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Extra Space Storage Inc (NYSE:EXR)
Q3 2020 Earnings Call
Nov 5, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the Quarter three -- 2020 Extra Space Third Quarter Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Jeff Norman. Please begin, sir.

Jeffrey Norman -- Vice President of Investor Relations

Thank you, Jenny, and welcome to Extra Space Storage's Third Quarter 2020 Earnings Call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business.

These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, November 5, 2020. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call.

I'd now like to turn the call over to Joe Margolis, Chief Executive Officer.

Joseph D. Margolis -- Chief Executive Officer

Thanks, Jeff, and thank you, everyone, for joining us on today's call. I trust everyone and their families remain healthy and are managing through this difficult time. 2020 has been a challenging and eventful year, an unprecedented conditions related to the pandemic have made it difficult to forecast performance. On our last call, we discussed the tailwinds we are experiencing in terms of rental activity, muted vacates, positive achieved rate trends and the resumption of normal operations. We also discussed the potential headwinds that we believe we could face, including economic and political risk as well as changing customer behavior and new supply.

During the third quarter and to date, the tailwinds have proved stronger than we expected, while the headwinds have not been as significant or have not materialized. Rental volume remains healthy, while vacate volume remains muted, resulting in all-time high occupancy of approximately 96%. Through July, occupancy was inflated with nonpaying customers due to the inability to auction delinquent units. However, as the quarter continued and auctions resumed, we have been able to maintain our high occupancy and collections have returned to historically normal levels. Our elevated occupancy resulted in the return of pricing power during the third quarter.

In short, our stores are performing significantly better than we expected earlier in the pandemic. On the last call, we stated that we expected to have negative same-store revenue growth in the third and fourth quarters. Due to the continuation of the tailwinds we are experiencing, we have achieved positive revenue growth in October and are confident we will produce positive revenue growth in the fourth quarter. We remain mindful of the potential macro and industry-specific uncertainties that we have referenced during the third quarter. However, at present, these risks do not appear to be negatively impacting the demand for storage or consumers' ability and willingness to pay for our product.

The primary headwind impacting performance is new supply in certain markets. While the pandemic has delayed new deliveries and may reduce new projects and planning, properties are still being delivered and excess inventory is still leasing up, which will continue to suppress rate growth in high supply markets. Despite the improving trends, our same-store NOI remained negative in the third quarter. However, even with the disruption COVID-19 caused to our operations, we continue to grow core FFO per share, which is our ultimate goal. In the third quarter, FFO per share increased 5.6%, and FFO growth for the first three quarters was 5%, both sizable beats over consensus. Our flexible organizational structure and focus on innovative capital-light strategies have enhanced FFO through new external growth channels and non-same-store income streams.

These contributions paired with improving same-store trends lead us to believe that our 2020 FFO will comfortably exceed the high end of our pre-COVID expectations. Turning to external growth. Acquisition volume has picked up in the sector as markets have started to settle. But pricing for widely brokered deals, particularly for stabilized properties, remains very competitive. During the quarter, we have closed or put under contract an additional $140 million of acquisitions, bringing our total expected investment in 2020 to $287 million. In addition to acquisitions, we continue to find ways to creatively invest capital in the storage sector. Our bridge loan program continues to grow with approximately $315 million in bridge loans scheduled to close in 2020, with the expectation to sell 70% to 80% of the balances.

We have also approved $167 million of loans to close in 2021. We also purchased $103 million senior mezzanine note at a small discount. And subsequent to quarter end, we invested an additional $50 million in SmartStop through our previously negotiated preferred equity investment. And through three quarters, we have added 72 stores net to our third-party management platform. In short, we continue to execute on our strategy to maximize shareholders' long-term value through optimizing property level operations and efficiently and creatively investing capital in the storage sector at acceptable risk levels.

I'll now turn the time over to Scott.

