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National Storage Affiliates Trust (NYSE:NSA)
Q3 2020 Earnings Call
Nov 6, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the National Storage Affiliates Third Quarter 2020 Earnings Analyst Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to our host, George Hoglund, Vice President, Investor Relations. Thank you. You may begin.

George Hoglund -- Vice President, Investor Relations

We'd like to thank you for joining us today for the third quarter 2020 earnings conference call of National Storage Affiliates Trust.

Now that the Presidential campaigning is over, we'd like to remind you that self-storage is available to save those Biden/Harris sign for another run in four years. And if Donald Junior ever pursues a campaign, those Trump signs and T-shirts maybe worth storing away too.

In the addition to the press release distributed yesterday, we filed an 8-K with the SEC containing our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nationalstorageaffiliates.com.

On today's call, management's prepared remarks and the answers to your questions may contain forward-looking statements that are subject to risks and uncertainties, including uncertainty related to the scope, severity and duration of the COVID-19 pandemic and the actions taken to contain or mitigate the direct and indirect economic impact. The Company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional detail concerning our forward-looking statements, please refer to our public filings with the SEC.

We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as FFO, core FFO, and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings.

On the line with me here today are NSA's CEO, Tamara Fischer; COO, Dave Kramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts.

I will now turn the call over to Tammy.

Tamara Fischer -- President and Chief Executive Officer

Thanks, George, and thank you, everyone, for joining our call today. I'll begin by acknowledging our PROs and our many team members who worked so diligently to deliver our strong third quarter results to provide us -- and to provide us solid momentum for continued improvement in the fourth quarter and into 2021.

A quick rebound to slightly positive same-store NOI after just one quarter of negative growth, attest to the resilience of the self-storage sector, as well as the strength of both our portfolio and our PRO structure. We are benefiting from increased customer demand for storage, driven by a handful of factors, which include the timing of our peak leasing season shifted to later in the year, given the pandemic-related restrictions on movement earlier in the year and increased customer demand as a result of pandemic and recession-related needs, including work from home, which is causing people to clear out a room for a home office and spending more time on household projects in general. Remote learning is likely driving the need to clear space for home classrooms. A variety of circumstances, including financial hardship are causing people to double up or move back to a parent's home, placing their furniture and other items into storage.

We're also seeing certain businesses store inventory and furniture, as they create extra open space for social distancing purposes. And finally, a migration shift to suburban, secondary and tertiary markets that has benefited our portfolio, which is heavily weighted in those markets. This increased demand accelerated over the course of the third quarter throughout October and continues into November.

Our core FFO per share increased 10% in the third quarter, compared to the third quarter last year. This growth is primarily driven by a combination of our ongoing robust acquisition volume, which is consistently accretive to FFO per share and the internalization of our SecurCare PRO in April of 2020.

Our outstanding performance despite the pandemic and related economic turbulence gave us the confidence to increase our third quarter dividend to $0.34 a share, representing growth of 6.3% year-over-year. And as you saw in our release, we also reinstated full-year 2020 guidance, which Brandon will address in more detail. But I'd point out that the top end of our guidance on core FFO per share of $1.68 is the same as the top end of the range in our pre-COVID guidance. The midpoint of our reinstated 2020 core FFO per share guidance is above analyst's consensus and represents 8% growth over 2019.

In the context of a pandemic and recession, the surge to remind investors and analysts of the fundamental strength of the self-storage sector and the benefits of both our differentiated PRO structure and our exposure to secondary and tertiary markets.

On the supply front, we've seen completions trending down on a year-over-year basis, while an increase in abandoned project is reducing the forward pipeline. Yardi forecast that total deliveries will steadily decline through 2024. However, we think we'll continue to face headwinds from new supplies in Portland, Phoenix, certain submarkets in Dallas and West Florida. Fortunately, though, the current boost in demand is alleviating some of that pressure, especially in Portland.

