Shurgard Self Storage Ltd (SHUR) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us in person and virtually for the Shurgard year-end 2022 results. I'm here with Marc Oursin, CEO; Jean Kreusch, CFO; and Isabel Neumann, Chief Investment Officer. Before we begin, we want to remind you that all statements, other than statements of historical fact included in this management presentation, are forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected by the statements. These risks and other factors could adversely affect our business and future results that are described in our earnings release and in our publicly reported information. You can find a press release and an audio webcast replay of this management presentation and -- on shurgard.eu website. With that, I will turn over to Marc.

So let's start the journey with these great numbers, 2022. So you will have this agenda. So I will start with a couple of numbers and then talking about the key strategy. Then Isabel will join us and present to you everything we have done in terms of increase of size, square meters and pipeline. Jean will come back on the more detailed numbers, P&L, cash flow and balance sheet and then talking also about the outlook and the medium-term guidance. And I will end with the conclusion and then happy to open to any questions that you have. So first, yes, Shurgard is a unique platform with a long runway, which is great. Talking about uniqueness, again, another year of outperformance. Secondly, proven by benefits from our geographic spread, and I will come back to this later with -- and the results, of course, an acceleration from our scalable prop-tech platform. Regarding the runway, we have overdelivered in '22 in terms of square meters, so in terms of developments and also M&A. And regarding the pipeline, we have been able to build under the authority and the leadership of Isabel, a very strong development pipeline. Thirdly, the combination of these three levers of growth, optimizing existing buildings, so called redevelopment; opening new properties, developments; purchasing some competitors, M&A, times seven geographies, clearly, in an undersupplied and also highly fragmented markets are feeding our pipeline growth. Last but not least, all of that is framed within a very robust balance sheet and also a very disciplined capital allocation and returns. We are becoming U.K. REIT next month. And on the top of that, we are the sector leader in terms of sustainability and ESG credentials. Talking about the numbers, you have here, on the left side, the growth on different aggregates for the company. So the top line year-on-year at constant exchange rate has grown up almost by 12%, 11.7% precisely. The NOI, so what we call actually, kind of operational EBITDA, grew by 13.6%. And then the earnings after tax grew by 10.1% year-on-year. Combined to this, you have, as I explained to you already, a very significant pipeline for -- starting from '22 and onwards of almost 150,000 square meter, which is more than 1.5 million square feet, and representing which is, I think, even more important, 12% of the total existing footage of the company. So if you look at then the leverage of the company, so we have a low leverage, 18% LTV-wise at the end of December '22 or expressed as a net debt over EBITDA of 4.1x. At the same time, the EPRA NTA has grown up by almost 17%. And I will not come back on the details of the sustainability leadership that we have, but great numbers here. All of that is also based on the proven model. We believe that we are the best-in-class self-storage platform in Europe. And this is demonstrated by the fact that the occupancy is really high, same store. We have been able to reach 90.5% across the platform. So for the same store, which means roughly 234 properties for the year 2022. And at the same time, to grow the rental, so average in-place rent by almost 9% on the same geography, which is total Europe over the year 2022. And this is also based on what you see on the right side of the graph -- of the table, sorry, which is how the customer base is structured and evolving. So if you take 100% of our customers, you will find 37 of them that we call short-term customers that are staying on average, 5 months. And on the other side, you have customers above 1 year with us that, on average, stayed close to 5 years. So what we have been able to do in '22 is to increase to new customers, what we call, street rates or board rates with, by the way, less discounts, so which means that these customers are getting in with a good level of move-in rate and at the same time, to increase the existing customers as we do every year, with a high level of increase, which has fed actually the growth of the total revenue. So this mechanism is really, I would say, the heart of the revenue growth. Then if we go to the also long-term prospects, they are unchanged. Nothing has changed from that perspective in the sense that this business and this industry of self-storage is a B2C industry. This is very different than logistics. Our customers are households. And secondly, we are -- and our customers are related to where they live, and it's an urban product. So we need to be close to residential areas to make our business. The catchment areas are pretty small. Roughly within 10 minutes driving time, you have 50% of your customers. Having said that, this industry has been able to grow by on average 8% the past 10 years. So