Earnings Call Transcript
CubeSmart (CUBE)
Earnings Call Transcript - CUBE Q1 2023
Operator, Operator
Hello, everyone. And welcome to the CubeSmart First Quarter 2023 Earnings Call. My name is Charlie, and I will be coordinating the call today. You will have the opportunity to ask questions at the end of the presentation. I will now hand over to our host, Josh Schutzer, Vice President of Finance, to begin. Josh, please go ahead.
Josh Schutzer, Vice President of Finance
Thank you, Charlie. Good morning, everyone. Welcome to CubeSmart’s first quarter 2023 earnings call. Participants on today’s call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company’s website. The company’s remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties, and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section of the company’s annual report on Form 10-K. In addition, the company’s remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the first quarter financial supplement posted on the company’s website. I will now turn the call over to Chris.
Chris Marr, President and CEO
Thank you, Josh. Good morning, everyone. Our first quarter of 2023 can be characterized as solid performance across all of our key performance metrics. Funds from operations per share came in at the high end of our guidance, as steady occupancy trends, coupled with our continued focus on expense control helped to generate strong same-store net operating income growth. Our customers are resiliently navigating an uncertain post-COVID economy. While the Fed pushes up interest rates to cool inflation, the unemployment rate remains historically low. Volatility in mortgage rates has created an uncertain housing market as prices remain stubbornly high, resulting in a slowing single-family home purchases and sales. We believe our portfolio focus on top markets and strong demographics has us well positioned to perform throughout all macro environments. Low unemployment, continued wage growth and solid household balance sheets translate into historically good credit metrics across our customer base. During the first quarter, delinquency metrics such as late fees charged and receivables over 30 days past due are at levels below what we experienced in the first quarter of 2019. Another bright spot continues to be the stickiness of our existing customer base. Vacates during the quarter were down 3.3% from the first quarter of last year and down 9.5% on a comparable store basis to the first quarter of 2019. 47.9% of our customers have been with us longer than two years, up 230 basis points from this time last year. This results in a larger pool of customers to potentially receive a rate increase. Top of funnel demand trends have been less consistent with historical patterns than we expected. We had a solid first couple of months as same-store rentals through February were consistent with the same time period last year. In March, trends slowed as weather, bank failures impacting consumer confidence and existing home sales weighed on March storage demand. March occupancy trends were mostly in line with last year, but that was driven by lower vacate activity offsetting slower-than-expected rental activity, which led us to a more cautious approach to rental rates. As we moved into April, trends have been on a more normal trajectory. Rental and reservation activity has returned back in line with last year’s levels as we have seen stabilizing signs in both the housing market and with consumer confidence. As a result, we have grown our occupancy, narrowing the gap to last year to 141 basis points and we are moving up rental rates as the busy season begins to ramp up. We have experienced unusual trend so far this year. The demand momentum we saw in January and February slowed in March, only to show signs of reigniting in April. Recent trends have us cautiously optimistic, but as we noted during our prior earnings call, the outlook for the back half of the year is heavily dependent on performance during the next few months of the rental season. Touching briefly on market level performance. The New York MSA was our most resilient MSA, with our borough properties experiencing positive growth in both occupancy and net effective rents to new customers compared to the first quarter of last year. This was offset somewhat by softness in supply impacted North Jersey and Long Island markets within the overall MSA. While decelerating off of their tremendous 2022 levels, we continue to experience above-average revenue growth in our Florida, Texas and Southern California markets. We experienced below average growth in the supply impacted DC, Virginia, Maryland markets and in Arizona, where COVID-induced migration has clearly waned. We continue to underwrite a good number of transactions, but seller expectations for assets that meet the quality requirements of our portfolio strategy are still disconnected from our current cost of capital. We are finding ways to accretively deploy capital within our existing portfolio as full scale redevelopments and cost-saving upgrades to high efficiency building systems are proving to be the best opportunity for capital deployment in this part of the cycle. We remain a third-party partner of choice as our reputation in the industry has consistently maintained our robust pipeline of new management opportunities. Our operating platform is prime to maximize performance, no matter the macro environment. Our differentiated strategic focus on quality across our portfolio and platform positions us well to generate shareholder value over the long-term. Thanks for listening and I will now turn the call over to Tim Martin, our Chief Financial Officer, for his remarks.
