Clem Teng - IR Ron Havner - CEO John Reyes - CFO David Doll - SVP, Real Estate Group.

Jeff Spector - Bank of America Merrill Lynch Gaurav Mehta - Cantor Fitzgerald Ki Bin Kim - SunTrust Gwen Clark - Evercore ISI Todd Thomas - KeyBanc Smedes Rose - Citigroup Vikram Malhotra - Morgan Stanley George Hoglund - Jefferies David Corak - FBR Capital Markets Steve Sakwa - Evercore ISI Michael Mueller - JPMorgan Ryan Burke - Green Street Advisors Dan Occhionero - Barclays Capital Jeremy Metz - UBS Michael Bilerman - Citigroup.

Welcome to the Public Storage Third Quarter 2016 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Clem Teng. Please go ahead, sir..

Good morning, and good afternoon, and thank you for joining us for our Third Quarter Earnings Call. Here with me today are Ron Havner, and John Reyes.

Before we begin, I wanted to remind those on the call that all statements other than statements of historical facts included in this conference call are forward-looking statements subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

These risk and other factors that could adversely affect our business and future results are described in today's earnings press reclose and in our reports filed with the SEC.

All forward-looking statements speak only as of today, October 27, 2016 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 and the non-GAAP financial measures we’re providing on this call is included in our earnings press release.

You could find our press release SEC reports and audio webcast replay of this conference call on our website at www.publicstorage.com. Now I'll turn the call over to Ron..

Thank you, Clem. Welcome, everyone. We had another solid quarter and so with that I'll open it up for questions..

[Operator Instructions]. Your first question comes from Jeff Spector of Bank of America..

Good afternoon. And definitely want to recognize great growth in the quarter. Just Ron if you could give us maybe two minutes overview on the state of the market.

You guys did a great job telegraphing some of the issues we may see this year in storage but if you could just summarize I guess the latest that you're seeing, whether it's supply, concessions, and how you're thinking of running the business through the end of the year that would be appreciated..

Sure, Jeff. I think big picture, a couple of items. Our revenue growth rate obviously slowed down to 5.1% but it's an incredible number, 5%. It's down from 6% last year but still a great number. If you look across our Top 20 Markets, all had positive growth year-over-year except one, Houston.

The interesting thing though or trend thing that I think you want to get after is that if you take 80% of our revenue base, the rate of change in our growth rate decelerated in the third quarter year-over-year so you take a market like Houston which their year-over-year growth rate was down 9.3% Q3 '15 to Q3 2016.

Denver was down 8.8% Q3 '15 growth rate versus Q3 2016. So 80% of our revenue base had a decline in the rate of growth and certainly, we were up against very tough comps from 2015. We had had an incredible third quarter last year. But what does that tell me? That growth is slowing.

It's not all due to new supply because not all of these markets are impacted by new supply to the same degree. But you have markets like Los Angeles and San Francisco which are certainly supply constrained, very hard to get new product in. I'd say relatively new low new supply but their rate of growth slowed.

The other big picture is expenses, uptick this quarter and for us, there's a couple of explanations, but overall expenses were up in the big change, one of the key items I think you should focus on is property taxes up 5.4% which continues to ratchet up year-over-year. Supply is up and the rate of change in new supply continues to accelerate.

It's different across various markets and I think that will continue to be a head wind on pricing power going into 2017. For us, we're going to continue to build our development pipelines up to 600 million. David and the team have done an excellent job and product that we're building is just exceptional.

It's filling up pretty much according to plan and our acquisitions we’re also doing quite well. For the most part the stuff we bought from 2013 through 2016 most of it is ahead of what we under wrote. So the fundamentals of the business are still great. It's just the rate of changing growth especially the top line has slowed a little bit.

John do you want to add any color on pricing and what we're doing in terms of marketing?.

Yes, I would say that what we are experiencing is mostly a softness in demand. The existing tenant base that we have is pretty much staying put like they normally have so they aren't vacating anymore rapidly than we've seen so the struggle I would say that we are experiencing is really on the front end, getting move-ins.

Demand appears to be soft around the country not in any one particular market. I'd say in general every market is experiencing softness and as a result we're advertising more television, we're advertising more on the internet.

We are lowering our street rates and we are giving away a little bit more discounts not much more than last year but a little bit more of this year so but again I'd like to emphasize that the existing tenant base is not vacating out any more rapidly than they have.

