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National Storage Affiliates Trust
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Greetings, and welcome to the National Storage Affiliates Second Quarter 2023 Conference Call. At this time, all participants are on 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 my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you. Mr. Hoglund, you may begin.
We'd like to thank you for joining us today for the second quarter 2023 Earnings Conference Call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions.
In addition to the press release distributed yesterday afternoon, 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, August 8, 2023. 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 details 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 Dave.
Thanks, George, and thanks to everyone for joining our call today. I would like to start by acknowledging and thanking all of our team members here at NSA and our PROs for their continued dedication and hard work. It is the significant contributions from our team members to drive our success and we appreciate everyone's efforts. Our continued focus on people, process and platforms is allowing us to improve our performance as we navigate very challenging comps and unusual environment for our sector. Our teams did a good job balancing the changing demand environment by effectively using all levers available to create rental opportunities and drive conversions.
Our customer base remains very healthy, portfolio is well positioned for long-term success, and our focus on key initiatives will enhance our ability to remain a leader in the self-storage sector.
Looking at the second quarter, we had a number of operational data points that we were pleased with, including street rate growth of 3.4% over the first quarter, contract rate growth increased 1% sequentially and 7% year-over-year. Our existing customer base remains resilient with average length of stay remaining well above historical norms. 50% of our customer base has now been with us for greater than two years. With that perspective, on average, our current tenant base has now been with us for over 40 months.
Our ability to implement ECRI remain strong at above pre-pandemic levels and insurance penetration continues to improve, increasing over 10% year-to-date. At debt was 2.1% of revenue and concessions were 2% of revenue, both below pre-pandemic levels. Overall, our operational performance is strong in many areas, and our customer base remained stable over the quarter. It is worth pointing out that Three rates in July were still 18% above 2019 levels and contract rates in July were 30% above 2019 levels.
We had a couple of areas that did not meet our expectations. The spring leasing season was weaker than we originally forecasted, resulting in occupancy levels that were below our initial projections. Movement activity was below the levels we had anticipated due to several external factors. First, we experienced a disappointing change in the amount of move-in demand due to the slowing housing market. Home sales are down across most of our markets. This change in volume of housing sales has temporarily decreased the demand for self-storage, which impacted our spring leasing season.
Although we expect this housing trend to eventually subside, it has put short-term pressure on our business. We also had a very competitive environment for the acquisition of new customers. Our teams were navigating a dynamic street rate environment along with elevated marketing spend across the sector. The number rental opportunity generated was below our expectations. And only did the rising interest rate environment put pressure on storage demand, it also put pressure on our interest expense, leading to less-than-expected core FFO for the second quarter.
We expect interest rates to remain a headwind for the remainder of the year. These factors have led us to revise our guidance, which Brandon will discuss later in the call. As we cycle past historically tough comps, in the back half of the year, we are confident our portfolio remains well positioned for future success. I want to highlight a few areas where we are focused on delivering both internal and external growth going forward. First, we remain focused on enhancing our customer acquisition and revenue management process and platforms. We continue to strengthen our team, and we're excited about the initiatives underway to optimize the online customer experience and front-end pricing.
Second, our investment in an improved net warehouse and the use of AI technology will continue to improve our ECRI program which drives our revenue growth once the customer is in the door. Third, we are actively working on repossession our balance sheet. We're exploring the various capital sourcing strategies that will enable us to become more opportunistic when the time is right. We are confident in our strategies will position the NSA to deliver healthy growth as we have demonstrated since our IPO.
I will now turn the call over to Brandon.
Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.68 for the second quarter of 2023, which represents a decrease of 4.2% over the prior year period. The year-over-year decline despite 3.4% growth in same-store NOI and 7.4% growth in adjusted EBITDA was due primarily to elevated interest expense given the rising rate environment. We delivered positive revenue growth of 2.8% on a same-store basis, driven by 7% contract rate growth.
Occupancy ended the quarter at 90%, up 20 basis points from Q1 and down 450 basis points year-over-year. Similarly, July occupancy finished relatively unchanged at 89.9%, which is also 450 basis points below last July. Our team did a tremendous job controlling expenses such that our growth in the second quarter was just 1.4%. Payroll declined 3.4% from the prior year period, while property taxes were down 1.5%.
