JCAP - NASDAQ

Greetings and welcome to the Jernigan Capital First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. A 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, Mr. David Corak, Senior Vice President of Corporate Finance. Please go ahead, sir.

Good morning, everyone, and welcome to the Jernigan Capital first quarter 2019 earnings conference call. My name is David Corak, Senior Vice President of Corporate Finance. Today's conference is being recorded, Thursday, May 2, 2019. At this time, all participants are in listen-only mode. The floor will be opened for your questions following management's prepared remarks. Before we begin, please remember that management's prepared remarks and answers to your questions may contain Forward-Looking Statements as defined by the SEC in the Private Securities Litigation Reform Act of 1995 and other Federal Securities Laws. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage you to review. A reconciliation of the GAAP to non-GAAP financial measures provided on this call is included in our earnings press release. You can find our press release SEC reports and audio webcast replay of this conference call on our website at www.jernigancapital.com. In addition to myself, on the call today we have Dean Jernigan, Executive Chairman; John Good, CEO; Jonathan Perry, President and Chief Investment Officer; and Kelly Luttrell, Senior Vice President and CFO. I'll now turn the floor over to Mr. Jernigan. Dean?

Thanks, David. Good morning to everyone. First of all, I'll start off with a little apology for getting you up so early this morning. This is an unusual time for us and in fact due to some travel schedules it was necessary. But thanks for joining us, thanks for being interested in our company. I'd like to start this morning by just kind of looking at the present situation. We've had some good reports so far in our sector this quarter and I'm pleased to see the results of our friend who have reported so far. I've been tracking results like this for a lot of years now. And I always found that the first quarter of each year tends to be the weakest quarter of the year. Q2 builds on Q1. Q3 ends up being the best quarter of the year. Q4 comes back some, but still ahead of the Q1 of that same year. So if history has any indication, I think we're headed for a good year. That would, of course, be in normal times. But I think we're - these aren't so much normal times as we do have a lot of new products hitting the market out there on a weekly basis. But because of the power of the platforms, you heard me talk a lot about that over these last four years. Power of the platform is up, these large companies to be able to attract customers; get them into their funnel and not let them out of the funnel until they rent a unit. Those platforms are very powerful and are functioning exceptionally well right now I think. So, pleased with the quarter as we've seen them. John and then Kelly, and Jonathan will talk some about our results and how good our results were for the quarter. But I want to speak a little bit more about the sector, as I always like to do. I want to look forward and talk about the silver lining. At least for the last three years, you heard us here at Jernigan Capital talk about the silver lining in this development cycle. There are a lot of storage facilities being built around the country. And I've always said, yes, there is going to be some short-term pain, but some long-term gain. And the gain is going to be far greater than the short-term pain. And specifically, what I mean by that is we've got some data providers out there, who have done a good job in this cycle, telling us how many properties are being built, where, and the estimates ranging from maybe a couple of thousands to 2,500 facilities that are going to be built in this development cycle in the top 50 markets. And you've also heard us say that we think in this development cycle 75% of those are going to be for sale sooner rather than later. And I think that that opportunity is going to start presenting itself in a large way starting this year, Q3, Q4 this year. So the silver lining to me is a huge opportunity for companies like Jernigan Capital, who have good access to capital to be able to buy storage facilities that are well located, almost all were Generation V vertical buildings built in with good demographics, well built. And in this [realm] [ph] most are well managed, as most I would say or many anyway have partnered with the large companies for third-party management. And so, that's the big opportunity. That's silver lining. And that's what I see happening starting this year, next year, the following year. It's going to be a huge consolidation of these new Gen V properties that have been built in this development cycle into those companies who have good access to capital. So we're very excited about that at Jernigan Capital and I'm sure our other friends out there with similar capital are very, very excited as well, so to something look forward to. Just one last comment is something that I set out to do at the very beginning of Jernigan Capital is to go out and recruit the smartest people that I can recruit to join us in this endeavor. And recruiting those people is step one, step two is to empower those people to do their job. And then step three and sometimes the hardest step is to get out of their way and let them do their job. So this morning, I've decided this is going to be my last quarterly analyst call with you guys. I'm proud to say after 20 years of this, I've answered every question. And seriously it's been - it really has been a joy. It speaks to the product. The product is so strong. It has been so strong since we took [went just say] [ph] public in 1994, that the answer is really weren't that difficult. The questions weren't that difficult. The product is such an outstanding product that it has been fun to meet with you on a quarterly basis on calls like this and talk about the results of the three different companies I've been involved in and talk about the future. So with that, I'm going to say I'll be on the call, stay on the call for the rest of today. But going forward, these people on this call with me today are empowered. I'm getting out of the way and let them do their job. It starts with you, John, take it away.

