Extra Space Storage Inc
NYSE:EXR
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
117.58
183.14
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Extra Space Storage Inc
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2019 Extra Space Storage Inc. Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your host today, Vice President of Investor Relations, Jeff Norman. Sir, please go ahead.
Thank you, Latiff. Welcome to Extra Space Storage’s fourth quarter and year end 2019 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, February 19, 2020. 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.
Hello, everyone. Thank you for joining us for our 2019 fourth quarter and year-end call, and thank you for your interest in Extra Space Storage. We delivered solid results in 2019 despite significant competition from new supply and for external growth. Our same-store occupancy ended the year at 92.4%, the highest year end mark since 2015. Our same-store revenue increased 3.5%, NOI increased 2.9%, and core FFO growth per share increased 4.5%, demonstrating the durability of our diversified portfolio and the progress of our platform and team. We had impressive external growth, acquiring 47 stores with an additional 177 stores added to our third-party management platform. The majority of these stores were new to the platform, meaning we brought a new property into the system every 1.3 business days on average. We also found other innovative ways to enhance our external growth, including redevelopment and net lease transaction with W. P. Carey, a preferred equity investment with SmartStop and the launch of a new bridge loan program. All of these efforts helped Extra Space invest approximately $650 million at attractive, risk-adjusted returns.
The fourth quarter not only marks the end of another solid year, but an incredible decade of performance. Over that time, we grew our store count by more than 1,000 stores, an increase of 137%. We developed proprietary technology that helped us optimize performance and consistently outperform our peers. We delevered our balance sheet and achieved a BBB stable rating from S&P. Most importantly, Extra Space Storage provided the highest 10-year return to shareholders of any publicly-traded REIT and the eleventh highest of all companies in the S&P 500 regardless of sector. We are proud of the growth we experienced over the past 10 years and the value it created for our shareholders. We appreciate the support of our investors, lenders, and partners who contributed to our growth and success over the past decade. We also acknowledge the vital contributions, hard work, and dedication of over 4,000 employees who made such performance possible. The culture and values of this team led us to be named in Top 100 Best Place to Work by Glassdoor out of over 1 million companies.
While we are proud of our accomplishments and while we believe it is important to celebrate our past successes, we are even more focused on the future. Most of the headwinds faced in 2019 will continue to be present in 2020. The supply cycle we find ourselves in will continue to dampen performance, but it is moderating and will reverse. But even while in the depths of this cycle, we are in an incredible business marked by high occupancies, increasing customer demand, longer average lengths of stay used by all age demographics, no real disruptor on the horizon, and an increasing advantage of the large operators over the mom-and-pops. The stable and increasing cash flows we have all enjoyed continue to be a hallmark of Self Storage. We are committed to leveraging our experience, our technological sophistication, and our diversified portfolio to continue to provide solid returns in 2020 and in the decade ahead of us.
I would now like to turn the time over to Scott.
Thanks Joe, and hello everyone. Our core FFO for the year was $4.88 per share, ahead of the high-end of our guidance. The beat was primarily attributable to lower interest expense and income taxes. During the fourth quarter, rental and tenant insurance revenue were in line with expectations. Revenue growth was primarily driven by achieved rate growth and higher occupancy with lower discount usage also providing a benefit. Same-store expenses were elevated due to increases in property tax, marketing expense, and payroll.
We continue to be pleased with the quality of our balance sheet and our access to all types of capital. After obtaining our BBB credit rating from S&P, we now qualify for improved pricing on our credit facility that will lower interest expense going forward. Last night, we provided guidance and annual assumptions for 2020. Our new same-store pool will increase by 42 stores for a total of 863 stores. We expect the change in the same-store pool to benefit our revenue growth by only 10 basis points or less over the year.
We experienced gradual moderation in our same-store revenue growth through the end of 2019 due to new supply, and expect that moderation to continue into 2020. Same-store revenue growth is expected to increase 0.75% to 1.75%. 2020 same-store expense growth is expected to increase 4% to 5%. We do not expect as much pressure from property taxes and marketing expenses in 2020, but we do expect them to continue to be outsized. The projected increases in property taxes are heavily weighted to Florida, Illinois, New York, and Texas. In addition, we anticipate higher payroll expense due to a difficult 2019 comp. Our revenue and expense guidance results in same-store NOI growth expectations of negative 0.5% on the low end of the range to a positive 1% on the high end.
