Greetings, and welcome to the National Storage Affiliates Trust Q2 2021 conference call. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates Trust. Thank you, Mr. Hoglund. You may begin.
We'd like to thank you for joining us today for the Q2 2021 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's CEO, Tamara Fischer, COO, Dave Cramer, and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. In addition to the press release distributed yesterday, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, 4 August 2021. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call.
The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional detail concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, Core FFO, and net operating income contained in the supplemental information package available in the investor relations section on our website and in our SEC filings. I will now turn the call over to Tammy.
Thanks, George, and thanks everyone for joining our call today. Before diving into our Q2 results and our revised full year 2021 guidance, I'd like to acknowledge and thank the entire NSA team, including our PROs and their teams, for the dedication and effort that allowed us to deliver such exceptional Q2 results. I'd also like to thank our shareholders for their ongoing support, which allowed us to complete a very successful upsized equity raise a few weeks ago. The results we announced yesterday, including growth in same-store NOI of 21.5% and growth in Core FFO per share of just over 34%, were consistent with flash numbers we provided in conjunction with our recent equity offering.
The healthy fundamentals and active transactional environment, which led to a strong Q1, really kicked into high gear during the Q2. These positive trends continue into the Q3. We're at record high levels of occupancy, street rate growth is dynamic. To top it off, we're seeing unprecedented volume of assets come to market. On the acquisition front, we've been very busy this year. We expect the pace of deals coming to market to remain elevated in the H2. During the Q2, we invested $270 million in 20 properties, bringing first half volume to 43 properties valued at $435 million. Year to date, we've closed or have under contract 100-plus properties valued at nearly $900 million.
Cap rates on these deals range from about 5%-7% and vary based on location, source of the deal, whether it was marketed, off-market, or from our captive pipeline, and if there's a portfolio premium, or some element of lease-up involved. The weighted average cap rate on all of our transactions closed and under contract is in the mid to high 5s cap range. We continue to see meaningful competition for transactions, and the amount of capital seeking to establish or expand a position in self-storage continues to drive cap rate compression, especially on larger portfolios. Fortunately, though, about 2/3 of our deals closed and under contract this year have been off-market or from our captive pipeline, where we tend to buy at cap rates slightly above market.
Our exceptional Q2 results and our outlook for the remainder of the year give us confidence to increase guidance on key metrics, including year-over-year growth in same-store NOI of 16%, growth in Core FFO per share of 24%, and increased expectations for acquisition volume to over $1 billion. Brandon Togashi will provide more color on our revised guidance in his comments. In summary, and it probably goes without saying, it's a great time to be in self-storage. We continue to benefit from our commitment to secondary and tertiary markets, as well as our differentiated PRO structure, which we're able to leverage to drive results and take advantage of the robust transaction volume that we're seeing this year. I'll now turn over the call to Dave to provide color on what we're seeing on the ground. Dave?
Thanks, Tammy. Since the start of the year, we've seen improvement in almost all key metrics. In my 20+ years in the self-storage business, I've never seen fundamentals quite this strong. Occupancy levels continue to reach new highs, which has allowed us to implement significant increases in our street rates, which ended in July about 28% over the previous year. We continue to be very assertive on rent increases to in-place tenants, which are averaging high single to low double digits. Now, we all know that 2021 comparisons to 2020 are distorted, so I want to provide some additional color. Last year, our street rates at the lowest point only declined about 6%. The current year increase of 28% at the end of July would imply about a 20% street rate growth since 2019.
We ended the Q2 with record occupancy of 96.7%, which further increased to 96.9% at the end of July. Based on the current strength we are seeing, it appears though occupancy will remain elevated relative to last year, but the next two months will give us a clearer picture. Our guidance assumes a seasonal decline of 2-250 basis points in the back half of the year. We do want to reiterate that we do manage to optimize total revenues and not occupancy. We remain impressed by the strength and sustainability of consumer demand. As we've discussed on our past couple of calls, consumer demand for storage is driven by change. In this current environment, that includes job transition, a very strong housing transition, lifestyle changes, adding a home gym, adding a home office, all of these which we believe will continue.
