Greetings. Welcome to the National Storage Affiliates Third Quarter 2023 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 third quarter 2023 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions. 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, November 2, 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 statement. For additional details 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 Dave.

Thanks, George, and thanks everyone for joining our call today. The third quarter was largely in line with our expectations as we continue to execute on the everyday blocking and tackling of our business. The teams did a great job navigating the dynamics of the seasonality and the competitive environment. In the back half of the year, occupancy continues to follow typical seasonal patterns and we are nearing year-over-year occupancy delta. Our consumer remains healthy and stable, allowing us to execute on our revenue management strategies. There were several positive items to highlight this quarter, including the completion of our $250 million net private placement. Our team did a great job in the timing and execution of that transaction. Treasury rates are higher today than when we priced the offerings, so we're pleased to have that capital raise behind us. We also continue to execute on acquisitions from our captive pipeline while our PROs continue to replenish our pipeline by making acquisitions outside of the REIT. This illustrates one of the many strengths of our PRO structure. We remain pleased with our geographic exposure and our secondary market performance. Our MSAs outside the Top 25 continue to outperform the portfolio average in revenue growth. However, we are facing near term headwinds, including high interest rates, which have muted the housing market plus slowing consumer transitions. We're in a very competitive customer acquisition environment, which is pressuring street rates. We have challenging comps in parts of Florida due to hurricane-driven demand last year. We're also dealing with elevated new supply in a few select markets like Atlanta, Phoenix and Las Vegas. That said, all these challenges will eventually ease, which gives me confidence in our outlook for NSA. In the meantime, we continue to focus on the things we can control, especially our efforts in regards to people, process and platforms. Our customer acquisition teams did a great job maximizing rental conversions by adjusting marketing spend in front-end pricing. Our revenue management team continues to utilize improved AI technology to maximize our ECRI program. I'm confident that the investments in technology we're making today will continue to enhance our results going forward. We're also encouraged by the progress to date around our strategic dialogue involving overall portfolio optimization and we're generating equity capital through programmatic joint ventures, non-core asset sales and portfolio recapitalizations. We expect to provide an update on these initiatives over the next few quarters. I think it's important not to lose sight of the long-term attractiveness of this sector and the positive attributes that will benefit us going forward. Few things to keep in mind, the new supply outlook is favorable. In our markets, deliveries are expected to drop by over 20% by 2025. The consumer remains healthy and stable. Our consumer length of stay remains well above pre-pandemic levels, M&A activity and bad debt expense remain in line with long-term averages. Technology initiatives will continue to improve our ability to attract new customers, enhance our revenue management strategies, allowing us to react quickly to changing environments. We believe NSA is well positioned within this sector to have a strong performance in the future. As I reflect on the sector's strong performance over the last five years, I want to point out that during that timeframe, our average same-store NOI growth was over 9%. And core FFO per share increased 86%, both are very strong results. I'll now turn the call over to Brandon to discuss our financial results.

Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.67 for the third quarter of 2023. This represents a decrease of 6.9% over the prior year period. The year-over-year decline, despite 3.9% growth in adjusted EBITDA, was due primarily to elevated interest expense as same-store NOI growth was essentially flat, declining just 10 basis points. We delivered positive revenue growth of 1.1% on a same-store basis, driven by growth in contract rate of approximately 5%, partially offset by a 400 basis point year-over-year decline in average occupancy during the quarter. Occupancy ended the quarter at 88.5%, down 150 basis points from Q2 and down 360 basis points year-over-year. Similarly, October occupancy finished at 87.4%, which is also 360 basis points below last year. Expense growth in the third quarter was 4.2%. Payroll declined 4.7% from the prior year period while property taxes were down 2.2%. These cost savings were offset by marketing expenses that remain elevated due to increased competition for customers and a tough comp, as well as insurance expense, which will remain elevated due to the policy renewal we have on April 1. We will continue to focus on minimizing our controllable expenses where we can. On the acquisitions front, during the quarter and through October, we acquired four facilities totaling $55 million, mostly out of our captive pipeline. In the near term, as Dave alluded to, we are focused on optimizing our portfolio and will remain patient in regards to acquisitions. Turning to the balance sheet, during the third quarter, we repurchased 6.4 million common shares for $213 million. We're encouraged by the volume of execution we were able to achieve under the repurchase plan our Board established last year. We are confident in the long-term outlook for NSA and believe the current trading levels represent a very attractive investment opportunity. Subsequent to quarter end, we issued $250 million of senior unsecured notes across four tranches in a private placement with a weighted average coupon of 6.58% and a weighted average maturity of 5.8 years. We are pleased to have completed this transaction prior to the recent increase in treasury yields, which were approximately 40 to 50 basis points higher than when we priced our deal. Today, approximately 18% of total debt is variable rate, mostly related to our revolver. Going forward, we will take further steps to free up some capacity on our line of credit, which will naturally reduce our floating rate exposure. At quarter end, our leverage was 6.3 times net debt to EBITDA, up slightly from 6.1 times at the end of the second quarter and within our target range of 5.5 times to 6.5 times. Now moving on to guidance. Results for Q3 were generally consistent with our expectations and performance in October continues to track in line as well. As such, we maintained our full year guidance ranges for same-store performance in core FFO per share. The midpoints of our guidance ranges as outlined in the earnings release are as follows: full year same-store revenue growth of 2.13%, same-store operating expense growth of 5.13%, same-store NOI growth of 1% and core FFO per share of $2.66. Our guidance is based on a continuation of normal seasonality, which would include a modest amount of downward movement in occupancy and street rates for the balance of the year. At the midpoint of guidance, our same-store revenue growth in the fourth quarter would be negative year-over-year. While this is the result of near-term headwinds and coming off the record performance over the past few years, I'll echo what Dave emphasized in his remarks. Self-storage is a great property type that has proven its resilience over time with needs-based demand and the ability of operators to be nimble with revenue management strategies. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions.

Thank you. Our first question is from Michael Goldsmith with UBS. Please proceed.

Good afternoon. Thanks a lot for taking my question. It seems as though the sequential deceleration in operating metrics was more modest than they've been over the last couple of quarters. So is that a function of the environment improving slightly, is that some of the larger steps you've had, some of the larger step downs in the past - the comparisons are getting easier? And then do you think the trend going forward should kind of continue to be more flattish as you've moved past some of the worst of it? Thanks.

Yes, thanks, Michael. It's Dave, thanks for the question. Thanks for being on the call. I think you're right in how you are looking at it. Our toughest comps are behind us as far as you know year-over-year street rate and year-over-year occupancy. As we go through, as we really came through the third quarter, September was really kind of the peak of those high points. And so as we head into the fourth quarter, you'll see us have a little bit easier comps and we're starting also to level out a little bit on street rates in a lot of our markets and a little less volatility around street rates in some of our markets. So, we're having easier comps in the fourth quarter and those spreads will tighten year-over-year and that's due to the fact that last year we held on a little longer on lowering our street rates - really in the third quarter when we had the movement around street rates. And the teams have done a good job really looking at how to revenue management practices and how we're really working with our existing tenant base and really looking at how we're putting the customers that are with us today. We've had really good success around some of the technology platforms that we've improved and some execution around that existing customer base that has allowed us to really work on what we have. Certainly today, there is still some pressure around some markets where we have supply. There are markets where street rates have been more volatile because of that supply and the demand ratios. And so we've had to react to that. But on a whole, our portfolio, we believe with the diversification and where it's located at, we've got some pretty good success moderating some of that - some of the effects of rate competition and supply and those things.

Thanks. And then my follow-up question is related to the share repurchases. Can you talk a little about the funding source for these and - is this a true invest in the shares buying back just given where they're priced. Are these offset some of the OP units you issued and then would you consider to - would you consider continuing to use this lever going forward? Thanks.

Yes, so I'll start and Brandon can jump in here. And again, thanks for the question. Our belief in our shares and our belief in our company and our belief in adding shareholder value - we think our stock is a great purchase, where it's currently trading at and where it's valued at today. We think purchasing our stock is a great opportunity for us and we were happy to fulfill what the Board has approved for us over a year ago. You know pretty much fulfill that commitment to repurchase our stock back from our perspective and we look at where we're at with our strategic initiatives and what we're trying to accomplish in the future. We talked about on our last call is we're looking at initiatives around our portfolio and optimizing our portfolio and if you think about part of that portfolio optimization, we're evaluating the sale of non-core, non-strategic assets, we're evaluating some portfolio opportunities around JVs where you might recapitalize some stores into a JV. And so, the team has done a really good job. And we've been very thoughtful about studying our portfolio top to bottom and really thinking about where we want to operate, how we want to operate and where maybe some locations don't fit into that strategy going forward. And the team has done a good job identifying assets that would fit in one of these categories, whether it be some kind of recapitalization or sale and we're vigorously working on those initiatives. I don't have much more to report as far as definitive pieces of that, but I can tell you I've been pleased with the progress we've made. The team has done a great job identifying and working the plan. And so I'm pleased from that aspect of it.