These cost savings were offset by marketing expenses that grew 34% and insurance that grew 41% due to the policy renewal we had on April 1 in a tough market, which we discussed on our last call. We will continue to focus on minimizing our controllable expenses, allowing us to slightly lower our guidance range for same-store OpEx growth. On the acquisitions front, the second quarter was fairly quiet given the wide bid-ask spread and elevated cost of capital. During the quarter, we acquired two facilities totaling $14 million that will be run as Annexes to existing locations and therefore, not increase our store count.
The larger of these acquisitions was from our captive pipeline. Subsequent to quarter end, we acquired one property for $18 million, also out of our captive pipeline. Going forward, we will remain opportunistic and patient as we look to continue to grow externally.
Turning to the balance sheet. During the second quarter, as previously announced, we issued $120 million of five-year unsecured notes in a private placement with a face coupon of 5.61% and an effective rate to us of 5.75%, inclusive of the impact of pre-issue hedges. Subsequent to quarter end, $175 million of swaps expired and we entered into new swaps with a notional value of $100 million, resulting in a net $75 million of incremental floating rate exposure.
Today, approximately 20% of total debt is variable rate, mostly related to our revolver. Going forward, as Dave mentioned, we will take further steps to free up some capacity on our line of credit, which will naturally reduce our floating rate exposure. At quarter end, our leverage was 6.1 times net debt to EBITDA, down sequentially from 6.3 times at the end of the first quarter and comfortably within our range of 5.5 times to 6.5 times.
Now moving on to guidance. As Dave mentioned, when we initiated full year guidance for 2023, we assume that occupancy would return to more typical seasonal patterns with the trough in February and then rising a few hundred basis points until peaking in the summer months. Instead, occupancy has been relatively flat all year. This caused our Q2 results to be below our internal projections and led us to revise expectations for the remainder of the year. Our updated guidance ranges as outlined in the earnings release are as follows:
Full year same-store revenue growth of 1.5% to 2.75% with a new midpoint of 2.13%. Same-store operating expense growth of 4.5% to 5.5% and down modestly from the previous midpoint. And we now project same-store NOI growth of 0.25% to 1.75% with a new midpoint of 1%. This leads to a core FFO per share range of $2.63 to $2.69 with a midpoint of $2.66. While the midpoint represents a 5% decline from 2022 results, primarily due to interest expense, and also represents an increase of 73% over our FFO per share in 2019, the year prior to the pandemic related impacts on our business.
Assumptions that we've modeled into the midpoint of our revised guidance is a return to normal seasonality. This includes 250 to 300 basis points of occupancy loss by year-end and street rate moderation of 8% to 10% from the end of the second quarter. Any deviation from these assumptions up or down would move us away from the midpoint. Thanks again for joining our call today.
Let's now turn it back to the operator to take your questions. Operator?
[Operator Instructions]. Our first question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Good afternoon. Thanks for taking my question. In the prepared remarks, you mentioned you were looking to reposition your balance sheet. Can you provide a little bit more detail into what you expect to do and how that's going to free up capital?
Thanks for joining the call. It's Dave. Yes, I'm happy to dig in that a little bit. I think of it this way, since our IPO, NSA has been a leader in external growth on a relative basis. Much of that has been driven through our multifaceted acquisition strategy, and we've increased the size of our company substantially. With that growth, we've built a really nicely diversified portfolio across 43 straits in Puerto Rico, with exposure in primary and secondary markets.
That external growth has led to obviously attractive FFO and NOI growth, which has benefited all of our shareholders. Currently, the external growth opportunities are limited in the time we're in today, given it's time to really evaluate our internal asset management. And as we look going forward, we intend to look very closely at our portfolio determine if there are properties or portfolios or even markets that are noncore to our strategic focus.
Now this will give us an opportunity to unlock by selling properties and unlock value, recycle capital in the core growth strategies or even help us deleverage our balance sheet. Also, attractive asset opportunities inside the portfolio, we're studying very hard expansion opportunities, redevelopment opportunities and really looking at our unit configurations to see if we can find opportunities to creatively grow FFO and really push occupancy to higher levels and doing unit reconfigurations.
We continue to explore their avenues of capital. You look at joint venture opportunities with private capital partners, we have an abundance of people looking to get into this industry. These ventures would give us access to capital to fund future growth, possibly delever as opportunities present themselves. The portfolio capitalization is a great access to capital without going into equity capital markets.
