CubeSmart (CUBE) Q4 2022 Earnings Call Transcript

CubeSmart (NYSE:CUBE) Q4 2022 Earnings Conference Call February 24, 2023 11:00 AM ET

Company Participants

Josh Schutzer - Vice President, Finance

Chris Marr - President and CEO

Tim Martin - Chief Financial Officer

Conference Call Participants

Jeff Spector - Bank of America

Michael Goldsmith - UBS

Spenser Allaway - Green Street Advisors

Juan Sanabria - BMO Capital Markets

Todd Thomas - KeyBanc Capital Markets

Keegan Carl - Wolfe Research

Steve Sakwa - Evercore

Ki Bin Kim - Truist

Mike Mueller - JPMorgan

Operator

Good morning. Thank you for attending today's CubeSmart Fourth Quarter 2022 Earnings Call. My sanction is Alicia, and I'll beryllium your moderator for today's call. [Operator Instructions]

I would now for illustration to walk nan convention complete to your host, Josh Schutzer, Vice President of Finance pinch CubeSmart. You whitethorn now proceed.

Josh Schutzer

Thank you, Alicia. Good morning, everyone. Welcome to CubeSmart's Fourth Quarter 2022 Earnings Call. Participants connected today's telephone see Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will beryllium followed by a Q&A session.

In summation to our net release, which was issued yesterday evening, supplemental operating and financial information is disposable nether nan Investor Relations conception of nan company's website astatine www.cubesmart.com. The company's remarks will see definite forward-looking statements regarding net and strategy that impact risks, uncertainties and different factors that whitethorn origin nan existent results to disagree materially from these forward-looking statements.

The risks and factors that could origin our existent results to disagree materially from forward-looking statements are provided successful documents nan institution furnishes to aliases files pinch nan Securities and Exchange Commission, specifically nan Form 8-K we revenge this morning, together pinch our net merchandise revenge pinch nan Form 8-K and nan Risk Factors conception of nan company's yearly study connected Form 10-K. In addition, nan company's remarks see reference to non-GAAP measures. A reconciliation betwixt GAAP and non-GAAP measures tin beryllium recovered successful nan 4th fourth financial supplement posted connected nan company's website astatine www.cubesmart.com.

I will now move nan telephone complete to Chris.

Chris Marr

Thanks, Josh. Good morning, everyone. Thanks for joining. Our 4th fourth results capped disconnected different fantabulous twelvemonth of capacity by our CubeSmart platform, and I convey each of our teammates for their dedication and outstanding customer service. Same-store gross maturation for nan twelvemonth came successful astatine nan precocious extremity of our guidance. Our attraction connected operational excellence contained disbursal maturation to an yearly complaint of 3%, resulting successful same-store NOI maturation astatine 16.7% for nan twelvemonth coming successful supra our guidance.

As we person performed our business readying and nan related financial forecast, each of these past 3 years, we surely person had to do truthful facing important uncertainties surrounding nan effect of COVID and nan resulting changing user behaviors. Entering 2023, while galore aspects of our business, specified arsenic seasonality and delinquency person returned to much emblematic humanities patterns, we surely are faced pinch home economical uncertainty and nan imaginable for geopolitical shocks.

We judge that our strategy of owning a high-quality portfolio successful nan champion markets, maintaining a high-quality equilibrium expanse pinch blimpish leverage and well-staggered fixed-rate maturities and nan truth that we foster an innovative civilization consisting of high-quality group and systems will complete nan agelong word nutrient above-average risk-adjusted returns passim economical cycles.

Our connection coming will truthful sound acquainted to those of you who person been weighted stakeholders successful Cube complete these past fewer years of robust outperformance. We judge our high-quality stores located successful submarkets pinch sector-leading demographics person america successful an fantabulous position entering 2023.

The New York MSA, our largest market, is opening to positively acquisition nan waning effect of caller supply. Operational capacity remained steady, and we are starting to spot nan greenish shoots from caller proviso deliveries leasing up nicely and nan caller transportation pipeline has almost been exhausted.

Our anticipation is for absolute levels of maturation to stay steady. And by nan backmost half of nan year, nan New York City boroughs will beryllium performing supra nan portfolio average. We're 1 twelvemonth connected from nan Storage West transaction, and we couldn't beryllium much pleased pinch nan assets and nan strategical fresh connected our platform. As expected, contempt nan stabilized occupancies of nan assets, location was important upside to rents connected our platform.

These properties saw accelerating maturation done nan backmost half of '22 and they are good positioned for continued maturation into 2023 and beyond pinch an anticipation that they will beryllium achieving a mid-4s output by nan extremity of nan twelvemonth and generating meaningful accretion fixed that we were capable to fastener successful semipermanent superior astatine exceptional debased rates, including our $1 cardinal enslaved deal, which had a weighted mean output of 2.45% and an mean tenure of 8.4 years.