Yes and Michael, this is Brandon. I mean the only other thing I would add is on the repurchases, it's not necessarily the offset, as you said in your question. The OP equity we've issued this year, I mean really what we've issued this year has been weighted towards our preferred equity, preferred OP units and the subordinated equity with our PROs. Now having said that, we grew a lot and very quickly in '21, early parts of '22. And so some of the equity, common equity we issued during that time was at higher levels than what we can repurchase that at now. So that's certainly part of the math and the obvious benefit that goes into it. But that's just the only other thing I would say, in response to your question. And I think what's important in terms of what Dave spoke to is that there is a multi-quarter execution to our strategy here. So what you saw in the third quarter, we're very pleased with, but more to come in the next couple of quarters.

Thank you very much. Good luck in the fourth quarter.

Thanks, Michael.

Good morning, thanks for the time. Just hoping you could talk a little bit about the street rate trends throughout the third quarter and you can provide an update for how October trended on a year-over-year basis. And as part of that where you feel most comfortable within the same store range. It's still pretty wide to cater. We only have a quarter left so to give any kind of - include that in the answer that would be fantastic?

Yes. Juan, this is Brandon. So street rates year-over-year as we finish the third quarter were similar to the update that we gave for August and we talked about those being 15% down year-over-year. And so that held pretty steady on a year-over-year basis in September. That delta has compressed a little bit and that goes to what Dave said earlier that last year we started to move rates down really in late Q3 and early Q4. And so we're hitting that comp that gets slightly easier. But there's still, there's still negative double-digits. And then in terms of the guidance, you're right, the ranges we kind of kept it where we revised too in August. The thought process there was just, whenever we've revised guidance in the past in August, we don't spend a whole lot of time micro-tweaking it in November. And frankly, this year has been more difficult to predict and you saw that based on what we introduced in February. And what we had to revise in August. So, I think going forward, including when we introduced guidance for '24 in February, it's possible that our ranges then are a little wider than what we've historically introduced to start the year. Where we're most comfortable is certainly around the midpoint of the range. I mean the - on revenue, for example, at the high end of our full year guide, it would imply a fourth quarter that's accelerating from the 1.1% revenue growth that we had in third quarter. And I would characterize that as unlikely. So I would guide you to really the midpoint of the range on all fronts, revenue, OpEx and NOI on the same-store pool.

Great, thank you. And then you guys are really kind of reinvesting in the platform and the systems given some of the rapid growth you've had over the last couple of years. So just curious as we start to think about '24, how we should think about G&A growth again as you reinvest into the business?

Yes, that's a good question. We're not prepared to speak to specifically the '24. But we certainly are making investments. Some of those investments we've been making throughout '23. So that's kind of already baked in. Those investments are on the personnel side. We've hired staff. There have been opportunities, frankly, given the M&A activity in our space. There's opportunities to add folks who had storage experience through our team. There has been technology investments for sure. Some of that runs through G&A, some of that’s capitalized and then it gets depreciated through our corporate investments and that does flow through to FFO, but it's only still impactful given you're spreading those costs out over a multi-year basis. So, I wouldn't characterize those investments one is like tremendous needle movers in terms of, in terms of like G&A costs. So, I think they're needle movers in terms of the ROI that they can provide, but in terms of the G&A line item, it's just not a super noteworthy delta.

Thank you.

Thank you.

Thanks Juan.

Hi, thank you. I just wanted to ask you a little bit, if there's any sort of change in the way that you're thinking about occupancy versus rates, I mean, I get that everyone is trying to maximize revenue per unit where occupancy is now in the high 80s kind of back to where you were pre-pandemic and as others seem to be maybe being more aggressive to maintain occupancies over 90% for various reasons. I'm just wondering is there any change like with what's going on in the housing market, or the ventures market or anything that would make you change kind of the way you think about what's the right occupancy level to achieve?

