Greetings, and welcome to the National Storage Affiliates' Fourth Quarter 2022 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 begin.

We'd like to thank you for joining us today for the fourth quarter 2022 earnings conference call of National Storage Affiliates Trust. On the line with me today are NSA's CEO, Tamara Fischer; President and COO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nationalstorageaffiliates.com. 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 and represent management's estimates as of today, February 28, 2023. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statements. For additional detail concerning our forward-looking statements, please refer to our public filings with the SEC. 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 section on our website and in our SEC filings. I will now turn the call over to Tammy.

Thanks George, and thanks, everyone, for joining our call today. We're very pleased with our fourth quarter results that capped off another impressive year, delivering growth in core FFO per share for the year of over 24%, the second highest year of growth for us since our IPO in 2015. Our same store growth for the year of almost 15% culminated a record three year period where same store NOI is now more than 40% and FFO per share is now more than 80% higher than the pre-pandemic levels of 2019. During the year, we acquired 53 stores valued at nearly $800 million comprised of 45 wholly owned properties valued at $570 million and 8 properties valued at $215 million that we acquired with our joint venture partners. I think it's worthwhile to note that this transaction volume was our third largest year since our IPO based on wholly owned acquisitions activity. To top it off, we also delivered 35% growth in dividends paid in 2022 compared to the prior year. Not only are we proud of being able to deliver record levels of financial growth for our shareholders, we're also proud that 2022 was our biggest year in supporting our communities since our IPO. Through our partnership with Feeding America, we were able to provide a million and a half meals to assist in ending food insecurity in America. Our properties continue to support their local schools and children's charities. And our corporate team thoroughly enjoyed our holiday toy drive for Children's Hospital here in Denver. We were pleased to again step up our support of the Self Storage Association's college scholarship program. We also continue to enhance our diversity at NSA, where more than 40% of our senior management are women or minorities. Turning to the current acquisitions environment, we're seeing fewer deals come to market and there remains a significant gap between buyer and seller price expectations. We continue to evaluate deals where it makes strategic sense and remain both disciplined and very selective in the face of today's increased cost of capital. Just like we refuse to buy at prices that are not accretive for our shareholders, sellers often refuse to sell given the healthy cash flow they generate. So it's not uncommon for sellers to just pull deals off the market if they don't like the pricing. Overall, the volume of transactions in the market is definitely slowing. In our case, though, we do have the unique benefit of our captive pipeline of assets, which are stores managed by our PROs, but that we don't yet own. Because we're on the same team as buyer and seller in these cases, we can cooperate to use structuring that is accretive for our shareholders while also beneficial to the sellers. To that end, we recently entered into an agreement to acquire 15 properties in Florida owned generationally by one of our PROs and family members. The transaction is valued at about $145 million and we expect the first year yield will be in the low 6s. In this case, we've negotiated to fund the transaction with the issuance of a new series of preferred equity, beneficial to the PRO's family, but still accretive to NSA. We expect the transaction will close sometime in March. This deal demonstrates one of the many benefits of our PRO structure and our ability to continue to grow while being very creative with capitalization. We began 2023 with another accretive event in the retirement of Move It Self Storage one of our IPO PROs. Move It managed over 70 properties for NSA concentrated in Texas and the Southeast. As most of you know, we've discussed anticipated PRO retirements over time, and we expected at the time of our IPO that as many as half of our six PROs at the time would choose to retire within 10 years. Move It is the third of our PRO retirements following Northwest last year and Secure Care in 2020. We will continue to operate the stores under the Move It flag and the internalization of Move It increases the number of stores managed within our corporate portfolio to almost 800 stores, or over 70% of our total 1100 stores at the end of the year. We estimate this retirement will be one to two cents per share accretive to core FFO. I'd like to thank the Move It team for their partnership over the years. They've been a key contributor to NSA's success. Finally, as today's call will wrap up my final year as NSA's CEO, I'd like to congratulate Dave on stepping up as CEO effective at the end of this quarter. I'd also like to congratulate Tiffany Kenyon on recently being elevated to Chief Legal Officer and Derek Bergeon, our current Senior Vice President of Operations, on his upcoming move to Chief Operating Officer. I look forward to Dave leading NSA through its next phase of growth and continuing to deliver outstanding results for all of our stakeholders. I'll now turn the call over to Dave.