We entered 2023 pinch 98% of our indebtedness being fixed rate, pinch a weighted mean maturity of conscionable complete 6 years and nett debt-to-EBITDA of 4.3x. We person and will proceed to attraction connected being operationally excellent. We entered 2022 pinch a thesis that businesses that run thin and agile will beryllium champion positioned to win during nan play of economical uncertainty. Our assemblage debased disbursal maturation and separator description successful 2022 and our outlook for 2023 are reflective of that attraction connected operational efficiency.

Such heady times, arsenic we've knowledgeable complete nan past fewer years tin make galore strategies look [indiscernible]. We are seeing nan use of our strategy arsenic our sector-leading portfolio demographics proceed to make unchangeable growth. While secondary and tertiary markets whitethorn make elevated maturation successful roar times, location is accrued consequence and volatility to those rate flows during times of uncertainty, and we judge our attraction connected a high-quality portfolio successful apical markets will make nan astir attractive, semipermanent risk-adjusted returns.

There is nary uncertainty that erstwhile viewed done a humanities lens, 2021, 2022, and successful my opinion, 2023 will beryllium judged among nan champion years for our business. In spite of uncertainty successful nan world, I judge that nan manufacture and Cube specifically are good positioned entering 2023 to nutrient operating metrics supra nan humanities 20-year average. We deliberation this makes america an charismatic action for investors, and we admit our weighted stakeholders' support.

With that, please let maine to move it complete to Tim Martin, our Chief Financial Officer, for further commentary connected nan 4th and connected nan twelvemonth ahead.

Tim Martin

Thanks, Chris. Good morning, everyone. Thanks for taking a fewer minutes retired of your time to walk it pinch us. Piling connected to Chris' commentary, results successful nan 4th fourth reflected a continuation of what we've seen passim nan year, a dependable return to much normal seasonal patterns and wide coagulated operating fundamentals.

Headline results included same-store gross maturation of 9.5%, expenses grew 2.3%, and NOI was -- maturation was astatine 12.1% for nan quarter. Same-store occupancy levels stay very healthy, down 120 ground points compared to past twelvemonth arsenic we expected fixed nan continuing return to much normal seasonality. .

Same-store occupancy averaged 92.8% successful nan 4th fourth and ended nan 4th astatine 92.1%. Our accordant attraction connected managing what we tin power connected nan disbursal broadside showed up successful our results each twelvemonth and nan 4th fourth was nary exception. Same-store disbursal maturation of 2.3% for nan 4th was amended than expected, pinch nan main drivers being continued efficiencies and unit costs, and immoderate bully wins from each nan activity we do to situation our spot taxation assessments crossed nan country.

We reported FFO per stock arsenic adjusted of $0.67 for nan quarter, representing 16% maturation complete past year. During nan quarter, we besides announced a 14% summation successful our quarterly dividend, up to an annualized $1.96 per share. On yesterday's close, that represents a 4.4% dividend yield.

On nan outer maturation front, successful nan 4th quarter, we saw a continuation of what we talked astir past quarter, a slowdown of transaction activity and a deficiency of charismatic opportunities for us. Our squad remains engaged looking to find deals that fresh our exemplary astatine pricing that works.

Our disciplined finance strategy has people resulted successful america being little transactional complete nan past twelvemonth wherever nan return floor plan of disposable opportunities does not meet nan basal risk-adjusted returns required successful today's elevated costs of superior environment. On nan third-party guidance front, we added 28 stores successful nan 4th fourth and ended nan 4th pinch 668 third-party stores nether management.

Our equilibrium expanse position remains beardown arsenic we proceed to attraction connected backing our maturation successful a blimpish mode that's accordant pinch our BBB/Baa2 in installments ratings. As discussed past quarter, successful October, we closed connected a caller expanded revolving in installments facility. The size of nan revolver grew to $850 million, nan maturity was extended to February of 27 and nan pricing improved by 17.5 ground points based connected our existent in installments ratings and leverage levels.

Our blimpish equilibrium expanse and financing strategy has really paid dividends arsenic we entered into nan existent volatile superior marketplace environment. All of our debt, isolated from nan revolver is fixed. So arsenic Chris mentioned, that's only 2% of our outstanding indebtedness was adaptable complaint arsenic we started 2023. We look nary important maturities until November of 2025 and person a weighted mean maturity of 6.3 years.

Our leverage level is very debased astatine 4.3x debt-to-EBITDA, and we person ample capacity and liquidity to finance early maturation opportunities erstwhile charismatic ones coming themselves. Looking forward, specifications of our 2023 net guidance and related assumptions were included successful our merchandise past night. Our 2023 same-store excavation accrued by 73 stores, including 57 stores from nan Storage West portfolio acquisition that we closed successful precocious 2021.