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Thank you, Joe, and hello, everyone. As Joe mentioned, we've seen a number of positive trends during the quarter that are continuing into the fourth quarter. During September and October, we typically see occupancy and achieved rates start to moderate due to seasonality. This year, this has not been the case. Rentals remained steady while vacates are still down, and October occupancy remained relatively similar to this summer's highs at just under 96%, a positive year-over-year delta of approximately 260 basis points, with less than 20 basis points of inflated occupancy-related to non-paying tenants. New customer rates also remain strong.

Achieved rates to new customers were flat year-over-year in July and improved to approximately 11% in August, September and October. We have completed the rollout of our online leasing platform, Rapid Rental, and have seen approximately 20% of rentals come through this channel. We have also reinstated existing customer rent increases in most markets with a focus on bringing customers with below market rates closer to current levels. To date, such increases have not caused outsized vacate activity. Despite these strong trends, same-store revenue remained negative in the quarter, primarily driven by lower other income due to fewer assessed late fees and auction fees.

We've tried to work with our customers and have been lenient where appropriate, given challenges related to the pandemic. We have been proactively controlling expenses to offset lower revenue, while ensuring we aren't hurting the long-term value of our properties or our business. Expense growth from property taxes was generally offset by savings in utilities and repairs and maintenance, and we managed to keep payroll generally flat without furloughs, layoffs or pay cuts. We continue to view marketing spend as an investment in top line revenue growth, and we'll continue to use this lever to drive revenue when the return warrants it.

We've been tracking the results of California's Proposition 15 vote carefully, and it appears that it will not pass and have an impact on property tax expense. We continue to strengthen our balance sheet and have access to many types of capital at attractive pricing. We received $425 million from our previously completed private placement transaction. And subsequent to quarter end, we used these funds, revolver capacity and shares to settle our $500 million convertible notes. All in all, 2020 has been an eventful year, and we have certainly seen the landscape shift rapidly over the last two quarters.

While we can't predict all of the future -- while we can't predict all the future challenges we may face, we believe our flexible organizational structure, our focus on innovation and, ultimately, our people position us to react quickly to change and to capitalize on various opportunities that follow. We operate in a fantastic sector, and our diversified portfolio, advanced platform and talented team will continue to maximize shareholder value regardless of the economic climate. With that, let's turn it back over to Jenny to start our Q&A.

Questions and Answers:

Operator

[Operator Instructions]

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Operator, we are ready for the first question.

Operator

Your first question is from Jeff Spector with Bank of America.

Jeffrey Norman -- Vice President of Investor Relations

Joe, as I hopped on a little bit late. But I think, Joe, you said 2020 will exceed pre-COVID expectations, is that correct?

Joseph D. Margolis -- Chief Executive Officer

For FFO, yes, that's correct, Jeff.

Jeff Spector -- Bank of America -- Analyst

Okay. That's a powerful statement. And so I just want to -- we thought the results were very strong, stock underperforming today a bit. I'm just trying to think about market concerns, again, maybe your comfort visibility on the business. I know that's tough, but how are you thinking about '21 guidance? I guess, you typically provide next quarter, like what gives you comfort to make the -- to provide that guidance at that time versus not? Is it vaccine? Is it just watching cases and potential risk of shutdowns?

Joseph D. Margolis -- Chief Executive Officer

So Jeff, I'm not sure I understood your question. What gives us comfort to provide 2021 guidance or not? Is that the question?

Jeff Spector -- Bank of America -- Analyst

Right. Just trying to think ahead to -- correct, to the next quarter and given business was more resilient than expected, a lot of the issues that you and your peers were concerned over started back in March, didn't transpire. Again, FFO better than pre-COVID expectations, like, are you planning to provide '21 guidance? And if not, what do you -- what would help determine that?

Joseph D. Margolis -- Chief Executive Officer

So our current plan is to provide 2021 guidance. If the political or medical situation gets to the level of uncertainty that we don't feel we could provide a range comfortably, then we'll have to rethink that position.

Jeff Spector -- Bank of America -- Analyst

Okay. That's fair. And then on -- a couple of the drivers that were discussed on the previous call, and I know we've talked to you about the work-from-home benefits, EXR and the sector has been seeing or movement in the economy. I mean, from your standpoint, what's the most important thing to watch from here? Is it the housing market? The work from home or work from anywhere, it seems to continue at least for now. I know there's always different levers at different times, different cycles. But what's most important as we head into '21?