Tim Martin, CFO
Thanks, Chris. And thank you to everyone on the call for your continued interest and for spending a few minutes of your time with us today. As Chris touched on, operating fundamentals during the first quarter were largely in line with our expectations and we continue to experience a return to more normal seasonality in the business, consistent with our discussion over the last several quarters. We reported FFO per share as adjusted of $0.65 for the quarter, which was at the high end of our guidance range and represents 12.1% growth over the first quarter last year. Our continuing focus on being as efficient as we can be, along with a mild winter resulted in 1% same-store expense growth, which when combined with 6.9% revenue growth produced a healthy 9.1% growth in same-store net operating income. Month-to-month occupancy trends during the quarter largely mirrored those of the first quarter of 2022. Our same-store portfolio gained 60 basis points of occupancy sequentially from the fourth quarter, ending the first quarter at 91.9%. We remain disciplined in our pursuit of external growth opportunities with no transaction activity to report in the first quarter. Our investment team continues to be active, although deal volume that went through our underwriting process was down about 30% compared to the first quarter of 2022. We continue to generally see a disconnect in the bid-ask spread and we are generally not seeing the high-quality opportunities that we were seeing over the past couple of years. On the third-party management front, we added 25 stores in the first quarter, bringing our total third-party managed store count to 676. In the current environment, no news is good news when it comes to corporate balance sheets and our balance sheet remains very healthy, putting us in a great position to pursue external growth opportunities when we see attractive relative returns. Our average debt maturity is 6 years, 98% of our debt is fixed rate, we have no significant maturities until November of 2025 and our leverage levels remain very low at 4.4 times debt-to-EBITDA. Details of our 2023 earnings guidance and related assumptions were included in our release last night. Our forward guidance for the year remains consistent with the guidance we provided in late February. So wrapping up, good in-line first quarter, balance sheet is in great shape, patient and ready to find attractive external growth opportunities and our team is ready and energized heading into our sector’s busy rental season here in the summer. Thanks again for joining us on the call this morning. At this time, Charlie, why don’t we open up the call for some questions.
Operator, Operator
Of course. Thank you. Our first question comes from Michael Goldsmith of UBS. Michael, your line is open. Please go ahead.
Michael Goldsmith, Analyst
Good morning. Thanks for taking my question. My first question is on what you are seeing in April, it sounds like March was slower, and April kind of rent returned to a more normal trajectory with run rates back in line. I guess, like, can you provide a little bit more color about where the demand is coming from? I think you talked a little bit about the housing market, you talked about rates moving higher, can you kind of quantify that? And then as well, did your ECRIs kind of come down during the slowdown in March and how are you thinking about that back now that things are more normal in April?
Chris Marr, President and CEO
Sure. Thanks. That was a little bit unpacked there. Let me see if I can remember all the questions and answer them all. So, going backwards, I think, from a rate increase to the existing customer perspective, we averaged mid-teens in the first quarter. That was consistent with our average for the fourth quarter of last year and down from the high teens that we would have averaged in the first quarter of 2022. So as we expected, if you think about kind of a historical expectation, so 1Q 2019, we keep pointing to as pre-COVID metric, we averaged in around the 12% range in the first quarter of 2019. So as we have talked about, I think, earlier in the year, the expectation is that the rate increases to the existing customers will continue to outpace pre-COVID, but come down from what we saw in a historically great 2022. In terms of customer demand, it obviously varies a lot by market. So absolutely thrilled with the performance in the New York boroughs. There you have a portfolio construct that is just made for this type of a climate. We have a very sticky customer there and a customer there that is not so focused transactionally on moving, and so that market, as we would have expected, continues to perform quite well in the current conditions. The rest of the country, I would say that, the performance and where the customers are coming from continues to be from what you would have expected historically. Certainly, in some of the Sun Belt markets, March, we just didn’t see the shorter-term moving customer. We are starting, obviously, we have picked up the college students at this point and that will continue here for a little bit. And again, signs in April that perhaps that moving customer has returned or March was an anomaly we will continue to pay close attention to that as we get into May and June.
