National Storage Affiliates Trust

NYSE:NSA

Earnings Call Transcript 2021-Q2

[Operator]

Greetings, and welcome to the National Storage Affiliates Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now pleasure to introduce you your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you. Mr. Hoglund, you may begin.

[George Hoglund, VP of IR]

We'd like to thank you for joining us today for the second quarter 2021 earnings conference call of National Storage Affiliates Trust. On the line with me here today our 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. They contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, August 4, 2021. 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.

The Company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional detail concerning the 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.

[Tamara Fischer, President and CEO]

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 second quarter results. I'd also like to thank our shareholders for their ongoing support which allowed us to complete a very successful upsize 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% are consistent with flash numbers we provided in conjunction with our recent equity offering. A healthy fundamentals and active transactional environment, which led to a strong first quarter really kicked into high gear during the second quarter. And these positive trends continue into the third quarter. We're at record high levels of occupancy, street rate growth is dynamic. And 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, and we expect the pace of deals coming to market to remain elevated in the second half. During the second quarter, we invested $270 million in 20 properties, bringing first half volume to 43 properties valued at $435 million. And year-to-date, we've closed or have under contract 100 plus properties valued at nearly $900 million. Cap rates on these deals ranged from about 5% to 7% and vary based on location sources 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. But the weighted average cap rate on all of our transactions closed in under contract is in the mid-to-high 5 cap range, we continue to see meaningful competition for transactions and the amount of capital seeking to establish or expand a position and self storage continues to drive cap rate compression, especially on larger portfolios.

Fortunately, though, about two-thirds of our deals closed 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 second quarter 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 a $1 billion. Brandon will provide more color on a 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 were 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?

[David Cramer, EVP and COO]

Thanks, Tammy. Since the start of the year, we've seen improvement in almost all key metrics. In my 20 plus years in the self storage business, I've never seen fundamentals quite this strong. Occupancy levels continue to reach new highs, with a lot of to implement significant increases in our street rates, which ended in July about 28%. Over the previous year. We continue to be very assertive by 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%. For the current year increase of 28% at the end of July would apply about a 20% street rate growth since 2019. We ended the second quarter with record occupancy of 96.7%, which further increased to 96.9% at the end of July. It's on the current strength we're seeing it appears though occupancy will remain elevated relative to last year. But the next few months will give us a clearer picture.

Our guidance assumes a seasonal decline of 200 basis points to 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 in 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 more developers looking for projects given how strong fundamentals are. We do expect to look at development activity to pick up. The 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 as a new competitor in the three mile radius, and approximately 48% within the five mile radius. These figures are flat and slightly down from year-end 2020. And currently robust demand is mitigating the negative impacts and supply in these markets.

I'll now turn the call over to Brandon to discuss financial results and balance sheet activity. Brandon?

[Brandon Togashi, EVP and CFO]

Thank you, Dave. Yesterday afternoon, we reported core FFO per share $0.55 for the second quarter of 2021, which represents an increase of 34% over the prior year period. Second quarter 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 average 95.4% during the quarter, an increase of 760 basis points compared to 2020. While this is the highest growth for same store revenue in NOI, as well as core FFO per share that we've ever recorded 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 a pandemic. Our 2Q the two-year average same store revenue in NOI growth is 7.6% and 10.2% respectively, the 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.Net debt remains below historical averages, the fee income has recovered from last year, it still remains below historical norms. Regarding OpEx, same store growth accelerated in the second quarter to 4.3% due to the challenging year-over-year comp, 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 second quarter, partially due to the challenging comp, because we had pulled back on all that absolutely necessary expenses in the second quarter last year. Property taxes also increased 1.4%. These increases were partially offset by utilities that declined 3.6% and marketing costs were down 6.4%. Clearly, with the elevated occupancy and strong demand that we're experiencing, there is a reduced need for marketing spend.

