© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the CubeSmart First Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Charles Place. Please go ahead.
Thank you, Steven. Hello, everyone. Good morning from sunny Malvern, Pennsylvania. Welcome to CubeSmart's first quarter 2018 earnings call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer.
Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental, operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com.
The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from those -- from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section of the company's annual report on Form 10-K.
In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the first quarter financial supplement posted to the company's website at www.cubesmart.com.
I will now turn the call over to Chris.
Thank you, Charlie. Good morning. A very solid quarter, very much in line with our expectations as we headed into the quarter. In our same-stores, we pushed up our physical occupancy 20 basis points at March 31 of this year compared to March 31, 2017.
On average, rates to new customer during the quarter were up about 1% compared to the average from Q1 of last year. Our rental rates were up year-over-year in the 4% to 5% range in the less supply impacted markets, and down in the 2% to 3% range in the more supply impacted markets. Discounts as a percentage of in-place rent at 3.9% were flat year-over-year, and our average length of stay elongated very mildly about 7 days.
Drilling down on the year-over-year specific same-store MSAs. We experienced the strongest growth in Southern California, specifically Inland Empire, L.A. and San Diego areas; followed by Northern California, Sacramento, San Fran area; followed by West Florida, Fort Myers, Naples, Tampa, Sarasota.
We experienced our weakest growth in the Chicago land area; North Carolina, primarily Charlotte; and Colorado, basically Denver.
Drilling into the year-over-year comparisons and the same-store New York City boroughs. Rental rates were flat, average occupancy up about 140 basis points. The Bronx continues to rebound nicely from the impact of supply, and Brooklyn is at the beginning of feeling that impact of the new supply. Again, no changes from our expectations last time we chatted some 45 days ago.
Our customer health remains solid. The various metrics we focus on, write-offs, accounts receivable, rate of auctions, are all very consistent with the first quarter of 2017. Our policy regarding rate increases to existing customers remains consistent in both the timing and amount.
On the investment front, we remain disciplined in allocating capital. We continue to both add property store 3PM program and to acquire assets from our third party-managed platform. During the quarter, we added 47 new stores to the platform and acquired 1 third party-managed asset on our balance sheet and 2 in our joint venture program.
Our balance sheet remains in great shape with no 2018 maturities and roughly $360 million available on our credit facility.
Thank you for listening. I will now turn the call over to Tim for some additional detail around our financial results and our improved guidance in certain of our metrics. Tim?
Thanks, Chris. And as always, thanks for everyone -- to everyone for joining us on the call, and for your continued interest and support. We reported first quarter 2018 results last evening, including a headline result of $0.39 per share of FFO as adjusted, which was at the high end of our provided guidance range, and represents 8.3% growth over last year.
Overall for the quarter, our results were very much in line with our expectations, as Chris had mentioned. Absolute levels of performance remain positive, as demand remained steady despite increased competitive pressures from supply in certain of our submarkets.
Our current cost of capital, coupled with elevated valuations for properties on the market, has muted external growth, and we remain committed to our disciplined investment strategy. We continue to grow our brand and leverage our operating platform through JV partners and our third-party management program.
Same-store NOI growth of 4.0% was driven by a 3.8% increase in revenue and a 3.4% increase on operating expenses, all 3 metrics very much in line with our expectations.
Revenue growth was primarily driven by a 3.5% increase in effective rate and a 20 basis point increase in occupancy as we ended the quarter at 92.5%.
Our same-store expense growth was impacted by a 4.5% growth in real estate tax expense as well as higher weather-related costs in both utilities and snow removal expenses this year compared to last year.
During the first quarter, we closed on 1 wholly owned property acquisition for $12.2 million. We purchased 4 stores for $51 million through our HVP IV joint venture, and we added 47 stores to our third party management program, bringing our managed store count up to 496 at quarter-end.
A quiet quarter on the balance sheet as we did not sell any shares under our -- at the market equity program. Our landscape for 2018 really hasn't changed much since we provided our initial guidance.
Our first quarter results and April performance to-date lead us to making slight upward revisions to our guidance ranges for same-store revenue growth, same-store NOI growth as well as our FFO per share as adjusted.