We could contribute wholly owned properties and new joint venture vehicle with a private institutional investor. We can then redeploy that new capital and opportunities and to leverage our balance sheet if that's the right opportunity. Adding these areas to the focus -- our focus on people, process and platform initiatives that we have, we believe will well position us for future opportunities and success.
Got it. That's really helpful. And my second question is on ECRIs. As we understand that street rates play a role in the ECRI strategy as you look to move customers back to or above street rate. So what point does the pressure on street rates start to weigh on the ECRI strategy to the point where you may need to reduce the magnitude of rent increases from it?
Really good question again, Michael. What I would -- I'm happy to report, and I think what we're pleased with is our cadence and the level of rate increases that we're giving today still remain above pre-pandemic levels, and we haven't had to alter that cadence at all. We're not getting any type of pressure from consumers, our move-out activity isn't changing as far as the test groups and the non-test groups. And so, we're pleased with that cadence.
We're not afraid to be above street rate. I mean street rates are very volatile. And I think this year, they've been more volatile than I've seen in a long time. And we're hoping the back half of the year, people will find their footing and the street rate volatility will settle down a little bit. And I think that will give us strength as we go into the back half of the year as far as that rate volatility, but right now, we have a better platform we've ever had. We've invested a lot of dollars around new team members and additional team members and new platforms. And that ECRI program is really, really strong for us in paying dividends on our existing customer base.
Thank you very much. Good luck in the back half.
Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.
Great. Thank you. On the last call, you discussed some markets that were a bit weaker. I think you talked about Vegas, Phoenix, Portland, Colorado Springs. I guess, what are you seeing today in those markets or are there other new weak markets or maybe even opposite strong markets to discuss?
Very good question, Jeff, and thanks for joining. I'll kind of break it down as Mark you discussed. We actually have found a little bit of traction in Portland where we've been talking about Portland for quite a while, having a lot of supply, a number of years of supply starting before the pandemic. And obviously, the pandemic help mask some of that supply pressure. And as we come out of pandemic, we've got a little traction around occupancy. We've done a little traction around rates and Portland actually had some positive revenue growth for the second quarter, which we're pleased with.
Still lots of ways to grow, still needs to grow to that supply piece, but we think we've come maybe just a little bit of footing of maybe some stabilization and now we'll have to work through the existing supply. Vegas and Phoenix are really -- they were red hot markets during the pandemic. There was a lot of supply coming online in '19, '20 and '21 in both those markets.
They're also feeling pressure from the housing slowdown, both really good markets. We're very happy with those markets, our portfolios are well diversified in the markets, but they're going to face some near-term pressure because of the supply and really the change in the housing market and around movement that's going on in our country.
We pointed out some hot markets. We're really pleased with South Texas down around McAllen and Brownsville in those places, well above portfolio average Oklahoma City, well above portfolio average. And I would also point to Atlanta to market, we've been talking about having some supply pressure, but Atlanta had probably one of our largest occupancy decreases on an average of 710 basis points but still put out a 4.8% revenue growth. So, I think our teams did a wonderful job balancing occupancy rate, marketing spend against a very tough occupancy comp in that market.
Okay. Very helpful. So, my follow-up then, I guess, is on the occupancy loss and just confirming exactly what's happening there because you talked about the strength in the existing customers. We heard that from your peers. I guess maybe focusing on Atlanta or pick anywhere like, then what exactly is happening with the occupancy loss because it is a bit more severe than what your peers have seen year-to-date?
Yes. It's a good question and one we talk often about it in our shop. If you think about the pandemic, our run-up from an occupancy perspective game was probably double that of our peer group. I mean from where our portfolio started, pre-pandemic to where it finished, we grew 850 basis points in occupancy, which is uncharacteristic for our portfolio and our markets. And as we come out of the pandemic, we're talking about how do we -- where are we going to settle back down and where do we find our soft landing? And we think we found that occupancy level that we think most of our markets are going to be comfortable operating in.
And so, in some ways, you might think that this has been a prolonged summer season where it started in back half of 2020 ran all the way through 2022 and now we're coming off those highs. And so, for us, I think the occupancy loss looks worse because our portfolios were not as occupied going in. And when we operate in our markets today, we're finding our footing between the revenue goal because that's what we're trying to solve for, and the balance of occupancy and rate. And most of our markets are pretty -- we're operating well within the comfortable levels of occupancy that we think our markets typically operate in.
