Public Storage (PSA) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Q4 2017 Earnings Call. (Operator Instructions)

It is now my pleasure to turn the floor over to Clem Teng to begin.

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

Before we begin, I want to remind you, 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, February 21, 2018, 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 www.publicstorage.com.

Now I'll turn the call over to Ron.

Thank you, Clem. We had a good quarter, good Q4 and a good 2017. So operator, let's open it up for questions.

(Operator Instructions) Your first question comes from the line of Michael Mueller of JPMorgan.

Just a couple of questions on rate increases. We're heading into the period of time over the next few months where you're going to start handing out rate increases to existing clients. So wondering, can you give us color in terms of what you're thinking of in terms of increases this year versus last year? And just any other commentary around that?

Yes, Mike. This is John. I think what we'll be doing -- or the game plan right now is we're going to continue to send out increases, similar to how we've done over the past couple of years. The increases will probably be in the range of 8% to 10%. We'll target our longer-term tenants that generally have been here longer than a year. That's very similar to what we've done in the past. And what we've noticed, so far, is that the long-term tenant continues to accept the rate increases. And so far, they're still very sticky. We haven't seen any detriment over the past year in terms of their stickiness as we continue to push the 8% to 10% increases. So we're going to continue to do that until such time we see some pushback by means of them vacating more rapidly, but we haven't seen that yet.

Got it. And for a follow-up, in terms of -- you gave us the spot January 31 occupancy rate. I was wondering, can you tell us what you've seen so far into September -- I mean into February?

Well, we gave you the year-end occupancy spot rate at 91.2%, yes, which was down about 1.4%. I would tell you that year-to-date, our average occupancy spread is down about 80 basis points. So it's better. It's inside of the 1.4% that reported at -- right at the end of the year.

Your next question comes from the line of Robert Simone of Evercore ISI.

Just a quick question on Q4. Just trying to dig into that 140 basis point drop a little bit. It's way more than anything you guys have experienced in recent years. So I was wondering if you could just comment a little on how much of that is pure occupancy drop and how much could be attributed maybe to you guys more aggressively revenue managing.

What we've -- this -- again, this is John. What we've been seeing is, is that our occupancy has been dropping more rapidly towards the end of the month, so that the month-end periods that we report in our Qs, the year-end number, the 140 basis points drop is somewhat misleading. And that's why when Michael Mueller asked the question, I gave him the average occupancy. So I think as we move forward, we will probably change that metric, that disclosure to try to provide a more average occupancy as opposed to reporting, yes, a single day in the month. So I think it's a little misleading, and it's different than what you've seen in the past. And we have seen more of our tenants vacate towards the end of the month now as opposed to kind of a little more spread out through the month. And so it's a little misleading now, I think, for folks when they kind of look at that and then think about revenue growth for the next quarter. Hence, again, that's why I gave you the average occupancy that we're seeing year-to-date at -- being down 80 basis points as opposed to the 140 basis points.

Okay. Great. Yes, that's helpful. And just a quick follow-up. Obviously, the big announcement last night. One portion of that release caught a lot of people by surprise, and that was the internal promotion to really promote the third-party management. And so I guess, just it's new for a lot of investors that have followed PSA for a while. So could you just kind of talk broadly around the strategic plan there?

Yes. The -- we've actually been doing "third-party management" for 40 years, not promoting it. And I think we got 30, 35 properties. So we think, actually, we know how to do it. But it's really -- the other guys have been doing it a while. They've established it as a business. I didn't really think it would ever take off as a business, but it seems to have taken off, and so we're going to kind of wade in here. Our business approach to it, though, is going to be a little different. I don't think it's going to be a big profit generator for us because we plan to pass through most of the benefits to the operators for which we'll be providing the service. So I liken it to kind of an Amazon strategy wherein we're going pass the -- most of the benefits from the tenant insurance and the benefits of operating our platform on to the owners for which we provide service.

Okay, okay. Great. And just that -- one last question for me on that last point. Like, what then is the ideal or the intended benefit to you guys? Is it just to create an acquisition pipeline long term? Or what's kind of the thinking there?

I'm sure there'll be some acquisition benefits associated to it, some scale benefits in terms of our platform, some marketing benefits, similar benefits to what the other guys are achieving, other than, again, we're going to pass most of the profits on to the owners.