Thanks, Tammy. I'd like to congratulate you on your upcoming transition to executive chair. We appreciate all that you've done for NSA and all that you will continue to do in your new role. I would also like to thank our PROs and their teams along with the NSA team for achieving great results in 2022. Without their efforts, we would not have been able to accomplish all that we have this year. As we reflect on the fourth quarter and how 2022 played out, we really experienced normal seasonal trends. Occupancy peaked in Q2 at 95.3% and finished in December at 90.5%. Contract rates grew every month in 2022 finishing 12.7% higher than 2021. Our rent roll down averaged 12% in the quarter, which was in line with our expectations. Rental activity followed historical patterns peaking in the summer months and declining in the back half of the year. As a reminder, our current tenant base has an average length of stay of over 40 months. Our team did a wonderful job in the quarter driving revenue which was up 7.4% controlling expenses of only 1.6% leading to an increase in NOI of 9.4%. That’s improving our NOI margin by 140 basis points. As we look to 2023 we are encouraged as our portfolio is following typical seasonal trends. Occupancy and street rates have bottomed here in February. We’re expecting both to pick up as we head into the spring leasing season. We believe we're on track to stabilize above pre-pandemic levels. January month-end same store occupancy was over 250 basis points higher than January 2019 implying that we are settling in well above pre-pandemic levels. Our Sunbelt markets continue to outperform with states such as North Carolina, Florida, Georgia and Texas all generating above portfolio average revenue growth. Several of our secondary markets such as Brownsville, McAllen, Oklahoma City, and Wilmington are also outperforming the portfolio average. This reinforces our strategic market focus on Sunbelt, secondary and suburban markets and continued emphasis on geographic diversity. Our focus on people, process, and platforms in 2023 will enable us to deliver strong results and continued success. I'll now turn the call over to Brandon to provide more detail on our financial results and balance sheet activity.

Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.71 for the fourth quarter of 2022, which represents an increase of 11% over the prior year period. For the full year, core FFO per share was $2.81, a 24.3% increase over 2021 driven by strong same store performance, including 12.1% revenue growth, and healthy acquisition volume in the back half of 2021 and throughout 2022. Dave spoke to the drivers impacting revenue. Let me give some color on fourth-quarter operating expenses. Our fourth-quarter growth of 1.6% benefited from lower than expected property taxes due to some successful challenges and efficiencies in personnel, partially offset by inflationary pressures on utilities and increased marketing expense. Turning to the balance sheet, during the quarter, we entered into swaps to fix interest rates on $410 million of floating rate term loans. The weighted average effective interest rate on these loans at September 30 was 4.6% and pro forma with swaps was 5.2% as of December 31. In early January, we announced the recast of our credit facility, including expansion of our revolver capacity to $950 million, a $230 million increase to our existing term loans, and the retirement of $300 million of 2023 maturities. This execution during an evolving bank lending environment demonstrates the appeal of self-storage as a property type and the strong relationships we have with our bank group. The end result was an extension in our weighted average maturity to 5.7 years from 5.1, increased flexibility, and about a five basis points increase in weighted average effective interest rate. At quarter-end, our leverage was six times net debt to EBITDA right in the middle of our targeted range of 5.5 to 6.5. Pro forma for the financing activity I've mentioned at year-end, approximately 17% of our debt is subject to variable rate exposure, down from 24% at September 30 with nearly all of that exposure from the outstanding balance on the revolver. We're committed to maintaining a conservative leverage profile and healthy access to multiple sources of capital. Moving on to 2023 guidance which we introduced in yesterday's release. Same store growth is reverting to long term averages. We estimate same store revenue growth at 4.5% at the midpoint of the range we've provided, which is in line with our average annual growth over the three years pre-pandemic. We estimate same store expense growth of 5.25% and NOI growth of 4.25% at each of the midpoints we provided. Our same store pool increases to 834 stabilized stores and 52 million square feet, an increase of over 200 stores due to our record acquisition volume in 2021. Approximately 68% of our same store portfolio is in the Sunbelt. We expect revenue growth from these stores to outpace our non-Sunbelt stores by about 100 basis points. We are very pleased with our core operating fundamentals. However, higher interest rates will be an earnings headwind in 2023. Based on our debt in place currently, and using an assumption SOFR average is 4.6%, we expect interest expense of over $150 billion for the year. All of this results in our 2023 core FFO per share guidance of $2.78 to $2.86 with a midpoint of $2.82. Lastly, before taking questions regarding Move It, I'll offer a reminder on the mechanics of a PRO retirement. The SP units associated with the Move It PRO, which were converted to OP units on January 1, at a conversion ratio of 2.75. Therefore, distributions to SP units will be reduced accordingly, while the outstanding common shares and units outstanding increased by 2.5 million. NSA will no longer pay a management fee. There will be a reduction in supervisory and administrative expenses within G&A, which will be partially offset by an increase in other G&A as the properties will now be managed by NSA's corporate property management platform. All of these items are factored into our additional guidance assumptions that are detailed in the earnings release. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions.

