Good day, and welcome to the Life Storage Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, today event is being recorded. I would now like to turn the conference over to Dave Dodman, Senior Vice President, Investor Relations and Strategic Planning. Please go ahead, sir.
LSI Life Storage
Good morning, and welcome to our fourth quarter 2020 earnings conference call. Leading today's discussion will be Joe Saffire, Chief Executive Officer of Life Storage; and Andy Gregoire, Chief Financial Officer.
As a reminder, the following discussion and answers to your questions contain forward-looking statements.
Our actual results may differ from those projected due to risks and uncertainties with the company's business.
Additional information regarding these factors can be found in the company's SEC filings. A copy of our press release and quarterly supplement may be found on the Investor Relations page at lifestorage.com.
As a reminder, during today's question-and-answer session, we ask that you please limit yourself to two questions to allow time for everyone who wishes to participate. Please re-queue and follow up with any additional questions thereafter. At this time, I'll turn the call over to Joe.
Good morning and thank you for joining this morning's call. I'd like to open my remarks by acknowledging our Co-Founder and former Executive Chairman, Bob Attea, who sadly passed away, in December, from a short illness. Bob was a true visionary who guided Sovran into self-storage, back in 1985, and he will be very missed.
So, we are pleased to report fourth quarter and full-year 2020 results that I believe Bob would be very proud of.
As I think back to where we were in late March and early April last year, I cannot be more pleased with how our business has performed, and who we are positioned as we begin 2021. In the early days of the pandemic our priority was the safety and health of our roughly 2000 teammates, and more than 500,000 customers. Decisions were made with a keen eye on our core values; teamwork, respect, accountability, integrity, and innovation. And I believe that our favorable operating results reflect that. We grew adjusted funds from operations in 2020 by 5.9% despite the global pandemic. Operationally, we continue to maintain record same-store occupancy for this time of year, 92.8% as of the end of January, almost 370 basis points higher year-over-year. I believe customers are attracted to our online rental platform and its differentiated and innovative features, such as tiered pricing. January represented the eighth straight month where roughly 30% of our movement came via our self-serve platform. I am proud that we were the technological leader and early adopter of the online self-serve channel. Though we continue to see robust demand throughout our network, a few regional highlights include, our Metro New York City, New England, and Boston regions, which were each up more than 500 basis points in occupancy, and 900 basis points in revenue in the fourth quarter year-over-year. Also strong were St. Louis, Sacramento, and Tampa.
As it relates to investments, we continue to be very active and acquired nine stores in the quarter for almost $115 million.
Our total investment for the year was just over $530 million with the acquisition of 40 stores, 32 of which were managed by us as part of our joint venture portfolio, and as such are in markets we know well. We grew several existing key markets by adding stores in the Greater New York City area, Philadelphia, Los Angeles, Tampa, Miami, Atlanta, and Dallas, among others. 2021 is off to a good start, with 13 stores closed or under contract thus far, representing a total investment of roughly $200 million. We remain focused on building our portfolio in markets with attractive demographics and rates per square foot greater than our portfolio average.
Our third-party management business had one of its strongest years as more and more owners recognize our leasing same-store performance and innovative technologies. On a net basis, we added 66 non joint venture stores to our management platform, representing 38% growth for the year. With regards to Warehouse Anywhere, we now have three micro-fulfillment centers in Atlanta, Las Vegas, and most recently, Chicago, and are actively working with our partner, Deliverr, on the next three to six locations. We believe our Warehouse Anywhere platform uniquely positions us to leverage our self-storage real estate assets to capitalize on the consumer shift for an e-commerce and last-mile delivery. And finally, we have reinstated guidance with a slight broader range than normal, primarily due to the COVID-related uncertainties as they relate to ongoing demand this year. I'll now turn it over to Andy to walk through the details of the quarter and our outlook for this year.