You can see all of our current assumptions underlying our guidance on Page 4 of our earnings release in tabular format that allows for easy comparisons to the assumptions we provided back in February. We feel that we are very well positioned operationally and financially as we head into the seasonally busiest part of the calendar for our business.
Thanks again for joining us on the call this morning. At this point, Steven, why don't we open up the call for some questions?
[Operator Instructions] And our first question comes from Todd Thomas with KeyBanc Capital Markets
Just first question on investments. I think you have issued stock under the ATM earlier in '17 in the low $29 range. And so you're a little bit around 1% or so from that level today. And you've slowed your own balance investment program over the last several quarters. So I'm just curious, do you feel like you have the green light here to start issuing and get back in the market? Is your appetite increasing at all?
Our appetite remains the same. I think what we consistently look at is the cost of our equity capital, the valuation of our stock relative to the investment opportunities that we see out there. And so the muted external growth you're seeing from us on balance sheet is really -- has really been twofold over the last couple of quarters. It's a combination of our equity valuation not being quite where we would like it to be as well as a lack of compelling investment opportunities. So it's always going to be a combination of the 2 for us. We did issue equity later in 2017, not earlier. But we're always going to look at those 2 things in combination.
Okay. In terms of the joint venture acquisitions, are you seeing a fair amount of product that you think could materialize in the joint venture format this year?
Todd, its Chris. So that venture is targeting really a blend of lease-up opportunities, combined with attractively valued, more stabilized assets, which are clearly more difficult to find today. So it has been a good pipeline or way to capitalize on third party-managed assets, where the owner is interested in exiting before stabilization.
So 2 of the transactions in that venture fit that exact description. And then there was another deal that was in a stage of lease-up. However, we weren't the manager. So I think given where we are in the cycle and given the size of the third-party platform, I think we do have an attractive newly developed, and then leased-up pool of assets. And to the extent that those owners decide that it makes sense to transact, I think that vehicle is set up to be able to take advantage of that.
Okay, got it. And then just last question, I guess, on construction costs. You guys obviously have a big pipeline, about $300 million in total between development and CFO activity. Can you just talk about what you're seeing in terms of construction costs? Is it having an impact? And how are you mitigating those rising costs?
Yes. It's clearly beginning to have an impact. I think you are seeing, as it relates to raw materials, steel, upward pressure. I think for the majority of what's in our pipeline, we are sort of past that stage. So in terms of a significant impact, we're not really feeling it.
On the labor side, you're also, and we are feeling some pressure there. It continues to be both in terms of accessibility to that labor, and then not a new theme. This has been for the past few quarters. To the extent that you have any issues in your schedule, and you're unable to be ready when you've got the labor lined up to install certain portions of the project, it creates delays.
So I think when you look at really what the impact is for projects that are underway today, I think you're just seeing increasingly deliveries getting pushed back because of those delays.
All right. Great. At what point are you bought out in terms of costs and from material, from labor?
Yes. For the most part, usually fairly early in the process, given that the components are not that numerous and not that complicated.
Our next question comes from Jeremy Metz with BMO Capital Markets.
I was wondering if you can expand a little bit on demand in your system, what you're seeing across your various channels, web, mobile, call center, and maybe how that compares to last year. Because it seems like you're continuing to see some solid demand, which is counter to what a peer yesterday was indicating. So just trying to figure out how confident this makes you also as we begin the peak leasing season.
Jeremy, it's Chris. So increasingly, we're seeing more customers coming through the various online channels, and particularly more customers coming through mobile. And then the offset to that is fewer customers coming directly into the store without a reservation or on the phone.
Hard to pin down exactly why we're seeing that gradual shift, but certainly increasing familiarity and comfort with the process. Sometimes, we talk about an analogy to the airlines. When they first tried to steer you checking in at a kiosk or a terminal in the airport, people were uncomfortable and still wanted to gravitate to the counter as they increasingly made that more difficult. And people got more comfortable, it's now become second nature.