the wave is massive and moving fast. So that's good to serve on that kind of wave clearly. And if you look at then the countries in Europe versus the U.S., this is the gray bars that you have on the graph. So the U.S. in terms of penetration of the industry is if you take all the footage of the industry in the U.S. divided by 350 million people living there, you will find a number of square foot or square meters per capita, which is close to 10, 9.4 square foot. And if you do the same math for Europe, you will find 0.2, so which is far less than the U.S. So that's why we're telling you about the wave and the one that we have. Secondly, if you look at, on the left side, these red bars, this is exactly the penetration. So exactly the same computation. So how many square meters or square foot of self storage per city. And here, you have the capital city from right to left by the highest to the lowest, and in terms of capital. And you see that you have mainly three groups, one above 1 square foot per capita that are Stockholm, London and Copenhagen. And then very close to one, you have Brussels and what we call Randstad. So for Dutch native, it means the conurbation of Amsterdam, Utrecht, Rotterdam and then Hague. And then you have Paris at only 0.6 and Berlin even far away with 0.3. What is interesting to note also is that in these cities, we are the #1 or the #2 by the size of the footage that we are operating there. So clear, great dynamics and in a very good position to continue to capture them. Then I was mentioning to you our leadership or leading position for ESG. So our goal is to be net zero carbon operationally by 2030, which means mainly Scope 1 and Scope 2. How do we get there in terms of priorities, it's what you have on the left of the slide. The point here is that, first, to reduce our consumption. By reducing your consumption of electricity, of gas, you're able to reduce, of course, the CO2 emissions. And then if you can offset them with solar panel, you are becoming net zero carbon Scope 1 and Scope 2. And this is what we are doing. So this year, we are rolling out a complete and massive plan to replace of the lamps with LED lights. It looks pretty basic. But in the end, you save 70% of consumption. So it is a big impact on the, let's say, CO2 emissions. And secondly, in our buildings, we are storing stuff that don't need light. So we have only lights for humans in the corridor. So if someone is there, the light is on. Someone is not there, the lights are off. So by doing that, we're able to target this objective. Secondly, regarding the ESG governance, we have already a great one, and we continue to, I would say, enhance it. So -- and this year, Isabel, will come back to that, will have a Board globally with less people, subject to, of course, the AGM. Our Chairman will be also independent and also the ratio of genders will improve in the coming 2 years. Last but not least, regarding ESG is how do you report all of that? So we are based in terms of stock market in Brussels -- on Euronext Brussels, you know that. So we are following the EU taxonomy from that point of view. Plus the fact that you have what you call physical climate risk change that is new to us, that is also a very detailed in the annual report that has been published this morning. So back to the portfolio and the key numbers there. So we have today 266 properties spread over seven countries, representing roughly 1.3 million square meters, so close to probably 14 million to 15 million square foot and with 180,000, 182,000 precisely customers. What is important to note is that this is what you have on the map, behind me, on your sides. The red dots are the capital cities of these countries. And you know how capital cities in Europe, which is pretty different than the U.S., but are important. Usually, the capital cities in Europe are the largest cities by the population, the one with the highest growth. The one also with the highest level of income per capita. So it's very interesting for our business. As I explained to you, it's an urban product. So it's good to be in these capital cities. And 2/3, more or less of our portfolio, 180 out of 266 allocated there. On the top of that, the remaining vast majority of the properties, the 69 you see are in what we call Tier 1 cities. So just the cities of the size after the capital city, mainly in France, in Germany, in Sweden and also in the Netherlands and also in Belgium. Another way to look at this portfolio is also proportion, freehold leasehold. 94% of our portfolio is freehold, which brings some benefit that Isabel will come back with. Secondly, what kind of buildings or real estate do we have? So again, close to 2/3 of that portfolio, 63% precisely, actually are what we call purpose-built. So they have been designed, constructed for self-storage, which means that the efficiency of the building between what you have built, the growth and what you are renting, the net, is close and over 70% which is also very important and good. Quite still young portfolio. This purpose built buildings have an average age of 15 years. So that's fine. So we are still in the teenage year of this portfolio. And an important factor is the average size of the building. So we have, on average, 5,000 -- bit more 5,100 square meter per building, lettable which is, by the way, versus the industry, much higher the industry, I think it's close to 3,000 on average in Europe. So by having larger