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National Storage Affiliates Trust
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Greetings, and welcome to National Storage Affiliates Third Quarter 2021 Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.
I will now turn the conference over to George Hoglund, Vice President of Investor Relations. Thank you, you may begin.
We'd like to thank you for joining us today for the third 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, November 3, 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 our forward-looking statements, please refer to our public filings with the SEC.
We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as FFO, core FFO, and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings.
I will now turn the call over to Tammy.
Thanks, George. And thanks everyone for joining our call today. Before we talk about our results for the quarter, I'd like to open by acknowledging and thanking our team for their extraordinary dedication and hard work, which allows us to again deliver exceptional results for the quarter.
The results we announced yesterday, including growth in same-store NOI of 24% and growth in core FFO per share of 30% are indicative of the ongoing strength of our sector, as well as the benefits of our differentiated structure. Continued near record occupancy levels have allowed us to assertively drive rate growth, both for new and existing customers. And right now, there are no apparent signs of any near term headwinds, which bodes well for the remainder of the year and implies a strong start to 2022.
On the external growth front, the volume of deals in the market remains at unprecedented levels. During the third quarter, we invested $600 million in 76 properties, bringing our total acquisition volume through the first nine months of the year to 119 properties valued at just over a billion dollars.
In October, we invested approximately $325 million in 39 stores. This results in our current year-to-date investment in acquisitions of over $1.3 billion, surpassing the top end of our prior guidance range. Cap rates on these deals range from just below 5% to over 6% and vary based on location, source of the deal, whether it was marketed off marketed or from our captive pipeline, and whether there's a portfolio premium, or some element of lease up involved. But the weighted average cap rate on all of our transactions closed this year is in the mid five cap range.
We continue to see meaningful competition for transactions and the amount of capital seeking to establish or expand the position and self-storage continues to drive cap rate compression, especially on larger portfolios. We remain disciplined in our underwriting and continue to benefit from our pro-structure, which essentially provides us with 10 acquisition teams and 10 operations teams across the country to source deals and integrate acquisition assets into our portfolio.
About two-thirds of our deals closed this year, as an off market or from our captive pipeline, where we tend to buy at cap rates slightly above market. It's also worth pointing out that just over 10% of the deals we've closed year-to-date, were in some stage of lease up, which further depresses the first year cap rate.
As we look forward, we have additional deals valued at over $300 million under contract that we have expect to close by the end of the year. Our exceptional third quarter results elevated acquisition volume and continued tailwinds in the sector led us to again revised guidance this quarter. We increase the midpoint of year-over-year growth in same store NOI to 19%. Full year growth and core FFO per share to nearly 30% and revised our expectations for acquisition volume to $1.75 billion at the midpoint. Brandon will discuss our revised guidance further in his comments.
The fundamental backdrop for self-storage remains very favorable in our team is executing at a very high level to deliver exceptional results for all stakeholders. Our historical commitment to secondary and tertiary markets, as well as our differentiated pro structure, continue to serve as well.
I'll now turn the call over to Dave to provide color on what we're seeing on the ground. Dave?
Thanks, Tammy. Overall storage fundamentals remain strong. Consumer demand is being driven by multiple factors such as job transition, geographic relocation, housing boom, a tight rental market, the lifestyle changes, all of which are contributing to the high occupancy and rate growth. Pandemic driven demand introduced a significant number of new customers to self-storage and we believe that much of this new demand will remain long-term.
Apart from the normal seasonality we're experiencing, which has been muted compared to historical patterns. We don't see any near term sign of changes to the current favorable environment. Occupancy levels remain close to record highs, allowing us to continue our push on street rates, which average 27% higher this third quarter compared to a year earlier. Through the high occupancy level, we’re able to hold discounting concessions well below historical averages.
We continue to be assertive on rent increases in place tenants, these rate increases are averaging high single to low double digits. Our rent rolls up in the third quarter, which is in the moving rental rate versus the move out rate was a positive 7% which is up slightly from the 6% that we realized in the second quarter. Positive rent rolls up trend continuing in October, which is impressive considering we normally be experiencing a rent roll down in the first quarter.
The combination of strong free rates and assertive in place tenant rate changes continue to drive improvements in our contract rates. Our contact rates have improved every month this year and we're up just over 9% for the third quarter. Keep in mind that we started the year essentially flat year-over-year. So we're pleased with the momentum in place rents and believe it sets us up well for the fourth quarter and heading into 2022.
We know that the 2020 comps are distorted due to the pandemic. I'd like to give a two-year comparison to 2019. Our third quarter Street rates are approximately 24% of our third quarter 2019 levels and are in place contract rates are about 8% higher as well. Both very healthy growth over a two-year period.
