Public Storage (PSA) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Third Quarter 2017 Earnings Call. (Operator Instructions) Thank you. I would now like to turn the conference over to Mr. Clem Teng. You may begin your conference.

Thank you, and thank you, all, for joining us for our third quarter earnings call. Here with me today are Ron Havner and John Reyes.

Before we begin, I want to remind those on the call that all statements other than statements of historical facts included in this conference call are forward-looking statements, subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in today's earnings press release and in our reports filed with the SEC. All forward-looking statements speak only as of today, October 26, 2017, and we assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

A reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. You can find our press release, SEC reports and audio webcast replay of this conference call on our website at publicstorage.com.

Now I'll turn the call over to Ron.

Thank you, Clem. We had another solid quarter and challenges with a few hurricanes, but overall, a solid quarter. Operator, let's open it up for questions.

(Operator Instructions) And your first question comes from the line of Gaurav Mehta with Cantor Fitzgerald.

I was wondering if you could comment on your views on rent growth versus occupancy at this point in the cycle? How you're thinking about pushing rents and occupancy?

This is John. So our rent growth during the quarter, our move-in volume was down, let me start with that, about 3.5%, and the take rate was down about 3%, but there's very little room to really push rental rates at the moment because demand still remains very soft throughout the country for us. We also have negative occupancy spread that continued to grow through the quarter through the end of the year -- excuse me, through the end of the quarter. So I don't really see as we move forward into the fourth quarter that we're going to see a lot of traction on pushing street rates that lease over the next 3 to 4 months probably, and that's my best guess.

I'll just add to that, that, again, this quarter, across all of our top 20 markets, revenue growth, the rate of revenue growth was down year-over-year, so we're not seeing any markets with accelerating rates of revenue growth. All 20 were down. I think that's the third or fourth quarter in a row.

Okay. And as a follow-up on the expense side, it looks like your ad and selling expense was down for the quarter. Does that mean that you spent less on promotion and discounting?

We did spend less on promotional discounts, but on the expense side, it's really television. If you'll recall, in Q2, our TV spend accelerated and we commented that we didn't think the TV that we did was very effective and so we did not spend any TV in Q3. So that's really the big swing. We increased our Internet spend, so net-net, in that numbers, an increase in Internet spend and a decrease in television.

And your next question comes from the line of Smedes Rose with Citi.

Just to kind of follow up on that, on your second quarter call, you talked about, I think, you used the word experimenting a little bit, with pulling back on the advertising and having some significant rate cuts across a number of your markets. So are you -- given the more competitive environment, I guess, that you're in, were you pleased with the results that you saw in the third quarter? And is that something you would continue to do going forward now?

Well, in particular one market, we ran a pretty aggressive price reduction in Q3 in terms of rate reduction versus last year. And we were a little disappointed. We did not get a corresponding change in move-in volume to offset the change in price reduction. Overall, that's not true, but as John touched on earlier, there's not a lot of pricing power across the platform.

Okay. And then, could you just talk here a little bit on what you saw in the hurricane-impacted markets, I guess, in parts of Florida, and then, your properties in Houston in terms of increased occupancy or the ability to price up there? Or would you be more sensitive with customers that came in because of the hurricanes in terms of price -- increasing your prices on them? Or maybe just some color around the strategy there.

Sure. With respect to Houston where we saw the biggest impact, no, we did not increase prices. We're very careful about that. So no, we did not. We did see an over 100% increase in move-in volume across Houston, which was -- which is welcome given the way Houston has been performing, so we had a nice uptick in move-in volume. Florida, some markets up, some markets flat, but in all of our Florida markets, in terms of revenue growth for the quarter, Miami was one of the worst in terms of revenue growth down, the rate of growth down 7.1%; Tampa, down 7%; and West Palm, down 5.7%. So not as much benefit in the Florida market as we got in Houston.

And your next question comes from Ryan Burke with Green Street Advisors.

Ron, just continuing with the hurricane impact, I guess, particularly in Houston, given the benefit there, at some point in time, that temporary fill from hurricane-related occupancy becomes a drag, is that 12 months out? Is that 24 months out? How long do these customers typically stay?