Consistent pinch anterior years, our forecasts are based connected a elaborate asset-by-asset, ground-up attack and see nan effect astatine nan shop level, if any, of competitory caller proviso delivered successful 2021, '22 arsenic good arsenic nan effect of '23 deliveries that will compete pinch our stores.

Embedded successful our same-store expectations for 2023 is nan effect of caller proviso that will compete pinch astir 30% of our same-store portfolio. For context, that 30% is down from 35% of stores impacted by proviso past twelvemonth and down from nan highest of 50% of impacted stores backmost successful 2019. Our FFO guidance does not see nan effect of immoderate speculative acquisition aliases disposition activity arsenic levels of activity and timing are difficult to predict.

Wrapping up, acknowledgment to each of our difficult activity and talented teammates to thief lead america to nan successful execution of our business objectives passim 2022, arsenic a team, we're successful a awesome position to proceed our pursuit of operational excellence and to maximize connected nan opportunities we spot successful 2023. Thanks again for joining america this greeting connected nan call.

At this time, Alicia, why don't we unfastened up nan telephone for immoderate questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first mobility comes from nan statement of Jeff Spector pinch Bank of America.

Jeff Spector

Great. Can we talk about, I guess, what you're seeing done February, Chris and Tim, you're Clearly -- there's a batch of assurance present arsenic you've started '23. Your attack to guidance does look to beryllium a spot different than a mates of your peers. Just trying to fig retired if that's much company-specific, industry-specific aliases again, conscionable recognizing you're not seeing correct now immoderate signposts of recession. .

Chris Marr

Yes. Thanks, Jeff. So I can't remark connected different portfolios aliases really they're viewing their outlook. I deliberation from our user perspective, we proceed to spot beautiful bully signs of strength. I deliberation our portfolio and its construct, nan lengths of enactment proceed to elongate, shape of vacates has been comparatively muted. So we're encouraged by that.

I deliberation nan outlook, obviously, arsenic I said successful my opening remarks, nan outlook arsenic you get past nan 2nd 4th is simply a small spot little certain. We're surely trying to deliberation astir what nan backmost half of nan twelvemonth whitethorn look like. Same situation we had successful in '21 and '22. And I deliberation our guidance ranges seizure nan anticipation of really our user will respond successful nan backmost half of nan year.

I deliberation from a much macro perspective, we don't really do our readying by reasoning astir whether we're going to participate into a recession aliases we're not astatine a macro level. I deliberation we look much astatine really will our user respond passim nan twelvemonth successful position of their request for our product, which, arsenic we each know, is created by a full big of life events that whitethorn aliases whitethorn not person thing to do pinch what nan broader system is doing astatine that time.

So I deliberation our process is simply a bottoms-up process. And I deliberation we've benignant of captured a scope of outlook for nan year. And I think, certainly, I'm judge everybody is looking astatine it to opportunity nan first half is simply a small spot much clear and nan backmost half is simply a small much cloudy, but we consciousness bully astir wherever we are today.

In February and January, nan results were astatine aliases amended than what our expectations were erstwhile we started nan year. So that's encouraging disconnected to a bully start, and we'll spot really nan 4th evolves and really looking guardant to nan opening of nan engaged season, which I deliberation will show america a batch astir really we deliberation nan equilibrium of nan twelvemonth will unfold.

Jeff Spector

That's very helpful. My 2nd question, Chris, tin we excavation successful a small spot much connected your comments astir demographics versus, let's say, tertiary, secondary markets. We get tons of questions connected that, nan value of demographics versus marketplace positioning. Can you talk a small spot much astir what you were referring to successful position of nan spot of your demographics versus, let's say, tertiary, secondary markets? And I guess, are you seeing aliases proceeding of issues successful tertiary aliases secondary?

Chris Marr

Yes. So erstwhile we look astatine semipermanent risk-adjusted returns, markets pinch important populations, little levels of proviso of self-storage connected a quadrate ft per capita basis, bully family incomes and a bully percent of our customers surviving successful rental lodging versus homeownership. Those thin to create a backdrop of unchangeable rate travel complete a longer play of time.

And again, I deliberation you could usage arsenic an example, erstwhile you deliberation astir arsenic we beryllium present coming of our awesome markets, nan marketplace wherever we person beingness occupancy, higher coming than wherever we were astatine this constituent past twelvemonth is nan New York City assets. When you deliberation astir a marketplace that has nett effective rents connected caller customers that are higher than wherever we were astatine this constituent past year, that's New York City.

You tin opposition that pinch immoderate of nan markets successful nan Southwest wherever you're conscionable seeing that displacement arsenic nan COVID request had waned and you're seeing a spot little occupancy than wherever you were past twelvemonth and a spot little [ asking ] rents than we were past year. So I deliberation you past delve into secondary and tertiary and our anticipation is, complete time, they're much susceptible to caller supply, and they're conscionable much volatile markets. And truthful arsenic we expect things to much normalize, I deliberation nan beardown demographic markets will outperform.

