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National Storage Affiliates Trust (NYSE:NSA)
Q3 2021 Earnings Call
Nov 3, 2021, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to National Storage Affiliates Third Quarter 2021 Conference Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions]

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

George Hoglund -- Vice President of Investor Relations

We'd like to thank you for joining us today for the third quarter 2021 earnings conference call of National Storage Affiliates Trust.

On the line with me here today are NSA's CEO, Tamara Fischer; COO Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks management will accept questions from registered financial analysts. In addition to the press release distributed yesterday, we furnished 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 answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, November 3rd 2021. 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. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details 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.I will now turn the call over to Tammy.

Tamara Fischer -- President and Chief Executive Officer

Thanks George, and thanks everyone for joining our call today. Before we talk about our results for the quarter, I'd like to open by acknowledging and thanking our team for their extraordinary dedication and hard work, which allows us to again deliver exceptional results for the quarter.

The results we announced yesterday, including growth in same-store NOI of 24% and growth in core FFO per share of 30% are indicative of the ongoing strength of our sector, as well as the benefits of our differentiated structure. Continued near record occupancy levels have allowed us to assertively drive rate growth both for new and existing customers. And right now, there are no apparent signs of any near-term headwinds, which bodes well for the remainder of the year and implies a strong start to 2022.

On the external growth front, the volume of deals in the market remains at unprecedented levels. During the third quarter, we invested $600 million in 76 properties, bringing our total acquisition volume through the first nine months of the year to 119 properties valued at just over $1 billion. In October, we invested approximately $325 million in 39 stores. This results in our current year-to-date investment in acquisitions of over $1.3 billion, surpassing the top end of our prior guidance range.

Cap rates on these deals range from just below 5% to over 6% and vary based on location, source of the deal, whether it was marketed, off marketed or from our captive pipeline and whether there is a portfolio premium or some element of lease-up involved. But the weighted average cap rate on all of our transactions closed this year is in the mid-5 cap range. We continue to see meaningful competition for transactions and the amount of capital seeking to establish or expand the position in self-storage continues to drive cap rate compression, especially on larger portfolios.

We remain disciplined in our underwriting and continue to benefit from our PRO structure, which essentially provides us with 10 acquisition team and 10 operations teams across the country to source deals and integrate acquisition assets into our portfolio. About two-thirds of our deals closed this year have been off-market or from our captive pipeline, where we tend to buy at cap rate slightly above market. It's also worth pointing out that just over 10% of the deals we've closed year-to-date were in some stage of lease-up, which further depresses the first year cap rate.

As we look forward, we have additional deals valued at over $300 million under contract. So we expect to close by the end of the year. Our exceptional third quarter results, elevated acquisition volume and continued tailwinds in the sector. Let us do again revise guidance this quarter, we increased the midpoint of year-over-year growth in same-store NOI to 19%, full-year growth in core FFO per share to nearly 30% and revised our expectations for acquisition volume to $1.75 billion at the midpoint. Brandon will discuss our revised guidance further in his comments.

The fundamental backdrop for self-storage remains very favorable and our team is executing at a very high level to deliver exceptional results for all stakeholders. Our historical commitment to secondary and tertiary markets, as well as our differentiated PRO structure continue to serve us well.

I'll now turn the call over to Dave to provide color on what we're seeing on the ground. Dave?

David Cramer -- Executive Vice President and Chief Operating Officer

Thanks, Tammy. Overall storage fundamentals remain strong. Consumer demand has been driven by multiple factors such as job transition, geographically relocation, the housing boom, the tight rental market and the lifestyle changes, all of which are contributing to the high occupancy and rate growth. Pandemic-driven demand introduced a significant number of new customers to self-storage and we believe that much of this new demand will remain long-term.

Apart from the normal seasonality, we're experiencing, which has been muted compared to historical patterns we don't see any near-term sign of changes to the current favorable environment. Occupancy levels remain close to record highs, allowing us to continue our push on street rates, which averaged 27% higher this third quarter, compared to a year earlier. I mean, in the high occupancy level, we are able to hold discounting and concessions well below historical averages. We continue to be assertive on rent increases to in-place tenants, these rate increases are averaging high single to low double-digits.

Our rent roll-up in the third quarter, which is in the move-in rental rate versus the move-out rate was a positive 7%, which is up slightly from the 6% that we realized in the second quarter. The positive rent roll-up trend continued into October, which is impressive considering we normally be experiencing a rent roll-down in the fourth quarter.

The combination of strong street rates and assertive in-place tenant rate changes, continue to drive improvements in our contract rates. The contact rates have improved every month this year were up just over 9% for the third quarter. Keep in mind that we started the year essentially flat year-over-year. So we're pleased with the momentum of in-place rents and believe it sets us up well for the fourth quarter and heading into 2022.

We know that the 2020 comps are distorted due to the pandemic, but I'd like to give a two-year comparison to 2019. Our third quarter street rates are approximately 24% above third quarter 2019 levels and our in-place contract rates are about 8% higher as well, while it's very healthy growth over a two year period. We ended the third quarters occupancy of 96.2%, a 450 basis points year-over-year and the positive trends continued into October.