Now moving on to guidance. As Tammy touched on earlier, the strong fundamentals and acquisition activity during the second quarter, combined with everything we're seeing so far in the third quarter, give us confidence that this positive momentum will carry throughout the second half of the year. While we previously highlighted as challenging second half comps, now on as challenging given the strength we're seeing in occupancy and REIT growth.

We're thus increasing full year 2021 guidance as follows. Core FFO per share increases to a range $2.11 to $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% to 12.75%, with the midpoint implying that the second half of the year shouldn't be just as strong as the first half. Overgrowth of 2.5% to 3.5% and NOI growth of 15% to 17%.Expected acquisition volume goes to a new range of $1.1 billion to $1.3 billion. Additional assumptions regarding guidance are outlined in the earnings release.

Now turning to the balance sheet, we were active in the second quarter and subsequent quarter end on the capital front, utilizing our ATM to rise over $140 million of equity. We also access the private placement market to issue $180 million of notes. And of course, most recently we completed a very successful follow on equity offering of 10.1 million shares of $51.25 per share for net proceeds of approximately $500 million. We were very pleased with the execution of the transaction was upsized and the green shoe was exercised in full. All of the proceeds from these capital raises were used to repay borrowings in 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 but the net debt to EBITDA ratio of 5.4 times at the end of the second quarter. 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?

[Operator]

Ladies and gentlemen, we will now have our question-and-answer session. [Operator Instructions] One moment please, while we poll for questions.

Our first question comes from Neil Malkin with Capital One Securities. Please proceed with your question.

[Neil Malkin, Capital One Securities]

Hello, everyone. Good morning and fantastic quarter. Brandon, congratulations, I believe you recently had the birth of your daughter. So that's great. And congrats.

[Brandon Togashi, EVP and CFO]

Thanks, Neil. Appreciate on both fronts.

[Neil Malkin, Capital One Securities]

Sure. So Yes, first question. Can you talk about what your roll up spreads were or the gap between move ins and people who moved out in the quarter? And then kind of what trends are you seeing into July and in the third quarter, what do you expect for street rates and similarly that that roll up spread?

[Brandon Togashi, EVP and CFO]

Yes, Neil. This is Brandon. Thanks, again, for the first comments. And 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. So if you ran into that or anyone else apologies there were some technical difficulties. On your question. We talked on our last call about the spread between moving rates for new customers relative to move out rates, decreasing such that it was near flat in Q1 and actually flipping positive for second quarter that spread was about a 6% roll up. And here through the early part of third quarter that has only increased we look at year-over-year. Very strong the quarter.

[Neil Malkin, Capital One Securities]

Yes, fantastic. Maybe just on acquisition market, you talked about more things coming to market, as the month progresses higher and higher deal activity. Can you just talk about maybe some of the larger assets and portfolios, we've heard from a couple of brokers that there are, I think, a couple of billion dollar portfolios or very large portfolios out there. Please comment on that. If those portfolios can be potentially split up or what the process looks like for you guys, just given your very, very low cost of capital?

[Tamara Fischer, President and CEO]

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. And we've heard the same as you that said, there are a number in that billion plus up to $2 billion value range coming. We -- 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 in good geographic fit for us, we'd be keenly interested. And in terms of how we might think about putting it together, we can probably do it on balance sheet, if it's up to a $1 billion, anything over that we might look for a joint venture partner to work with. But 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.

[Neil Malkin, Capital One Securities]

Okay, great. Well, that's all for me. Thank you. And again, great quarter.

[Brandon Togashi, EVP and CFO]

Thanks Neil.

[Operator]

Thanks, you. Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question.

[Juan Sanabria, BMO Capital Markets]

Hi, good morning. Just hoping you could talk a little bit more about the calculate environment. I think you talked about mid-to-high 5 for the transactions or the acquisitions to-date. But just curious if that is a going in yield or stabilized yield and if it's a stabilized yield, what the going in number is and kind of the path to get there.