We're continuing to send rate increase letters similar to how we did last year with increases in the range of 8% to 10%..

Can I ask one follow-up on that softness in demand, can you discuss that a bit and is there anything you attribute to that specifically related to the economy whether it's jobs or lack of income growth?.

Well Jeff, I'll touch on that. It kind of goes to and this is my point in terms of 80% of our revenue base had a slower year-over-year rate of growth than Q3 of last year. We're up against very tough comps.

It's broad based and a number of these markets have very dynamic economies, the Bay Area, Los Angeles, Seattle this quarter had had had a positive year-over-year rate of growth change.

Sacramento, Minneapolis, so there's a lot of markets that still have some growth in them but it's broad based in terms of slowdown and I think in part it's due to just an exceptional 2015..

Your next question comes from Gaurav Mehta of Cantor Fitzgerald. .

Following up on the slowdown in demand and revenues, I was wondering how that impacted the acquisition market and how you're underwriting assets today versus a couple of quarters ago?.

It's not materially impacting what we're doing. In underwriting our acquisitions, we use what we have in terms of kind of a spot price, in terms of rental rates on a trailing basis.

We don't necessarily try to anticipate what the forward rate per foot is going to be, and then of course for us, replacement cost has been and continues to be a key element in terms of our underwriting. So the market may be tough. Take Houston.

If we can get something at 60% or 70% replacement cost, we'll do that deal even though in the short-term we may be impacted by overall market conditions. .

And as a follow-up, have you seen any changes in cap rate for stabilized assets in any of the markets?.

Not really. .

Your next question comes from Ki Bin Kim of SunTrust. .

Could you give some stats on the move-in rate for the quarter and how that trended into October, please?.

This is John. The average move-in rate during the third quarter was about $135 per month. That compared to last year at $137 for the month. That was for the quarter, on a monthly basis. Month to date in October, the average move-in rate is about $127 per month, and that's actually up a little bit from last year which was about $126 per month.

But I will tell you this, notwithstanding the fact that it is higher than last year, the volume of move-ins that we are getting in the month of -- at least month to date October, is down about 3%. So we're getting higher rates but lower volume. .

And I guess as a similar question I asked, like half an hour ago, with your competitors call, but I know we tend to focus a lot of the supply side, but overall on the demand side, what do you think is causing it? The lower traffic or lower volume or price sensitivity? Because we just haven't seen it before in this sector recently, so what do you think is really causing this change?.

It's so broad based. And it varies by market, while John is saying volume is down 3%, in a number of markets right now and submarkets we're chalk full. We have not much space to sell, so there's not much of a volume uptick that we can get.

And then you have markets like Houston which have probably both a supply issue as well as an overall local economy issue with the big changes in the oil industry. And the other markets, whether it's San Francisco or LA, don't have enough net new space to sell to offset the decline in volume in markets like Houston or Denver. .

And how about New York?.

New York is doing okay. .

Your next question comes from Gwen Clark of Evercore ISI. .

So I know the information will be given in the Q, but since that won't be out for awhile, can you just give us a brief run through of the market performance? Specifically?.

In terms of NOI?.

Revenue and NOI would be great if possible. .

Why don't I give you kind of some of our top markets. So Los Angeles was up 7.1% for the quarter, and this is in order of our largest to smallest within our top, let's just say 10. So Los Angeles was up 7.1%, San Francisco 6.2%, New York 2.9%, Seattle 9.1%, Washington D.C.

2.7%, Miami 5.5%, Chicago 1.6%, Dallas and the Fort Worth area 6.4%, Atlanta 7.6%, Houston was down 1%, Philadelphia was up 5.3% and Denver was up about a percentage point. That might be 10. And then in terms of NOI growth, Los Angeles was up 7.8%, San Francisco 6.2%, New York 2.1%, Seattle 9.7%, Washington D.C.

1.3%, Miami 8.7%, Chicago was down a negative 3.4%, Dallas Fort Worth was up 5.8%, Atlanta 7%, Houston down 5.4%, Philadelphia up 6.2% and Denver was down 1.2%. .

I'd add, Gwen, that Chicago and Houston, in particular, while the revenue was modest or negative, they were also really impacted by property tax increases year-over-year. .

Okay. That's helpful. And of these that sticks out, Houston, Chicago, Denver, D.C. are clear underperformers of the group.

Can you talk about what you think is driving the demand within these markets, just from a very high level perspective? And what might be affecting the growth rate?.