On the acquisitions front, transitional activity is strong and we currently have a solid pipeline of about $300 million of properties under contract or LOI. We expect to close nearly half by year end. And it's also worth noting that these pending acquisitions will put us somewhere near the middle of our original pre-COVID acquisition guidance. During the third quarter, we acquired four wholly owned properties for a total investment of $24 million, and subsequent to quarter end, we acquired two additional stores valued at $9 million. Three of these assets were from our captive pipeline, which remains a strong source of acquisition opportunities for the future. We are extremely well positioned to take advantage of additional acquisition opportunities with full capacity on our revolver, following our private placement of $160 million of pending proceeds from our forward equity offering and OP equity that serves as attractive acquisition currency.

We are encouraged by our third quarter results and the momentum we felt early in the fourth quarter. Things have clearly moved in the right direction, which gives us the confidence to reinstate our guidance for full-year 2020 and also gives us optimism heading into 2021.

I'll now turn the call over to Brandon to discuss operating results and balance sheet activity.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thank you, Tammy. Yesterday afternoon, we reported core FFO per share of $0.44, which represents an increase of 10% over the prior year period. As Tammy mentioned, this growth was fueled by a combination of strong acquisition volume over the past year and accretion from the internalization of SecurCare.

For the third quarter, same-store NOI increased by 0.2% over prior year, driven by flat same-store revenues and a 0.4% decline in property operating expenses. Same-store occupancy averaged 91.1% during the third quarter, an increase of 100 basis points, compared to the same period in 2019. This occupancy improvement was offset by an average rental revenue per occupied square foot that decreased 1.4% year-over-year. One nuance to point out is that, the rental revenue per square foot metric includes auction, admin and late fees, which accounted for approximately 90 basis points of that decline, with the remainder attributable to rental rate declines.

Similar to last quarter, same-store opex growth benefited from diligent cost control measures across the board. Specifically, personnel costs declined 2.7%, as we optimized staffing hours early in the quarter, with those expenses starting to normalize toward the end of the quarter.

Utilities declined 4%, partially attributable to the benefits from our LED lighting initiative. And repairs and maintenance costs decreased 2.4%. These favorable expense controls were partially offset by property taxes that grew 2.2% from the prior year period.

Next, let me give some color on the positive trends that continued in October. Move-in volume continued to be higher year-over-year, while move-outs continued to be lower, which drove same-store occupancy at the end of October to 92.4%, which is up 420 basis points, compared to the end of October 2019, and up 50 basis points sequentially from the end of September. This is an all-time high level of occupancy for our same-store portfolio.

As for street rates, they turned positive in October just under a 1% year-over-year versus down about 3% in Q3. Our customer acquisition strategies are clearly proving effective at capturing demand, while we remain disciplined on starting rate and discounts.

Now, as Tammy noted, with only one quarter of the year remaining, we've reinstated full-year 2020 guidance, which includes positive growth for both revenue and NOI in our same-store pool. For full-year 2020, we expect the following: core FFO per share of $1.66 to $1.68, or 8.4% growth over prior year at the midpoint; same-store revenue growth of 0.75% to 1.25%; opex growth of 1.5% to 2%; NOI growth of 0.25% to 1%; and wholly owned acquisitions of $400 million to $500 million. Additional guidance assumptions are outlined in our earnings release.

I would like to highlight that we have a challenging year-over-year expense comp in the fourth quarter, primarily due to favorable property tax adjustments last year, which will mute same-store NOI growth for the quarter. But importantly, midpoint of our revenue range implies growth of over 2% for the fourth quarter. These positive expectations should set us up well for continued strong performance in 2021, assuming the current fundamental recovery is not derailed by a resurgence of COVID infections or material impacts on our business from the economic recession.

Now, turning to the balance sheet. In September, we entered into an equity forward sale agreement to issue 4.9 million common shares for proceeds of approximately $160 million. We have six months from the time of the agreement to settle the forward, and we plan to use proceeds primarily to fund acquisitions. Further, evidencing our access to multiple sources of capital, during the third quarter, we issued 182,000 shares of common stock through our ATM program at an average price of $34.36 per share for gross proceeds of $6.3 million. We also issued $3.4 million of OP and SP units in connection with our acquisition activity.

