Ladies and gentlemen, thank you for standing by. And welcome to the Public Storage Fourth Quarter and Full-Year 2018 Earnings Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation [Operator Instructions].

It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Ryan, you may begin..

Thank you, Maria, and good day everyone. Thank you for joining us for the fourth quarter 2018 earnings call. I am here with Joe Russell and Tom Boyle.

Before we begin, we want to remind you that all statements other than statements of historical fact included on this call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected by those statements.

These risks and other factors could adversely affect our business and future results that are described in yesterday’s earnings release and in our reports filed with the SEC.

All forward-looking statements speak only as of today, February 27, 2019, and we assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release.

You can find our press release, SEC reports and an audio webcast replay of this conference call on our Web site, publicstorage.com. With that, I will turn the call over to Joe..

Thank you, Ryan and thank you for joining us. We had a good quarter. And now, I’d like to open the call for questions..

Thank you. Our first question comes from the line of [Shirley Wills] of Bank of America Merrill Lynch..

So on supply, what are your latest supply outlooks for '19 and '20 and maybe just a little bit of color if markets are improving or are deteriorating?.

No question for last two to three years, we've seen heavy amount of supply in entering many markets across United States. Statistically and in particular if you look at the amount of deliveries that took place in 2017, which was roughly over $4 billion, last year, just over $5 billion. Our view for 2019 is it's likely to be similar to 2018 deliveries.

So if you just look at those three years, there is no question there has been a lot of new products that's entered the market. The totality of that is in its full view is pretty commanding, it's got 90 million square feet plus or minus 1,200 to 1,500 properties.

So as we've talked over the last few quarters, we've been very transparent around the markets that we've seen the most impact from all the supply entering.

Another part of the delivery and the complexion of these properties is something I talked about last quarter, which not only is it a heavy level of deliveries but on average the size of many of these properties are much bigger than they've been historically.

So you've got a number of owners out in some of these markets that frankly don't have the tools or capabilities to operate them in a traditional way.

So I think there is an element of both disappointment and potentially and ultimately some level of distress that could come from that as they learn and see the challenges of running these larger properties. So you also asked about, okay, how are we thinking about this shift? So there is a couple of good things here.

One is first of all the markets that have seen these delivery levels many of the markets have actually absorbed the products well and we've been encouraged by that. I would point to the resiliency of the product type itself and the depth of many of those markets, consumer behavior all those things.

But they're still a number of markets that continue to be impacted. Those include Denver, Dallas, Chicago, Charlotte, where again we have seen this overhang from the amount of new supply entering. And we don’t see that really changing here in the near-term.

The good news, however, is there is a lower level of our deliveries anticipated going in many of those markets going into 2019. Some of our better markets, again, going into 2019 include Boston, Philadelphia, LA, New York, Atlanta, San Francisco, Orlando. So we do see some additional product coming into Boston, for instance, New York.

And again, we're going to keep our eyes wide open around the potential impact from that additional supply. The good news is the West Coast, outside of Portland, has been pretty resilient to supply additions.

And again, we see very good metrics and just overall consumer and customer activity coming from those markets, because we have far less new competition. So with all that said we still feel like we're not out of again a heavy supply environment.

But on the flipside, we continue to be encouraged by some of the things that we've seen through 2018, particularly in the fourth quarter and our feelings activities playing through as we begin 2019..

Could you talk about Street rate trends you actually see in 4Q and maybe into 1Q as well?.

We generally like to talk about move in rates more just given they have the real impact to our revenue as it's what customers actually rent from us. Street rates were down about 1.4% in the quarter. Overall, move-in rates were down about 3.5%. But I think that talking about moving rates really masks what happened in the fourth quarter.

So as we talk about the customer behavior and trends that we saw through the quarter, you really need to talk about move-in and move-out volumes as well. So as we started the fourth quarter, we were down about 110 basis points in occupancy. We closed the quarter positive 20 basis points in occupancy.

And so what happened through the fourth quarter will be solid pretty encouraging customer trends throughout the quarter of flat move in volumes year-over-year, which is the best quarter for move in volumes all year.

And so how do we achieve that combination of increased advertising spend where we saw good customer response there, as well as attracting customers with that lower move-in rate that I just highlighted. In addition to that, we benefited from what is a continued trend throughout 2018 and that is consistent sticky existing customers.

So lower move-ins, again, in the fourth quarter, which drove the occupancy pick-up. So, overall as we sit here today, we were encouraged by customer trends through the fourth quarter that's largely holding through the beginning part of the first quarter. And obviously, we're at the seasonally slow part of the year.