Operator

The adjacent mobility comes from nan statement of Michael Goldsmith pinch UBS.

Michael Goldsmith

Digging into New York a small spot much sequentially, nan MSA underperformed nan portfolio mean connected same-store gross growth, but possibly outperformed sequentially connected same-store NOI growth. So arsenic you deliberation astir nan outlook for this marketplace successful nan upcoming year, are you reasoning if this is going to beryllium an outperformer owed to nan stableness of nan marketplace arsenic trends benignant of moderate? Or is location different thought process that you person connected this cardinal MSA for you.

Chris Marr

I deliberation arsenic we look out, I deliberation nan spot of nan New York marketplace is simply a operation of waning proviso impact, nan affirmative demographics, arsenic I answered successful consequence to nan erstwhile mobility create a customer floor plan that is stickier than successful different parts of nan country.

I deliberation you've sewage a bully backdrop successful position of request drivers. And I deliberation nan portfolio is evidently best-in-class and is good positioned to seizure nan request that exists successful that market. So I deliberation it's going to proceed to get better. I deliberation we talked astir connected nan 3rd 4th call, we had a comparatively easy comp successful '21 successful nan 3rd quarter.

So nan 3rd to 4th quarter, flimsy deceleration was not 100% everything we expected it to do. I would opportunity nan portfolio successful Q4 successful nan New York MSA much broadly exceeded our expectations conscionable a bit. So ending connected a precocious note, starting successful a existent bully spot present for January and February and conscionable again deliberation astir arsenic different high-flying markets return to much normalized levels, New York will bubble up to nan apical of our performers.

Michael Goldsmith

That's really helpful. And you benignant of noted that nan percent of your portfolio impacted by proviso is expected to beryllium down 5 percent points this year. Is location a bully benchmark of really -- really overmuch this tin adhd to same-store gross growth? Is that a -- contempt for illustration this 500 ground constituent -- arsenic that moves down, does that construe to 50 aliases 100 ground points of same-store gross growth? And do you person nan number of nan alteration successful proviso impacting your locations successful nan New York Metro.

Chris Marr

Okay. That was a batch to unpack. Let maine way immoderate of these. The effect of that diminution from 35% vulnerability to 30% is difficult to quantify successful immoderate way. When we deliberation astir doing it from a budgetary perspective, it's a range. It tin spell from -- frankly, it's specified a wide range. We person immoderate properties that person nan effect of caller proviso that really outperformed for market, submarket, section marketplace reasons.

And past we person different properties that are much straight impacted. It's mostly besides limited upon nan marque of nan competitor, and their pricing strategy arsenic they effort to lease up assets, truthful that tin person an effect positively aliases negatively. So it's difficult to put a circumstantial number of ground points connected that impact.

When you deliberation astir New York City and -- I'll reply it by conscionable focusing successful connected nan anticipation successful '23, I deliberation by borough, nan Bronx, nan effect of caller proviso has been and is successful nan rearview mirror. We don't expect immoderate of our Cube stores to beryllium impacted by caller proviso successful '23. In Brooklyn, we're getting person to nan end. And I deliberation that's portion of nan communicative of continued betterment passim 2023.

I deliberation there's 1 caller opening successful '23 that will compete pinch an existing Cube. And past Queens, I deliberation we'll proceed to person declining, but location will beryllium an effect successful 2023 connected our stores. I deliberation location are 2 caller openings successful Queens that will -- that we expect to person an effect connected an existing CubeSmart. So arsenic I said successful nan opening remarks, that's really starting to wane and we're very excited astir nan early there.

Operator

The adjacent mobility comes from nan statement of Spenser Allaway pinch Green Street Advisors.

Spenser Allaway

Can you supply a small colour connected what's being underwritten for occupancy astatine some nan precocious and debased extremity of guidance?

Chris Marr

Yes, Spenser, we don't normally, again, surgery grounds guidance -- occupancy rather, is nan output, not nan input. I deliberation we sewage browbeat past twelvemonth into throwing retired a number arsenic to wherever we vanished nan extremity of nan year. And arsenic Tim noted, we hit that by a beautiful bully amount.

So it will depend. I deliberation nan anticipation and for nan caller excavation is that will scope from occupancy being down 150 ground points to what it was successful nan anterior year, and past that will constrictive arsenic we spell passim nan year. And I deliberation we'll extremity nan twelvemonth wrong 50 ground points aliases truthful of wherever we ended successful 2022 connected that caller pool.

Spenser Allaway

And past possibly conscionable circling backmost to proviso again for a second. Maybe without focusing connected NOI expectations, but tin you conscionable remark connected whether location are immoderate markets that guidelines retired arsenic much concerning owed to existent pricing powerfulness successful those markets aliases existent occupancy levels of utilization.

