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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings. Welcome to the Life Storage Fourth Quarter Earnings Release Conference Call. [Operator Instructions] Please note, this conference is being recorded.
I will now turn the conference over to your host, Brent Maedl. You may begin.
Good morning and thank you for joining us today for the fourth quarter 2022 earnings conference call of Life Storage. Leading today's discussion will be Joe Saffire, Chief Executive Officer of Life Storage; and Alex Gress, Chief Financial Officer. Following prepared remarks, management will accept questions from registered financial analysts.
As a reminder, the following discussion and answers to your questions contain forward-looking statements that are subject to risks and uncertainties and represent management estimates as of today, February 24, 2023. The company assumes no obligation to revise or update any forward-looking statement because of the changing market conditions or other circumstances after the date of this conference call. Additional information regarding these factors can be found in the company's public SEC filings. In addition to the press release distributed yesterday, this morning, we published an investor presentation regarding the unsolicited acquisition proposal received from Public Storage on February 5, 2023. We have also furnished our supplemental package with additional detail on our financial results. These materials have been filed with the SEC and may be found on the Investor Relations section on our website 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 requeue with any follow-up questions thereafter.
At this time, I'll turn the call over to Joe.
Thanks, Brent and good morning, everyone. Following our discussion of our fourth quarter and full year 2020 [ph] results and financial outlook, I'll spend some time walking you through the presentation we filed with the SEC this morning and the rationale behind our Board's unanimous decision to reject Public Storage's unsolicited acquisition proposal. But first, I'm excited to announce that Life Storage crossed the threshold of $1 billion in total consolidated revenue in 2022. This is an incredible accomplishment as we now have nearly doubled the revenue we reported only 5 years ago in 2017. I am confident in our ability to continue to build on our momentum and deliver outstanding results.
I am also pleased to announce that Newsweek has awarded us the Best Customer Service Award in America for storage center category for the sixth year in a row. This award is a testament to the best-in-class brand and team we have here at Life Storage and to our commitment to delivering exceptional, seamless experience for our customers.
Turning to our quarterly results. I am pleased to report we delivered another quarter of outstanding performance across all segments of our business. While we continue to see a return to more normal seasonal trends, our operating fundamentals and business trends were very strong and remain above pre-pandemic levels. This positions us well for the year ahead. I'd like to highlight a few notable results and trends. For the quarter, we achieved same-store revenue growth of 11.8% versus the prior year period. Our strong performance was broad-based, with 85% of our major markets achieving 7% or greater revenue growth. For the year, 32 of our top 33 markets achieved greater than 10% revenue growth. These results underscore the benefits of our disciplined portfolio strategy to expand in key growth markets that allow us to benefit from regional income and population trends.
In addition to this outstanding operating performance, we also completed another strong year on the acquisitions front, completing over $1 billion in wholly owned and JV acquisitions totaling 75 properties. Of this amount, $974 million and 49 stores were wholly owned acquisitions representing nearly 7% growth in our wholly-owned portfolio. We continue to expand in markets such as Dallas, Los Angeles, Phoenix, San Diego, St. Louis and New York City.
Today, we own and/or operate nearly 1,200 storage facilities across 37 states and the District of Columbia. With regards to third-party management, we added 40 stores gross, net 39 stores in the fourth quarter and 107 stores for the year for a total of 440 stores at the end of 2022. Our third-party management platform had an excellent year as both our existing relationships and new relationships continue to add more facilities to our platform. During the quarter, we transitioned 29 operating facilities from other REIT platforms, further evidence that more and more owners are choosing the Life Storage brand and platform to manage their assets. This portfolio of managed stores continues to provide a strong pipeline of acquisitions. We acquired 11 managed stores during the year, representing nearly 1/4 of our wholly-owned acquisition volume.
Our operating trends thus far in 2023 demonstrate that we are continuing our strong momentum as we achieved January month-end occupancy of 91.2% which is 150 basis points higher than pre-COVID January 2019. In fact, we had record move-ins in January. Demand remained strong. Our excellent performance in 2022 reflects the strength of our operating model and the significant progress we have made to build our portfolio with high-quality properties in attractive growth markets. In 2023, we will continue to focus on executing on our strategy to expand our portfolio and deliver best-in-class service. By doing so, we will build on our track record of strong profitable growth to continue to enhance value for our Life Storage shareholders.
And with that, I will hand the call over to Alex, who will provide additional color on our performance for the quarter and the year and walk you through our 2023 financial guidance.