Joseph D. Margolis -- Chief Executive Officer

So we'll watch our customers' behavior. We don't have perfect visibility as to how some of the things you're talking about work from home, housing market, the direct correlation or translation to customer behavior. So we track literally every day customer behavior across a whole lot of metrics and optimize operations based on what we see.

Jeffrey Norman -- Vice President of Investor Relations

Great. Thank you.

Joseph D. Margolis -- Chief Executive Officer

Sure. Thank you, Jeff.

Operator

Our next question is from Rose Smedes (sic) Smedes Rose with Citi.

Smedes Rose -- Citi -- Analyst

Hi, I just wanted to ask you about move out activities. And if you've seen that relatively low relative to where you normally would have, which seems to be kind of like an industry issue. And just trying to think about as that returns to maybe more normal levels in a post-pandemic world, how do you think about more normalized occupancies? And how might you encourage customers to stay? Would you try to entice them with rents or you do occupancy levels where you could stand on to maybe have that decline a little bit?

Joseph D. Margolis -- Chief Executive Officer

So occupancy -- I'm sorry, vacate levels are still muted. They're still below historical norms. They're not as muted as they were earlier in the pandemic. But one of the factors -- a strong factor in our very high occupancy is that vacates are muted. And I agree with you. A risk of the future is that customer behavior returns to normal, vacates return to normal and that puts pressure on occupancy. However, we don't think there's any way to encourage people to stay in storage. Storage is a need-based product and at some point, people won't need the storage anymore.

And at that point, they'll leave. They may not leave immediately because of inertia. But sooner or later, they're going to realize I don't need this anymore. And even if we cut their rent to $1, they don't need it and they're going to go and move on and do whatever they need. So we can't encourage people to stay. What we can do is make sure that we can replace those tenants in the most efficient manner at the lowest cost, at the best rate that we can.

Smedes Rose -- Citi -- Analyst

Okay. Fair enough. And then maybe you could just touch on the debt maturities that you have coming up through the balance of this year, I think, and into next year and kind of how you're thinking about handling those?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Yes. Smedes, this is Scott. The major maturities that we had coming due at the end of this year were really two items. One was a $70 million loan that came due in September that we actually extended for a year, so that will come due in a year. And the second piece is a $575 million convert, and that was actually paid off in two tranches, part of $71 million getting paid off the 1st of October. And the other $504 million getting paid off the second day of November. So we have paid -- we've either extended or paid those off, and we paid that off with the proceeds from our private placement, which was a $425 million private placement and then proceeds from our lines of credit.

Smedes Rose -- Citi -- Analyst

Great. Okay. Thank you.

Joseph D. Margolis -- Chief Executive Officer

Thanks Smedes.

Operator

Your next question is from Rick Skidmore with Goldman Sachs.

Rick Skidmore -- Goldman Sachs -- Analyst

Hey, Joe and Scott. Joe, could you just talk a little bit more about the bridge loan program and how you assess the credit risk and then how you think about the pacing of that capital and the rates on those loans? Thanks.

Joseph D. Margolis -- Chief Executive Officer

Sure. Happy to. So we started this program in 2019. We lend only on existing product. They're not development loans. The product has to be complete and operating. We manage each of these loans. So in addition to the economics of the loan, we get the economics of the management contract. We look somewhat at the borrowers' financial capacity, particularly because they have obligations -- personal obligations to replenish operating and interest reserves. But our primary collateral is the real estate. We underwrite this real estate, as if we're going to buy it, to the same team that underwrites our acquisitions. And we make loans where we're comfortable. If we have to own the property at our loan balance, then we'll be happy that we did that.

The second question with regard to pacing, this program has grown, frankly, faster this year than we thought. And we did $100 million in our first year. We will fund or approve for funding probably close to over $500 million this year. And I think the acceleration is because where people are just looking for a way to get to a better tomorrow. We're in this weird position. They just want to get some financing that will let them get their store to a more stabilized number, and then they can put permanent financing or sell or do whatever.