Michael Goldsmith, Analyst
That's very helpful. For my follow-up question, you mentioned that same-store NOI was down 300 basis points sequentially for the portfolio, but New York was up 120 basis points sequentially. You also added eight properties to the same-store pool. I'm curious about the trends in New York. You've often said that during times of moderation, New York tends to outperform. Is that playing out as you anticipated?
Chris Marr, President and CEO
Yeah. It is playing out in the city as we expected. Those stores, I think, on the old pool accelerated 50 basis points and the new pool as reported, in the city, the MSA, you are suffering a little bit of supply impact in North Jersey and out on Long Island, but the stores in the boroughs, again, we are thrilled with the performance. We expected a good year and it’s playing out so far at that expectation or better.
Michael Goldsmith, Analyst
Thank you very much.
Operator, Operator
Thank you. Our next question comes from Samir Khanal of Evercore. Samir, your line is open. Please go ahead.
Samir Khanal, Analyst
Thank you. Hi, Chris. So occupancy fell year-over-year, but we also saw the in-place rent decline sequentially and you haven’t seen that in a while. I guess how much of this decline is related to sort of normal seasonality versus the business starting to weaken here, maybe you can help us unpack this? Thanks.
Chris Marr, President and CEO
Yeah. On the occupancy, again, you have got to make sure you are focused on the fact that the 2023 pool, obviously, changed on January 1st. So if you think about where we started the year on an apples-to-apples basis, occupancy was down January 1 versus January 1 of last year by about the same as it was at the end of March. So the occupancy during the quarter didn’t really change, which is more normal relative to trends 2019 and earlier. If you just look at seasonality from 2017 to 2019, rates typically fall and did every quarter, every year rather from Q4 to Q1. So the patterns that you see in Q1, if you adjust for the change in the pool are very typical to pre-COVID type patterns.
Samir Khanal, Analyst
Thank you for that. And I guess my second question, Tim, I just wanted to ask about expense growth. When I look at last year, you did 3% for the year, but you guided, I think, it was close to 6% as part of your initial guidance. This year you are guiding to 4.5% and you did 1% or 2% depending on the same-store pool you look at. Maybe walk us through the things you are doing from an expense control standpoint and is there more you can do that actually end up surprising us to the upside as the year goes by? Thanks.
Tim Martin, CFO
I’m not sure what might catch you off guard; it really depends on your expectations. However, we take pride in our results and have been dedicated, as Chris mentioned, to managing what we can control. There are many expense items where we can do just that. In the first quarter, we benefited from a mild winter, which resulted in lower-than-anticipated snow removal and utility costs. Looking ahead for the rest of the year, while we enjoyed that positive surprise with winter costs, we have also encountered a negative surprise with our property insurance renewal process, which will cost more than we expected just two months ago. These factors tend to balance each other out. As we evaluate the year, we see potential in marketing expenses where we can invest wisely for promising returns. This is an area we will continue to explore when it aligns with our strategy. A noticeable trend over the past few quarters is in our personnel expenses, where we are successfully integrating our operations with technology, improving staffing, store hours, and enhancing our sales center and online tools to assist customers. This has had a significant impact on our personnel expenses. However, we anticipate facing tougher comparisons in that area as the year progresses. Overall, those are our primary focal points, and we are pleased to report a 1% growth in same-store expenses.
Samir Khanal, Analyst
Thank you.
Chris Marr, President and CEO
Thanks.
Operator, Operator
Our next question comes from Smedes Rose of Citi. Smedes, your line is open. Please go ahead.
Smedes Rose, Analyst
Hi. Thanks. I just wanted to ask you, as you go into your kind of busy asking rates, it sounds like consumers are maybe a little more cautious based on some of the remarks that you have said. So would you maybe go lower in order to sort of get folks in or how are you thinking about that?