Thanks, Joe. Last night, we reported adjusted quarterly funds from operations of $1.07 per share for the fourth quarter, an increase of 11.5% year-over-year. Fourth quarter same-store revenue accelerated significantly to 4.9% year-over-year, up from just a 1.2% increase in the third quarter. Revenue performance was driven by a 310 basis point increase in average quarterly occupancy. Considering that we started 2020 with occupancy that was 30 basis points lower year-over-year, to finish the year with 330 basis points higher is amazing. Growing occupancy has been a priority for us. And our team has done a tremendous job adding customers to our platform. That occupancy is augmented by positive rent rollout. In the quarter, our move-ins were 4% more than our move-outs which is a significant improvement from the rent roll down of roughly 1.5% that we experienced in the same quarter last year. Same-store operating expenses increased only 1% year-over-year in the fourth quarter. Increases in repair and maintenance, payroll and benefits, office and other operating expenses were offset by decreases in real estate taxes, utilities and marketing. Payroll and benefits included the impact of $300,000 onetime bonus payment during the fourth quarter to select store team members who have been with us since early 2020 and worked tirelessly to adapt to rapidly changing operating procedures to keep their fellow teammates and customers safe and healthy. Absent that payment, payroll and benefits would have increased only 70 basis points in the fourth quarter. The net effect of the same-store revenue and expense performance was an increase in net operating income of 6.8% for the quarter.
Importantly, our balance sheet remains strong. We supported our acquisition activity and liquidity position by issuing approximately $140 million of common stock via our continuous equity offering program in the fourth quarter.
We also filed a new $500 million continuous equity offering program late in the quarter. In the early January 2021, we issued approximately $94 million under the new program to fund expected first quarter acquisitions.
Our net debt to recurring EBITDA ratio decreased to 4.5 times -- I am sorry, to 5.4 times. And our debt service coverage increased to a healthy 4.7 times at December 31st. At quarter end, our $500 million line of credit was almost fully available. And we have no significant debt maturities until April of 2024 when $175 million becomes due.
Our average debt maturity remains over seven years.
Regarding 2021 guidance, we expect same-store revenues to grow between 3.75% and 4.75% for the 2021 fiscal year.
Excluding property taxes, we expect other expenses to increase between 2.25% and 3.25% while property taxes are expected to increase 6.75% to 7.75%. The cumulative effects of these assumptions should result in a 3.75% to 4.75% growth in same-store NOI. Consistent with our past practices, we are not including in our same-store group any stores acquired in the early stages of lease-up that were less than 80% occupied at market rates as of the beginning of 2020. By 2021, same-store pool is expected to increase by 16 stores from 515 to 531 stores. And we do not expect this change to have a material impact on same-store growth rates. We anticipate general and administrative cost to be between $56 and $57 million. Growth in G&A relates primarily to improvements to talent and additional teammates to support our increased store portfolio which grew by 8.5% in 2020.
As a reminder, we allocate cost associated with management of our three PM portfolio to G&A. Anticipated investments for 2021 include approximately $400 million of acquisitions, expansions and enhancements of roughly $45 million, and investments in joint ventures to be between $20 and $25 million. Based on these assumptions, we anticipate adjusted FFO per share for the 2021 year to be between $4.18 and $4.28. And with that, operator, we will now open the call for questions.
We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Juan Sanabria with BMO Capital. Please go ahead.
Hi, good morning, guys. And hope you're doing well.
Just firstly, just curious if you could give us a sense of the same-store revenue trajectory over the course of the year, and maybe a first-half second-half split? And in particular, maybe how you expect occupancy and rate to trend throughout the year in the same-store perspective?
Sure, Juan. We had a strong fourth quarter, so we expect to start the year strong with the occupancies [indiscernible] rates are moving nicely, meaning street rates; you would expect the first-half of the year to be very strong.
Second-half of the year is where we expect it to return to normal.
So our model, we expect a return to normal. In the second-half we would see occupancy actually below in the model, below where it ended 2020. Rates will be strong first-half of the year. What happens in the second-half, again, we assume we go back to a normal seasonality where we see occupancy decline from the summer months, some about 200 basis points from July to December.
So that would be our expectation, and that's how we built it through the guidance.
So hopefully that helps you out.
And what do you, I guess, consider normal in terms of rate? You kind of talked about the occupancy declines, if you could just give us a little bit more color on --
Sorry, I was just -- I was on mute, kind of story of 2020 continuing into '21.
