartest thing to build the next store in North Dallas. Secondly, costs are up, right? Interest rates are up. We talked about that. Land pricing is up. Labor is certainly up. Materials, up. You have an increased cost. On the other side, you have moderating operating projections, right? If someone honestly underwrites a deal, they're not going to underwrite 8% rent growth.
If you have increased costs and moderating projections, that squeezes your development yield. You have lenders that are somewhat more cautious, where you have a little bit more difficulty getting loans. I think all those factors make it harder these days to stick the next shovel in the ground.
Is it fair to say that a lot of developers were underwriting a lease-up time of, say, two years, three years at most, which was maybe common a couple years ago, but that's turned out to be what it's historically been in that three to five-year range?
I don't know if it was lease-up time or rate, but in general, developers are optimists, they will create a pro forma that has an aggressive lease-up rate, an aggressive lease-up time period, and an aggressive unit mix too, which is what we frequently see where the unit mix is meant to maximize revenue but may not actually work in the market. It's the equity providers and the lenders and the operators, the manager's job to try to make sure the developer has a realistic pro forma, and if that can get financed, then the deal typically goes forward, and if not, sometimes it gets put on the shelf.
Interesting. Just another development financing-related question. I think one of your public peers has taken on the strategy of underwriting a construction mezzanine loan business, whereas I think what you and some of your peers do more of the Certificate of Occupancy-type acquisitions, those are available. Would you consider being in the lending business as well if it led to more investment opportunities?
We do not want to be in the lending business for development. The primary reason for that is because if you make a loan, you have to be willing to own that project, and we don't want to own a broken development deal where we have to continue development, take the project to completion. There's obviously already problems. That's not a risk we're willing to take. We are willing to make loans on completed buildings that we, one, manage, and two, would be willing to own.
Okay, thanks. That's it for me.
Thanks, Eric.
Next question comes from Omotayo Okusanya from Jefferies. Your line is open.
Hi. Yes. Good morning, gentlemen. My first question has to do with the comment made earlier about discounts declining in 4Q. I'm just, again, wondering how the confidence level you have in that, just kind of given some of the supply issues that are still out there, why you wouldn't keep discounting to try to maximize revenue.
I don't think we're necessarily cutting back on discounts. It's more a comp issue. We will discount in October, November, December. The difference is we also discounted last year in October, November, December. Just seasonally, you typically have more discounts in the fall, winter than you do in the summer, whereas this year, we increased our discounts in the summer months. Our strategy year-over-year is much more similar this year.
Okay. That's helpful. Thank you for that clarification. The second question. Just given your meaningful exposure to L.A. and as well as San Francisco and some of the talk happening around Prop 13 potentially hitting the ballot in 2020. Just wondering kind of what you're hearing about that, what you're thinking about that, and if you've done any homework about what kind of impact that could have on EXR.
Obviously, we recognize it as a risk. Some of our properties are legacy properties that we've owned for quite a while that have just had the 3% raises every year. We have done some math. It's pretty simple math where you're basically comparing what you're paying in taxes today compared to if they were assessed at full value. We understand what that is. Clearly, it's an impact. It will depend a little bit on, one, if it gets passed, and then two, how they phase that in. Very difficult to really comment on the impact at this point, but it's a risk we're monitoring. I think the Self Storage Association's aware of that. I think that you'll probably see some lobbying efforts around that.
Do you care to share anything you've done in regards to just a worst-case analysis, like if the law kind of shows up straight away?
We have, but it's probably not something we would want to disclose on the call today.
Got you. All right. Thank you.
Thanks, Tom.
Thank you.
The next question comes from Wes Golladay of RBC Capital Markets. Your line is open.
Hey, good morning, everyone. I just want to go back to the $0.20 dilution this year from acquisitions and C of O deals. Will those be still dilutive next year? I know you might have some more roll-in, but just for this comp set here, will you get to, I guess, a no dilution point next year? And has there been any change in stabilization of C of O deals as far as timing goes?
Yeah. We'll continue to add C of O deals. You can see that in our supplements. As the value add in C of O deals that are causing that $0.20 lease-up, we'll have others added into the pool.
It depends a little bit on what stage they're at in terms of their lease-up. A property that opened fourth quarter of this year clearly will be dilutive next year. An acquisition that we bought that was 70% full and we bought it in January of this year, it likely is not dilutive next year. Overall, I would tell you part of that $0.20 continues into next year, but it's a different pool, a different group.
Okay. What is still the typical underwriting? From what I recall before, it was up to three years, but they were stabilizing maybe one to one and a half years. Has that changed at all?
We're underwriting C of O deals between 36 and 42 months to achieve economic stabilization, depending on the size of the property and the market that it's in. We're currently doing maybe slightly better than 36 months, maybe 30 to 36 months to get to economic stabilization. We're getting to occupancy stabilization earlier than that.
Okay. Thanks a lot, guys.