Subsequent to quarter end, we funded our previously announced $250 million private placement, which extends our weighted average maturity to six years, lowers our average fixed rate borrowing cost and replenishes the capacity on our $500 million revolver.

Our balance sheet is well positioned with only $4 million of debt maturing through 2022, healthy access to multiple sources of capital and a net debt-to-EBITDA ratio of 6.0 times at the end of the third quarter, down from 6.3 times at the end of the second quarter. The strength and flexibility of our balance sheet positions us well to take advantage of the pick-up in acquisition activity we're seeing. We remain committed to delivering our investors stable cash flow from an outstanding property type, combined with disciplined external growth through accretive acquisitions.

Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Neil Malkin with Capital One Securities. Please state your question.

Neil Malkin -- Capital One Securities -- Analyst

Hey, everyone. Good morning.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Good morning, Neil.

Neil Malkin -- Capital One Securities -- Analyst

George, first off, with your comment about the storage facilities, maybe you should check to see if there's any missing mail imbalance [Phonetic] in there?

George Hoglund -- Vice President, Investor Relations

Yeah. That's something we have been focused on.

Tamara Fischer -- President and Chief Executive Officer

People worry about that creating some vacancy.

Neil Malkin -- Capital One Securities -- Analyst

Yeah. I hear you. So first one, you just mentioned, I think Brandon that it's about 2% implied growth for the fourth quarter. I'm just wondering if you could maybe elaborate a little bit about what the assumptions are. I'm assuming that the occupancy higher year-over-year will help. And I imagine, is it -- the renewals being in full force, accelerating street rate growth, any of those things, if you could walk through, that would be great.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Yeah. Neil, I mean, you pretty well captured it all there, but I'll try to add some color. I mean, the cadence of revenue growth as we went through Q3 was such that we were negative to start the quarter and then hit positive to give you that flat growth. And so, we have very solid trajectory going into Q4. I spoke about the occupancy at the end of the month for October, which is an all-time high. It's certainly the peak for 2020 and we're typically declining in occupancy sequentially at this point in the game. So, it's really those things, which I think you summarized, but I'm just reinforcing here that we're seeing.

Street rates, as I mentioned, it turned slightly positive in October. So that's in lockstep with the velocity of leasing. And right now we're just not seeing any signs of it abating. So, we're very optimistic about Q4 and heading into '21.

Dave, anything to add?

David Cramer -- Executive Vice President and Chief Operating Officer

No, I would agree. I think what you've touched on is important and we're happy with rental velocities. The move-outs remain muted as well. So, we think that's a positive sign. Neil, the team is very focused on what we can do with in-place rate changes and looking at street rates.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

And, Neil, I guess, the one other thing I'd say is that, we talked last quarter about the various ways that we've been restricted. But by and large across our portfolio, there is very few geographies where we're restricted on things. You still have some price gouging and rate restrictions or caps predominantly in California. So, we're dealing with that. The State of Oregon, for the entirety of Q3, we still had restrictions on the ability to charge late fees and run our auction process. But starting in Q4, some of those activities can resume. And so, that also plays into the color commentary on October and going forward.

Neil Malkin -- Capital One Securities -- Analyst

Got you. All right. Thanks. And then another question I had is just based on your credit card info about the people who are moving in, does anything point to maybe accelerating in migration from some of those higher-priced coastal cities now that working from home is very widely accepted? Any commentary or anything that you've discerned when looking at that just to maybe see the trends or work how, where people are moving? That'd be great.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

We certainly -- you've heard the stories and anecdotally, we've seen some of this materialize. There is nothing really substantial in our credit card material. It says, we're seeing a tremendous amount. But you look at Florida, Phoenix, Nevada, those places, we've certainly seen some uptick from that inward migration into those states, but nothing that's, in my opinion, really tip the scales through the credit card data we're studying. Again, all the story lines exists like Tammy put in her prepared comments. I mean, it's -- all of the factors that are going on with the pandemic and in some of the things that we've seen.