Yes, Ryan, generally, we see an uptick in activity for about 12 to 18 months. And then, to your point, it becomes a headwind because activity normalizes, and so then you're up against tough comps. So assuming these customers stay for the norm, I'll call it, if there's a normal hurricane, certainly, Harvey in Houston was not a normal hurricane, but assuming what we've historically seen, they'll be there for 12 to 18 months so that'll give us a lift. The comps obviously will be easier going into '18 in Houston than they were in '17, but those will certainly give it a slight uplift.

Okay. And I'm going back in time a bit here, Ron, but back in 2005, when you were talking about Florida hurricanes on 1 to 2 earnings calls, you didn't foresee much benefit. Your view at that time was that occupancy was already pretty high and that it remained high sort of during and after the hurricanes. Fast-forward to the end of that year, end of 2005, and I think, NOI growth in those Florida properties were something like 20% when the same-store was doing something like 7%, so it ended up being a real benefit, but besides the fact that occupancy there, or the starting point of occupancy now is higher than it was back then, what was different enough this time about Florida for your properties not to fill up as much as you might have thought?

Well, if you recall, in 2005, we had 3 hurricanes through Florida, so, so far, knock on wood, we've only had really 1. And last time, it really impacted, if I recall, our Orlando markets and kind of north of Miami, Fort Lauderdale, that area. So we have more properties in Florida this time, but the severity and the fact that there's been 1 versus 3 is, I think, the biggest difference versus 2005.

Your next question comes from the line of Nick Yulico with UBS.

Ron, hoping to get your latest thoughts on the supply landscape, which market, submarkets you're operating in are seeing the most impact? And is the pressure, meaning, the sort of the visible pipeline supplying your markets, is that -- has that been increasing this year?

Again, there's not good stats on what is supply and we really focus on properties near us. I would say that we talked about Houston, pre-hurricane supply, Dallas has got supply, if you look at the markets that had meaningful degradation in occupancy, Q3 '17 versus Q3 '16, Charlotte's down 1.8%, Miami's down 1.8%, Portland's down 1.6%, Chicago's down 1.6%, Dallas is down 1.6%, Atlanta's down 1.5%, Denver's down 1.3%. All of those markets, we've seen a meaningful increase in supply in those markets. You take Portland, we've been told there's 30 properties under consideration to be developed in that market, which is a big uptick in supply. Denver, we've been saying quarter after quarter, big uptick in supply and we still see 30 or 40 more properties coming in that market. So I'm hoping, given the slowdown in rental rates, or in occupancy and rental rates and reduction in pricing power that, that will create some kind of headwind for people to put developments on hold or simply abandon doing them. Certainly, the tone has changed with respect to developing properties and gaining 4%, 5% rate increases in revenue, quick fill up and all that kind of stuff. So I think, it's going to be -- we'll have pretty meaningful uptick in supply this year. I don't know about next year, but even if we have a meaningful reduction next year, it's going to be a couple of years as these properties fill up.

That's helpful. And then, I was hoping to get the move-in versus move-out rate delta, which you usually provide in the Q and K. And also, just to get a feel for that impact, that's been an impact, I guess, in the last year in move-in, move-out delta changing. How is that playing out this year? And how -- at some point, when is the timing issue where some of that negative impact perhaps eases?

This is John. It's starting to ease a little bit now if you look at Q3 versus Q2. Wherein Q3, people were moving in with average monthly rates of about $131 for this quarter, and they were moving out at about $143. So there's about a $12 negative delta there. Last year, for the same quarter, it was $135 move-in, $143 move-out, that's about $8. So we're down about $4 -- call it about $4. In the second quarter, we were down about $8 differential, so it's narrowing, but it's still a negative. And when will that turn positive, or at least neutralize? It's difficult to say.

And your next question comes from the line of Andrew Rosivach with Goldman Sachs.

You're the first storage REIT to report, so potentially, others may have a similar trend in same-store, but if you look at least through 2Q, your same-store revenues have been under a couple of competitors, CUBE and EXR really now for years, so I'm just wondering, I don't know if you've ever thought about it, for best practices, or for competitive spirit, have you ever looked into why there's been a gap between you and the other large competitors?