If you could just give us a sense of what normal rate growth means -
Hello. Yeah, can you hear me?
You just redial.
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Is he getting back here?
Could you call that number, Dave, for me.
Yes, and pardon me, everyone. This is the operator. We're going to get the speaker line situated here.
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Just letting you know we're still getting the speaker line reconnected. And we thank you for your patience. The call will resume here momentarily. Thank you everybody. And pardon me, everyone, this the conference operator. And once again, apologies for the delay.
We have our speaker connection rejoined. Juan Sanabria, if you could please restate your question. Thank you.
Sorry about that. I was just curious, Andy, if you can give us a little bit more color on what normal means in terms of your rate expectations? You gave us some sense of occupancy with the seasonality in the second-half, but any more color on the rate would be helpful.
Yes, on the rates, where we saw them in the fourth quarter was where we saw rates up almost 5% for incoming customers. And we see them up 9%, in January. We would expect in the second-half of the year for those to be more normal levels, up 2%, 3%, 4%, in that range.
So it's in the low single-digit numbers is what we're assuming for rates in the second-half of the year.
Great. And just my last question, in terms of geography performance, Joe, you gave a little color at the beginning. But curious on what you're seeing from some of the cities, and maybe you're ahead of the curve in terms of reopening, in terms of demand, and importantly, move-outs and any kind of lessons in terms of the return to work, how that's faring across the portfolio?
Yes, hi, Juan. No, to be honest, Juan, I think we've said it for the last couple quarters now. It really has been kind of coast to coast in terms of -- of in terms of strength. I mean even our lowest markets, in terms of move-ins, Atlanta, Miami; we're up 11% each.
So that gives you a sense of just how robust the whole industry has been.
So, it really is a matter of who are the best performers versus where the weak ones are, because there really is no weakness. It's been pretty strong since, obviously, things started to reopen in September-October, and it's remained that way.
Thank you, guys.
All right, thanks.
Sorry about the [indiscernible]…
Our next question today comes from Todd Thomas with KeyBanc Capital Markets. Please go ahead.
Hi, thanks. Good morning. Andy, just following up there, just about your comments there suggesting a more normalized environment, I guess, in the second-half of '21 in terms of occupancy and move-ins and rates. Does that imply that you might anticipate a good amount of demand that materialized during the last several months to vacate? And are you expecting same-store revenue and same-store NOI growth to potentially sort of flatten out or perhaps go negative in the second-half of '21?
Hi, Todd. We don't expect negative in the second-half. We do expect low single digits in the second-half. It's a tough quarter. We just had a great quarter, when you look at 4.9% revenue growth and 6.8% NOI, we have a tough quarter. Obviously, our investments in technology paid off early and we were early adopters, and we think we gained more than our share this year.
So we had a great second-half of the year. And we just think when you return to normal, and those students that have been with us now a year, those students are going to move out, right.
So we're not going to have that again. How much of the housing activity was pulled forward, we have to assume some of that.
So that's what we did in the model.
And so you'll see, we expect in the model in the second-half of the year to be very low single digits, but we expect to stay positive for the second-half.
Okay, and what's been -- it's been just a short period here, but what's the impact, if any, related to the recent storms and the winter weather in Texas and some other markets in the south, and sort of [indiscernible], I guess. Do you anticipate any impact in demand or pricing as a result?
Typically, from this type of activity we will see some demand. We did have some damage, and we had some customers -- we'll see some customer goods claims. We had pipe bursts, some sprinkler systems. Nothing significant, but we do have some customers that obviously will be covered under their insurance -- our insurance program.
So we'll have some extra claims there, but no significant damage to the buildings.
We haven't seen the uptick in move-ins yet, it's pretty early. But we would, as is typical in situations like this; we would expect to see some of that.
Okay, got it. And just last question, around the [C of O] [Ph] portfolio, had a big quarter. And the overall NOI yields, right around 3.5%, there were some pretty strong occupancy gains in the quarter. A number of those facilities are now well into the 80% and 90% range, even a few that were, I guess, delivered just about a year ago or so, in 2019. How are the C of O deals tracking versus your original underwriting overall? And what's the expected stabilized yield expectation on that $300 million of spend?