I think to some extent, some of our customers are just getting more comfortable going through that reservation process online and showing up with that reservation. I think, again, while the demand, and we continue to see it through those channels, is there, I do think the reality is that getting price with that demand continues to be challenging and, as I mentioned particularly, so in those markets impacted by supply.
Got it. Just sticking with supply there. Just other than the cost pressures you noted earlier, are you seeing anything else in the market today that makes you more or less optimistic that supplies flows from here as we get through -- after we get through these latest on the deliveries?
I think when you look at our -- when we look at our top 12 MSAs, which is where we concentrate in the most detail, so really New York and Chicago, Miami, Dallas all the way down through Boston. I think you've got -- that rental rate pressure that I talked about, which I think for anybody who's doing an honest underwriting, when you combine that and you combine the supply that has been introduced, and you combine that with increasing hard costs and labor and rising interest rates, I think that there are beginning to be some more impediments to, if you're really being honest with yourself, penciling out returns.
I think the flip to that is, as long as capital is available, developers are going to develop. But I think in our top 12 markets, it certainly continues to feel like 2019, certainly in our rolling 3-year basis, will not be significantly worse than the impact we're feeling here in 2018.
Got it. And then I just have one last quick one in acquisition. A fair amount of what you've closed or have under contract looks like it was in Texas. I know on an absolute level, it's not really a ton of activity. But are some of the challenges in that market, and those markets, those Texas markets, driven some increased product coming to market that's creating the opportunity to grow there? And could you maybe talk about the relative pricing side of that as well?
Yes. I think, again, when you take a state like Texas and a submarket micro-market business like storage, I think the disconnect is simply there are pockets in Dallas-Fort Worth, Houston, San Antonio or Austin where you can get comfortable at the right price that you can make a deal that's a good deal for our stakeholders. So I think it's hard to take.
It's hard to take the state which is certainly getting a significant amount of supply. But when you boil it down to the actual submarket or market for that store, you can find your opportunities. And in this instance, on balance sheet, we found a Class A plus asset we were already managing in Austin.
That is going to be an excellent long-term hold for us on balance sheet, and we've found a few deals and lease-up that fit the venture and I think are going to produce solid returns. So I wouldn't look into it as anything that's under some form of duress because it happens to be in Texas. I think it’s very micro market-specific.
Our next question comes from Juan Sanabria with Bank of America Merrill Lynch. Our next question comes from Nick Yulico with UBS.
On just the topic of supply. I think you've previously said that 40% of your stores and 80% of the New York stores are facing competitive new supply. Have you seen any increase or decrease in that activity that would change that number? And since you raised your same-store revenue guidance, does this imply that the impact of new supply has lessened?
It's Tim. So the 40% refers to our expectation. 40% of our same-stores will face competition within the triggering of those stores. A new competition being defined as something that opened in 2016, '17 already has or we expect to open in 2018. And the short answer to your question is, we haven't changed any of those assumptions because same 40% of the stores that we indicated 2 months ago are the same 40% that are impacted by supply as we sit here today. So no change there.
And to the second part of your question, there's really been nothing that we've seen in the past 2 months that would have any significant impact on our expectations for the year. We did modestly bring up the midpoint and the lower end of our expectations, given the fact that we're -- we sit here 1/3 of the way through the year, and we have a little bit better visibility to eliminate the low end of the range we had initially provided.
And that's helpful. And then any thoughts on 2019? Yes, I think we can all kind of wrestle with this supply data for the sector. I mean, do you have any visibility into how 2019 is going to look versus '18 at this point?
Yes. It's still a little bit too early to tell. In many of our markets, from approval to construction, it can take 3 to 4 quarters. So there's -- until we get past the midpoint of the year, we still don't have great visibility into the back half of 2019 in some of our markets. Now markets like the boroughs of New York have much better visibility because the time line from start to completion is a lot longer.
Our best guess as we sit here, and Chris alluded to it little earlier in his comments, is that if you think about supply on a 3-year rolling basis, that as we think about our top 12 markets, deliveries -- when you look at deliveries in '16, '17 and '18, which are the big impact to us currently, and think about how that's going to compare to deliveries over the 3-year period of '17, '18 and '19, we don't think it looks materially different.