For 2020, we expect to invest $230 million in acquisitions, approximately $55 million of which is closed or under contract. We also expect to invest an additional $60 million in bridge loans. Our guidance assumes external growth will be financed with net operating income and debt. As always, we are committed to being disciplined, but we will be opportunistic and innovative in seeking additional ways to grow externally. We have plenty of liquidity and capacity and will proactively pursue accretive growth opportunities as they become available. Our full year core FFO is estimated to be $4.99 to $5.08 per share. In 2020, we anticipate $0.07 of dilution from value-add acquisitions and an additional $0.13 of dilution from C of O stores for a total dilution of $0.20, down $0.03 from 2019 levels.
With that, let’s now turn it over to Latiff to start our question-and-answer session.
[Operator Instructions] Our first question comes from the line of Jeff Spector of Bank of America. Your line is open.
Great, thank you. If we can talk a little bit more please about your same-store revenue guidance for ‘20 over ’19. I think Joe talked about moderation, but can you talk – and again continued pressures from supply, but can you tie the comments and discuss that a little bit more?
Sure. Thanks, Jeff. So, we have been discussing revenue growth moderation and a soft landing for several years now, and we experienced a decline as moderation in revenue growth in 2019, but it was somewhat delayed from our initial guidance. It was somewhat later in the year, and that was likely due to delays in the delivery of new supply. Our 2020 guidance indicates continued revenue growth declines, but at a moderating pace over the year. And by the end of the year, we believe it will be flat.
Okay. And then I guess again I am just trying to think about the guidance versus previous comments about supply and peak supply in your markets. I think you were estimating for that to be ’18, and I know you weren’t willing to say peak pressure in ‘19, so obviously that pressure continues into ‘20. But I guess can you then provide more color on your supply forecasts for -- in your markets?
Sure. So, we do still believe we experienced peak deliveries in 2018 and that deliveries moderated somewhat in 2019. We see a more significant decline in deliveries in our markets in 2020 by about a third. Now that assumes some assumptions as to the same push rate or delay rate in 2020 than [ph]2019, but we do see a greater decline in deliveries in our market significantly greater in 2020 than ‘19. But that being said, as you hinted at, the impact is accumulation of the supply from the past 3 plus years. And that’s why we are still fighting through this development cycle, although we are seeing the light at the end of the tunnel.
Okay. If I can ask one follow-up then, I guess again tying those comments to, you mentioned you expect less pressure from – on the marketing spend or marketing spend to stabilize, which was much higher in ‘19 than we initially thought. Does the lower revenue forecast have anything to do with a company decision to spend less on marketing or nothing?
No. First of all, thank you for that question. I think it’s important that we be clear about what marketing spend is. Marketing spend is akin to an investment. When we choose to spend marketing dollars, we are doing so because we can track a positive ROI on those dollars, and marketing spend is less than 3% of revenue for us. So, it doesn’t have a giant impact when you have a high margin business and you can generate rentals by that spend. That being said, our 2020 budgets do have a moderate increase in marketing spend. We will see and feel a greater impact of that increase, excuse me, in the first quarter due to a bad comp with first quarter 2019, but we do have a moderate impact over the life of the year. And frankly, if we end up spending more than our budgets, say we do, it’s because we chose to spend that money and we believe it’s going to have and we know it’s going to have a good return.
Okay, thank you.
Thanks, Jeff.
Thanks, Jeff.
Thank you. Our next question comes from the line of Ki Bin Kim of SunTrust. Your line is open.
Thanks. Can you talk about those Street rates and promotion trends you saw in the quarter and up to January, February?