Thanks, Joe. This quarter, we reported adjusted funds from operations of $1.69 per share, an increase of 19.9% over the same quarter last year and well above the high end of our guidance. Fourth quarter same-store revenue increased 11.8% year-over-year driven by realized rates per square foot growth of 14.7% over the fourth quarter of 2021. As Joe mentioned, we continue to see the operating environment normalize. As expected, though asking rates and occupancies remain elevated, they continue to level off from their highs during the pandemic. Same-store occupancy for the quarter averaged 91.5%, or 140 basis points above pre-COVID levels. Demand remained strong through year-end, with move-ins accelerating in the last month of the quarter and through January 2023.
Same-store operating expenses, excluding real estate taxes, increased 4.1% for the quarter versus the prior year period. The largest negative variances occurred in utilities, repairs and maintenance and Internet marketing. The 15.7% increase in same-store property taxes as compared to the prior year quarter reflects the impact of large tax rebates received in the fourth quarter of 2021 that reduced the comparable expense in the prior year quarter. For reference, full year property taxes increased 5.2% compared to the prior year. These quarterly increases were partially offset by a 4.3% decrease in payroll and benefits.
The net effect of same-store revenue and expense performance was a 100-basis-point expansion in quarterly net operating income margin to 73.7%, resulting in 13.3% year-over-year growth in same-store NOI for the fourth quarter. With this improved performance, we again increased our dividend 11% in January as we continue to focus on increasing capital returns as we grow our business. This increase follows our 8% dividend bump this past July and marks a cumulative quarterly dividend increase of 20% since January 2022.
Turning to the balance sheet. Our net debt to recurring EBITDA ratio remained strong at 4.8x at quarter end and our debt service coverage ratio was a healthy 5.2x at December 31. We had approximately $655 million available on our line of credit at quarter end, with no significant debt maturities until April of 2024, when $175 million becomes due and our average debt maturity is 5.5 years. In addition, at December 31, nearly 85% of our debt was fixed rate.
Turning now to our 2023 guidance. Details of our 2023 earnings guidance and related assumptions were included in our release last night. Our 2023 same-store pool increased by 88 stores, bringing our total 2023 same-store pool count to 664 stabilized stores. We expect same-store revenue to grow between 4% and 5.5%, a majority of which will be driven by existing customer increases. Excluding property taxes, we expect other expenses to increase between 4% and 5%, while property taxes are expected to increase 6.25% to 7.25%. The cumulative effect of these assumptions would result in 3.75% to 5.25% growth in same-store NOI.
We expect our wholly owned acquisitions to be between $150 million and $250 million. Based on this outlook, we anticipate adjusted FFO per share for 2023 to be between $6.75 and $6.95, or 5.2% growth over prior year at the midpoint. Additionally, as you will hear in Joe's comments shortly, we felt it was important to share with you our summary outlook for 2024. Based on what we know today, we expect low double-digit FFO per share growth in 2024, with a midpoint of 11%.
With that, I'll turn the call back to Joe to discuss the presentation we filed this morning that discusses the factors that led to our Board determining that the proposal from Public Storage significantly undervalued our company and its growth prospects.
Joe?
Thanks, Alex. Last week, we announced that Life Storage Board of Directors unanimously rejected the unsolicited acquisition proposal publicly announced by Public Storage on February 5, 2023. The Board's decision followed a comprehensive review of the proposal in consultation with independent financial and legal advisers. As Brent noted in his opening, this morning, we filed a presentation that provides a deeper dive into the factors that led to the Board's determination that the proposal significantly undervalues our company. I want to spend some time this morning walking through the presentation and providing more color on why we are so confident in our future and why we believe that Public Storage's proposal does not appropriately reflect the value embedded in the upside of Life Storage and our clear line of sight to continued growth and value creation.
I'll start on Slide 3 of the new investor presentation we posted this morning. If you haven't seen it yet, the presentation is available in the IR section of our website and on file with the SEC. The Board's decision was grounded in the significant progress we have made over the past 5 years, creating a differentiated platform and what we believe is truly unique value creation opportunity. In this time, we have grown Life Storage from 706 stores across 28 states to a diversified footprint of nearly 1,200 stores across 37 states, primarily in the key growth markets across the Sunbelt. As we have grown, we have enhanced our operating model, building on our pioneering technology and innovating our platform to provide best-in-class service to our more than 675,000 customers.
My focus since 2019 when I was appointed CEO has been to accelerate our progress by focusing on our strategic pillars to deliver profitable growth and industry-leading shareholder returns. Our operational and financial performance over the past several years demonstrates that our strategy is working. We have a robust platform to continue building on this momentum.
Turning to Slide 4. The Board unanimously determined that the Public Storage's proposal significantly undervalues Life Storage and the company's prospects. Over the next several slides, I will walk you through the key elements of the Board's decision, including Life Storage's significant outperformance over the past several years and the reasons we believe we are positioned to extend our industry-leading track record. The unique opportunity we have to drive continued superior growth by scaling our platform faster and more efficiently than our peers.