building, fixed cost, larger margin in the end. And on the top of that, the bandwidth of this portfolio is very standard. Almost all the markets that we have, the seven countries, have this size of 5,000 square meter, which is, again, very efficient in the way you run it. So back to the occupancy of, I would say, the last years and also the in-place rent and revenue growth. If you look at on that slide, the occupancy, we have been able to grow the occupancy quite decently from 88% to 90.5% same-store. So -- and what is the same store for us, is a property that we run for at least more than 3 full years, which means that starting to be stabilized properties. So which means that we have the highest level of occupancy of that kind of properties in Europe with 90.5%, which is great. And secondly, also, if you look at the way this spread of occupancy is with the countries that we're operating, you can see that we go from 89% to 93%, which is pretty narrow. So you have a gap of only 4% in a way, 4% versus 89% and versus 93%. And this is clearly due to the fact that we are running and using a lot of data to manage our pricing, pricing to get prospects into customers, but also pricing to increase existing customers. And you understood the, I think, the mechanism. So if you look at then the revenue. So we have been able to grow the revenue by almost 9% last year, I mean, the in-place rent between '22 and '21. And what is interesting to notice on that graph is between the countries. So the bars, the gray and the red bars, are the absolute value of the in-place rent per geography. And you have in the circle, the growth. Well, this 9% growth of the in-place rent starts from a bit more than 7% in France, up to 12.3% in London because we call London, the U.K., sorry for that, but we are only in London. So that's why you have the British flag at the bottom. But you see again that all the markets have performed very well because it goes from 7% to 12%, more or less with astonishing performance, we believe, in Belgium. You see the absolute value quite low, but the growth is 9.2%. So it's a fantastic achievement in Belgium, but also in Germany with 9.5%, and Denmark and Sweden. So globally, a fantastic year when you have all the markets at the same time growing at that speed with a quite consistent level, it's really good. Then this, as I said, is related to what we call the optimization of our digital platform. And if we look at how customers have, let's say, evolved and also changed since COVID, it's just amazing. So you could have thought that self-storage is a very traditional slow-moving company from a customer perspective, not at all. Customers are behaving exactly the same when there's something which is going into their direction, they take it on and they apply it to their behavior. As an example, we have set up a new access control system in all our properties during the year, actually 2022. And this is coupled with an app on your phone, Samsung or Apple. And then you stay in your car, you are Bluetooth recognized, the gate is opening. You arrive, you park your car, you go to the gate -- the door of the building, same thing, you are recognized, you just push the door, it's opening. Then in the lift, you go to the level because our building are elevated. You go to the lift, recognize and you go to the floor where you are supposed to go, let's say, the third floor and then you take your unit. So this, today, has been a fantastic change for our customers. And that's why, by the way, that -- the way they rate us on Google is really high. We have the highest score with 4.8 out of 5. And this number is based on 300 reviews all time per property across Europe, which is very significant and very massive. And again, the other point to remember is the -- what we call e-rental. During the COVID, it was in 2021. We have rolled out, which is a full experience with your phone. So it's very simple. You're on your coach on a Sunday evening, let's say, we're on Sunday night, even 9:00 p.m. Suddenly, you think and you talk and you need some space. Well, you take your phone, you go on the website or you talk to your phone, Shurgard appears, you click. And within 6 minutes, you have rented the unit for the day after. Today, in 2022, 30% of all the move-ins that we do are coming from that channel. 2 years before, it was zero this way. So just to show you how people are fastly changing their behavior and how we can catch from that as soon as you're the right process, the benefit of it. And again, as a customer satisfaction, 1/3 of all these move-ins have been done outside business hours. So which means the coach on Sunday at 9:00 p.m., even sometimes we are checking, I saw some people doing some move-ins at midnight. So I don't know what they are doing at midnight, but they were suddenly needing something. And so, it's a fantastic experience for customers. And of course, the benefit of that is that how to drive our revenue, it does help to support our revenue growth. And secondly, obviously, the fact that 30% of our customers are suddenly having a 100% experience through their mobile phone, you are able to optimize and to run your properties better. So having a good way to manage the potential impact of inflation on labor cost, therefore, meaning that the margin has increased significantly in '22. And on that, I will turn to Isabel and to let her sharing with you the great numbers that we have regarding the pipeline.