We ended third quarter's occupancy of 96.2%, up 450 basis points year-over-year. The positive trends continued in October. We're very pleased with how resilient occupancy has been, especially in light of the strong growth in rental rates on both new and in-place customers. Earlier this year, we project the seasonal decline in occupancy from the end of June to the end of December in the range of 200 to 250 basis points.
The occupancy has only declined 70 basis points, and seems to be holding relatively steady in the 96% range. I do want to remind everyone that we managed to optimize our revenues, not occupancy.
Turning to new supply. We've yet to seen a meaningful shift in development activity in any of our markets. And the unprecedented consumer demand has muted the competitive impact with the new facilities that are coming online. There's certainly no shortage of developers who want to build a self-storage. And we do expect development activity to pick up. The constructional and costs arrive and the entitlement and permitting process remains slow and cumbersome.
We expect to continue to face some headwinds from new supply in Portland, Phoenix, certain sub-markets of Dallas, Atlanta and West Florida. Currently just under 30% of our portfolio has a new competitor in the three-mile radius, and under 50% within the five-mile radius. These figures are in line with last quarter and flat to slightly down from here in 2020.
I’ll now the call over to Brandon to discuss financial results and balance sheet activity.
Thank you, Dave. Yesterday afternoon we reported core FFO per share of $0.57 for the third quarter of 2021. Which represents an increase of 30% over the prior year period. Third quarter same-store NOI increased by 24.3% over prior year, driven by an 18.4% revenue increase combined with the 4.6% increase in property operating expenses.
Same-store occupancy average 96.5% during the quarter, an increase of 580 basis points compared to 2020. All this is amazing growth. As you've heard from us throughout the year, we think it's appropriate to look at average growth across the last two years. That's removing some noise from the impact of the pandemic.
For 3Q, the two-year average, same-store revenue and NOI growth is 9.2% and 12.3% per year respectively. And core FFO per share growth over those same two periods is 20% per year, all very impressive levels.
Regarding OpEx. Same-store growth picked up in the third quarter to 4.6%, due to the challenging year-over-year comp. Specifically, personnel costs increased 5% due impart to more normal store hours and staffing levels this year, versus the reduced levels of 2020. Also contributing to higher personnel costs is overall wage inflation, and incentive opportunities for store employees given the top line revenue and occupancy performance.
Another expense line item which saw higher growth was repairs and maintenance, up 16.6% in the third quarter, partially due to the challenging comp, as we limited spend last year to the most critical items. Other modest increases were property taxes of 2.4% and utilities at 2.2%.
This expense growth was partially offset by marketing costs that were down 10.4%. Clearly, with the elevated occupancy and strong demand that we're experiencing, there is a reduced need for marketing spent.
Now moving on the guidance. Incredible internal and external growth we've experienced this past quarter led us to increase full year 2021 guidance as follows; Profitable per share increases to a range of $2.19 to $2.22 or approximately 30% growth over prior year at the midpoint and a 4% increase from the prior guidance midpoint.
For same-store revenue growth of 14% to 15%, implying that we drive year-over-year growth in the mid-teens for the fourth quarter, which is a slight moderation from third quarter growth as we encounter a tougher comp. OpEx growth of 3% to 4% and NOI growth of 18% to 20%. Additional assumptions regarding guidance are outlined in the earnings release.
Turning to the balance sheet. We were active in the third quarter on the capitol front, much of which we discussed on our last earnings call and the details of which are in our earnings release. In summary, these accomplishments included on the equity side, issuing nearly $600 million across our large follow-on offering in July, ATM activity and OP equity for acquisitions.
On the debt side, we issued nearly $350 million across multiple channels in the third quarter. Subsequent to quarter end, we priced $450 million of senior unsecured private placement notes, with a weighted average maturity of 11.2 years, and a weighted average coupon of 2.88%. The transaction closing is subject to among other things, market conditions, and the completion of definitive documentation.
However, we're working to have all the documents for the private placement signed very soon, at which time we will provide more specifics on the transaction.
Proceeds from these capital raises are being used to repay borrowings on a revolver, and to fund our acquisition activity. Our balance sheet is well positioned with no maturities through 2022 and a fully available $500 million revolver at the end of the third quarter. We are committed to maintaining a conservative leveraged profile with a net debt to EBIT ratio of 4.9 times at the end of the third quarter, and healthy access to multiple sources of capital.
Obviously, based on our revised acquisition guidance, the fourth quarter will be busy. We are well capitalized and look forward to remaining and discipline consolidator in our sector. 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 is from Neil Malkin, with Capital One. Please proceed.
Hey, everyone, good morning to you. Fantastic quarter. First one for me. Maybe bigger picture Dave, anyone who wants to take it? It seems like over the last 12 to 18 months there's been a couple step change functions higher in terms of demand, changes in move out propensity, occupancy going extremely high. And I'm just wondering if there are things that you believe are permanent from either, COVID, or sort of the great relocation that's happening right now.