Turning to new supply, we've yet to see a meaningful shift in development activity in any of our markets. However, we are hearing of more developers looking for projects given how strong fundamentals are. We do expect development activity to pick up, but construction and land costs have risen meaningfully, and the entitlement and permitting process will remain slow and very cumbersome. We expect to continue to face headwinds from new supply in Portland, Phoenix, and in certain sub-markets of Dallas, Atlanta, and West Florida. Currently, approximately 29% of our portfolio has a new competitor in the three-mile radius and approximately 48% within the five-mile radius. These figures are flat to slightly down from year-end 2020, and currently, robust demand is mitigating the negative impact from supply in these markets. I'll now turn the call over to Brandon to discuss financial results and balance sheet activity. Brandon?
Thank you, Dave. Yesterday afternoon, we reported Core FFO per share of $0.55 for the Q2 of 2021, which represents an increase of 34% over the prior year period. Q2 same-store NOI increased by 21.5% over prior year, driven by a 16.3% revenue increase combined with a 4.3% increase in property operating expenses. Same-store occupancy averaged 95.4% during the quarter, an increase of 760 basis points compared to 2020. While this is the highest growth for same-store revenue and NOI, as well as Core FFO per share that we've ever reported during our six-year history as a public company, I think it's appropriate to look at average growth across the last two years, thus removing the noise from the impact of the pandemic. For 2Q, the two-year average same-store revenue and NOI growth is 7.6% and 10.2% respectively.
Core FFO per share growth over those same two periods is 21%. All very impressive levels. Dave hit the highlights on operating trends, but I wanted to point out a few additional details regarding top-line revenue. Add that remains below historical averages and fee income has recovered from last year, but still remains below historical norms. Regarding OpEx, same-store growth accelerated in the Q2 to 4.3% due to the challenging year-over-year comp, but partially offset by an ongoing focus on cost control. Specifically, personnel costs increased 5.6% year-over-year, in part due to more normal store hours and staffing levels this past quarter versus the reduced levels we experienced last year. Additionally, repairs and maintenance grew 9.8% in the Q2, largely due to the challenging comp as we had pulled back on all but absolutely necessary expenses in the Q2 last year. Property taxes also increased 1.4%.
These increases were partially offset by utilities that declined 3.6% and marketing costs that were down 6.4%. Clearly, with the elevated occupancy and strong demand that we're experiencing, there's a reduced need for marketing spend. Moving on to guidance. As Tammy touched on earlier, the strong fundamentals and acquisition activity during the Q2, combined with everything we're seeing so far in the Q3, give us confidence that this positive momentum will carry throughout the H2 of the year. What we previously highlighted as challenging H2 comps now don't appear as challenging given the strength we're seeing in occupancy and rate growth. We are thus increasing full-year 2021 guidance as follows. Core FFO per share increases to a range of $2.11-$2.14, or 24% growth over prior year at the midpoint, and an 11% increase from the prior guidance midpoint.
For same store, revenue growth of 11.75%-12.75%, with the midpoint implying that the H2 of the year should be just as strong as the first half. OpEx growth of 2.5%-3.5%, and NOI growth of 15%-17%. Expected acquisition volume goes to a new range of $1.1 billion-$1.3 billion. Additional assumptions regarding guidance are outlined in the earnings release. Now turning to the balance sheet. We were active in the Q2 and subsequent to quarter end on the capital front, utilizing our ATM to raise over $140 million of equity. We also accessed the private placement market to issue $180 million of notes. Of course, most recently, we completed a very successful follow-on equity offering of 10.1 million shares at $51.25 per share for net proceeds of approximately $500 million.