Well, as I touched on in Houston, you've got -- there's not a huge amount, but new supply in Houston, both from us and competitors. As well as kind of a macroeconomic condition with the oil industry and a dramatic slowdown in job growth and probably outmigration of people. Denver, the economy is good there, but there's a big uptick in new supply.

And D.C. was that your other one? Washington D.C.? That's been a languishing market for awhile. It's been languishing for apartments, it's languishing for office and its been a tough market for us. A couple years ago the government shutdown, a lot of reduction in spending, and that created some outmigration of people and that really has not returned.

I think the market stabilized there, but it certainly hasn't been on an upswing. .

Your next question comes from Todd Thomas of KeyBanc. .

Ron, the discounting, the promotional activity, the move-in rates you touched on earlier, can you just talk about how all of that boils down to the net acquisition cost per customer that you've talked about in the past? So what that cost per customer was in the quarter and how that compares year-over-year?.

Sure, Todd. Marketing costs in Q3 were up 9.5% and that's -- or about $670,000, and that was evenly split between incremental TV and incremental internet advertising.

Promotional discounts were flat, so our overall customer acquisition costs were up 2.2% for the quarter, move-ins were up 1.1% or about 2,800 incremental new customers Q3 this year versus last year. So that gives you an acquisition cost of $127 versus $126 last year. Move-in rates for the quarter were down 1.5%.

Fees were up 9.1%, so our net profit per customer move-in was $32 this quarter versus $33 last year. Year-to-date, Todd, net profit per customer move-in was $38 versus $33 last year, so we had a 15.2% improvement in profitability. Year-to-date move-ins are about flat -- or I'm sorry, costs are about flat.

Move-ins were down 3,200, but rates were up and fees were up, so net-net, we made 15% more per customer this year than last year. .

And then on EXR's call last hour, management noted that they suspect that there might be some impact in the New York market from some of the full service operators.

Are you seeing there in terms of either slightly lower move-in activity or increased customer acquisition costs as a result of some of the increase in competition around that market?.

No, our New York markets have pretty well stabilized and are trending slightly up. There are easier comps, but, no, I think John gave you the revenue growth for New York, up 2.9%, which wasn't bad for Q3. So we haven't seen anything. .

Todd, they may be affecting us and I'm sure they are, but to the extent that they are, we kind of don't see it in our numbers. I mean, they could be taking away, let's just say 10 customers a facility, it's hard for us to notice that. .

Your next question comes from Smedes Rose of Citigroup. .

I wanted to ask, Ron, you mentioned a couple of things going on the expense line and you kind of called out the property taxes.

As we look at the quarterly expenses up to 6.4%, is there anything in any of those line items that were maybe one-time in nature for this quarter, or do you feel like we're just going to be on a higher run rate than you have been over the last couple of years?.

Yes, Smedes, a couple items. You see onsite payroll there up 6.7%. Most of that is due to about $1.5 million increase in our medical insurance cost to employee benefits, and that's been up year-over-year, but we had $1.5 million increase in Q3.

We'll probably have another $500,000 or so increase in Q4, smaller amount but still a meaningful percentage increase year-over-year. Advertising I touched on. Up about $600,000 split between TV and internet. And then the other big swing item was allocated overhead, which was up about $2 million.

About $1.6 million of that was costs attributable to our annual sales conference, which we held in Q3 this year versus Q4 last year. So just over $1 million of that will flip back around in Q4, as we expensed it in Q4 last year, and Q3 this year. .

And then I just wanted to ask you, too, at least relative to our forecasts, the equity and earnings on consolidated entities was up significantly, it was up year-over-year a lot.

I assume that's Shurgard, and maybe you can just give a little color on how that performed in the quarter?.

Yes. Well, I think it's both Shurgard and PS Business Parks. And Business Parks, I think -- I don't think, I know -- their earnings were up about 20% quarter to quarter. That's a combination of two things.

Solid same-store results, build up of some developments, and then they -- Business Parks has been sitting on $150 million or $200 million of cash, and so at the end of June they paid off a $250 million mortgage, and so they had nominal interest expense Q3 versus having cash and the interest expense last year.

So half the improvement in Business Parks was due to reduced interest and half of it was due to improved operations.

Shurgard Europe had good operating results both from the same-store and non-same-store properties, but a big chunk of their difference was a $1.5 million special tax provision we made in Q3 last year that we did not make in this quarter. .