So, Todd, they're really performing well from a physical occupancy point of view, above what we had thought.
Now, rates were low most of 2020, so they were definitely coming in at lower rates than we expected, and that's why you're not seeing the yield there yet. When we get the occupancy and rates stable, we believe there's over 6% yield on those C of O deals.
Okay. How much yield upside do you anticipate in 2021 from that C of O portfolio?
I don't have it in front of me, Todd. But I can't answer that question. Obviously we expect improvement in the yield, but we're not going to go from 3.5% to 6%, but I think you'll see some decent improvement in there, but I just don't have it in front of me.
Okay, all right, thank you.
All right, thanks, Todd.
And the next question today comes from Alua Askarbek with Bank of America. Please go ahead.
Good morning, guys. Thank you for taking the questions today.
So, I just wanted to ask a little bit more on the expense side. I know you guys had talked about higher increases in taxes earlier to last year, but can you just talk about which markets are driving those increases, and how we should think about the other expense items? Will there be any relief from marketing since occupancy is holding on strong?
Sure. From a property tax point of view we had some great wins in 2020, and the year, for our full-year of only 3.1%, much below what we expected. We challenged property taxes in Texas and Florida, and won some nice deals where not only did we receive a reduced assessment, but we received more than a million dollars back in assessment challenges from 2019, and that's the cash flows received this year.
So we had a great year from challenges, which makes it much tougher going forward.
So that's why you see that bigger number in the property taxes in 2021, where we're expecting 6.75% and 7.75%. It's the touch comp, so that's part of what you're seeing there from a property tax. Marketing-wise, I think you saw it in the fourth quarter where the marketing was controlled. We don't expect in the first-half of the year in our model, we believe we can control marketing expense. In the second-half, if we do see a fall off in occupancy, you would see us increase that spending again.
So, overall, relatively flat on the marketing, a slight uptick, but nothing like the over 20% what you say in 2020.
Got it. And on any other --
And the other expense line --
Sorry, go ahead.
Sorry. Yes, I don't think there's -- it's pretty much normal. We've increased our employees' pay 3% at the store level. R&M, we're looking at a 3% increase.
So we're doing some other initiatives to control other line items, but overall we think it's going to -- those other expenses will come in, in the 2.25% to 3.25% range.
Got it, okay. And then just a little bit more on the Warehouse Anywhere and the Deliverr partnership, so what markets are you guys looking for next or are you looking to expand more locations in the current markets that you guys are already operating in?
We are definitely looking at new markets. The one market we are in right now, Atlanta. That one we're looking to expand. It was a smaller micro-fulfillment center. It's kind of reached capacity, and we'll probably expand that one.
The other two, with Vegas and Chicago, really just up and running, and have some capacity.
So the next markets, that's what we're working on. But I would expect them to probably be somewhere Dallas, L.A., New York, Seattle are some of the cities that we're looking at, and we'll probably head out some clarification in the next couple weeks, if not sooner. And probably look to rollout one or two in the next couple months, and hopefully three to six by the end of the year.
Got it. And then will you guys be providing a little bit more disclosure around [this] [Ph] going forward, like when can we expect to see some more about that?
On the Warehouse Anywhere fees?
Or just -- just kind of what you're doing there, yeah.
Yes, I would say, as that grows, it's still a very small part of our business. Warehouse Anywhere fee income in total was about $6.6 million and the rent from that programming, but it shows up in the rental income line is about little over $4.5 million.
As that grows, we'll break it out when it makes more material impact on our results.
Okay, got it. Thank you.
And our next question today comes from Smedes Rose with Citi. Please go ahead.
Hi, thanks. I just wanted to ask you a little more about your acquisition activity is obviously pretty active coming out of the gate and could you talk about your thoughts around stabilized versus lease-up.
I think in the past, you focus more on stabilized more recently. And what you're seeing on the cap front and any change in your expectations around financing acquisitions should we still see kind of a 50:50 split?
Yes, for sure. Hi, Smedes for sure, you'll continue to see the 50:50 split that equity for acquisitions yes, we've had a very good year, we've been very active.