Or as you think that some of the things that are potentially driving more people with two storage, or perhaps making them stay longer, kind of abate, as the sort of COVID related things ease up, people's savings accounts kind of dwindle a little bit, as stimulus is sort of stopped from the federal government. Do you just kind of talk about how you see that playing out over the next 12 months? That'd be great. Thanks.
Thanks Neil, thanks for the question. Interesting question and harden have a real tight line of sight on how this demand in this current favorable by rent really plays out. I don't think it's a short term thing. I think usage is an all-time high for self-storage, which is great for us in our sector.
I think the things that happened in the pandemic, we’re accelerating things that were already happening in our country already. There's always been a push to more work from home, remote work, a little bit things around lifestyle changes that were accelerated by the pandemic.
As you look at the transaction patterns of all the consumers around the country, there's certainly been an outflow from some areas of the country into the similar markets, which is definitely benefiting us. That's a permanent stick, in my opinion. I just think a lot of things that we're experiencing from the demand piece are not going anywhere, anytime soon. Even if return work happened, I still think there'll be days at home where you have home office, for example.
So we're encouraged by that. And we're encouraged the fact that the people are using our product are finding it very affordable, very easy to use a great product overall, it fits lifestyle. If you think of housing prices today, and all high they've gone and what's happening in the rental market and all these things, it'll take a lot for those things to really change. And self-storage is a very affordable product, when you maybe can't buy the size of the house, you want it or downsize it a little bit less of an apartment because of costs. So I think long-term that's there.
Another thing I would tell you is I think all of our teams have gone a little bit better to this, I think our tools are getting better. And so some of the gains that we've been able to have with occupancy and some of the revenue gains we have is a function of demand, but it's also a function of us doing our jobs better. So to me, I'm proud of what all of our teams have accomplished. I'm proud of what our tools and our technology improvements are weighing in for us right now. So I think a lot of good things for us as you go into the future.
Well, that's great. Other ones for me. Shockingly, is on acquisitions, you guys have been extremely active, I think, especially for your size, you've been able to source a really robust amount of activity, I think it's a testament to your pro structure. Can you maybe talk about, what kind of product you're seeing on the market, in terms of either quality, lease up component, are you seeing potentially more players, maybe more institutional players, given how your markets have fared and the relative yield premiums, you can get on going in cap rates, and just kind of your outlook for the cap rate environment, kind of near term.
So I’ll start and other members of the team can jump in here, if I missed something, but the volume of transactions continues to be literally unprecedented. And even as we head toward the end of the year, it's actually not slowing down at all. The type of transactions that we're seeing, range from a large portfolio that can really large portfolios to one off assets, that's really where we'd like to play.
We are also very -- I think we've been very successful, we've remained discipline, but very successful in targeting our secondary and tertiary markets. And we like cap rates, they're a little bit better. Now, we've also strategically invested in some non-stabilized assets. And when I say non-stabilized, I'm talking about assets that are delivered and in some stage of lease up, so maybe in the 70% to 75% range.
But on the whole I think that as you said, Neil, like I think our structure continues to benefit us. We remain very active in our markets. And again, it's not to say that that we won't look at everything that's out there. We look at the top MSAs but from a strategic standpoint, building scale and the cap rate environment. We still like the secondary and tertiary markets and that's where we continue to focus.
In terms of your question about capital chasing deals, there is a lot of capital there's a lot of competition and we've said it many times, and probably will continue to say it, that self-storage is a great place to be. Right now, it's a fantastic sector as evidenced by our peers results released over the last few days and our own results. And so naturally, I think it is bringing new players, and it's keeping us on our toes and it's highly competitive. But I also think that we will remain relevant in this consolidation phase. So I'm not sure if I hit all of your points there, or did I missed a couple of things.
No, that's the only thing I was just saying is, I think a lot of other sectors have seen cap rate compression since the beginning of the year. So I wonder if you can kind of comment on that, specifically in the markets you plan, just because I know that the yield game, I think is a little bit more important, particularly because of the pro structure.
Right. So this is what I would say on the whole, we're buying assets in the 5.5 half cap range. The non-stabilized assets that we've acquired are below that in the mid 3 cap range. In this year, one yield, stabilized yield on those assets is still in the 6 cap range. The thing that we like about the assets that we acquired that are sourced by our pros, either through their captive pipeline, or through their relationships, and I think I mentioned in my prepared comments, about two-thirds of our deals have been sourced off market this year.
And I think that gives us an advantage from a cap rate standpoint, having said all that, there is still some cap rate compression, we're still pretty comfortable in that mid five range, we like six better, but I -- we're I think we'll just remain active and continue to go after those deals.