So we'll need to watch how that progresses as we get into the busy season here in the next several months..

Do you take that out continue to strength through the beginning of '19 as well, or is that just a function of maybe that actual advertising spend that you mentioned?.

Well, let's talk a little bit about the marketing spend. So we did increase our advertising spend 29% in the quarter. The driver of that was paid search spending, because I've talked about on previous calls. We've incrementally spent more as we've gone through 2018.

We've been encouraged by the customer response to that spend, what we've discovered throughout the year is that the real power of the Public Storage brand online and the reception that we're receiving to that increased spend. So we've been encouraged by that as well and will continue to use that tool as we get into 2019.

So that was a fourth quarter certainly a decision to drive traffic. And we're continuing to push a little harder on that lever to drive traffic in the first quarter of 2019 as well..

Our next question comes from the line of Ronald Kamdem of Morgan Stanley..

Just sticking with expenses, just looking at -- you came in full year around 3.2, obviously you are not providing guidance. But can you just talk maybe about the big buckets how we should think about maybe '19 and beyond? So I'm thinking property tax is growing in the 5s, on-site property payroll. I know you have touched on marketing spend as well.

Just curious how you guys are thinking about that in '19 and beyond?.

I would point you to the disclosure we have in our MD&A and the 10-K, which breaks out line-by-line expectations for the spend items. I think you covered it reasonably well, actually, which is that property taxes we expect to continue to increase. We expect that around 5% and obviously we will update as we go through the year.

But there continues to be pressure there. On-site property manager payroll continues to be another pressure point with a very tight labor market out there. And certainly throughout 2018, we grow some efficiencies, while at the same time, being able to increase wage rates to attract the right employees at the property level.

On down the list marketing spend, I just touched on. We expect to continue to spend online is our primary tool there to drive traffic. And we did see good response there and we're seeing a good here in the beginning of 2019 as well..

And then just moving to development, maybe a two-part question. One is just maybe if you can give us some color, three versus six months ago.

What you are hearing on the ground in terms of development projects, in terms of making their pro formas or delays being had? And the second piece of it is going back to the opening comments about all the supply coming on and potential distress with properties.

Is that an opportunity for you guys, you see yourself down the road maybe trying to acquire some of those properties that are distressed? Thank you..

Yes, I mean that's been historically and we would look at calling that as the absolute right time to start getting much more aggressive. And going out and acquiring properties in an environment where there is an elevated level of stress.

What comes with that is the opportunity to buy much better valuations that we think would potentially be the right time to again start accumulating and much more aggressive basis.

If you look at our acquisition volume, not only for 2018 but last two or three years, we've been very disciplined around the price point at which we decided to go ahead and acquire assets. We found some good values out into the markets, but have also shied away from the frothiness that has played through.

And that's still part of the market today where again there is a lot of capital that still wants to come into the sector. There are pro formas out there that we think are not reasonable.

I think there is a population of owners that I talk to moment ago that are starting to see the reality very different than we expected either returns or timeline time lines ties potential, lease up and revenue stabilization on these assets.

So for all those reasons, we're prepared and we've got the balance sheet ready obviously to go out and be very aggressive when more of that stress starts entering the market.

Anecdotally, I would say there are a few more reverse inquiries coming to us that would include some owners out there that maybe now not meeting pro forma and are seeing some stress points from either the lenders or maybe some of the partners, or frankly are just saying wow, this is very different than I thought it was going to be and it maybe the right time to exit.

So we're going to continue to track and look for those opportunities. You saw in our quarterly numbers, which is consistent really through obviously 2018, is we've got a very strong and healthy development pipeline.

We think that to a property where we're putting all of our, not only internal metrics and everything that we do from studying the submarkets to submarket, we've got a very good opportunity to continue to deliver brand-new generation type product into our own ownership structure where we can build this product for say $120 a square foot, which in today's environment could trade in almost multiple higher of that.

So we are very focused and we pivoted into a vibrant development program plus or minus five years ago. We see a lot of good opportunity there.

We have shifted more of our efforts into our own redevelopment as well where again, we've got great locations, iconic opportunities to take very well performing assets and potentially make them even bigger or again more profitable ultimately by doing some either redevelopment or expansion.

So many of the tools and capabilities that we've learned through round-up development or being applied to our redevelopment portfolio, which is again shifting from a waiting even more on that spectrum right now. Part of what's driving that, land costs are in many markets getting more expensive.