You've seen the results of what we've been able to close a lot of it's hard work, we've been a lot of this, that we've just announced is 1Z, 2Z roughly 90% of them are off market, 30%, 40% are from our third-party management owners.
So, a nice mix, I think there is a mix of stabilized versus lease-up, I think some of the properties that may be qualified to stabilize, we've probably seen a little bit of opportunity with expansion.
So they're stabilized, but we look at kind of the potential that we can build in with some of our expansion enhancement project. But overall, I think a lot of these are north of stabilized cap rates north of 6%, some of them reaching 7%.
So, a good mix, but I think the majority of them are mostly stabilized. But we have been added in a few opportunities with lease-up maybe one or two CMO deals. But yes, it's a good mix. And I would expect 2021 to be similar.
I think our underwriting and our model shows kind of a year one cap rate of 4.5 and then obviously growing from that.
Okay, and then you added 66 net adds to your third-party management system, which I mean, would you look for kind of a similar number across the course of 2021? Or would you be expected to be higher or lower?
I would hope, Smedes, I think we're obviously gaining traction and our performance, our brand, the technology has really raised a lot of opportunities for us. We're definitely being noticed, and we're winning a good share for ourselves. And I would hope that would continue, I would think between 50 and 75 net is a reasonable goal for us for 2021.
Okay, thank you.
Your next question today comes from Ki Bin Kim with Truist. Please go ahead.
Thanks, good morning, just want to return back to the -- return to normalcy topic. When you look at the types of customers renting storage space from you guys, I'm curious if you're able to discern any trends, and perhaps know what percent of customers you think might relatively quickly stop using Self Storage, once the vaccine rolls-off further, and the world returns back to normal?
Yes, Ki Bin, it is quite difficult, even with pre-COVID days, customers would come in, we ask questions, how long are you going to be there, they might say three months, and they end-up staying for three years. It's pretty, pretty unusual, you never really get a straight answer. This sort of extended demand and higher occupancy levels is obviously something we're all benefiting from.
We expected that this would linger, as we said in earlier calls that this would linger up till hopefully a peak season and stay around for a while, but then it gets a little murky, we're not sure. That's what was part of the reason why we weren't able to reinstate guidance earlier, it's just so many moving parts, but, for our model, we assume that there will be return to normalcy starting the second-half of the year, may be we're going to be wrong. Hopefully we're, but really, there's so many reasons why customers are using a lot of it is home related, renovations business activity.
So and then obviously, there's businesses that are using us for things such as restaurants that may have shuttered doors, they may reopen.
So, the good thing is this is diversified and it's across all our MSAs, but we do expect some return to normalcy in the second-half of the year. Maybe we'll be wrong but yes it's not that easy to ascertain how long some of these new customers will stick around and we'll see.
Got it and when you look at your cities that had net migration in over the past year versus in cities that has net migration out, is there any kind of discernible trends in terms of how your portfolios trended?
Not really, I think I guess if you're talking about net migration now, if that's New York or LA, obviously, our New York has been doing excellent.
So maybe there was some folks who left the city for a while, but they store their goods in New York, they're not bringing it with them.
So that means they're going to return, folks leaving California for Texas or LA market is doing fine.
So really nothing we can concretely point to, in terms of that, except that there's just been tremendous demand for all sorts of reasons. A lot of change, people moving, and all the reasons we've talked about the last couple of quarters.
Okay, thank you.
And our next question today comes from Samir Khanal with Evercore. Please go ahead.
Thank you, good morning.
Just following up on the previous question on transactions, how much of the compression cap rates have you seen especially in the secondary markets over the last year, and you hear a lot about the primary markets? Are you seeing evidence of cap rates even below sort of 5% in some secondary markets?
Yes, for sure Samir, I think you're seeing more than four handle, interest rates are starting to move up.
So that might help the cost there, but there's been an awful lot of demand, there was big portfolios out there with four handles on them. And we have seen some compression, but we've been able to find, still some good opportunities, when you see a large portfolio go off in sometimes there obviously is a typically 25, 50 basis points premium, especially if the platforms involved, so you're going to have to take that kind of away from the comparisons. But we're still able to find some good stabilized opportunities and with five handle on them. But overall, I think we just need to be competitive and take the pencils out. And it makes sense where your cost of capital is, there's still some good opportunities, especially in some of the more desirable markets with higher rates and better demographics, you'll likely see caps.