We were very pleased with the execution as the transaction was upsized and the greenshoe was exercised in full. All of the proceeds from these capital raises were used to repay borrowings on our revolver and will fund our acquisition activity. Our balance sheet is well-positioned with no maturities through 2022, a fully available $500 million revolver, and approximately $450 million of cash on hand at the end of July. Our leverage profile, with a net debt to EBITDA ratio of 5.4 times at the end of the Q2, and these recent transactions clearly demonstrates our commitment to maintaining a strong balance sheet with access to multiple sources of capital. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator?
Ladies and gentlemen, we will now have our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may also press star two if you would like to remove your question from the queue. One moment, please, while we now poll for questions. Our first question comes from Neil Malkin with Capital One Securities. Please proceed with your question.
Hello, everyone. Good morning, and fantastic quarter. Brandon, congratulations. I believe you recently had the birth of your daughter. That's great, and congrats.
Thanks, Neil. Appreciate it on both fronts.
Sure. Yeah, first question. Can you just talk about what your roll-up spreads were or the gap between move-ins and people who moved out in the quarter? What trends are you seeing into July and in the Q3? What do you expect for street rates and similarly, that roll-up spread?
Yeah, Neil, this is Brandon. Thanks again for the first comments. By the way, we just wanted to say, I know some people had trouble getting into the call, maybe starting as early as 30 minutes ahead of time. If you ran into that or anyone else, apologies there. There were some technical difficulties. On your question, we talked on our last call about the spread between move-in rates for new customers relative to move-out rates decreasing such that it was near flat by the end of Q1 and actually flipping positive. For Q2, that spread was about a 6% roll-up. Here through the early part of Q3, that has only increased when you look at year-over-year.
Okay, great.
A very strong momentum per quarter.
Yeah. Fantastic. Maybe just on acquisition market. You talked about more things coming to market as the months progress, just higher and higher deal activity. Can you just talk about maybe some of the larger assets or portfolios? We've heard from a couple of brokers that there are, I think, a couple billion-dollar portfolios or very large portfolios out there. Can you just comment on that, if those portfolios could be potentially split up or what the process looks like for you guys, just given your very low cost of capital?
Sure. I'll start and Dave can jump in. Neil, thanks for the question. I think it's probably safe to say that we see every portfolio of any size that comes to market. We've heard the same as you that there are a number in that $1 billion plus up to $2 billion value range coming. I can't really comment on it right now. I guess the one thing I could say is that to the extent these portfolios are in markets that we like, that are a good geographic fit for us, we'd be keenly interested. In terms of how we might think about putting it together, we could probably do it on balance sheet if it's up to $1 billion. Anything over that, we might look for a joint venture partner to work with.
I think probably the safe thing to say here is that when a portfolio like that hits the market, we'll take a good hard look.
Okay, great. Well, that's all for me. Thank you, and again, great quarter.
Thanks, Neil.
Thank you. Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Hi. Good morning. Just hoping you could talk a little bit more about the cap rate environment. I think you talked about mid to high 5s for the transactions or the acquisitions to date, but just curious if that is a going in yield or a stabilized yield. If it's a stabilized yield, what the going in number is and kind of the path to get there.
Yeah. Hey, Juan, this is Brandon. The 5.8% that Tammy referred to, that's a year one going in. For us, that's NOI. With our structure, there's a management fee, % of revenue management fee that is paid to the PROs. That's before that cost, but it's that NOI year one over the total investment. For us, historically, we're acquiring stabilized assets, but we have talked recently in the past few quarters about having some appetite should those deals arise. There is some assets here and there that we would consider non-stabilized that are going to be in that number in that year one going in 5.8%.
Very impressive. Okay. Just on the cost side, just hoping to talk to a couple line items, one being marketing. You guys were up year-over-year despite kind of the record occupancy. Just curious on how we should think about that going forward. Second would be on personnel. We've seen some large declines from some of your peers able to leverage the kind of rent now or e-rental programs or however you want to name them or call them. Just curious on how you guys are seeing that line amidst all the wage pressure and difficulty in finding labor.