Our margin expansion initiatives which are leading to enhanced profitability and the belief that Public Storage's proposal was opportunistically timed and does not reflect the significant continued growth and value creation that Life Storage is poised to realize. I'll begin with the reasons we believe that the proposal does not provide adequate value for Life Storage and the company's prospects for future value creation.
As you can see on Slide 6, over the past 5 years and since March of 2019, we have translated our significant growth and strong financial performance into superior returns for our shareholders. Our team has delivered industry-leading returns of nearly 100% since March of 2019 and nearly 150% over the past 5 years. The strong results and financial outlook that we announced today reflect our confidence in our ability to continue this track record.
Slide 7 underscores our proven commitment to exceptional dividend growth. Providing an attractive and growing dividend for our shareholders is not something we have embraced only recently. In fact, we have raised our dividend 6 times since March of 2019 for a total increase of 80% over that period. Growing our dividend is a key focus and we intend to continue to do so as we drive enhanced FFO growth over the coming quarters and years. The substantial value we have driven for our shareholders over the past several years has been underpinned by our significant financial outperformance.
On Slide 8, you can see that Life Storage has beat or met analyst consensus for FFO per share every quarter since the beginning of 2018, with the exception of 1 quarter at the start of COVID in 2020. We have also achieved or exceeded our own guidance for FFO every year over that period, including substantial outperformance in 2021 and 2022. We hold our team to high standards and time and time again our team has delivered. The financial outlook that we have announced today reflects our confidence in our team's ability to build on this substantial momentum in '23, in '24 and for the long-term.
In addition to our outperformance expectations, we have outperformed our peer group. On Slide 9, you can see that. Since 2019, we are consistently at or near the top of the list on FFO per share growth. And if you include forecasted 2023 results [ph] Life Storage is the highest FFO per share CAGR in our peer group at 13.3%. This compares to Public Storage at 9.3%. As Alex and I mentioned earlier, we anticipate industry-leading growth in 2024.
Slide 10 shows our expectation of low double-digit FFO per share growth in 2024, with a midpoint of 11%. Our growth projections are based on a number of different factors, including continued same-store growth, contributions from recent requisitions, the positive impact of lease-up assets, growth in fee revenue from third-party management and joint ventures and redevelopments. We expect to continue leading the industry in terms of growth.
Moving now to our operating strategy and track record of execution which have allowed us to deliver best-in-class performance across our portfolio. Let's turn to Slide 12. Our best-in-class operating performance is driven by accelerating top and bottom line growth. Over the past 3 years, we have driven leading same-store revenue growth. Through our strong operating fundamentals and disciplined expense control, we have translated this top line growth into same-store NOI outperformance.
Our leadership position is bolstered by our footprint in rapidly growing markets, as you can see on Slides 13 and 14. Over the past 3 years, we have reshaped our portfolio to focus on key Sunbelt markets where we benefit from attractive demographics and higher projected growth than our peers. We believe expanding in the right markets is critical to future growth. Between our existing footprint and our relationships through our third-party management and joint ventures, we have a built-in pipeline to continue growing in markets supported by strong demographic tailwinds. Our advantaged geographic footprint is clearly a factor in rejecting the proposal.
A key component of our portfolio strategy and our superior value creation has been our focus on expanding in the Sunbelt which I mentioned on the prior slide, offers compelling demand trends and population demographics. Since 2019, we have acquired 140 new properties in the Sunbelt, totaling approximately 70% of our acquisitions over this period. Though population and employment growth trends in the Sunbelt are projected to continue to drive strong demand, our peers' portfolios remain underexposed to the region. We believe our strong footprint in the Sunbelt represents a significant competitive advantage, particularly relative to companies that have focused on growth in California, where population demographics are trending in the opposite direction.
Today, roughly 60% of our total store count is located in the Sunbelt states, excluding California and we expect to drive continued above-market growth in the region as we benefit from in-migration trends. With approximately 65% of our third-party and joint venture assets also in the Sunbelt, we have considerable opportunities to expand in the region. Thanks to focused planning and outstanding execution, today, Life Storage is in better markets, positioning us for continued superior growth.
Turning now to our operating platform. which, together with the size of our asset base, allows us to grow faster and more efficiently than our peers.
Let's turn to Slide 16. At Life Storage, we have built a model that allows us to scale our portfolio and drive superior earnings. Our leading third-party management platform and joint ventures provide us with an embedded pool of potential acquisitions in key markets, the vast majority of which are off-market opportunities. We have historically been able to capitalize on these opportunities at attractive rates as we avoid competing bids from an open market process. Further, we have a strong track record of translating these acquisitions into enhanced profitability by identifying and executing on redevelopment activities.