Chris Marr, President and CEO
Yeah. Week-to-week, Smedes, that’s really the point of focus here as we are looking out over the next couple of months is, we have great properties in great demographic markets, and so from a customer perspective, we know they are going to see us. So when they make that decision to rent, we are really keenly focused on getting them into the top of the funnel and then making sure that our conversion of that reservation or that customer inquiry to a rental is operating as efficiently as possible and that we are then pricing in a way that maximizes that opportunity and so it’s a week-to-week decision as we go through. As we think about April, from the beginning of April through essentially today, we have increased rates about 8% and that’s about consistent with what we would have done last year. So we are going to continue on that focus as long as the demand and conversion continues to support it. But it’s been an unusual year-to-date, and so, again, we are going to have that keen focus week-to-week and make sure we are maximizing that opportunity.
Smedes Rose, Analyst
Okay. Thanks. The other thing I just wanted to ask you, I know you added 25 stores, but it looks like it was more like eight on a net basis to the third-party management platform. Are you just continuing to see volatility with just assets being sold or I am just surprised because it sounds like there hasn’t been a lot of transaction activity, so just maybe you could comment on that?
Tim Martin, CFO
Yes, we are beginning to notice an increase in the number of stores featuring our brand being marketed, which is a positive development. While there have been a few instances over time, it's a bittersweet situation for us. We dislike seeing our name removed from signs, but in those cases, we've effectively delivered on what our third-party clients expect from us, creating value that they recognize when they sell. We would prefer to retain many of these stores under the CubeSmart brand and acquire them on our balance sheet. As we mentioned earlier, we haven't been particularly active, making it difficult to predict the net number of stores, as it's hard to foresee when stores will exit our platform. However, we are successfully maintaining a robust pipeline of new stores joining our platform, and we currently have a strong pipeline of owners seeking third-party management services who view us as a leading provider in that area.
Chris Marr, President and CEO
And just to give you a little bit of data there. Of the stores that left the platform, I think, I know 15 of the 16 were actual sales where the stores were sold to another party who either chose to self-manage or had a different third-party management relationship. So while activity is muted, certainly, there were 15 transactions that took place that closed during the quarter.
Smedes Rose, Analyst
Okay. Thank you, guys.
Chris Marr, President and CEO
Thanks.
Operator, Operator
Our next question comes from Juan Sanabria of BMO Capital Markets. Juan, your line is open. Please go ahead.
Juan Sanabria, Analyst
Hi, guys. Thank you for the time. Just curious if you can give us the April trends. First Street rates and occupancy just kind of where the spot fits, and for Street rates, if you don’t mind giving us how that trended year-over-year throughout the quarter, just to help contextualize?
Chris Marr, President and CEO
Sure. In the first quarter, net effective rates for customers compared to the same time last year varied week-to-week but generally ranged from the low to the mid-teens. By March, the trend remained similar, leaning more towards the mid-teens. In April, we increased rates by 8% since the start of the month, which is slightly more than last year. The gap compared to April 2022 still hovers in the mid-teens range. Regarding occupancy, we decreased the gap to last year from 150 basis points at the end of March to 141 basis points as of yesterday.
Juan Sanabria, Analyst
Thank you. I wanted to ask about the testing you seem to be conducting, where you're asking customers to commit for a certain period, perhaps four months. I'm curious about how that testing has progressed and the reasoning behind offering that option. Insights into that strategy would be appreciated.
Chris Marr, President and CEO
Thank you, Juan. That's a great question. We explore a wide range of strategies for two main reasons. First, we aim to understand consumer behavior and gain insights from their decisions about how they use our product and what matters to them. Second, we focus on maximizing revenue across all customer segments. This particular test was intended to determine if customers would be more likely to commit for a longer period knowing the potential changes to their rate after that four-month period. It's just one of many tests we conduct, and we will continue to do so. This approach is valuable from a data standpoint as it helps us understand customer behavior better, and these tests are underway in various stores across our portfolio.
Juan Sanabria, Analyst
Okay. And just as a quick follow-up, are customers willing to sign up for the four months or I am assuming you were trying to weed out customers who were just in and out for a month, but just curious on the take-up versus expectations.
Chris Marr, President and CEO
Yeah. I would say, again, it is still in process in certain properties. So the absolute answer to the question, we don’t have a definitive one at this point. It certainly does attract a customer who knows or is certain at least in their own minds that their intention is to stay longer. It also has an attraction of a customer, though, who has more certainty around the move in and move out. So you tended to see the vacate down at the end of that 4-month time period. So again, it’s one of many things that we continue to test at an array of properties across the country and we will continue to do so to, again, always try to find ways to creatively maximize revenue for each customer we get.