It's important to remember that we sell 70% to 80% of the balances of the loan. So they're structured as first in mezz or A and B, will sell the first position and retain the second position that both leverages our return and allows us to control the amount of capital that's allocated to this program. Sorry for the long answer.

Rick Skidmore -- Goldman Sachs -- Analyst

And as you look to 2021 expectations, thinking about the bridge loan program continuing at those -- at the similar 2020 level or do you think it increases or comes down a bit?

Joseph D. Margolis -- Chief Executive Officer

So I would expect the program to grow. Our goal is to grow these programs as we develop more relationships, have more programmatic borrowers, it's kind of like a snowball rolling down a hill. So it's my hope and expectation that we do more in 2021 than we did in 2020.

Rick Skidmore -- Goldman Sachs -- Analyst

Great. Thanks, Joe.

Joseph D. Margolis -- Chief Executive Officer

Sure. Thank you.

Operator

Your next question is from Todd Thomas with KeyBanc Capital.

Todd Thomas -- KeyBanc Capital -- Analyst

Thanks. Just following up on the bridge loan program a little bit. I guess you said you have an expectation to sell 70% to 80% of the balance, but what's on the books today? And what is the average yield on those loans and sort of the weighted average maturity?

Joseph D. Margolis -- Chief Executive Officer

So what's on the books today isn't representative of our final capital investment. When we first started this program, we would simultaneously close and sell the first tranche, so that never show up on our books. We now think a better execution is to close them all on balance sheet, package it up in $30 million, $40 million, $50 million chunks, then take those to the market and sell it. So we currently have more on the balance sheet than we ultimately will because we're in the middle of selling a couple of those tranches.

Yields on the whole loan are between 5% and 6%. There's a LIBOR for that, puts the yields in that place. Once we sell it, the yields on our piece are between 9% and 11%. And those numbers don't include management fees or kind of an insurance that we get from managing the property.

Todd Thomas -- KeyBanc Capital -- Analyst

Got it. So -- yes.

Joseph D. Margolis -- Chief Executive Officer

No, I was just going to make the comparison of where we see cap rates and opportunity to make money, buying wholly owned properties versus the yields we can get from this plus the management contract plus we've already bought three assets out of the loan program, it's somewhat of an acquisition pipeline. And it allows us just to create more partnerships and more relationships, which is so important to us in everything we do.

Todd Thomas -- KeyBanc Capital -- Analyst

Okay. So as you're sort of warehousing these loans and ultimately retaining 20% or 30% of the balance, how large or how much of an appetite do you have for this type of structured finance investment portfolio overall? And do you plan on adding some additional disclosure to describe some of the details around this as it continues to grow?

Joseph D. Margolis -- Chief Executive Officer

Yes. So I think your second point is spot on. Now that this has gotten significant, we need to add some things to our SOPs, and we will do that in 2021. Seeing that we sell the vast majority of the loan balances, I don't see a meaningful cap on what we can do. I don't know if we can grow big enough where we won't have the capital to do it.

Todd Thomas -- KeyBanc Capital -- Analyst

Okay. And then, Joe, so your comments about supply still impacting fundamentals, I just wanted to circle back there. So your occupancy for the portfolio overall is 95.9%, and rates are trending higher. So what impact is new supply having on the business today? It's hard to see those pressures right now. I guess, is demand just overwhelming that supply at this time or is there something else? Can you just expand on those comments a bit?

Joseph D. Margolis -- Chief Executive Officer

Yes. Those are macro stats. If you broke it down to the store level and look at stores that had new supply challenges or new supply competitors, they may still be up quickly or have very high occupancy, but their rate growth, their rate power is very different than stores that don't have that new supply challenge. So we're able to fill all our stores up. The impact of new supply is on how much rate power we have.

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

And Todd, you can see that some in the supplementals. If you look at it by market, so for instance, if you look at Dallas or South Florida or New York City, you'll see that those are performing, from a revenue growth perspective, below the average versus markets that are performing above the average. And we would tell you that supply markets are typically performing below the average.