Thanks, Dean, and good morning, everyone. JCAP's first quarter of 2019 was another very strong quarter for us. In addition to posting what we believe to be excellent financial results that beat our expectations. We also made excellent progress toward meeting our 2019 investment guidance. Our investment goals this year can be broken down into two primary categories: first, to opportunistically acquire developer interests in our existing development investments at favorable prices; and number two, to originate new development investments in underserved markets with healthy spreads over prevailing cap rates. Today, we've done just that with the acquisition of the developer interest in five properties. One of which was on balance sheet and four were within our Heitman joint venture. And we've originated three new development investments with profits interest and ROFRs. With the five acquisitions, we either align in with our joint venture partner have now acquired full ownership of 12 of the 66 development projects that we financed as of the end of the first quarter, in what we call our core development program, which involves are having profits interest and Right of First Refusal in the properties. We expect to continue to see opportunities to buyout the interest of developers and projects we finance, especially as we move into the second half of this year as properties complete the upcoming rental season. The three new development projects that we've closed this year all are in the New York metropolitan area. As we've said before, we seek high density locales that are at levels of supply that are substantially less than the national average in the New York area is a good example of that type of market that JCAP is looking for. We intend to close fewer development deals this year than in 2017 and 2018, but we're committed to maintaining the attractive development yield spreads on those deals like the deals that we've done thus far in the cycle. Our existing portfolio continues to mature nicely. As of the end of March, 46 of our 71 investments are now completed and open for business. Our properties that have been open since the end of the fourth quarter added an average of 825 basis points of occupancy from the end of December through this past weekend. We're pleased to have added meaningfully to occupancy during the historically slow time of the year and ahead of the busy summer rental season, and occupancy is running approximately 210 basis points ahead of initial underwriting for our 23 properties that have been open for at least one full leasing season. Additionally, our eight wholly-owned facilities outperformed our expectations this quarter as revenues exceeded budget, driven by both rate and occupancy. As you've heard us, and other REITs say for several quarters now, new supply is, and will continue for some time to impact operating performance in most major MSAs. We believe that new deliveries have picked in the top 50 MSAs, which are the MSAs that we follow. However, normalcy will not return until a reasonable absorption period is passed. Looking at our portfolios specifically as important or remember that third of our development in investment properties have not yet delivered, while 50% of our development in investment properties have not yet experienced the full rental season. In fact the most mature asset in our portfolio is only seen two full rental seasons. So by the nature of the lease-up process, these assets tend to offer below market rates especially those that have just been delivered. However, our assets continue to make progress on rate and the majority of our assets outperform their respective markets this quarter from a rate growth standpoint, all the while gaining approximately 565 basis points of occupancy. While new supply is a headwind for all institutional owner operators, we're hitting our occupancy targets than we believe the rate pressures will subside, as we continue to stabilize the portfolio. We have excellent third-party managers, we have a high degree of confidence in them and we are confident that we've assimilated a very well located high quality portfolio that will perform very well for many years to come. Finally, I'll touch very briefly on internalization. Since our IPO in early 2015, we've disclosed the timing and process for internalization that timing and the process have not changed and we intend to follow the timing and process to the letter. That's all for me in terms of prepared remarks. And with that, I'll turn it over to Kelly to discuss financial results.