There is a little bit more cost pressure relative to components of construction, whether it's steel, labor, concrete. So we're keeping a very close eye on that. But overall, we think that we will continue to deliver very good returns with the development pipeline that we have ahead of us.

And then the properties that we put into the market over the last three or four years continue to be very well, they are meeting if not exceeding expectations. And we continue to think that’s a very appropriate use of our own capital and we are getting very good returns from that strategy..

My last question would be just looking at the end of period metrics, the square-foot occupancy in the annual contract rents. If I'm doing the math right that suggests that's about 1.5% revenue growth compared to the 1.2% that you did in 4Q. Just as you are sitting here today and obviously the commentary about the marketing spend being taken well.

Does it feel like the business is starting to stabilize a little bit and the portfolio is absorbing some of that extra supply? Or which way are the risks skewed is basically what I'm trying to get at?.

I'll maybe give you some color from my perspective and Tom can add to that as well.

But sitting here today compared to where we were a year ago, I would say that yes, we have an outlook that shifted to be more encouraged around many of the things that we are seeing, which include again the resiliency in the sector of large products types and the way as we know it behaves from our lease up fill-ups standpoint, we are seeing good resiliency.

And given many of the things that we continued to use that are unique to us for 2018, we saw some good traction, particularly the second half of the year. So sitting here today, we feel like we are in a better place. Now, going into moving in busy season, we will see how that plays through. We are just a few weeks from that.

But all things considered, we feel like we are in a better place going into that than we were a year ago. And we will continue to see and figure out how to maneuver around the supply that continues to come in the markets as well. So it's little bit of a two-edged sword. But all things considered, we are on-balance and we are more encouraged..

I would add a couple of things to that. One is that you have to look back several years as you think about where we were at the beginning of the development cycle of occupancies north of 95%. You certainly watched in the last several years, some of that occupancy given up and some of the supply impacted market.

And as we look at those markets today, we have been impacted in some areas. We expect to be impacted in others. And so there is more of a put and take around markets where we are seeing some improvement and markets where we are seeing deterioration based on that new supply. I think your question around the period end math, you did the math right.

The 1.3% and 0.2% gives you 1.5% aggregate contract rent as we go into 2019. As we look at trends, since January 1st as I highlighted earlier on the call, pretty consistent. So occupancy trends have been consistent with that time period or up about 30 basis points in occupancy today.

And contract rent continues to be impacted by rent roll down and existing tenant rate increases. But I think that period end math you did is right..

Our next question comes from the line of Todd Thomas of KeyBanc Capital Markets..

Just first question, I guess following up on that a little bit. I was just curious on the 10-K that was filed this morning, you disclosed the move-in and move-out spread was negative 16%. So that's the widest during the cycle. And Tom you noted that move-in rates were lower year-over-year by 3.5%.

Any sense where we are in the cycle, whether you may see some stabilization in pricing for new customers? And then can you talk about how much that spread contributes to revenue growth and how we should think about that spread?.

So let me take that by piece-by-piece. So we did see, as I highlighted earlier in the call, rental rates for move-in customers to be down 3.5%. That move-in move-out spread that you highlighted, call it 16% did deteriorate that was a strategy to drive the move-in volume that we achieved during the quarter.

And so it's hard to talk about rate without volumes, because I talked about the move-in volume that we achieved was the best move-in volume that we achieved throughout 2018. And so it's really a combination of both of those factors.

But certainly, there is rental rate pressure in many of the markets that Joe highlighted having been impacted by new supply. We're going to see some new markets enter that list and I'm sure that we will see some rental rate impact in those markets as we get to 2019. So I think the environment there remains a challenging one.

But as I've said earlier, the flipside of that is our existing tenant base continues to perform very well. And move outs were down on a volume basis and those sticky customers afford us the ability to send rental rate increases as we get through the busy months here, and so we've been encouraged by those trends.

And I think those customers are supported by the macro environment, wage growth, the employment market, things like that are all contributing to the performance and behavior of our existing tenant base..

And so you talk about obviously the business is seasonal and you mentioned that you drove higher move-in storing the quarter. And the fourth quarter represented on a square footage basis just under 24% of the full year move-ins, which is up 100 basis points versus the prior year for the fourth quarter.

So it seems like the fourth quarter this year there was a lot less seasonality than in prior years and you talk about the marketing spend and the positive effect it had on move-ins.

Was that in or was there anything more broadly that led to the higher fourth quarter rental activity that you can point to?.

