Earnings Call Transcript
Public Storage (PSA)
Earnings Call Transcript - PSA Q1 2020
Ryan Burke, Vice President of Investor Relations
Thank you, Erica. Good day, everyone. Thank you for joining us for our first quarter 2020 earnings call. I’m here on the line with Joe Russell and Tom Boyle. Before we begin, we want to remind you that all statements other than statements of historical fact included on this call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected by the statements. These risks and other factors could adversely affect our business and future results that are described in yesterday’s earnings release and in our reports filed with the SEC. All forward-looking statements speak only as of today, May 1, 2020. We assume no obligation to update or revise any of the statements whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, SEC reports and an audio replay of this conference call on our website publicstorage.com. As usual, we do ask that you keep your questions limited to two initially. Of course, after that, please feel free to jump back in queue, if you have additional questions. With that, I’ll turn it over to Joe.
Joe Russell, CEO
Thank you, Ryan. And thank you for joining us. We wish the best for all of you listening in today, particularly those that have been personally impacted by the pandemic. I want to begin by thanking our employees, customers, and business partners for their extraordinary efforts and flexibility as we adapt to this environment. Our focus is simple. Safety is the top priority in everything we do, protecting our employees and customers. We are operating our entire portfolio in all markets as we are an essential business. The need for self-storage, even in disruptive times like these, is yet again being validated. In that regard, our priorities beyond safety include servicing new and existing customers as our communities navigate through these challenging times. To do so, we are supporting our frontline employees in several ways to optimize customer service. Protocols are in place that reinforce social distancing, keeping properties clean, and offering customers multiple avenues to rent or access their space in a contactless way. At the start of the pandemic, we also established the PS Cares Fund, which provides childcare coverage, extended pay time off, and additional hourly compensation to our entire team of property managers. I can’t overstate how valuable their commitment to Public Storage has been and will continue to be as they serve our 1.5 million customers. As Public Storage approaches its 50th year, we have clearly weathered significant economic cycles, and this one will likely rank as one of the most extreme. We have a proven playbook to maneuver through severe economic and natural disasters. Our teams are battle tested, our product is resilient, and we have intentionally crafted a fortress balance sheet to not only survive but thrive in times like these. At its core, the full Public Storage team is well equipped to not only face whatever challenges arise in the near term, but confidently, we will find new ways of applying our unique strength and fortitude to find opportunities. Now, I will hand the call over to the operator for questions.
Operator, Operator
[Operator Instructions] Your first question comes from the line of Jeff Spector with Bank of America.
Jeff Spector, Analyst
Thank you. Good afternoon and hope all of you are doing okay. First question, just trying to tie some of the comments, Joe, you made on the fundamentals or what you’re seeing and the market validates the stability of the sector, resilience in the past versus some of the color around COVID-19 in your press release, which seemed to be much more cautious. Can you just discuss? That’s my first question.
Joe Russell, CEO
Yes. Sure, Jeff. So, again, we’re obviously in an environment that is new and different for everybody. We’ve all been through a number of economic cycles of different degrees. As I mentioned, we in particular go through what we call natural disasters, hurricanes, and otherwise. This is clearly even different than those because it’s health and science related. The predictability of this environment is, at best, uncertain with a lot of information none of us have dealt with before. When we do look back at prior cycles, again, our product type has played through very well, even during the great recession. We were pleasantly surprised by the resiliency and the adaptability and relevance of the property type itself. On one hand, we clearly know that there continues to be a high degree of need and usage of the product. Last month, April, we moved in 82,000 customers into our portfolio. Now, again, that’s down, but on the flip side, there’s vibrancy there, there’s need. We see it also with the activity at our properties that we can track holistically because we have a centralized access system. So, whether it’s at a raw consumer level and/or anything that tiers into service oriented from a business that may or may not be facility, even the type of activity in this COVID economy, there is a true and valid need for the product itself. So, we are looking at the future with some caution, because, frankly, we just don’t know what’s going to happen. And I don’t know how realistic you can predict anything because we’re six weeks into this. There are additional pressure points that we haven’t seen before. Now, again, other things are somewhat similar so far to what we’ve encountered with extreme economic cycles. So, during the great recession, our delinquency hovered around, again, a 2% factor or so through the month of April, very similar. Our customer base, even through the month of April, from a collection and payment standpoint, was consistent, even on a year-over-year basis. So, it’s a mixture and it’s something that we’re going to continue to react to. We have great tools to be nimble, and great analytics to address anything that continues to surface and requires our attention and different strategies. So, that’s an overview of how we’re looking at this environment, and clearly the predictability of it is still unknown.