[Brandon Togashi, EVP and CFO]

Juan. This is Brandon. So the 58 that Tammy referred to that's a year one going in. So for us that's NOI before with our structure, there's a management fee percent of revenue management fee that is paid to the pros. So that's before that cost, but it's that NOI year-one over the total investment. And 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. So there is some assets here and there that we would consider non-stabilized there are going to be in that number, in that year-one going in 58.

[Juan Sanabria, BMO Capital Markets]

Very impressive, okay. And 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. So just curious on how we should think about that going forward. And 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 your rental programs, or however you want to name them or call them. Just curious and how you guys are seeing that line amidst all the wage pressure and difficulty finding labor?

[Brandon Togashi, EVP and CFO]

Yes, sure. Juan, its Brandon again. Soon marketing costs, they were down, same store costs were down year-over-year for the second quarter, just over 6%. And also in the first quarter, I believe that number was down year-over-year, about 4%. So year-to-date, six months, same store, marketing costs are down. And so 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 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. So there's a comp, that I would point out for us, our actual dollar spend in the second quarter for same store was actually down from Q1 sequentially. But that increase year-over-year 5.6%. That's really up against a tough comp from Q2 of last year.

So, when you're serving 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 manage their staffing. So just that's one heads up. But then going forward, I would just say we're certainly speaking a lot of the same efficiencies. And 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. And I should probably pause here and let Dave chime in on some of the other potential efficiencies were exploring.

[David Cramer, EVP and COO]

I think what I would add one, as you look at going forward with payrolls, great numbers we're putting up as well, our employees have an incentive program. And so 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. And so 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. And so 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 position as well 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. So 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 doing the environment we're at. And so our online leasing programs 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, I'd like to see those numbers increase, which obviously leads to efficiencies around the call center, efficiencies around our store personnel. And, the brand has a lot of lessons learned. And there's a lot of a lot of more runway for us here, I think to improve.

[Brandon Togashi, EVP and CFO]

And then Juan last thing, Brandon again. So for the six months same store, payroll and related costs were up 2%. And so 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 us 2.5% to 3.5%.

[Juan Sanabria, BMO Capital Markets]

Thanks very much. Great color.

[Brandon Togashi, EVP and CFO]

Yes. Thank you Juan.

[Tamara Fischer, President and CEO]

Thank you.

[Operator]

Thank you. Our next question comes from Wes Golladay with Baird. Please proceed with your question.

[Wes Golladay, Baird]

Hi, everyone. When we looked at 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 will be items such as maybe students going back to school taking their stuff out of storage or other items like that?

[David Cramer, EVP and COO]

That's a great question. I think first of all, we thought 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 looked at the back half of the year, we guided towards 200 basis points 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. And so that 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 various sort of increases that could cause some movement, I think the positive is right now, the rental velocities are super strong. And so as we're moving folks out, they're moving right back in. And, we're sitting here, still at 97%, almost 97% occupancy at that point in time, this should be the peak of the season, that 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.

[Wes Golladay, Baird]

Great. And then, like you mentioned, you had about 48% of your portfolio has to apply within five miles, do you think this number will move, I guess, lower as we go up in the next 12 months?

[David Cramer, EVP and COO]

I certainly think it could, the new deliveries are slowing. And 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 a lot of certainly a lot of interest in our product and a lot of people, liking our product, but 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. So I think you might see that number declined a little bit in the next 12 months.

[Tamara Fischer, President and CEO]

Yes, I think the only thing I'd add to that Dave, is that the secondary and tertiary markets were 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. So the least historically, we've been somewhat protected from the new supply cycle.

[Wes Golladay, Baird]

Got it. I think in the prepared remarks, you mentioned yet unprecedented -- seeing unprecedented amounts of assets coming to market. Can you maybe talk about how your conversations with potential process is going on right now? Are they eager to sell or transact ahead of potential tax changes?

[Tamara Fischer, President and CEO]

I think with our potential pros, we continue to have conversations with private operators who would be good add to our group of participating regional operators. But 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 the decision to sell or stay in the business and continue to grow. But basically selling all of your assets and into NSA and becoming part of a team is a very big decision. So I just said it's not really changing the cadence of our discussions.