And then we'll see where it goes. But we have seen cap rate compression that we've never seen before. Portfolio premiums, if they were 15 to 20 basis points a couple of years ago, they're upwards of 25 to 40 basis points now. So it's challenging, but there's no shortage of transactions to look at.
Thank you.
You bet.
Our next question is from Juan Sanabria with BMO Capital Markets, please proceed.
Hi, good morning. And thank you for the time, just curious on the assumptions with regards to occupancy for the fourth quarter from I guess, under September, and if you can give us where the spot is reduced as at the end of October, just to see how you're trending relative to those assumptions in guidance?
Yes, Juan, this is Brandon. So the spot occupancy at the end of October for same store was 96 flat. And so that gets up to 70 basis points down from the end of June, as Dave hit on in his remarks. As he said earlier, when we spoke last quarter, we had estimated maybe a 200 to 250 basis point drop, that's from period in June to period in December. But things have played out more favorably.
Looking at a pre COVID year, it would not be uncommon, from June to October, month end for you to have something like a 200 basis point or more drop in occupancy. So the fact that we're at that 70 basis point mark is very encouraging. And so for the back half remaining couple months, I mean, I think we're looking at something closer to a could be in the 150 to 200 basis point range going from that June to December period.
But November and December historically there's been movement, so the next couple of months will be telling.
Okay, so the assumption and guidance is that 150 to 200 that you just touched on.
That's right. That's right.
Okay. And then just with regards to rate, is the expectation that continues to accelerate or grow on a year-over-year basis that the numbers have been steadily going up? Or should we assume that begins to tail off as you have some tougher comps in the fourth and into 2022?
It's a good question. And certainly there’s a tougher comp in the fourth quarter and end of 2022. I think what we see happening right now is Street rates are starting to level off and moderate. We're not backing off on any type of in place changes. And so as we look going forward, we don't see Street rates declining to considerable not at all that was probably plateau. We stay aggressive and in the in place piece of it. We'll see contract rate growth as we continue onto the rest of fourth quarter and into 2022.
And any chance I can get you guys to comment on what the earning is, or else equal occupancy, shoot rates for how you would start, or what that is today, kind of going forward?
Probably not a lot of color, you're going to get on this one, but I just you tying into the remarks I made about occupancy. I mean, if we do end up in that range than I said, it's going to give us a nice year-over-year positive number in terms of that occupancy spread. And so that's going to benefit us well in the trajectory on the rate that they mentioned a 9% for the quarter contract rate growth year over year. I mean, the trajectory of that throughout the quarter was just steadily improving. So we were closer to below double digits by the end of the quarter, and certainly in October and so that's also tremendous tailwind. That's kind of the most that will comment on in terms of looking into 2022.
Super helpful. Thanks guys.
Our next question is from Steve Sakwa with Evercore ISI. Please proceed.
Thanks Mike. I might just want to follow-up on some wines line of questioning, just to be clear, the 150 to 200 is what you've got baked in. But I think so far the decline, maybe I'm wrong, I wrote it down wrong. That was something maybe like 70 basis points max. So I'm just curious, is that just your effort to be conservative? Is there anything that you're seeing in the recent weeks that would suggest that you're going to that level? Or that's just kind of what's happened historically, and you just want to be cautious?
A great question. It's more around what we've seen historically. And we did see some seasonality in the back half of this year, which encourages, things are returning back to what we would expect to be a little bit more normal patterns.
Certainly, we're happy with random velocity, and move outs are still muted. So those two factors in play? You know, I will say we're 100% conservative, but certainly historical patterns there’s some movement in November and December. But we're pleased with where we're sitting right now.
Okay, and then, just to sort of go back to some of the acquisition questions, again, if I've done my math, right, you basically have done $1.3 billion including what you closed in October and can't remember if it was Brandon, or Tammy said you had another 300. That was sort of under contract to close sometime in the fourth quarter, which would sort of put you $1.6 billion. So above the low end of the range, but maybe still a little far away from the upper end of the range at 2 billion.
So, are there things that you can actually get over the finish line that are not under contract today, before year end? Or I mean, are sellers really scrambling to try and get deals done before tax rates change? Or is the 2 billion maybe just, maybe really not realistic at this point?
No, I think it's achievable Steve. Good question and your math is right. But we're speaking to what we have closed what we have under contract. And there is a fair amount more that is in some other stage of negotiation. And sellers are highly motivated. And so it'll come down to how much we can actually get done, get it through third party, get it through diligence negotiations and get it closed this year. So I don't think that our range is, is at all unrealistic. I don't know if we'll get to the 2 billion, but it certainly can be done based on what we're seeing right now.