Thanks, Wes.
Next question comes from Todd Bender of Wells Fargo. Your line is open.
Thanks. Probably for Joe, just to round out your last thoughts there on the CFO and lease-up duration. I wanted to just get a sense of how you're incorporating maybe potentially higher risk in your underwriting assumptions. It just depends on if it's being acquired within a joint venture or wholly owned. Are your yield expectations up front coming up? Is leverage assumed for these portfolio deals coming up? I just want to get some color. Maybe you're going to expect a little more yield up front because the NOI stream going forward might slow down. Just getting a sense of the risk there.
Everything needs to make sense on an unleveraged basis. We underwrite on an unleveraged basis, if it doesn't make sense, we don't try to do the deal by adding leverage to it. That's an easy answer. We've been underwriting pretty consistently at 90% occupancy, 36 to 42-month lease-up and 3% rental rate growth. Some of those, given where you see our current occupancy and revenue rate growth, some of those may be conservative numbers, but we feel that's the right way to underwrite these deals. Our target stabilized yield on C of O deals is and has been for some time 8%, plus and minus. If someone brings us one in a great location in a barrier-to-entry market, will we take a little less? Yeah, probably, and a little more in other markets.
That's kind of our target yield that we think compensates us for taking the dilution during the lease-up period. We bring in joint venture partners so we can stay within our dilution target, and we don't have too much dilution, so we can de-risk these deals. We're doing more of them and spreading our equity out further, we can enhance our returns.
All right. That's helpful. Thank you. Lastly, the Menlo Park property sold. You got a huge gain, it's also high barrier, very affluent market. Is that just an offer you couldn't refuse?
Yeah. We sold that to an adjacent large corporation that wanted the property for an alternative use, it sold around a 3 cap. We can take those dollars, even though it's probably impossible to build storage in Menlo Park. We can take those dollars and kind of double the yield from them by reinvesting them, which we have done through a reverse 1031 exchange. Every property's for sale if someone offers us enough money.
Got it. Thank you.
Thanks, Todd.
Next question is from Juan Sanabria of Bank of America. Your line is open.
Hi, good morning. I just wanted to touch back on supply. Do you have a sense of what % of your portfolio is going to be exposed to that three-year rolling supply in 2019 versus what that number is in 2018? If that delta is going to be a greater %, and to what extent?
Sure. Let's start by looking at 2018. About a third of our own portfolio of 841 stores will be facing new supply in 2018. Of those stores, almost half of them have not yet been delivered. Some of those are under construction, so they will be delivered, but they'll be pushed into 2019, and others are under the proposed list, so they may or may not be delivered. In 2019, that number is less than half of that, of what we've identified. That's where we see the drop-off into 2019. Did that answer your question?
Yeah. When you say less than half, 15%, if 2018 was a third?
14%.
Is that right? Okay. Do you have a sense of what that is on a three-year rolling window, not necessarily new deliveries? From a three-year rolling window of deliveries, is that more or less?
It actually goes up. The three-year rolling I'm sorry, Juan. The three-year rolling goes up by 9% because you're dropping off 2016, which was a relatively small number, and adding 2019, which is, while a smaller number than 2018, a bigger number than 2016.
Okay. That's up 9% to what? Or from what base? Just so we have the sense of the total portfolio exposed on a three-year basis.
With a three-year ending in 2018 is probably close to 50%, you're closer to 60% in the three-year ending in 2019. Was that the right question?
Yes, sir. Thank you very much. That was perfect.
Thank you.
Just from a same-store perspective, how should we think about the benefit of the new stores being added next year to the pool and relative to the benefit you've had this year, which has kind of come down as the year has gone?
We haven't completed the 2019 budgets, but I think the majority of the benefit will come from C of O stores that are moving into that pool and less from acquisitions. I would tell you it's going to be somewhat minimal. It's a big enough same-store pool, and you're not bringing that many properties in that the number's not going to be that significant.
Okay. One last question for me. You said that the concessions were about an 80 basis point drag to the third quarter same-store revenues, and you've kind of described the fourth quarter, given an easier comp as not being an issue. Does that mean that that 80-point delta goes away to zero in terms of a drag on a year-over-year basis?
Not sure it goes to zero, but a significant portion of it goes away.
Okay. Thank you very much.
Thanks, Juan.
Thank you.
There are no remaining questions. I would like to turn the call back over for further remarks.
Thank you. Thank you for joining us today. We are pleased with our platform and our team's ability to continue to drive rental rates and occupancy. We have always invested in our platform, our portfolio, and our people, and it is paying dividends in the current competitive environment. 2018 is following our expectations, and our diversified portfolio is performing well. We're excited about our outsized external growth as we enhance our size, scale, and brand. We thank you for your interest in and support of Extra Space Storage. We look forward to seeing you and speaking with everyone at Nareit. Have a great rest of the day. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.