And Jeff, this is Brandon. The other thing I would just add is for the second quarter, our Sunbelt markets outperformed the non-fund belt. So, the Sunbelt markets on that revenue growth of 2.8%. They were above that portfolio average. The non-Sunbelt markets were below. And then similarly, our secondary markets, call it, NSAs outside the top 25. They were above portfolio average outperformed the top 25 markets in our portfolio, which were below that 2.8% rev growth.
So just from like a -- we've taken questions about how those secondary markets are performing and to your point about relative to peers. I just wanted to point that out because that was the case for Q2, very consistent with Q1, and we included some five-year trailing information on same-store performance across those splits in the June Nareit back the our website. So, I just want to call that out.
That's very interesting. I know it's two questions, but if I could just then ask on occupancy, you're saying you feel like you have stability today where you stand, let's say, through the rest of the year? It sounds like you found that stability, just to confirm.
We are still forecasting. So, if you look at our guidance in the back half of the year, we're still forecasting a normal seasonality of loss of occupancy in the back half of the year. We did not peak as high as we thought in this summer. And that's around what we discussed moving around the country and all the things around the rate environment and stuff that were going on in the spring leasing season. But we think conservatively, we have in our midpoint of our guidance really forecasted 200 to 300 basis points of occupancy fall off in the back half of the year, which would be consistent to historical trends pre-pandemic.
But lower than last year, Jeff. So last year, we lost 450 basis points, and that's where we do -- that midpoint of the guide projections, we do believe that the negative delta on occupancy year-over-year will tighten, but it will still end negative at the midpoint of what we've guided to do.
Okay, thanks for clarify.
Our next question comes from the line of Cassandra Fiber [ph] with Truth Securities. Please proceed with your question.
Hi, thanks for taking my question. You mentioned in your prepared remarks that street rates were up 3.4% sequentially. Can you tell us what street rates were in the second quarter year-over-year and the cadence in July?
Yes. Good question. The street rates are down about 9% year-over-year as we've all talked about, still cycling some really large occupancy comps and straight rate comps, so street rates are about 9%. In July, they fell this a little bit more, and that's still around the comp. If you remember last year, we held street rates very steady through the third quarter. And so, as we look at our comp against street rates, this year, I think we're going to show a little bit more negative comp for the next couple of months, and then we started going back into where we adjusted street rates down at the back half of the year, really the back quarter of the year.
Okay. Got it. And then can you comment on promotions and marketing dollars in the second quarter, maybe also in July and what your strategy is there for the remainder of 2023?
Good question. So certainly, the marketing dollars themselves have been elevated. We're seeing that across the sector. We're seeing in a lot of our markets. It's very market specific, and the teams have done a good job using marketing dollars to generate lead activity. And we've got more sophisticated programs than we've ever had. We've got more team members in that seat than we've ever had. And so, we're pleased with the way we deployed marketing dollars, really through the first half of the year and finding our footing on the balance of spend versus lead generation.
The discounting remains muted below pre-pandemic levels, around 2% of revenue right now and pre-pandemic, it was 3.5% to 5%. Right now, our information is telling us the rate is a little bit better trigger than discount. And I think that's probably why you're seeing a little bit more muted discounts versus historical, and that's just the fact of having better tools and better information.
Okay, that’s helpful. Thank you.
Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
It's A.J. on for Todd. Just a couple of questions. So, follow up what's already been asked in a sense. So just going back into the marketing and web dollars, were the web hits and phone inquiries. Did you see a decrease there or was the conversion rate lower with the sense that customers are shopping around more and being perhaps a little more rate sensitive?
Good question. Thanks for joining. The session activity at the very, very top of the funnel was less than we expected. And so, we were very careful not to over deploy marketing dollars. It's a big year-over-year increase. But last year, you got to consider we weren't spending a lot of marketing dollars. So that large increase looks a little outsized.
But the team did a good job focused on conversion rate, as you touched on, and keeping our conversion rate where we felt comfortable with the amount of spend. But the top of the sessions funnel, particularly early in the second quarter, April was probably our sluggish -- it was our sluggish month around moving activity to expectation, and we improved through May and June and July has improved as well. But on top of the funnel is what I would tell you on sessions.
Okay. That's helpful. And then a question just going back to Portland. So, should we think about Portland as a bit of a leading indicator or perhaps a road map of sort for how the other markets of the portfolio overall may perform over the next few quarters? Is that a good way to think about it?