I've been talking about our faster growth. Let me show you what that looks like. As you can see on Slide 17, since 2018, we have accelerated our store count growth by leveraging our unique external growth levers, increasing our overall footprint by 55% over that time. We have scaled our third-party management platform and joint venture portfolio at a faster rate than our overall portfolio, creating an increasing number of acquisition opportunities. Today, our portfolio of managed and joint venture asset comprises of about $8 billion in assets, approximately 65% of which are in the Sunbelt. This is a primary driver of our acquisition pipeline which currently stands at $685 million in assets, approximately 95% of which are off-market opportunities.
We expect to continue to build out our pipeline as we enhance our third-party and joint venture relationships, allowing us to continue to bolster our portfolio and strengthen on our foundation for continued profitable growth. We expect our store count to increase by approximately 100 over the coming year. Growth is valuable and likely a key reason Public Storage is pursuing Life Storage.
Referring now to Slide 18. The relative size of our asset base positions us to scale our portfolio more efficiently than peers, allowing us to deliver higher growth rates through our proven acquisition strategy. Our wholly owned acquisition volume since 2019, as a percentage of our total enterprise value at the year-end in 2022 is 30%. Public Storage cannot match this growth rate because of both the size of their portfolio and the overall lack of larger-scale portfolio deals. For example, Public Storage's acquisition volume over that period is only 12% of their total enterprise value. For public Storage to have achieved our growth over that period, they would have needed to spend approximately $16 billion more on acquisitions.
Our smaller base compared to Public Storage means we have significant runway and more upside and can more easily deliver significant growth. That's an exciting and important differentiator for Life Storage.
Turning now to Slide 19. We attribute much of our strong growth rate and continued robust acquisition pipeline to our leading third-party management program and establish joint venture relationships. Our third-party management program has seen remarkable growth since 2019, adding 227 new managed stores, including 65 net transfers from other REITs. We also continue to develop our JV portfolio of 141 stores through relationships with leading institutional and private equity partners. These relationships enable us to participate in top markets and quality properties that provide future upside with a moderate capital investment. We've increasingly leaned on our pool of managed and JV assets to fuel our acquisition pipeline in recent years. In fact, 37% of our total acquisition volume since the start of 2020 has come from these properties.
These relationships also provide an attractive annual fee stream, delivering approximately $31 million in annual fee income and reduce our reliance on the public markets as an alternative source of capital. We believe the relationships we have built through these pipelines are valuable assets in and of themselves. Our partners trust Life Storage and they rely on our leading operating platform and brand. This kind of trust is a differentiator for Life Storage and it's not built overnight. It is something we earned through our hard work every day. We have heard from many of these partners and they have serious reservations about continuing their relationship with Life Storage if the company were to be acquired by Public Storage.
In short, our third-party management and joint venture relationships are unique and valuable. We have been able to translate our strong external growth into significant profitability through our redevelopment initiatives to improve the quality of our assets and drive enhanced ROI and enhance margins. We are relentless in our efforts to deliver the best possible experience for our customers through ongoing investments in our owned assets.
As you can see on Slide 20, since 2018, we have completed $208 million of redevelopments which have yielded stable, attractive ROIs of over 10% and translated to a 390-basis-point increase in our NOI margin. We have a strong pipeline of these initiatives underway across our portfolio which are positioned to drive future growth and cash flows as they are completed. Importantly, this is all in our control. As we continue to execute on both internal and external growth opportunities, Life Storage has the proven capabilities and dynamic operating platform to drive enhanced profitability and value for shareholders.
Speaking of profitability, I will now provide a deeper dive into our margin improvement trajectory and the initiatives we have underway to sustain this momentum. Since the beginning of 2019, one of our key areas of focus has been to improve our margins and I'm pleased to say we have made substantial progress so far.
The chart on 22 speaks volumes. Since 2019, we have delivered sector-leading NOI margin expansion of approximately 630 basis points. We achieved this through disciplined execution of our initiatives to improve rental rates and reduce operating expenses in our stores while maintaining best-in-class service. As we continue to advance these initiatives, we expect to deliver at least 70 basis points of additional margin uplift over the next 2 years.
One point that Public Storage has brought up in his discussions around its proposal has been its relative margin differences. However, when you look beneath the surface, the margin gap is not as great as they may suggest. While Public Storage has been able to achieve higher reported NOI margins, a direct comparison of our 2 companies' margins ignores several key variables with meaningful impact on total margin differences. You can see a breakdown of these factors on Slide 23.