And that would suggest -- if that's true, then that would suggest that the impact from supply to our existing, open and operating same-stores, we don't think is going to be materially different, the impact of supply in '19 versus what we're seeing here in '18.
Okay, that's helpful. Just last question. In your supplemental, you removed the information about scheduled asking rents. Can you talk about why you removed that? And maybe you can give us a feel for how that did trend in the quarter versus the positive 1.5% that you had and reported in the fourth quarter.
Sure. It's Tim. I'll answer the first part of your question, and then I'll -- Chris can chime on with some color on trends. So we began disclosing scheduled rent or street rate over a decade ago. And we believe, at that time, that it provided helpful disclosure to investors to give a sense as to our asking rates across our portfolio and use that as a barometer to see how things trend over time.
The reality is, is that street rate or asking rate or rack rate is not indicative of what we're actually renting units for, nor can it be used as a mathematical input to try to be predictive of future revenue growth. And that's what many people were trying to use it for. And so you combine all that with the fact that over that decade, we're the only one who discloses that metric.
We concluded that continuing to provide that disclosure was much more likely to create confusion for investors than to provide the insight that we envisioned when we decided to provide it many years ago. So we've elected to follow others, and we're happy to provide some color on it, but eliminate it from our written disclosure.
Okay. Nick, it's Chris. And then to the actual metrics themselves, so in the opening comments, I mentioned the units that we were renting in the quarter we were renting at about a 1% premium to what we were renting for in the first quarter of last year. In terms of the specific asking rate metric that you referred to the fourth quarter in our supplemental, in the first quarter, that metric would have been basically flat.
And then if you look at where that metric would be today, we're up somewhere between 2% and 3% over where we were last year. So again, to Tim's point, the fact that we would have had that average at the end of those 3 months is flat. And now here we are, 27 days later, it's up 2% to 3%. It just hasn't -- it just proved to be, in our view, something.
And again, blame me because I'm the one who created the used storage supplemental package 11 years ago, and I've put that in there. And I think it had some meaning at the time, at least in my mind. I'm not sure it really has the same, if at all, any help to folks and, as Tim said, I think more or less likely confusing.
Our next question comes from Smedes Rose with Citi.
I wanted to go back to you. You talk about EBIT -- you mentioned as long as developers can access capital, they'll develop. And I was just wondering, are you seeing anything that would suggest that it's maybe more difficult to access capital or overall from lenders?
It's Chris. So I would say that perhaps, modestly at the margin, you're seeing it become a little tighter very modestly. And I would say that the combination of the institution, the specific institution and its allocation to commercial real estate in general, and therefore its appetite.
But for 4 projects, if you have a relationship, because many of these loans for new developments at the local level are being made by financial institutions that have an existing and ongoing relationship with the borrower. So they're underwriting the borrower as much as the project. And again, at 70% advance rates with full recourse, there is capital out there for folks who have those pre-existing relationships.
I think as projects that may have come on in the last 6 to 9 months, 12 months, I would guess most of them in the markets where we're seeing reasonable amounts of supply are leasing up fine, but at rental rates that are lower than what they shared with the bank when they underwrote the deal. And if that pattern continues, then I think you start to see some pressure on covenants, and perhaps that starts to alter lenders' views.
But from an equity capital perspective, there's still a decent amount of money out there that is pursuing new development in the storage. There certainly is no shortage of folks who are interested in developing. I think -- again, I think, today, it's significantly more difficult if you're honest with yourself to make the numbers work. And whether or not that slows things down remains to be seen.
All right. That's good color. And then I know it's early days that PSA mentioned that they're seeing a lot of significant interest in their third party management platform. Just wondering, are you seeing that at all from -- as you go out to add folks to your third party management system? Or is it such a big market that you're not really coming across each other?
Yes. At this stage, I think early is probably the right description. So no clearly identifiable impact. I think as we go through the process, it's not a vanilla business, right? So each owner and each provider have certain characteristics that are appealing and are sympathetic to one another. And so from a CubeSmart perspective, we're very keenly focused on customer service.