Got it. And then maybe last question is given the incredible strength we've seen in in rent growth and high occupancies. I'm just curious, when you're underwriting new acquisitions today, how are you sort of thinking about the new normal? Is kind of these numbers, the new normal or you sort of reverting back to something in between the old numbers and today's numbers? I mean, how do you sort of think about what stabilized rent occupancy will be two, three, four years from now?
Yeah, it's a great question. And it's a tough call, but we are finding our way, probably in the middle someplace. We don't believe as competition comes in, and maybe a shifting market distance come that'll put pressure on street rate. And so as we're looking at new properties, we're really taking a look at what we think free rate and market rate really is how we look at that, what it'll be next year in the year after, and then modeling, of course, our IPRC models that we put into it.
So I would say it's somewhere between maybe the upper and middle of what you're talking about what historical is to where we are now, but certainly we're in a very hot market right now. And screen rates are very, very everybody's done a great job taking advantage of the situation we're in.
So, Steve, we've talked about this before too, but First and foremost, as you know we're highly motivated to grow externally. And we have our targets and we've hit them every year and expected certainly hit or exceed this year. But we also remain disciplined where we are not going to fall into a trap of growing just for the sake of growth. And so for us, it's all about underwriting good deals, that ultimately are strategic and accretive to our shareholders.
Great, thanks. That's it for me.
Our next question is from Todd Thomas with KeyBanc Capital Markets. Please proceed.
Hi, thanks. Couple of questions on acquisitions. Tammy how much of the third quarter and or I guess remaining acquisition sorry, expected through the end of the year here will be lease up or CFO deals and do expect to be able to maintain the yields that you discussed on investment so that that mid 5% range moving forward.
So through the third quarter, the investment in non-stabilized assets was about $180 million. What we have under contract right now what we've closed in the end, so that speaks to what we've closed through October, what we have remaining to close is there are a handful of non-stabilized assets in there. But I do believe that on the whole, we'll be able to maintain that 5.5 -- mid five cap range, it may come down a little bit with the remainder of our Q4 acquisitions. But it'll be pretty close. Again, we're not really going for CFO type deals where most of what we're looking at is in some stages still moving toward stabilization.
Right. Okay. And then, I guess that pricing on acquisitions, it seems to be above what we're seeing from others and what we're hearing in the market, you mentioned that there's a premium you get from transacting off market, and in the captive pipeline. How much of this year's activity was in the captive pipeline specifically? And sort of what's the premium that you think you get on those acquisitions?
It's hard for me to, to estimate the premium. But what I -- let me start with your the first part of your question, about $80 million of our deals came through our Captive pipeline. And, and I think that combined with the fact that in total, about two-thirds of our deals have been sourced off market, it has given us an advantage, and that cap rate analysis. Whether that is -- we can compare it to what we're buying from third parties, and it could be easily 50 basis points is what I would say, I think, the Captive pipeline clearly come in at the higher end of the range and the off market deals are pulling the cap rate up to.
Okay, and then your -- so your comments, just sort of looking ahead, your comments about the amount of product coming to market being unprecedented? Do you anticipate this this level of activity to continue into 2022? I guess, it will the first half of the year, which I believe historically has not been as busy traditionally, will it be much busier time of year in your view than it has been in prior years?
I believe that potential exists. Yes. And the reason is, because that's the volume of deals and the potential sellers who would like to get something I'm sure they'd like to get it done right now. Some of it's just not going to be -- it's not going to be possible. And so it is going to fall into the first part of next year. While people have been and continue to be motivated by potential changes in tax law. I would also say that the amount of capital chasing deals and the pricing that we're seeing right now is keeping sellers interested.
So it may fall off some maybe some people who don't get their deal done this year, just pull back and hang on for a while. But based on what we're seeing and hearing, we believe that some of this activity will fall into the first part of 2022.
Okay, great. And just one last one. The updated guidance for acquisitions is the $1.5 billion to $2 billion. Is that NSA share of investments and is their interest to do anything sort of on a larger scale with a joint venture partner?
Yeah, that assumes all on balance sheet, our guidance range right now assumes all on balance sheet. And, yes, we would be interested in doing something with the JV partner under the right circumstances. If it was a strategic move and we have conversations with investors who are interested, and we keep that door open, and there may come a time when it makes sense, we would definitely be open to it.
Okay, all right. Thank you.
Our next question is from Smedes Rose with Citi. Please proceed.
Hi, thanks. I guess I just wanted to understand a little more to someone just mentioned that the cap rates seem kind of higher than what we're seeing for other acquisition opportunities in the market. You mentioned two-thirds are off market and sort of outside of your captive pipeline. I guess I'm just wondering, why are someone selling to you at these rates? When it seems like they'd be able to sell at a lower cap rate to someone else through maybe a more broker process? It's just trying to sort of get -- is it just relationship driven? Or because you're talking about stuff that's outside of your captive pipeline, right, where you kind of get [multiple speakers].