Todd Thomas -- KeyBanc Capital -- Analyst

Right. Okay. And I guess, given the improvement, though, in fundamentals that the industry has seen, are you anticipating new supply growth to reaccelerate a bit? It sounded like it was expected to fall or moderate. What's the outlook like today? Thanks.

Joseph D. Margolis -- Chief Executive Officer

So I do expect moderation. Equity -- there's probably equity out there for good developers. I think that is harder to get. And there are some markets that it's just harder to underwrite to get the deal. So new supply is not going to stop, but I would expect moderation.

Todd Thomas -- KeyBanc Capital -- Analyst

All right. Thank you.

Joseph D. Margolis -- Chief Executive Officer

Thank you.

Operator

The next question is from Spenser Allaway with Green Street.

Spenser Allaway -- Green Street -- Analyst

Commented that the transaction markets continue to open up. I was just wondering if you could provide some color around what portion of the deals you're seeing are either assets that are in some stage of lease-up versus those that are already stabilized?

Joseph D. Margolis, Extra Space Storage Inc.-CEO & Director

So I actually don't know if I've ever provided deals we're seeing. I don't know if I know the answer to what percentage of deals we're seeing are lease-up versus stabilized. I'll tell you the deals we've approved this year, we've approved 22 stores for acquisition and none of them are stabilized. They were all between -- they averaged about 64% occupancy, and that's stabilized periods of six to 36 months with stabilized cash flow in the mid-sixes. So those are the type of deals that are attractive to us now. Stabilized stores at sub-five cap rates are not all that attractive to us. Okay. That's helpful. And then you guys also mentioned that rental volumes have remained healthy. Can you just elaborate a little bit more on the moving trends and whether or not this growth is widespread throughout the whole portfolio? Or is there any markets that stood out in terms of elevated activity?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Yes. I would tell you the rental volume and occupancies are consistent across the portfolio so it's not just urban versus suburban. If you look at our property occupancy, we're full across the U.S. If you look at kind of rentals and vacates throughout the quarter, we actually had higher vacate volume this quarter due to auctions than we normally would because we kind of move six months' worth of auctions into three months here.

And so I would tell you our rental volume might be slightly below last year. Last year was a really good year with July being very high. We're very close to historical norms. So our rental volume has been strong, and we've also been able to offset any vacancy that was created by the increase in auctions in the third quarter. So we had those pent-up auctions as we paused during the stay-at-home time frame.

Spenser Allaway -- Green Street -- Analyst

Okay. Thank you.

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Thanks, Spenser.

Operator

The next question is from Juan Sanabria with BMO Capital Markets.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, folks. I was just hoping you could elaborate a little bit on the payroll line for same-store pool was down slightly year-over-year. What's driving that? Is that more of the rental without having to talk to anybody, just the automated process? Or is it just more cost controls by you guys and trying to manage that line item? Any expectations going forward?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

So in the first and second quarters, I would tell you, it was up slightly for a couple of reasons. One is we had a very tough comp from last year. We had very low payroll last year as we had turnover that was maybe a little higher, and our time to fill was a little higher last year than it is this year. So this year, we've had very little turnover. We also tried to be fair with our employees as people got sick and they had family members who got sick.

So our staffing was maybe a little higher in the second quarter. As we moved into the third quarter, we've seen that normalize somewhat. And in the second quarter, the other thing we saw that nobody was taking vacations. So you're accruing the vacations there. Nobody was taking time off. And so we would expect it to be up slightly, but not to the degree it was in the first and second quarter.

Juan Sanabria -- BMO Capital Markets -- Analyst

Great. Thanks. And then I was just hoping you could talk to the fees, the options, etc. The late fees. What part does that stop being a drag? Does it have to do with how high occupied you are today? In other words, is the higher occupancy working against you on the fees in some respect or is it just because the move-outs are down also obviously tied to your occupancy? Just if you could just help us with when that will pass that pressure on the same-store revenue line?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Yes. So I would tell you, late fees are down for a couple of reasons. One is you have state of emergency orders that don't allow us to charge late fees in certain markets. So in the Los Angeles area, we're not charging late fees or we're being leaner with late fee. The second one is early in the pandemic and as we moved in and as people went to auction, we have been more lenient on late fees as we've tried to be fair with our customers. As that auction volume has slowed, meaning we've gotten through some of the pent-up auctions, we would expect that to normalize in areas where we have had auctions and do not have state of emergencies.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thank you.