Well, there's 2 big reasons. One is difference in the way we report same-store versus the way they report same-store, and two, market mix.

Do you think there are particular markets that are dragging you down versus the broader market?

Well, if you -- and you can see this in the Q, you can see which markets have greater headwinds. I just touched on Florida, Charlotte, Dallas, Houston, Denver. Those were all markets that have pretty significant headwinds for us. I don't know the exact market mix of EXR relative to us in those markets. I know CUBE is much greater concentrated in the Northeast, in particular, in New York. While there's anticipated a lot of new supply in New York, our occupancy in New York was only down 10 basis points year-over-year, and our revenue growth, the rate of revenue growth was only down 40 basis points year-over-year. So in terms of rate of change in revenue growth, New York was the best in Q3 of all of our top markets.

And your next question comes from the line of Jeremy Metz with BMO Capital Markets.

I just want to go back to Houston, some of the hurricane impact quickly and just think about the supply picture there. Just, Ron, given your experience through seeing this stuff before, do you think this -- what's going down there will actually squash out some of that supply or is it more likely to possibly just delay it further down the road here?

Jeremy, I don't know because -- in terms of what guys are going to do because there's certainly been an uptick in demand. And the properties, I think, we delivered 4 properties in Houston in Q3, and 1 of them, we delivered mid-July and it's already 60% occupied. So in terms of new development, our timing couldn't have been better for those deliveries in July. But depending on do they get flooded? Did they have -- were they halfway out of the ground? Did their property get water-damaged and all that, that may impact their decision to build or not to build.

Okay. And John, just one for you on the balance sheet in terms of the bond offering, the cash buildup we saw, you can more than fund your current pipeline with retained cash, so how should we think about redeployment from here? Is there anything in the pipeline? Or should we just kind of think of the cash there to be opportunistic if something does shake free?

Well, in terms of pipeline, I think, we disclosed everything in the press release of what our development pipeline is and our acquisition commitments are. Other than that, we don't have anything else specifically earmarked for that. There are some preferreds that are callable, but we haven't made the decision whether to call them or redeem them yet. So we'll look for probably some opportunistic uses of the cash that we're currently sitting on.

And your next question comes from the line of David Corak with FBR.

Not to harp on the hurricane too much, but I just wanted touch on it real quick. I realized that it might be difficult to exactly quantify how much benefit you got from the hurricanes during 3Q, but do you have a sense as to what maybe overall same-store numbers would have been excluding the hurricane? Even if you can just say actuals versus your budget?

Well, I don't think it was a net benefit. In fact, we wrote off a fair amount of rent, fees, late charges. We held back rental rate increases to customers, both in Houston and in Florida. So if you put all that together, excluding the 7 properties or 8 properties that we shut down, our revenue in Q -- in September, basically Q3, was down about $1.5 million.

Okay. That's helpful, and...

We won't really see the benefit of the move-in, I don't think, really, until we get to Q4, assuming those customers stay.

Right. Makes sense. Okay. And then, turning to expenses, how do you think property taxes will trend next year versus this year's kind of 4.5% level? And then, overall, should we expect kind of normal levels or are we at a pretty good run rate for expense growth in the quarter.

Just talking to our property tax guy before I walked into this room, and I think, we're still expecting for 2018, and it's still early, but we're still probably expecting 4.5% to 5% increase, which is kind of what we've been experiencing over the past 3 years or so. So we think that'll be probably fairly consistent going into 2018.

And your next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

Ron, your comments about a lack of pricing power, just curious, you've been taking down rate and increasing discounting and promotions, what do you attribute the decrease in move-ins to? Is there anything that you can point to on the softer demand?

Well, a couple of quarters ago, I touched on what I thought might be some macroeconomic factors. I would just add to that, the rate of both employment in -- kind of look at that in 2 ways, both the rate of growth in employment has slowed, while there's -- while we're at low unemployment. The needle is not really moving materially lower in most markets, so the rate of change in employment hasn't really moved very much. And that, to me, would be an indicator of activity. As people get more jobs, they do more things. But once everyone's employed, the kind of the activity level has slowed. And then, two, the other big headwind is new development. I started seeing in 2015, things are probably peaking, and developments will create headwinds for pricing power, and we are here in 2017 and, in fact, development has accelerated and it is creating a headwind for pricing power. Markets where we have not seen a material level of development such as L.A., San Francisco, Seattle, but we have modest pricing power, we don't have the headwinds that we have in markets where there's a material amount of new supply, Charlotte, Denver, Houston, Dallas, all the ones I named.