Yes. Ki Bin, this is Scott. So, we continue to use promotions to attract customers, but it’s pretty similar to what we have done throughout the entire year. The quarter looked a little different, because it’s when we lapped our current discounting policy with how we did things last year. So, discounting had less of a benefit in the fourth quarter than it had for the first three quarters of the year. Our discounting trend in 2020 is assumed to be very similar to what we did in 2019. If you look at rates in 2019, you probably need to start at the first of the year. At the first of the year, we had low-to-mid, single-digit rate growth and our occupancy fell. So, by midyear, we were about 50 basis points below year-over-year in our occupancy, and we made a decision to be a little bit more aggressive not only in marketing spend, but also in our – on our rate. So, starting with July 4, we ran a special where we dropped rates 7% or 8% during the month of July and primarily related with that special is when we started doing that. And we would tell you it worked. The additional marketing spend, and the lower rates in July caused occupancy to jump. We then pushed rates up throughout the remainder of the year and finished the year close to flat. So, we were slightly negative on our achieved rates, but our occupancy grew by about 140 basis points from the end of June through the end of the year, so that combination of increased marketing spend and lower rates caused occupancy to grow, and towards the end of the year, as we pushed rates back up to closer to flat, we continued to maintain that occupancy and actually expanded it a little bit.
Okay. And implicitly in your guidance, I know it’s not just one lever, because everything is kind of related, but what is implicitly in your guidance for – in 2020 for Street rates and promotional usage, because I am guessing the promotion usage will become a tougher comp in 2020?
Yes. Promotional usage we are not assuming there is any benefit or any detriment in 2020 and all of the growth in the 0.75% to 1.75% comes from a combination of rate and occupancy.
Okay, thank you.
Thanks, Ki Bin.
Thank you. Your next question comes from Smedes Rose of Citi. Please go ahead.
Hi, thanks. I wanted to ask you just a little bit about your acquisitions outlook. At least relative to our forecast, it’s quite a bit lower relative – and where it was last year. And I guess if you could just talk about what you are seeing and maybe why you expect it to come down some and then just on the JV side that looks flat year-over-year? And I think before in your comments you sort of talked about how that was maybe a more attractive risk reward situation. So just wondering maybe if you could talk a little bit more about your expectations on the JV side as well?
Sure, happy to, Smedes. So I think it’s important to recall that we went into 2019 with over $300 million of deals in the pipeline and we are entering into this year with $54 million, $55 million worth of deals in the pipeline. So, we have less kind of – less in the bag that we know is going to come about. A lot of that is due to we significantly slowed down our commitments to CO deals and developments several years ago. So there is much fewer of those delivering now and that turned out to be a good decision. I am happy we don’t have more new product being delivered into today’s market. On the acquisition side, we see very few least stable good properties, good markets on the market. There is just very few of those. Most of what we see in the market are stores that are in some stage of lease-up and we price those and bid on them, but our view of the lease-up and the future returns of those is less than the market. And frankly, we are not very competitive and we don’t rely on being an active purchaser of brokered deals in 2020 just like we weren’t in 2019 and prior years. So that means we are going to have to get creative and we are going to have to try to talk to a lot of people in the market and see what their needs are and find the capital voids and see how we can use our advantages and try to create deals that produce accretive long-term value for our shareholders. And I can’t tell you what that is just like I couldn’t tell you in the beginning of 2019 that we were going to do a preferred equity investment or that our bridge loan program was going to be so successful or that I guess we were talking to W. P. Carey at that time, but we didn’t know we are going to ultimately get to a deal. So I can’t give you specifics of how we are going to grow externally, but I do tell you we got a bunch of smart people who are working everyday out in the market trying to create good deals for us.
Okay. And so it sounds like just on the acquisitions front, they are looking at stabilized assets, maybe not much change in already pretty aggressive pricing and just less sort of quality product on the market. Is that a fair kind of characterization of what you are seeing?
That is fair. And I apologize, Smedes. I didn’t answer your joint venture question. So, we will go out and try to find deals that make sense for us. And once we find those deals, we will then find – we will then determine the best way to capitalize whether it’s with debt or with joint venture money or some other form of capitalization. And you are correct in today’s environment because of the reduction of risk when we are a joint venture partner and the enhancement of returns through management fees, tenant, insurance, and hopefully, promotes and fees someday that joint ventures are more attractive in this stage of the market cycle than in other stages.
Okay, great. Thanks for the color.
Thank you.
Thank you. Your next question comes from Michael Mueller of JPMorgan. Your question, please.
Thanks. Just want to clarify something, when you were talking about moderating revenue growth throughout 2020 and being flat by year end, was that a comment that the moderation would subside by year end or you expect to be fourth quarter 0% year-over-year growth?
I am sorry if I wasn’t clear on that. No, we do not expect the fourth quarter to be 0%. We expect the decline in revenue growth to have stopped.
Got it, got it. And then another question, you mentioned a longer length of stay, can you talk about that today versus say 3 years ago and 5 years ago how different it is?
Yes, it’s low single-digits, but it’s a very consistent slow increase in length of stay.
Your average today is just over 15 months, your average of everyone that has moved in and everyone that’s moved out in terms of length of stay.
Got it. Okay, that was helpful. Thank you.
Thanks, Michael.
Thank you. Our next question comes from Jeremy Metz of BMO Capital Markets. Your line is open.
Hey, guys. I was just wondering if you kind of look at your call it top 15 or so markets, which ones of those do you think inflect here in 2020 for revenues versus 2019 and conversely, which ones do you think still have some slowing to go? And I guess I am just trying to think of how that gives you kind of confident, Joe and some of the comments are on the light at the end of the tunnel and finishing the year here flat?
Yes. Jeremy, maybe starting on somewhere that could potentially hurt us to the downside you are starting with the New Jersey, New York market. It’s one of our top three markets and we saw revenue growth slow throughout this year and we are assuming that it will continue to slow next year. So, that’s a very big market for us. Another assumption is Los Angeles, Orange County continued to slow and another big market for us on the upside, potentially you saw Dallas tick up this quarter. Not necessarily one quarter doesn’t make a trend, but we are maybe optimistic that Dallas has seen bottom. And Atlanta and Miami are other markets that have seen a lot of supply and we are hoping are bottoming out and have potential upside that are both big markets for us.
Alright. Switching gears, just on the loan book, I am just wondering what sort of yields you are getting on those and how the reception has been so far? And if anything it did seem like late last year, maybe the pipeline was a little larger, maybe that was a wrong read, but just how that’s going and then received in the market?
Yes. No, our pipeline is pretty robust. We have I think about $24 million, $25 million in signed term sheets. We have another $130 million of term sheets outstanding and are back and forth on another $150 million with the loan. So don’t know how many of those will hit, but we are very active. There is a lot of activity. The yields on the loans depend on whether we keep the whole loan or involve our debt partner to take the value piece if you will. So if we keep the whole loan, our yields, not including management fee and tenant insurance is 5% to 6%. And if we placed the A piece with our loan partner, our yields are 10% to 11%.
Got it. And last one from me is just on the third-party and just adding stores or platform, you mentioned the frequency with which you are adding them. So how are you thinking about further growing the third-party platform from here. I know in the past you used to take almost any contract to grow and scale the business. But now that you’ve got scale in many markets, are you turning more down today and being more discerning at this point?
I hope we didn’t – I hope our guys didn’t take any contracts like that. I think you are absolutely right. We are being more discerning today and we are turning away on lot more properties either because of saturation in the market where that property is, because it’s too big and it’s too small in some cases, we don’t believe in the project. If it’s a development, we frequently tell people, we don’t think they should build it and we’re not going to manage it if they do. It’s – but we still growing that platform at a good pace. We expect to have similar growth this year as last year and we are doing it without compromising our pricing structure. I know when some of our peers entered the business, there was a lot of concern that our pricing structure would have to change to continue to be – to attract the number of new properties that we attract, and it turned out that that’s not the case. We are able to maintain our pricing structure and grow at the rate that we’ve been growing at.
And are the bulk of those still kind of on the development lease upfront, that’s the right way to think about?
It’s probably like 70:30, 70 development and 30 existing.
Great. Thanks, Joe and thanks, Scott.
Sure.
Thank you. Your next question comes from Jonathan Hughes of Raymond James. Please go ahead.
Hey, good afternoon. Joe, earlier you mentioned continued revenue growth deceleration this year similar to last year, but last year’s initial guidance implied only 100 basis point of revenue growth deceleration. Your guidance for this year implies a greater than 200 basis point decel. So I am just trying to understand the level of conservatism that’s embedded in guidance. And I realize it’s better to set the bar low and then maybe raise throughout the year. But the outlook given last night just seems, I’d say, either concerningly lower or incredibly conservative.
So I guess it depends on where in the range you end up with. And we also ended December lower than the full fourth quarter. So – our budgets actually project flatter de-acceleration in 2020 than in 2019.
Okay, because December was lower than the average for the entire fourth quarter. Okay.