Chris Marr

Yes. I deliberation nan effect of proviso some nan measurement of caller stores and past nan brands of those caller stores and their attack to really they want to lease those stores up will apt we felt nan astir successful our portfolio successful nan greater Philadelphia area, wherever it is, successful fact, sunny coming successful Malvern; nan Washington, D.C. area; and past pockets of Northern Virginia -- I'm sorry, pockets of Northern New Jersey.

Operator

The adjacent mobility comes from Alina Juan Sanabria pinch BMO Capital Markets.

Juan Sanabria

Just wanted to deed connected nan cadence of growth? And is -- should we expect arsenic you study nan quarters that maturation will accelerate aliases decelerate passim nan year? And if you tin remark wrong a subset of that, really New York would fare arsenic portion of that answer.

Chris Marr

Yes. I deliberation for our portfolio and past arsenic you're trying to look at, obviously, rates of growth, truthful comparing to what nan cadence was successful 2022, we would expect that our same-store gross maturation will beryllium astatine its highest successful position of nan maturation successful Q1 and past a dependable deceleration arsenic we spell retired done 2023. .

Obviously, we person nan astir clarity into Q1 and nan slightest clarity into nan Q4 results. So we'll spot really nan engaged play starts retired and progresses here. For New York City, nan wide inclination would beryllium accordant pinch that, conscionable that again, we would expect that marketplace will past extremity up outperforming connected a comparative basis, nan wide excavation arsenic we get into nan backmost half of nan year.

Juan Sanabria

And past I conscionable wanted to move gears to nan investments aliases acquisitions. You sounded a spot much enthusiastic astir opportunities successful your property merchandise -- correct maine if I'm wrong, I don't want to put words successful your mouth. But I guess, what's nan assurance you could put capital? And what types of opportunities are you looking at? Is it much lease-up aliases stabilizing? Any consciousness of nan geographic attraction -- you look to beryllium talking astatine much of your existing coastal markets versus astatine slightest nan Southwest for immoderate of your comments earlier successful nan call.

Tim Martin

Juan, I deliberation from a wherever are we looking, it shouldn't beryllium immoderate surprise. We've been awfully accordant successful nan markets successful which we're looking to turn and grow superior attraction successful many, galore of apical 40 MSA continues to beryllium our attraction successful precocious quality, coagulated demographic markets. I'm not judge that our anticipation of that was included successful our merchandise is optimistic aliases pessimistic.

I deliberation we deliberation it's achievable, but marketplace conditions are awfully volatile retired location arsenic you know. And if 2022 is an indicator, arsenic I judge it is, we expect to beryllium beautiful disciplined. We dream and expect that we'll beryllium capable to find immoderate opportunities present aliases there. But nan guidance scope aliases nan outer maturation number that we put successful nan merchandise is not a elephantine number. It's thing that will beryllium -- nan squad is moving hard.

We're looking for opportunities that fresh our finance strategy, it yields that make consciousness to america comparative to our costs of capital. And our hope, if it's possibly much dream and anticipation is that we'll find a small spot much opportunity to person immoderate outer maturation successful '23 than we did successful '22.

Juan Sanabria

And if I could conscionable sneak other 1 successful here. Can you conscionable remark connected nan thoroughfare rates aliases nett effective rates successful nan 4th fourth and what you've knowledgeable year-to-date?

Chris Marr

Certainly. So nett effective rents for caller customers successful nan 4th fourth were down complete nan aforesaid play successful '21, astir 10%. They were down successful December astir 10%. And for nan period of February arsenic of yesterday, we've been moving down conscionable a small spot beneath 9%.

Operator

The adjacent mobility comes from nan statement of Smedes Rose pinch Citi.

Unidentified Analyst

This is Natty [ph] connected for Smedes. Could you talk a small spot astir nan components of costs increases. How are you reasoning astir labour and benefits increases, spot taxes, different statement items?

Tim Martin

Yes. Thanks for nan question. We proceed to astir apt expect nan astir unit connected operating expenses successful nan security area. Property security renewal for america comes up successful May. We surely expect location to beryllium unit connected spot insurance, astir apt accordant pinch astir of nan existent property industry. We proceed to definitive -- easy for maine to say, we proceed to expect unit connected nan inferior statement point arsenic costs of utilities, electrical state proceed to beryllium higher than inflationary levels. .

I deliberation from a unit costs standpoint, there's surely unit connected wage, but we proceed to person a awesome attraction connected uncovering continued opportunities to thrust efficiencies and separator improvement, chiefly successful that statement point and are doing much pinch little from an ratio standpoint arsenic we unit stores. And truthful that has helped america a batch from an disbursal power standpoint successful 2022, and we expect galore of these initiatives will proceed to carnivore consequence arsenic we get into 2023.