Okay. And then, in terms of acquisitions, I guess, you continue to chip away here, but John, your comments about being opportunistic with the cash on the balance sheet, just curious if you could comment on that a little bit further.

There's not much to comment on. I mean, we've got about $400 million to spend on our current development line -- development pipeline over the next 12 months. And at quarter end, we had $30 million or $50 million of acquisitions. We'll probably have a few more in the quarter. So if you just take that cash right there, that's almost $0.5 billion.

Is there -- what's your interest level like to expand in New York City, in Manhattan today? Is that something that you'd like to increase your exposure to? Is that a market that you'd like to increase your exposure to if you had the opportunity?

We're open to every market. It really depends on the opportunity, what's the price per pound for the property, competition ratio, the demographics. New York's like any other market. We'd be happy to grow into New York, if it was the right opportunity.

And your next question comes from the line of Juan Sanabria with Bank of America.

Just curious if the period-end data points that you previously pointed to being an indicator of kind of the next quarter's performance, if that was in any way, positively or negatively affected by the hurricanes? I'm not sure if those numbers were scrubbed from the properties that were taken out of the same-store pool?

If you look at the end of Q2, occupancy was down 70 basis -- period end, 70 basis points. In-place rents, we're up 3.6%. And so you would have expected same-store revenue growth of 2.8%, 2.9%. I think, we came in at closer to 2 6. And most of that difference, 2.6% to 2.9%, is attributable to the write-off of rents and delays of fee -- rental rate increases for the hurricane impact to properties. So going into Q3, occupancy is down 110 basis points, in-place rents are up 270 basis points. So you're looking at a 1.6% increase in place heading into Q4.

That 1.6%, is it necessarily being impacted by the hurricane delays in rent increases or not? Sorry. Or that was third quarter?

It didn't have an impact in Q4 from the delay of rental rate increases of, I think, about $0.5 million.

Okay. And then, just a question on the demand side. Are you seeing any kind of offsetting benefit, particularly in some of the more urban areas from a pick up in business demand, whether it relates to e-commerce or not?

We haven't really -- this is John. We haven't really looked at it in that fashion, so we couldn't really say.

(Operator Instructions) And your next question comes from the line of Gwen Clark with Evercore ISI.

I know you gave us some occupancy sales stats earlier on, but can you talk about the revenue and NOI growth within your top markets?

Gwen, this is John again. So let me start with the revenue growth first. So Los Angeles, which is our, by far, our largest market, for the quarter, was up 5.3%; San Francisco, 3.6%; New York, 2.6%; Chicago was down about 2.8%; Washington D.C. was up 0.9%; Miami was down 1%; Atlanta was up 1%; Seattle was up 4.2%; Houston was down 3.5%; and Dallas was at -- was a positive, but it's only 0.2%. Those are our top 10 markets and that's with respect to revenue growth. On the NOI growth, Los Angeles was up 6.3%; San Francisco, 4.3%; New York, 2.3%; Chicago, down 2.7%; Washington D.C. was down 0.1%; Miami, down 3.1%; Atlanta, up 5.1%; Seattle, up 4.3%; Houston, down 5.8%; and Dallas was down 1.8%.

Okay. That's helpful. So I was just hoping to go into the L.A. and SF trends. They are decelerating despite what seems like limited new supply. Can you talk about what you think might be going on there in terms of pricing power?

I think, Los Angeles, for us, is really -- the deceleration is really more of a year-over-year comp issue. It's not a market that we're seeing a lot of new supply. So I think, our move-in rates are probably flat to slightly up and we've got pretty good move-in volume, pretty good occupancy. Los Angeles, given its size, is one of our best-performing markets. It represents about 15% -- 16% of our revenue. It's a good market for us.