Your next question comes from the line of Juan Sanabria of Bank of America Merrill Lynch.

Just with regards to same-store revenues, how are you guys thinking about how that moves going forward? Or are we approaching a trough? Any signs of kind of stabilization from kind of current levels? It looks like your rent per occupied square foot actually, the delta this quarter versus last year, and if I compare that to the third quarter '17, the number's actually improved. So if you could just give us a sense of kind of where you think we are in the cycle and the proximity to the trough, maybe.

Well, I -- certainly, we're later in the cycle. 2011 to 2015/16, we had above-average trend -- above trend line growth rates. That has slowed down with the pickup in new supply. The other 2 public companies that have reported have indicated in their guidance that they're going to have positive revenue growth, or that's their anticipation in 2018. I think Q4 results for most people were better than The Street expected. So overall, are we at the bottom? I don't know if we're at the bottom. I expect deliveries this year to be comparable to last year, $3.5 billion to $4 billion. So we still got headwinds in terms of new supply. The business is really incredibly resilient. When you think back in 2013, there were about $500 million of deliveries. And here in '17, the best guess is about $3.5 billion. So you've had a seven-fold increase in new supply in a period of 4 years, and yet, at least from the public companies reporting, all reporting positive same-store growth. So I think it's a testament to the resilience of the business as well as the pent-up demand for the product.

And just a follow-up for me. You guys bled some occupancy throughout 2017. Do you expect that to continue into 2018 as a result, I guess, of the new supply? And kind of what are your latest thoughts related to that on using concessions at this point? You kind of sounded a little bit more skeptical in the second half last year that it wasn't getting the results you needed. And how should we be thinking about that going forward?

Certainly, we'd like to see the occupancy gap close as much as possible, and we're working towards that goal. We also mentioned that we weren't happy with our television marketing efforts, and we're going to spend more time or more money and time with paid search, and we started to do that. And I expect us to continue to do that as we move forward. We're trying to hold the line on discounts and rates as best we can. So I don't know if the occupancy gap increases or decreases, but certainly we're working on trying to balance that with continued revenue growth. So again, it's not just about occupancy, although we think it's a big part of it, obviously, but there's other factors that come into play also. So we're really focused on the revenue growth and trying to maintain positive revenue growth throughout the year.

Your next question comes from the line of George Hoglund of Jefferies.

Just wondering if you can give your outlook on the acquisition environment and what you're seeing from developers who have recently developed a product, if they're looking to exit early.

We -- George, we've actually seen an uptick in that, both reverse inquiries from people that have sites or thinking about sites, calling us wondering if we wanted to purchase them, take over their entitlements. There's a couple of portfolios on the market that are recently developed properties that are -- at least the indications are selling on a pro forma basis, which to me indicates a little bit of skittishness in terms of developed -- local developers in terms of their market outlook. So we're seeing more of that kind of product. In terms of stabilized properties, not a lot to date. It's early first quarter. So normally, there's not a lot of product at this time of year, but not a lot of the more stabilized properties. There's a gap between private and public markets. The private markets are pricing ahead of what the public companies are trading for. A couple of years ago, there was an arbitrage. Guys could sell stock and buy properties in the private marketplace. That's flipped. In the private market values, there was a lot of capital-chasing stuff, and it's ahead of the public market.

Okay. And then given that those developers are kind of looking to exit earlier and getting a little bit more nervous, do you think that then translates to new development starts slowing?

Well, you got to understand in terms of development, it's kind of the economics. So for us, we're building at anticipated 8% to 9% stabilized yields. And on our earlier developments, we've exceeded that. And if you're able to market that portfolio -- we're not in the business of building them and selling them -- but if we were to market that portfolio, as I indicated earlier, it'd probably trade somewhere in the 5% -- 5% cap rate ZIP code. So that, on terms of development, that's a 60% to 80% margin on what we're doing. And so even if you're a local guy and you're only getting 30% or 40% margin, meaning you build it for $1 and sell it for $1.30, you're going to keep developing, really until 1 of 2 things happens. Either, A, you can't achieve the yield; or the monetization rate, the 5% goes to a 6% or a 7%, and so there's basically no spread. But the economics of development have made a lot of sense, and that's why you've seen a big uptick in new supply.