We're very pleased with how resilient occupancy has been, especially in light of the strong growth in rental rates on both new and in-place customers. Earlier this year we project the seasonal decline in occupancy from the end of June and the end of December in the range of 200 to 50 basis points. The occupancy is only declined 70 basis points and seems to be holding relatively steady in the 96% range. If you want to remind everyone that we managed to optimize our revenues not occupancy.

Turning to new supply, we've yet to see many meaningful shift in development activity in any of our markets. And the unprecedented consumer demand has [Indecipherable] the competitive impact of the new facilities that are coming online. Certainly, no shortage of developers, who want to build a self-storage and we do expect development activity to pick up. The construction and land costs are high and the entitlement and permitting process remains slow and cumbersome. We expect to continue to face some headwinds from new supply in Portland, Phoenix certain sub-markets of Dallas, Atlanta and West Florida.

Currently, just under 30% of our portfolio has a new competitor in the three-mile radius and under 50% within the five mile radius, these figures are in line with last quarter and flat to slightly down from here in 2020.I will now turn the call over to Brandon to discuss financial results and balance sheet activity.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thank you, Dave. Yesterday afternoon we reported core FFO per share of $0.57 for the third quarter 2021, this represents an increase of 30% over the prior year period. Third quarter same-store NOI increased by 24.3% over prior year, driven by an 18.4% revenue increase, combined with the 4.6% increase in property operating expenses.

Same-store occupancy averaged 96.5% during the quarter, an increase of 580 basis points, compared to 2020, while this is amazing growth as you've heard from us throughout the year. We think it's appropriate to look at average growth across the last two years. Thus removing some noise from the impact of the pandemic. For 3Q, the two-year average same-store revenue and NOI growth is 9.2% and 12.3% per year respectively. And core FFO per share growth over those same two periods is 20% per year, all very impressive levels.

Regarding opex, same-store growth picked up in the third quarter to 4.6%, due to the challenging year-over-year comp. Specifically, personnel costs increased 5%, due in part to more normal store hours and staffing levels this year versus the reduced levels of 2020. Also contributing to higher personnel costs is overall wage inflation and incentive opportunities for store employees, given the top line revenue and occupancy performance.

Another expense line item, which saw a higher growth was repairs and maintenance of 16.6% in the third quarter, partially due to the challenging comp as we limited spend last year to the most critical items. Other modest increases were property taxes at 2.4% and utilities at 2.2%. This expense growth was partially offset by marketing costs that were down 10.4%. Clearly with the elevated occupancy and strong demand that we're experiencing there was a reduced need for marketing spend.

Now moving on the guidance. Incredible internal and external growth we've experienced this past quarter, led us to increase full-year 2021 guidance as follows: Core FFO per share increases to a range of $2.19 to $2.22 or approximately 30% growth over prior year at the midpoint, and a 4% increase from the prior guidance midpoint. For same-store revenue growth of 14% to 15% implying that we drive year-over-year growth in the mid-teens for the fourth quarter, which is a slight moderation from third quarter growth, as we encounter a tougher comp. Opex growth of 3% to 4% and NOI growth of 18% to 20%. Additional assumptions regarding guidance are outlined in the earnings release.

Turning to the balance sheet, we were active in the third quarter on the capital front, much of which we discussed on our last earnings call and the details of which are in our earnings release. In summary, these accomplishments included on the equity side issuing nearly $600 million across our large follow-on offering in July. ATM activity and OP equity for acquisitions. On the debt side, we issued nearly $350 million across multiple channels in the third quarter. Subsequent to quarter end, we priced $450 million of senior unsecured private placement notes with the weighted average maturity of 11.2 years and a weighted average coupon of 2.88%. The transaction closing is subject to, among other things, market conditions and the completion of definitive documentation. However, we're working to have all the documents for the private placement signed very soon, at which time we will provide more specifics on the transaction.

The proceeds from these capital raises are being used to repay borrowings on our revolver and to fund our acquisition activity. Our balance sheet is well positioned with no maturities through 2022 and a fully available $500 million revolver at the end of the third quarter. We are committed to maintaining a conservative leverage profile with a net debt to EBITDA ratio of 4.9 times at the end of the third quarter and healthy access to multiple sources of capital.

Obviously, based on our revised acquisition guidance, the fourth quarter will be busy, but we are well capitalized and look forward to remaining and disciplined consolidator in our sector. 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 is from Neil Malkin with Capital One. Please proceed.

Neil Malkin -- Capital One Securities -- Analyst

Hey, everyone. Good morning to you, fantastic quarter. First one for me maybe bigger picture, Dave. Anyone who wants to take it. It seems like over the last 12 to 18 months, there's been a couple of step change functions higher in terms of demand changes and move out propensity, occupancy going extremely high. And I'm just wondering, if there are things that you believe are permanent from either COVID or sort of the great relocation that's happening right now? Or do you think that some of the things that are potentially driving more people to storage or perhaps making them stay longer, kind of, abate as the sort of COVID-related things ease up people's savings account, kind of, dwindle a little bit as stimulus is sort of stopped from the federal government? Maybe just, kind of talk about how you see that playing out over the next 12 months, that would be great? Thanks.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes. Thanks, Neil. Thanks for the question. Interesting question hard to have a real tight line of sight on how this demand in this current favorable environment really plays out. I don't think it's a short-term thing, I think usage is an all-time high for self-storage, which is great for us and our sector. I think the things that happened in the pandemic, we're accelerating things that are already happening in our country already. There's always been a push to more work-from-home, remote work a little bit things around lifestyle changes that were accelerated by the pandemic.