Yes, Smedes. Thanks. That's a great question and thanks for being on today. Certainly, the muted housing market and the lack of transition has certainly changed one of the demand drivers in our business and we have a lot of them, but certainly, that's one of them that over the years has provided a good source of tenants for us. What the team is doing is really trying to balance how much we want to chase occupancy at the expense of rate and discount and how does that affect the lifetime value of a customer and really how does that fit into our revenue model, I think the team between marketing spend, between discounting, between how aggressive to be on asking rent, street rate, entry rate. And how to really balance our occupancy. I'm very pleased. So if you look at our annualized rent per square foot growth, it has been strong and I think we're finding our foothold around, calmer around the street rate movement and trying to balance that street rate occupancy discount we want to drive with the revenue number we want. And so what I would say is in the markets where it's been very volatile like, we have new supply like Phoenix and Vegas and Atlanta, we probably had to react a little harder. But we have a lot of markets where we've actually found a good occupancy foothold and been able to really hold some street rate activity to leveling off. And so, to your point, it's a balance. I think we're probably returning a little bit more through our heritage where we're not necessarily going to chase occupancy at all costs. We're going to balance and try to find our revenue path with balance occupancy rates and discount.

Okay. And then just to follow-up on that. I mean, any change in the way that you're thinking about ECRIs going forward, either more moderate or less frequent or you know the same - to the same degree?

We've been, that's to me been one of the silver linings to our business for a lot of years and it remains. Our customer rates, it's healthy, they are stable. That side of the revenue management business, we've been able to maintain our cadence and our level of increase, and quantity of increase and we're just not seeing any change in customer behavior because of that program. And so why maybe we're not attracting as many from the top of the funnel, because of the muted housing market, the existing consumer base is very healthy and we've had great success there.

Great. Thank you. You know back on the occupancy. Again, you have had the most loss versus your peers since the third quarter of '22 and again that gap hasn't closed as much as the peer. So again just trying to think about what your comments on the strategy. You know occupancy versus rate. And that or is it certain markets that are maybe winning on the portfolio versus others?

Thank you for your question and for being here. We've experienced a significant decline in occupancy since the heights of 2019 and 2020, but we also led the peer group in occupancy gains during that time. Currently, we're still feeling the effects of that difficult comparison. We're closely examining supply and demand, marketing strategies, and the occupancy levels that maximize our revenue. As we transition back to more typical patterns, we're focused on balancing these factors. In our last call, I mentioned that as we aim to optimize our portfolio, we need to assess whether we have the right unit mix in all locations to achieve our desired occupancy rates. We are actively looking at unit sizes, their market duration, and occupancy levels to determine if adjustments to our unit mix are needed rather than relying solely on significant discounts to fill them. We believe there is a more effective approach, and I expect that as we move through this final quarter, the occupancy comparisons will start to align more closely with our peers year-over-year.

Yes, Jeff, good question. It's obviously top of mind for us and that that goes back to my earlier comment about this being a multi-quarter execution. So I think you know at the end of the day, our intent is when we're done with you know, with these core set of immediate initiatives that they've spoken to, our leverage is going to be equal to what it was before we endeavored to execute on all these strategies or even lower. Right. And so everything that we're doing now is with an eye towards ultimately creating more liquidity so that when market conditions are more conducive, we can grow externally at the same pace that we enjoyed for several years and also address the annual debt maturities that we have coming up and put ourselves in the best capital position to fund our growth and to address kind of those annual capital needs.

Hi, Dave, regarding the easier ECRI question, can you tell me how much that has moderated through the year?

You know it's a good question, Samir. You know for us, I would say in the last couple of months, we've probably come up, are really, really high. We were pushing really, really hard through the summer. Frequency, a little bit elevated in the summer, but certainly on the amount of rate increase. And so it's moderated slightly in the last couple of months. Frequency hasn't changed, cadence hasn't changed. But we've come off a little bit on the top in percentages of rate increases and some of - that's a function of we got a lot of tenants process through the summer you know and so that was great. We got out in front of that piece of it and some of it were obviously you know as you look at market conditions and units that are opening up and those things. But I will tell you, we're still well above pre-pandemic levels and the technology is you know, we have better line of sight. We're able to react quicker, understand trends quicker. I'm really pleased with the position we're at to really continue to execute in the market conditions we are in.