Certainly, as it relates to how we think about our team on-site, we've always been interested in making sure it's a living wage, that your benefits are there, and we think that's very important. We believe in flexibility with that owner to a point we believe in information sharing, and we have a way of doing our marketing and our revenue management.
That appeals to some owners, owners who are purely focused in on cost. And that's -- their only metric that matters to them. And the top line growth is something that, for whatever reason, is secondary. Well, we may not be the right third party manager for them.
And somebody like Public Storage who does have this sort of low-cost delivery, low-service model, they may be more appealing. So I think it's a big enough swimming pool to say it in a more concise way that I think we're going to be able to do just fine with each other. But will customers move back and forth? It wouldn't surprise me if it happens already today with the other 2 major competitors.
Our next question comes from Ki Bin Kim with SunTrust.
Just a couple of clean-up questions here. So how did the take rates trend in April so far?
Yes. No significant difference to what we saw in the first part -- in the first quarter.
Okay. And when you kind of take a lay of the land out there for the summer time, and obviously, there's many variables and inputs that are considered for how to pursue pricing strategy. But some of those more important levers, how are they looking right now as we head into summer leasing season?
They're all available.
Yes. I think what we're seeing out there is that we believe where we are from a physical occupancy perspective going into the quarter, market-by-market, sets us up well to be able to attract those customers that we want, which are those that are higher potential, longer-term length of stay. And if that plays out, as we think it will, then we're pretty optimistic about how this summer rental season will go. But to your kind of first observation on April 27, too early to tell.
Okay. And what drove the other property rental income higher this quarter?
We had slightly better growth in merchandise sales and tenant insurance in the first quarter -- or the fourth quarter, if you're looking at it sequentially, the fourth quarter was a little low given the tough comp relative to the fourth quarter of '16. So the trend line in that line item looks a little bit off. The first quarter is a more normal growth in those line items than the fourth quarter was due to the tough comp.
Okay. And just a general question about the fourth quarter and first quarter. When you have a tougher winter in the first and fourth quarter, does that really help revenues? Or does it divert on the revenue side?
Does it help from the revenue side? It's a tale of 2 cities, right? So when you have a tough weekend from a weather perspective in a certain part of the country, your movement certainly tend to be lower than you had modeled or planned for obvious reasons. The flip side of that is your move-outs are lower, too. So what you're worried about there and try to trend that over the series of the following 10 days or a couple of weeks is that if somebody's needs over for our product, they will move out, right?
They might not move out the weekend that the weather was really bad, but they'll move out the next weekend or the following one. What you worry about on the demand side is if you see a period of time, a weekend or a week where you move into a low because of weather, you worry that whatever that customer's need was, that was -- that otherwise would have gotten them to come to your store, to call the sales center, to click on your website and make that reservation, you worry that perhaps their need has shifted or they changed their mind that they delay it for some extended period of time.
So in the short term, you'll see -- with bad weather, you'll see move-ins low and move-outs low. Move-outs will catch up pretty quickly to Move-ins, where you have to focus and spend your time to make sure you keep getting eyeballs to the website and convert all of those phone calls to reservations, and convert those reservations to rentals.
Well, I guess, that's on-site, net-net, maybe a little bit negative in the short term?
You always come negative. I don't know that it would be -- it creates uncertainty. I'm not sure that I would say on the margin that it ends up being positive or negative. It shifts the timing, for sure, but...
Our next question comes from George Hoglund with Jefferies.
You continue to show really strong growth from third party management business. And so the properties added this quarter, like what percent of them were recently developed properties versus kind of existing operating properties?
So of the 47 that we added this quarter, we would classify 15 of those as existing, open and operating stores and 32 as newly-developed.
Okay. And then just any change in kind of forward outlook of kind of the pace of adding to the program?
No. We continue to have a good pipeline of both existing, open and operating stores and those that are intended to be developed. The only uncertainty around that is on the intended to be developed, whether or not that owner actually raises the capital and elects to proceed with the asset. Typically, we had a pretty modest drop rate, but that doesn't necessarily mean it won't change going forward.