Thank you, John. Good morning, everybody. Last night, we reported first quarter earnings per share of $0.35 and adjusted earnings per share of $0.52, both of which are above the high end of our quarterly guidance. Overall for the quarter, our results came in above our expectations on several line items. But there are few noteworthy items for which I'll provide some additional color. First, fair value for the quarter came in $2.8 million above the midpoint of our range. This was primarily driven by favorable movements of interest rates and spreads along with better than expected timing of certain deliveries and construction progress. Second, interest income exceeded the high-end of our guidance. And NOI on our wholly-owned assets came in above the midpoint as revenues were higher than we expected. Lastly, our cash G&A came in about 10% lower than expected for the quarter, as we were able to recognize some savings from the timing and amount of certain professional fees and business development activities. On the basis of the foregoing, even a fair value would have been at our $6 million midpoint. Quarterly EPS and adjusted EPS would have been substantially above the midpoint of our guidance range. In terms of guidance, the backdrop for the year hasn't changed much since we provided our initial range two months ago. Overall, our construction progress and timing of deliveries remain on track and although interest rates decreased significantly in Q1, they've already recovered some of that drop since the end of the quarter. As such, we are still expecting fair value accretion in total of $30 million to $40 million for the full year. Additionally, our portfolio results along with the pace of investment activity through April, both give us confidence and the guidance range that we provided in February. And as such, we have reaffirmed our full year guidance range for both EPS and adjusted EPS. Turning to the balance sheet. We issued $2.9 million of common stock under our ATM program during the quarter, at an average share price of $21.43, which was a 12.7% premium to our year-end book value per share. We also utilized new credit facility that was upsized and extended back in December with $27 million drawn at the end of the quarter. These capital activities continue to position us well for funding our current activities and have given us dry powder for our future growth. And notably, our leverage as measured by net debt to gross assets stood at 9% at quarter-end. And in our supplement, we have our table of capital sources and uses that reflects ample capital to fund our commitments for the next year. And as we've done since inception, we'll continue to prudently seek to match our funding obligations with the source of the capital that best adds to the value of our company, and maintain our debt levels in the range of 25% to 30% of gross assets. That's all we have in the formal prepared remarks. I will turn it over now for Q&A.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Jonathan Hughes from Raymond James. Your line is now live.

Hey, good morning, everyone. On the last call I believe Jonathan talked about expectations for a transaction activity to pick up through the end of this year and you're already about half way to your investment guidance. But curious if you could update us on the investment page, into the back-half of the year I think some of that volume was predicated upon seeing distressed or disappointment deals. But one of the larger operators yesterday said they haven't seen those yet, just trying to get a sense of the deal flow activity out there.

Yeah, Jonathan, so when you think about our deal flow, it's really you can put it in two different buckets. One is, are the programmatic development deals. And we will continue to do those as we have suggested. We're really working at this stage of the cycle with a core group of programmatic developers. I would say the number is half dozen at this stage, who we are - we're totally aligned with the type of product we're looking for. The markets that we're looking to develop then and we're perfectly in sync with that group. And then, the second piece would be on the acquisitions front. And when you think about our - what I would call our captive pipeline, we continue to have conversations with our partners about acquiring their interests. I do think that those conversations have ramped up to some degree over the course of the last six months. And I would expect those conversations to accelerate even further once we get on the back side of the 2019 rental season. So I do think that you're going to see some - a ramp up in opportunities that present themselves from our internal pipeline for the end of this year, going into 2020. As it relates to the market in general, I have not seen distressed deals to any wide degree. I do think that you have motivated sellers and the majority of the assets that were developed during this cycle were developed to be sold. And when you look at the time horizon, maybe it took a little bit longer to get out of the ground. Maybe it took a little bit longer to close out the permitting process and get your CO. Maybe you don't have quite the visibility or you're not meeting your rate expectations at that particular stage of lease-up you're in. I still think the developers are going to do well. I think it's candidly the difference between a developer hitting a home run and maybe hitting a double. So I think that the developers will do just fine. I don't expect to see a lot of distress. I think they're just going to be motivated.