Okay, got it. And then I guess the switching of the transaction markets. You know, it looks like you acquired a few assets. I mean, how are you thinking about sort of revenue growth, NOI growth, maybe the underwriting of those properties? Thanks.

Yes. And another good question. Certainly, you know we're able to tap the Captive pipeline. So those are assets, obviously our PROs have had a good line of sight on them for a number of years whether they were filling them up or built them in and worked through the process of seasoning them up. Certainly next year, and it's going to be a challenging year as far as you look at revenue growth. But we also, we're adding stores in markets where we have operational efficiencies. We think as we're bringing them in, there's still upside to those. You know we believe we brought most of those assets in around - right around our six caps today and as you look forward moving forward, you know, we'll grow out of that and have some success around it. And I think really with six caps a year forward-looking if you think about it that way. And then, we'll continue to grow through it. But yeah you know from a revenue perspective, we've certainly moderated our expectations on underwriting and how we're thinking about growth on assets we're looking at. I think that also contributes to the overall market conditions of how people are buying properties today, it's hard to underwrite a tremendous amount of revenue growth unless an asset has some fillip left into it or something that's not got on from a seasoning point of view, hope that helps.

Hi, thank you. Brandon, Dave with regard to the buybacks. You know, I think you characterized it as a multi-quarter execution. So does that mean that you anticipate continuing to buy back stock here in the near term or do you pause a bit here? I just wasn't clear on what the message was. And you know it sounds like some of the dispositions or the recap plans that you're alluding to you know are, you know, you are expecting to reduce leverage. But is it possible that leverage rises above the 6.5 times leverage level in the near term just between additional buybacks and the near-term negative NOI and EBITDA growth that you're forecasting?

Yes, Todd, those are great questions. I'll address them, and let me know if I miss anything you've mentioned. When I spoke about multi-quarter execution, I was referring to various aspects, including the debt raise we completed after the quarter ended in October, the share repurchases from the quarter, and the portfolio optimization strategies that Dave mentioned, which will generate capital for us. All these factors contribute to the multi-quarter execution I referred to. Connecting this back to Jeff's question, I believe this is how we can move leverage back toward the midpoint of our comfort range of 5.5 to 6.5 times. We are confident in our share repurchases, and the execution in Q3 demonstrates that effectively in terms of dollar volume. We have approximately $28 million remaining in our current repurchase program. Regarding your question about potentially doing more, we would need to refresh that program, which we will announce when the time comes, but it's certainly a possibility and will be discussed among our management team and the Board. You’re correct about the seasonality in our business. If we maintain everything as is and carry forward typical seasonality from the third quarter into the fourth, we would expect our leverage to increase. However, by February, I hope to provide a positive update, whether it’s for the fourth quarter as of December 31 or after year-end, regarding the execution of these other strategies that we believe will help improve that number.

Okay. And you know I guess, sticking with that a little bit, can you provide a little bit more color maybe book end, you know how much of the portfolio that you might be looking to sell or recapitalize? Sounds like you know joint ventures on the table, you know perhaps some outright dispositions. And just to you know continue there. You know is the strategy focused on you know what - in terms of the portfolio optimization, you know is the strategy focused on the geographic footprint of the portfolio, you know the competitive landscape and where you operate or you know just sort of growth or something else altogether, I mean how should we think about you know what that recap or the dispositions might be looking to accomplish?