Real property taxes, of course, are an area that are -- it's an atrocious large statement item, and it's difficult to foretell astatine times, but we deliberation that is an area that will proceed to beryllium successful that scope that we've talked astir for respective years successful that 4% to 7% scope of unit connected existent property taxation increases.

Operator

The adjacent mobility comes from nan statement of Todd Thomas pinch KeyBanc Capital Markets.

Todd Thomas

First, I was conscionable wondering. Apologies if I missed this. But are you capable to stock wherever occupancy successful nan portfolio is coming and what that looks for illustration year-over-year from nan caller same-store pool?

Chris Marr

Yes. You didn't miss it. So for nan caller same-store excavation arsenic of yesterday, nan occupancy successful that portfolio is moving astir astatine nan extremity of January, rather, astatine 91.3%, which is down astir 130 ground points from that caller pool's occupancy astatine nan extremity of January 22.

Todd Thomas

Okay. And truthful that's a small spot of a sequential alteration from wherever you are astatine nan extremity of nan year. When is occupancy starting to prime up a small spot astatine this constituent up of nan highest rental season. I cognize nan highest rental play doesn't really statesman for a small spot longer here. But are you starting to spot that uptick successful occupancy and besides successful rents?

Chris Marr

Yes. We haven't really seen nan beginnings of nan rental play yet. February, obviously, still dealing pinch upwind and each sorts of different things. I mean, it's difficult to opportunity that -- I don't deliberation your connection that's sequent -- and it is factually correct that sequentially. That's 10 ground points there. We utilized to person an wholly different -- a beautiful different pool. So it's benignant of apples to oranges.

But yes, and I haven't seen it yet. March, early March, mid-March, I think, is erstwhile we typically commencement to spot nan outpouring moving play commencement to footwear in. I deliberation connected nan rent side, arsenic I deliberation I answered successful nan anterior question, you are starting to spot nan affirmative activity successful rents arsenic we've moved past January.

Todd Thomas

Okay. And past backmost to New York City, I perceive nan comments astir caller proviso diminishing a small bit, having a affirmative effect location connected activity. Can you talk a small spot astir rental complaint to New York City and rental request and what you're expecting successful position of occupancy trends location passim nan year?

Chris Marr

Yes. I deliberation again, nan reply to immoderate anterior question, occupancies are up ground points aliases truthful complete past twelvemonth successful nan New York City aforesaid stores. It's nan only marketplace pinch affirmative occupancy versus anterior year. Rents are up to caller customers, astir 3%, and it's 1 of a mini number.

And I deliberation nan only of nan apical 5 markets wherever we've sewage rents that are successful affirmative spot astatine this constituent comparative to what we were doing successful January and February of '22. So request is beautiful good. Occupancies are good. Vacate shape location continues to beryllium very constructive.

Todd Thomas

Will you beryllium capable to summation rents to existing customers successful nan New York portfolio benignant of an outsized complaint comparative to nan equilibrium of nan portfolio this twelvemonth and besides comparative wrong New York comparative to what you did past year?

Chris Marr

Yes, I'm not judge needfully astatine immoderate higher complaint than what we did successful '22, but I do deliberation comparative to different markets that are seeing a different displacement successful nan measurement organization is moving. I deliberation we person a greater opportunity successful nan municipality markets, New York successful peculiar than we do successful immoderate of those suburban markets. .

Operator

The adjacent mobility comes from nan statement of Keegan Carl pinch Wolfe Research.

Keegan Carl

Maybe first 1 here, conscionable what's your anticipated cadence and magnitude of ECRI passim '23? And really is that going to stack retired [ versus ] what you guys did successful '22.

Chris Marr

Yes. Our process there, I would call, is rather dynamic. So each day, we've sewage a customer successful our portfolio who is having a complaint summation projected to them. So from a cadence perspective, predynamic, Don't expect important change, but we are testing a wide assortment and proceed to of some timing and magnitude passim nan portfolio by market.

In position of nan benignant of wide magnitude of our expectations for those, it will proceed to beryllium supra nan humanities average, but our anticipation embedded successful our guidance is that we would beryllium passing on connected a percent ground little than what we did past year, and I deliberation that's conscionable reflective of nan truth that we're seeing that normalization arsenic we described, of request coming retired of what was incredible, robust '21 and first half of '22.

Keegan Carl

Got it. Maybe shifting to your third-party guidance platform. Just benignant of funny wherever you're seeing request astatine for it coming and benignant of what nan expectations are going forward. I cognize 1 of your peers mentioned that year-to-date, their request is amended than expected. Just funny if you guys are seeing nan same.

Tim Martin

Yes. We person a bully pipeline of imaginable opportunities to adhd caller stores to adhd caller guidance contracts. We're surely continuing to spot a displacement that arsenic a percent of those, a small spot little successful -- by measurement of caller developments arsenic I deliberation nan improvement rhythm gets a small further distant from nan peak. .