Got it. And I guess my second question is, can you just provide an update on your current views on supply? It sounds like that's taking sort of a backseat at this point. Right, as demand remains strong, but just curious on kind of what your thinking is?
Yes, 2020 was a good year in terms of new supply, we expected 2020 was going to be a good year for us heading into it pre-COVID, 2019 was the peak for our markets and for sure that that held true not a ton of deliveries, some are delayed because of COVID. What we're really trying to keep an eye on is the planning, what is going to become new planning given where the industry is, we've started to see some indications of some new planning, but nothing that worries us, but I think we'll be watching that more than new deliveries. But overall, still our top market, Houston is we're not seeing much change there. We're still obviously absorbing some supply there. And it's nice to see street rates move, the New York City region, there's been not a lot of deliveries in our markets, maybe two last year, but we would expect that to accelerate, we've been watching a number of facilities that have supposedly been in construction, high teens. And we'll see if those become deliveries in 2021. Chicago still has been a pretty good market for us, Cooke County, Texas kind of scares many away. But again with occupancy where it is, if we do see a return to normal, like we expect in the second-half of the year, then maybe we shouldn't worry too much about new planning. But if it's an extended period of demand, and some of this new demand becomes sticky, and I would expect the planning to increase but it's something we watch. Right now, I think 2021 will be a pretty good year for us in terms of new deliveries.
That's it for me. Thanks, guys.
Our next question today comes from Jonathan Hughes with Raymond James. Please go ahead.
Hey, good morning.
Going back to expense growth guidance, ex-property taxes, that's expected to be up almost 3% this year. Have you captured all the low hanging fruits in terms of expense optimization and strategic efficiency initiatives that have been implemented over the past few years? I'm just trying to decipher how much of that guidance is conservatism? How much due to tough comps if that's possible to separate the two?
We're obviously, hi, Jonathan, we're obviously striving to continue to be more efficient in everything we do, we still have our strategic initiatives.
So that that low hanging fruit again, some of that might be true in terms of some of the things we did with repair maintenance and provided some new controls on that business and revisit it. But there are a lot of new things that we've been doing related to rent now. ESG, such as more solar, going paperless, things like that, they're going to continue to evolve.
We have some other projects that we're working on, that I believe will help us control costs in the future.
So, we're never done. We're obviously an innovative company, we have some other things that we feel we can continue to bring to the industry that we're looking at, but I think we feel good about the estimates that we put in for expense still controlled.
No, I think Jonathan, we already saw some, go ahead Jonathan.
No, please go ahead, Andy.
Just saying the pressure we see is, insurance, property insurance, we see some pressure on that our policy renews soon.
So we expect an increase there. But yes like Joe said, we're controlling very well, our payroll that some of the bigger line items, we can't control property taxes, we'll find them as we did in 2020. And hopefully, we can have some good results, but we have a tough, tough comp there, but otherwise, there's not any significant increases, we're expecting in any particular line item outside of insurance. Even Internet advertising should be pretty well controlled.
Okay, I mean I don't mean to not appreciate what's been done in the past couple of years, I mean, the same store expense growth ex-property taxes have been down, 1.5% last year and 2% in 2019.
So I know there are tough comps that have been created.
So that's why I was trying to gain some more color there. But I'll appreciate the details. Sticking with the expenses, can you break down the G&A guidance in a little more detail, expect that to be up 8.5% this year after being up about 12% last year? I guess, what would that increase or what would G&A expected to be if you excluded third-party managed G&A expenses?
So the third-party is about 40% margin business. And I think when you look at our 3PM revenue, you're talking to $17 million or so in management fee income.
So you can back into, how much of the G&A was related to third-party managed cost, the growth in that line is really the talent we're adding and the personnel and to cover those additional stores. We do have our area managers are in our G&A, so you see as we grow store count, we'll see increased G&A from just the store count growth.
Okay, all right. That's it for me. Thanks for the time.