So I think first half, so my two-thirds basically includes the $80 million. So but having said that, it's still a big number. And I Smedes that’s a great question, I would tell you that it is relationship driven in every single case, and in all the one case, when we're talking about anything of any amount of money, the seller was interested in OP equity.
And so between our relationships, and these are long-term relationships, and our ability and willingness to work with the seller and the issuance of OP equity. I think it did give us an advantage. But I think you're right, if it was a fully marketed deal, it seller might have left a little bit of money on the table. However, they got stuck at a good price tonight. And I think they've done okay.
Okay. And then the other thing I wanted to ask you, it sounds like development activity hasn't changed a whole lot from what you've talked about in the last quarter. But it sounds like in your opening remarks, you guys are expecting an uptick in development? Is that just because you feel like fundamentals are strong, and it will draw new development to the space? Are you starting to see here rumblings of more development that you think is coming, I just wanted to maybe clarify that?
I wouldn't say that it's anything that we are seeing specifically today, I think that our comments are probably a little bit more anecdotal. They're based on the same data that all of you guys see, which comes from primarily from Yardie, and maybe a handful of other sources, we also have the benefit of having conversations with our pros who are on the ground, and they know what's going on, and they and they stay very close to it, because it affects them in a very real way.
So I think we form our opinions based on those facts and what we're hearing. But I also think that it's human nature, this sector has so performed so well over the last 18 months and even more than that, but what I think will slow it down is that the entitlement process itself, which takes a very long time. And then beyond that the cost of the building products, the availability of the building products and shortage of labor.
So I don't think it's an imminent threat. But I think that it's just maybe common sense that it will happen again. And the question is really timing is it 2024? A little later than that? Maybe the end of 2023. But we don't see it happening near term.
Great. Okay, thank you.
Our next question is from Elvis Rodriguez with Bank of America. Please proceed.
Hi, congrats on the quarter. And thanks for taking the question. You mentioned labor pressures and payroll pressures in the opening remarks. Can you maybe comment a little bit more on what you're seeing on the ground in your markets? And in particular, do you expect payroll increases to continue to exceed inflation going forward?
Great question. Certainly the labor market is tight. And so a little more clarity on that payroll is, part of our payroll uptake has also incentives played to employees for the great performance. And so if you look at how strong revenue was and the metrics that affect our store operations teams across all of our pros and ourselves incentive levels are high. But we are seeing a little bit of pressure from overtime, obviously, trying to keep staffing levels at the right level and find it and attract the right team members is tougher now than it's ever been.
And obviously, there has been a handful of rate changes around, certain states raising minimum wages and things like that democrats in the country. But overall, it's really tight labor market, we're doing our best to attract people doing our best to look for efficiencies within our systems and our operations to make sure that if as we feel the weight pressure, maybe we can find different paths to do business. But I don't see the labor market easing anytime soon at this point, we'll do our best to manage and I think we've done a good job throughout and creating the right culture in the right place for our team members to be and I guess, navigated as we go.
Great, thank you. And just to follow-up, this might be in connection to labor and other expenses. But your safe-store operating margins continue to improve? Is that a function of just having more scale as you get bigger in your individual sub-markets? Or is it something you're doing with technology, or mix in sort of how you're changing and managing each individual stores with the pros, anything you can share could be helpful? Thanks.
Yes, great question. I think it's combination of a lot of those things. So certainly, tremendous rate growth that we've had will certainly help your margins, high occupancy levels will help your margins. I mean we are looking at technology, how do we look at how we staff, our stores, how many hours are open. With online rentals approaching 30%, so there's an opportunity to transact with the consumer in the way they want to transact. And maybe that allows us to look at our office hours, we recently upgraded the call center platform to get a better technology behind that and really work on customer service and rental application there as well. So I think it's a handful of a lot of things that are in play here.
Thank you.
Our next question is from Ronald Kamdem, with Morgan Stanley. Please proceed.
Yes, I think two quick questions for me just sticking on the acquisition theme. So if I look at the $1.75 billion at the midpoint of the guidance, just can you give us a sense of what the total pipeline that you would look at in a year would be? Is it like, are you looking at five? Are you looking at 10 billion to be able to sort of close that $1.75 billion?
And I think sort of back to a previous question, which was, we're thinking about over the next two to three years, is this sort of more sustainable? Or there's really one time bigger deals this year that we should be mindful of?
I think that I will tell you, Ron, -- thanks for the questions. We look at every major portfolio that hits the market. And so and answer to your question, how do you get to $1.7 5 billion? We probably have looked at, I don't know, Dave, would you guess $10 billion portfolios valued at every bit a $10 billion. And will this continue into the next two – one, two, three, four years, it is impossible to predict.