Yeah, sure, Juan. It's Brandon again. On marketing costs, they were down. Same store costs were down year-over-year for the Q2, just over 6%. Also in the Q1, I believe that number was down year-over-year about 4%. Year to date, six months, same store marketing costs are down. I think that's more in line with maybe what you'd expect given the strong occupancy, the strong customer demand. I think last call I made the comment, if we don't need to spend the money, we're certainly not going to spend the money, and that's been the case with the marketing costs. On personnel, I think we're experiencing a lot of the same things as our peers. We cut hours and cut staffing quite a bit last year. There's a comp that I would point out for us.
Our actual dollar spend in the Q2 for same store was actually down from Q1 sequentially. That increase year-over-year of 5.6%, that's really up against a tough comp from Q2 of last year. When you're surveying across the other companies, I just think you have to consider anything they might have done with regard to hazard pay or when they really slashed their hours and how they managed their staffing. Going forward, I would just say we're certainly seeking a lot of the same efficiencies as we have been over the last year. I think there's been a lot of lessons learned. We've proven we can run stores at lower hours than we realized we could pre-pandemic. I should probably pause here and let Dave chime in on some of the other potential efficiencies that we're exploring.
Sure. I think what I would add, Juan, as you look at going forward with payroll and stuff, with the great numbers we're putting up as well, our employees have an incentive program. When you have revenue numbers that are off the charts like we have, some of those personnel costs you're seeing, the comp is one piece of it, but we're also having a bonus program backing that up. We're proud of the results, and we're proud to obviously pay the incentive programs. As we look forward going forward, it's very competitive for personnel. It's a very tough environment to hire. We're looking at always, online rental, online payment systems, ways that we can run our stores more efficiently and really look at our store hours overall and our headcount overall.
I think the unique part about our business positions as well is as we can run a little leaner or maybe a little short-staffed in this very tough hiring environment, it doesn't impact our business. We're flexing team members around. We're probably using a little bit more overtime than we're historically used to using, but we're making do in the environment we're at. Our online leasing program's about mid to high 20s on leasing, 26%, 27% on online rentals across the portfolio came through our online platform. We continue to work on that customer journey and improving that platform and like to see those numbers increase, which obviously leads to efficiencies around the call center, efficiencies around our store personnel. To Brandon's point, a lot of lessons learned, and there's a lot of more runway for us here, I think, to improve.
One last thing, Brandon, again. For the six months same store, payroll and related costs were up 2%, we do expect that to be a little higher of a growth rate in the back half. For the full year growth rate, I would put it probably close to the high end of that total OpEx growth range that we gave of 2.5%-3.5%.
Thanks very much. Great call.
Yep.
Thank you, Juan.
Thank you.
Thank you. Our next question comes from Wes Golladay with Baird. Please proceed with your question.
Hi, everyone. When we look to the back half of the year, what do you think is the biggest moving part for occupancy? Is it purely the decision to push rate or be items such as maybe students going back to school taking their stuff out of storage or other items like that?
That's a great question. I think first of all, we felt we did have a little college student activity in April. We had a pretty significant gain in occupancy. We saw some good rental velocities, and so as we look at the back half of the year, we guided towards 200, 250 basis point decline in occupancy by the end of the year. Some of that's around that seasonal, what we felt was a little more seasonal pattern. College students, a little bit of summer transition. We think we'll see some of that towards August, September. As you mentioned, when you start pushing rates and you start really applying some very assertive increases, that could cause some movement. I think the positive is right now, the rental velocities are super strong.
As we're moving folks out, they're moving right back in and we're sitting here still at 97, almost 97% occupancy at this point in time. This should be the peak of the season. It should start to deteriorate a little bit from here, but it's not going anywhere quickly. We're very pleased with the fundamentals. We don't see anything in the future, the back half of the year, that's going to really knock those fundamentals off one big wall, if you want to call it that, coming. There's just a lot of strength because of a lot of reasons.