Neil Malkin -- Capital One Securities -- Analyst

Okay. Yeah. I appreciate that. Last one, it sounds good about the LOIs, the acquisitions in the portfolio around -- sorry that you have queued up. Maybe can you talk about the pricing and then the composition of that in terms of portfolios, one-offs, pricing, all those things? Thanks.

Tamara Fischer -- President and Chief Executive Officer

Sure. Hi, Neil. This is Tammy. Yeah. So, we have about $300 million of deals in the pipeline, either under contract or under LOI moving forward contract. We saw a little bit of a flurry of activity. We thought it might have to do with the potential changes in tax law, but the activity continues. So, we're encouraged by that. For us, it's mostly one-off deals. There are a couple of smaller portfolios. And I think we do have an opportunity to look at any portfolio that hits the market. But pricing is -- I read around the six cap range, I'd say. Some for portfolios, it's a little bit lower than that and one-offs, especially when assets that come out of the captive pipeline a little bit higher than that. So, that's kind of the long and short of it.

Neil Malkin -- Capital One Securities -- Analyst

Thanks.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thanks, Neil.

Operator

Our next question comes from Smedes Rose with Citi. Please state your question.

Smedes Rose -- Citigroup -- Analyst

Hi. Thanks. I just wanted to ask you a little more about the percentage changes you saw in the quarter on move-in and move-outs. And did you see -- or it sounds like you did see maybe a slowdown in move-out activity. And do you think about that sort of normalizing as we get back to a more normal world? Or how should you -- how should we think about maybe occupancy going forward?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

It's a great question and I do agree, move-out activity is moving a little bit more toward normal as we saw coming out of the third quarter. Thus far, in October, a little more. It's still muted. But it's starting to move more toward normal. The encouraging thing is rental velocity has stayed very high. And so, I think that's a nice trend. I think the rental velocity will stay high. But I do agree, move-outs will move a little bit more toward normal as we go through the end of this fourth quarter and into next year.

Smedes Rose -- Citigroup -- Analyst

Okay. And then you put in the guidance for this year. So, will you now be reinstituting guidance going forward?

Tamara Fischer -- President and Chief Executive Officer

I don't have any reason to think that we wouldn't. I mean, that's something that we have done since our IPO. And based on everything we know right now, Smedes, I would fully expect that we'll put the guidance out for 2021 with our year-end earnings release in February.

Smedes Rose -- Citigroup -- Analyst

Okay. Fine. And then, Tammy, I just wanted to ask you to -- I don't know what -- how much you can say, but it seems like the simply self-storage portfolio that recently traded would have been a nice complement to assets that you had purchased earlier. Was the scope of that deal just kind of too large for the Company to contemplate? Or was it just a matter of a pricing? Or I don't know what you can maybe just kind of -- I'd be interested to hear your thoughts on that?

Tamara Fischer -- President and Chief Executive Officer

Not at all. I mean, I think it's safe to say that we have an opportunity to look at any portfolio that hits the market. And certainly, that looked like a great portfolio. The pricing, it looked to me was quite aggressive. And for us, it's a matter of remaining disciplined and acquiring assets and portfolios that are accretive over the long-term for our shareholders.

Smedes Rose -- Citigroup -- Analyst

Do you see institutional capital coming in when you're looking at smaller deals? Or is it mostly in these kind of larger portfolio type transactions? Just sort of thinking about people who are coming to the table as you're trying to get acquisitions done.

Tamara Fischer -- President and Chief Executive Officer

We're seeing more institutional capital, really transaction-to-transaction. I think that our PRO structure gives us some opportunities to see deals that others may probably don't see. That gives us an advantage in the acquisitions market. And to a certain extent, some of the markets that where we've been focused over the years are not as appealing to the institutional capital but it's definitely competitive. There is no question about it.