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Thanks, Juan.

Operator

Your next question is from Ki Bin Kim with Truist.

Ki Bin Kim -- Truist -- Analyst

So when you look at the customer mix, that center occupancy lately, I mean, I guess it's kind of logical to assume it has to do with housing and people moving from different states. But is there something about that demand that you're getting that you think is more transitory in nature, maybe they don't stay as long versus what's more typical of your tenancy?

Joseph D. Margolis -- Chief Executive Officer

We don't know, right? We don't know how this is going to play out and how long some of this demand generated by the virus is going to last. We do know that it's a good thing that more people are getting exposed to the product. They're using the product and now know that it's an option. But one of the uncertainties is as all the colleges go back to normal and if people move back into the city and out of their parent's home, do we lose some of this demand. It's a risk.

Ki Bin Kim -- Truist -- Analyst

Okay. And we've seen a lot of acquisition activity in the self-storage sector relatively forward time. Usually, you guys win more than your fair share. So I'm just curious, what's this thing about just expensive pricing or the quality of some of the deals out in the market? Or is it that you just see more value in the bridge loan program, and that's attracting your capital?

Joseph D. Margolis -- Chief Executive Officer

Yes. So we don't judge success in the acquisition market by who bought the most. I mean we could buy the most. We have the money. We can go out and bid more than anyone else. But at the end of the day, it's about the returns you produce for your investors. So we are going to be active in the acquisition market when we can produce the good returns. We're going to be active in bridge loan market. We're going to find creative ways, whether it's preferred deals or otherwise to do that. And we're also going to increase our management and capital-light businesses. So at the end of the day, we're not seeking to buy the most, we're seeking to make the most money.

Ki Bin Kim -- Truist -- Analyst

Thanks again.

Operator

Our next question is from Hong Zhang with JPMorgan.

Hong Zhang -- JPMorgan -- Analyst

I was wondering -- so you talked about expecting positive same-store revenue growth in the fourth quarter, is there any, I guess, baked-in assumptions about move-outs or rent growth that goes into that?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

So I would tell you, obviously, we've made some assumptions. I think that we do have some vacancy assumptions in there, vacate assumptions and if those -- I think that if anything -- if it keeps going like it is, we are very confident that, that will be positive. I think that right now -- so that we had positive rent growth in October. Our occupancy is still 2.5-plus percent ahead of last year and rate increases have kicked in.

Hong Zhang -- JPMorgan -- Analyst

Got it. And I guess, would you be able to quantify how much of a drag the rents that you signed in the pandemic and the rent process that add-on just your overall rent number?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

So in terms of quantifying them, we're not looking to quantify them here today, but I would tell you that many of those are getting rate increases today that are going to be outsized as we move people more to market levels. So if -- our typical rent cycle is such that many of them have received rent increases or will be over the next month or two. So we should be moving them to market, and it should be much less of a drag into the fourth quarter.

Hong Zhang -- JPMorgan -- Analyst

Got it. And it sounds like you're accelerating that, is that right?

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

So our rent increases are, overall, pretty similar to what they typically are in terms of our existing customer rate increases. Remember, we still do have some state of emergency areas that are limiting the amount of rent increases that we can't pass through.

Hong Zhang -- JPMorgan -- Analyst

Got it. Thank you.

Operator

[Operator Instructions] Your next question is from Ronald Kamdem with Morgan Stanley.