[Operator Instructions]. Your next question comes from Vikram Malhotra of Morgan Stanley. .

Can you maybe just elaborate on some of the expense items, in particular advertising, as you see potential occupancy or growth moderate a bit, given how much more -- how many more customers are coming via the internet? Can you give us how you view the marketing and advertising bucket over the next, call it year or so?.

Yes, this is John. Over the past year or two we've enjoyed a reduction in advertising as demand was coming in without the need to really spend more. In fact, we cut back significantly on both television and on the internet.

As we go forward, if the softness continues and we expect that it will at least over the next quarter or two, perhaps beyond, I don't know, I anticipate that we will spend more on -- definitely more on the internet, on keyword search terms, probably spend more there than we will on television advertising.

We did do a little television in Q3 and into Q4. I wasn't really thrilled with the response that we were getting, but we have been getting some pretty good response on the web. More and more of our customers, as you know, are moving to the web, whether they are using their desktop or mobile device, we're there, we're in both channels.

So I expect, at least in the near term, our web spend will continue to tick up. I don't think that our television will really tick up. It will probably be the same. But, overall, marketing costs will definitely be up. .

And just to clarify, the allocated overhead, I believe there was a shift from 4Q to 3Q.

Can you just elaborate on what that was?.

You mean what I just touched on in terms of the annual sales conference?.

Yes.

That's what drove all of it?.

Yes. Yes. .

Your next question comes from George Hoglund of Jefferies. .

Just looking at the balance sheet, early next year you've got $460 million of 5.9% Series S preferreds coming, that are callable, and another $460 million of the 5.75% Series T preferreds.

So what are your plans for potentially calling and refinancing those? And then just generally speaking, what sort of spread from existing preferreds to where you could raise preferreds at, which you view as necessary to call and do a new issue?.

We haven't made any decisions on what we're going to do with that Series S and Series T that you mentioned are callable in early -- or in the first quarter of 2017. I think it will depend on what the capital markets look like as we start getting close to that. You're probably aware we just recently issued a preferred at 4.90%.

That was about 10 days ago. I don't think that we can issue another one today at 4.90% under today's conditions, but that may change. What does the spread need to be? It probably needs to be at least 75 bps before I think we would really want to issue another preferred to take out some of these other preferreds.

But I also wouldn't rule out us issuing debt. We've talked about debt before, so that's always a possibility that we could issue debt and take out some of these preferreds, but I want to make sure that you understood, we haven't made a decision on what we're going to do in the first quarter yet with respect to these preferreds. .

Your next question comes from David Corak of FBR Capital Markets. .

In terms of individual market supply, going beyond the usual suspects, you mentioned a couple of these earlier, but we've heard some anecdotes recently about building picking up in certain west coast markets, specifically San Francisco.

Can you touch on what you're seeing out there if anything?.

Dave Doll is here with us, so I'll have him respond to that, what he's seeing?.

I would say core San Francisco, no, I don't see a lot of pick up in core San Francisco. There may be some outliers like Sacramento and some other submarkets to San Francisco. Portland seems to have a fair bit of new supply coming into that market.

San Diego has a fair bit being built for the size of the marketplace, but again, we don't see that much in Los Angeles or Orange County. We aren't really focused on Riverside and San Bernardino where there may be some more building going on. .

Maybe just a bigger picture question for you Ron.

We're now pretty well into a development cycle nationally, if you want to call it that, but in terms of your overall strategy for revenue management, what are guys planning on doing differently, if anything, this time around from the last time we were entering a development cycle? Just in terms of what you're doing with rate, occupancy and strategy overall?.

Well, David, I like to say the big dog eats first. And so I think going into this cycle, we have better pricing, better pricing strategies, better marketing, both television and internet. Our market position, in terms of our market share, product, where it's located is better headed into this cycle.

We've really got great positioning and we will have next year as the deliveries come on in terms of Dallas, Houston, Miami, Charlotte, LA, San Francisco, so I'm really happy -- Seattle -- with our market position. Our people are fantastic out in the field. We've got better product that we have available to rent.

And I think our processes are as good as they've ever been. And I'm just skipping over the balance sheet, which has never been stronger in our history, so we're really ready for this cycle. .

Your next question comes from Steve Sakwa of Evercore ISI. .

I guess, still good morning out there. Ron, I know you've been asked a lot about the revenue side.