Juan Sanabria, Analyst
Appreciate it, Chris. Thank you.
Operator, Operator
Thanks. Our next question comes from Ki Bin Kim of Truist. Ki Bin Kim, your line is open. Please go ahead.
Ki Bin Kim, Analyst
Thanks and good morning. So to follow up on the last question, I am curious about the cadence of demand that you saw throughout the quarter and into April. Was it a top of funnel type of dynamic where you just have less touch points coming into you guys or was it more about market share dynamic?
Chris Marr, President and CEO
Yeah. From our perspective, felt like top of funnel demand was, as we would have expected in January and February, and then was less than we would have expected in March. Now has returned to expectations.
Ki Bin Kim, Analyst
Okay.
Chris Marr, President and CEO
What caused the decline in March? You can look at several macro factors that occurred in March, including the housing market. One of the larger publicly traded homebuilders mentioned during their earnings call last week that March was unusually slow for them, but they have seen a pickup in demand in April. It’s unclear whether the decline was due to weather, the banking crisis, or mortgage rates. We are also navigating through post-COVID trends that have been inconsistent over the past several years; 2021 was unusual, 2022 was unusual, and March 2023 was not what we expected. However, April appears to be much more normal.
Ki Bin Kim, Analyst
Okay. And second question, I want to ask about your leverage and capital allocation. Your balance sheet is 4.4 times levered, obviously in great shape and I appreciate your press release comments about being disciplined on price. Can you just help us understand what the gap is, the bid-ask spread, how wide or narrow it might be? And if you can remind us of your latest thinking on capital allocation, is it still from an asset quality or a market standpoint, is it still kind of demographically driven or has your scope widened a bit to include other assets that maybe you traditionally didn’t want to own?
Tim Martin, CFO
We haven’t changed our areas of focus. We continue to target attractive markets, particularly within the top 40 MSAs, in search of great infill opportunities that complement our existing presence. There are some markets that we're not currently in but would like to enter; however, we haven't found appealing opportunities. The bid-ask spread is challenging, and the overall transaction activity is lower, making it hard to assess the market accurately. Many available properties are listed at prices that seem unreasonable, and some aren't trading at all. Typically, we find ourselves 15% to 20% off from where broker transactions suggest a deal should close, indicating a noticeable gap that could change. As I mentioned earlier, we are actively reviewing many opportunities and would be eager to find high-quality options closer to a price point that aligns with our risk-adjusted criteria. We are open to a broad range of opportunities. Whether it's a fully stabilized asset or something newly developed, we don’t impose strict limits on our interest. However, our search criteria in terms of market quality and asset types remain consistent with our previous communications.
Ki Bin Kim, Analyst
That’s great color. And I was asking about these other markets, because lately the one of the changes that we have seen from the software companies, including you, is kind of touchless Internet-based leasing and if that would perhaps expand, what you would want to own, like in secondary markets where you can use technology versus having a lower margin business with people? Thank you.
Chris Marr, President and CEO
Yeah. Kind of flavor of the day, right? I mean, to me, the idea of not having an office at a store has been around since 1968. So whether it be the phone or whether it be some use of technology, the concept is not new, and so, again, it’s been out there. We continue to look at where that might apply certainly in the more urban and the dense suburbs, it’s much less applicable than it is in tertiary areas. So it’s not new, certainly, it’s generated a lot of conversation over the last several months.
Operator, Operator
Thanks. Our next question comes from Hong Liang of JPMorgan. Hong, your line is open. Please go ahead.
Unidentified Analyst, Analyst
Yeah. Hey, guys. I guess on the personnel expense side, you talked about technology savings. Are there any further savings we should expect in that line going forward or do you think that’s largely capped?
Chris Marr, President and CEO
Hey, it’s Chris. We are exploring ways to meet our customers where they prefer to finalize transactions. Based on focus groups and customer conversations, we find that roughly one-third of our customers are comfortable using technology and transact without face-to-face interaction, similar to how my kids text from their rooms instead of talking to me in person. Another third of our customers, however, prefer direct interaction; they want to engage with store representatives and have the opportunity to ask questions during their decision-making process. The final third falls into a category of customers who are fine using digital tools, like a hotel key, as long as everything functions properly. If there’s a problem, such as being unable to access their room on the 13th floor, they would prefer to come back down to the lobby and resolve the issue through conversation. We are addressing these varying needs while striving to maintain our reputation for excellent customer service. We are continuously looking for efficiencies in our processes, although improvements might slow down as we tackle more complex issues.
Unidentified Analyst, Analyst
Got it. And then as it relates to other property revenues, particularly late fees, it seems like post-COVID, there’s just been a step function down on delinquencies and late fees. Do you think that’s just the new normal given auto pay and all that?
Chris Marr, President and CEO
Yeah. That’s a great question. We definitely have seen on that side of the equation, lower revenues than we would have seen in some of the prior years. So it’s a two-part issue. One is, as I said, health of the customer is really good, which is a positive, receivables are down, delinquencies are down, that translates into lower late fees, but a higher quality customer per se from a credit perspective. And then on the technology side, as we can push folks into or they choose to go through smart rental or self-service rentals in some way, shape or form, talk to one of our service reps either from their phone or from a kiosk, they tend to be auto pay customers, they tend to be more ACH customers, and again, they are paying on time, which is great, but the late fee will come down. Is that going to change as we go through economic cycles? I would suspect that at least the first part of that answer will as we see different parts of the economic cycle over the next couple of years.
Unidentified Analyst, Analyst
Yeah. Thanks. Great quarter.
Tim Martin, CFO
Thank you.
Chris Marr, President and CEO
Thank you.
Operator, Operator
Our next question comes from Spenser Allaway of Green Street. Your line is open. Please go ahead.
Spenser Allaway, Analyst
Thank you. We are hearing that private market players are facing high interest costs on construction loans, which may lead them to consider selling some properties. Have you started to notice any opportunities arising from this situation, or is it still relatively quiet? I know you mentioned some transactions happened during the quarter, but I would appreciate it if you could provide a bit more detail.
Tim Martin, CFO
Hi, good morning, Spenser. I wouldn't say it's quite the right time yet. There’s some discussion happening, and it seems to indicate that there could be some activity. However, in our sector, looking at different parts of the cycle, this might translate into a more motivated seller wanting to clear their inventory rather than someone who will sell at a high price. So, there might be sellers who are more eager, but I don’t expect to see any desperate sellers. Our business is performing well, the operating fundamentals are solid, and people have options. I don’t think anyone anticipates a significant fire sale situation. That said, if we do see more motivated sellers, especially in high-quality markets and assets we’re targeting, that would be great for us.
Spenser Allaway, Analyst
Okay. That’s helpful. And thank you for all the color you provided at the market level, but just maybe looking at some of the markets with lower occupancy, maybe such as Vegas and Phoenix. Just curious if you have any color on operating trends in these markets or what might be driving the lower than average occupancy?
Chris Marr, President and CEO
When considering those markets, there is a return to more normal conditions after significant movement and a large influx of people. The most noticeable increase in market rates occurred in 2021 and 2022, particularly in areas like Phoenix and the broader Sun Belt. Over the past couple of years, we've observed the most substantial rate increases in these regions. For instance, comparing rates to the first quarter of 2019, Sun Belt markets like Phoenix have seen an increase of about 30%, with Tucson around 20%. In South Florida, cities like Miami and Fort Lauderdale have experienced a rise of approximately 44%. While these markets had strong rate increases, they are now starting to normalize, and we're not witnessing the same level of movement that we did in 2021 and 2022.
Operator, Operator
Thank you. Our next question comes from Todd Thomas of KeyBanc. Todd, your line is open. Please go ahead.
Todd Thomas, Analyst
Hi. Thanks. Good morning. I just wanted to circle back to the trends that you discussed that you experienced in March. Was that concentrated in certain geographies or was it more broad-based across the country, across the portfolio?
Chris Marr, President and CEO
Yeah. It was really broad-based across the portfolio. If there’s an outlier, again, in this kind of climate, it would have been the New York City borough assets, which, as I mentioned, were the assets in the market really where we saw occupancy gains over the first quarter of last year and rental rates that were in positive territory relative to the first quarter of last year, but the rest of the country all kind of moved the same.
Todd Thomas, Analyst
Okay. And so, net-net, if we think about what happened, you mentioned, the volatility in move-ins and move-outs, sounded like both were down, so less movement altogether, but you mentioned that asking rates or Street rates did decrease a little bit, I think, you were in the low-double digits. You mentioned March moved into the sort of mid-teens or high-teens, I believe. But, net-net, how did results compare to your budget for March, did it create a setback in any way, maybe a benefit, what happened in March as a result of that volatility?
Chris Marr, President and CEO
Yeah. We would have expected in March, net-net, slightly better performance than what we were able to deliver.
Todd Thomas, Analyst
Okay. So results in March fell slightly below your budget sort of within the context of the year so far?
Chris Marr, President and CEO
Yeah.
Todd Thomas, Analyst
Okay. And then just last question, just stepping back and looking at the guidance, which you maintained, you previously talked about growth decelerating gradually throughout the year, revenue growth, right? So starting the year higher, ending the year lower. Do you see potential stabilization midyear or later in the year, I guess, has your view changed around the trajectory of growth throughout the year as we sit here today at the end of April?
Chris Marr, President and CEO
No, the high-level perspective remains unchanged regarding the expectation of continued deceleration across the same-store pool as we progress through the quarters. Looking back at last year, it is clear that the first half presented more challenging comparisons than the second half.
Tim Martin, CFO
Thanks, Todd.
Operator, Operator
Our next question comes from Jonathan Hughes of Raymond James. Jonathan, your line is open. Please go ahead.
Jonathan Hughes, Analyst
Hey. Good morning. I was hoping you could talk about performance in the 73 properties that were added to the same-store pool this year, most of which I believe is the Storage West portfolio. Does that add in 50 bps or so to revenue growth, 100 basis points to NOI growth and when you back into metrics for those properties, it looks like almost all of that growth was from higher rents and expense savings on occupancy is almost 500 bps lower than the 2022 same-store pool. So maybe there was a rate versus occupancy trade-off there, but I am just a little surprised by the occupancy of that portfolio. Can you just update us on the outlook maybe for occupancy recovery and those properties and Storage West was in the mid-90% range 18 months ago?
Chris Marr, President and CEO
Yeah. You are spot on. I mean you are talking about assets in those markets, I think, I responded to a previous call in some of the markets that saw a significant inflow of population and movement. We were very, very aggressive on rate, continued to be reasonably aggressive on rate as we went through the first quarter, saw a give back in terms of some of that occupancy. And as we go forward here, again, we will see how demand trends work in those markets, April through July and try to balance out where we are on the rate side versus where we are on the occupancy. But during the quarter, we absolutely were focused in on rate and we are willing to sacrifice some of the occupancy as a result.
Jonathan Hughes, Analyst
Okay. And was the benefit from those new stores in the pool, I mean, is that in line with the expectations at the start of the year or a surprise to the upside or downside?
Chris Marr, President and CEO
Very much in line with the expectation at the start of the year.
Jonathan Hughes, Analyst
Okay. And then on capital allocation, you mentioned the lack of high-quality acquisition opportunities out there and talked about that in Ki Bin’s question in your prepared remarks. The balance sheet is in great shape, leverage near the lower end of I think the 4 times to 5 times target range, same-store NOI growth is driving organic delevering and the stock today is trading 10% below consensus NAV and a high 5% implied cap rate. So my question is, if acquisition opportunities don’t come to the market as hoped and that discounted valuation dynamic continues for the next six month or 12 months, would the Board consider repurchasing shares given you have the leverage capacity?
Tim Martin, CFO
We have a program in place for share repurchases, but we have not used it yet. As we've mentioned before, there is certainly a time and place to consider a share repurchase program. Some of the factors you've highlighted are present. The key will be the duration of the market dislocation. We remain optimistic that we can leverage our strong balance sheet to pursue external growth opportunities. However, if the situation worsens and persists for an extended period, we would certainly evaluate and consider that option.
Jonathan Hughes, Analyst
Okay. Great. Thanks. I appreciate it.
Chris Marr, President and CEO
Thank you.
Operator, Operator
Our next question comes from Jeff Spector of Bank of America. Jeff, your line is open. Please proceed.
Jeff Spector, Analyst
Great. Thank you. Chris, my first question is just on consolidation in the industry and how you are thinking about that in terms of Cube strategy or just the industry as a whole, third-party management, what type of impacts do you expect or really minimal on your portfolio?
Chris Marr, President and CEO
I am sorry, Jeff, could you try that one again? So I am making sure I am answering the specific question.
Jeff Spector, Analyst
Yes. Basically I was just asking about, given the consolidation in the industry, from your seat, how are you thinking about that in terms of your strategy. Does it change anything on the third-party management side or given your scale in your markets, there’s really minimal impact on your business?
Chris Marr, President and CEO
Yeah. I think when we think about just consolidation in general again and we can look at that from a whole bunch of different angles, because certainly, today there’s more assets under third-party management than ever. There’s certainly no shortage of third-party management providers both public and private. I think when you just think about consolidation or scale or however you want to term it, I think, there absolutely are our benefits. But again, I think over time, when you think about Cube, our strong density and scale within our markets and our focus on building a high-quality portfolio in those top quality markets and our coverage within those markets, the scale and brand recognition that we have on a submarket level is quite significant and I think that’s where it’s most impactful. I think in terms of opportunities for us, I certainly think with fewer choices, especially on the third-party side that could create a nice opportunity for us to grow that program at perhaps a rate faster than we would have anticipated as we enter 2023.
Jeff Spector, Analyst
Great. Thank you. And then I just wanted to clarify kind of the thinking about the second half of the year and the initial guidance. Again, it sounds like in April things have normalized again. We have been discussing the tougher comps or decel into the second half and I can’t remember, when you provided the initial guidance, did you say that the bottom half did reflect recession or you really didn’t comment on that?
Chris Marr, President and CEO
I didn't directly link our results to macroeconomic conditions. Instead, it's a variety of outcomes based on our expectations of consumer behavior and how that behavior influences customer demand for self-storage, regardless of economic fluctuations. Nothing is directly tied to a single economic scenario.
Operator, Operator
Thank you. We now have a follow-up from Smedes Rose. Smedes, your line is open. Please go ahead.
Nick Joseph, Analyst
Thank you. This is actually Nick Joseph here with Smedes. I appreciate you taking the call at the end. There was a question earlier on the impact of kind of regional banking and lending broadly on maybe acquisition opportunities. And so just curious kind of similar idea but on supply and new starts and how you would expect those to trend maybe given the contraction in the lending environment?
Chris Marr, President and CEO
Yeah. Certainly, what’s going on in the lending environment directly impacts self-storage developers and how they think about starts or how they think about projects going forward. I think you have got, obviously, the tailwind to new development being continued strong fundamentals within self-storage. I think, again, the headwind against that is cost, raw material and labor delays with supply chain and raw materials and certainly cost of capital, particularly the lending at the regional and local level. While we have seen issues with certain banks and you have seen the larger money center banks talk about overall commercial real estate exposure, I think, there are other product types that are causing a lot of problems for lenders, self-storage is not one of them. So I think it’s a healthy balance. I think it certainly puts some headwinds in front of development and I think as a result, what we are seeing in the numbers and our expectation continues to believe that new supply will continue to slow in terms of deliveries here over 2024 and 2025, given where things are today.
Nick Joseph, Analyst
Thank you very much.
Operator, Operator
Thank you. That’s all the questions we have time for, so I will hand back over to Chris Marr for any final remarks.
Chris Marr, President and CEO
Thank you and thanks for listening. Our portfolio construct we believe really shines in the types of markets that we are seeing and the type of economy that we are seeing right now in the United States. So really thrilled with the performance, particularly of our urban portfolio. We think that customer is and the customer base there really performed well in this climate. And we are looking forward to speaking to you again when we end the second quarter. So thank you and have a great weekend.
Operator, Operator
Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.