Your next question comes from the line of Todd Thomas of KeyBanc Capital Markets.

Just, Ron, first question. Just following up your comments about the third-party management platform that won't be a big profit generator. So you're going to pass along the tenant insurance revenue to the owner. Can you just describe the price structure a bit more? Will you be charging management fees as a percent of revenue? Or is it going to be some sort of a fixed cost or something else?

Yes, Todd, it'll be a percentage of revenue. It's going to be very competitive. The expense pass-through is going to be competitive, and the tenant insurance participation is going to be very competitive. In fact, from what I know, it's -- most of the others are not passing much of the tenant insurance through, and we're going to pass a fair amount of it through.

Okay. And is -- do you have sort of a pipeline in place of third-party management contracts today? Is this something that you've started working on already? And how big of an opportunity do you think that there is?

Well, we made the management changes here recently, putting a longtime veteran here, Pete Panos, in charge of the third-party program. And I think you'll see, in the coming months, Pete rolling out our program. And he's actually out today soliciting some business. So how big is the opportunity? Well, as I said earlier, I think the -- certainly, CUBE and Extra Space have demonstrated that it's a business much bigger than I ever thought it would be, and so the size of the opportunity is probably quite significant.

Okay. That's helpful. And then just lastly, Ron, it was just a couple of quarters ago, I think late last summer actually, where you talked about a lack of pricing power, a weaker consumer and some consumer credit metrics. The tone on this call and your comments about the resiliency of the business and the pent-up demand for the product, it seems a bit different. And I'm just trying to understand whether there's been a change to your market outlook, whether you're seeing an improvement in demand or whether conditions are firming up across the portfolio, if that's sort of the right read.

Well, I think, a year ago, right, we didn't have a big tax law change. The stock market was about 20% lower. Unemployment was good, but still not at the 4.0%, 4.1%, and animal spirits were a little less. So I think there's been an overall change in the tone of the economy. How long it lasts, I don't know. But I think there's been a bit of a change in tone. Certainly, last year, we were suffering pretty mightily in Houston with the decline in oil. Oil has almost doubled year-over-year, and the Houston market is actually up year-over-year in terms of occupancy. So a number of things have changed.

Your next question comes from the line of Vikram Malhotra of Morgan Stanley.

One of your peers just commented that on the West Coast, San Francisco seems to be accelerating, and they've sort of baked that into their guidance. Wondering if you could compare what you're seeing between San Francisco and L.A., and whether you're seeing similar acceleration.

Well, I'll start, and John can add. San Francisco -- and this will be in the 10-K. San Francisco square foot occupancy at year-end was 95.4% versus 96% last year. And for the year, it was flat 96% versus 96%, which is -- basically, you're full at 96%. L.A. was 95.7% versus 96%. And for the year, L.A. went up 96% versus 95.6%. So revenue growth, both in Q4, L.A. was 5.9%; San Francisco, 4.7%. And for the year, L.A. was 7.2%; San Francisco, 6.9%. So they're somewhat neck and neck.

And do you expect to see sort of an acceleration into '18?

Well, when you're 96% occupied, there's not much to accelerate. We may be a little more aggressive in the Bay Area depending on how we see demand flow with possibly rental rate increases and Street pricing and reduced promotional discounts, but San Francisco and L.A. have both been robust markets for the last couple of years. John, you have anything to add on?

No, they're great markets. Both markets are great for us. The whole West Coast has been very good for us.

Okay. And then just one more, if I may. Your CapEx spend seemed to tick up this year relative to the last 2 years or 3 years. Just wondering if this is sort of a good run rate to use? Are there any specific redevelopment projects that you are envisioning in any specific markets?

Well, redevelopment that adds square footage does not go into maintenance CapEx. It goes into the -- it's in the development numbers and redevelopment properties. Yes -- well, we've changed a couple of things in the CapEx arena. One, we're on -- we've moved to a quarterly process and budget versus an annual. So that's accelerated spend, meaning we're getting more of our CapEx done faster. Two, we had the hurricanes last year, which cost $2 million. Three, we've had some big projects in terms of LED lighting going on, some HVAC upgrades. You may classify that not as maintenance because they're upgrades to light works. We just changed it out. But -- so we've got some upgrading in terms of equipment and features of the properties that we haven't had in prior years. What the run rate is this year, I'm sure we'll be somewhere $90 million to $100 million would be my guess at this time, but it's going to change.