As you look at the transaction patterns of all the consumers around the country, it is certainly been an outflow from some of the -- some areas of the country into the Sunbelt markets, which is definitely [Indecipherable] us that's a permanent stick in my opinion. I do think a lot of things that we're experiencing from the demand piece are not going anywhere anytime soon. Even if return to work happened, I still think there'll be days at home or you have home office for an example. And so, we're encouraged by that and we're encouraged in the fact that the people are using our product are finding it very affordable, very easy to use, a great product overall that fits lifestyle. If you think of housing prices today and how high they've gone and what's happening in the rental market and all these things, it will take a while for those things to really change and self-storage is a very affordable product when you -- maybe can't by the size of house you want it or you have to downsize it little bit less of an apartment, because of cost. So I think long-term that's there.

Another thing I would tell you is, I think all of our teams have gotten a little bit better to this, I think our tools are getting better, I mean so -- so some of the gains that we've been able to have with occupancy in some of the -- we know the revenue gains we have as a function of demand, but it's also a function less doing our jobs better. So to me, I'm proud of what all of our teams have accomplished, I'm proud of what our tools and our technology improvements are weighing in for us right now. So I think a lot of good things for us as you go into the future.

Neil Malkin -- Capital One Securities -- Analyst

Well, that's great. Other one for me. Shockingly is on acquisitions you guys have been extremely active, I think, especially for your size, you've been able to source, you know, really robust amount of activity. I think it's a testament to your PRO structure. Can you maybe talk about what kind of product you're seeing on the market in terms of either quality, lease up component, are you seeing potentially more, more players maybe more institutional players given how your markets have fared, and the relative yield premiums you can get on going in cap rates and just kind of your outlook for the cap rate environment, kind of, near-term.

Tamara Fischer -- President and Chief Executive Officer

So I'll start and other members of the team can jump in here, if I missed something. But the volume of transactions continues to be literally unprecedented. And even as we head toward the end of the year, where it's actually not slowing down at all. The type of transactions that we're seeing are range from a large portfolios that can really large portfolios to one-off assets were -- that's where really we like to play. We are also very -- I think we've been very successful, we remained disciplined, but very successful in targeting our secondary and tertiary markets. And we like the cap rates there a little bit better now. We've also strategically invested in some non-stabilized assets.

And when I say non-stabilized, I'm talking about assets that are delivered and in some stage of lease-up. So maybe in the 70%, 75% range. But on the whole, I think that as you said, Neil, I think our structure continues to benefit us. We remain very active in our markets and again it's not to say that we won't look at everything that's out there. We look at the top MSAs, but from a strategic standpoint, building scale and the cap rate environment, we still like those secondary and tertiary markets, and that's where we continue to focus.

In terms of your question about capital chasing deals. There is a lot of capital, there's a lot of competition and I -- and we've said it many times and probably we'll continue to say it, but self-storage is a great place to be right now, it's a fantastic sector, it is evidenced by our peers results released over the last few days in our own results. And so naturally, I think, it is bringing new players and it's keeping us on our toes and it's highly competitive, but I also think that we will remain relevant in this consolidation phase. So and I'm not sure if I hit all of your points there or did I miss a couple of things.

Neil Malkin -- Capital One Securities -- Analyst

You now that's -- the only thing, I was just saying is, you know, I think a lot of other sectors have seen cap rate compression since the beginning of the year. So wondering if you can kind of comment on that specifically in the markets you plan just because I know that the yield game, I think is a little bit more important particularly, because of the PRO structure?

Tamara Fischer -- President and Chief Executive Officer

Great. So this is what I would say on the whole, we're buying assets in the 5.5 cap range. On the non-stabilized assets that we've acquired are below that in the mid-3 cap range. and that's your one yield. Stabilized yield on those assets is still in the 6 cap range. The thing that we like about the assets that we acquired that are sourced by our PROs either through their captive pipeline or through their relationships, and I think, I mentioned in my prepared comments about two-thirds of our deals have been sourced off market this year.

And I think that gives us an advantage from a cap rate standpoint. Having said all that, I -- there is still some cap rate compression. We're still pretty comfortable in that mid-5 range, we like 6 better, but I -- we're -- I think we'll just remain active and continue to go after those deals. And then we'll see where it goes, but we have seen cap rate compression that we've never seen before portfolio premiums, if they were 15 basis points to 20 basis points a couple of years ago they are -- upwards of 25 basis points to 40 basis points now, so it's challenging, but there is no shortage of transactions to look at.

Neil Malkin -- Capital One Securities -- Analyst

Thank you.

David Cramer -- Executive Vice President and Chief Operating Officer

Thanks, Neil.

Tamara Fischer -- President and Chief Executive Officer

You bet.

Operator

Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, good morning and thank you for the time. Just curious on the assumptions with regards to occupancy for the fourth quarter from the -- I guess the end of September and if you can give us where the spot is? Is is -- as at the end of October just to see how they're trending relative to those assumptions and guidance?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Yes, Juan, this is Brandon. So the spot occupancy at the end of October for same-store was 96% flat. And so that gets up 70 basis points, down from the end of June that Dave hit on in his remarks. As he said earlier, when we spoke last quarter we had estimated maybe 200 to 250 basis point drop that's from period in June, the period in December. The things if played out more favorably. Looking at a pre-COVID year, it would not be uncommon from June to October month end for you to have something like a 200 basis point or more drop in occupancy. So the fact that we're at that 70 basis point mark is very encouraging.