I think you summarized it pretty well, a number of factors. And as I said, we are encouraged by the traffic we saw in our stores and we'll see where we get to during the busy season, which will be the real litmus test as we get through 2019. And we see much more volume through the summer months and it will have a big impact on our 2019 performance.

So more to come there..

Have you seen some less seasonality starting to materialize in recent quarters, or is this the first quarter where you've seen that?.

I think we continue to see seasonality in the business. There is nothing different about the fourth quarter this year versus prior years from a seasonality standpoint. It was different, customer use storage for different reasons through different times of the year. You don't have the college students in the fourth quarter.

You don't have folks that are moving to get into a new school district in the summer, in the fall. So there is going to be seasonality and we continue to expect that 2019 will be no different there..

Our next question comes from the line of Smedes Rose of Citi..

I wanted to go back to on the expense side, you mentioned also in the 10-K that you had reduced hours on site in order to help offset some of the wage increases.

And I was wondering if there is more to go there? Or if you are able to maybe put in more automation perhaps it eliminates the need for employees or how you think about that part of the business?.

Smedes, what we did in 2017 was put into all of our properties in our Web Champ 2 system, which we talked about some degree through 2018. So full year, we had 2018 Web Champ 2 which again is our customer interface system throughout the entire organization.

There is no question based on its design, we were able to optimize labor hours along with training. It's a much more intuitive system, so new employees were able to come into the company on a much more efficient training program. So we saw some good traction there. And I would say we've got a lot of that work through this system.

So there may not be going into 2019 the same level of additional benefit. But the great news is the system itself continues to evolve from a functionality standpoint and efficiency standpoint. It's all built around making the customer experience that much more efficient and timely coupled with again easier to learn use and adapt by new employees.

So a lot of that traction I think went through the system in 2018. The thing that we will see, which is something Tom has already talked about is the price pressure we are seeing in labor overall is the toughest employment arena that we have seen in well over a decade. So we are looking at many ways to optimize our labor force, the size of it.

But at the end of the day, many of our properties fundamentally need that key single person each and every day to run a property. And we really can't cut beyond that until we are at a point where we can do something as forward thinking as what you're asking is and we actually run properties with our people. So we are not at that point yet.

It's an interesting concept. But that’s something clearly downstream that we will have to take a fair amount of time to figure out how to put any of those opportunities into the system..

The other thing I just wanted to ask, you also mentioned in the 10-K there were no plans to use joint venture financing or sales of properties as a source of capital. But just wondering, I mean it seems -- we keep hearing that pricing has been very sticky and relatively high or low cap rates.

And is there not an opportunity maybe to sell more mature properties at very strong pricing and retain management contracts from them? Or is that just something that you would be interested in doing to jump start the third-party platform?.

Well, I don't think that’s necessary component to jumpstart our third-party platform. I would just tell you from a strategic standpoint, I mean that’s something that we would continue to evaluate as we have in the past. But again that’s not -- I would am evolving strategy.

For the most part, we're very pleased with the size and the scale and ownership structure that we have with the full portfolio and we'll continue to consider all alternatives as they arise. But no, I wouldn't -- I would point you that direction right now..

Our next question comes from the line of Ki Bin Kim of SunTrust..

So I think you mentioned the average length of stay increasing.

Can we talk about like what kind of magnitude you're talking about and maybe if we can answer that differently? What percent of your customers have been there for over a year and how's that trend over the past couple years?.

What we saw and what specifically we highlighted in the 10-K was the increased length of stay from some of the move-ins that we saw through 2018. So we saw some good traction there. Overall, the entire portfolio, the metrics are pretty consistent with what we've talked about in the past, so a little under 60% of our customers are with us for a year.

As we highlighted in the K, we've seen some modest improvement to those metrics. But overall, not a fee change at this point but encouraging trends..

And 60% of customers have been their over year, and I'm assuming that’s a similar pool for the eligible customers to get a rent increase letter.

But what percent of that 60% when the once they get a letter actually end up rolling down? And I know it depend on timeframe, so maybe within three months we're getting a letter or four months, I'm not sure what the cut off is, what your cut off is.

But just trying to get a sense on what the roll down and how meaningful that can be?.

Ki Bin, I'm not understanding the question.

The roll down, what roll down are you talking about with existing tenants?.

So my question is basically if 60% of customers, in theory, get a rent increase letter. What percent of that 60% actually ends up leaving within call it four months or so that might….