Okay. And then, just really quickly, can you talk about street rent trends within the West Coast markets and the Texas one?

I don't know the numbers off of my head. I could just, intuitively, the West Coast street rates are probably up year-over-year. Texas is down year-over-year.

Do you know if the negative growth rate in Texas have improved at all because of the hurricane?

Well, we're -- as Ron mentioned, we were running a test in one of the markets, and the market that we were running that test in happened to be Houston, so -- but then when the hurricane hit, that kind of threw a monkey wrench into a lot of things we're retailing, so the rents are kind of a little wacky down there, but nonetheless, they're not really up year-over-year, even if you account for the uplift in demand in Houston. We really can't jack up our rents during a natural disaster such as that, so we kept the rents in check.

And your next question comes from the line of Ki Bin Kim with SunTrust.

Going back to the acquisitions topic. What is your current appetite for larger portfolio deals given some of the slowdown we've seen in fundamentals? Do you think it's like the right time to buy? And of course, is a bid-ask spread close to what you think is realistic?

Is your question really like what is the acquisition environment? Or what are we interested in doing?

Both.

Okay. Well, the environment, acquisition activity, velocity of transactions is below demonstrably from last year. A couple of reasons. I think, the bid-ask spread has widened, and I think, it continues to widen as forward growth projections come down by buyers and sellers continue to hope for 2016 pricing, so that's one. Two, in terms of what we would be willing to do, same answer I gave on New York. We're interested in 1 property or 100 properties. It simply depends on the quality of the assets, the price per foot, where the rents are, what the competition ratio is, all those things that we evaluate on 1 property, we do on 100 properties.

Okay. And you guys obviously tested the unsecured debt market this time, this quarter. Given the favorable response, just curious, your appetite to do more of it? And at any given moment, how much expansion capital and sort growth capital do you think you can raise today, including debt or preferred?

We have tremendous amount of capacity to raise capital, either debt or preferred. And whether we use debt or not, it really depends on what the opportunity -- A, how much money we need, use of proceeds and what's happening in other capital markets. So up until September, we've been tapping the preferred market. When rates are at 4.90% to 5.10% in the preferred market, we'll probably go to that side of the market versus the debt market. And when you go to the debt market, you need to raise $400 million to $500 million, so you need a pretty meaningful use of proceeds. Do you have anything to add, John?

And I guess, debt question there, how much do you think you can raise without -- where you really feel comfortable with the leverage ratios of the company?

A lot.

And your next question comes from Vikram Malhotra with Morgan Stanley.

I just wanted to follow up on the estimated same-store revenue, the 1 6 you referred to, John. Just sort of, adding your comments or taking your comments about property taxes, I'm assuming sort of a more normalized expense rate is sort of in the 2% to 3% range. Do you envision sort of then, therefore, using that math, same-store NOI potentially trending down, maybe stabilizing somewhere sub 1%?

Well, that -- doing your math, that would certainly indicate, if revenues at 1.5% to 2%, and if expenses are at 1.5% to 2% or 2.5%, the math is, yes, 1% to 2% NOI growth. One thing you need to keep in mind, as we kind of rent roll down here and have all the occupancies, but don't have much -- haven't had much pricing power of late, is that the comps will get easier. And one of the things we've continued to try to express to people is that 2017 is coming off some really exceptional comps in 2016 and '15. Certainly, I touched on Houston earlier. Certainly, the comps for Houston in 2018 will be much easier than they were here in 2017.

Okay. And then just to follow up on a prior question. Just tactically, going in 4Q and maybe 1Q, are you considering any specific tests or strategies like you did with Houston in the prior quarter, any sort of tests that you're planning to run, you can share any color with us?

There's nothing in the works right now. So I think, we'll just continue, marketing-wise, we'll continue to spend more probably on the Internet. I think, we did a little television in the fourth quarter of last year. We probably will forego that this year and divert those funds into the Internet. But other than that, there's nothing really new that we're going to be testing at the moment.

And your next question comes from the line of Michael Mueller with JPMorgan.

First, going into your comments about development, when we look at your pipeline, you've had about $500 million to $600-plus million in process for some time for probably a couple of years at this point. As you look forward over the next year or so, do you expect any meaningful, I guess, shrinkage to that pipeline? Or do you think you're going to be at that same level?