I think Portland is a tough one because Portland still has an overabundance of supply buildup. We're happy that it's kind of found some traction. So that's good. But I would point you more to the markets like Oklahoma City, Tulsa, even some of that South Texas. I mean, if you look at Oklahoma City, relatively low new supply over the past three years or four years.
In the pandemic, it was not as red hot as some of the other markets because they didn't have the influx of housing. And if you look at its performance today, that's what a stable market that's really kind of cycled all the activity of what's gone on in the last couple of years and then our ability to really implement our revenue management platform.
Okay. That's helpful. And then real quick, if I could squeeze in one more. Just where was occupancy at the end of July? And what was it year-over-year?
I think, as Brandon stated, it was 89.9 and it was down still 450 basis points year-over-year.
Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
You've answered a lot of these, but I guess I just wanted to understand the guidance a little more because it sounds like, I think if I'm doing this right, your second half same-store NOI will contract at the high end and then even more at the low end. And we've seen a downward bias, I think, for the group overall for a lot of the reasons that people have already talked about. But I'm wondering why yours seems more kind of pronounced if you're pushing through the same level of rate increases and occupancies are going back to kind of what you saw pre-pandemic levels. I'm trying to figure out what piece are we missing that's driving your -- to see same-store NOI contraction in the second half?
Yes, Smedes, it's Brandon. Probably a little tough for us to comment relative to the peers. I think you really got to parse the -- what was everyone dealing with a year ago and when did that growth look like. And frankly, they've kind of hit it in his remarks earlier in response to a question in the sense that -- I mean, for us, we've really been looking at things on a three year and four-year basis because you had so much volatility, especially across certain markets starting in 2020, all the way through now.
So, I think that's tough to answer relative to the peers. I mean, our absolute growth rate in the first half of the year is below peers, right? And so, if we're moderating and decelerating on growth as everyone is implying, we're starting lower. And so, I think that's where the back half might imply lower than the others.
I can tell you, just to give a little more color on what we are expecting for the back half. I mean it's certainly somewhat dependent on whether or not we do experience that 250-basis point to 300 basis point occupancy decrease that I mentioned in the opening remarks. And if we do, when do we experience that, we lost a good chunk of occupancy.
I said it earlier, 450 basis points last year. And a lot of that came in August and September. Dave mentioned that we didn't see this year that typical spring summer occupancy uptick that we typically might. And so, I think, naturally, a question we were expecting today and a question we've asked ourselves is, are we going to lose as much occupancy as historical. And it's very challenging to predict right now.
We've baked that into the midpoint. I think if you ask me how do we get to the high end, I think it's well -- maybe we're a little conservative and there's opportunity and some optimism that we won't see that 250-basis point to 300 basis point decline in occupancy.
Okay. And then you had just mentioned increase in insurance penetration in the quarter. I was just wondering what is the -- what percent of customers are taking tenant reinsurance now?
Good question. Over 80% take it at move-in, and we have pushed our portfolio to that level as well. So, we've -- team's done a good job with a lot of initiatives. And so, we -- both those metrics are sitting above 80 today.
Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Robin Adlan [ph] here with Juan. I just want to touch on expenses. Payrolls and R&M were both down year-over-year. What's the expectation for balance over the year? And how many more personnel can you take out from here?
Yes. Good question. So, on I'll answer the specific line items, but maybe just speak broadly. Operating expenses for the full year, we forecast property taxes to be in the 5% to 7% range. Personnel the next biggest line item, as you pointed out, was relatively flat for the first six months. We expect that to similarly be essentially flat, plus or minus a percent on either side in the back half of the year. And then I would say the two biggest other line items in terms of growth are going to be marketing and insurance, which you saw in the Q2 actuals up over prior year.
To my earlier comments about controlling the controllable, the team is doing a great job with R&M and other spend at the store level that we contain. In terms of potential incremental efficiencies, I would say the team has done a tremendous job on a new staffing model that we've been working on for the better part of the past year. I would say we're further along than I would have expected a year ago at this time, and that's credit to the team that goes to what Dave talked about in terms of us focusing a lot internally on operations, be it on all fronts, the tenant insurance administration we've remarked on, staffing at the stores. Look, the average employee per store is already pretty low.
So, there's only so much additional room you can make on that. However, I will say our portfolio, as Dave pointed out at the beginning, is benefiting from the scale that we've added over the last couple of years. Our same-store pool this year is up 13 million square feet from what it was last year, and that goes to the benefits of scale that we've added over the past couple of years.
Well, and a follow-up to that, wondering on the PRO structure, does it in any way act as a deterrence or poison pill in an M&A scenario? And what rights is and does the PROs have in change of control?
Good question. And then, thanks for asking it. Our Board is keenly focused on adding shareholder value, and they focus on that constantly. Our PRO structure does not prevent a deal from taking place with the NSA and we've covered that a lot from previous calls. And so, I think I'll leave it at that.
Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.
A lot of questions have been asked and answered. But I guess following up on that question on the Pros, Dave. I'm just curious, given that you've gone from being a big net buyer to now potentially being a net seller. To what extent does that change the dynamics with the PROs who likely signed up thinking that they would be able to really grow their business in concert with you? And now your capital starved and don't have good access to capital, how does that change the dynamic with the Pros?
Yes. Really good question. And we've spent a lot of time with our PROs as we really started this cycle 12 months ago when we saw rising interest rates and cost of capital changing. And these PROs are very seasoned. They've been at this a long time. They realize there's still a disconnect between seller and buyer. And even though our capital has moved around and things have happened, there's also this disconnect where you wouldn't be buying properties in this environment.
Given that, what I would tell you is what the PROs do a wonderful job is outside of the REIT, they're out buying maybe development properties. They're about working on development properties. They may be buying less then occupied or less stabilized properties, and they're growing those outside of the REIT. And so, they still have resources available to them.
They're very good at this. And we look at it as the restocking our Captive pipeline. And so, if you notice two of the assets we bought -- that we talked about in our quarter that we bought, one in the quarter one thereafter, which came out of the Captive pipeline. And we think that's the strength of ours it sits at almost, I don't know, $1 billion to $1.5 billion of properties that are not in the REIT yet, and the PROs are very actively working outside of the REIT today to find good properties, acquire good properties or build new properties, which will then eventually come into that captive pipeline.
And Steve, this is Brandon. I would just add, long term, we're still net buyers. And the PRO model very much allows us to do that in an outsized way. I think actually, the way I would characterize it is the fact that the composition of our portfolio and the way it's evolved to be a little more heavily weighted on corporate is what allows us near term to take advantage of some of these asset management opportunities that Dave alluded to because we're talking about generally corporate managed stores that we've acquired in portfolios that one-off assets that we think we could selectively this card strategically.
And so, I think all that things together with what Dave said. And as he pointed out, pretty much everything that we have acquired going back to fourth quarter of last year has been from our PRO captive pipeline or PRO source, so they're still very much a part of the story and allow us to grow when we can.
Okay. And then just maybe a follow-up on Dave, your comment about, I guess, kind of pursuing asset sales and dispositions I don't know if that's more one-off, if that's kind of markets perhaps that are, I guess, things are maybe not as enamored with long term. I guess, is all that money that you would take in going to be redeployed into a new acquisition, be debt pay down or see -- or share buybacks at all on the table?
Good question. And we don't see this as a large scale, but when you go through and bought $3 billion of the properties in the last 24 months, you certainly have picked up portfolios that have assets that aren't in your strategic plan. We certainly have also been around long enough to know that there may be markets that have one or two assets in a market, and we've not been able to grow.
And so, we may decide to leave that market because we're not able to grow in that market. Or you may look around where we have a massive amount of scale in a market where we think there's a couple of assets we want to just reposition and redeploy that capital into better assets.
If I rank how you, I guess, kind of deployed it, I mean we want to recycle capital. We are buyers. We want to be buyers. Today is not the greatest environment to be buyers in. So, we're being smart with our asset management, and taking advantage of -- there are transaction selling one-offs, we see quite a bit of one-off activity in some of these markets. We think it's a good time to sell these assets. You pay down your debt now and you to deploy it at a different time.
And so, we think it's a good time to be doing this. We think it's a smart time to be doing this, and we're going to be very patient around the external acquisitions activity until we see market conditions really come our way, and we want to buy properties that they're attractive to our return and media hurdles that we have set for ourselves.
Great. Thanks. That's it for me.
Thank you.
Thank you. Our next question comes from the line of Keegan Carl with Wolfe Research. Please proceed with your question.