Ronald Kamdem -- Morgan Stanley -- Analyst

Quick ones from me. Just going back to the demand question and the customer behavior, just asking in a different way. Just thematically, when you're doing the analysis and you're looking at the customer behavior, is there anything that stands out to sort of explain sort of the demand drivers, whether it's be college students or small businesses, work-from-home demand or people leaving a city, just thematically, is there anything to call out there? And the corollary to that would be, as we think about a normalization scenario, what is onetime versus what's going to recur as well as what are we thinking about when things normalize that could actually be a demand positive? Thanks.

Joseph D. Margolis -- Chief Executive Officer

So thematically, I would think about demand broadly in two ways. One is, the demand for storage is driven by life events, at least, on the non-business side. And those life events occurred during a pandemic. Some of those life events occurred during a pandemic and not during a pandemic, right? People are getting divorced there. People are dying, moving to folks -- to old folks' home, all the stuff that gives rice to storage demand before the pandemic is still happening.

In addition, you have unique things like college students not going back to college, restaurants having to store half their tables and chairs, people leaving the city to work from home, people leaving the city to move back with their parents because they don't want to be in the city. And that stuff -- some of that stuff may eventually go back to normal. Some of it may be more permanent in nature, and we don't know the mix of that. But we do know that we live in a dynamic country where there's economic movement where there's movement of people and that will continue. And people will continue to use storage based on that. And our customer acquisition platform will continue to reach out and acquire those customers.

Ronald Kamdem -- Morgan Stanley -- Analyst

Great. That's helpful. And then not to beat the dead horse on external growth, but just thinking about it sort of a different way in terms of just the run rate, I think you said earlier about, obviously, you could buy more deals if you wanted to. But clearly, the focus is about making money. But six months ago, when COVID hit, I think we were all trying to get their arms around it.

Clearly, the sector has done that really well. Should we just expect a level run rate activity acquisitions to increase simply because maybe there's a little bit more confidence, a little bit more visibility? Could we get back to $200 million, $300 million, maybe even more in acquisitions, assuming those opportunities are out there and they -- and again, they sort of meet your return requirements? How should we think about that?

Joseph D. Margolis -- Chief Executive Officer

Well, we have $287 million already this year that we closed or under contract to close on the acquisition side. So I guess we have gotten back to the levels you have spoken about, and then we have our other growth activities. So if we can go into a year, I don't think this will ever happen and buy nothing because the pricing doesn't make sense and it would destroy value and not create value, then we'll do that. If we have an opportunity to place $1 billion because it's accretive to our shareholders, then we'll do that.

And it's incumbent on us to be aware of all the transactions, to manufacture transactions, to structure things that create value for our shareholders. And I think if you look historically, with what we've done and the volume we've done and how successful it's been, I hope that gives you some confidence that we'll continue to do so in the future.

Ronald Kamdem -- Morgan Stanley -- Analyst

Great. Thanks so much.

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Thanks, Ron.

Operator

At this time, there are no further questions. I will now turn the call back over to Joe Margolis, Chief Executive Officer, for closing remarks.

Joseph D. Margolis -- Chief Executive Officer

Thanks, Jenny. We're very happy to achieve 5.6% FFO growth this quarter. That's very meaningful accomplishment for us, particularly in a quarter where we have negative same-store NOI growth. And we do this through improving store performance, both inside and outside the same-store pool and creative external growth and capital-light activities.

But none of this is possible without the teams at the stores and here in our corporate office and at the call center, who worked really hard all the time, who exhibit our values, who work as teams, while managing through the pandemic. And I wouldn't want to end the call without acknowledging the hard work all of our teammates.

Thank you much, and I hope everyone has a great day.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Jeffrey Norman -- Vice President of Investor Relations

Joseph D. Margolis -- Chief Executive Officer

P. Scott Stubbs -- Senior Vice President & Chief Financial Officer

Jeff Spector -- Bank of America -- Analyst

Smedes Rose -- Citi -- Analyst

Rick Skidmore -- Goldman Sachs -- Analyst

Todd Thomas -- KeyBanc Capital -- Analyst

Spenser Allaway -- Green Street -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Ki Bin Kim -- Truist -- Analyst

Hong Zhang -- JPMorgan -- Analyst

Ronald Kamdem -- Morgan Stanley -- Analyst

More EXR analysis

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