In particular, the higher regional rent in Public Storage's key markets account for approximately 370 basis points of margin difference. These are noncontrollable factors reflecting the different geographies of the portfolios. Moreover, Public Storage benefits from a lower tax basis than Life Storage, primarily due to Proposition 13 in California. Their margins in California have inherent risk from a potential repeal of Proposition 13 which would eliminate tax rates and could remove approximately 150 basis points from their margins. When you consider the 70 basis points uplift we expect over the next 2 years, the spread between our margins shrink significantly. Given the momentum we have in increasing store profitability through our efficiency initiatives and technology rollout, we are confident that we can continue to close the margin gap as a stand-alone company.
The strong growth and profitability trends in our business and our superior geographic exposure and capabilities were key factors in the Board's decision to reject Public Storage's proposal. The Board also determined that the proposal was opportunistic and fails to account for our compelling outlook and ability to continue to drive leading growth and value creation. So let me explain why we think the proposal was opportunistically timed which is covered on Slides 25 and 26.
First, Life Storage has been undervalued compared to historical averages. Based on recent history, however, we believe that this dislocation in our stock price is temporary. In fact, the proposal currently reflects an implied FFO multiple of only 17.7x which is well below our 3-year average of 19.4x. In other words, it's a great proposal for Public Storage but it is clearly inadequate for Life Storage shareholders. Public Storage's proposal which was made during the quiet period before we announced our '22 results and outlook through 2024, does not account for our company's strong future growth prospects.
Let me take a moment to explain the graph you see on Page 26. What we show here is the PEG ratio for us and our peers which is defined as the price-to-earnings ratio, divided by our earnings growth rate over a period of time. The PEG ratio calculates our 2024 FFO multiple, adjusted for the expected growth in 2024 and dividend yield. While Life Storage is undervalued on a 1-year FFO multiple basis, as we just discussed, it is even more undervalued when looking at our PEG ratio. When our FFO multiple is viewed in the context of our expected growth, we are trading well below our closest peers multiple. We anticipate a significant improvement in our multiple as the markets better understand the superior growth Life Storage is poised to deliver over the next 2 years.
Let me repeat that. We anticipate a significant improvement in our multiple as the markets better understand the superior growth Life Storage is poised to deliver over the next 2 years. Public Storage's proposal fails to account for this industry-leading growth and instead seems to be opportunistically timed to transfer Life Storage's upside value to Public Storage.
Now turning to Slide 27. The Board conducted a robust evaluation process. Among other things, the Board considered whether Life Storage is better positioned to deliver growth and value stand-alone or with Public Storage's proposals. The conclusion of this evaluation was unanimous. Life Storage is better positioned to continue enhancing value for shareholders by executing its current strategy than it would be through the proposed transaction. In reaching this conclusion, the Board considered a number of factors I reviewed today, our robust growth pipeline, our track record of delivering higher-than-expected total shareholder returns and driving leading revenue, NOI and FFO growth rates and our strong margin improvement.
Further, the Board determined that our portfolio of newer, higher-quality assets in attractive markets is primed for growth that we do not believe public storage can match. The Board's evaluation indicated that the Public Storage proposal is inadequate, opportunistic and does not reflect Life Storage's best-in-class performance and value potential.
I want to briefly mention in closing the independence of the Life Storage Board. This is a diverse, regularly refreshed board that is clearly committed to acting in shareholders' best interests. Board members bring significant experience and expertise relevant to our business objectives and are ultimately focused on value creation for shareholders. We are proud to have a strong record of engaging with shareholders and taking action in response to their feedback.
Turning to the final slide. We believe Life Storage is uniquely valuable, growing at a faster rate in higher-growth properties than peers and delivering sector-leading margin improvement. Public Storage's proposal is opportunistically timed to take advantage of a temporary dislocation in the stock price and does not reflect Life Storage's recent performance and bright prospects for continued superior value creation. The Life Storage Board is open-minded and will continue to review opportunities to further enhance value as we execute on our proven plan to drive continued growth and shareholder value.
Thank you all for joining us today. I hope you share in our excitement for the bright future we see ahead for Life Storage. As we turn to the Q&A, I'd ask that you keep all questions focused on our strong performance, our business and the outlook we provided today. We shared quite a bit of detail around the Board's decision to reject the Public Storage's proposal and I'm sure you can appreciate that we do not intend to comment further on that matter.
And with that, operator, we will now open the call for questions.
[Operator Instructions] Your first question for today is coming from Juan Sanabria at BMO.
Thanks for the time and for that thorough presentation this morning. Joe, I was just curious if you could maybe shed some light as to the drivers behind the 2024 earnings growth you laid out, in particular, what you guys would expect from a same-store revenue perspective just to kind of think about how that stacks up relative to your guidance that you laid out last night for '23.