Thanks. I mean just following up with Steve's question on the share buyback. Just curious what your thoughts are in the current environment. You bought a lot back in Q1 and obviously, the multiple is lower now. So, I'm just kind of curious where your head is at.
It's certainly an option that's available to us. We still have additional share backs that the Board has approved, buybacks that the Board has approved. I think as I kind of answered the previous question, I think we'll look at all the opportunities available to us. I think it's important to make sure that our balance sheet is positioned should an opportunity come that we have the ability to take advantage of it.
And so, I think all the things we just talked about might leave us a little bit more towards do we have a little more capacity on our revolver availability. So, if an opportunity would come our way, we could exercise that opportunity. Share buybacks. I'm not saying no to it. I just think as we think about what we're trying to work towards maybe a little bit lower on our list at this point.
Got it. And then shifting gears, at our NAREIT meeting, one of the topics you guys brought up is that you're looking at potentially starting your own third-party management platform. Just curious where you're at in that process today.
It's a good question. We constantly evaluated it. We've added a member of our team will Colin, to really look at strategic initiatives, and this is one that's on his plate along with Derek to really evaluate the PROs and cons of third-party management. Our PROs are doing it today, we do it on a limited scale today. We think it is an opportunity that is worth a lot of evaluation. And if we see an opportunity, I would not be surprised to see us enter that market more meaningful than what we do today. But at this point, I'm still under evaluation.
Got it. Thank.
Thank you.
[Operator instructions]. Our next question comes from the line of Eric Luebchow with Wells Fargo. Please proceed with your question.
Hi, great thanks for taking my question. I know you're not providing guidance for 2024 quite yet, but just maybe you could frame some of the puts and takes of the business as we kind of fast forward to 2024. Obviously, based on the new guidance, you'll end the year at a lower run rate. But it does seem like supply growth construction starts getting more constructive in the next year, with negative comps on street rates, maybe lessening from where they've been at. So, maybe you could just kind of talk a little bit about the trajectory of the business and how you kind of see things evolving into 2024.
Yes. Thanks for the question. Certainly, we're not going to talk about 2024 guidance. But you're on how we're thinking about how we finished the back half of the year. I think our comps are getting easier. One of the things that we've really been battling for the last 12 months is this elevated occupancy level some of the best pricing power we've had as far as free rates and ability to push on ECRIs. And so, the back half of the year, if you look at our portfolio, we felt pretty substantially in occupancy.
We actually adjust to treat street rates pretty substantially. So, our comps will get better. And we think that positions us to the first part of next year to where you're in a little more level playing field as far as occupancy and rate. So, to Brandon's point earlier, what's the unknown right now or a little foggy for us right now is we're going to have the occupancy loss that you would normally have in normal seasonality.
And I think if you don't have that would bode well as how you start 2024. And then if everybody finds their footing on where they want to land on their revenue projections, maybe the rate environment calms down a little bit as well. And so that would be things that I think we're looking at that as you look towards 2024, better comps and hopefully a little more -- less volatility, I guess, is what I would say.
Okay. Great. I appreciate that. And then just to touch on the length of stay topic. It sounds like that's remained at very healthy levels. Could you talk about whether that's continuing to elongate or are you starting to see a plateau? And do you think we're kind of at peak levels there? Can you extend it even further, which would give you more room to run on the ECRI program?
As far as the people who've moved out, and if you look at that number, it's starting to stabilize north of 17 months. There was a time it grew a little bit higher than that, but it's not falling off tremendously. We do believe at this point, we've seen nothing that's changed our opinion on the length of stay changing. As we talked about, the health of our consumer remains very strong. And I think that's the positive out of all of this. There may be a housing some housing movement around occupancy, and new occupancy demand, but our consumer base is very healthy.
And all the things that we want to do within that computer base is sticky. And so, at this point, we don't see anything that's disrupting that length of stay in any of the buckets we're tracking, whether it be over a year or over two years, total portfolio.
Great. Thank you.
Thanks to you.
Our next question comes from the line of Wes Golladay with Bard. Please proceed with your question.
I just want to go to the part about getting the balance sheet position for maybe some opportunity down the road. Are you seeing the potential right now for distress when you look at maybe debt maturities or anything in your conversations with operators?
Wes, Good question. We've seen more product come to market. We're certainly underwriting more deals than we have been in the last six months to eight months. The types of the deals we're seeing, some of those do represent a little bit of for our capital partners deciding what they want to stay in for the long term or they want to get out now. Some that's around how mature the properties are, how filled up the properties are, but we've seen some portfolios and some individual properties, where I think people are making a decision.