I guess what I'm trying to really get a handle on is if you looked at the third quarter fundamentals and maybe broke it down by month, and looked July, August, September and maybe even October, would you say the rate of decline picked up throughout those four month periods? Or it was higher in the beginning and slowed as we got towards the end?.

On expenses, Steve?.

No, sorry, on revenue growth.

I guess what I'm trying to figure out is, is the slowdown getting worse or is the slowdown moderating and getting less bad as we move forward?.

Steve, let me see if I can answer the question a little bit. If you take the time and go back and look at our first quarter press release where we describe our same-stores, we give some metrics at the end of the quarter what our square foot occupancy is and what the annual contract rate per occupied square foot is.

If you look at the first quarter, we reported that it was a 5.9% delta year-over-year. That is a good indicator of what second quarter might be and second quarter turned out to be a 6.1% revenue growth.

If you now go to the second quarter information that we reported, we reported that the square foot occupancy had a negative decline of about 0.5%, that the annual contract rate was up 5.4%, the net of those two is a 4.9%, and we in fact reported a 5.2% for the quarter. So there was a big drop from Q1 to the end of Q2. We went from 5.9% to 4.9%.

If you now look -- fast forward to the end of the third quarter, those same numbers are now at 4.7% versus 4.9% at the end of the second quarter, so the big drop, as you kind of touched on, happened in Q2, we're still experiencing a decline, but the big drop happened earlier this year. .

Right, so you would say the rate of slowdown is kind of moderating and while it may get a little bit worse, we shouldn't be having a cascading down effect on the revenue as we look going into 2017?.

Well, I'm not commenting on 2017. I'm just telling you what's happened year-to-date, and what we're seeing month to date in October.

Steve, if you go back to 2015, the revenue growth in Q2 last year was 6.8%, year-over-year, Q3 was 6.7%, Q4 was 6.6% and then Q1 this year was 6.5%, and then it started moderating, so that rate of change, right? We had exceptional quarters in Q2, Q3 and Q4 of last year. .

Your next question comes from Michael Mueller of JPMorgan. .

I don't think we've had any comments on acquisitions this call, so I was wondering can you just talk a little bit about what you're seeing, you're seeing more product in the market, any changes in pricing, just some bigger picture comment there?.

Well, I'll let David talk about volume, but in terms of pricing, I think we touched on earlier, no material change in pricing. .

Volumes I think are down -- or at least I should say, the quality of the product coming to the marketplace is less than what it had been in prior quarters over the last year or so, so I think buyers are being a little more selective. There's lots more that we pass on than what we're buying. Primarily due to quality of the product.

Pricing hasn't changed that much. Will it continue to change? I don't know. But I think there's been a slowdown of quality product coming to the marketplace. .

Your next question comes from Ryan Burke of Green Street Advisors. .

John, I don't believe you provided this, but what was the roll down from move-out to move-in rent for the quarter? And also for October?.

Okay. I put that away. I didn't think anyone was going to ask that question. So for the quarter, as you mentioned about the move-in rates, it was about $135 per move in, the monthly rate. The move-out over the same time frame was $144, so down about $9. Last year it was $137 on the move-in and the move-outs were going out at $140. So about $3. .

And then just one more question.

There's all this talk about demand softening in terms of coming into your system, but how do you measure and quantify that? Is it simply internet traffic plus walk-ins? And are you able to quantify the deceleration that you've seen in the third quarter in October?.

The way I look at it, Ryan, is I look at it as the call volume into our call center, the hits to our website, where they are actually seeking and looking at storage space. So it's not the hits that come to our website of exiting tenants who are paying their rent, as well as looking at our walk in traffic, as you mentioned.

During the third quarter we were actually seeing an uptick in sales calls. Part of that is due to increased marketing activities. The web channel was about flat though. But the channel that, I think, gives me most concern is that our walk-in traffic was down about 7%. So two of our channels were either flat or up, but the walk-in channel was down.

And I can't tell you why that has happened, but in fact, it was down 7% during the quarter. .

Your next question comes from Dan Occhionero of Barclays Capital. .

Could you give us the geographic dispersion of your development activity and what markets are you building the most product in?.

Sure. If you take our pipeline, $680 million or so, and that's both redevelopments as well as ground up developments, 49 properties, 5.3 million square feet.

So do you want number of properties, square footage, value?.

Square footage would be good. .