Sure, Juan, be happy to. So obviously, we feel really strong about the guidance we gave for '23. That's embedded in our outlook for '24. There's multiple drivers. I just kind of went through some of them in the presentation. But again, much of it is to do what we've been doing over the last few years, in particular, the acquisitions of nearly $5 billion, including JVs over the last few years. So for sure, we see continued growth in the same-store growth, outperformance in some of those acquisitions since underwriting, we're seeing -- we like what we see, to be quite honest. The growth in the third-party management platform has been going extremely well, better than expected. And then obviously, we've got our enhancement program that we've -- is doing quite well and providing double-digit returns on those investments. And obviously, there's the margin improvement we talked about. We do see at least 70 basis points of further improvement.
Great. And then just -- I understand the hesitancy to want to delve deeper into the presentation. But I think there's clearly -- you lay out the multiple difference versus history which is well and good but I would argue today is a different environment given the higher interest rate. So just curious on how you think about the difference in cost of capital and absolute values when the Board is thinking about assessing bids out there because clearly, today's world is different from where it was unfortunately 6 months ago.
Well, listen, I'm not going to get into the Board's reasoning behind some of this. But I will say I'm not happy with the multiple right now. It doesn't reflect the opportunity ahead of us. The growth prospects ahead of us is why I felt it was important to talk about '24. It was just last year, we were trading at a premium to the average multiple of our peers and now we're at a discount. It's definitely market-driven and I believe temporary.
Your next question for today is coming from Todd Thomas at KeyBanc.
I guess 2 follow-ups on those questions actually. First, just around the '24 growth. Joe, the industry lacks visibility which you discussed in the slide that outlines the track record the company has of beating versus consensus but also your own quarterly and annual guidance over the last several years. And so I'm just trying to get a sense around the level of comfort that you have as it pertains to the 2024 FFO growth that you outlined? And maybe how much of that growth is sort of locked in, I guess, in your view and sort of controllable versus what is from maybe the same-store and operations more generally?
Right. Thanks, Todd. What we put in there, we feel very confident about. Obviously, our guidance for future acquisitions, for at least '23, is much smaller given the market conditions than the last 3 years. So actually, there's not a lot in that 9% to 13% FFO growth from future acquisitions. So really, it's what we see, what's controllable. We have very clear visibility in our 3PM pipeline going forward. We have signed contracts of stores that are opening over the next 12 to 18 months. That's in there. We see our expansions program, where they are in the pipeline. There were some supply chain issues that helped some of them back over the last few years. We're catching up. We know when they're going to open and we have a really good track record of understanding how they're going to lease up.
And then obviously, we did $3.3 billion in acquisitions over the last few years in the Sunbelt. We feel very strongly about the demographics of the Sunbelt. And all of that is embedded in the '24. So we feel very confident, Todd.
Okay. And then just, yes, in terms of the process here, can you talk a little bit about how the Board thinks about maximizing shareholder value over time? I think you said the Board conducted a robust review of the company's valuation and value potential. Has the Board engaged with a third party to provide a valuation for the company? Or is there another way that the Board defines value in terms of sort of a target multiple or NAV? And does -- what does the Board view as the current NAV of the company?
Todd, I'm not going to get into what the Board looks at and their process. We talked a lot about in the presentation. I will say that the Board is always open to and will regularly evaluate any opportunities that are put in front of them. What we talked about today was one proposal put in front of them and I won't say more about it.
Okay. And I guess one last question, if I could. You talked about some of the risk of the third-party management contracts, I guess, may be falling out in the event of an acquisition by PSA, maybe some impact around some of the joint ventures. I mean, are you seeing an impact today on discussions that you're having with potential parties, either for joint ventures, for third-party management. I mean is there a hesitation around them moving forward? Is this having an impact at all on business today?
Absolutely no impact on our business today. The feedback we got about a potential transaction, that was unsolicited. We've gotten many calls from JV partners and third-party management owners, telling us that they're not going to stay. It's a risk.
Your next question is coming from Steve [ph] at Evercore ISI.
If I'm doing my math correctly, I think FFO growth is projected at around 5% this year at the midpoint of your guidance. And effectively, Joe, you're saying that you can double FFO growth in '24. I know you've laid out a bunch of drivers. Which ones are the biggest contributors to that accelerating, I guess, earnings growth? Or which ones are creating big headwinds this year that you think may get neutralized or become tailwinds next year?
Steve, I'll let Alex jump in a little bit here.
Steve, when you think about 2024, I want to go back and just quickly say, to put in context, we are a relatively young company with a smaller base. As we've talked about in our meetings, we're very much continuing on our journey to grow and expand and we've shown that. Since 2019, we've driven same-store margins up by 630 basis points than most of our peer group. So we recognize that. We recognize we have more work ahead. I think in terms of 2024 and specificity around the weight of each factor, while we are confident in that outlook, we're not going to give specific weightings to the individual growth drivers. But I would really go back and reiterate a couple of points that Joe made. It's a couple of different things from different factors, the growth of our same-store pool, the strong performance of our acquisitions, $5.5 billion of wholly owned and JV over the last few years, growth of 3PM and JVs and contribution from our lease-ups.