Thank you. Ladies and gentlemen at this time we will be conducting a question and answer session. Our first question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Hello, good morning. Just hoping you could talk a little bit more about the acquisition environment you talked about, I think it was a low 6% yield on some of the PRO assets you're acquiring in Florida. Just hoping to get an update on kind of where you see yield today and how we should expect that to maybe evolve over the course of 2023 given what you're seeing in the markets today.

Thanks Juan. Nice to speak with you this morning. I would say as it relates to the PRO assets that we're acquiring here. Sometimes we hope in the next month so those assets come in on appraisal. As we said, it's just over a six cap. In general in the marketplace, I would say that cap rates have not increased in a commensurate way. They are probably in the mid fives where we're seeing things. I think more importantly, what we're seeing is fewer deals coming to market generally, a gap in expectations between seller and buyer. And it is not unusual for us to see sellers pulling a transaction when they're not getting the pricing that, everyone was seeing in 2021 and the early part of 2022. So I think people are generally just pulling back a little bit.

And then just as a follow up on the PRO retirement. Curious about the decision to keep the flags and how you think about the opportunity from an efficiency standpoint, to have everything on one data versus keeping the disparate brand names out there across the BNSF platform.

Yes, Juan, this is Dave. Good question and nice to talk to you this morning. As we look at the Move It retirement, we will keep the brand in place in most of the markets. There are a few markets where we have overlap. As we look at maybe some of the other brands we run in those markets where we may selectively look at a group of stores where it's more powerful for us to have maybe a brand that had more flags in one of those markets, we may move them around within the brands we have. But we still believe very strongly in these regional brands. We believe very strongly that our platforms do not limit us, and having multiple brands across the country. We've proven it out through the years. We're pretty committed to it. We've built tools that make it easy for us to be efficient. Those tools can be deployed across multiple brands very easily. We looked at it and we will continue to look at it in the future on any PRO retirements or any branding across our markets. We think we can get a better scale by having a single brand and maybe one of these markets where we had multiple, we would change. But at this point in time, we're pretty comfortable with where everything is.

Just one sneaky follow-up if you don't mind. Can you just give the January occupancy and street rate spot numbers, please?

Yes, Juan, this is Brandon. So street rate year-over-year was down about 7%, a little over 7%. We're switching to a new same store pool as we mentioned in the opening remarks. So the new pool at the end of January is at 897, and that's down like 20 bips sequentially from December, which is kind of in line with typical seasonality.

Thank you guys. Appreciate it.

Thank you, Juan.

Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Hi, thanks. I just was wondering if you could just talk a little bit more, I guess why these 15 properties in Florida are available to you in a low six cap range and kind of how do you think about their performance, I guess over the next couple of years. That seems sort of a pretty good pricing fee 15 properties in Florida and it's been generally a strong market. So I'm just wondering if you could talk about it a little more and maybe what this special issuance of preferred equity to this family kind of any more details around there.