Your next question comes from the line of David Corak of B. Riley FBR.

John, just going back to the quarter ending occupancy commentary. Why do you think more customers are vacating at quarter-end than kind of you've seen historically?

I think one of the things that we've done internally is we've somewhat encouraged them to -- if they're going to vacate, vacate at the beginning of the month or the end of the previous month, which helps us kind of backfill the space quicker. And so we've done some things internally to encourage that. And so that's what's accelerated, I think, some of the vacate activity at the end of the month (inaudible). And we started that probably mid-summer time frame.

Okay. And then I apologize if I missed it, but what are your take rates year-to-date?

Year-to-date 2018 or the fourth quarter?

Both if you've got them.

Okay. I'll give it to you on a monthly basis, so let's start with the fourth quarter. The fourth quarter, the average take rate -- monthly take rate was $121.85 versus the same quarter of last year at $122.64. So it's down about 60 basis points. Year-to-date 2018, the average take rate is $121.52 versus $122.31, sort of down again at about 60 basis points.

(Operator Instructions) Your next question comes from the line of Jeremy Metz of BMO Capital Markets.

John, just sticking with that, can you talk about how discounts trended in the quarter relative to last year and similarly so far this year?

Yes, I can. So discounting was last -- this year, so we gave away close to $19 million this year, the fourth quarter of 2017, versus about $20.8 million the same quarter last year. So down roughly about 8% on discounting.

And then on effective discount to new customers, is it down as well?

Well, the number of tenants -- the percentage of tenants getting discounts was actually -- was up about 1.4%. So about 78% of our tenants were getting a discount versus last year at about 76%, 77%.

Okay. Appreciate that. And then in terms of your advertising cost, you guys -- you were testing on TV earlier this year. John, you had mentioned increasing paid search. But overall, the spend was down again in the fourth quarter. So are you finding that these levers just aren't making as much of a difference even when you ramp them up or down? And is it really just coming down to cutting rates that's driving the most traffic?

No, we didn't spend any money on television this year. Last year, for the fourth quarter, we did spend money on television. We talked about that in the last quarter that although television is still effective, it's not as effective as it once was. So we were going to spend more of our dollars, our advertising dollars, on paid search, which we did during the fourth quarter. And we -- and I expect that we will continue to do that and probably not do -- do little to no TV as we move into 2018 and just spend our dollars on the Internet on paid search, which we find more effective in paid search not only on using -- folks using their desktop, but the mobile devices, as you know, as everyone knows, has become much more important for our consumer and probably most consumers as the device of preference that they're using. So we're definitely focused a lot more time, energy and money in those venues.

Jeremy, to put some numbers on that, so Q1 '17, we spent about $3.5 million on the Internet and nearly $2 million on television in the first quarter of last year. This year, we're not going to spend any money on television, but our Internet spend is going to go up to around $5 million. Now on Internet spending, that depends on a whole bunch of bidding on keywords, markets, a whole variety of things, but that's kind of our current estimate. So we're swapping -- as John said, swapping the television for the Internet. Absolute level in '18, my guess is we'll be comparable to what we spent in '17.

Your next question comes from the line of Ki Bin Kim of SunTrust.

So a few things seem different than what we've been used to from PSA. One, you guys already talked about -- a little bit about the third-party management initiative. Your payroll at your property level increased, which is unusual for you guys. And then your CapEx increased. So just curious if you can add more color behind those things and, of course, the management changes, and congrats on that. So any more reasons behind all these changes? And is there, at all, maybe some acknowledgment that you have to invest more in your properties or people to achieve better results?