Thank you, Marc. Good morning, everybody. At the Investor Day in September 2021, 1 week after I arrived, we announced a new growth strategy, whereby we committed to doubling the growth of the company. As a recap, we grow using 3 levers. The first one is we expand the size of our existing buildings, redevelopments. Secondly, new development. We buy a piece of land and we build a property, sell storage property on it. And thirdly, market consolidation or M&A, as we call it, whereby we acquire competitors properties. Overall, we have committed to adding 70,000 square meters in 2023 and 90,000 square meters as of 2024 onwards with a total investment of EUR 170 million. Three key messages here. The first one is we're on track. We have added 65,000 square meters in 2022 for a total of EUR 142 million. And we've significantly accelerated the pipeline, but I'll come back to that a little bit later. Secondly, we have increased our target yield at maturity from previously a range of 7% to 8% to now a range of 8% to 9%. This is to reflect the change in cost of capital and in market conditions. Thirdly, we are confident that we can continue the speed of development, and we're confident that we can deliver on the promises that we have made for 2023 and 2024. Now let's go deeper into our first lever, redevelopments. So as Marc said, we own 94% of our properties, which gives us really a unique ability to extract further value from the properties, the platform that we already have. We committed to adding 1,000 square meters in redevelopments per year. We have done that in 2022. But more importantly, for 2023 and 2024, we plan to significantly expand via redevelopments with a total of 18,000 square meters planned in the coming 2 years. Important, this project, they generate immediate uplift of the revenues and NOI. On the development side, our second lever, we've added 7 properties and 33,000 square meters to the portfolio. We had guided towards 5 properties and 25,000 square meters, so we have overdelivered there. For 2023, we currently have about 51,000 square meters currently in the pipeline, so we're on target towards reaching the 70,000 square meters from 2024 onwards. Our third lever, market consolidation or M&A. Also, on the M&A side, we have overdelivered. We had guided towards 6 properties and 20,000 square meters, and we have delivered 7 properties and 31,000 square meter. What's interesting is that the 7 properties, they represent 5 transactions in 5 different countries. So you can really see how we use acquisitions as a tool to add square meters throughout our entire portfolio. We use the acquisitions to both capture new catchment areas or infill there where we see a lot of demand. Shurgard has been and is the #1 market consolidator. And we've really built up an expertise to integrate and scale up these acquisitions at speeds, giving us a real competitive advantage compared to other self-storage operators. Now let's turn to the pipeline. I think we're very proud to have really been able to significantly accelerate our pipeline. We currently have a short-term pipeline of about 150,000 square meters with an investment of EUR 312 million, and this represents 12% expansion of the current rentable square meters. You can see that a large part of that pipeline is situated in the Netherlands and Germany. And that makes sense, and why is that? Previously, we were focused on 4 cities or 4 regions: Paris, London, Berlin and [indiscernible]. And at the last Capital Markets Day, we added four additional cities and regions, which were Ranstad, Munich, Frankfurt and Stuttgart. So all of these new cities and regions are based in the Netherlands and Germany. So it's quite logic that a large part of our new pipeline is situated there. Our strategy, though, for those 2 countries is quite different. In the Netherlands, we've been there for 25 years, and we are by far, the leader. So there, we are really more surgically micro targeting specific pockets of demand. For Germany, Stuttgart and Frankfurt, we were not present. In Munich, only very limited presence. So there, we're really still building out the presence overall. Now moving to sustainability. We continue to make significant investment in sustainability, as Marc said, with the goal to become net zero operational by 2030. We look at sustainability from a very holistic approach, whereby we look at the entire building life cycle. Now what have we done in 2022? Three things. We further reduced our gas and electricity consumption by continuing the rollout of the LED and the heating optimization. We've installed smart meters whereby we can better control water consumption. And thirdly, security, an important feature for our customers. As Marc said, we upgraded and standardized our access control system. We installed more and better cameras, and we improved our remote 24/7 monitoring. Now what's on the docket for 2023? Four things. We will finalize all the LED installations. That will all be done by the end of 2023. We continue with our heating optimization and the rollout of heat pumps. Thirdly, we are currently investigating solar panel electricity generation, whereby we have a specific pilot running in the Netherlands. And finally, we are trialing a BMS system in Belgium and the Netherlands. From our perspective, we really strongly believe that these investments have significant benefits. A, we will be better in predictive repair and maintenance. We will optimize the life of our assets. And we will continue to generate operational efficiencies, eventually benefiting not just a better customer experience, more sustainable buildings and then more shareholder value. And finally, we continue to excellence in governance. As we announced in the report this morning, 3 changes will take place in the AGM from May onwards that will further reinforce the independent governance. First of all, the proportion of Independent versus Dependent Directors will increase from 55% to 66%, with 6 out of 9 Directors being independent. Secondly, Ian Marcus, who has been our lead Independent for the past 5 years, will become our new Chairman, which means that we will have an Independent Chairman. And thirdly, Ron Havner, who has been -- or is our current Chairman, former CEO of Public Storage and a real authority in the self-storage space, has agreed to remain closely involved with Shurgard as Chairman Emeritus. I'll pause here on the governance side, and I will hand it over to Jean to talk about financials.