And so for the back half of the remaining couple of months, I mean, I think we are looking at something closer to a -- it could be in the 150 to 200 basis point range going from June to December period, but November and December historically, there has been movements over the next couple of months we'll be telling.

Juan Sanabria -- BMO Capital Markets -- Analyst

Okay, so the assumption and guidance is that 150 to 200 basis points that you just touched on?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

That's right, that's right.

Juan Sanabria -- BMO Capital Markets -- Analyst

Okay and then just with regards to rate is the expectation that, that continues to accelerate or grow on a year-over-year basis, that the numbers have been steadily going up? Or should we assume that, that begins to tail off as you have some tougher comps in the fourth and into 2022?

David Cramer -- Executive Vice President and Chief Operating Officer

It's a good question, and so there is a tougher comp in the fourth quarter and of 2022. I think what we see happening right now street rates are starting to level off and moderate, but we're not backing off on any type of in place changes and so as we look going forward, we don't see street rates declining to a considerable amount at all, that was probably plateau we stay aggressive and in the in-place piece of it. What we will see contract rate growth as we continue on through the rest of fourth quarter and into 2022.

Juan Sanabria -- BMO Capital Markets -- Analyst

And any chance you can get you guys to comment on what the earn-in is all else equal occupancy street rates for how you would start or what that is today, kind of going forward?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Probably, not a lot of color, you're going to get on this one, but just you're tying into the remarks I made about occupancy, I mean, if we do end up in that range that I said, it's going to give us a nice year-over-year positive number in terms of that occupancy spread. And so that's going to benefit us well in the -- the trajectory on the rate that Dave mentioned a 9% for the quarter, contract rate growth year-over-year. I mean, the trajectory of that throughout the quarter was just steadily improving. So we were closer to the low double-digits by the end of the quarter and certainly into October and so that's also tremendous tailwind that's kind of the most that will comment on in terms of looking into 2022.

Juan Sanabria -- BMO Capital Markets -- Analyst

Super helpful. Thanks guys.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

Our next question is from Steve Sakwa with Evercore ISI. Please proceed.

Steve Sakwa -- Evercore ISI -- Analyst

Yes, thanks. I might just wanted to follow-up on some of the Juan's line of questioning. Just to be clear, the 150 to 200 basis points is what you've got baked in, but I think so far the decline maybe I'm wrong, I wrote it down wrong, it was something maybe like 70 basis points max. So I'm just curious is that just your effort to be conservative? Is there anything that you're seeing in the recent weeks that would suggest that you're going to that level? Or that's just kind of what's happened historically and you just want to be cautious?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Hey great question, you know, it's more around what we've seen historically. And we did see some seasonality in the back half of this year, which encourages that things are returning back to what we would expect to be a little bit more normal patterns. Certainly, we're happy with rental velocity and move-outs are still muted. So those two factors in play, I will say we're 100% conservative, but certainly historical patterns [Indecipherable] movement in November and December, but we're pleased with where we're sitting right now.

Steve Sakwa -- Evercore ISI -- Analyst

Okay and then just to sort of go back to some of the acquisition questions, again if I've got my math right, you've basically have done a $1.3 billion, including what you closed in October and can't remember if it was brand, you know, Tammy said you had another 300, that was sort of under contract to close sometime in the fourth quarter, which would, sort of, puts you to $1.6 billion so above the low end of the range. But maybe still a little far away from the upper end of the range of $2 billion. So, are there things that you can actually get over the finish line that are not under contract today before year-end, or I mean our sellers really scrambling to try and get deals done before tax rate change? Or is the $2 billion, maybe just -- maybe really not realistic at this point?

Tamara Fischer -- President and Chief Executive Officer

No, I think it's achievable, Steve, good question and your math is right, but we are speaking to what we have close, what we have under contract and there is a fair amount more that is in some other stage of negotiation and sellers are highly motivated. And so it will come down to how much we can actually get done -- get it through third-party, you know, through diligence negotiations and get it closed this year. So I don't think that our range is at all unrealistic. I don't know if we'll get to the $2 billion. But it certainly can be done based on what we're seeing right now.

Steve Sakwa -- Evercore ISI -- Analyst

Got it and then maybe last question is, given the incredible strength we've seen in rent growth and high occupancies. I'm just curious when you're underwriting new acquisitions today. How are you sort of thinking about the new normal is kind of these numbers, the new normal or you sort of reverting back to something in between the old numbers and today's numbers, I mean, how do you sort of think about what stabilized rent occupancy will be two, three, four years from now?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Yes, it's a great question and it's a tough call. But we are finding our way probably in the middle, some place, we don't believe as competition comes and then maybe a shifting market issuance come that will put pressure on street rate. And so as we're looking to do properties we're really taking a look at what we think street rate and market rate really is. How we look at that? What will be next year and the year after. And then modeling of course our RRP -- IPRC models that we put into it. So I would say it's somewhere between, maybe the upper middle of what you're talking about what historical is to where we are now, but certainly we're in a very, very hot market right now and street rates are very, very everybody has done a great job taking advantage of the situation we're in, so...