Sure. I'll start, and we'll probably have Brandon and Dave weigh in a little bit. But these assets are coming in from our participating regional operator in Orlando. These assets have been owned for many, many years by our PRO's family and now extended family. As part of their long-term planning and basically estate planning, they have agreed to contribute these assets to NSA. This has taken a long time—it's just complicated with the number of owners in these 15 properties. They finally were able to pull it together and get everybody on board. Our history and our agreement with our PROs is that assets coming out of the captive pipeline do come in at appraised value, and without a portfolio premium. This has been a long time coming, and we’re very excited about it. This is an excellent PRO that joined us in 2017, and their performance is outstanding. We have no doubt that they will continue to operate at the top of the pack. So maybe you want to jump in a little bit.

I mean on that deal. This is Brandon Togashi on that deal. Specifically, I think another positive, it's deepening our presence in the Orlando market, a top 25 MSA growing Sunbelt market. We got five stores in the current portfolio right now. So this takes us to 20 assets with the incremental 15. So, that's a tremendous positive. The other thing I would tell you just broadly is the deals that we have done recently, we only did two, albeit at higher value properties. So $40 million in Q4, those were PRO sourced. All of these are situations where the PROs are working with us helping us solve for the cost of capital side of the equation. So those two properties that we closed on in Q4 were done with a good chunk of the consideration in the form of OP units that we issued at an agreed upon premium of $60 a unit, and in the case of the personal mini-shifting property Florida deal where we expect for the vast majority of the consideration to be issued in the form of preferred, as Tammy mentioned. We just signed the agreement last week in terms of getting the deal done. There are some more documents and things to get through over the next few weeks. So I don't have a hard number for you. But we expect the majority of that purchase value to be paid for in the form of preferred equity, based on the price that we've agreed on, which will carry a yield very similar to our outstanding performance today. It's going to be a 6.1% yield.

Okay, thanks. And then I was just wondering, or go ahead, I am sorry.

No, that was it.

Okay, I just wanted to ask you on your expense outlook, if you could just talk a little bit more about kind of some of the components, maybe what you're seeing in wages and labor, and maybe sort of marketing thoughts or property taxes, and any other significant line items?

Yes. So the two biggest line items, property taxes and personnel, we expect those two line items’ growth rates in '23 will be in line with that total OpEx range we gave, 4.5% to 6%. Property taxes probably low bias to the high end, personnel is a little biased to the low end, at kind of our base case levels. That comes off just under 5% growth on property taxes in '22. For wages, we had essentially flat growth in '22. So we're working against that comp. So that's very pleasing if we ended up in that mid-single-digit growth number. The other line items that will be above the total range that we gave in terms of growth would be marketing, utilities, and insurance. Marketing and utilities, for sure, the first half of the year, we still have a tough comp to work against. By mid-year, we kind of get to the point in time last year where we were starting to increase net spend. The last thing I would guide you to is, just for the first quarter '23 the growth rate is going to be elevated or probably be high single digits, because we've got kind of a dynamic I just mentioned with marketing and utilities, but also a tough comp on property taxes. We had a good guide in Q1 '22 so we're working off that comp.

Okay, appreciate the detail.

Our next question comes from the line of an unidentified analyst with Bank of America. Please proceed with your question.

Good morning. Thanks for taking my question. I was wondering if you could provide some color on maybe the latest demand indicators as we're into February, just as it relates to the consumer. Maybe there's a read-through that could provide into the spring how are web traffic trends doing perhaps might be a good indicator and how does that compare to the typical seasonal cadence that you would see.

Yes, Lucy this is Dave good question. We're pleased right now with what we're seeing as far as customer activity. I thought the team did a really good job in the back half of 2022, managing rate as we knew occupancy levels would come back to more historical levels. So we did a really good job around, discounting around what we did with contract rent, and what we did with our asking rents to the end of 2022. Towards the end of '22, we ramped up marketing spend and we really turned that on in November and December. So we're seeing the positive effects of that, as we come into January and February. January's moving numbers were 4%, 4.2%, higher than a year ago in January for this pool. We were pleased with the amount of moving activity we had. Move outs were close to flat at about just a 2%, or half a point, half of what historical numbers were in January. Top of the funnel has been good. We've applied the right amount of paid spin. We've applied or out of mind the right amount of market pressures around where we wanted to be in pricing. So we've adjusted speed pricing to be a little more competitive in these markets. We're seeing the results of that. The top of the funnel is strong. Our conversion activity is good. I think that the teams have done a wonderful job positioning us for what we think is going to be a pretty typical spring leasing season. At this time of year, you usually see the bottom of occupancy. You see the bottom of street and we think we found that and we're starting to cycle more towards the spring leasing season.