It's around the efficacy of the existing tenant rate increase program, but that's metrics that we watch very closely. And obviously we seek to optimize the rental income that we can charge our customers based on many factors. And certainly, the propensity to vacate thereafter is a key component to that analysis..

[Operator Instructions] Our next question comes from the line of Eric Frankel of Green Street Advisors..

Just a broad question, I noticed that of course your 10-K, your market share and the market share of the top five operators of 7% and 15% respectively, hasn't changed over the year. Obviously, there's been a lot more storage volume.

Do you have on hand how much what those percentages look like with third-party management and the professionalization of that business? And what that market share is if you include that?.

I don't have that on hand. It's something that we can get some industry data and talk about offline. But I don't have that in front of me..

Do you think it increased or stayed the same versus last year, the third-party management of the top five operators versus all of the U.S.

stock?.

I don't know. We have to look at that data. I don't have it in front of me..

Do you guys have any targets of -- obviously you're fairly sensitive to price and you think that acquisitions are still a little bit pricey today.

Do you guys have a goal or target of what you think your market share should be overtime?.

You mean, on a per market basis?.

Yes, per market and nationally, sure..

Well, no. I mean, it's never that scientific that it's best to have one number versus another. There's no question -- in almost every market internationally, we have commanding market share. And we see inherent benefits whether that share is 15% or 20% or 25% for instance. So for the most part, more share is better.

One of the things that we continually look for are opportunities through our ownership and now through our third party management platform to grow that scale.

And the scale come through and can be very advantageous in a number ways, not only physical presence but obviously all the tools that we're using in today's world relative to our marketing tactics for the Internet, et cetera. So we constantly look for ways to optimize our share, let's put it that way.

But we do enjoy the fact that the largest operator by a meaningful factor and crossing that stage and literally in almost every metropolitan market, we see a lot of inherent benefits to that..

And related to market share and controlling more and more properties. Your third party management business I guess 10-K disclosed you manage 33 third-party stores.

Is that correct?.

Well, no. Today, in the program, we have 50, okay. So if you look at our program, we literally announced our entrée into third party management business exactly a year ago. And we literally started from zero. So when we announced it a year-ago, we did not have a team in place.

We had designated a senior leader, being Pete Panos, to basically build the business from the ground up. And he now has team that’s fully in place, have been working on that diligently over the last 12 months. So we're very pleased with the traction that we're seeing from our entrée into the business.

We're seeing good receptivity to the components of our offering, which include obviously the brand itself, our operational capabilities, the ability to be part of our all of our initiatives tied to our marketing prowess, et cetera. And again, a very competitive fee, which also include sharing insurance revenue. So the offering is very compelling.

We've got a backlog that continues to build on. Pete and his team are now out doing much more outbound efforts.

So what has taken place with our entrée into the business, which I think is similar maybe to others overtime is it does take a number of quarters to get pipeline build, because many of the properties that are typically coming to these programs are being built. So, we have a healthy backlog that includes a number of those properties in it as well.

We have a number of properties that have been in place that have decided to come into our platform versus either be running the facilities themselves or coming up another third party platform. So we see a lot of good traction there and we'll continue to see good opportunities going into this year..

And I have probably have a few more questions. I'll just ask last one just related to Shurgard Europe. I guess after the offering, you now own 35% stake in the company.

Do you foresee that increasing or decreasing or staying the same over time depending on how fast they grow?.

Well, the thing I would comment to Eric and you've use that an example, our commitment and sponsorship of PSP, I would say we have a same view of Shurgard. We think the teams very capable. I think IPO went really well. They've worked really hard over last decade optimizing their portfolio, their full capabilities.

We think they have got a great opportunity and platform to go forward on their own. And with that we continue to be a key sponsor of their efforts and we will continue to again be committed to the entity as a whole. So from a specific percentage standpoint really I'm not going to talk to that.

But I'll just tell you that we plan to have a very strong endorsement sponsorship of the entity..

Our next question comes from the line of Mike Mueller from JPMorgan..

Just a quick financing question, you called the series Y preferred.

Just curious what are the plans to either finance that, replace it, looking at debt, looking at other preferreds, et cetera?.

We did issue the redemption notice and we will redeem the series Y 6 and 38 preferred at the end of March. That is a 6 and 38s coupon. So we view that as a good capital allocation decision to redeem those. We have many tools at our disposal. The financing market is pretty attractive right now, both preferred as well as the debt market.

And we finished the year with $360 million in cash. So lots of tools to address that $285 million redemption at the end of the quarter, and the financing markets are good..