Yes. You started the quarter closer to 3%. And then if you average for the quarter, 2.5%, you can guess that you ended at closer to 2%, which is our starting point for 2020.
Got it. Okay, that’s helpful. And then when you do your budgets, obviously they come in and get rolled up into the overall portfolio. Do you then take that and apply a, say, 50 basis point haircut and that’s what is issued as initial guidance or are the ranges given in guidance strictly from the property level budgets with no adjustment from the team in Salt Lake City?
So our budget process involves both, as you point out, budgets coming up from the field and also a top-down approach from our Financial Planning and Analysis department. So it’s both – both have been put into the budgets. We don’t have a set kind of deduction. For whatever reason we don’t do that. We try to produce guidance that we believe in and that we believe we can achieve.
So if there is a big divergence between the top-down and bottoms-up, I mean, did you, obviously, go through and reconcile that or do you pick one over the other?
No. Their job is to reconcile that.
Okay, alright. And then last one for me, have you looked at increasing the magnitude or frequency of renewal rate increases since existing tenants are seemingly stickier than ever as a way to offset some weaker move-in rates?
So I would tell you one thing about Extra Space is that we are always trying to be innovative, and test new and different things across all aspects of the business, including rate increases.
Can you give any details on that or is that a proprietary to Extra Space?
I don’t think I’m going to give any details on that.
Alright. Fair enough. Thanks for the time.
Thank you.
Thank you. Our next question comes from Todd Thomas of KeyBanc Capital Markets. Your line is open.
Hi, thanks. Just first question, Joe, back to your comments that revenue growth flattens out late in 2020 that suggests growth might begin to recover in ‘21 relative to ‘20. What gives you confidence at this point in the year ahead of the peak leasing season that growth will in fact flatten out or the deceleration will flatten out late in the year?
So we’ve been producing estimates of performance – annual performance at this time of year for many, many years. We have a great deal of experience in how our stores perform during different times of the season. We have, what I think is, a really good track record of at least achieving our guidance and therefore, have a great deal of confidence in the numbers we put out.
And does that – thought process, does that include a recovery in move-in rates and also in asking rates sort of across the system nationwide?
So rates are, of course, one input into revenue. And in many cases, rates will be the driver of the performance we project, but we have other tools as well that we can use.
Okay. And then Scott, I’m just curious where is the SmartStop preferred the dividend income in the guidance or where does that flow through the P&L, I guess – how is that being treated or accounted for? Is that in interest income or is that somewhere else?
It’s – right now, it’s in management fees and other income. It really is in management fees, but I mean, in other income but we roll it up into that bucket.
Okay. So that’s included in the $69 million to $70 million assumption for that line, got it.
Yes.
Okay. Alright, thank you.
Thanks, Todd.
Thanks, Todd.
Thank you. Our next question comes from Ronald Kamdem of Morgan Stanley. Your line is open.
Hey. Yes, two quick ones from me. Just on – going back to the expense side, on the property taxes, thinking about sort of the total expense guidance and what property taxes are going to do. Can you give us a sense of how much room is there to outperform based on going back to the various counties in fighting taxes and so forth?
Yes. So we continue to appeal our major increases, your hard part is with cap rates being as low as they are. Sometimes we don’t have a lot of a defense there in terms of values. But we have seen the appeals process being much longer today than it used to be. Some of those actually have to go to court and things like that. So we have appealed things. Our current guidance does not have a significant amount of upside in terms of appeals and winning those.
Helpful. And then going back to the marketing spend, I think previous quarter, as you talked about some of the public as well as private operators making that environment a lot more competitive in terms of online advertising. Can you just provide any more color on what you’re seeing on the marketing spend side? Is there any – is pricing – any room for pricing alleviate or is it getting more competitive, is it sort of the same as last year, just trying to get a sense there? Thanks.
We had seen, to use the word again, a flattening in – increases in auction market, if you will and we hope that continues. But the real test will come during leasing season.
Got it. Thanks. That’s all from me. Thank you.
Thank you, Ron.
Thank you. Our next question comes from Spenser Allaway of Green Street Advisors. Your question please.
Thank you. You guys have talked a lot about your guidance for ‘20 and most of the key levers. But could you just provide a little bit more color around your underlying assumptions regarding new supply? And when you think we will ultimately see the negative impacts from new supply peak?