Yes. Sure, Todd. Thanks for the question. You know I'm not going to give a whole lot of color about size, so obviously, we're still working through a number of factors there. What I will tell you, you're right about is we've had tremendous growth since our IPO and really and if you look at the years of '21 and '22, we were able to buy a few sizable portfolios and when you buy portfolio certainly, you have assets. Then those portfolios that maybe do not fit strategically long-term where you want to go. And so what I would tell you, we did is we really looked at the portfolio, top to bottom and we asked ourselves, if you looked at a 9010 rule for an example and ask yourself 10% of the assets that you know where are they positioned, do we have synergies, do we have operations synergies, do we have multiple properties, are we able to grow? Are we happy with rent growth? All the factors we look at as far as long-term owning assets in those markets. And the team did a good job just analyzing across the country that we were not geographically focused on one area, we were asking ourselves, as we look at markets, where they're singles, where they're doubles in these markets. Have we not grown or had the ability to grow? Do we not like the demographics of the market and or do, if we do like the demographics, is it something long-term that we can continue to improve our position on? We've identified a list of products out there that might be good candidates for dispositions. As you look at this from that aspect of it, we were having great discussions and the team has done a good job working that plan and we think there are real opportunities to go out and really execute on the sale and disposition of the assets. From a portfolio recapitalization and JVs, it's a little bit different approach here. I mean you look for stores where maybe you want to deleverage some of the risk you have in particular markets. You look at maybe opportunities where you can infuse capital and improve performance of the properties, things like that that long-term properties we want back, properties we want to own long-term, but it certainly gives us an advantage or an opportunity to go out and kind of you know re-look at those properties, re-infuse those properties and the JVs that provide good opportunity for that.

Okay. And Dave. One more question if I could, you know you mentioned in your prepared remarks that the PROs continue to make acquisitions outside of the REIT. Can you just speak to that a little bit maybe put some numbers around that activity and I'm just curious, you know, how they're sourcing deals, how they're going about that and you know maybe talk a little bit about the pricing and also where they're sourcing capital from today?

Yes, sure. Great question. You know and that is an advantage. Our PROs have done this for years, they're very good at it. They have raised money for years, they have friends and family networks, they have seen on small investment firms that have certainly invested in them over the years and you know with the NSA program, that's one of the advantages that they can roll those in and take OP units at the time when they want to roll the properties into the REIT, of course. You know, I would say numbers, you know if you think about what they're looking to buy, some of them are developing, some of them are value-add where they buy a small property and build expansions. Some folks are buying maybe CO deals that they think are great opportunity that it's the right time to be buying those pieces of it. And these are all activities, we like to see outside the risk. The PROs are really taking more of that risk and they'll season the asset up and then bring it to us and see if it's an acquisition target for us in the future. And again, from a source of capital, they've all done this over the years, they have a lot of good line of sight on where to get the pieces from. Pricing wise, I'm not going to get into because there's a lot of moving pieces there. If you're building or you're value adding or if you're buying a CO deal that the pricing metrics are quite wide through all those pieces of it. You know, I would, if you look at it, I would say, you know from a number's perspective, 10 to 15 stores have been bought by the PROs this year. And they're still sourcing more. And then, you know there's some other activity, I know they're working on it. And for us, we like it, and the fact that it just continues to restock our Captive pipeline.

Okay, all right, thank you.

Thank you.

Our next question is from Spenser Allaway with Green Street. Please proceed. Spenser, please check and see if your phone is muted. Okay. We will move on. Our next question will be from Keegan Carl with Wolfe Research. Please proceed.

Hi guys, thanks for the time, maybe a two-part question here, just curious what you're seeing top of the funnel demand and you know how that's benefiting from marketing spend and then how you're thinking about the mix between your marketing spend and your street rate?

Good questions and hi thanks for joining too. You know top of the funnel, certainly, we've been able to generate good activity there and a lot of that activity is, because of the additional marketing spend. The teams have done a good job really analyzing where we're getting our best value from a paid search perspective. And really looking at how we can drive the right opportunity. I would tell you, what we're focused on is conversion rate. And so as you think of the top of the funnel, you can produce a lot of people at the top of the funnel by marketing spend but it's how you get them to convert through the funnel is important to us. And so that's where discounting and street rate and that conversion piece all come together. And so us - in the markets where we have good footing on occupancy, we have pretty stable street rates, conversion rates have been a little more easy to predict and a little more easy to maintain. Markets where you have some pretty wilder dynamic street rate movement, a little more challenging. I mean if you're generating an additional 5% of the top of the funnel but your conversion rate is dropping by 4% and you've had a pretty volatile street rate market, obviously, we have to incite ourselves. We want to continue to spend and drive the top of the funnel and lower our conversion rate or we want to adjust our pricing and keep that conversion rate at the target levels we want to keep it at. I would tell you in our business, it's a store-by-store, market-by-market venture, right? And you know one thing I will talk about, and we've been talking about is our technology continues to improve. Our bid models are new and improved. And our AI technology behind those bid models, are new and improved. And so the team is much more efficient at what they're doing today versus where we would have been a year, two, three years ago.