Smedes Rose -- Citigroup -- Analyst

Okay. Okay. Thank you. Appreciate it.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Juan Sanabria with BMO Capital Markets. Please state your question.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi. Thanks for the time. Just curious on the acquisition funding, how you're thinking about funding that, given where your balance sheet today is and your willingness to kind of use the equity at this point and/or lever up to effectuate this transaction.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Hey, Juan, it's Brandon. Thanks for the question. So, we've positioned ourselves throughout this year to be ready for exactly what we're seeing this fourth quarter and going into '21 with pickup in acquisition volume. We did, as I mentioned in the opening remarks, get funding on our private placement transaction, which takes down the revolver balance to completely undrawn today. So, we have $500 million on the revolver. We have $160 million equity deal yet to fund and we have through March to take that down. So putting it in relation to the $300 million of acquisition activity, Tammy spoke about, that will be equity funded by about half and then we will certainly use that revolver. And then going into '21, it will be the same strategy that we've stated. We run a net debt-to-EBITDA range of 5.5 times to 6.5 times. We've been within that through this year and expect the same going forward.

Juan Sanabria -- BMO Capital Markets -- Analyst

Great. Thanks. And then just a question on the deals you have sourced. Were those to the PRO structure, the $300 million that you referenced?

Tamara Fischer -- President and Chief Executive Officer

It's a combination of assets coming out of the captive pipeline assets that were identified and sourced by our PROs and assets that are underwritten by our corporate acquisitions team. So -- and it's spread relatively evenly across the board and to the extent, you're looking at portfolios that obviously from a volume standpoint starts to take up a lot of space.

Juan Sanabria -- BMO Capital Markets -- Analyst

And then just finally, just on the rent bumps to existing customers. With the occupancy being at all-time high levels, are you more likely to push kind of a boundary there and see if you could become more aggressive, maybe taking people up to street or even may be higher kind of quicker or -- just your thoughts on that would be appreciated.

David Cramer -- Executive Vice President and Chief Operating Officer

That's a good question. We are evaluating all those scenarios. We have some test programs that are being pretty aggressive. We certainly feel like it's a good opportunity for us to maximize as much as we can. We did a good job coming out of the no increases in the second quarter. We use the third quarter to really work hard at trying to get caught up and that's carrying a little bit in the fourth quarter. But yes, I think we're looking at all those pieces and then we're pushing where we can.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thank you.

Operator

Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please state your question.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi. Thanks. Good afternoon. Just first, following back up on investments. I'm just curious in terms of the -- funding those acquisitions, is the forward equity to be used sort of dollar-for-dollar with the first $150 million or so of that you expect to close before the end of the year. Is that how we should think about funding those or will you look to settle those sort of unevenly over the next several months?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Yeah, Todd, this is Brandon. I would think about it more like a 50% match, so that it sits kind of nicely with the $300 million that Tammy mentioned in the $160 million. I will tell you that with this volume that we're seeing, there is definitely sellers that are motivated to close in 2020, largely due to potential tax law changes. And so, we're working to accommodate that provided, obviously, we can get through our normal diligence process. So, some of the expected funding of that forward will depend on how successful we are in closing some of that in -- by the end of December versus some of that could creep into January.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then it sounds like you're still seeing stabilized deal pricing in the 6% range, which is about where you've been buying for some time now it seems. Are you starting to see some cap rate compression at all on single assets and what do you think the premium is for a portfolio today? What's the difference in pricing look like?

Tamara Fischer -- President and Chief Executive Officer

So, I think the pricing -- we're definitely seeing some cap rate compression. There is no question about that. But I would say that it's very market specific. And so, in the bigger markets, more dense markets, cap rates are a little bit lower. And in some of the secondary and tertiary markets, we're still seeing cap rates in the 6-plus range. Portfolio premiums are probably in the 75 basis points to 125 basis point range. That's how we're seeing it and thinking about it right now.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then just a question on the Simply transaction, I guess, and there being sort of a new entrant in the space. There have been many new entrants in the space over the last several years. Quite a bit of capital are coming in the self-storage. But do you think that the landscape changes at all now? Do you think it becomes more competitive for acquisitions, for you to compete with sort of a platform buyer and sort of Blackstone in the mix here?