So, our assumption for 2020 is that supply is down. We are seeing less than we saw in 2019. We still think that supply peaked in 2018. We’ve peak impact probably coming in ‘19 and ‘20. We saw our rate of deceleration be steeper last year than it is in 2020. So it is all kind of in your definition of when that peak impact is.
Okay, thank you.
Thank you.
The next question comes from Steve Sakwa of Evercore. Your line is open.
Thanks. Joe, I guess I wanted to go back to an earlier comment you made about not seeing much in this way of disruptors in the industry. And I can appreciate companies like MakeSpace and Clutter right now are reasonably small and have a relatively small footprint, but I’m thinking also UPS has kind of thrown its hat in the ring. I’m just curious how you’re sort of thinking about these different competitors in some of your different markets?
Yes. We’re certainly keeping our eye on and we are monitoring impact on our stores in the markets that they are active and keeping our eyes wide open. We are not dismissing them. But right now I just don’t see it and I don’t see huge barriers to entry into those businesses if it turns out to be something that our customers want. I also look at those companies and I see Clutter buying hard assets in New York City. And that indicates to me a change in business strategy and that’s usually not a positive indicator.
Okay. And then this is really a small technical question for Scott. I just – on the guidance page your 1-month LIBOR assumption is slightly lower than where our current 1-month LIBOR sit. So, are you just looking at a kind of a forward curve that suggest rates are going down, or do you have kind of a different view about the curve or just curious how sort of that assumption was kind of determined?
It’s an average for the year and we look at the forward LIBOR curve, which does imply that rates are going down.
Got it. Thanks.
Thanks, Steve.
[Operator Instructions] We have a follow-up from Ki Bin Kim of SunTrust. Your line is open.
Thanks. Just a follow-up on Steve’s question, did you guys talk about your refinancing plan for $1 billion that you have of debt that is rolling this year?
Yes. Ki Bin, so we have $1 billion coming due this year, some of that has extensions. About $700 million is what really needs to get taken care of this year without extensions. The majority of that is a $575 million convert that comes due in the first part of October. We will likely take that out with a combination of some most likely bond offerings and our line of credit, and then terming that out over time. So we will look to be opportunistic on when we approach the market for those.
And just for simplicity sake, what is the average interest rate that is maturing versus what you would look to refinance that?
Yes. So the piece that’s coming to $575 million is 3.8%. And our assumption in our model today is closer to 3.25%, but there is – if rates stay low where they are today, there is some potential benefit. And we’re also looking at more term we are looking at going 10 years versus 5 years.
Okay. And just last question I realized when I asked you earlier about January or February rates, I don’t think that we heard an answer. Any insights you can share?
So rates are similar to where we ended the year. They are slightly negative to flat. Our occupancy is also – we’ve continued to have that delta in occupancy year-over-year. So we continue to keep things keep things full and rates are as good as they were at the end of the year to slightly better.
Alright. Thanks again.
Thanks, Ki Bin.
Thank you. At this time, I’d like to turn the call back over to Chief Executive Officer, Joe Margolis, for closing remarks. Sir?
Thank you. Thank you everyone for your participation today and interest in Extra Space Storage. We certainly understand everyone’s concern over declining revenue growth and impact of new supply in the market. However, I think it’s important to step back and look at some big picture items. Even in the toughest part of the development cycle, we project to deliver over 4% core FFO growth, which, given where we are, I would say, is not a bad result. We can do so because we have many tools, including innovative ways to grow to support this FFO growth, and we will continue to explore and execute smart innovative strategies with good risk-adjusted returns. Even with all this new supply delivered, we are at an extremely high occupancy, and this is a direct result of our ability to acquire customers. Our machine works. We have positive same-store revenue growth, even though two-thirds of our property have had new supply delivered in their markets. We have an improved rated flexible balance sheet and access to multiple sources of debt and acuity capital to allow us to take advantage of opportunities presented in the market. And we have been disciplined in the acquisition market. We’re not stretching to get deals. We are not buying things just to grow. We are remaining very disciplined and we continue to grow our management plus business without compromising our pricing structure. So, I know we are in difficult times, but I am very excited about our opportunity to outperform in 2020 and beyond. Thank you very much.
Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.