Yes, Mike, we ended last year at $660 million, but I think, that was up $100 million, $150 million from the beginning of '16. You're right, we've been running about $600 million. I see that continuing for probably the next 12 to 18 months, at least.

Got it. Okay. And going to NOI growth, looking at the expense lines, it looks like year-over-year expense growth was down meaningfully compared to prior quarters, almost across the board. And I know you touched on ad spending, but when you look at the summed up quarter here, does it feel a little bit more like an anomaly or a little bit more like more normalized go forward level?

Well, utilities are down 2.9%. Year-to-date, they're down 1%. It's obviously been benefiting from lower oil prices. That comp could get a little tougher next year. Snow removal is -- snow removal depends on the weather. The big swings really were in the advertising. Year-to-date, television is up, but Q3 is down. And as John just touched on, we did Q4 television last year. We probably won't do that this year, although the Internet spend will be up, but my guess is the advertising line will be down in Q4. The other items, there's an item here or an item there, but 2 -- it's roughly 2% or 3% is what I would expect in terms of expense growth.

And your next question comes from George Hoglund with Jefferies.

Just one question, in terms of the New York, it sounds like New York might have been a little bit better than expected. Any kind of comments you can give on trends in New York and how that's faring relative to expectations? And well, how you feel the market is going forward?

Well, New York's been bouncing around a couple of percent. Revenue growth hasn't been strong, but it hasn't been meaningfully weak. We've done some management changes in New York over the last year, 1.5 years.

(technical difficulty)

Texas markets.

(Operator Instructions) And you do have a question from the line of Smedes Rose with Citi.

It's Michael Bilerman here with Smedes. Ron or John, just thinking about the cadence of occupancy throughout the quarter, if I think back to last year in the fourth quarter, you effectively maintained most of the occupancy from where you started, so you started the quarter at 94.2%, and you averaged 93.8% for the fourth quarter of last year. You're coming in, as you said, down 110 basis points at 93.2%. I assume there's some rounding going on there. How should we expect that trend line? And certainly, how is it today relative to last year to know whether that spread compresses or whether it expands?

I think, as of a few days ago that I've looked at the occupancy spread, our occupancy spread, that negative spread has narrowed quite a bit, so that 1.1% negative spread that we had at the end of the quarter, as of a few days ago, that narrowed to about 50 basis points, so cut in half.

And so when you threw out the math, down 110, plus 2.70% you did in place, getting to 1.6%, there's a possibility if the 50 basis points hold, that same-store revenue growth could be an excess, and certainly taking into account, Ron, your comments that '16 already saw a deceleration from '15, which is a record occupancy year, the comps for '17 certainly look better from that respect?

Yes. And Michael, you can be assured that we are working every day to try to narrow the occupancy spread and drive revenue growth.

Well, I guess, the question is how aggressive you're going to be on rate and discounts, which would offset the gain in occupancy?

Well, Michael, again, we're not -- we've said this before, we're not just occupancy-driven. I mean, occupancy is just 1 leg of revenue growth. So we're trying to balance the occupancy as best we can with rates and discounting. Looking at length of stay, looking at rate increases to existing tenants and how sticky that still remains, we want to make sure we're not disrupting the apple cart because those tenants that have been here for more than a year are very important and a significant part of our revenue growth in the past and going forward. So there's a lot of components in there. I mean, if all I wanted to do is narrow occupancy, that's -- dare I say, it's kind of easy to do, but it's not, and that may not be the best thing to maintain the revenue growth we can get.

Right. But at the same token, you said earlier, in that one market, you dropped rates significantly and it didn't drive the move-in volumes to what you thought.

It didn't, and I would say that, that's a special market. I mean, we've all been talking about Houston for a while now, but I would be willing to bet if I did something like that in San Francisco, Los Angeles, I'd be almost 99% occupied.

Line out the door. Can you elaborate just a little bit on the rate increases just in tenants? Sort of what levels those are going out at? What's the take rate on those, in terms of acceptance versus negotiations? Just a little bit more color around that aspect of the revenue stream.

