AMERCO [UHAL] Conference call transcript for 2023 q2
2023-08-10 20:38:02
Fiscal: 2024 q1
Operator: Good day, and welcome to the U-Haul Holding Company First Quarter Fiscal 2024 Investor Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.
Sebastien Reyes: Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company first quarter fiscal 2024 investor call. Before we begin, I would like to remind everyone that certain of the statements during this call including, without limitation, statements regarding revenue, expenses, income and general growth of our business may constitute forward-looking statements within the meaning of the Safe Harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to the company's public SEC filings and Form 10-Q for the quarter ended June 30, 2023, which is on file with the US Securities and Exchange Commission. I will now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.
Joe Shoen: Good morning, and thank you for joining us today. We continue to struggle to post U-Move numbers as good as the prior two years. My experience says overall moving activity has contracted. We have seen this before in an uncertain economy. Of course, we're continuing to scramble for business. As consumers become more optimistic, the entire market will likely expand. Our repair spending on trucks and trailers continues to rise. Of course, there is always some waste and I'm working to eliminate the waste, but the fundamental drivers of repair are too few replacement units leading to increase mileage per unit and parts and labor inflation. We have not resorted to large-scale discounting in self-storage unlike some of our major competitors. We are continuing to build and buy the rate above our rate of unit rent up. This doesn't disturb me greatly and I plan to continue adding units and drive on increasing the room of -- rate of room rent ups. In U-Box, our total revenue was down for the quarter due to decreased pricing. Freight costs finally went down and we lowered some rates due to that. Our margins, however, are holding. Transactions are up. This should continue to be an expanding market for us. I look forward to speaking with you at our upcoming Investor and Analyst videoconference. And Jason will now address the numbers in greater specifics.
Jason Berg: Thanks, Joe. Yesterday, we reported first quarter earnings of $257 million, that's compared to $338 million for the same quarter of last year, representing our company's third best first quarter results. Looking at from the perspective of earnings per share, we reported $1.31 for non-voting share this quarter compared to $1.68 for non-voting share in the first quarter of last year. Starting off with equipment rental revenue results. Compared to the first quarter of last year, we had $92 million decrease, that's about 8.4% down. To put it into context, over the last four quarters, we've had a nearly $230 million decrease in U-Move revenue. In the eight quarters before that, so starting with the second quarter of fiscal 2021, we've experienced $1.428 billion increase. So, in the last 12 months, we've given back a small portion of the gains. The trends that we've seen in the past several quarters continued; declining transactions and reduced miles per transaction. Revenue per mile growth has remained positive. And July results trended down compared to last year. Capital expenditures for new rental equipment in the first quarter were $454 million, that's an $103 million increase compared to 1Q last year. The majority of this increase is in our box truck fleet. And we have increased our fiscal 2024 full year net CapEx projection from $685 million to approximately $820 million. I would say about three-quarters of this increase is from the addition of more units on to our manufacturing schedule, with the remainder being projected decreases in sales proceeds from what we initially thought was going to happen. Speaking of, proceeds from the sales of retired rental equipment increased by $34 million to a total of $193 million for the first quarter. Sales volume increased while average proceeds per sale declined. Self-storage continues to be positive. Self-storage revenues were up $26 million, that's 15% up for the quarter. Average revenue per foot continued to improve across the entire portfolio, up nearly 6%. Our occupied unit count at the end of June was up a little over 42,000 units compared to the end of June last year. During that same 12-month timeframe, we've added nearly 64,000 new units to the portfolio. This differential led to the average occupancy ratio coming down for all of our owned locations by about 170 basis points to an average occupancy rate of just under 83%. This same moderation in occupancy was also seen in our same-store grouping of these properties. We saw about an average decrease again of 170 basis points, bringing the occupancy level to 95 -- just over 95%. We continue to fine-tune our new self-storage disclosure in the press release. During the first quarter of fiscal 2024, we invested $294 million in real estate acquisitions along with self-storage in U-Box warehouse development. That's a $16 million increase over the first quarter of last year. During the quarter, we added just over 1.1 million new net rentable square feet, about 73,000 of that was in the form of existing self-storage acquisitions. We currently have just under 7.1 million new square feet being developed across 159 projects. Operating earnings in our Moving and Storage segment decreased $95 million to $387 million for the quarter. Operating expenses were up $28 million for the first quarter. Fleet repair and maintenance led the way with a $30 million increase. Work continues on increasing capacity, shifting repair work to company-operated shops and rotating the truck fleet, but we are -- we have fallen behind. Personnel costs increased $11 million, about half of that coming from increased health plan costs. Compared to the last two years, personnel costs as a percent of revenue are elevated. However, over a longer-term view, they're not out of line on a percent of revenue basis. Other expenses, including accident liability costs, the cost of freight and shipping and payment processing costs, all decreased during the quarter. We continue to place a premium on having access to cash and liquidity. At June -- at the end of June, cash along with availability from existing loan facilities at our Moving and Storage segment totaled $2.792 billion. During the quarter, interest expense in Moving and Storage increased $11 million, while interest income that we earned on our cash and short-term investments was up $22 million. During the quarter, we implemented Accounting Standards Update 2018-12, the targeted improvements to the accounting for long-duration contracts. This affects most of the products that we have on the books at our life insurance subsidiary. While this new rule has increased the amount of life insurance disclosures that you're going to see in our filings and it's going to lead to some additional earnings or comprehensive earning shifts between years, it does not have any effect on the underlying economics of our book of business there. With that, I would like to hand the call back to our operator, Dave, to begin the question-and-answer portion of the call.