Jeff Spector, Analyst
My second question then, if we could talk about the strength of the balance sheet and opportunities. I think you discussed this quickly in your opening remarks. Are you seeing -- what are you seeing today? And how should we think about this? And how can PSA take advantage during this downturn versus? I think one of the regrets was not being a bit more aggressive during the world financial crisis.
Joe Russell, CEO
Sure. Well, Tom can talk a little more specifically about the balance sheet as it stands today, so I’ll let him do that shortly. But again, looking at extreme cycles like this one is likely to be, there is evidence, it’s very early, but it won’t be surprising. If, again, a number of owners that have come into the sector, particularly over the last three or four years where we’ve seen an abundance of new supply coming into the market, particularly with owners and ownership structures that may not be well suited to deal with something like this. There could be, again, a predictable fact, which would be more ability to capture assets at a price point that we think is much more attractive than it’s been over the last, say, three or four years. We’re starting to hear some rumblings around assets that are underwater, where they’ve been funded through a certain level of debt, and the valuations are below that value. We’re starting, again, to hear some of that out in the market. And again, it’s early, but it wouldn’t be surprising to us. The ability for us to, in particular, take advantage of an environment that could create that additional level of transaction activity, the balance sheet is ready for it. And it’s ready in a meaningful way. So, we’ll see how that plays out. And I’ll hand it over to Tom, and he can give you a bit more color on where the balance sheet stands today.
Tom Boyle, CFO
Yes. Thanks, Joe. Yes. The balance sheet is in great shape, as we’ve discussed on previous quarterly calls. We’re sitting right now with debt to EBITDA just over 1 times, fixed charge coverage around 8 times, and over $700 million in cash on the balance sheet. So, we feel very good about our financial and liquidity position to take advantage of potential opportunity should it arise. As Joe mentioned, we’re starting to see the early signs of that.
Jeff Spector, Analyst
Thank you. I wish everyone well.
Joe Russell, CEO
I appreciate, Jeff, you too. Thank you.
Tom Boyle, CFO
Thank you.
Operator, Operator
Your next question is from Jeremy Metz with BMO Capital Markets.
Jeremy Metz, Analyst
Hey guys. Joe, Tom, I was wondering if you could just give a little more color on the trends and what happened in April in terms of occupancy and where you ended turnover move-in rents. And then it sounded like delinquencies were 2% for April and that was in line with last year. Was that right as well?