Thank you very much, Isabel. So looking back at our financial results in 2022, we delivered a very strong performance year-on-year with an acceleration in the Q4. Our revenue total company has grown by 13.5% at constant exchange rate for the last quarter of the year, while we grew by 12.3% for the year. NOI margin at 68.8% is up 2.1 percentage points for the quarter and at 66.1% for the year, up 1.3 percentage points, demonstrating once more the scalability and continuous digitalization of our operating platform. Finally, our adjusted EPRA earnings at EUR 143.6 million grew by 15% for the year, if we exclude a one-off insurance income recorded in 2021. So we can say we delivered a strong quarter in a very solid and good year. On the next page, our same-store -- yes. On next page, our same-store property operating revenue continues to show a strong and consistent growth with an average occupancy of 90.5% for the year, up 0.2 percentage points versus last year and an average in-place rent up by 8.9% versus 2021, reflecting our ability to increase rates for existing customers and raise board rates for new customers as the demand continues to remain very strong. On the country level, Scandinavia results must be seen in the context of a very strong performance in 2021 while the Netherlands, the U.K., Germany and Belgium are showing double-digit growth or close to it. On the following page, our three levers of growth are contributing to the 12.8% increase in our NOI. Our same-store NOI grew by 10.8% at constant exchange rate and contributed EUR 20.5 million to the growth, while the development and acquisitions added another EUR 5.7 million, reflecting the ramp-up phases in our development activities. And this, combined with the leveraging of our standardized and digitalized platform, allowing us to deliver economies of scales and keep the cost basis low. Moving on to the cash flow. On the next page, we can -- we see we improved our operating cash flow. And as Isabel explained, we are continuing to expand our pipeline. This is reflected by a 47% increase in our cash spend investment, amounting to EUR 184 million in 2022. We ended the year with a cash balance of EUR 87.3 million. We also confirmed the payment of a dividend of EUR 1.17 per share for the year. Page 26. We continue to show a very strong balance sheet with a low and stable LTV at 18% and a net debt-to-EBITDA ratio of 4.1x. Our debt has a weighted average interest rate of 2.36%. Our maturities are well spread, and 100% of our debt as fixed interest rates. Our EPRA NTA per share increased by 17.6%, reflecting both the growth of the NOI as well as further contraction of 46 basis points of our exit cap rate to 5.19%. Let's now look into our outlook for 2023. We expect our total revenue growth to be above 8% versus 2022. As we reach the 2 percentage point growth of NOI margin over 2020, well ahead of our guidance, we now expect a 0.2 percentage point increase of all stores margin going forward. As explained by Isabel, we increased our property yield expectation and maturity by 100 basis points. And now for new development, we have a yield expectation of 8% to 9%. Our average effective tax rate based on adjusted EPRA earnings before tax, is expected to be at 18%. We will pay a dividend per share of EUR 1.17 for the year. The outlook clearly shows our confidence in our resilient operating model and the opportunities of growth that lie ahead of us. To finish, on Page 29, we plan to maintain an attractive shareholder return in the medium term. Our guidance remains unchanged with a 6% all store revenue growth per annum and an LTV at 25% and 4x to 5x net debt to EBITDA. I will now hand over to Marc for the conclusion.

