PSA
#Yes, we pulled that package and have changed strategy in terms of what we're going to do in those markets.
I can't comment on that now because we're in the middle of trying to do a couple of things, but I would just say we pulled that transaction.
We don't have any properties on the market for sale right now.
Maybe next quarter or the quarter after, I'll be able to tell you ---+ explain what happened.
I'm not sure I understand that question.
Change in consumer behavior.
Well, I think we've touched on the differences in some of the markets where the demand issue is more of a problem, maybe there's an uptick in supply there, certainly in markets like Austin.
So that's having an impact on demand and rental rates.
As I touched on earlier, we have not seen any degradation in the churn rate and actually have seen an improvement in length of stay this year versus last year, which would lead you to believe that customer stickiness and our ability to have pricing power with our existing tenant base is still quite good.
Does that answer your question.
Okay.
<UNK>, this is <UNK>.
The reason why we didn't is because stabilization isn't just about occupancy.
I could fill up a property in a year by giving it away for free and then throw it into the same store the next year and revenues would then just go skyrocketing.
We view stabilization as not only stabilized occupancy, but also the stabilization of the rental rates that the existing customers are paying.
So for those properties that we acquired in 2013 that we did not put in the same stores, even though the occupancies were mid-90%s, the rental rates that were being charged to the existing tenant base was still far below what we think a stabilized number should be.
So those properties we didn't put in.
They're still growing at a much more rapid year-over-year change than the same store properties that are operating in those same markets.
So clearly they're not stabilized and so we didn't put them in.
<UNK>, to add some color to that ---+ what <UNK> just said, on the 2013 acquisitions, our occupancies year-over-year were flat 94.6%, but the contract rents were up 7.4%.
And NOI growth on those was up for the quarter about 12%.
As <UNK> said, it would look ---+ make the numbers look nicer or stronger if we put them in, from an objective reality in terms of are they really stabilized or not, they're not.
So we've kept them out.
<UNK>, I'm not quite sure I understand.
Are you implying or indicating that we should allocate more or less.
I'm not quite following your question, I'm sorry.
Well, a couple things.
Houston's a great market.
We think it's long-term.
I view it as the oil capital of the world.
It's a great dynamic market.
There's a lot of submarkets within Houston where we have little to no product and some markets where we do have some product, but we could penetrate those submarkets more.
Same applies to Dallas.
And there's a number of markets around the country, but those two markets in particular are very vibrant and this does not change our program going forward.
Now, what may impact our program is, as rates roll down, it may adjust our ability to develop because it may not make sense in terms of what we can get land for and construction costs and the returns that we want on development to build as much in Houston as I would otherwise like.
But long term, we're committed to those markets.
Our development pipeline itself, I think we've delivered through June about $320 million or so, and so there's a fair amount of embedded growth on that.
We're targeting stabilized yields, 8% to 10% on the development and I think in the second quarter we generated about $2 million on that $320 million of investment.
So you can ---+ going forward as you kind of go out 2017, 2018, 2019, those development deals will provide a substantial source of growth for us.
Right now they're a bit of a headwind.
Our 2016 deliveries for the first six months lost about $500,000.
So, net-net, we think it's a great investment long term, as I touched on, they're filling up ahead of plan, but it's a bit of a headwind on earnings today, but a great source of future growth.
Does that address your question.
First off, <UNK>, it's a different market mix than the same store pool, so it's hard to compare the two.
It's a little apples and oranges, but I would say that in terms of potential future growth in this, I think that we're probably another 12 months to 18 months away for another rate increase to existing tenants before we start getting to that level of them reaching that stabilization point.
All other things being equal, if they were in the same markets, they should get there.
But my point is that they're in different markets, a different market mix and I'm not sure what they are.
For example, if they were all in Houston, could they get to the same market mix ---+ same rate as our same stores, probably not because Los Angeles and San Francisco dominate our same store pool and they have much higher occupancies right now than Houston does.
And higher rental rates.
Correct.
So you're asking me to compare apples and oranges.
All I'm telling you is that they're not stabilized and I expect that their growth will continue to outpace the existing same store growth, not only the growth of the overall same store portfolio, but those properties that are in the same markets, they will continue to outpace them just because of still filling up or stabilizing on the rental rates.
Thanks, <UNK>.
Thank you for participating on our call this afternoon and we'll talk to you next quarter.
Have a good afternoon.
Thank you.