Tamara Fischer -- President and Chief Executive Officer

So Blackstone has been acquiring assets and trying to deploy capital in self-storage for a couple of years now. And so, we're used to seeing them with this new platform that they've acquired. They certainly maybe more aggressive. But ultimately, they -- I think they are buyers like the rest of us. Now, they have the advantage of using more leverage and they will be aggressive. We're not kidding ourselves. But I think that our -- I honestly think that our PRO structure will continue to give us an advantage. That combines with our focus on the secondary and tertiary markets.

So, we'll stay focused. So, I guess, maybe next quarter, we'll be able to give you a better answer on that and see what happens over the next couple of months. I guess, I don't know for sure what their strategy will be in terms of deploying capital. But I think they're going to try to close before the end of the year as I've understood it. And so, maybe the beginning of next year is when we start to face off with those guys.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

All right. Great. Thank you.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thanks, Todd.

Operator

Thank you. [Operator Instructions] Our next question comes from Ronald Kamdem with Morgan Stanley. Please state your question.

Ronald Kamdem -- Morgan Stanley -- Analyst

Hey. Two quick ones from me. Just staying on the acquisitions, just keep beating that dead horse, I guess. But maybe can you talk a little bit more about sort of the pipeline? I know, historically, you've only looked at mostly stabilized assets with maybe a few on lease up. But has that changed at all? And is there sort of a $500 million, $600 million opportunity every year in your markets to do stabilized assets? Or what is that mix? What could that look like sort of going forward as this environment gets a little bit more competitive?

Tamara Fischer -- President and Chief Executive Officer

Well, there are still a lot of assets to acquire out there. Using round numbers, if there are 50,000 self-storage facilities in the United States and call it, 18%, 20% are controlled by the top four or five operators, we have -- I think we still have a pretty good runway to acquire assets in that $400 million to $600 million range. And so, from our perspective, we are focused on stabilized assets. And yes, we are seeing deals that include non-stabilized assets and we are open to acquiring. We've always been open to acquiring them. It's just not our core strategy.

And, I guess, the only other thing I would point out is, one differentiating factor about NSA is our captive pipeline. And so, if you said, we have 140 assets valued at around $1 billion, over time we believe we'll have an opportunity to acquire those assets. So, between our strategy for external growth through the acquisition of third-party deals and through our captive pipeline, I think we'll be able to hit our targets in that, like I said $400 million to $600 million range. And, I guess, I don't want to wrap up without pointing out that we also have an opportunity to add another one to three PROs, and that timing is very unpredictable. We're always in conversations with a handful of private operators. And we do think we have room for a couple more operators to join the team. So, I think that does allow us to differentiate ourselves in our external growth strategy.

Ronald Kamdem -- Morgan Stanley -- Analyst

Great. That's helpful. And then just circling back to some of your opening comments, I think, provides some really helpful color just thematically about maybe what's driving the strength in demand that we've all seen, whether small businesses or work from home or people leaving the cities and so forth. My question is really, as we sort of think of next year, presumably, when we have a vaccine and things normalize, how is the Company thinking about, which of those demand drivers are sort of a one-time versus which could go away? And the other piece of that is, what's the market maybe not thinking about that could be a potential demand driver again in a more sort of normalized environment? Thanks.

David Cramer -- Executive Vice President and Chief Operating Officer

That's a great question. Hopefully, we get a vaccine and then we start to go back to what the new normal is, I don't think there's any guarantee that everybody goes rushing back to work. Work from home may stick. Certainly, you might see classrooms come back to normal. You would see the restaurant owners and some of these small businesses be able to pull some of their items back. Unlike the diversity in our portfolio, and so we don't particularly think we have one particular market that's going to go quickly rushing back or you're going to see a significant occupancy drop because of where we're at and where we're located in the country. So, we do think there's some stickiness here.