Great. Then, I think you mentioned you had about 48% of your portfolio has supply within five miles. Do you think this number will move, I guess, lower as we go out the next 12 months?
I certainly think it could. The new deliveries are slowing. We've been talking about that over the past few calls. Deliveries are declining since 2019, and with the 2020 pressures of the pandemic and stuff slowed the 2020s into 2021, and so those are delivering now. There's certainly a lot of interest in our product and a lot of people liking our product. It's hard to buy metal right now. It's hard to buy wood right now. It's hard to get planning done right now. I think you might see that number decline a little bit in the next 12 months.
Yeah, I think the only thing I'd add to that, Dave, is that the secondary and tertiary markets where we're focused are less attractive.
To new developers. Now, that may not always be true, but the returns just historically haven't been there. The rents aren't as high, and the risk isn't that much different. At least historically, we've been somewhat protected from the new supply cycle.
Got it. I think in the prepared remarks, you mentioned you had seen unprecedented amounts of assets come into market. Can you maybe talk about how your conversations with potential PROs is going on right now? Are they eager to sell or transact ahead of potential tax changes?
I think with our potential PROs, we continue to have conversations with private operators who would be good adds to our group of participating regional operators. I will say this is a case where potential changes in tax law don't seem to be moving the process along that much faster. I think that it's a big decision, and I think operators are making a decision to sell or stay in the business and continue to grow. Basically, selling all of your assets into NSA and becoming part of a team is a very big decision. I'd just say it's not really changing the cadence of our discussions.
Great. Thank you.
Thank you. Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
Hi there. This is Ravi Vaidya on the line for Todd Thomas. Can you talk a little bit about the self-storage market in Puerto Rico? Can you comment on how the pricing and demand for self-storage is different between Puerto Rico and stateside? Do you have a long-term target about how much exposure you would want to Puerto Rico?
Thanks for the question. I appreciate it. I'll start by saying that Puerto Rico has been a fantastic market for us. We really like the supply-demand dynamics, and frankly, pricing is a strength down there. In the case of the portfolio that we just acquired in the Q2 , that portfolio was sourced off-market by our PRO, who's built strong relationships down there. What we liked about adding to our portfolio there was the ability to build scale. On the whole, we like Puerto Rico, and we see it as a good long-term play.
Perfect. That's it for me. Congrats on a great quarter.
Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Please proceed with your question.
Great. Thanks. Most of my questions have been asked and answered, but I'm just curious, as you're thinking about ECRI, given that you're sitting at almost 97% occupancy, are you sort of changing the pricing strategy going into the back half of the year? How are you sort of managing the business a bit differently?
A great question, Steve. With the strength of what we're seeing and then the continued strength of rental velocity and our ability with the rent roll-up and all the things that are going right now for us, we've been a little bit more aggressive, I think, particularly going through July and August as we look out and even into September. I would say we're very much on the assertive end. We're looking at a broader base of tenants. We're looking at maybe where our potential caps are, where we may have capped out and not done. Looking back at that, our revenue management platform, which was fully implemented about 12 months ago, is really starting to pay dividends. We've got some really good logic built in behind it, and it's really challenging us to really think about how we maximize the situation we're in.
At this point in time, I would say we're probably being a little bit more assertive in amount and how quick we're implementing the rate changes.
Is there anything you can tell on customer behavior about rent increases? Is there sort of a threshold at which you see maybe higher move-out rates or any kind of change in behavior that would kind of limit how far you can push rent increases?