Great, thanks. That's helpful. And as a follow up, I am just wondering if you could talk about focus with respect to the acquisitions you're hoping to enter into through your PRO partnerships. Just given the latest Florida acquisition, as a top 25 MSA. Is there more of a focus to shift towards these more primary markets versus what you've had historically, as a secondary, tertiary? More of that exposure? Maybe if you could talk about where you're seeing the best demographics are and what still makes the most sense in terms of markets in 2023?

Yes, good question. I think our focus on acquisitions and our strategy around acquisitions hasn't changed tremendously. We will fill in markets where we think it gives us good economies of scale and good ability to derive revenue. We’re certainly focused on the Sunbelt, and our focus on Sunbelt, secondary and in suburban markets isn't changing. The fact that we're able to have a PRO that had assets in a top 25 market is fantastic. We like it. We've been looking for these assets for a long time, and we're happy to have them coming into our portfolio. The rest of our captive pipeline is around where the PROs operate today. We will look to get more of those captive assets in the future as timing comes. The time here on those assets are around estate planning and loan maturities, there's a lot of things we can't control. But when they become available, we remember they are in our portfolio. We're balanced. We’ve liked our balance. We liked the markets we operate in, we've had success in these markets. We're really not changing what we're looking for in the future.

Yes, the only thing I would add, this is Brandon, is if you looked at our captive pipeline, where we have the biggest geographic footprint concentrations, it would be Orlando, which we're now bringing a good chunk of those assets in. Phoenix, in parts of Southern California. So as we continue to harvest deals out of the pipeline, I think you will see some more in those areas. But no disagreement with what Dave remarked on.

Great. Thank you. Our next question comes from the line of an unidentified analyst with Wolf Research. Please proceed with your question.

Hey, guys, thanks for taking the questions. Maybe first, just give a little bit more color on what appears to be a slight strategy shift in the quarter. Prior communication made it sound like you guys were looking to more or less hold occupancy and give rate, but it seems like that wasn't the case, given the steep drop in occupancy. So kind of curious on that.

Yes, good question. Really, I think, when you look at the occupancy drops, we're coming off historic highs. Our spreads look probably a little greater than what our peer group does. I may pointed to maybe the Atlanta market where if you look at Atlanta, fourth quarter, we saw a 700 basis point drop in occupancy, but still delivered 9.1% revenue growth. Atlanta last year was at 97% occupied. That's an unsustainable number for our portfolio. We knew we were going to settle back into what was more normal occupancy levels. The back half of the unit team does a good job holding rates, knowing that occupancy would start to come back down to historic levels. Once we reached those historic levels, we go back to turning on other levers like what rates do we want to do with discounting. What do you want to do with our conversion rate and paid spend? So I think we've settled in where we wanted to be in an occupancy level. Now we're back to driving revenue, as we always do—that's our ultimate goal. We're focused on revenue growth.

Brandon, one thing I would just add is, when we were on our last call, I think we had given the spot occupancy at the end of October. We talked about that being a 450 basis point delta and negative year-over-year at that time, and you can see that spreads widen. That speaks to what Dave hit on. I mean, that was part of our strategy to hold through the trough here, as we typically seasonally do in January, February, and then kind of see the normal bell curve and occupancy throughout the year that we're accustomed to in normal times.

Got it. And then in the markets in the press release, you called out as seeing weakness, what's driving it? Is it just new supply coming online or is there something else you guys are seeing?