Our next question today comes from Spenser Allaway with Green Street. Please go ahead.
Yes, thank you.
So thanks for the color on rate and occupancy expectations for '21. But can you guys provide a little bit of color on the portfolio turnover you're expecting for the year, and you expect there to be a lot more elevated move outs or a demand reversal coming out of '20?
Yes, Spencer, with the move outs being down, 10,000 less move outs, we have in same-store basis in 2020.
We have to assume that we're going to see a return to normal.
So we do expect more move outs as we go through the year.
We haven't seen it yet with the increases in move-ins for the last 10 months, same-store went up. We really haven't seen the move out yet. The model, we're predicting that at some point this year, we do see elevated move outs. There's not a whole lot more activity left. Again, we do have some there.
So I think it's a tough comp as we go through the year.
You can't expect occupancy to remain at 93% from July through December and into January as we did over the last seven, eight months.
So I think that's what we would expect. And that's how we modeled out the guidance.
And then, just going back to the discussion on the significant kind of uptick and COVID-related demand from last year, do you guys -- are you guys underwriting like a significantly greater move out or demand reversal in some of the larger markets versus some of your smaller ones as people kind of return to apartments and normalize the working environment?
There are so widespread in 2020, so that we expect it to be widespread when it reverses. We don't see any particular markets where we are seeing any activity that would tell us that, yes, there is a hint here that we are going to see some move-outs in this market versus that market. It was widespread coming in.
Our expectation is it would be widespread if it does return.
Okay, that makes sense. Thank you.
[Operator Instructions] Today's next question comes from Todd Stender with Wells Fargo. Please go ahead.
Hi, good morning, thanks.
Back to the CMO portfolio, if rates begin in the low side just for the CMO deals, you are driving occupancy, do those properties issue rental rate increases sooner than your stabilized stores? Year-over-year occupancy [indiscernible] were pretty meaningful.
Just seeing how you either let those run or do you raise rate in this?
We do raise the rates pretty typically probably a little bit slower than we do in our overall portfolio. Meaning that first rate would go in six months after move-in, and then, some 10 months thereafter.
So, it's not significantly different. A little bit slower on the renting. We want to get that momentum and make sure that occupancy has great momentum before we start raising the rates.
So, it's very similar, but probably a few months delayed I guess if you look at the overall how we treat CMO versus stabilized store.
Got it, okay. And then on the acquisition front, you indicated going yields in the fours. But you can stabilize those into the sixes and even maybe reach seven. What kind of growth rate you assume in your underwriting? And then how about the metrics compared to JV deals that you do?
Yes, I think in the growth rates, if it's a stabilized store, we look at growth rates in the 3% range. When you see anything where you see a 6.5 to 7 yield on stabilization, that's a property that we bought early in the lease-up or CMO.
You won't see us buying a stabilized store four and three quarters and getting at the 7. That's not going to happen.
On the stabilized store, we expect 3% growth. It's those CMO stores or early in the lease-up where we see that significant benefit on the backend as the yield increases as we fill up those stores and rates \stabilizes.
For JVs, what kind of growth rates for JVs as well?
Nothing unusual in our JVs, we did buy a lot of stores out of JVs.
So, we were earning management fees out of those 32 stores that we bought from our JVs in 2020. But, the growth rate in our JVs is very similar to -- the stabilized JVs is very similar to our overall portfolio.
Typically our JVs at this point in the cycle will be of an underdevelopment side. We don't do development as you know Todd. And it will see our lease-up or CMO deals.
We have some bigger JV partners that have more appetite for that type of asset.
We will look with those in similar to a lease-up store shouldn't really change. Again, our JV activity is as not as active as previous year just given where we are with our cost to capital if we combine to REIT that's going to be the priority number one. There are some cases early lease-up, new development that we will put into a JV.
Great, thank you.
And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Joe Saffire for any final remarks.
Well, thank you everybody. I wish everyone a safe spring. And hopefully, we will see light at the end of the tunnel and we will all get back to it soon. Until then, we'll speak in a few months. Thank you.
Thank you, Sir. This concludes today's conference call. We thank you all for attending today's presentation.
You may now disconnect your lines and have a wonderful day.