A lot remains to be seen, I think what's -- when we have this call, again, at the end of February, well, so much better line of sight, and what we think is going to happen, at least in the next 12 to 18 months. But right now, it's really, truly impossible to predict. It is an interesting phase of consolidation in this industry. I think that we on the inside has been expecting for a while. And yet, how long does it go on and just how consolidated does the sector become? I don't know the answer to that.
We've talked about -- historically, we've talked about something like let's just say 50,000 self-storage facilities in the United States, take a haircut it for non-institutional grade assets of 40,000 assets in the United States, and it's a piece of acquisition this year, if the number historically has been the top five plus 18%, or there about. Dave and I and Brandon, we're just talking yesterday was that number becomes it'll be interesting to see how this rolls out over the next six months or so because that numbers in our view maybe well over 20%.
So, it's a very good question. I don't have a -- I certainly don't have a black and white answer, but it's certainly something that we're going to be watching and monitoring and our objective will be to remain relevant. And I think we're well set to do that.
I think I would add and I think you touched on something. There have been a couple of portfolios at transacted that maybe we wouldn't have thought would have transacted through this year. But I think if you look at our acquisition activity, the amount of even one-off and smaller portfolios and the amount of activity we've done because of relationships and all the things we do, as I look forward 2022 and beyond, I think we stay very active, and it's not always about the one-off a portfolio that really helps us in our acquisition activity.
The point, back to the blocking and tackling.
We lost you Ronald.
[Operator instructions] Our next question is from Kevin Stein with Stifel. Please proceed.
Good morning, guys. I was just wondering, Portland's on your larger markets. And it's been doing really well, it's one of the top performing markets. But it's also it's had quite a bit development for like the last few quarters. So I was just wondering why your portfolio is doing so well? Is it because demand is just so strong? Or is it development isn't near your story? Thanks.
Yes, great question. We talk a lot about Portland, Portland still remains our most challenging market with the amount of new supply that's in the market. A couple of things have gone on. Certainly the new demand has certainly helped the Portland market and help all of the market -- the self-storage is in that market have better success.
I think the team up there in Portland has done a great job in really implementing strategies around pricing, and discounting and attraction of customer acquisitions. And I think they've done a good job repositioning themselves in that competitive market. And I think that shows in their performance. And I think we need to call it up, they've done a wonderful job.
If you really look at it, so Portland's still trailing our average portfolio accuracy by about 3%. So you can see there's still pressure there, you can see where the new supply still remains there. Oregon as a whole, it seems to migration has been moving around Oregon. And so if you look outside of Portland, Oregon is really, really done exceptionally well. But, to answer -- get back to your question. I think the team is doing a better job and certainly despite the demand factors helping with all the suppliers.
Okay. Thanks.
We do have Ronald back. So we'll jump right back to him.
Sorry about that. Just the second question was just looking at expenses a little bit. And the reason I asked is because I think a lot of the peers if either increase wages give special sort of incentive in 2020. So that in 2021, expenses were actually sorted down. I guess, the question is really, obviously, property tax expenses are what they are.
But is there expense savings opportunities, as you're thinking down the road three, four or five years down, whether it's with increased penetration of E-rentals, whether it's a marketing expenses that you may not need because of occupancy? Granted the margins already pretty high, but just curious how you guys thinking about potential expenses opportunities down the pike? Thanks.
Great question, Ron. And we're always thinking about that, and I think you touched on a few of them is how do we take technology and platform and make it better, online rental, if we can, continue to increase our online rental presence, obviously, that may see some opportunity around stores, and maybe overall personnel costs. Certainly with the customer acquisition platform, and really, the revenue management platforms that are still new to us, I mean, revenue management platform for us is only 21 months old. Our customer acquisition platform, continually being updated. I do think there's ways to find efficiencies there, and really look at overall operating efficiencies, I am very pleased with what our margin growth has been. And we've had really good margin growth this year, all of our pros and their teams and our corporate team has done a good job focusing on where we can be efficient, and really drive down expenses where possible or maintain and really drive on revenues.
So I think we're looking at all those things. I do think we run very lean. It's not like there's a lot of fat hanging around in our organization around our properties in an organization. So we'll do our best to find those efficiencies and implement them.
Great, thank you.
Thank you.
Our next question is from Wes Golladay with Baird. Please proceed.
Hello, everyone. So I want to dig in a little bit into the drivers of the above average occupancy levels is mainly driven by the demand more movements or is it a lack of turn the move outs?
Good question. I would say the majority of its lack of move outs, our rental volumes are vigorous, but it's really that muted move out volume that's really elevated the occupancy levels.
Okay. And then when we look at I guess the lease up deals. Can you remind us how long those typically take to lease up and where that is now to get to that 6% stabilized deal?