Okay. And then just one thing. Going back to tenant insurance, has overall -- the percent of tenants, utilizing tenant insurance, has that changed materially over the last handful of quarters? And kind of what's the current percent of usage?
Yes. It really hasn't changed materially here over the past couple of years. We tend to provide tenant insurance to -- or connect our customers to tenant insurance to a little bit north of 90% of customers coming through the door elect to take insurance. And then our overall penetration is up to 75%. And it's been plus or minus 75% now, not for the last couple of quarters, but really for the past couple of years.
Our next question comes from Eric Frankel with Green Street Advisors.
Just to expand on what George said, given the rise in supply, would you expect your third party management business to increase with the increased level of deliveries coming online?
It's Chris. So we've been obviously adding stores at quite a pace here for the last few years. Sometimes, it's hard to imagine we just got into this business not so long ago with the acquisition of United Stor-All, and now we're up to just shy of 500. If I would expect the pace to continue, certainly, as long as we're in a development cycle and projects are getting done, obviously, the entrant of another competitor into the space is something new.
So we're going to have to see how that plays out. But I think the idea that, much like lodging coming out of the '60s, there was a consolidation of management under brands. I still think that if you look out 20 years, it would seem to make sense, particularly in the top 15 or 20 MSAs that you would see a similar consolidation of management in our industry under a handful of brands.
Yes, that makes sense. My last -- my only other question, actually, it's somewhat related to the hotel industry and the brand question. You said that your cost of capital is pretty high right now, and acquisitions are not -- aren't particularly attractive. Have you given -- and given also your relationships with the joint venture partners, have you ever given thought to sell any more asset to some of your venture partners and keeping management of assets and buying back shares with those proceeds?
So on the disposition and retain management piece, that's a model that we've implemented over time. I think specifically going back, we did quite a number of transactions with our friends at W.P. Carey, where we were selling the assets into their program and retaining management. It really depends on the market and the asset and why we would be interested in exiting the asset.
There are some assets that it just doesn't make sense for us to continue to be involved, particularly if they're in markets where we're exiting that particular submarket altogether. So it's something we've done in the past and we would continue to evaluate going forward.
And then in terms of the repurchase, if you think about that, I guess, from my perspective at least, you're still, in theory, sort of leveraging up to buy back those shares. And I think we've been fairly clear that unless it became such a compelling and obvious use of capital, we would be hesitant to lever up to buy back stock.
Okay. By premises isn't necessary to do it on a leveraging up basis. It'd be more just selling assets and buying back shares on a leverage neutral basis? But I understand your point.
Our next question comes from Todd Stender with Wells Fargo.
And Chris, this goes back to your earlier comments regarding Texas and acquisitions and those that are under contract. Can you go through your going-in yield and maybe annual growth rate assumptions on wholly-owned stuff versus maybe JVs that could have some slower growth assumptions? Maybe just compare the 2.
Yes. It really is where you are in the point in the cycle for each individual assets as the going-in yields can range, quite frankly, based on the maturity of that asset from -- I don't know. And I hate to imitate another caller, but -- or another call, but if they range from the 0 to 7.5.
I think for the specific ones, we're talking about the wholly owned asset we acquired in Texas was in lease-up. Our going-in was in the low 4s, and our stabilized expectation was about 200 basis points north of that. For the ones that we acquired not only in Texas, but in Arizona and Maryland in the JV, they were a little bit further down the path in terms of their maturity.
And we were expecting those going-ins to be in the mid- to high-5s, and then growing from there to the sort of low 7s over time. And then the ones that are under contract are earlier in their process, and those stabilized expectations are sort of in the 6% to 7% range.
Okay, that's helpful. And then just how about the duration to get there from a 4% to a 6% or just your general CFO expectations of number of months it takes to stabilize.
Yes. It depends upon where the asset is when we acquired it. I think the blend of the ones that require either on balance sheet or under our venture in the quarter need another -- need this leasing season, and then one more on average, I think, to get to that stabilized occupancy from a brand-new store opening today, depending again by the market.