We've talked about margin initiatives and improvements of at least 70 basis points in that outlook and that comes from an investment in process and technologies. So it's continuing that journey of the 630 basis points that we've done to date.
Okay. And either Joe or maybe Alex, employee costs at the site have certainly been a big focus for everybody as people have tried to streamline kind of operations and improve margin. Maybe just talk about some of the things that you've done technologically and what else is left to be done on the on-site personnel side? And how much of that factors into the 70-basis-point margin improvement over the next 2 years?
Steve, I'll take that. Listen, thanks for acknowledging and talking about technology. Many may forget, we led the sector with the Rent Now program. When everyone else kind of laugh and said, we want to sell at the counter, we prove that technology can improve payroll, improve efficiency and actually improve customer service levels. So obviously, we're still heavily invested in our Rent Now program. We have dynamic pricing. We continue to look ways to increase the utilization of that channel. It continues to go up. But we're not just stopping with that. Obviously, there are other things that we can do to make the stores more efficient and maintain the livable wage that we provide. We invest in our people. We're very proud of our people. There are lot of the reasons why we are growing our 3PM business and our JV business. So we'll continue to invest in our people. But we're just trying to work smarter at the counter. We're trying to reduce the hours. We're using data.
We have a ton of data that we're just really learning how to utilize. We've been hiring data scientists and that data is helping us decide hours of stores, traffic which stores do we need more people? Which stores can we pull back but still keep them open? So there's a lot involved in that. Obviously, there's been talk of kiosks in the industry. We're looking at kiosks, a different type of kiosk, virtual management, a live agent at a kiosk. These are the types of things we're looking at and we're excited about what they're going to do for us going forward.
Your next question for today is coming from Smedes Rose at Citi.
I guess just with this year's guidance and next year's guidance, maybe you could just talk a little bit about what you're seeing kind of on the wages and benefits line? What you're thinking about for this year's growth in '23 and how you think that will grow in '24?
Smedes, I'll let Alex talk a little bit about '23 in the payroll that we expect. But for '24, probably won't get that granular but go ahead, Alex.
Sure. Yes. In '23, just specifically on the payroll and benefits line, obviously, very good coming off of 2022, coming in lower year-over-year. But as Joe alluded, we really invest in our people and we really pride ourselves in customer service. So in '23, payroll is up but nominally, certainly well below the pace of inflation. But it's probably between that -- around that 2.5% to 3.5% level. But if you look at '24, we see that continuing to normalize, if not come down more for the exact reasons Joe outlined. It's the continued investment in technology and specifically part of that is the continued rollout of our kiosk program that enables us to optimize hours at stores with lower physical count in the store and leveraging our call center operations.
Okay. And then, Joe, I just wanted to go back. When you said you had managed -- owners of managed properties calling and saying that they would drop out if PSA took over, -- what -- I'm just -- what's the version? I mean, is it because they're newer in that space? Or is it they don't like the brand? Or what -- like why would they do that?
Smedes, I can't comment as to why they choose decisions. I know that when we're trying to win business, brand, people at the store and really your performance in their region, they want to choose an operator that is outperforming the others. That's how their stores are going to perform. We invested in our people. We invested in our properties and they see how our stores are managed and they like that about us. I think there's many options in the third-party business. It's a very difficult business to win. We kind of got into it late in the game. But I think we're really punching above our weight right now. We're doing very well and we're excited about the prospects going forward.
Your next question for today is coming from Mike Mueller at JPMorgan.
In terms of the redevelopments that you talked about completing over the past few years, the returns, can you talk about the size of that pipeline because there's really nothing in the supplemental about it today. And what the pipeline could grow to over the next few years and just kind of marginal returns?
Sure. I mean, obviously, with our acquisitions, Michael, we kind of continue to build up a pipeline. Every acquisition we do, we look at opportunities to expand or enhance, do a knockdown. But the pipeline -- we have been targeting $60 million to $70 million [ph] a year in investment. We could do more. We could do $100 million. Sometimes there are constraints with municipalities and getting the appropriate approvals. Supply chain issue has been an issue but we think that's getting a little bit better. So we -- our guidance kind of includes $60 million to $70 million, '23, '24 million but we will do more if we can. We can get up to $100 million, $110 million. We have the capacity. We have our own construction team that just focuses on that. So a lot of it is in our control but some of it isn't in our control and that's supply chain and municipality speed. So our guidance, $60 million to $70 million a year but I think we'll do better.