Okay. That's helpful. And then, maybe a question for Kelly, but on the fair value income guidance, obviously, that was well above this past quarter. But still your guidance is not changed. I know there are a lot of variables that go into that number. But was hoping you could maybe quantify the sensitivity to compressing rate and spreads. So what would the $30 million to $40 million fair value income guidance be if rates and spreads compress, say, 50 basis points from today?

All right. Hey, Jonathan. Good morning. Yeah, we include that disclosure in that footnotes to our quarterly and annual reports. And so, that sensitivity, we sensitize it for 25 and 50 bps. And so, it's about $2 million for 25 and 50 for - or $4 million for 50 basis point swing. So I think you can take that and extrapolate that to the current interest rate environment and movements that we've seen. And as we were looking at our guidance and whether or not to adjust for the year, you have seen rates go up some since quarter end. And as you mentioned, there are several other factors that go into that assessment. So we felt at this time it's best to leave that range where it is.

Yeah, okay. All right, that's it for me, Dean. Thanks for your insights over the past four years on these calls. Hopefully, you can enjoy some more free time.

Okay, Jonathan. Thank you.

Thank you. Our next question is coming from Tim Hayes from B Riley FBR. Your line is now live.

Hey, good morning, everyone. Thanks for taking my questions. My first one, this quarter you closed five acquisitions of developer interest at great pace to start the year. And it sounds like you're going to be seeing even more opportunities six months from now than you see today. So when you look at the portfolio today, how many assets do you believe are currently prime candidates for take on your portfolio? And then, how many do you see becoming candidates by the end of the year?

Hi, Tim. It's John, and thanks for the question. It's a good question. And it's a question that is hard to answer, because this is largely in the control of the developers. We feel like today the trend has been, when projects get somewhere between that 18 and 24 month period in their lease-up, we start to hear from developers and start to have some conversations. So as you look at it over the balance of this year, we have, I guess, 45 assets that we still have as prospective acquisition candidates going forward. Over the balance of this year, lot of - as we said earlier in the call, 50% of our assets haven't even seen one full leasing season yet. And it's possible that one full leasing season is not enough for these developers to become motivated to sell. So our anticipation is that the real pick up in pace comes as we move into 2020. And then, of course, we have 2019 and 2020 deliveries that will become more ripe in 2021 and maybe a few of them leading into 2022. It's hard to pinpoint a number. I would say that the number this year, absent there being some exceptional opportunity that we see, that we choose to take advantage of, the opportunity this year is likely single digits in the on-balance sheet portfolio. And then, perhaps in the joint venture portfolio, that's a little more mature portfolio and we could see opportunities to acquire a few more of those. That's only 11 asset portfolio and we've only bought 4, so we have 7 left. And out of that 7, we could end up seeing some additional opportunities as the year goes by. But I think 2020 and 2021 are going to be the big years.

Got it. I appreciate all that, John. That's a good insight. And then this one is for Kelly. Kelly, interest income beat the high-end of your guidance range. And can you just touch on maybe some fees that were potentially embedded in there that led to beat your high-end of guidance? And if there were some loan mod fees associated in that number, can you maybe touch on what you're seeing from your borrowers that is driving the need to modify terms or extend durations? Is it because assets are taking longer to lease up than expected or because they're having - developers are having a hard time finding their next project or - and do you see this picking up as we get later in the development cycle?

Hey, Tim, great question. We did have in our interest income this quarter some fee income that we are recognizing related to some modifications of certain of our investment agreement. This quarter it was about $250,000 amount of fees that we recognize this quarter. And we expect that we will see some more of those, the timing and recognition of those fees. It's very facts and circumstances specific to the transaction that occurred. I think John wanted to give a little bit more insights to some of the factors driving those.