Okay, so 1.9 million in Texas, 900,000 in California, 150,000 in Arizona, 550,000 in Florida, 430,000 in Washington, 150,000 in Tennessee, 270,000 in North Carolina and 240,000 in New Jersey, and then some smattering of others. .

Your final question comes from Jeremy Metz of UBS. .

Just one quick one. I want to stick on the development front.

I was just wondering if some of the correction in the market, be it lower rates, increasing discounting, if that's created any additional opportunities on the development front for you guys, either opportunities to go acquire some land to build or markets where maybe you were holding off, but now it seems like a better time to start construction?.

Well, I'll have David amplify that, but Jeremy, generally, if rates are trending down, all other things being equal, that's going to slow development for us because the deals won't underwrite the way -- in terms of what we're trying to achieve in terms of return on invested capital, so a declining rate environment won't do that in the near term.

Also in the near term, land prices tend to lag changes in market conditions. Just like on the way up, they tend to lag on moving up. When you see the market turn you can usually get good land deals for a period of time, so they tend to lag on the way down. So far, at least I haven't seen any big reductions inland prices.

David?.

I think you're correct. The sellers and developers are usually the trailing indicators, not the leading indicators, so it will be some time before those deals come to fruition. .

We do have time for one more question. That question comes from Smedes Rose of Citigroup. .

It's actually Michael Bilerman.

Ron, I'm curious, you've always focused on cash flow and cash flow growth rather than any sort of NAV metric, but I'm curious now that the stock is around $200, which is probably just about where you probably peg your NAV, but more importantly from a cash flow perspective, a free cash flow yield north of 5%, does that entice you at all to put your -- what you described as the best balance sheet you've ever had, into your stock at this point?.

Well, Michael, I'll just say this. If you looked back in time over 20-plus years, it's very rare that we can issue preferred at coupons below the earnings yield on our stock. And we're getting pretty close to that.

The last time that there was, that it happened to any -- for any extended period of time was 1999/2000 when everyone wanted dotcom stocks and real estate was a bad word. Brick and mortar. I don't know if we're going into that now, but it's very unusual for us to be able to issue preferred coupons lower than our earnings yield.

So we're getting close, and as John touched on, we'll see what we can continue to issue preferreds and or debt at, but it's not out of the question as time goes forward in terms of where to deploy capital.

Having said that, if we can deploy capital in third party acquisitions or development opportunities that provide a better spread yield or better overall earnings yield to the Company, then we will do that vis-a-vis our share repurchases.

So which part of the menu, acquisitions, development, or share repurchases makes the most sense in terms of capital deployment, in terms of both growth and then creation of shareholder value. .

Well, I guess would you want to have a program in place so that you can be able to execute if choppiness continue in the stock market? One would hope that it doesn't, but if it does, then you want to be prepared to be able to execute?.

We have a share buyback authorization. .

And how big is that?.

I don't remember the exact number, but it's big. .

Perfect.

And then last one just on Europe, is there any plans at all to float or change the ownership structure there in terms of proceeds that we should be thinking about?.

Not at this time. Europe is generating more cash flow than it can deploy, and so while they are ramping up their development program over there, their free cash flows is $80 million to $90 million a year, which is more than they currently have plans to deploy. So in terms of an IPO, it would be tough to do in terms of use of proceeds.

That could change in three to six months if some big opportunity came up in Europe, but at this time, I don't see that. .

We do have another question from Ryan Burke of Green Street Advisors. .

Thanks for letting me slip one last one in.

The question is, during past periods when we've had move-in rate growth go flat to negative, what exactly has happened to existing rate growth for that subsequent near term period? Is there a change in your willingness to push that first rent increase around the six-month mark, and what happens to the magnitude of the rent increases?.

Ryan, this is John. We'll continue to test it and push it and see what happens. We constantly will have a test group kept out of the normal group that's getting the increase to see what the reaction differential is to the rate increases, and if we do see some upticks, then we'll adjust accordingly.

I can't respond to how we've done it in the past because, one, I don't remember, and two, I don't think we were smart enough to really test it as well under such circumstances. But we will do that this time around and then we'll adjust, as I mentioned, as we see fit. .

This concludes today's question and answer session. I'll now turn the floor back over to Mr. Clem Teng for any additional or closing remarks. .

Okay. I want to thank you all for attending our call today. We'll see many of you at NAREIT in a few more weeks, so have a good afternoon. .

Thank you. This concludes your conference. You may now disconnect..