And what is the typical redevelopment or enhancement? And is it -- and what portion of those tend to, I guess, have expansions tacked on to them as well?
So every year, it's kind of a constant building of our pipeline, our area managers, our store managers and we kind of like bring up ideas and we have a whole committee around it, we looking for opportunities. And it can be everything from just knocking down an old drive-up facility and building up 3 stories climate control. It could be just changing the front of an office. It could be all sorts of things, Michael. It really depends on the project. We've had complete knockdowns. We had a store in the Sunbelt that just kind of kept flooding over a few years. And we ended up knocking the whole thing down and building a next-gen 3- or 4-story climate control building. And when you do that, obviously, climate control, you get better rates per square foot and so forth. So it really depends on the project but it's a great program for us. It's a great use of our capital.
Okay. And then just lastly on the view that margins are expanding about 70 basis points over the next, I forget if it was a year 2, is that more driven on the expense side? Or is that more driven on the revenue side? Just any color you can shine on that.
Michael, it's Alex. I reiterate what we said a few moments ago. When you think -- when you look forward in the next couple of years, 70 basis points at least of margin initiatives, predominantly on the expense side. And so that's a reflection of what we said, the investment in technology and then the benefit of our scaling coming through our numbers. And so we would see benefits on payroll, Internet marketing and also continued rationalization of other expenses.
Your next question for today is coming from Michael Goldsmith at UBS.
In your presentation, you talked a lot about the Sunbelt and the continued growth there. Can you talk a bit about the performance of the Sunbelt relative to the rest of the portfolio in '22? And what are the expectations for that region and its impact on your '23 and '24 guidance?
Yes, Michael, it's Alex. And I think you can -- when you look at 2022 in our markets in the Sunbelt, really good production coming out of some of the key states in the area. I'd specifically call out obviously, Florida, Georgia as kind of the prime ones. So that's a good setup -- that's part of the good setup into 2023.
Yes. I mean it's just -- it continues to be -- if you go to Florida, I was just down there a couple of weeks ago, no one's talking about recession, it's incredible. So I mean, the demographics, the job growth speaks for themselves. And obviously, Florida has been just on fire for us the last couple of years and we expect that to continue, Michael.
And you had a big acquisition year in 2021. So I guess I would expect that there would be a large contribution from some of the lease-up properties impacting your FFO growth in '22 and '23. But you're looking at like 5% growth. So I'm just wondering and there's an acceleration in your '24 guidance. So just trying to better understand the dynamics from the lease-up properties and the acquisitions on the earnings growth over the next couple of years.
Michael it's Alex again. Yes. I mean, go back to what we talked about in '24. It's really coming from a number of factors. And so we're not going to comment on the weighting. But definitely, it's continued growth of our same-store pool. Yes, it's the strong performance of acquisitions that we've done to date. $5.5 billion that's wholly owned and of course, there's a JV number in there as well. So while we're not going to go into specific weightings, it's couple of different factors. And certainly the continued performance of our lease-up pool as part of it.
Got it. And just one more for me. You did a really nice job outlining your thoughts on the proposed acquisition and your case here. Have you received any approaches from any other interested parties?
Michael, I can't comment on that.
We will take one more question and your question is coming from Jon Petersen at Jefferies.
We just made the cut. Question on the margin. So I know some of your peers, I guess, Public Storage specifically breaks out direct and indirect expenses as part of their operating expenses. Can you just help us definitionally what do you guys put in OpEx? What do you put in G&A? And any commentary on how that differs from your peers would be helpful?
Well, I won't -- it's Alex. I won't comment, obviously, on the peer definitions. For us, in our same-store NOI margin, it's really direct operating expenses at the store level. Obviously, the payroll, property tax benefits, internet marketing, those utilities, those are the obvious line items. We don't include in their supervisory costs. So our regional managers, our AVPs, our RVPs, centralized costs come out into our G&A.
Okay. And then maybe if I could just ask one more question on -- since it's the last one, on where we're at, kind of in the process? Are you -- are you -- I know you hired bankers? Are you running a process? Are you actively considering all sorts of opportunities? Or it almost seems like the way you presented it you got this bid from PSA, not good enough, you're just moving forward business as usual. Like how should we think about how you guys and the Board are evaluating maximizing shareholder value right now? Does it go beyond just operating the business?
Well, as CEO, I'm executing on our strategy, to be quite honest. But as we've said a few times now, the Board is always open to and will regularly evaluate opportunities to enhance shareholder value as and when they come. I can't really say more than that.
I will now turn the call over to Joseph Sapphire for closing remarks.
Okay. Well, thank you, everyone, for joining us today. We look forward to continuing to engage with our shareholders as we focus on driving strong shareholder value. Please follow up with Brent, if you have any additional questions related to the unsolicited proposal.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.