Well, Ki, the -- we don't have to invest more in our properties to achieve better results. I think our results are quite, quite good. I mean, I just went through San Francisco and L.A. occupancies for the year, 96%, and those are some of our older, more mature -- very mature properties. But they're in phenomenal locations, and of course they have the brand. With respect to property payroll, if you haven't seen, there's a number of markets where we operate where there's been significant increases in the minimum wages due to statutory changes. And so that's made -- we've been mandated to increase the wages in those markets. And as you can imagine, there's some spill-on effect. So if your -- if you have properties in an adjacent market, even though that market may not -- that city may not have mandated an increase, you're going to have spillover effect in terms of retaining employees in that adjacent market because of the increases in wages. So it's just not the markets explicitly where there is a minimum wage increase. And then third in that line is medical insurance, and that's also increased.

And maybe, can you talk about the timing of the -- your retirement and John's and timing of making a change in succession plans?

Timing in terms of what?

Not timing on the exact date, but why is it -- why is this the time to announce those things?

Well, Ki, we've actually been working on this since 2014. We identified Joe, and Joe raised his hand sometime in 2015. So we had to effect a succession plan at PS Business Parks first to free up Joe, and that resulted in the promotion of Maria Hawthorne to be the CEO of PS Business Parks. And she's a great CEO, and she's doing a great job there. She's been with us for 30-plus years, so she knows the business. But once we got Maria in place, then Joe was freed up to come up here and start learning the self-storage business. Keep in mind, I worked with Joe for 16 years. He knows the culture here. He's a great leader. So really, we've been just giving him time to get up to speed on the business. And he and Tom are doing that. And we think, by the end of the year, that they'll be ready or more than ready.

Your next question comes from the line of Smedes Rose of Citi.

I wanted to circle back on your getting more active in the third-party management business. That's -- it's a pretty profitable business. And as you've indicated, certainly there's a fair amount of demand for it. Given that PSA has such a brand premium in the space, I'm just wondering why is it the right decision to go into this. It sounds like from a neutral basis to earnings versus -- it seems like you could even charge more relative to peers given what a dominant position you have in the industry.

Well, Smedes, maybe once when we dominate it, then we'll change our pricing. But we're getting started, and we want to be very, very competitive. And like I said, I liken it to the Amazon strategy. We want to take share. We want to be very competitive. And if we make a modest profit for the first couple of years, that's fine. But I do appreciate your comment that we do have a dominant brand because yes, we do have the dominant brand. We have the only brand, by the way.

Your next question comes from the line of Todd Stender of Wells Fargo.

And just going back to the move you guys are making at the management level. Is it cleaner for both of you to leave at the same time? I just wanted to hear a little more color and maybe even from John.

Is it cleaner for us to -- Ron and I have talked about that a lot. And I guess the way I look at it is, is that I believe that I'm -- we will still both be active trustees in Public Storage. We -- Ron and I have invested most of our lives here, and we are basically wedded to this company. So although we're retiring, I still view us as still being somewhat actively involved, consulting with Joe and Tom and the rest of the team here. And even though we're retiring, we're not really going anywhere per se. We're just not coming into the office every day. So I don't see a whole lot changing. In fact, I see that it's actually an upgrade. Joe and Tom will be an upgrade from John and Ron, but it's a good thing.

I'd just add, Todd, John has been the CFO here 22 years. I've been the CEO going on 16. And we're both nearly -- well, I'm 32- and John's 28-year company veterans. As John said, we've been here most of our working lives, and we're still committed. And we're going to be, as John said, active trustees. We both own a lot of stock. A big chunk of our net worth's tied up in the company. So we have a very strong vested interest in Joe and Tom's success.

Great. And just last but maybe sticking back to you, John. Did you have a line of credit balance at the end of Q4? And maybe what your capital sourcing thoughts are over the near term? It's always preferreds, but now you guys also have an appetite for the unsecured debt market.

Well, we certainly can tap into the unsecured market. We've already done that, and we've demonstrated Public Storage's ability to raise capital in that manner. We still like the preferred market, although we may not like the current coupons. They're not as nice as they were a couple of months, years ago. But nonetheless, they -- we're still interested in the preferred market. We'll retain -- we'll continue to retain cash within the company. We'll probably retain $200 million to $250 million a year. We're sitting -- at the end of the year, we were sitting on about $433 million of cash. So we have plenty of liquidity, and so I'm not -- we're not too worried about our liquidity position. We have strong coverage ratios, so we have the ability to continue to raise capital if need be. Our needs right now are really funding our development pipeline, our redevelopment pipeline, which, for the most part, our retained cash flow and the existing cash that we have on hand can do that. So we have no real stress on the company to have to raise capital at least within the next 6 months to 9 months.