I think you're right there. We've talked about Portland and Phoenix a lot, as we call it out as well. There's a lot of new supply being built prior to the pandemic. The pandemic certainly helped mask some of the new supply pressure. Some of the pandemic fluff is going away, and those markets are returning back to the fact that there is quite a bit of supply coming into those markets. We're working our way through it. A couple of markets like Phoenix is also a very, very hot housing market, tremendously hot compared to the rest of the country. That is now cooling off. New supply, a little bit of cooling economic factors. That's what's driving some of that movement around.

And just one more, if you don't mind, just want to clarify on the interest expense commentary. You guys aren't contemplating an additional potential Fed rate hike given what you said SOFR is going to be. I just want to clarify that that's correct.

Well, it's a range. I mean, we're modeling a multitude of scenarios. I gave you kind of a spot number that we've used. I would say, primarily our base, but we're running sensitivity analyses up and down on that. That corresponds to also what we're assuming for the way we're able to move rate and drive revenue on the top line as well.

Great, thanks for the time guys.

Yes. Thank you.

Our next question comes from the line of Todd Thomas with KeyBanc. Please proceed with your question.

Hi. Thanks. Good morning. I just had a couple of follow ups, I guess on first on acquisitions. Tammy, what is the gap like today between buyers and sellers? Is it in that 75 basis point range? I guess you're comfortable buying at a low 6% cap rate, but sounds like sellers are in the mid 5% range? Is that the right way to think about the delta between where you're at and where sellers' expectations are?

Now, Todd, I think that's right, and honestly, 6%, if we're using this preferred stock as consideration for the transaction, we'd still be looking at it. We're going to be very, very selective and very opportunistic in our decisions around investing capital and acquisitions this year, based on your current cost of capital.

Okay, and then, Brandon, so the 6.1% rate on the preferred that you anticipate issuing to fund the personal mini investment. Is that similar to—is that a traditional preferred? Or are they subordinated performance units or something else? And then is that transaction—expected to be funded 100% with preferred equity?

Yes. So, it's not subordinated or anything like that. Todd, it's more traditional preferred stock. There are some tax efficiency reasons to the transaction why we're actually going to issue a new series of preferred. You might be aware of current existing preferred series; the five-year non-call burned off late last year. So it makes sense in this deal to stand up a new series with new terms. But I think it'll be more traditional in that sense. It doesn't have any, like subordinated features like our SP equity with PROs. As I mentioned earlier, we expect the majority—and I said the vast majority—I don't have a hard number, but the vast majority of the purchase price we expect to issue that preferred equity on.

Okay, and how about, how are you planning to fund incremental acquisitions during the year? Are there any sort of balance sheet initiatives embedded in guidance in order to permanently finance the outstanding balance on the revolving line of credit or anything else that's contemplated in guidance?

I think, well, incremental acquisitions—we expect us to do what we talked about doing in Q4 with the OP equity at a premium. What we're talking about doing in Q1 here with the preferred, certainly our PROs can co-invest, keep bringing cash to the table, and we issue new SP equity that helps solve for the equity portion of any funding. Other than that, because we've done a good job of clearing the slate in terms of near-term capital needs, we've got very manageable $75 million mortgage debt maturing in '23. Now that we did everything on the balance sheet last month, and your CapEx, returning CapEx means we can fund all that with this routine cash. So we're drawn $600 million roughly today on the revolver, still have $350 million in capacity, but we don't have a lot of near-term pressing needs. We're not going to do anything hastily. We'll be as Tammy said, opportunistic on both the acquisition side as well as the capital side.

Okay. And one last one for Dave. Apologies if I missed this, you mentioned the January occupancy was higher by 250 basis points versus 2019. I understand the pool changes, and I think you talked about trends sort of loosely, but how does January compare to last year, January on a year-over-year basis? And can you share an update for the end of February, just curious if you have started to see occupancy start to stabilize at this point in the year and start creeping higher, or if it's still sort of flattish relative to what you said, I think 89.7% at the end of January.

Yes, good question, Todd. I mean, as I commented, we have found what is typical in seasonal patterns. February is where we think we found our bottom and our trough, and we're starting to see things improve. As we look at February, we're happy with where we're at as far as where rates are going and where occupancy is going. I can't give any more color because the month isn't over, and I probably will not do that. But as I said, we are, we think we've really cycled back into what we think is going to be a nice spring leasing season, and February is certainly responding the way we want it to.