We think long-term, new people have got to introduced to self-storage who's never used it before, understand the convenience of it, understand the benefit of it, which we think is a long-term positive. And so, it's hard to know how soon it's going to come and how quick it's going to come. But I think for us, we were pretty happy with where we're positioned. And you look at housing market, you look at job market and you look at some of its relocation that's going out of the country, I think that also favors our portfolio and in the long-term through next year, I think helps us as we move forward.

Ronald Kamdem -- Morgan Stanley -- Analyst

Great. Helpful. Thank you.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Ki Bin Kim with Truist. Please state your question.

Ki Bin Kim -- Truist Securities -- Analyst

Hi. Good afternoon. Just sticking with the whole PRO commentary, what are the prospects of internalizing any PROs over the next year?

Tamara Fischer -- President and Chief Executive Officer

Hi, Ki Bin, this is Tammy. Back at the time of our IPO, we talked about the notion that maybe half of our PROs would be retired within 10 years. So, that would put us out the, call it, 2025. This year, with the internalization of SecurCare, our largest PRO, I think what they did with SecurCare debt is they demonstrated how it could work and how it would play out to other PROs. Right now, today, I can't tell you that we have any indication than any other PROs are planning to retire. But I will say, the success of the SecurCare internalization show some leadership and some opportunity. But no way of predicting when it might happen.

I guess, I would wrap up by saying, I don't have any reason to think that what we thought back at the time of the IPO won't still happen. Maybe half of our PROs will be retired by 2025, but again no clear line of sight on that today.

Ki Bin Kim -- Truist Securities -- Analyst

Okay. And in terms of the existing customer rate increase program, I was wondering if you could just put it in perspective. I know you and also other companies have reengaged it, but there's a little bit of a timing element, right, when you send it out, you got some click-ins. It doesn't turn on right away. So in the third quarter, I guess, from the eligible pool of customers that should have gotten one, how many actually got one and if that -- actually converted to cash flow?

David Cramer -- Executive Vice President and Chief Operating Officer

Good question, Kim. It's Dave. So, we certainly spent the time in the third quarter and it really came in the latter part of the third quarter. July was really testing the waters. August, we ramped up. In September, we got going really full gun on getting things put in place and getting our rate increases to happen. I think as we look into the fourth quarter, the revenue piece of it will start to come into play more and more in the fourth quarter as it takes typically 35 days to 40 days to get the rate increases to really fully implement and get and taken care of.

And so, we have been aggressive. We've been assertive. But I think what's also in front of us is in the fourth quarter, we do believe because of occupancy levels and the metrics we're seeing, we will be -- continue to be pretty aggressive through the fourth quarter, which typically historically hasn't been a strong, strong quarter for a really big push in IPRC. And so, that's -- I guess, that's the way we look at it. We are certainly testing, we're looking and we think the fourth quarter has still opportunities.

Ki Bin Kim -- Truist Securities -- Analyst

Okay. Thank you.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thanks, Ki Bin.

Operator

Thank you. There are no further questions at this time. I will turn the call back to Tamara Fischer for closing remarks. Thank you.

Tamara Fischer -- President and Chief Executive Officer

Thank you. And now that the bell has rung, the party is over. And I'd like to thank, everyone, again for your interest in NSA. And to reiterate, we're pleased with our third quarter results and the fact that self-storage continues to demonstrate its resilience in the face of challenging times. We're optimistic about the fourth quarter and we're looking forward to 2021. Be safe and healthy everyone. Bye.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

George Hoglund -- Vice President, Investor Relations

Tamara Fischer -- President and Chief Executive Officer

Brandon Togashi -- Executive Vice President and Chief Financial Officer

David Cramer -- Executive Vice President and Chief Operating Officer

Neil Malkin -- Capital One Securities -- Analyst

Smedes Rose -- Citigroup -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Ronald Kamdem -- Morgan Stanley -- Analyst

Ki Bin Kim -- Truist Securities -- Analyst

More NSA analysis

All earnings call transcripts

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