Your next question is a follow-up from the line of Smedes Rose of Citi.

Ron, I was wondering if you can comment a little bit on the board -- the anticipated board changes. So I think right now your board is 9. Sounds like John and Joe are going to come onto the board, so that would be 11. Of those 11, between the 3 of you, and then Wayne and Tamara, that's 5 insiders. There was some comments in the release that you would look to add more independents. But can you sort of go through the timing of that, the anticipated size of the board? I know you've -- from the size of your company, keeping a board with 9 members has been relatively small, so I don't know if that's going to change. Can you just give a little bit of color on that?

Yes. Is this Smedes or Michael?

It's Michael.

Thank you, Michael. Yes, the -- as noted by our Lead Director in the press release, we'll be adding some independent directors during the course of this year. John and Joe are not going to join the board until January 1 of next year, so the board's got 10 months to go find a couple of more directors and -- which we expect to have in place, obviously, by the fourth quarter. In terms of board size, as with John and Joe coming on and myself being an insider and Hughes, we will have to enlarge the size of the board to balance out independent versus insider directors.

And so you anticipate that you're going to be going up to like a 13-type member board?

Yes, somewhere along that line. And it may even get a little bigger because a couple of years down the road here, we're going to have some director retirements. So...

Right. That was going to be my other question. You've had a couple of guys on from the mid to late '90s still on the board...

Yes, yes. So they'll be moving on in the next couple of years.

How do you -- one of the things about the third-party business that, I think, you've been critical of is that you have felt that it has stimulated a lot of development because a lot of mom-and-pops that haven't been able -- or developers that just can't get access to something all of a sudden can walk into a bank and say, "Hey, look, I've got Extra Space managing my facility. Hey, look, I've got CUBE managing my facility." And all of a sudden, they're able to get their loan and then go build. And you thought it's been a big detractor and one of the reasons potentially for increased supply during this most recent wave. How do you sort of foresee yourselves playing in that? I mean, do you -- will you do development sort of third-party deals and that will contribute to this overall supply? Or do you view this business really as trying to take away managed assets from your peers? Or just growing it just by taking existing mom-and-pops?

Well, I think you answered your own question. It's all 3. We're going to hopefully take share away from our competitors. Yes, we will do some developments. Yes, we will do some established facilities. We want to grow the business. I think -- and I have commented, as you noted, that I think it has contributed to development because, to a certain extent, it takes away the operational risk. But I also think the economics of the development, which I went through earlier, you build for $1 and you can monetize it for $1.50 or $1.60, are more determinative of whether someone's going to build rather than whether Public Storage or Extra Space or CUBE are going to operate the property. At the end of the day, it's about the economics of building and selling versus just getting someone to operate it.

And then as you think maybe a couple of years down the road, would you envision the potential for 2 companies: Public Storage, the manager, the brand; and a storage REIT that just owns the assets. Especially in light of tax reform, that makes C corp that much more profitable. Is that part of, just thinking of going down the road, that there's something bigger at play here?

No, not at this time.

Not at this time...

Yes. (inaudible), Michael. I mean, today, we're managing 30 properties. You're getting way ahead of -- we're not that smart, okay? So you're way ahead down the road in terms of saying, "Okay, this is part of an 8-year plan, and we're going to have 3,000 properties under management." No. We've got to get going. We got to get out of the blocks here and get some business.

Yes, I just thought about taking your existing properties and rolling that it into a management platform and leaving the REIT that owns the real estate aside.

Well, recall, we had that structure up until 1995. And yes, tax reform has made a C corp better in terms of tax rates. 20% or 21% is better than 35%. But 20% leakage is a lot more than 0% leakage. And we can put the third-party business into a TRS. It fits at today's size level and business volume level, and so we prefer to have no leakage versus a 20% leakage.

I will now return the call to Clem Teng for additional or closing remarks.

Thank you for attending our conference today, and we'll talk to you next quarter. Bye now.

Thank you. That does conclude the Public Storage Q4 2017 Earnings Conference Call. You may now disconnect.