But we would be looking at having 3 summer leasing season. So 3 full, April to August time frames to get to that mid-80s, call it, occupancy level, and then a fourth rental season to get to your effective rates basically up until what we would have considered to be first level of stabilization. So all in, about 4 years.
Okay. And the last one, just shifting back to New York, you're a few years into your emphasis to have a very strong presence there. But looking out, where do you think you're going to put new dollars to work? If you're going to deliver new properties after 2020, what boroughs do you have a better comfort in, and maybe which boroughs do you think you're fine at your exposure right now?
Yes. I think, obviously, from just where the exposure is weighted to the fine citizens of Staten Island, that would be where we only own 1 store, followed by Queens, followed by Brooklyn, followed by the Bronx. Obviously, Manhattan's similar to Staten Island. We only have the one store. So I think development in New York is going to get increasingly challenging.
And so it would not be surprising if our -- if you go out past 2020, our pace of new product slows. And then when you look at the existing stores that are there that would meet our criteria, we do have a decent number of managed stores there that are purpose-built and we would be pleased to own. So I could envision over time, as those owners decide to sell us, buying back in from the managed portfolio.
Our next question comes from Rob Simone with Evercore ISI.
Just a quick one for me. You guys mentioned earlier that in some cases, rising construction costs might be causing some delays in delivery. Is that why you guys pushed back Waltham? Or I'm just trying to understand what the rationale was there.
Yes. No, I'm sorry if I was confusing. It's not the rising construction costs, it's the labor, and then the process. And so Waltham is a complicated project, which getting the approvals along the way, much like most municipalities, has been a little bit slower than our initial hope. And then we had some weather issues in Massachusetts, which caused delays pretty much throughout the first quarter. So nothing on the cost side there, more on the approvals, on the inspections, et cetera, and then some weather delays.
Our next question comes from Juan Sanabria with Bank of America Merrill Lynch.
Second time's a charm, hopefully.
There you are, mute button.
Exactly. Just a question on the new additions to the same-store pool, it seems like you added about 40 basis points to the top line growth in the first quarter. Any color on kind of what your expectation is for that contribution, that new additions for the balance of the year?
Yes. Juan, it's Chris. I would expect that, that contribution mutes as we go throughout the year. And I think for the full year adds, at least based on our modeling, 10 to 20 basis points to the growth.
And then just on the same-store revenue guidance, at the midpoint, at the high end, it implies a pretty decent deceleration. How should we think about the pace of kind of growth for the balance of the year? Some of the numbers seem to be stabilizing. Kind of what's the upside risk and the downside risk to kind of revise guidance range for same-store revenues for '18?
I think the -- it's Tim. I think the upside and downside risks aren't really changed. Certainly, our guidance implies that we have an expectation that on a quarterly basis, you will see further deceleration in the rate of revenue growth primarily linked to the 40% of our stores that are impacted by new supply.
And so nothing has really changed in our expectation for the pace of that deceleration. If there will be some deceleration, we're guiding and telling you that there will be. And I don't think -- I wouldn't expect it to be lumpy. I would expect it to be kind of slow and steady as we go through the year.
Okay. And then just on the kind of development and supply question. For the projects you're looking at, whether it's for third party, where you guys are coming as managers or joint ventures, can you guys just give us a sense of kind of the general targeted development yields versus kind of spot transaction cap rates on a stabilized deal basis, just to get a sense of the spread that the developers are targeting, if that's compressed at all?
Yes. I mean, I think you're still in that, call it, plus or minus 250, 275 positive spread over spot acquisition cap rates to the extent that you have a good mark. I think, really, the question today are those who think they're getting 400, I'm not sure, are being honest with themselves.
And this concludes our question-and-answer session. I'd like to turn the conference back over to Chris Marr for any closing remarks.
Great. Thank you so much for participating in our first quarter call. We are very bullish on the prospects here for 2018. We are continuing to focus in on outperforming in the opportunities that are presented to us, and we'll continue to do everything to execute on our business plan here in 2018. So thank you. We look forward to seeing many of you at June NAREIT, and look forward to speaking to everyone else on our next quarter's call. Have a great day.