Thank you. So you understood that we have, to summarize this presentation, first, strong business model with a unique platform. This is coupled with a large pipeline for future growth, so expanding physically the size of the company. And also, benefiting for the permanent optimization and leading ESG performance. The sum of the 3 are delivering to shareholders, high and sustainable returns. So that's the conclusion. So happy now, I think, Caroline, to go for the Q&A.

Thank you, Marc, Isabel and Jean. Now we are available to take your questions. First, we will take questions from the audience. And then we will take questions from the webcast. [Operator Instructions] Selene?

[indiscernible] from Barclays. I got 2 questions. The first one on your dividend policy. Can you help us notice that the wording on your new dividend policy kind of suggest that you could be reviewing the dividend policy going forward. Now that the company's passed peak growth, would you be considering behaving more like a mature company/established, and increasing the dividend to match earnings growth? That would be my first question. The second one is, you've mentioned that you're now expecting 100 bps higher yield -- on the yield at maturity for new investments, which I guess is what all investors will be looking to do as well. Does that mean that property yield should go up 100 basis points in your portfolio?

So -- well, I will take it. So the -- regarding the dividend policy. To us, it's part of the total shareholder return. So the way we approach it is how your earnings are growing plus the dividend yield and the sum of it makes the return for our shareholders. So for the time being, since what Isabel mentioned regarding September '21, we think that we are keeping this level of a fixed dividend per share for the coming years. And if the growth of the earnings or if there is a way to adjust it, it will be related to what we are looking for in terms of total shareholder return. That's pretty simple. Jean, do you want to elaborate on that?

And our guidance hasn't changed. Investor Day, we're very clear as well that we would keep it stable for a while, and as Marc explained, address it if needed. So there is no change in our view from that point of view.

So yes? Yes, maybe?

Yes to your yes, maybe.

And the second one, sorry?

Well, want to take it, Jean?

The second one, 100 basis points higher. Yes, we are clearly reflecting, as Isabel mentioned, the fact that the cost of capital is more expensive that we have seen increase in cost of construction. And we also want to have, as a result of that, higher returns for our shareholders. And that's reflected in what we'll be looking for in terms of new developments going forward. So the one that we're going to be improving going forward, we're expecting obviously a higher return to compensate for the cost of capital that's gone up.

And the read cross to your portfolio yield -- and the read across to your own portfolio yield at the moment, should it go up 100 basis points as well?

Why would it go up?

[ Expecting ] 100 basis points higher for your new investments?

Yes. But that's new investments that we're looking at. So existing one, obviously, they are going up. I mean if you look at our results, they have been very strong. So that will help the investments compared to what we initially planned. So yes, I mean, compared to what we initially planned, everything, being constant, with the good performance we're having, it's obviously positive.

So just a follow-up because I had a similar question on the yields on your portfolio because a few months ago, I think at the prior, you were also saying that you were starting to see, on the transaction market, more sellers and possibly slightly higher yield. So have you seen in the transaction market also the yields going up for self-storage in Europe in general? Or is your analysis just that due to the rising cost of capital, you're talking about buying at higher yield, but you've not seen a movement in yield in the investment market?

The behavior is a bit different depending on each country, I would say. It's more the kind of linear situation. I think there's a bit of a noise. So what have we seen? The reality is, of course, still that you don't see that many M&A transactions in the market. And those who are there, they don't really disclose the yields. But from the ones that have disclosed, you can see that they've done that yields at 6% to 7%. So we are realizing this already at yields, which are higher than I think the market does. You are seeing for bespoke transactions, a slightly increase in yield, absolutely, but I would reiterate that this is -- continues to be a growing market with a lot of appetite from also institutional investors. So there continues to be a good level of competition for the self-storage space as a whole.

And by market, you see yields going up a bit faster in the U.K. than in the continent?

Transaction to [ sell ]. It's not like if you have 10 transactions or 5. So no way. It's still very related to the situation of the personal seller. Is it an institution? Is it a physical person? Depending the edge of the person and again, the personal situation, some people are eager to sell rather quickly. Others, not. So it's -- I don't think that we can really, up to now, draw some conclusions. So the year '23 will probably help because this started to be the -- I mean, the cost of capital really massively increased and impacted the level of transaction probably at the end of '22, but not before. So let's see how '23 will go.

And just a question on the change at the Board level. Obviously, very nice to see the increased percentage of Independent Board members. Just what is the background or the reason for the change taking place now?

Well, it's I think -- I'm sure you didn't maybe have the time to read our Chairman's letter in the annual report this morning, but you will see that after being a public company for 5 years, at the beginning, when we did the IPO in October '18, we saw that having a strong presence in the Board of our 2 anchor shareholders, Public Storage and New York Common was good. I mean, each of them 2 Directors, so which means 4, plus the CEO, which is non-independent, 5. So the need of having 6 independent directors to have the majority. So we thought that it's the time now to go for a Board where for public storage and New York Common, having one representative is enough, which means that the size of the Board is going from 11 to 9. And mechanically by the fact that there's a rotation on the Chairmanship, you have a Chairman, which is independent -- who is independent and having an increased majority of Independent Directors. So that's a very simple reason.