Yeah, Tim, and for everybody on the call, we talked all along about the lifecycle of these projects. These projects start out with an idea and a piece of land. Developers have to go through an entitlement process. And then, they have to design projects and they have to get those projects permitted. And then, we talked a lot about construction delays and things of that nature. So there - when you underwrite a project, sometimes you're underwriting it a year, maybe even a year and a half, before you're ready to start the project. And when these delays come about, sometime the reserve calculations and other calculations that you've made that on which we have made our investment decision instead our investment amount. Change that you get to the backend of a project and in lease-up indicates the project on a path toward stabilization, sometimes it's necessary to modify these loans to either increased the principal amount to add more reserves, occasionally to extend maturity date or certain target date, and when we have those modifications, we will, in many cases receive some form of a modification fee. So it's a - it's - at this point, a somewhat recurring source of income, it's unpredictable. You can't model it, because you don't know, which projects you'll be modifying. But we're seeing a little bit of this every quarter and in this quarter that resulted in some additional interest income that was not contained in the original guidance range.

Okay. Great. That's helpful. And then my last one before I hop back in the queue. As you look at the markets you want to invest in, which characteristics are most desirable? Is it the existing footprint and/or pipeline of storage supply per square foot, is it the economic growth or population growth of the MSA? If you could just maybe expand on what you guys are looking for and then maybe point to some of the markets you're most interested in today and maybe those are sticking away from?

Yeah. I - this is Jonathan. I think, you start with the MSA and the vitality of an MSA, which would be population growth, job creations, the number of universities in a - in an MSA with which and you could add a host of additional factors to rack and stack MSA is based upon vitality. But generally, it's going to lead you to the top 25 to 50 MSAs. And really the key is once you look at those top 50 funding submarkets within those MSAs that are the best storage submarkets. And it starts with demographics and you obviously look at supply in the market square foot per capita, et cetera. And then - on development in particular you also focused very extensively on the real estate, on the location itself, and its proximity to demand drivers, its east of access and location relative to retail, et cetera. So there are a host of variables that we look at whenever we are evaluating sites and site selection. But to take it back to the top against your immediate question, it would be the top 25 to the top 50, a subset of the top 50 MSAs.

Okay. Yeah. That's helpful. And then maybe if - and then just part being that was talking about some of the markets you are liking today versus those, and I know that some of these markets we've heard there have a common - just common response, but just curious, if there are any more that are moving up your list or some that are moving down the list?

I think that - the West Coast markets continue to outperform, so to the extent that you can find opportunities, Coastal California, I think that you'll be well served. There are - as we've mentioned before, it takes a while to get projects completed out there. And there have been - the groundwork has been laid 24, 36 months in advance, and you're finally starting to see some deliveries out there, just takes a long time to get things done. When you work your way across the country, the three most recent yields that we have committed to or in the Greater New York area, we continued to love that market. The square foot per capita is - are the lowest in the country and people don't oftentimes talk too much about the demand drivers up in New York. But when you think about the population densities, you think about the present renters, you think about the small living spaces. Just the demand characteristics in New York are exceptional. So we continue to like that market. And then some more challenged markets as they're the ones that, I think, we've been talking about for a while. You have Nashville. We don't have any exposure there. But I know that there are some pretty significant headwinds. And in Nashville, Austin, Raleigh, and I think Portland is the market that has experienced some challenges. And I think, there are some pretty headwinds on the horizon there. So the Pacific Northwest, I would think would be a little bit challenged or going into the cycle kind of late.

Okay. And I might just sneak one more in because that based on one of your comments especially on the West Coast markets. But a trend that we've noticed or just read from one of the data aggregators is that developers are making new facility sizes smaller and on maybe some land parcels that are too small for other types of CRE assets? And just wondering if you find this to be the case and if so, if it's opened up any doors for you in markets or some markets that have kind of been challenging to find spots to build, but have had strong demand?