Yes, I mean, certainly the lease up schedule certainly tightened with the demand that's going on, we're seeing properties that maybe would leased in 24 to 36 months, or maybe 20 to 24 months now. So we're certainly seeing a quicker side of it. Most of what we're purchasing those, it has a lot of the physical occupancy in place, and what we're working on is getting the rate back up where it should be.
So very quick, build to the high physical occupancy levels, but now we need to work on getting the discounts to burn off and really get the rate where it needs to be. And for us, we look at stuff that most of our stuff that we're buying will be stable by year or two.
And I would just add to that the, the stabilized yields on those assets is estimated at about 6%. And the average occupancy was in the mid 70% range and the non-stable what we're classifying is non stabilized assets.
Great, thanks for the time.
We now have a follow-up question from Neil Malkin with Capital One, please proceed.
Thanks, everyone. Dave, just a question on the benefit from the in-place customer renewals. So because move outs are lower, more of the population now every month, every quarter is eligible for renewal increases. And obviously, lower churn means that more people are taking them. So can you just talk about how what that looks like? What is the sort of quarterly potential of the portfolio that eligible for renewal increase versus like, maybe pre COVID? And how far below or is it above the sort of renewal rents from market, almost like a loss to lease, if you will, for your existing customers, just to kind of get a sense on how much more you can push. Thanks.
Yes, great questions, a lot to unpack there. So, first of all, we're in a positive rent roll up right now. And we were through October, which is a good place to be as far as giving us the ability to really be assertive on what we want to do in case we haven’t had somebody move out, we're actually replacing them right now at about a 4.5% improvement on a new tenant coming in the door.
We certainly were around in place, tenants have the opportunity to push harder and more frequently. And we're bullish around that. So what we've seen is the frequency of tenants that are getting rate increases, probably increased 2.5% on average per month of what we would normally be doing, particularly this time of year. And as we talked about, low single -- low double digit increases is probably more than norm at this point in time.
We really shifted to -- removing some of the caps, maybe removing some of the ways we think about, replacement of that tenant. And you've probably heard me talk about this before more of a lifecycle if you're going to be with us on average 16 months, how do we maximize that time efficiently through our in place rent change program?
Okay, yes. Last thing I had was, these eviction moratoriums in some of the coastal markets have been expiring, some shorter or in sooner than others. And in particular your West Coast portfolio, are you seeing or do you expect to see some near term windfall if those evictions, which could be pretty sizable, continue to play out or come to fruition?
Certainly, I think we will see, that's going to create transition. And anytime you have transition, were a great opportunity for having people need in our space. I think the interesting thing now is, you mentioned the West Coast, we're fairly pull out there, as is everyone. And so, I think, obviously, will help in the fact that we can probably continue to be very assertive on street rates. But, I think, for the folks that are getting evicted, it's going to be a challenging time. And the fact that I think storage space is pretty lean on some of these areas. So certainly, we'll do our -- we do what we normally do, we'll look at opportunities and do what we need to do there, but it certainly will create transition. Yes.
Okay, thank you guys.
We do have a follow up question from Smedes Rose with Citi. Please proceed.
Hi, I just wanted to ask you, I think in the past, you've talked about acquisition targets at about annually about 10% of enterprise value, is that still sort of a good metric just metric to think about as we model going forward for next year?
That's a great question Smedes. I think that is certainly something that we have said historically. And I'd like to say yes, I think that's how we should continue to think about it. But the one thing that I would add, is the way that we have talked about it historically, is that on average, will acquire about 10% of our total enterprise value year-over-year. And so some years we will and some years, we will not hit that, and is sitting here today, it's a little hard to predict what 2022 will look like. I think we still hold that out as a goal of ours, but I am going to focus on the average part of it since it's been such a big year this year.
Yes, Smedes, this is Brandon. Just one of the things on that. I mean, obviously with a year like this year, it's so unique, and much of what we're doing is back half weighted, so obviously that serves 2022 more than it will 2021 in terms of like our bottom line core FFO per share growth. So that's just another way that we think about much of what we're doing this year is serving us over maybe not a 21 calendar year, but obviously the into next year.
And just a point of color on that. Since I mentioned that of the $600 million that we bid in Q3, the vast majority of that was in the month of September, around 425 million specifically, it was in the back half of the September month, just as you said helps me think about modeling and what's not what we're not getting the benefit of in Q3 that we'll have full quarter Q4 and into next year.
Thank you. Appreciated.
Yes. Thank you.
We have reached the end of our question and answer session, I would like to turn the call back over to Tamara Fisher for closing remarks.
Thanks again for joining our call and for your interest in in support of NSA. And as many have said, it's a great time to be in self-storage. 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 look forward to connecting with many of you next week during day rate. Thanks.
Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.