Tamara Fischer -- President and Chief Executive Officer

And you know, Steve, we've talked about this before, too, but first and foremost, as you know we're highly motivated to grow externally and we have our targets and we've hit them every year and expected certainly hit or exceed this year, but we also remain disciplined. We are not going to fall into a trap of growing just for the sake of growth and so for us, it's all about underwriting good deals, that ultimately our strategic and accretive to our shareholders.

Steve Sakwa -- Evercore ISI -- Analyst

Great, thanks. That's it from me.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

Our next question is from Todd Thomas with KeyBanc Capital Markets. Please proceed.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, thanks. A couple of questions on acquisitions. Tammy, how much of the third quarter and or I guess remaining acquisition sorry expected through the end of the year here will be lease up or CFO deals. And do you expect to be able to maintain the yields that you discussed on investments, so that mid-5% range moving forward?

Tamara Fischer -- President and Chief Executive Officer

So through the third quarter the investment in non-stabilized assets was about $180 million and what we have under contract right now, well we closed in the -- and so that speaks to what we've closed through October. What we have remaining to close is a -- there are a handful of non-stabilized assets in there, but I do believe that on the whole, we'll be able to maintain that 5.5% -- that mid-5 cap range. It may come down a little bit with the remainder of our Q4 acquisitions, but it will be pretty close. Again, we're not really going for CFO type deals, we're -- most of what we're looking at is in some stage of fill up moving toward stabilization.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Right. Okay and then, you know, that I guess that pricing on acquisitions right, it seems to be above what we're seeing from others. And what we're hearing in the market. You mentioned that there is a premium you get from transacting off market in the captive pipeline, how much of this year's activity was in the captive pipeline specifically and sort of what's the premium that you think you get on those acquisitions?

Tamara Fischer -- President and Chief Executive Officer

It's hard for me to estimate the premium, but what I -- so let me start with your first part of your question about $80 million of our deals came through our captive pipeline. And I think that combined with the fact that in total about two-thirds of our deals have been sourced off market, have given us an advantage in that cap rate analysis. Whether that is -- we can compare it to what we're buying from third-parties and it could be easily 50 basis points, is what I would say, I think the captive pipeline is clearly come in at the higher end of the range and the off-market deals are upon cap rate up to [Phonetic].

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, and then your -- so your comments, just sort of looking ahead your comments about the amount of product coming to market being unprecedented. Do you anticipate this level of activity to continue into '22, I guess it will -- the first half of the year, which I believe historically has not been as busy. Well, traditionally, will it be much busier time of year in your view then it has been in prior years?

Tamara Fischer -- President and Chief Executive Officer

I believe they are potential exists, yes. And the reason is because the volume of deals and the potential sellers, who would like to get something I'm sure they'd like to get it done right now, but some of that's just not going to be -- is not going to be possible. And so it is going to fall into the first part of next year. While people have been and continue to be motivated by potential changes in tax law. I would also say that the amount of capital chasing deals in the pricing that we're seeing right now is keeping sellers interested. So it may fall off some, maybe some people who don't get their deals done this year, but we'll just pull back and hang on for a while. But based on what we're seeing and hearing, we believe that some of this activity will fall into the first part of 2022.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, great and just one last one. The updated guidance for acquisitions is the $1.5 billion to $2 billion is that NSA share of investments and is there interest to do anything sort of on a larger scale with a joint venture partner?

Tamara Fischer -- President and Chief Executive Officer

Yes, that assumes all on balance sheet. Our guidance range right now assumes all on balance sheet. And yes, we would be interested in doing something with the JV partner under the right circumstances, if it was a strategic move and we're have conversations with investors, who are interested and we keep that door open and there may come a time when it makes sense, we would definitely be open to it.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, all right, thank you.

Operator

Our next question is from Smedes Rose with Citi. Please proceed.

Smedes Rose -- Citi -- Analyst

Hi, thanks. I guess I just wanted to understand a little more too on the -- someone just mentioned that the cap rate seem, kind of, higher than what we're seeing for other acquisition opportunities in the market? You mentioned two-thirds are off-market and sort of outside of your captive pipeline? You know, I guess I'm just wondering why or someone selling to you at these rates and it seems like to be able to sell at a lower cap rate to someone else through maybe a more brokered process. I'm just trying to sort of -- is it just relationship-driven or you're talking about somethings it's outside of your captive pipeline, right, where you've kind of get [Speech Overlap].

Tamara Fischer -- President and Chief Executive Officer

So that -- it might be two-thirds basically get includes the $80 million. So -- but having said that it's still a big number and I -- and Smedes it's great question, I would tell you that it is relationship driven in every single case and in -- in all but one case when we're talking about anything of any amount of money the seller was interested in OP equity and so between our relationships and these are long-term relationships and our ability and willingness to work with the seller and the issuance of OP equity. I think, it did give us an advantage. But I think you're right, it was a fully marketed deal, seller might have left a little bit of money on the table. However, they got stock at a good price and I think they've done, OK.

Smedes Rose -- Citi -- Analyst

Okay. And then the other thing I wanted to ask you, it sounds like development activity hasn't changed a whole lot from what you've talked about in the last quarter. But it sound like in your opening remarks, you guys are expecting an uptick in development. Is that just because you feel like fundamentals are strong and it will draw new development in the space? Are you starting to see hear rumblings of more development that you think is coming. I just wanted to maybe clarify that?