Todd, a comment about comparing to three or four years ago, that's based on a core group of properties—a 500 property pool that we can study for a five-year period, so it's a true apples to apples.

Okay, got it. What's the 89.7% at the end of January look like? Again, I realize it's a different pool, but what's that year-over-year spread look like on the new pool?

At the end of January, it was down 370 from last year, 370 points.

Okay. Thank you.

Yes. Thank you, Todd.

Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Good afternoon. Thanks a lot for taking my question. Maybe I'll start with Brandon. Your same store NOI guidance calls for growth in the low to mid single digits and your earnings growth range is slightly down to slightly up. So can you help provide some clarity in terms of what's preventing the flow-through on the nice same store NOI growth and is this just a one-year type of headwind progress? Or is this something that we can expect in future years?

Yes, Michael. It's largely interest expense, as I mentioned at the open. We have about $700 million of variable rate debt that we carried in '22, a little bit below that on average throughout the year, and projected right around that level in '23. That's a pretty comparable base. The rate on variable rate debt is probably going to be 300 points higher throughout '23 versus '22. That will have a meaningful headwind effect. We're comfortable with our variable rates strategy, carrying 20% to 25% of total debt. It's under that right now at 17%, and you're going to feel it in a year like this, but long term we feel like it gives us some optionality. It correlates to the fact that the fundamentals in our business have some characteristics that provide an inflationary hedge aspect, and we can move rates quickly and respond to the current economic environment with our customers swiftly. That's the philosophy.

Thanks for that, Brandon. Next one for Dave. Are you seeing—with the macros kind of softening, are you seeing customers being more price sensitive than in the past? I guess just generally, what are the advantages and disadvantages of the PRO structure? In a time when we return or moving this higher, moving this higher and your just an ability to kind of weather the macro with the price structure. Thanks.

Yes, good question. Thanks. From a customer perspective, on asking rents, we've had to bring asking rents down a little bit, due to market conditions, there's been a lot of competitors moving their rates down. I think the consumer as they're shopping today is shopping more; they're a little more price sensitive to getting the conversion rate. We've looked at marketing spend, and we've looked at our conversion rates, we have adjusted pricing to find the right blend of what we wanted and conversions of customers. But for in-place tenants, they've been pretty resilient. We've been able to stay on our cadence regarding in-place rent changes. We haven't really had to alter much of what we're looking at in terms of what we're modeling in that in-place rent change. They've been pretty resilient. We’ve been staged to get on our cadence and haven't had much noise. From the PRO perspective, they have very strong market knowledge, very strong on-the-ground history in these markets. These PROs have 20, 25, 30 years of experience, seen good times, seen tough times. Our PRO response and how they're modeling their businesses in their local markets has been superior. They have the tools and our platforms to make them better than before. If you look at our cost control and our expense control in the fourth quarter, we had really good expense control. That’s due to operators who have long history and know what they need to do to pull back when necessary and be smart with their money. Our PRO structure gives us an advantage because of this history and market knowledge, and they’re using new platforms to improve performance.

Thank you very much. Good luck in 2023.

Thank you.

Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Hey, just digging in on the same store revenue guidance at the midpoint of the range. Number one, how are you guys thinking about that in terms of the first half of the year versus the second half of the year? Thinking about an exit rate in the second half of the year? And then I'd also be curious about what's baked in to the top end versus the bottom end? Are you guys thinking about recession, not recession? How are you guys thinking about that? Thanks.

Yes, Ronald. It's Brandon. Thank you for the questions. We definitely start out higher on the growth rate year-over-year and '23. Then decelerate or moderate on that growth as we progress. In all scenarios, given where we ended '22 and our starting '23, and all scenarios that inform the guidance range we've given, we're still finishing the year with positive growth. At no point are we projecting a flat or even negative growth by any means. In terms of what's baked in, we assumed a variety of current economic predictions for all of '23. That does take into account whether it's a technical recession or just recessionary forces in place mid-year, feeling some of that. There's a lag between when a technical recession may be officially declared, and when you really start to see it flow through some of the operating numbers of the storage REITs. We have that all baked in, but it begins in the second half of '23 and continues into early ‘24.