Yeah. We really haven't seen that trend in a big way, I understand it. I think that if you're developing on a smaller parcel, I mean, obviously that's one of the benefits of going vertical, you don't have to have as much land, but if you are developing micro facilities. I think you're having to put a whole lot of stock in and pressure focus on rates. So I think you better be right on your bet on rates if you're going to go small. That would be my only caution there. We have not really seen it. I think earlier in the cycle, you had a trend toward building bigger facilities. I think it's really come back to more of a historical size that we're accustomed to which is at 65,000 to 80,000 net rentable, where you have a high degree of confidence that you're going to be able to lease-up a facility that size.

Okay. I appreciate the comments.

Thank you. Our next question is coming from R.J. Milligan from Baird. Your line is now live.

First off, Dean, I want to echo Jonathan's comments. Thank you for your comments over the years. We've always valued your insight on the sector and we'll miss them.

Hi. Well, R.J., I am not changing my telephone number, so pick up the telephone and call if you want to call. I am always happy to talk about self-storage.

I appreciate that. So far this year, three development commitments, all of which happened to be in the New York city area. And I'm just curious, with all the new supply coming online. Can you talk about the underwriting assumptions for deals that you're signing today both what the lease-up timelines look like and where rents are going to pan out relative to today's market?

Yeah. R.J., this is Jonathan. With regard to the lease-up timeline depending on the facility side, but you just assume a traditional size facility for that particular market. We are going to typically assume three rental seasons to stabilize to make visible occupancy standpoint. And fourth rental season to fully stabilize from an occupancy and rate standpoint. And as it relates to the rates being used for underwriting, we are taking a deep dive into the market and looking a trailing 12 rates, and looking spotting trends over that trailing 12 period of time, and formulating our rate forecast for rate expectations with that data.

Okay. That's helpful. And then, obviously, a lot of activity in the joint venture bringing - buying up the developer's interest. Can you talk about how you think the Heitman joint venture plays out over time are those assets you're looking to bring on balance sheet? Or do you guys holding them in the joint venture for longer period of time?

Yeah. R.J. That's a good question. I wish I had a good answer to that. That's largely in the control of Heitman. The structure of our joint - we have ROFRs on all of those assets and the developers have the same right that they have on our - on balance sheet development to come to us, before they go in the market, the property for sale to try to negotiate and buyout of their interest. And the sprite of the deal back, when it was cut was that, at the time that happened we would have effectively a joint right to buy the developer out. But with that said, there are one of the co-investors in the Heitman joint venture is a large institutional, large pension plan that has a longer whole period, but not indefinite or in infinite life for holding in the Heitman. The Heitman fund, the internal fund that's a partner, probably as a shorter whole period, so I think that that remains to be seen, how that works out. In a worst case scenario, we are going to own these things 50-50 with them. In the best case scenario sometime in the next few years, they come to us with a proposal for us to just buy them out. We would love to earn every one of those properties on balance sheet. And I think ultimately it's going to be up to Heitman as to how that plays out.

Got it. All right. That's it for me. Thanks, guys.

Thank you. Our next question is coming from Todd Thomas from KeyBanc Capital Markets. Your line is now live.

Hi, thanks. Good morning. I'm wondering if you're seeing developers lower their required returns at all, maybe accept lower returns at this point of the cycle, the cost of financings decreased and the capital markets continue to function fairly well and there's quite a bit of capital on the sidelines looking to get involved in the space. Just curious if you're - if you could comment on that?

Yes. Todd, I don't think that traditional storage developers have necessarily lowered their return expectations. I think that for years we've talked about it, the target would be developing to a spread that's 275, 300 over a stabilized acquisition yield. I do think that in this cycle you've had primarily developers coming from multifamily, who have developed self-storage and multifamily spreads are closer to 150. And so I do think that you've seen individuals develop to spread probably closer to that number, which would be well below what we've traditionally done in the space. So I don't know that they're long for the space, meaning I'm not sure that that is a trend that is necessarily here to stay. But I can confidently say that some developers have developed to spreads closer to multifamily than what we've seen traditionally in self-storage.