[Wes Golladay, Baird]

Great, thank you.

[Operator]

Thank you. Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

[Unidentified Analyst]

Hi, there. This is Robby 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? And do you have a long-term target about how much exposure you would want to Puerto Rico?

[Tamara Fischer, President and CEO]

Well, thanks for the question. I appreciate it. And 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 a portfolio that we just acquired in the second quarter, that portfolio was sourced off market by our pro who's built strong relationships down there. And what we liked about adding to our portfolio, there was the ability to build scale. And so on the whole we know, we like Puerto Rico and we see it as a good long-term play.

[Unidentified Analyst]

Perfect. That's it for me. Congrats on a great quarter.

[Tamara Fischer, President and CEO]

Thank you.

[Operator]

Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Please proceed with their question.

[Steve Sakwa, Evercore ISI]

Great, thanks. So 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 bit differently?

[David Cramer, EVP and COO]

Great question, Steve. With the strength of what we're seeing and then the continued strength, the 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. And so 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, where we may have kept out and not done looking back at that, our revenue management platform, which is 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. So at this point in time, I would say we're probably a little bit more assertive in amount and how quick we're implementing the rate changes.

[Steve Sakwa, Evercore ISI]

And is there anything you can tell on customer behavior about rent increases, is there a sort of a threshold 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?

[David Cramer, EVP and COO]

We haven't come across anything yet. Like I said, 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 $1 amount that we may feel would be uncomfortable to the tenant. So we're replacing some of those boundaries today. But we haven't come across anything. And anywhere across the country, my mind you and all of our municipalities and all of our communities, we've been testing a lot of different projects, and nothing standing out that what we're doing is caused any type of change in behavior at this point.

[Steve Sakwa, Evercore ISI]

Great, thanks. That's it for me.

[David Cramer, EVP and COO]

Thank you.

[Operator]

Thank you. Our next question comes from Smedes Rose with Citigroup. Please proceed to question.

[Smedes Rose, Citigroup]

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. So I mean, you're on target, I guess, to have over 1,000 properties now between wholly-owned and unconsolidated? What -- are they all on that platform now? As I recall, the pros have the option to be on the platform or not. And it's just wondering kind of, is there an opportunity there to add more to the platform and kind of where do you stand on that?

[David Cramer, EVP and COO]

That's a great question. And one of the things we've been very pleased with through our best practices and through our really a lot of our conversations over the last 12 to 18 months, is the acceptance level of some of these platforms and are pros are doing a wonderful job. And they have built some really great teams, but 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. So the pros of getting much better data than they've had, and they're getting much better results. And so we're very pleased there.

[Smedes Rose, Citigroup]

So you would expect kind of incremental take up I guess, for that 80%?

[David Cramer, EVP and COO]

I would think so. Yes.

[Brandon Togashi, EVP and CFO]

Yes, Smedes, this is Brandon. The one thing I would say is that, the pros that maybe have an onboard run to our specific in-house bill platform. I mean, they're still running, certainly revenue management strategies, similar things that they've maybe done as private operators. And so they they're still pushing rent increases to customers. And so there's still, I do believe there is opportunity. I just wanted to make that clear.

[Smedes Rose, Citigroup]

Okay, thank you David that's a perfect.

[David Cramer, EVP and COO]

Yes, thanks Smedes.

[Operator]

Thank you. [Operator Instructions] Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question.

[Ronald Kamdem, Morgan Stanley]

Hey, congrats on the quarter. And now Brandon congrats on the new board. Just on the thinking about, historically there were a couple markets that have been over supplied. 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 12 to 18 months has done to those markets?