We haven't come across anything yet. Like I say, we're looking at some of those upper boundaries, and what I mean by that is maybe the total dollar amount. We may have a cap set on a dollar amount that we may feel would be uncomfortable to the tenant. We're pushing some of those boundaries today, but we haven't come across anything anywhere across the country. Mind you, in all of our municipalities and all of our communities, we've been testing a lot of different projects, and nothing's standing out that what we're doing has caused any type of change in behavior at this point.
Great. Thanks. That's it for me.
Thank you.
Thank you. Our next question comes from Smedes Rose with Citigroup. Please proceed with your question.
Hi. Thanks. I just wanted to follow up on that a little bit. You mentioned the revenue management platform that was rolled out about 12 months ago. You're on target, I guess, to have over 1,000 properties now between wholly owned and unconsolidated. Are they all on that platform now? As I recall, the PROs have the option to be on the platform or not, and I was just wondering kind of, is there an opportunity there to add more to the platform? Kind of where do you stand on that?
That's a great question. One of the things we've been very pleased with through our best practices and through really a lot of our conversations over the last 12-18 months is the acceptance level of some of these platforms. Our pros are doing a wonderful job, and they have built some really great teams. We figure right now, a little over 80% of our stores are on the platform and taking advantage of it, and the pros have really built some great talent inside of that, too. The pros are getting much better data than they've had, and they're getting much better results, and so we're very pleased there.
You would expect kind of incremental take-up, I guess, for that 80%?
I would think so, yes.
Yeah, Smedes, this is Brandon. The one thing I would say is that the PROs that maybe haven't onboarded onto our specific in-house built platform, they're still running certainly revenue management strategies, similar things that they had maybe done as private operators. They're still pushing rent increases to customers. I do believe there is opportunity. I just wanted to make that clear.
Okay. Thank you. That's it for us. Thanks.
Yep. Thanks, Smedes Rose.
Thank you. As a reminder to our audience, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question.
Hey, congrats on the quarter, and Brandon, congrats on the newborn. Thinking about historically, there were a couple markets that have been oversupplied. Portland, for example, comes to mind. Can you just help us contextualize just the amount of demand that we've seen in the last 18 months and so forth? You're looking at same store numbers that are double digits. How many years did we gain sort of during that period before we get to equilibrium? Just how should we think about what these last 18 months has done for those markets?
It's a great question. I'm not sure we have a clear line of sight of how many maybe years of supply we've shaved off. With all the drivers that are going on right now, Portland and Oregon and a couple of these other markets, Phoenix being one of them, have just seen tremendous results. You look at the results around Oregon, they're just at the top of the list. We look at it this way, there's certainly still pressure there. If you look at Portland's overall occupancy, it's still about three points less than the overall portfolio, which is kind of the presence of there is some competition there.
The team has done a wonderful job really maximizing where they want to be positioned, how many rentals they want to get, how many consumers they want to get, and have done a great job driving occupancy and revenue and all the other things that come with that. I don't know that I could really answer how many years do we think we've shaved off, but currently, certainly the demand factors are mitigating some of that competitive pressure. For Oregon and a few of these other places, numbers are solid.
Ronald, it plays into the answer to Juan's earlier question as well about that 48% that we talked about on the Five Mile. That's something we didn't say in our response is the fact that some of what's happened in the past year has certainly accelerated the absorption. You're hitting on the right thing. It's just, it's tough to put a number to it, as Dave said.
Got it. Not to beat sort of the acquisition question to death, but you doubled the guidance, right? I think you talked a little bit more, just there's just more activity going on. Is that really the biggest change and the biggest drivers from three to six months ago? You're getting a look at a lot more deals than you thought, you're closing maybe a lot more than you thought, or is this a view of just being more aggressive into an accelerating market or maybe a little bit of both? Some color there would be helpful.
I think it's a couple things, Ron, and it's a good question, but what we saw in the 1st quarter, frankly, just continued to accelerate into the 2nd quarter and what we're seeing right now. As I mentioned in my early comments, we've also been able to source a number of portfolios, either off market or you might call it pocket marketed, and I think that's given us a benefit. We've been able to leverage our PROs relationships and our captive pipeline. I guess I'll say it's a little bit of all of the above. I would add that I think we're being extremely disciplined in our underwriting. We like what we're seeing. It just so happens that I don't know if we'll see another year like this, but it clearly is unprecedented potential volume.