But no bias at this point in terms of debt or preferred?.

No..

Our next question comes from the line of Jonathan Hughes of Raymond James..

Tom, on the predicted revenue growth metric, you said in prior calls that average occupancy is a better way to look at it and using period end occupancy.

Has that view changed? And the reason I asked is because using period end occupancy implied worse revenue growth for the following quarter than using average occupancy in the past three earnings releases?.

Yes, that’s a good question. We had talked and really shifted to talking about average is being probably a better metric as we went through 2018. And the reason for that was some shifting consumer trends as we looked at vacate trends throughout the month. We have now lapped that.

And so the period end trend, particularly for the fourth quarter given the fact that we increased occupancy on a year-over-year basis throughout the quarter, period end is a better metric to look at an average. So short answer is we have lapped that differential. Period end is as close to 2019 as you are going to get.

So I would point you to that as an indicator to look towards..

And could you just remind us what were changing the preferences again?.

We just saw customers electing to vacate more towards the end of the months. And we've talked about there was something that we like that allowed us to get more inventory back before the busy part of the month where we moving a lot of customers at the end of the month and getting into following.

So that was another encouraging customer behavior change we saw through 2018..

And you don't think that will continue this year?.

It will. It's just that it happened in 2018, so we've lapped it..

And then looking at the CapEx spend that was about $140 million last year, actually a bit below guidance. But I understand some might have gotten shifted into 2019. But the 2019 CapEx spend guidance of $200 million suggests a 40% increase this year.

Can you just give us some color on what's driving that increase?.

So it's primarily driven by an initiative that we did a lot of testing on through 2018 that includes a number of enhancements that we're going to be delivering to our existing product.

So through our development program over the last few years, we've come up with what we've labeled our generation five products that has a number of components and elements that we think are really well suited to go back to our existing assets.

And basically use it as an opportunity to do a refresh of the physical part of the assets, as well as looking at some opportunities to improve from a cost and efficiency standpoint, things like utilities, et cetera.

So it includes simple things like paint, which again we've learned overtime and done a lot of testing that using a dominant amount orange plays well, not only for curb appeal but it lines up with a lot of things that we do on our online efforts, simple signage, just some of the office environments, retooling them to make them much more customer oriented.

We have now a paperless environment with webcam too. So we need fewer filing cabinets and with that can use office space in a very different and more efficient way. And then to the efficiency side of the equation, we're doing things like internal and external LED, upgrading landscaping. So we have less water usage. We are looking at solar.

So we're doing some testing on solar as we speak. So there's a number of, I think, meaningful investments that you're going to see as we use really the enhanced capabilities that we've seen and good reaction to our generation five product as we deliver that new product in many markets across United States now into our existing portfolio.

So this year, we're likely to spend plus or minus about $100 million on that effort. It's going to launch in many parts of the West Coast. So when you're out here towards the end of the year, for instance at NAREIT, we may have an opportunity to actually display and show some of that while a number of you are in town.

So we're excited about what traction that we're getting from this. We're getting very good reaction from customers and employees. And we're really excited about the overall benefits we're going to see in existing portfolio..

And then on the last one on the 383 stores and 31 million square feet that are outside of the same-store pool. I realized a large portion of that's not stabilized.

But how much do you expect to roll into the same-store pool this year?.

We'll look at the number of properties within that pool that will be stabilized as of the January 1, 2017 and it would be appropriate to roll in. And when we make that determination, it will be based on both their occupancy as well as the rental rate and revenue growth associated with those properties, as well as cost of operations.

So our philosophy is to ensure that those properties that are added are stabilized versus the other properties within the market and within the market with those properties are. I would expect that many of our 2016 acquisitions, as well as some of our 2013 and 2015 developments will roll into the same-store pool.

They will be stabilized when we roll them in. So we won't be talking about any revenue benefits associated with rolling those properties in given the fact that they are stabilized when they are going in. And there is probably some expansions as well in the 2013 and 2015 period that are in the other categories that will be rolled in.

As well as any other category, there are properties impacted by natural disasters, damage, et cetera that we'll evaluate. So I don't have a number for you at this point, but certainly we'll be prepared to talk about that for the first quarter call..

And thank you ladies and gentlemen, that was our final question. I would now like turn the floor back over to Ryan Burke for any additional or closing remarks..

Thank you, Maria. And thanks to all of you for joining us today. We look forward to connecting with you in the coming weeks and months. Have a nice day..

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect..