National Storage Affiliates Trust Q1 FY2020 Earnings Call

Greetings and welcome to the National Storage Affiliates First Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund, you may now begin.

Good morning. I expect that most people on this call are working from home and spending more time at home in general, and you may have found the need to clear out some space for your home office, or if you’re like me, your spouse has made you clean out the garage. I just want to remind you that self storage is available to help you optimize your space needs. With that, we'd like to thank you for joining us today for the first quarter 2020 earnings conference call of National Storage Affiliates Trust. In addition to the press release distributed yesterday, we filed an 8-K with the SEC containing our supplemental package with additional detail on our results, and our 10-Q which may be found in the Investor Relations section on our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties including uncertainty related to the scope, severity and duration of the COVID-19 pandemic and the actions taken to contend or mitigate the direct and indirect economic impact. The Company cautions that actual results may differ materially from those projected in any forward-looking statement. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as FFO, core FFO and net operating income contained in the supplemental information package available in the Investor Relations sections on our website and in our SEC filings. On the line with me here today are NSA's Executive Chairman, Arlen Nordhagen; CEO, Tamara Fischer; COO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. I will now turn the call over to Tamara.

Thanks, George. And thank you everyone for joining our call today. First, I'd like to acknowledge and thank our PROs and our many team members who've demonstrated their commitment and resilience in response to the demand of the novel COVID-19-induced crisis, which brings with it both health and economic-related dimensions. I'd also like to formally welcome Dave Cramer, our new COO, to participation in his first earnings call. So, welcome Dave. You really picked a great time to start. By the way, as many of you know, while Dave is technically new to our NSA corporate team, he has decades of experience in self storage, most recently as CEO of SecurCare. Dave and Arlen will both be available to answer questions during the Q&A session. Now, let me comment on the current environment and our response to the coronavirus pandemic. Health and safety of our employees and customers is our top priority. We've been actively addressing the rapidly changing environment and impact on our business, driven by the pandemic. All of our stores are open and operating in a modified manner for safety, including using safe face masks, protective barriers, and social distancing protocols. All properties have contactless rental options, and we have halted rent increases and suspended auctions for the time being. Although 40% of our customers are on auto pay, we remain focused on cash collection, and have had good success with those initiatives. We were very pleased that the year was off to a strong start, but the environment clearly began to change mid-March as the pandemic gained momentum and stay-at-home orders started to spread across the country. The dramatic economic slowdown that ensued has led to unprecedented job losses. And although self storage has historically proven recession resistant, it is not recession proof. The stay-at-home orders and rapid job losses have weighed heavily on our move-in volume. Walk-in traffic during the height of the stay-at-home orders was all but eliminated. Of course, move-out volumes have declined significantly as well. Nonetheless, since this has happened during the typical beginning of our busy season, move-ins year-over-year from mid-March through April are down by 22%. Overall, this situation is still very dynamic. And given that we have limited visibility into the ultimate depth and breadth of these negative forces, we made the decision to withdraw our 2020 guidance at this time. We will revisit this decision each quarter as the year progresses. In spite of the significant challenges currently facing the economy, we remain bullish on the self storage industry generally and NSA specifically. In particular, we believe the industry is better positioned operationally today than we were at the time of the great financial crisis, given the advances in internet marketing and sophisticated revenue management platforms that provide large operators advantages in capturing and holding market share. We also think that NSA is well-positioned relative to our peers, given the downside protection inherent in our unique PRO structure, our greater secondary and tertiary market exposure, and essentially no lease-up exposure. And finally, with just under $40 million of debt coming due through 2022 and $300 million of availability on our line of credit, we are well-positioned to ride out this economic storm. On the external growth front, we acquired 36 wholly-owned properties during the first quarter for a total investment of $223 million and two properties in our joint ventures valued at $12 million. The acquisition environment has slowed significantly with fewer deals in the market and frankly many buyers hitting the pause button for now. Our intention is to remain disciplined and strategic in our acquisition efforts with the objective of investing when and where it makes sense for us for the long term. Finally, before I turn the call over to Brandon, I wanted to highlight the fifth anniversary of our April 2015 IPO. We talked then as we have many times since about the strengths and the benefits of our differentiated PRO structure, which aligns the interests of some of the most successful private operators in self storage with the interests of all of our stakeholders. Since our IPO, we have welcomed four new PROs, invested approximately $2.5 billion in over 350 wholly-owned properties, formed two joint ventures with initial portfolio values of nearly $2 billion, and delivered sector-leading quarterly same-store NOI growth, averaging about 7.5%. Combination of our internal and external growth has allowed us to increase our dividend by 74% since our IPO and to deliver sector-leading total shareholder return from our IPO through the end of April of over 170%. We believe we've demonstrated the benefits of our differentiated structure. And as we enter this recession, the downside protection inherent in our structure will facilitate continued outperformance. I'll now turn the call over to Brandon to discuss operating results and balance sheet activity.

Thank you, Tammy. Yesterday afternoon, we reported a solid first quarter with core FFO per share of $0.40, which represents an increase of 8.1% over the prior year period. This growth was fueled by a combination of healthy same-store NOI performance and strong acquisition volume. For the first quarter, same-store NOI increased by 3.5% over prior year, driven by 3% growth in same-store revenues and 2.1% growth in property operating expenses. Same-store average occupancy was strong during the first two months, but ended the first quarter down by an average of 30 basis points to 87.2%, compared to the same period in 2019. Same-store OpEx growth for the quarter benefited from a handful of favorable property tax assessments and appeals, which drove a 1.2% decline in property tax expense, compared to last year. Utilities expense declined 6.8% over prior year, driven by milder winter and energy conservation efforts in many of our markets. These favorable expense items were partially offset by personnel expenses that were up 4.4% and marketing expenses that grew 4.8% over the prior year period. We began to feel the impact from the pandemic-related slowdown in mid-March, which has had a noticeable impact on our portfolio performance. Our key April metrics are as follows: Same-store occupancy at the end of April was 87.1%, which is down 140 basis points from the end of April 2019, and flat sequentially from the end of March. Street rates which were relatively flat year-over-year in the first quarter were down about 3% in April. I'll remind you that we focus on optimizing revenue. So, there is always going to be a give and take between occupancy and rental rate. Cash collections in April were approximately 1% to 2% below normal levels with a number of customers struggling with job losses and business declines. Same-store move-in volume in April was 28% lower than during the same period in 2019. Move-outs also declined 28%. As for specific markets, let me give some examples of what we're seeing. Our largest market, Riverside-San Bernardino has performed above portfolio average for several periods now, and this has continued in April, with storage rent revenue growing about as strongly as it did in Q1. However, total revenue growth in April slowed from the Q1 rate. The primary drag on total revenue in April was lower fee income due to both fewer move-ins, as well as auction suspension, and other ancillary revenue such as retail sales and truck rentals tied to the move-in process. Similar situation exists for the Phoenix and Oklahoma City markets. In Portland, our second largest market, the April operations were impacted more than portfolio average when compared to first quarter results, which is attributable to the elevated new supply in Portland, as well as regulatory restrictions on both auctions and late fee assessments. Las Vegas is a similar case. We had very strong growth during Q1, but in April, we observed a larger decline in performance relative to the portfolio average, which we attribute to negative economic impacts on the tourism and service industries as well as auction and late fee restrictions. These are just a few examples of what we're experiencing across markets. As Tammy stated earlier, we've withdrawn our full-year 2020 guidance until we have better clarity on the economic impact of the pandemic, including consumer behaviors as stay-at-home orders are lifted, and until we have better visibility on resuming auctions and rent increases to in-place customers. Now, turning to the balance sheet. During the first quarter, we issued 125,000 shares of common stock through our ATM program at an average price of over $36 per share for gross proceeds of $4.5 million, and issued approximately 230,000 OP and SP units at an average price of nearly $31 per unit in connection with our acquisition activity. Also, as we've previously disclosed, we issued 8.1 million common shares and retired approximately 1 million OP units and 2 million SP units in connection with the internalization of SecurCare. Our balance sheet is well-positioned with $300 million of availability on our revolver, just under $40 million of debt maturing over the next three years, and healthy access to multiple sources of capital. This favorable position, combined with our commitment to maintaining a conservative balance sheet is reflected in the recent affirmation of our BBB flat credit rating with a stable outlook by Kroll. Our weighted average cost of debt at quarter-end was 3.4% with all borrowings except our revolver, fixed rate or swapped to fix. Our weighted average maturity is 5.5 years, and our net debt to EBITDA ratio was 6.5 times at the end of the first quarter, at the high end of our target range of 5.5 to 6.5 times. We have no immediate need for capital, and we'll be opportunistic about accessing the capital markets this year. Strength and flexibility of our balance sheet also positions us well to take advantage of investment opportunities as they arise. And we believe our well-connected network of PROs and our ability to offer tax-deferred transactions with our OP unit currency continue to fuel our external growth strategy. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions.

Our first question is coming from Smedes Rose of Citi. Please go ahead.

Hi. Thank you. I wanted to just ask big picture, maybe Arlen or Tammy. Obviously, your company wasn't public in the last downturn, but maybe you could just shed some light on how the kind of assets you own performed in the last downturn, and what do you see as kind of the relative advantages or disadvantages, I guess, to the other public portfolios, as we work through, it looks likely to be a recession coming, going forward?

Yes. Hi, Smedes. This is Arlen. I'll tell you that our portfolio, as you know, is a little more geared towards the secondary and tertiary markets. We do have about a third of our portfolio in the primary markets but being more geared toward smaller markets. We found in the last downturn actually that the predecessor company, SecurCare, predecessor to NSA actually outperformed all of our peers throughout that downturn. Our worst quarter of revenue declines during the great financial crisis was a negative 2% year-over-year on same-store revenues, and we only had four quarters during that entire time where we had negative revenue growth. The average of those was about negative 1% for that four-quarter period compared to our peers that were averaging about negative 3% to 4%. So, it's a little more stable market typically by being a little more geared towards the secondary and tertiary markets. The other thing I would say about that is that, in particular in this COVID situation, we are seeing those markets having less impact with restrictions on movement. Self storage is generally a necessary business. So, we're not forced to close. And we're particularly seeing that in those secondary and tertiary markets our business has not dropped off as much as in the other areas.

Thank you. And you mentioned that rent increases have been halted. Is that for the months, kind of April, May, June, or what's kind of the time frame that you're thinking about?

Good question. This is Dave. We're evaluating that as we look at every community and every market that we're in. We don't have a definitive timeline. We've certainly got models run. We're looking at when we think the communities would be ready for rate increases, as we go forward. Optimistically, we'd hope to see some toward the end of the second quarter, beginning of the third quarter. But, we really just got to understand, it's too soon to draw that conclusion on how this economy and how the market is going to respond.

And just to point out too, Smedes, that that's on our existing in-place tenants raising their rates. We can always move our street rates up and down as necessary, based on occupancy and demand trends.

Thank you. Our next question is coming from Neil Malkin of Capital One Securities. Please go ahead.

Hey, everyone. Thanks for taking the questions. I was wondering if you could give a breakdown of how much of your portfolio or demand is commercial. And then also, what collections have looked like between the two segments, and how are you planning on collecting on the delinquent residential side?

Hi, Neil. This is Tammy. About 18% of our customers are small business owners, typically between 15% and 20%. I would say that we haven't noticed any significant difference in customer behavior between our residential customers and our small business owners. Brandon, do you have anything to add regarding cash collections for the month of April?

Well, I’ll let Dave hit on this.

Certainly, Tammy. And from a collection standpoint, we've been fairly happy with what we've had as part of collections brought home. Looking at historic levels, we're getting about 98% to 99% of our expected rent in the door, as we've gone through April. In the first part of May, it's looking very similar. We haven't seen a big differentiation between commercial or residential tenants at this time, as far as collections. We haven't felt a lot of pressure for rent deferral or rent decreases. As we look across the portfolio, it's been fairly tamed. We're looking at a one-off basis, as we go across portfolio with these tenants. But, so far so good. It's just that we've not felt tremendous pressure there yet.

Okay. So…

Sorry, Neil. This is Brandon. The one clarification I just wanted to mention, just because I saw in some of the notes that came through. What we did is we analyzed our total April cash collections compared to last year. And after you adjust for change in revenue, that's where the 1% to 2% lower levels from last year come in. That was a total cash collected which includes rent for April. It could include collecting rent going back to March. It could include prepaid rent for May. So, we felt very good about coming in at such a high clip. On an average basis, we're collecting somewhere in the mid-90% of current month rent in any given month. And so, that's the number that held pretty steady, maybe a slight bias to the downside. So, just to clarify, because I think it was maybe worded or phrased slightly different than all of our peers.

How long does delinquency persist before it is written off as bad debt, and when will that be reflected in your results?

Yes. Historically, we have seen bad debt account for about 2% to 2.5% of revenue. So far, since the end of the quarter, we haven't noticed any significant changes in that figure, but it’s still early to draw conclusions. In our process, as a customer ages before going through the lean process, we start to adjust the rent charges accordingly, either by recording against them or reversing them, so it doesn’t affect revenue. This process remains estimated until they enter the auction phase.

And that starts at when they hit 30 days.

Okay, great. Another one for me is around external growth acquisitions. It's been a big part of your story, obviously. Just wondering how you're approaching acquisitions in 2020, given I guess leverage, stock price, and then I guess more uncertainty with NOI, etc. Are you focused on one channel more than others? And wondering, if you'd be willing to potentially take out some distressed owners with lease-up properties right now?

So, I'll start. Neil, I think, 2020 was off to a very good start for us with the volume of transactions we closed in the first quarter. I will say that beginning in March, frankly, the number of transactions on the market has reduced significantly. We're just not seeing as much. I would also say that buyers who we have historically competed with, many of them have hit the pause button. We think that our balance sheet is in great shape. We are very comfortable with where we are. However, I would say that we're going to be very strategic and very opportunistic with respect to our investment choices. I think, one advantage that we have, and Brandon mentioned this briefly in his prepared remarks, is we've been very successful with attracting sellers with the use of our OP equity, and allowing sellers to complete a tax-free or tax-deferred transaction. And so, our view of acquisitions is we're going to keep our eyes open, and we will be very selective. But, we intend to continue to evaluate transactions, as they become available. And with our PRO structure, we think we have some opportunities with our PRO relationships in their markets and across the self storage industry that will give us a slight advantage. So, does that more or less answer your question?

Yes. The other part of my question is about supply trends over the last couple of years, which have been quite high, and the lease-up timeline has only continued to extend. Considering this and the leverage affecting some of the less capitalized operators, I understand your concerns regarding lease-up risk. I’m curious about your willingness to engage in this area given the currently distressed environment related to self-storage assets.

Well, as you know that it really has not been part of our core strategy. The risk reward hasn't really been there. However, I will tell you that we are keeping our eyes open to opportunities. It's a little too early for us to have seen much of anything at this point in time. But we are, I think, in agreement with you that opportunities will present themselves. And I think that at the right pricing, we would be more inclined to move forward with that type of transaction. I would also say that historically some of the best deals that Arlen has talked about, Dave has talked about over time, come about in distress times, such as these. However, there aren't that many deals to take advantage of. But, we'll see, we'll see where we go with that. We are definitely open to taking advantage of the opportunities as they present themselves.

Thank you. Our next question is coming from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Hi, everyone. This is Ravi Vaidya on the line for Todd Thomas. I was just curious, in terms of occupancy, can you talk about what you're seeing so far in May? Given where we're at in the peak leasing season, do you have any visibility around occupancy gains you’ll achieve throughout the balance of the year?

This is Dave. Good question. Obviously, the occupancy levels and the trends that we're seeing, as far as move-ins and move-outs, are below historical levels. This is typically a very busy time of the year for our industry. It's very seasonal. The months of April and May are very peak leasing opportunities for us. Thus far in May, we may be able to hold occupancy coming out of April into May. The move-in activity has ticked up slightly, as well as the move-out activity. So, too early to really tell, I think, at this time where we're going to finish at the end of the year, let alone the end of the quarter. But, we are, at this point, really stable would be the word I'd use, coming out of April and May.

Okay. Thanks. Just one more question. How are street rates trending in May so far, compared to the minus 3% in April?

So far, in May, they’re flat. No significant change on our street rates, nor in discounts or promotions. Everything seems to be very flat and stable at this point in May.

Thank you. Our next question is coming from Ki Bin Kim of SunTrust Robinson Humphrey. Please go ahead.

Hey, guys. This is Ian on with Ki Bin. Dave, you just talked about occupancy for May and move-in and move-outs. Could you maybe talk about what rent collection has been so far in May compared to this time in April?

Sure. Again, real similar to what the April patterns look like. We haven't seen a significant change into the buckets that we study. At this point in time through the first 10 days in May, it's real similar to what we saw in April.

And Tammy, in your prepared remarks, you mentioned that downside protection from the SP structure. Can you give us just some color on how much protection is baked in right now? I know SecurCare is just internalized. So, maybe there is a little bit less or more protection because of that.

About 60% of our portfolio stores are managed by our PROs, who have a financial stake in the stores and are therefore safeguarded by the SP equity.

This is Arlen. I wanted to clarify something that can sometimes be confusing. The SP equity, which represents about 60% of our wholly-owned assets, accounts for approximately 25% to 30% of the equity in that portfolio, yet it absorbs 50% of any downside risk. Even though Ki Bin mentioned that we don't reach a point where they absorb all the downside risk until there is a significant decline, any downside at all results in them absorbing a disproportionate amount. The SP equity takes on about twice the typical level of downside risk.

Okay. So just to clarify, so even if NOI went down this year and a PRO has been in for call it 5, 10 years, they would still absorb some of that right away, correct, about two-thirds?

Yes, they still absorb half of that. So, for example, if NOI on a PROs portfolio went down by $1 million, $0.5 million of that comes right out of their pocket, the other $0.5 million goes to NSA shareholders. So, it's a way disproportionate to the PRO.

Thank you. Our next question is coming from Ronald Kamdem of Morgan Stanley. Please go ahead.

Hey. I have two quick questions. First, could you discuss the involvement of college students and their activity in your portfolio? Did you notice significantly higher activity in the first quarter?

This is Dave. Good question. We have about 15% to 20% of our portfolio that has some college influence, some of them bigger than others, small colleges to major universities. It's been a really interesting season for us. We did see a slight uptick in a few colleges markets in March, as it really related around spring break and when colleges did or didn't let people come back, did they let them stay in the dorms or not. We do have 20%, 25% of the colleges that haven't done anything yet and we're not sure they will move students out. So, I'm not really sure how to tell you in the second quarter if we're going to see any more movement at all or not. I would probably tell you that we've seen all the college movement we're going to see for the year.

Great. That's helpful. I noticed that Los Angeles was listed among the markets that are lagging. I'm not sure if you mentioned that in your opening comments, but I'm curious if you have any insights or observations about the situation there.

Yes. Ronald, the revenue growth compared to the prior year was essentially flat. Last year, we had a positive growth of over 2%. The same 14 properties from last year are included this year. We finished 2019 with a similar flat growth year-over-year. This is primarily due to two or three properties facing direct competition from new supply. Unfortunately, since we are only working with 14 properties, the performance of two or three can significantly impact the overall results. This is the main reason for what you’re observing.

Our next question is coming from Stephen Mead of Anchor Capital Advisors. Please go ahead.

Yes. Hi. Can we go back to the street rent sort of impact? As we go forward and as your move-ins sort of pick up, I was kind of wondering what that does forward-looking in terms of the average annualized rent per property, especially in the markets where we have more supply, Oregon or parts of California?

Yes, Steve, this is Arlen. It's important to note that street rates typically impact about 5% of our customers each month, as only that percentage is moving in during an average month. Interestingly, this has now decreased to around 4% due to lower move-in and move-out volumes. Therefore, street rates have a minimal effect on our overall revenue growth. The more significant focus is on the remaining 95% of our customers and whether we can increase their rates. This situation has been affected by COVID, as we are currently not raising rates for existing customers and will not do so until at least June. As Dave mentioned, we may initiate some increases in June, but it's more probable that we will start in July. This delay is due to the impact on people and state regulations that prevent us from making changes. It is crucial for us to begin these rate increases at a regular pace in July. Additionally, it's ironic that the rates for customers moving out, which are usually higher due to prior increases, have rolled down less than normal because there are fewer move-outs—only 4% compared to the usual 5%. So, this situation involves a combination of various factors.

And then, during this period, do you get any kind of sense of what's going to happen or what's happening to the amount of new permits in terms of the supply situation?

So, from our perspective, what we are seeing is to the extent, there is a silver lining to the current environment, permitting is slowing down, lenders are slowing down. Generally speaking, we believe that we are seeing a sudden halt to this new development, new supply cycle.

Steve, that's really the best news of this situation. If we can find any positive aspect, it's that we were already experiencing a strong January and February. This is due to the slowdown in new construction, which will come to a complete stop, as it wouldn't make sense for anyone to start building new properties now with a major recession on the horizon.

As we consider the ups and downs this year, looking at the results from April and May, what are the expectations for overall occupancy?

This is Dave. Good question. I think we will see a slight increase due to the seasonality of our current markets compared to where we are today. At this point, it doesn’t appear that unless move-out activity significantly increases, move-in activity has been positive. We experienced positive net moves for April and so far in May. Therefore, I believe we will see a slight uptick in the near term. The challenge is that when comparing to historical levels, it won’t match the same historical levels we are accustomed to due to these peak seasonal periods. However, we have seen a slight improvement.

Yes. I think, our biggest concern frankly is that we may in fact completely miss our annual peak leasing season…

So, where we do the normal big bump, we won't get the big bump. We'll get a small bump, not a big bump.

Okay. And is there a lot difference in terms of geographic in the places that have had less cases and in terms of activity, traffic and stuff? What are some of the most affected markets for you in terms of what COVID has done?

Certainly, the secondary and tertiary markets have performed better than our larger markets, and we've seen that across the board…

Portland and Nevada though I would say. Would you jump in on that?

Yes. We talked about Las Vegas. Las Vegas has certainly been one that's been hardest hit with unemployment. Las Vegas turned from a very, very hot market to very cold market, and it's largely because of the unemployment and what's happening in there. Plus, they locked down the ability to charge fees and delinquencies and those things in the state of Nevada. Overall, it goes back to secondary and tertiary markets, if I had to call in a couple that have been hot, like Arlen mentioned, Oklahoma City has been very good for us. Oklahoma in general has been good for us, some of those smaller, more rural areas.

Thank you. Our next question is coming from Todd Stender of Wells Fargo. Please go ahead.

Your market commentary in the last question was very good. I appreciate that. With the acquisitions you made in Q1, I'd normally just assume that they go under the iStorage umbrella. But, the fact that you're keeping the SecurCare brand, maybe just elaborate on where new acquisitions go, if they are wholly owned?

That's a good question. Our current plan, and for the foreseeable future, is really not to change, to be honest. If we acquire a store in a SecurCare area where we are operating under the SecurCare brand, we will brand that store as SecurCare because it makes perfect sense. Similarly, for the iStorage stores, if we are acquiring locations in those markets, we will use the iStorage brand. Dave, would you like to elaborate on some of the things you have been considering regarding the transition to address a potential question we might have?

Certainly. It's a valid point. We've been quite busy with COVID-19, and this transition has unfolded a bit differently than we anticipated over the past six to eight weeks. We've been focusing on efficiencies and reevaluating how we manage our markets and brands. Moving forward, we will have a family of brands that includes our PROs, SecurCare, and iStorage. Specifically, we are assessing the operation of our call centers, which we are currently managing from home. This experience has provided us insights for the future and opportunities for greater efficiencies as we aim to consolidate call centers and locations, bringing all our brands together. Additionally, we're examining our overall structure, and the teams are performing well, with cross-collaboration proving successful. We are identifying efficiencies within that structure. Despite the busy environment, we are making significant progress with important integration efforts.

Todd, one of the things we've talked about historically about the local market, the submarket is the value of the brand. And I think we stand by that thought process. The local brand has a lot of value, and for now at least and for the foreseeable future, I think we stick with that.

Very helpful. Thank you. Just a follow-up from earlier, just to make sure I understand it correctly. So, with state level restrictions on price increases and auctions, as states reopen, does that mean the state restrictions are lifted or really it's a state of emergency has to be lifted? When can you guys go back, and not suggesting you're turning auctions back on, but just when can you go back to your normal course of business without restrictions? What needs to be put in place at the state level?

That's an important observation. It's a mix of what you mentioned regarding declarations and emergencies, along with additional restrictions that certain cities may have implemented, in addition to what governors have enacted. We are maintaining a comprehensive list to monitor these changes closely. As regulations ease and we determine the appropriate time, we will implement our standard policies. Our focus will also be on ensuring we are doing the best for our communities moving forward. It's important to recognize that this is a multi-faceted situation that we've been tracking, which enables us to adjust pricing, manage efficient auctions, and handle late fees. There have been significant differences across various states and cities in this regard. Thank you.

Thank you. At this time, I'd like to turn the floor back over to Ms. Tamara Fischer for closing comments.

Thank you, everyone, for your interest in NSA. We'll look forward to connecting with you probably virtually in the not too distant future. Be safe and stay healthy. Thank you. Bye, bye.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time. And, have a wonderful day.