And I wouldn't call it distressed. I don't think it's a decision on do we write it out for two more years and try to fill the property effort do we try to take our chips off the table and sell the profit a day. We're seeing quite a bit of transaction activity, particularly in smaller markets, one-off properties. So, transaction activity, we believe, is picking up. We're still -- as we underwrite and we're still being very patient about what we want to buy when we want to buy and we still think there's still a little bit of a bid-ask spread that has not materialized yet, and this will take time.
If interest rates stay up, pricing will have to adjust to expectations of people's returns and that just takes time or sometimes sellers just don't sell it all, right? They just say, "All right, enough of that" and we'll hang on to it.
Okay. And then you mentioned competition for new customers. Is this still mainly from some of these aggressive lease-ups? Are you starting to see maybe owners of legacy assets as they get more vacancy, start to get more aggressive as well?
I think it's market-specific. Certainly, in markets where there's been a lot of product introduced, and there's obviously a lot of product needs to be pulled up. We've seen those markets be more volatile than more and more stable markets. And so, I don't think -- I referenced to Oklahoma City before, not -- hasn't been a tremendous amount of supply brought in there, and so our pricing power and our occupancy levels have maintained a little bit more reasonable cadence based on history, and that's because they don't have some of these pressures to fill properties up.
And so, I would answer it. I think it's more volatile in markets where supply is really putting pressure in.
Okay, thank you for your time.
Thank you.
Thank you. Our next question comes from the line of Ronald Kamden with Morgan Stanley. Please proceed with your question.
Great. Two quick ones. Hopefully, you can hear me. So, the first one is just going back to sort of the guidance. I think historically, we sort of talked about the end-of-the-year run rate at sort of a good look for 2024, as others have sort of mentioned on the call.
So, I guess the question really is based on the NOI guidance in the second half of the year, it suggests 2024 should be negative. So, can you just remind us what the puts and takes are with the cost? Like how do you get comfortable that what are the offsets of that next year that I think you were trying to highlight?
Yes, Ron, I'm not sure if I'll say anything that's too widely different from what we said earlier, in terms of not speaking too much about 2024, but obviously, I agree that the exit rate in '23 kind of sets you up for how we'll be thinking about 24. Frankly, a lot will be determined as we see how the back half of this year plays out. I mean, that's kind of the big unknown and so I don't know if I have too much more to comment from what we said earlier, unfortunately.
Got it. And then my second question is just taking a big step back and I think the average portfolio rents are probably at all-time highs. Just trying to get a sense of what you guys are doing internally, I get comfortable that you're not at that point where the tenants are not taking any more pricing, right? Like so what sort of test rent-to-income ratios? Like what do you look at to get comfortable that they're still sort of a little bit more juice to be had on the pricing side?
Yes. Really good question. Certainly, we have test groups and these test group is experiencing maybe no rate increases or maybe a mid-level rate increase or maybe a little higher-level increase, and we're certainly studying the effects of those on that consumer base. And the more data we gather and the more times they do this, the smarter the machine gets and what we're really looking forward is a risk score. And we're looking at the risk or if we do this and we do it at this level, what's the risk that the tenant is going to react and then potentially have a move out to it?
Thus far, I would tell you, gosh, I was doing this job 20 years ago, and we didn't have the tool, our knee-jerk reaction be pulled back and don't do the rate increases and don't do some of the things we're doing today. The fact that we have the technology is proving out that we can still it's a needs-based business. The customer is here because it needs to be here, and we need to obviously work the ECRI program effectively during that cycle. And so, our tools are helping us determine and actually make better decisions, and I think we're having better results out of it.
Nothing yet has really knocked us off except the fact we put guardrails on the top end. I mean, at some point in time, you have customers who have been with you long enough, it may be the third or fourth rate increase and maybe they're elevated above replacement cost that you do not want to take the risk of running them out the door. And so that's some of the guardrails we're reinstalling now.
Helpful thank you so much.
Thank you.
Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Cramer for final comments.
Thanks. As we move past the near-term challenging comps and housing market impacts on demand, we remain confident that our focus on people, process, and platform initiatives combined with our exposure to attractive Sunbelt markets, position us well for continued success.
I want to thank you all for joining the call today and for your continued interest in the NSA.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.