Okay. Has JCAP lowered its return requirements at all for various investments? And do you think that market cap rates have moved at all in the last few months?

Yeah. Todd, we haven't lowered our expectations at all. We - when we came into this cycle, we're looking for a spread of around 300 basis points over what we felt prevailing stabilized cap rates were. And in our earlier deals, I think we may have done better than that in a few cases. I think that as the cycle has progressed, you've seen us significantly reduce the number of deals we're doing. And so - yeah, I think that's indicative of the fact that yields have come down in a lot of the markets that we're interested in and the deals that we continue to do, we still expect to hit that spread target that we set out to achieve on the front end of our investment history. In terms of cap rates, yeah, the indicators are that they certainly haven't moved up. And if anything, they perhaps moved down a little bit. Jonathan can weigh in on that.

Yeah, Todd, I think that for a cash flowing asset, when you just think about the opportunity set out there with the majority of the opportunities being assets in the early stages of lease-up. I do think that you've seen a compression in cap rates for core cash flowing asset, particularly in the last 24 months. I think you could arguably say that the cap rates have compressed 25 basis points on that asset class. And in total, I think it's yet to be seen on the assets and lease-up. Everyone is underwriting probably a little bit differently on their lease-up horizon. But I think that you have seen a compression, 25 basis points, I'm not sure a whole lot more than that. But that would be the number I would put out there.

Okay. That's helpful. And then, as you think about the increased deal flow that you're expecting to begin surfacing later in the year, just curious what the appetite is like here to utilize the ATM a bit more at current level. Seems like you're committed to maintaining the balance sheet in low leverage profile, just given where the stock is trading, how are you thinking about equity here?

Todd, I think that our best opportunity continues to be our existing projects and buying developers out of our existing projects. And I think as we've established over the dozen or so deals that we've - where we've actually bought our developer out, we've shown that the ticket to buy them out is not a ticket that requires the issuance of a lot of common stock. And it's somewhat episodic and so we have the ATM to fund those opportunities as they come to pass. I feel like we'll opportunistically use the ATM to be ready for that. We can always take - we can always use ATM sales to pay down the credit line and have that capital free for when those opportunities do arise. And so, we'll continue to judiciously make those decisions and allocate the funding between ATM and the credit facility in a way that makes most sense for shareholders.

Okay. All right, and then just lastly, Dean, since we'll miss you on future calls, I didn't want to leave you out entirely here. You've always said that the industry gives away too much rent and discounts a little too much. It didn't seem to matter all the time, because the number of larger players in the competition in general, still discounted and provided promotions to renters. Has anything changed with your view on that? And it's still a heavy promotional environment, but there has been a lot of new technology implemented across the industry. There is better data, some new management teams, perhaps strategies around pricing. Are you seeing any changes in pricing or behavior from the operator community at all?

Thanks, Todd. I appreciate the tuck-in question seriously. No, unfortunately, I've not seen anything change. It really is unfortunate. When we have our studies out there that shows, still you got 60% of our customers' find us through the Internet and go right into our funnel and do not compare another price with any one other - with another competitor. They go through and rent and you give them a month's free at the end of that for no reason whatsoever. Frustrating to me, and we see it happen and we wonder why the retailers are struggling. You woke up to get ready to pay for something in a Macy's and they tell you, oh, I can give you another 20% off here today. You were ready to pay the full price and they give you 20% off and there goes the whole profit margin, wherever you're buying. That kind of stuff is prevalent, not only in storage, but across the retailing world today. It's ridiculous, but we're stuck with it apparently. So, I guess, I'll have to go to my grave with that one.

All right, thank you.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you everybody for your continued interest and we love getting together with you every quarter and your questions are always very good and we appreciate the interest and the continued support and we'll talk to you again next quarter. Take care.