Our call center investment as well, Keegan is another one to call out. I mean, that's an area where we've really made some big advancements on our - what is now our proprietary platform. And that I should have added that when Juan asked an earlier question about our G&A, because that's another area where our investment in these technologies manifests itself. The call center expense for us is in the marketing line item, in our property OpEx. So that's another area where you know that shows up and impacts the numbers, outside of just the pure G&A.

Got it. And then just one on guidance. Just curious what's baked in from an occupancy perspective? I think Brandon said last quarter, you guys were expecting 200 basis points, 250 basis points drop from peak to trough, just wondering if that's still in play and then where you ultimately see yourself ending the year at.

Yes, I think it was 250 basis points to 300 basis points was the range we gave from the end of June through the end of the year. The working theory, I think for us and others in the sector was that maybe the back half of the year we wouldn't see some of the same seasonal occupancy declines, because in the spring-summer, we didn't quite see the same magnitude of uptick. And so that's a potential scenario, you know that - the optimistic scenario was baked into more of the high end of our guidance, Keegan. What's played out is in fact much closer to kind of your typical seasonality. So we lost 150 basis points from the end of June through the end of September and another 90 basis points to the - in October. And so, that's pretty much in line with kind of your pre-pandemic years 2018-2019. And so, what's baked into our call it base case projections, which is really the midpoint of our guide is a continued de-sell or loss of occupancy of maybe - could be 100 basis points from the end of October through December. That wouldn't be out of the norm.

Got it. Super helpful. Thanks for the time guys.

Thank you.

Thank you. Sorry about that, you guys commented on the difficulty in underwriting future operations in the current environment. And with that in mind, can you just provide some color on the depth of the potential buyer pool and your confidence in ultimately being able to execute on dispositions and your potential JVs?

Yes, very good question and I'm glad you get in this, Spenser. We had someone at our end, but we have a high level of confidence. One thing I would tell you is throughout our history and our relationships and all the things that we've done in the past, we have a lot of relationships in this industry and as we look at possible sale of assets, there are groups of buyers that we know that are well-capitalized, they can get the deals done that we've reached out to and we're having discussions with. And so from that aspect of it, we know that these folks are in the market already. They have assets in the market, they would be strengthening their positions in the market where we believe in a market with one or two assets. And so from that aspect, it's a win for them and it's a win for us. And so I would just tell you, as we talked about in our last call, we are seeing transactions trade and we're seeing transaction chains in a lot of the markets that will probably be leaving and the size of the transactions are fitting what our sellers' expectations are and so at this point in time, I would tell you, we've got a good confidence level going into it.

Hi, just wanted to ask a follow-up on the cap rates, essentially, you said, you'd transacted on the most recent acquisitions in the third quarter around 6%, so just curious if you think that's a good indication of spot yields or if that's maybe a still number acquisitions where you kind of agreed to months back and not indicative of where rates are today. So just curious on the commentary with regards to transaction pricing today versus that 6% cap rate that you noted earlier for third quarter deals.

Yes, and good question, Juan. There's a little bit of legacy to those, to your point as we, those deals. Those deals have kind of materialized and really worked through the process. You know it's hard with cap rate because it's also these were one-off assets in one-off markets in - where you know that could dictate if it's a 5% cap market or a 7% cap market, right. I mean, just depending on type of asset, type of quality, type of market. I think, I think cap rates today, they're certainly starting to nudge up a little bit. But there's still a big spread between seller's expectation and buyer. And you know in our industry, you typically don't see a lot of stress in the product type. And so you know we are seeing individual properties sell. We're seeing smaller portfolios sell. And you know, I mean and we're also seeing deals not trade because the expectation of prices not being met. But I would tell you, I would - if looking back to where we've come from '21 to '22, now to '23, cap rates are definitely nudging up. And you know I don't know if it's 25 basis points, 50 basis points from where they were maybe a year ago. But it's also by market, by property type, a lot of variances in there, right to drive that cap rate.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to George Hoglund for closing comments.

Thank you all for joining the call today. And we appreciate your continued interest in NSA. We remain confident in the long-term outlook for our business. And we look forward to seeing many of you at the NAREIT Conference in two weeks. Thanks.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.