Helpful, and then my follow-up would just be, look, as you're sitting here today, and looking at website visits and top-of-the-funnel demand. Are you seeing anything that would suggest that same surviving could go sort of negative number one? And then number two, what are some of the indicators you're looking at to determine if the peak leasing season is coming in better or worse than you anticipated? Thanks.

Yes, Ron, good questions. I don't see anything yet as we look at the opportunities being presented to us on the website. The tactics we're using are working. We're getting the responses we want, the volume we want, and certainly the conversion levels we want. From that aspect right now, we’re pleased with what we're seeing. As you look at the spring leasing season, we think January and February reacted to pre-pandemic patterns, right? How do we figure out we get through this pandemic stuff and get back to more seasonal trends? I think we have found that. We'll know probably early April or mid-April, by May if we don’t start to see the occupancy gains and rate gains that we’re expecting—maybe we saw some consumer change or macroeconomic pressures put on our business. We’re not expecting that at this point. We think the spring leasing season is shaping up nicely.

That's it for me. Thank you.

Thank you.

[Operator Instructions] Our next question comes in line of Wesley Golladay with Robert W. Baird. Please proceed with your question.

Hey, everyone, I just have a question on the movement numbers you cited. I think you said they were up a few percent in January, year-over-year. Is zero potential that there's a weather benefit there or is it pretty broad-based?

It's been pretty broad-based. Yes, there have been some really tough weather in some parts of our country, and so we were positive over 4% move-ins in January. It was pretty broad-based across the country.

Okay, and then, can I get one question on the guidance? Do you have a number for how much the new additions contributed to the same store growth this year?

Wesley, this is Brandon on revenue. It's about a 20 to 25 basis point increase that the new stores provide.

Okay, thanks a lot.

Thank you.

Our next question comes in the line of an unidentified analyst with Green Street Advisors, please proceed with your question.

Thank you. You made some share repurchases in the quarter, which seems prudent given where your stock is trading. Just wondering how you're thinking about future repurchases and how that stacks up on your capital allocation priority list?

Yes, Spencer, this is Brandon. It's certainly an option that will continue to be an option as we go throughout 2023. It's the easiest single investment underwrite I can tell you that much. It has the highest return. It's also, I would say, the least risky relative to individual asset acquisition. It's something we can do pretty quickly. So those are all the positives about it. On the flip side, for practical and regulatory reasons, you're also kind of constrained on how much you can do in any given quarter or period. So there’s a bit of a lid on it from that perspective, but I think Q4 frankly is a really good representation of where our heads are at with things. We did $40 million of buyback, we also did $40 million of acquisitions in creative ways that included OP equity at a premium that I mentioned earlier. That's how we're thinking about things. Everything's on the table, and we’re going to do what delivers the most long-term value.

Okay, that's helpful. And just a quick follow up on the ECRIs discussion. Can you just comment on where the most recent ECRIs have been in terms of magnitude? And do you expect to be able to push typical ECRI in terms of leasing season?

Yes, good question, Spencer. Our cadence has remained the same. The timing we're hitting our customers has remained the same. The amount of customers we’re hitting each month is pretty similar to what we've seen over the past 6 to 12 months. As we look at rate moving on the top and market rate has certainly come down. So we're being a little cautious around our top end, and we may put some guardrails around the top end. Overall, it hasn't significantly changed. As spring leasing season approaches, we should see some better pricing as we look at Street going into the spring leasing season. That helps take the top lid off a little bit. As we go into spring, we expect at this point in time to stick to our cadence and be as assertive as we've been.

Thank you.

Thank you.

At this time, there are no further questions in the queue. I'd like to hand the call back to Ms. Fischer for closing remarks.

Okay, thank you. So this wraps it up for the fourth quarter and for the year 2022. We're definitely feeling very optimistic about 2023. We certainly appreciate your participation in our calls today and your ongoing support of NSA. We look forward to seeing many of you in the coming weeks. Thanks again for your time today.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.