Tamara Fischer -- President and Chief Executive Officer

I wouldn't say that it's anything that we are seeing specifically today. I think that our comments are probably a little bit more anecdotal, they are based on the same data that all of you guys see, which comes from primarily from Yardi [Phonetic] and maybe a handful of other sources. We also have the benefit of having conversations with our PROs, who are on the ground and they know what's going on and they stay very close to it, because it affects them in a very real way. So I think we form our opinions based on those facts in what we're hearing. But I also think that it's human nature, the sector has so -- performed so well over the last 18-months and even more than that, but what I think will slow it down, is that the entitlement process itself, which takes a very long time and I -- and then beyond that, the cost of the building products, the availability of the building products and shortage of labor.

So I don't think it's an imminent threat, but I think that it's just maybe common sense that it will happen again. And the question is really timing, is it 2024 little later than that, maybe the end of '23, but we don't see it happening near-term.

Smedes Rose -- Citi -- Analyst

Great. Okay, thank you.

Operator

Our next question is from Elvis Rodriguez with Bank of America. Please proceed.

Elvis Rodriguez -- Bank of America Merrill Lynch -- Analyst

Hi, congrats on the quarter and thanks for taking the question. You mentioned labor pressures and payroll pressures in the opening remarks. Can you maybe comment a little bit more on what you're seeing on the ground in your markets? And in particular, do you expect payroll increases to continue to exceed inflation going forward?

David Cramer -- Executive Vice President and Chief Operating Officer

Great question. Certainly the labor market is tight and so -- it's a little more clarity on that payroll part of our payroll uptick is also incentives, paid employees for the great performance. And so if you look at how strong revenue was and the metrics that affect our store operations teams across all of our PROs and ourselves, incentive levels are high, but we are seeing little bit of pressure from over time, obviously try to keep staffing levels at the right level and find an attract right team members is tougher now than it's ever been. And obviously there has been a handful of rate changes around certain states raising minimum wages and things like additive cross -- come across in the country. But overall, it's really tight labor market, we're doing our best to attract people doing our best to look for efficiencies within our systems and our operations to make sure that as we feel the wage pressure maybe we can find or past to do business. But I don't see the labor market using anytime soon at this point, we'll do our best to manage and I think we've done a good job throughout and creating the right culture and the right place for our team members to be and I guess navigated as we go.

Elvis Rodriguez -- Bank of America Merrill Lynch -- Analyst

Great, thank you. And just a follow-up. This might be in connection to labor and other expenses, but your same-store operating margins continue to improve. Is that a function of just having more scale as you get bigger in your individual submarkets, or is there something you're doing with technology or mix in sort of how you're changing and managing each individual stores at the PROs anything because you can share could be helpful, thanks?

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, great question. I think it's a combination of a lot of those things, certainly tremendous rate growth that we've had will certainly help your margins, high occupancy levels will help your margins. I mean we are looking at technology, how do we look at -- how we staff our stores, how many hours we're open with online rentals approaching 30%. So there is an opportunity to transact with the consumer and the way they want to transact and maybe that allows us to look at our office hours, we recently upgraded the call center platform to get a better technology behind that and really work on customer service and rental application there as well. So I think it's a handful of lot of things that are in play here.

Elvis Rodriguez -- Bank of America Merrill Lynch -- Analyst

Thank you.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed.

Ronald Kamdem -- Morgan Stanley -- Analyst

Yes, Hi, two quick questions from me, just sticking on the acquisition theme, so if I look at the $1.75 billion at the midpoint of the guidance, just could you give us a sense of what the total pipeline that you would look at in the year would be, is it like are you looking at $5 billion are you looking at $10 billion to be able to sort of close that $1.75 billion and I think sort of back to a previous question, which was -- we're thinking about over the next two to three years, is this sort of more sustainable or there is some really one-time bigger deals this year that we should be mindful of?

Tamara Fischer -- President and Chief Executive Officer

I think that -- I will tell you, Ron. Thanks for the questions that -- we look at every major portfolio that hits the market. And so, in answer to your question, how do you get to $1.75 billion, we probably have looked at, I don't know, Dave, would you get $10 billion portfolio is valued at every bid of $10 billion. And will this continue into the next two -- one, two, three, four years? It is impossible to predict. A lot remains to be seen, I think, what -- when we have this call again at the end of February, I have so much better line of sight on what we think is going to happen and at least in the next 12 to 18 months.

But right now it's really truly impossible to predict. It is an interesting phase of consolidation in this industry. I think that we -- on the inside have been expecting for a while. And yet how long does it go on and just how consolidated does the sector become, I don't know the answer to that, we've talked about historically we've talked about something like, let's just say 50,000 self-storage facilities in the United States. We take it, haircut it for non-institutional grade assets, so 40,000 assets in the United States and is a pace of acquisition this year if the number historically has been the top five plus on 18% or thereabouts. Dave and I would -- and Brandon were just talking yesterday was that number become, it will be interesting to see how this rolls out over the next six months or so, because that number is in our view going to be well over 20%. So it's a very good question. I don't have a -- certainly don't have a black and white answer, but it's certainly something that we're going to be watching and monitoring and our objective will be to remain relevant. And I think we're well set to do that.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, I think I would add and I think you touched on something there have been a couple of portfolios that transacted that maybe we wouldn't have thought would have transacted through this year, but I think, if you look at our acquisition activity in the amount of even one-off and smaller portfolios and the amount of activity we've done, because of relationships and all the things we do, as I look forward '22 and beyond. I think we stay very active there and it's not always about the one-off big portfolio that really helps us in our acquisition activity.