Tom Boyle, CFO
Sure, Jeremy. I’ll walk through a number of those points. It’s Tom. So, stepping back, looking at activity through the quarter and then into April, we had a pretty good quarter on move-in, which really began in January. In February, we were up, call it 5%, 10% on move-ins in January. In March, we saw a meaningful increase in demand, as customers pulled forward activity that would typically occur later in the second quarter, most notably college students and others ahead of stay-at-home orders. One week in March, for instance, move-ins were up about 20%, to give you context. But then, that volume started to decline significantly, as folks were encouraged to stay at home. Overall search volumes have come down. Inbound sales calls are down about 25% in April. Web visits are down about 7% in April. Overall move-in activity through the month of April was down 17%, despite decreases in rental rates of about 20% to drive volume across the country. So, for those customers that have a storage need, we’re providing space with enhanced precautions in our properties and utilizing our e-rental online lease. Somewhat encouraging, as Joe mentioned, over 80% of last year’s seasonal activity we experienced in April, which speaks to demand for the product, even in tough times. Trends modestly improved as we moved through April. So, last week of April, for instance, move-in volumes were down about 11%. But again, it reduced rental rates. Somewhat offsetting the decline in move-ins was an anticipated decline in move-outs. So, move-out volumes, not taking into account auction-related move-outs, were down 9% in the month of April. We’re watching this metric closely and anticipate that as stay-at-home orders are lifted, we may see an increase in pent-up move-out volume. We’ve talked about in the past that in 2009, there was a shift in consumer behavior with longer length of stay customers moving out. We have not seen that to date. Our existing tenants continue to perform well and move-outs remain down. As Joe mentioned, we have seen less overall activity on properties, so not just move-ins and move-outs, but customer visits to the property. Our new centralized access system gives us insights into what’s going on at the properties, and April activity was down about 20% versus March. In terms of occupancy, we ended the first quarter up about 60 to 70 basis points in occupancy. As we disclosed, part of that was attributable to the fact that we had postponed auctions of delinquent customers. We’ve continued to do that through the month of April. So, our occupancy at the end of April was up about 30 basis points. But, if you take into account the fact that we have some customers with us that we may have otherwise auctioned in prior years, our occupancy was down on a year-over-year basis. Still up seasonally on an absolute basis, but down on a year-over-year basis. Moving to collections, which is the third prong of your commentary. As noted in the press release and as Joe just highlighted, April rent collections were very consistent with the prior year, and that is consistent with what we saw in 2009. We’ve collected about 95% of our April rent at this point, which is right in line with where we were last year at this time. So, as the duration of this pandemic elongates and we react to where we go from here, it could likely put more pressure on the consumer. And we’ll have to monitor that as we go forward. But at this point, collections are very much in line.
Jeremy Metz, Analyst
That’s great color. And my second question, I’m going to double up a little bit here. I just wanted to see, Tom, if you can expand a little more from what you see in April but kind of talk about it from a regional perspective. How’s Texas performing, just given the fall off in energy, Southern California, given the closures, Florida, what about areas that are starting to reopen? What are you starting to see there? And then, just if I could add on is just on the business customer side. It sounds like they’re pretty steady right now. But, when do you expect to start hearing from them and what sort of trajectory are you seeing there -- or would you foresee there? Thanks.
Tom Boyle, CFO
So, there are regional trends that are worth speaking to. I think the high-level takeaway is that the Northeast has been more impacted. We’ve seen slower rates of move-ins in the Northeast, also slower rates of move-outs, but slower rates of move-ins. So, as you look at New York or Boston or Philadelphia, and you can expand that up and down the East Coast because that would put Miami probably in that category as well. Along the West Coast, move-in volumes have been more similar to prior years, still down, but down more in the 5% to 10% range in many of those markets, compared to the Northeast. That extends through the Southwest and into Texas. Houston is a market that certainly with the combination of the pandemic and with what’s going on with oil prices, one that we and we suspect others are watching closely. We have seen move-in volumes hold up reasonably well in Houston, but we have cut rates to drive that volume more meaningfully in Houston than we have in other markets in Texas and the West Coast.
Operator, Operator
Your next question is from Steve Sakwa with Evercore.
Steve Sakwa, Analyst
Thanks. Good morning. I know that the industry has kind of gone to a temporary hold on existing customer rent increases, which has really been kind of the single driver of revenue growth for the industry. I’m just curious, what is the timetable on that? I assume that that’s still in place for May. And how long do you think that that might be on hold for?
Joe Russell, CEO
Sure. So, we thought it made sense and was appropriate to pause that program as we move through March. And we did not send existing tenant rate increases out for June 1st billing. So, that will continue through the second quarter. Stepping back, existing tenant rent increases in a more normal time are managed at a very granular level, using data analytics to drive what we send, when we send it and the magnitude. That will be an important part of where we go from here and how we restart at the appropriate time, recognizing that consumer behavior could be a little bit different post this event than what it was before. We’ll be using the same tools that we have in the past to determine those rental rate increases and the appropriate time to send them.
Steve Sakwa, Analyst
Yes. And Tom, just as a follow-up, is there something, is there a guidepost, is it about the amount of country that’s open? I mean, what sort of guidepost should we be looking forward to kind of determine when those may be appropriate?
Tom Boyle, CFO
Yes. I’d say, it’s a number of different things. Certainly, the situations going on in the local economies, consumer behavior that we’re seeing, and we’ll react to a number of those things as we see them. At this point, we thought it prudent not to send them out at the end of April for June 1 effective.
Steve Sakwa, Analyst
Okay, thanks. And you mentioned in the press release increasing kind of hourly wages by $3 at least. It sounded like at least for the second quarter. Maybe just talk about expenses overall. I think maybe online marketing costs were still up. Just how are those trending and how do you expect employee costs to trend through the balance of the year?
Joe Russell, CEO
Yes. Steve, first on personnel-related expenses. Yes, that’ll be elevated through Q2, by virtue of the things that we’ve discussed about. We put some information on that in the Q as well. Again, we’ll continue to moderate and understand how we need to react to the overall environment going into the second half of the year. We’re looking at all expense levels across the company as a whole. The burden of tax increases is still with us. We don’t really have a way to predict that going one direction or another at the moment, other than that it’s continuing to be elevated. Tom can give you a little more color on another component of our expense tied to advertising. So, again, that’s been a vibrant tool for us. We’re going to continue to use it aggressively. It’s going to be a factor in the mix as well. We continue to look at all our operational expenses, whether it’s tied to vendor contracts, the amount of maintenance capital we’re putting into the portfolio, etc. So, it’s definitely something that we continue to focus on and look for ways of optimizing overall cost levels in this environment. And Tom, if you want to give a little more color on what we’re doing with advertising and marketing spend?
Tom Boyle, CFO
Sure. Thanks, Joe. I’d just briefly touch on that, because that’s a lever that we pulled pretty hard through 2019 in the first quarter. In the first quarter, like we saw last year, we saw pretty good demand response from that. That’s continued through in April. So, we’re going to continue pushing pretty hard on advertising, as we continue to see a great response to the Public Storage brand, online. We’d anticipate that remains somewhat elevated as we seek to drive volume to our website, call center, and properties.
Operator, Operator
Your next question is from Todd Thomas with KeyBanc.
Todd Thomas, Analyst
Hi. Thanks. Good morning. Thanks for the April trends. That information is helpful. It sounds like you haven’t yet seen an increase in move-outs though. I’m just curious, if you look back at prior cycles -- and I realize this is a different environment than what you’ve seen in prior cycles. But any sense of what kind of lag you might expect to see between job loss and move-outs?
Tom Boyle, CFO
Sure. Todd, I think looking back at 2009 as a guidepost, but 2009 was a different environment. As I look at move-in, move-out trends in 2009, they were more gradual than what we’ve seen to-date. In the fourth quarter of 2008 and the first quarter of 2009, the magnitude of those were in the mid-single-digits. As you compare that to the sharp decrease in move-ins and move-outs that we are encountering already at this juncture, it’s hard to provide a perfect analog. But it did happen with increased move-outs aligned with declines in employment in the fourth quarter of 2008. One of the biggest drivers now is not just job loss, but also the fact that many customers are staying at home and don’t want to visit our properties to move out right now, because they feel good about the safety and security of their goods at our properties. We’ll see where we go from here. Your point is right; we have not seen any noticeable shift to-date and in fact move-outs are down.
Todd Thomas, Analyst
Okay. That’s helpful. And then, the rent reductions for new move-in customers that you mentioned, Tom, I think 20%, is that across the platform on average? And can you talk about whether or not you anticipate needing to change pricing going forward here, based on call volumes or site visits and just I guess rentals and conversions overall?
Tom Boyle, CFO
Yes, sure. We actively manage our pricing on a day-to-day basis across the country at a unit size and property level basis. And so, as you would expect, my comments around volumes being different by region, pricing strategy is different by region as well. Some regions in the country have pricing that is only down about 5% year-over-year, and there are others where pricing is down 30%. There’s a good mix there. We’re managing that dynamically to drive both volume and revenue outcomes.
Todd Thomas, Analyst
Okay. But normally in the peak leasing season, there would be a few large net move-in months in a row, and you’d be raising rates, right? So, you’re discounting and lowering rents here. Do you expect to be able to begin to take that pressure off a little bit and be able to move rents higher on a seasonal basis at all throughout the spring and summer months?
Tom Boyle, CFO
Well, I think looking at last year as a guidepost is probably not helpful. We manage our pricing, advertising, promotion strategies on a real-time basis at all times regardless of market conditions. There’s certainly different signals driving this year’s strategy than what we saw last year. Your point on seasonality is noted; we’ve already seen an impact to seasonality to-date, which is the college students that with college going to e-learning, leading to a shutdown of physical presence in the month of March, pulled activity forward. As we move into May and June, you’d have other seasonal use cases come up. Whether we see those this year, I think remains to be determined, and may very well differ materially by region and jurisdiction, given how things are managed with stay-at-home orders this year. So, it’s too early to comment on what seasonality may look like through the second and third quarters. We’ll be managing in real-time as we always do.
Todd Thomas, Analyst
Okay. Thank you.
Operator, Operator
Your next question is from Smedes Rose with Citi.
Smedes Rose, Analyst
Hi. Thanks. I wanted to just ask you, going back to the compensation increases that you put in place for the second quarter, and you noted that you might extend them. I was just wondering, if the decision around potentially extending them tied to shutdowns and disruption from this pandemic, or is it more just a reflection of kind of competition for that level of worker at the property level, or what are the issues that would help you make that decision?
Joe Russell, CEO
Yes, Smedes. Yes. I wouldn’t take that as we intend to do any of the things you’re talking about. It’s really, we felt comfortable in the near term that the range of issues that our employee base is facing, we thought the right thing to do was to elevate their level of overall compensation and other tools they had at their disposal that we could help fund, whether it was childcare or extended time off, etc. Because of the unpredictability going into the second half of this year, and frankly, even for the rest of this quarter, we’ll see how things go. The variety of wage rates we have nationally is something that we constantly evaluate; we consider the relative pay for the scope and applicability of skill for the type of compensation we offer, and we think we’re aligned in that regard. Again, it’s something that we’ll continue to be fluid. Clearly one of the things we have the ability to do, which we thought was right, was to provide additional support to our frontline workers, as I mentioned in my opening comments, as they’re a critical part of our overall operational strategy.
Smedes Rose, Analyst
Yes. That makes sense. Thank you. The other thing I just want to ask you regarding the pricing behavior of facilities that are still in lease-up. Has PSA taken a more aggressive approach on rates there, just to kind of gain whatever kind of market share is available, or what’s happening specifically at those properties versus your stabilized assets?
Joe Russell, CEO
Yes. Smedes, those properties continue to lease up. We have reacted to the new pricing environment and have lowered pricing on many of those as well. Depending on the level of volume and interest in those individual markets, it’s around the trade areas of those properties. They’ve continued to lease up through the month of April, so we’re encouraged by that, albeit at lower prices.
Tom Boyle, CFO
Thank you.
Operator, Operator
Your next question is from Jonathan Hughes with Raymond James.
Jonathan Hughes, Analyst
Hey. Good morning out there. First off, thanks for the outlook commentary in yesterday’s release. I found it to be very helpful. Could you just remind us of your average length of stay, which I believe is a bit higher than your peers? Do you think that makes them more or less price-sensitive to renewal rate increases whenever those are, of course, slated to resume?
Tom Boyle, CFO
Sure, our average length of stay is right around 10 months. That’s really a barbell between some customers that have use cases for storage that are very short-term in nature, be it between apartments, etc., and customers that are using the space for longer-term needs, be it storing seasonal goods, businesses, or an extension of homes. In terms of sensitivity to rate increases, various factors play into that, including stickiness of customers. Once you get past that one-year mark, it’s quite sticky, and that’s remained the case through April. We’ll have to evaluate what consumer behavior and business behavior may change as we navigate this pandemic.
Jonathan Hughes, Analyst
Maybe another -- maybe a similar question. What percentage of your customers have been there for over a year and over two years?
Tom Boyle, CFO
About 60% of our customers, a little less than 60% of our customers have been with us for longer than a year, and a little over 40% have been with us for longer than two.
Jonathan Hughes, Analyst
And what percentage of those are on AutoPay?
Tom Boyle, CFO
AutoPay for us is around 50% of the tenant base. We haven’t seen any change in AutoPay signups or any cancellation trends. It’s very consistent.
Jonathan Hughes, Analyst
I’m going to sneak in one more. Have you looked at expanding the size of your credit facility to be able to take advantage of acquisition opportunities, or do you feel you have enough capacity with free cash flow, and what’s your cash and revolver capacity for any opportunities you pursue?
Tom Boyle, CFO
Yes, sure. We feel very good about our current liquidity with over $700 million in cash on the balance sheet, an entirely undrawn revolver, and access to capital markets, given our uniquely low leverage and high coverage. We feel very good about the firepower we have to fund potential opportunities, and we await that opportunity in the next several quarters.
Operator, Operator
Your next question is from Ronald Kamdem with Morgan Stanley.
Ronald Kamdem, Analyst
Hey. Just a couple of quick ones. Thanks for the disclosure. I thought that was very helpful. The first is just, can you just talk about the small business tenant in the portfolio? Just high level, sort of where the exposure and how are they faring in this environment, to the extent that you can?
Tom Boyle, CFO
Sure. Small business customers are a component of our tenant base. They typically are good paying customers, and that’s continued through the month of April. One notable trend is that we have seen a decrease in move-in volume more pronounced for business customers than for individual consumers, particularly over the last four weeks. I wouldn’t put there as anything concerning there, but the decline in move-in volume has been more so.
Ronald Kamdem, Analyst
And what percent is the business customer of the portfolio?
Tom Boyle, CFO
We have about 5%, 6% of customers that are true businesses that sign business leases with us, and then we have appreciably more customers that are business users that, by survey, indicate around 15% to 20% of our customer base, which includes sales reps and others that use our space. That gives you a sense of the composition.
Ronald Kamdem, Analyst
Very helpful. Just another quick one. Just looking at late charges and administrative fees, just saw it was down 3.5% year-over-year. Is there a thought, either this go-round or did you do this last cycle as well in terms of trying to deal with customers and potentially waiving some late fees or is there sort of no change in strategy there?
Tom Boyle, CFO
Yes, sure. One of the things we did was provide some incremental customer accommodation for those impacted by the pandemic. Our operational teams have dealt with crisis situations over the past several years and are well-equipped to handle situations that materially impact local communities. While that’s historically happened in specific geographies, in this case, it happened across the country, but our operational team pivoted quickly and effectively. We are waiving fees, reducing rent in some instances, and working with delinquent customers across the country for those impacted by the COVID pandemic. We already talked about the fact that we’ve paused auctions and existing tenant rate increases, as well, and I’ve been impressed by our operation team’s ability to move into crisis mode and help those impacted to-date. This is a driver of some of the fees that you highlight, and we expect that to be the case as we move through the second quarter as well.
Ronald Kamdem, Analyst
Great. One more if I may. I just was noticing that I think Minneapolis was looked like it was additive in the Q this quarter in terms of markets you called with supply. Hopefully, I got that right. Could you provide a little more color or what’s happening there to warrant that call out?
Joe Russell, CEO
Yes. Sure, Ronald. Minneapolis is a market that we have significant market share and presence. Over the last two years, we’ve boosted that by doing three things. We’ve added to our own portfolio through acquisitions, ground-up development, and redevelopment in a market that we hadn’t had a lot of investment activity for some time. We like and see very good long-term traction relative to the market itself and the additional inventory and new properties that we put into that market. All told, for us directly is about 10,000 units. Lease-up there is going well on the new properties. We’re not seeing a like-for-like magnitude of new development going in the market, but there’s some. We felt it was relevant to call it out because our same-store is not progressing as well as some other markets have been in the near-term. But we feel like the stabilization that will take place over the next one to two years will see good absorption of the new product and any of the things that are happening in our existing properties correct as well. The market is well poised for future growth. We’re really pleased with the additive scale and the range of new assets that we've constructed or acquired that we've put into that market.