We continue to send out increases to the existing tenant base, albeit Ron touched upon the 2 markets, the Houston market as well as all the Florida markets where we deferred increases. We will probably not pick them back up until December, so we're going to forgo those -- that benefit of increases. It'll be a negative hit for us in the fourth quarter. Ron mentioned it's about $0.5 million drag, irrespective of those 2, I would say, markets, the rest of the markets, we're continuing to send them out just like normal. We haven't seen a degradation in the length of stay or an uptick in move-out activity. The percentage of monthly increase that have been -- that are being given are very consistent with last year.

Last question, just on Europe. You want to just give an update as to where things stand today in terms of performance and overall sort of direction of how you see your holding evolving there?

Sure, Michael. Europe, for the quarter, same-store revenue growth was up 2.2%, NOI was up 1.3%. We had an uptick in expenses, both in advertising and R&M during the quarter, so expenses were a bit above trend line at 3.7%. Occupancy is 90.8%, basically the same year-over-year. Last year was 91.1%. And in-place rents are up 2.3%. That's on the same-store pool, continue to benefit from the acquisitions, filling up of those in both Holland and Germany and a couple we did in France. They're all filling up nicely. And in Europe, we've been ramping up our development and so we have about an $80 million development pipeline that should be invested over the next 12 to 18 months, properties mainly in Germany and London.

And your next question comes from the line of Juan Sanabria with Bank of America.

Just hoping you could talk about street rates and how that trended year-over-year throughout the third quarter and into the fourth?

I don't have that data handy. I mean, what I mentioned was what the move-in rate was because it's, to me, that's the more important data point of what people are actually taking and moving in is additive to our revenue growth. And as I mentioned earlier, the take rate was down about 3% during the quarter versus the same quarter of last year. I would suspect that our street rates were probably down about similar amounts.

Okay. And then, on the acquisition side, hoping you could talk to kind of what kind of cap rates you'd be comfortable underwriting on a stabilized basis for primary and secondary markets?

I can give you general numbers. It really depends on the market, the submarket, quality of the asset, the competition ratio, demographics, a whole variety of factors. I think, what we've been seeing is, in general, we're developing to 8% to 9% yields, and acquisition, 6 to 7s.

And your next question comes from the line of Jonathan Hughes with Raymond James.

I think, I heard this right earlier, but sounded like Chicago and Miami, saw outsized expense growth in the quarter, and I'm guessing that was due to tax hikes, do you see this headwind continuing into 2018, or you see it coming down to maybe low single-digit increases?

In tax hikes or overall expenses?

Tax.

I think, you're right. Your point about taxes is driving up some of the expense growth in those markets is probably true. Some of those markets have been fairly aggressive. Will they continue to be aggressive into next year? Possible. I mean, that was kind of embedded when I said earlier that I felt that the tax -- property tax increases are still going to be in the range of about 4.5% to 5%. I think, we're going to still see increases in like Cook County and Chicago as well as some of the Florida markets. The only maybe positive thing we might see is, I think, there's been some discussion in Houston about possibly lowering property tax assessments given the damage caused by the hurricane, but that remains to be seen.

Okay. Just one more. You mentioned you'll be opportunistic with uses of your cash balance. I mean, does that include share buybacks? And if so, what do you look at when determining that as an option?

What I think we had ended the quarter was about $700 million in cash on the balance sheet. We've got about $400 million to spend on our development pipeline. And I think, at quarter end, we had $50 million or $60 million of acquisitions under contract and we've got a few other things we've been working. There's not more than a kind of a couple of hundred million there that we can't kind of point to and say, here's a potential use. As I said on previous calls, share buybacks are always one of the menu items in terms of allocating capital, whether we do developments, redevelopments, acquisitions, retire debt or share repurchases depends on what is the opportunity set, what do we think the rates of returns are going to be and then our kind of overall financial liquidity. So we have an authorized share repurchase program and that is one of the menu items in terms of allocating capital.

And ladies and gentlemen, that does conclude the Q&A portion for today's call. I would like to turn the call back over to Mr. Clem Teng for any final statement.

Thank you for your attendance this afternoon and we'll talk to you for our year-end earnings in some time in February.

And ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your lines.