Super helpful. Thanks again.
You bet.
Thank you.
Thank you. Our next question comes from Joe Bempsin with Truist. Please proceed with your question.
Hi. Good afternoon, everyone, and thanks for taking the questions. First of all, just wanted to circle back on the acquisitions topic again. Can you talk a little bit more about in-depth about the type of assets you're targeting, the quality? I know you spoke a little bit about yields. I guess ultimately, how do you sort of balance more activities in the markets and more assets for sales versus the higher prices that you're seeing now?
I guess I'll start, and Dave can jump in here, but I would say that our approach to underwriting, in terms of geographic location, quality of the asset, and as you know, we're perfectly happy with single-story assets, multi-building, and secondary and tertiary markets. I think that gives us a slight advantage. It fits well with our geography, and for that reason, the cap rates might be a little higher than what others are seeing. I'll tell you that in addition to that, we are also looking at newer assets that are in stabilization. They're not quite stabilized yet. If we see assets like that are well-priced and fit well with our geography, in a place where we want to be long-term, we'll go for it. I don't know if that answers your question or if there's any other color I can provide.
I don't think it's changed too much. Our focus on secondary and tertiary markets remains the same. I guess the one thing I would add is that we've talked historically about being focused on stabilized assets, but to now to the extent we're seeing non-stabilized, we're open to underwriting and acquiring those assets.
One thing, this is Brandon. The one thing I would add is, geographically, everything that we have that we spoke about that's ahead of us to close is very nicely complemented with the existing portfolio.
That's right.
Mm-hmm. That's a good point.
Okay. Great. Secondly, you mentioned some of the demand in your prepared remarks is coming from transition-related, housing-related demand. Traditionally, our users that stem from that kind of demand segment, do they have longer length of stays, shorter, or is it pretty consistent with the traditional customer base?
It could be a variety of answers, but I'd say overall, fairly consistent. What we're seeing now, though, with the tight housing market, is how long they're out of house. You sold and you can't get your new house in maybe the time you were thinking about. We're seeing something around housing pressure as far as pricing. Maybe I wasn't able to afford the type of house I was thinking or the size of the house I was thinking about, so maybe I'm buying a little bit less square footage of house, which may lead to longer storage needs. If you look at our product, we think that's very encouraging because it's very affordable, and it's a great use of space.
As this housing market and this red-hot rental market play out, we think, for us, we're in a very good position to have some good success around this really tight housing transition that's going on.
Okay. Perfect. This is just lastly from me. I figured I'd ask, with the Delta variant cases beginning to rise across the country, any noticeable difference in consumer behavior over the past few weeks?
Nothing to speak of. I know we've come back and we've kept all of our protocols in place, so we have that piece going on. We're seeing a little bit more noise around some of our communities about masking mandates. Nothing that we can really definitively say is going to push economy one way or the other. Keep in mind, we were able to navigate the pandemic last year very successfully. I don't know, even if the Delta variant really flares or puts pressure on communities, it's going to have a significant impact on us. We were deemed an essential business last year, and I think that will continue should this thing really flare.
Okay, great. Thank you.
Thank you.
Thank you. There are no further questions at this time. I'd like to turn the floor back over to Tamara Fischer for closing remarks.
Thanks. To wrap up, I'd like to thank you again for joining our call and for your interest in and support of NSA. I'll also reiterate our thanks to our team members and our PROs whose efforts are key to NSA once again delivering sector-leading results. We remain optimistic about 2021, and we're looking forward to meeting with many of you either virtually later this quarter or hopefully in person at Nareit in November. Thanks again.
Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation. Have a great day.