Tamara Fischer -- President and Chief Executive Officer

Yes, good point. Back to the blocking and tackling.

George Hoglund -- Vice President of Investor Relations

We lose you Ronald.

Operator

[Operator Instructions] Our next question is from Kevin Stein with Stifel. Please proceed.

Kevin Stein -- Stifel -- Analyst

Good morning, guys. I was just wondering support [Indecipherable] your larger markets, and it's been doing really well. It's one of the top performing markets, but also had quite the development for like the last few quarters. So I was just wondering why your portfolio is doing so well? Is it because demand is just so strong or is it development isn't near your store? Thanks.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, great question. And we talk a lot about Portland, Portland still remains our most challenging market with the amount of new supply that's in the market. A couple of things have got uncertainty, the new demand has certainly helped the Portland market and help all of the market -- the self-storages in that market, a better success. I think the team up there in Portland and has done a great job and really implementing strategies around pricing and discounting and attraction of customer acquisitions. And I think they've done a good job repositioning themselves in that competitive market and I think that shows in their performance. And I think we need to call out, they've done a wonderful job. If you really look at it, so Portland still trailing our average portfolio of occupancy by about 3%, so you can see, there's still pressure there. You can see where the new supply still remains there.

Oregon as a whole has seen some migration. There has been some movement around Oregon and so if you look outside of Portland, Oregon has really, really done exceptionally well. But I don't -- you get back to your question, I think the teams did a better job and certainly the supply, the demand factors helping with all the supply, sir.

Kevin Stein -- Stifel -- Analyst

Got you. Thanks.

Operator

Okay. We do have Ronald back. So we'll jump right back to him.

Ronald Kamdem -- Morgan Stanley -- Analyst

Sorry about that, just the second question is just looking at expenses a little bit. And the reason I ask is, because I think a lot of the -- here is -- if have they either increased wages give special sort of incentive in 2020. So that in 2021 expenses were actually sort of down. So I guess the question is really obviously property tax expenses are what they are? But is there expense savings opportunities that you're thinking down the road three, four or five years down whether it's with increased penetration of e-rentals, whether it's the marketing expenses that you may not need, because of occupancy granted the margins already pretty high, but just curious how you guys thinking about potential expense saves opportunities down the pike? Thanks.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, great question, Ron, and we're always thinking about that and I think you touched on a few of them is how do we take technology and platform and make it better online rental, if we can continue to increase our online rental presence, obviously that may see some opportunity around stores and maybe overall personnel costs. Certainly with the customer acquisitions platform and really the revenue management platforms that are still new to us. I mean, revenue management for us is only 21-months old. Our customer acquisition platform continue to be an updated. I do think there's ways to find efficiencies there and really looked at overall operating efficiencies.

I am very pleased with what our margin growth has been and we've had really good margin growth this year. All of our PROs and their teams and our corporate team has done a good job focusing on where we can be efficient and really drive down expenses where possible or maintain and really drive on revenue. So I think we're looking at all those things, I do think we run very lean. It's not like there's a lot of fat hanging around in our organization around our properties in our organization. So we'll do our best to find those efficiencies and implement.

Ronald Kamdem -- Morgan Stanley -- Analyst

Right. Thank you.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

Our next question is from Wes Golladay with Baird. Please proceed.

Wes Golladay -- Baird -- Analyst

Hello, everyone. I want to dig in a little bit into the drivers of the above average occupancy levels. Is it mainly driven by the demand more move-ins, or is it a lack of churn, the move-outs?

David Cramer -- Executive Vice President and Chief Operating Officer

Good question. I would say the majority of it's lack of move-outs. Our rental volumes are vigorous, but it's really that muted move-out volume that's really elevated the occupancy level.

Wes Golladay -- Baird -- Analyst

Okay. And then when we look at the -- I guess the lease up deals, can you remind us how long those typically take to lease up and where that is now, to get to that 6% stabilized yield?

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, I mean, certainly the lease up schedule certainly tightened with the demand that's going on, we're seeing properties that maybe with the least in 24 to 36 months, or maybe 20 to 24 months now. So we're certainly seeing quicker side of it. Most of what we're purchasing though is it has a lot of the physical occupancy in place and what we're working on is getting the rate back up where it should be. So very quick fill, you know, the high physical occupancy levels, but now we need to work on getting the discounts to burn off and really get the rate where it needs to be. And for us, we look at stuff that most of our assets, we're buying will be stable by year two.

Tamara Fischer -- President and Chief Executive Officer

And I would just add to that the stabilized yields on those assets is estimated to be about 6% and the average occupancy was in the mid-70% range and announced it, what we're classifying as non-stabilized assets.

Wes Golladay -- Baird -- Analyst

Great, thanks for the time.

Tamara Fischer -- President and Chief Executive Officer

Yes, you bet.