[David Cramer, EVP and COO]

It's a great question and I'm not sure we have a clear line of that of how many maybe years of supply we've shaved off. As the economic all the drivers that are going on right now Portland and Oregon and a couple these other markets, Phoenix being one I've just seen tremendous results. You look at these all throughout Oregon, they're just at the top of the list and so we look at it this way is, there's certainly still pressure there. If you look at Portland's overall occupancy, it's still about 3 points less than the overall portfolio, which is kind of the presence of there is some competition there. But the team has done a wonderful job really maximizing where they want to be positioned, well, how many rounds they want to get how many consumers they want to get in and done a great job driving. Occupancy and revenue and all the other things that come with that. So I don't know that I could really answer how many years and we think we've shaved off. But there's certainly the demand factors are mitigating some of that competitive pressure. And so for Oregon and a few of these other places, numbers are solid.

[Brandon Togashi, EVP and CFO]

And it plays Ronald, it plays into, the answer Juan's earlier question as well about, that 48%, we talked about on the five mile I mean that's $200 million, in our responses, the fact that that's some of what's happened in the past year is certainly accelerated the absorption. So you're hitting on the right thing, it's just, it's tough to put a number.

[Ronald Kamdem, Morgan Stanley]

Got it. And then, not to beat sort of the acquisition question to debt. But, you double the guidance, right. And I think you talked a little bit more just, there's just more activity going on. Is that really the biggest changes and biggest drivers from three to six months ago? Just 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? Just some color there would be helpful?

[Tamara Fischer, President and CEO]

I think it’s a couple things run in good question. But what we saw in the first quarter, frankly, just continuing to accelerate into the second quarter and what we're seeing right now, and 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. So 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.

[Ronald Kamdem, Morgan Stanley]

Super helpful. Thanks again.

[Tamara Fischer, President and CEO]

You’re welcome.

[David Cramer, EVP and COO]

Thank you.

[Operator]

Thank you. Our next question comes from Joe [Indiscernible] Please proceed with your question.

[Unidentified Analyst]

Hi, good afternoon, everyone. And thanks for taking the questions. First of all, I 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 sale versus the higher prices that you're seeing now?

[Tamara Fischer, President and CEO]

So 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 storey assets, multi building in secondary and tertiary markets, I think that gives us a slight advantage. It's just well with our geography and for that reason, the cap rates might be a little higher than what others are seeing. But I'll tell you that in addition to that, we are also looking at newer assets that are in stabilization there, they're not quite stabilized yet, if we see assets like that, that are well priced and fit well, with our geography in place where we want to be long-term.

We'll go for it. And so 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. But 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.

[Brandon Togashi, EVP and CFO]

One thing. This is Brandon, and the one thing I would add is geographically, everything that we have, that we spoke about is ahead of us to close is very nicely complemented with the existing portfolio.

[Unidentified Analyst]

Okay, great. And then, 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 like longer length of stays shorter is a pretty consistent with the traditional customer base.

[David Cramer, EVP and COO]

It could be a variety of answers. But I'd say overall fairly consistent what we're seeing now that with a tight housing market, how long they're out of house, so you sold and you can't get your new house, in maybe the time you were thinking about receiving something around housing pressure as far as pricing, so maybe I wasn't able to afford the type of house, I was thinking of 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. And 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. And so, as this housing market in 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.

[Unidentified Analyst]

Okay. So Just lastly, for me, I figured I'd ask that with Delta variant cases beginning to rise across the country, and any noticeable difference in consumer behavior over the past few weeks.

[David Cramer, EVP and COO]

Nothing to speak of I know, we've gone back and we've kept all of our protocols in place. So we have a lot of that piece going on, we're seeing a little bit more noise around some of our communities about masking mandates, but nothing that we can really definitively say is going to, push economy one way or the other, keep in mind we’re able to navigate the pandemic last year very successfully. And so 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 deeming essential business last year. And I think that will continue should this thing really clear?

[Unidentified Analyst]

Okay, good. Thank you.

[David Cramer, EVP and COO]

Thank you.

[Operator]

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.

[Tamara Fischer, President and CEO]

Thanks. And to wrap up, I'd like to thank you again for joining our call and for your interest in 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 that may read in November. Thanks again.

[Operator]

Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation and have a great day.