Ryan Burke, Vice President of Investor Relations
It’s Ryan Burke. We do have a number of analysts left that want to ask questions. So, please do try to keep it to two and then feel free to jump back in queue.
Ronald Kamdem, Analyst
Sure, thanks. Thank you.
Joe Russell, CEO
Thanks, Ronald.
Operator, Operator
Your next question is from Todd Stender with Wells Fargo.
Todd Stender, Analyst
Hi. Thanks. Just to flush out that rent relief question that you may offer tenants, if they ask. Is it deferred? What’s the expectation on that? Maybe just trying to flush that out, is it a maintenance -- ability to maintain occupancy, so you’ll give a rent holiday? How are you looking at that?
Tom Boyle, CFO
Yes. I would say, first off, it’s been a relatively modest amount of requests that have come in for things like that. We have a little bit of a different business than many other real estate asset types that may have long-term leases, and we may be talking about blend and extend and things like that. We have month-to-month leases. As we think about customers and their rent and navigating this environment, one of the choices customers have is the ability to move out. Extending payment plans or otherwise are a little bit less applicable for our product type than others. But, we have a range of different tools to work with customers impacted by this pandemic.
Todd Stender, Analyst
Right, understood. And then, how about your stance on share buybacks, as you look at the stock come inside of maybe our NAV estimate. Are you looking at putting cash to work, should the stock decline?
Tom Boyle, CFO
Sure. Stock buybacks are something that we have authorization from the Board to undertake. It’s part of our regular capital allocation dialogue. We’re hopeful this pandemic could create a different business environment and acquisition pricing environment, allowing us to use our balance sheet to grow the portfolio attractively. We will see how that plays out. In addition to that, stock buybacks are another tool we have to allocate capital. At this point, we have not bought back stock.
Operator, Operator
Your next question is from Ki Bin Kim with SunTrust.
Ki Bin Kim, Analyst
Thanks. I just want to verify a couple of comments you made earlier. You said at the end of April, occupancy was up 30 basis points, but that included some units that haven't been auctioned off yet. So, if you look at it from a paying occupancy standpoint, how does April look year-over-year?
Tom Boyle, CFO
We finished April down about 40 to 50 basis points in occupancy, if you take out those units that may have been auctioned in the previous year.
Ki Bin Kim, Analyst
Okay. And in terms of move-in rates, you ended the first quarter down 4.2%. How did that trend in April?
Tom Boyle, CFO
Yes. Ki Bin, I’ve already commented on that in terms of the range of different move-in rates by different markets, on average. It’s down around 20%.
Ki Bin Kim, Analyst
Okay. Sorry. I was confused about volume versus rate. All right. That’s it for me. Thank you.
Tom Boyle, CFO
Great. Thank you.
Operator, Operator
Your next question is from Mike Mueller with JP Morgan.
Mike Mueller, Analyst
In terms of the planned capital spending that you talked about, the case for property upgrades and everything. Is there going to be any disruption to that or any notable change to the budgeted amounts?
Tom Boyle, CFO
Yes, Mike. We reset the budget from what we spoke to a quarter ago where we were looking at something along the lines of $250 million or so. We’ve reset that to about $175 million. There’s some things in the mix that have led to the reduction. One is a number of the capital projects that we launched in 2019 carried into this year along with some of our strategic investments around what we call our Property of Tomorrow initiative. We’ve tapered that down knowing we’re going to face delays in approvals and permitting through the next few months based on staffing levels, coupled with the fact that we think we’re going into a much more beneficial arena for bidding and continuing from a scale standpoint the transition of properties to our Gen 5 standard that the Property of Tomorrow programs align with. This was one component, and we’re still anticipating about $175 million that will happen this year. This ties to things that will keep our properties highly functional, doing repairs, and facilitating high levels of customer move-ins and high occupancy. We’re continuing with a few initiatives that we can still manage in this environment that relate to upgrades with LED and energy efficiency and putting solar on properties.