David Cramer -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

We now have a follow-up question from Neil Malkin with Capital One. Please proceed.

Neil Malkin -- Capital One Securities -- Analyst

Thanks everyone. Dave, just a question on the in-place, the benefit from the in-place customer renewals. So because of move-outs are lower more of the population now every month, every quarter is eligible for renewal increases and obviously the lower churn means that more people are taking them. So can you just talk about how, what that looks like, what is the sort of quarterly potential of the portfolio that eligible for a renewal increase versus like maybe pre-COVID and how far below or is it above the sort of renewal rents from market almost like a loss to lease, if you will, for your existing customers, just kind of get a sense on how much more you can push? Thanks.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, great questions, Neil and a lot to kind of unpack there. So first of all, we're in a positive rent roll up right now and we were through October, which is a good place to be as far as given us the ability to really be assertive on what we want to do, in case we haven't as somebody move out, we're actually replacing them right now at about a 4%, 4.5% improvement on a new tenant coming in the door. We certainly were around in place tenants have the opportunity to push harder and more frequently and we're bullish around that.

So what we've seen is the frequency of tenants that are getting rate increases probably increase 2%, 2.5% on average per month of what we would normally be doing particularly this time of year. And as we talked about low single -- low double-digit increases is probably more the norm at this point in time. We really shifted to removing some of the caps maybe removing some of the ways we think about replacement of that tenant. And in my -- you probably heard me talk about this before, more of a lifecycle, if you're going to be with us on average 16 months, how do we maximize that time efficiently through our in-place rent change program.

Neil Malkin -- Capital One Securities -- Analyst

Okay. Yes, and -- of last thing I had was the -- these eviction moratoriums and some of the coastal markets have been expiring, some shorter or in sooner than others, and in particular, your West Coast portfolio. Are you seeing or do you expect to see some near-term windfall if those evictions, which could be pretty sizable continue to play out or come to fruition?

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Certainly, I think we will seek, that's going to create transition, in the meantime we have transition with great opportunity for having people need in our space. I think the interesting thing now is we are -- you mentioned the West Coast, we're fairly pull out there as is everyone. And so I think obviously will help in the fact that we can probably continue to be very and sort of on-street rate, but I think for the folks that are getting evicted it's going to be a challenging time and the fact that I think Storage basis pretty lean on some of these areas. So certainly we'll do our -- we go out what we normally do, we'll look at opportunities and do what we need to do there, but it certainly will create transition, yes.

Neil Malkin -- Capital One Securities -- Analyst

Okay, thank you guys.

Operator

And we do have a follow-up question from Smedes Rose with Citi. Please proceed.

Smedes Rose -- Citi -- Analyst

Hi, I just wanted to ask you, I think in the past you've talked about the acquisition targets at about annually about 10% of enterprise value. Is that still sort of a good metric to think about as we model going forward for next year?

Tamara Fischer -- President and Chief Executive Officer

That's a great question. Smedes, I think that is certainly something that we have said historically and I'd like to say, yes. So I think that's how we should continue to think about it, but the one thing that I would add is that the way that we have talked about it historically, is that on average, we'll acquire about 10% of our total enterprise value year-over-year. And so, some years we will and some years we will not hit that and sitting here today, it's a little hard to predict what 2022 will look like. I think we still hold that out as a goal of ours, but I'm going to focus on the average part of it, since it's been such a big year this year.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Yes, Smedes, this is Brandon. Just one other thing on that, I mean, obviously with the year like this year so unique and much of what we're doing is back-half weighted. So obviously that serves 2022 more than it will '21 in terms of like our bottom line core FFO per share growth. So that's just another way that we think about much of what we're doing this year is serving us over -- maybe not a '21 calendar year, but obviously into next year.

And then just a point of color on that, since I mentioned it the -- of the $600 million that we did in Q3. The vast majority of that was in the month of September, around $425 million specifically was in the back half of the September month, just as it helps. When you think about modeling and what's not -- what we're not getting the benefit of it in Q3 that will have for a full quarter of Q4 and into next year.

Smedes Rose -- Citi -- Analyst

Thank you. Appreciate it.

David Cramer -- Executive Vice President and Chief Operating Officer

Yes, thank you.

Tamara Fischer -- President and Chief Executive Officer

Thank you.

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Thanks. Smedes.

Operator

We have reached the end of our question-and-answer session. I would like to turn the call back over to Tamara Fischer for closing remarks.

Tamara Fischer -- President and Chief Executive Officer

Thanks again for joining our call and for your interest in and support of NSA. And as many have that, it's a great time to be in self-storage. I'll also reiterate our thanks to our team members and our PROs, whose efforts are key to NSA, once again delivering sector-leading results. We look forward to connecting with many of you next week during NAREIT. Thanks.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

George Hoglund -- Vice President of Investor Relations

Tamara Fischer -- President and Chief Executive Officer

David Cramer -- Executive Vice President and Chief Operating Officer

Brandon Togashi -- Executive Vice President and Chief Financial Officer

Neil Malkin -- Capital One Securities -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Smedes Rose -- Citi -- Analyst

Elvis Rodriguez -- Bank of America Merrill Lynch -- Analyst

Ronald Kamdem -- Morgan Stanley -- Analyst

Kevin Stein -- Stifel -- Analyst

Wes Golladay -- Baird -- Analyst

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