[indiscernible]. Thank you for the presentation. I just had one question on the medium-term pipeline because currently, your pipeline -- because you mentioned that you were focusing on Germany, Netherlands in the next couple of years, but are there any plans for different cities or countries even?

In the slides, there is one word, which is discipline of manual allocation or capital allocation. And up to now, we stick also for the medium term to what we have said, which is the benefits of this industry is the size and where the size is. I mean you have a lot of synergies and leverage on -- because it's an operational business. You understood that. It's a B2C thing. So we stick to the 7 countries where we are. And by the way, we have the experience for more than 25 years being in 7 countries, 7 different languages, 4 different currencies. So we know what complexity means when you don't have the size and the cost. So we believe that growing in the 7 seven countries today is the right thing to first. Secondly, in terms of cities, back to your point. By targeting still the capital cities and some Tier 1 cities that do make sense for us, and that's why Germany, because Germany is such very different demographics, for example, the U.K. or France, or many other countries where you have the capital city is roughly 20% of the whole population. If you take London versus the U.K., Paris versus France. And more than 30% or even 40% of the GDP. Berlin is not of that kind. It's 4 million -- 4.5 million people versus [ 85 million or 87 million people ]. So even -- in Germany, you need to be in the top cities. So it means you need to be in Berlin, then you need to be in Munich and Hamburg, 2 million people. You need to be then in Cologne, in North Rhine Westphalia, the west side of Germany, in Stuttgart and Frankfurt and Dusseldorf potentially. So by saying we want to be in Germany, a key player, requires or means that we have to focus on much more cities than saying, we want to be a key player in the U.K. or France or Sweden by simply focusing on Paris, Stockholm or London.

A bit of a more long-term question. Just regarding the slide on the self-storage per square foot per capita. A lot of people talk about the differences between the U.S. and Europe. And in the office space, for example, people have been saying the reason that people haven't been going back to the office in the U.S. is because people have bigger houses, more work-from-home capacity. So by the same logic, they probably have more storage capacity in the U.S. at home as well. And yet they have a lot more per square foot space. Does that mean that in the long, long term, actually, we could see more density in Europe, given we're in smaller houses and have less capacity, i.e., could we see more than 9.4 square foot per person?

That's very ambitious. But by the way, it's like comparing Uranus and the sun, if it's a volume. You see the U.S. is the sun and Europe would be Uranus, meaning that the sun continues to expand. So it's not a static situation. It means they are, by far, the largest industry in the world for self-storage, and they continue to expand. But where you are right, it's the behavior is the same of a prospect in Chicago or in London or in Stockholm or in [ Nice ] South France. The only difference would be the average size that the people are renting. In our case, in Europe, resi people will rent, on average, something close to 5 square meters, if you look at the median. While in the U.S., it's a double. They tend to rent on average, the famous 10 x 10, which is in fit, which is roughly 10 square meter. So the need is the same, but the way they translate this into a product is different, the size. And secondly, for us, the industry, the gap is so far that I -- it's 40x more than us. So I think I will not be in this world when we will reach more than 40 where we are today, to be frank. So -- and also the -- Europe is always slower than the U.S. in your regenerating, for example, areas. I lived in Asia quite a while. And over there, it's pretty fast. U.S. are in the middle. Europe is the slowest space. So if you have to regenerate a block in London or in Paris, I tell you, it's going to take a decade while in the U.S., the block could be redeveloped within less than 5 years. Asia, 2 years. So very, very, very long term. The dynamics of the market are clearly in our favor, as I compare that surfing on the wave. Yes, the wave is very large, very powerful and long. But the U.S. continued to grow. So I think that this gap would be still the same or partially the same.

Marios?

I suppose we're coming off the back of a very strong full year '22, and you're also guiding towards revenue growth or also revenue growth ahead of your medium-term guidance levels. Really, I suppose 2 parts to the question is, what trends are you already seeing as we're coming into the new year? We're obviously, a couple of months into the new year already, whether it's for your whole portfolio or on a by market basis, but also the assumptions you're making on your existing portfolio into that 8% all store revenue growth from maybe an occupancy or even a total revenue growth you're seeing from markets?