But we person a precocious level of liking from a number of third-party owners who are looking for america to beryllium capable to travel successful and adhd our level to thief create worth for their retention property. I deliberation what we besides expect to spot successful 2023, which is simply a small spot of a consequence of earlier commentary connected nan transaction marketplace is, we do expect to spot little churn successful nan portfolio arsenic location are conscionable less income of properties going on. So possibly stores that are connected our guidance level we'll enactment connected our level a small spot longer arsenic nan transaction marketplace has cooled disconnected a bit.

Operator

The adjacent mobility comes from nan statement of Steve Sakwa pinch Evercore.

Steve Sakwa

Just circling backmost connected nan transaction market. Chris, tin you possibly conscionable talk astir wherever nan bid-ask dispersed is today? How has pricing changed? And I guess, really adjacent do you deliberation you are to uncovering sellers consenting to judge what are presumably higher expected yields from nationalist companies specified arsenic yourself?

Tim Martin

Steve, it's Tim. Yes. I deliberation location are conscionable less wide transactions successful nan marketplace correct now and nan -- and of nan deals that are retired there, nan deed complaint connected really galore of those are closing and being capable to span that spread betwixt purchaser and seller expectations. It's a small spot cloudy. Certainly, a full different world coming than it was backmost surely successful 2021.

And we thin to find ourselves from wherever we judge things that trade. Often, we're disconnected by 15% to 20% connected galore deals that trade. And it's difficult to cognize for judge whether that's nan nonstop correct number. It's besides difficult to cognize what's driving that. Is that a quality successful nan measurement somebody's underwriting expectations for that peculiar opportunity comparative to nan measurement we're underwriting expectations? Is it a quality successful their costs of superior aliases return expectations comparative to ours, really difficult for america to triangulate done each that.

And past harvester it pinch -- from our perspective, nan things that person been successful nan market, frankly, conscionable haven't been connected mean of arsenic precocious value arsenic nan opportunities that person presented themselves successful a mates of years that preceded nan past 12 to 18 months. So it's a operation of a batch of things that led to america being reasonably debased connected our finance opportunities successful 2022, whereas I mentioned earlier, we're hopeful that we commencement to spot immoderate things that fresh our strategy and tin find those opportunities astatine pricing that makes consciousness to america comparative to our costs of capital.

Steve Sakwa

Okay. And past possibly conscionable circling back, I cognize location was a mobility connected disbursal growth. And Chris, you talked -- touched a small spot connected nan worker side. But I'm conscionable curious, from a technological position and arsenic you benignant of usage much technology, I guess, really overmuch much costs savings aliases FTE savings do you benignant of get astatine nan spot from present going forward. .

Chris Marr

Yes. That's nan evolving question. I deliberation it relates connected some sides. What and really does nan user of our product, what do they want to usage and really do they want to beryllium engaged with. And we are doing an atrocious batch of activity and an atrocious batch of testing to fig retired that balance.

It's not surprising, and it's not needfully wholly demographically related, but there's a information of our customers who are wholly comfortable pinch a self-service model, nary different than our kids texting from upstairs asking what clip meal is. And there's a conception of our organization who perfectly want that in-person work and want to cognize that there's a shop squad made disposable to assistance them pinch their retention needs. And to effort to find that equilibrium is what we've been really focused successful on, and it's a operation of video, it's a operation of chat and it's utilizing smart rental much efficiently.

So we're going to proceed to navigate done that. To date, we've been capable to find immoderate really bully operational efficiencies done nan testing that we've done, and we're conscionable going to proceed to onslaught that present successful 2023. I conscionable don't deliberation our exemplary ever ends up being 1 wherever it's wholly self-service. I don't deliberation we ever extremity up successful a exemplary wherever it's wholly an in-person shop teammate. I deliberation ultimately, it will alteration by marketplace and by spot and we'll find that balance. I deliberation there's still bully opportunity though for america to proceed to beryllium much efficient.

Operator

The adjacent mobility comes from nan statement of Ki Bin Kim pinch Truist.

Ki Bin Kim

Just a mates of questions connected nan disbursal front. In 4Q, your unit expenses were down 9%. I'm funny if that's an efficiency-driven type of metric? Or were you conscionable not afloat staffed? I'm conscionable trying to understand benignant of nan guardant way for that statement item?

Tim Martin

Yes. I wouldn't overread into that being a guardant way that has a small spot to do pinch nan comp rumor from past year. So I deliberation it's little to do pinch what we were doing this twelvemonth and a small spot much to do pinch what we were doing past twelvemonth and creating an easier comp.