Operator, Operator
Your next question is from Spenser Allaway with Green Street Advisor.
Spenser Allaway, Analyst
Actually, all of my questions have been asked. Thank you.
Joe Russell, CEO
Great. Thank you.
Operator, Operator
Your next question is from Parker Decraene with Citi.
Michael Bilerman, Analyst
It’s Michael Bilerman here. So, just a couple of questions. The first is more strategic. This pandemic is going to change the way we live, work, and play, both in the near-term and certainly over a longer term. Have you given thought about the live part of it? If there’s going to be a shift of population out of urban dense cities into more suburban house living, even a modest shift could certainly accelerate. How does that change the dynamics of demand for your product?
Joe Russell, CEO
Yes. Michael, we’ll see how that plays through. Obviously, with 2,500 locations across 38 states, we’ve got a sizeable portfolio in both urban and suburban areas. It’s too soon to tell if one is benefiting more than the other. We’ll assess it and see what trends might materialize regarding population shifts from urban desirability to suburban practices. It’s still early but we have plenty of tentacles out there to assess the impact of this situation. It hasn’t shown meaningful effects yet, other than Tom mentioned that we have seen more impact in the Northeast, primarily from a health perspective due to the severity of the COVID virus. Much of that area remains in lockdown. We play in both arenas actively and are continuously making development decisions in both suburban and urban markets, utilizing demographic data to inform where we locate and invest in properties that we believe will see good demand.
Michael Bilerman, Analyst
And I think about the shift that you made into some extraordinary larger facilities in more urban markets. Is there anything you can glean from those during this pandemic yet?
Tom Boyle, CFO
It’s tough. Michael, it’s really difficult to isolate what longer-term trends will arise based on the last six weeks we’ve navigated during this pandemic. The larger drivers of activity have been folks managing this crisis for both personal and business reasons. I’m not sure if that reflects what longer-term impacts could arise moving forward.
Joe Russell, CEO
Yes. I think, the reason we think through and design, either build or invest in larger assets matters, whether they’re in urban or suburban markets, is highly correlated to demographic data, both population-based and competitive factors. Some of our largest properties, even through the last few weeks, are performing as well as they’ve historically. It’s still too early to tell.
Michael Bilerman, Analyst
Right.
Joe Russell, CEO
Thanks, Michael.
Operator, Operator
Your next question is from Jeremy Metz with BMO Capital Markets.
Jeremy Metz, Analyst
Hey. Just one quick follow-up. Joe and Tom, you both commented earlier on capital allocations; you mentioned acquisitions. You had a question about stock buybacks in there somewhere. I was just wondering how you’re thinking about the marginal dollar there versus reinvesting in your existing portfolio, just given the pullback that we saw outlined in the Q for the CapEx program.
Joe Russell, CEO
Yes, Jeremy. Like always, as Tom alluded to, stock buybacks and capital allocation are ongoing considerations. We’ll continue to assess it. I can’t guide you toward where it ranks or what we prioritize but I did address that there are potential opportunities arising due to the impact on owners that have entered the sector within the last three to four years, where properties haven’t met pro forma expectations. We’d anticipate this correction will lead to opportunities in capital allocation for our company each cycle. So, we have various capital allocation options and will assess them as this situation evolves.
Jeremy Metz, Analyst
Yes. No, that’s right. Just trying to understand highgrading the portfolio externally versus focusing on internal, which you’ve made a big priority in recent years. So, I appreciate it. Thanks, guys.
Joe Russell, CEO
Yes. Thanks, Jeremy.
Operator, Operator
And there are no further questions at this time. I’ll turn the call back over to Mr. Ryan Burke for any closing remarks.
Ryan Burke, Vice President of Investor Relations
Thanks to all of you for joining us today. We certainly hope the best for everyone as we continue to manage through this interesting environment.
Joe Russell, CEO
Thanks, all. Stay safe. Thank you.
Operator, Operator
Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.