So the trend we see in the new year is actually quite good. I mean, when we look at the first -- almost 2 months now, we are very much in line with what we've seen in Q4. So demand continues to be strong, as I mentioned earlier, which gives us opportunities to grow our rate. So quite positive from that point of view. We, however, expect that the year-on-year comparison is going to be tougher and tougher because 2022 was a very good year. So we're expecting that the growth will slightly decelerate in Q2 and Q3 to stabilize around 8% in Q4. So that's our expectation.

The -- of course, we've been strong with our performances with our peers, and we don't see a deceleration in Jan and Feb. So if you look at October, November, December, Jan, Feb, same pace for the same store. Exactly, as Jean said, we approached the year '23 with the idea that we should see a deceleration for the same store in Q2, Q3, but we don't see this in Q1 for the time being. And the non-same store, so all the new stores that we have opened or acquired continue to ramp up and to deliver the growth. So that's why in the end, when you make the sum of 2, the same-store deceleration and the continuous growth of the non-same store, you arrive to this growth of 8% total company for the year '23 versus '22 at -- with a constant exchange rate. But for the time being, all good.

Okay. Do we still have questions from the audience? Yes, we have question on the Zoom.

Let me try that one. I'm unmuted. It shouldn't happen to me, my apologies. We have 3 questions queued up on the webcast. The first is from Frederic Renard.

Hello, can you hear me?

Yes, we can Frederic.

Just 2 questions for me. What would be today, your marginal cost of funding? So you have several undrawn committed facilities I would like to know a bit more on your average cost of funding? And then the second question I would have is maybe just to relate on the deal of public storage in the U.S. -- to [ life ] storage in the U.S. So question would be what is the read across for you guys? And do you see the potential of public storage to, well, limit this exposure to Shurgard due to the need of additional cash to maybe fund the transaction at some point?

Jean here. Our marginal cost of funding is estimated to be at around 5% right now, that's where we expect to be.

And regarding the second point of this potential transaction in the U.S. from PSA. So first, we are not supposed to talk publicly to disclose anything about it. And maybe just 2 things. I don't think -- well, the starting point of the exposure of public storage to Europe. When you have a market cap today, I think they are between $50 billion and $60 billion, and Shurgard is around [ $4.5 billion ] that, it's still very minor, so -- versus the total that they have. And it's, I suppose, very opportunistic. We talked about the industry, you know again, the leverage, the operations and synergies of all of that and size in that case, does matter on the same geography. And so, talking about the future for Shurgard, I think Frederic, it was one of your point, does it give us some ideas? I don't talk about that.

Okay. So no speculation on a potential addition of big player in Europe?

Sorry, Frederic, if you could just repeat your follow-up.

Sorry. So this is not a read across for a potential acquisition of another big player in Europe at some point because the market is still in much more growth phase than in U.S., I guess. It's not a mature market.

The next question comes from John Vuong.

I have just one on the Chairman's letter. I think there's a statement made by Mr. Havner, who says that he would expect Shurgard to maintain investment-grade rating. Could you perhaps comment on this? Would this imply that you could potentially tap the bond markets in addition to USPPs and your current capital structure?

Correct. I mean currently, all the debt markets are open to us. I mean we can go bank debt, USPP [indiscernible] obtaining an investment grade rating at some point in the future, it will allow us as well to go for public bonds. So we really have the full scope of financing available to us. So that's the idea.

Yes. And to support that message. I mean, the -- it's a way very logical. We became a public company 5 years ago, having access to the capital market. And therefore, and having, we believe, pretty good performance since these 5 years. So it's, for us, pretty logical to be able to become investment grade and if there is a need to go to the bond market.

We have one more question from the webinar, which has been typed in. I'll read it out. Are you seeing more distressed or motivated sellers currently versus 1 or 2 years ago?

As I explained, I mean, it's -- if we had a lot of transactions in the market, you could maybe draw some conclusions. Today, this industry is doing very well. So we have not seen, up to now, distressed assets coming from mainly institutions, so people with a very high leverage and having some constraints to get some funds quickly. We have not seen that yet. It might happen, who knows, but for the time being, no, it's not the case.

That is the last question from the webinar.

Okay. No questions from the audience? No additional questions? Okay. And then thank you all for joining us today. We look forward to reconnecting with you in this venue soon.