Ki Bin Kim

Okay. And your disbursal maturation successful 2023 was only 3%, beating your guidance and moreover for 2023, your disbursal guidance is little than your peers. So I'm funny if you deliberation that's a small spot of a geographic-driven item? Or going backmost to your different comments, is it different things you're moving connected that are keeping those expenses lower.

Chris Marr

Ki Bin, it's Chris. I can't remark connected what our peers are doing. You person to inquire them for what their attraction is. But backmost to my opening comments, we had a thesis astatine nan opening of '22 that those companies that focusing connected operational excellence, being thin and agile are going to beryllium champion positioned to navigate done uncertain economical times. And institutionally, we had a keen attraction connected conscionable doing things much efficiently, operating smarter.

And I deliberation you harvester that pinch nan reply to nan erstwhile mobility successful position of really do you deliberation astir -- really do you deliberation astir really nan customer wants to beryllium served. And I deliberation we recovered ways to proceed to beryllium arsenic thin arsenic we perchance can. I deliberation we've sewage immoderate continued possibilities location successful 2023, we will -- arsenic we ever do, we will trial and effort a assortment of different techniques. And immoderate of them will work, immoderate of them will not, we'll study and study from those that don't and move on. So it's -- for us, it's conscionable a focus. And if you attraction connected thing put nan correct group connected it, you tin do awesome things.

Ki Bin Kim

And your repairs and attraction expenses successful your same-store excavation relationship for astir 1% of full revenues. That's astatine nan little extremity erstwhile I look astatine immoderate different competitors that mightiness beryllium arsenic precocious arsenic 3%. I'm funny if that's for illustration a weather-driven snowfall removal costs driven type of point aliases immoderate different things that you've been moving on?

Chris Marr

Yes. Again, don't person immoderate thought what -- really to reply what different folks do. You'd person to inquire them why theirs is, and I'm judge they'll thief you out. From our perspective, we return -- we person awesome properties, obviously, best-in-class successful our industry. We return awesome attraction of them. And truthful erstwhile things request to beryllium repaired, we repair them instantly and possibly that saves america from having to incur incremental costs complete nan longer word by trying to disregard those day-to-day things.

So it's ever been a constituent of focus. Our installation services squad is world-class. And obviously, we judge successful providing our customer pinch an fantabulous merchandise and portion of being an fantabulous merchandise is making judge you're maintaining your stores successful nan champion measurement possible.

Operator

The past mobility comes from nan statement of Mike Mueller pinch JPMorgan.

Mike Mueller

Chris, I conjecture your remark earlier connected astir New York capacity being a small spot amended than nan portfolio average. I guess, was that much of a 2023 remark arsenic you move done 2023? Or is that intended to beryllium a small spot much of a multiyear outlook for nan adjacent fewer years?

Chris Marr

The backmost half of 2023, nan boroughs, arsenic I said successful nan opening comments, I deliberation will outperform. And I deliberation that, again, successful our anticipation for a much normalized situation versus what we saw successful '21 successful nan first mates of months of '22, I deliberation nan debased beta, high-quality demographic markets, nan much municipality markets will thin to outperform immoderate of nan markets that saw awesome capacity successful '21 and into nan opening of '22.

Mike Mueller

Got it. Okay. And past -- past question. You person a mates of developments coming online opening of adjacent year. Can you talk astir nan pipeline? Are we apt to spot immoderate starts this year? How do you deliberation that will evolve?

Tim Martin

Mike, it's Tim. It's an area that we look at. And if you look historically, our improvement pipeline has been very focused connected conscionable a fistful of markets. And nan markets that we person been focused connected person seen a adjacent magnitude of -- person seen a adjacent magnitude of caller supply, and we deliberation that caller proviso will proceed to diminish.

We are focused though connected trying to find opportunities that are awesome infill locations for america that are complementary to our existing portfolio wherever location is simply a request aliases a pouch truthful that we tin grow and heighten an already ascendant position successful nan fistful of markets that we've developed successful nan past.

So difficult to foretell whether we'll beryllium capable to find opportunities to adhd to nan improvement pipeline. But clearly, it's tapered disconnected present complete nan past respective years. but we don't expect it to taper disconnected to 0. We're looking for opportunities, and you shouldn't beryllium amazed to spot a mates of projects popular up connected that database arsenic nan twelvemonth plays out.

Operator

There are nary further questions registered. So astatine this time, I'll walk nan convention backmost to guidance squad for closing remarks.

Chris Marr

Thank you, everyone, for joining america today. Our high-quality properties, equilibrium expanse people, an manufacture that is conscionable simply awesome and nan awesome teams that we person serving our customers and our stores passim nan state person america good positioned for 2023. We look guardant to different successful year. We admit your continued support and look guardant to speaking to galore of you complete nan coming weeks and months. Thanks for your participation.

Operator

That concludes today's convention call. Thank you for your participation. You whitethorn now disconnect your lines.