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Steven Ralston with Zacks. Please go ahead.
Steven Ralston: Good morning. Obviously, the self-moving equipment rental business is being driven by some macro-economic factors that are out of your control. But looking down deeper, it seems like the one-way market is being especially affected. I'm wondering how the -- your effort to reposition the fleet from the situation that was created by COVID couple of years ago given that slowdown in the one-way traffic business.
Joe Shoen: Okay, this is Joe. I'll speak to it for a minute. At least three times in my career, I've seen during this time of consumer confidence decreasing, people shorten the entire mileage that they move. And that also results in a shift of longer mileage one-way rentals into shorter mile rentals. The vast majority of our moves are driven by necessity, peoples' family grow or lifestyles or people retire, these are life events, and they kind of continue just pretty even rate, but people's optimism and their willingness to go a long-distance in a move we've seen decline, and I believe that's what we see going on here. Our fleet issues are that we're not able to purchase quite the rate, though we would like to, to get the optimum balance of repair costs versus depreciation. And anytime you buy a car or truck, it's just like in your personal life, it kind of trading off variable cost, repair, for fixed-cost which is capital costs. So we would rather here today be a little bit heavier on the fixed-cost. We think that balance -- our experience says the balance would favor profits, but just don't have availability of that many units yet. That answer your questions?
Steven Ralston: I was more thinking about how the equipment has migrated, let's say, from New York and California towards Florida that the equipment is not equally dispersed.
Joe Shoen: Yes. We -- of course, we always have some equipment imbalances. Actually, Florida and Texas, which you would think would -- they'll be buried in equipment, are not. And we're seeing more localized, what we call, unproductive -- what we call unproductive areas more around retirement communities than they simple shift from the North and the East to the South. So, there's a lot of factors go into that. Part of it is whether my team does a better job. If they do a better job, we rent more equipment out. And I think we've got teams in Florida and Texas right now that on balance are doing a pretty good job. So, they've kind of alleviated that. But we have other imbalances and this is just a constant juggling.
Steven Ralston: Thank you. Looking at something more under your control, though not completely, are the expenses, the different components and some interesting dynamics in the different line items. But it looks like there's about 3.5% to 4% inflation through the costs. Can you mention anything specific that you're using to address these increased expenses?
Joe Shoen: Well, of course, we're trying to purchase more, but there is an end to that. Everything is inflating in our experience from electricity to steel. And we've seen a little catch-up and there's probably a little more catch-up in wage rates, because that's just the truth that the point-of-sale, which is where the bulk of our people exist, there's lot of pressure on wages as you see with people -- other people in retail areas if they are seeing wage pressure. We're seeing it too. So people are getting paid more, but normally you would kind of celebrate, but it's inflationary and that's going to go on. I don't -- we don't have any spin on the ball as far as controlling that. What we can control and we work very hard on is simplifying processes and making them less labor intensive. So, to a certain degree truck rental just simply is very physical. Trade rental is same, just there is tremendous physicality to it. We have several initiatives, one would be our Truck Share 24/7, which I think just recently broke its 6-millionth transactions. Now that's program to date, so -- but it means we're getting that process working pretty good. We also have -- we vitalized I would say or focused much more on the U-Haul App. And the U-Haul App gets the customer to participate in some of this activity and reduces basically hours needed to work at the point-of-sale. That's not a perfect equation. But overall, it works. And we're driving on that and I think that will continue to yield results for two or three more years. There's a lot of room to refine that. So I think our best chance of countering increased cost does not end-up. We're going to get a better deal on deal or something of that nature on building materials. So it means that we're going to eliminate some processes that can be better done, technology win, something to that and get some increases in efficiency which will result in less labor, manhours per transaction.
Steven Ralston: And just one last question in the self-storage area. You mentioned -- and it's an interesting way it was worded, but you said that you look at that subset that the occupancy has stabilized at 80% for at least 24 months and showed that the decline was consistent with the overall number. I assume, the purpose of that was to show that the decline is consistent across most of the segments there and therefore it's just general industry trend and there's nothing specific to worry about there other than what -- that the market is weakening.
Jason Berg: Yeah, that was the general thrust of that comment. It's Jason.
Steven Ralston: All right. Thank you very much for taking my questions.
Joe Shoen: Thank you.
Operator: The next question comes from Keegan Carl from Wolfe Research. Please go ahead.
Keegan Carl: Yeah, thanks for the time, guys. So, first on the moving business being down 8.4%, it obviously includes locations that were added over the last 12 months. So just kind of curious on a true like-for-like basis, what do you think it actually would have been down year-over-year?
Joe Shoen: I don't have that number, but I think that's a fair question. It's more complicated than just what it's -- how many new locations you brought on because it also -- we do about half of our moving business through independent dealers. And always when we add a new location, we have to be careful that we're not cannibalizing those dealers. And undoubtedly there had been some cannibalization of that by these new stores. So if they hadn't been built, we'd just still gotten that part of the revenue. If you want to assume there's 10% or 15% cannibalization and I don't have a firm number on that, it's very location specific. And then the rest of it is new business. That might be fair. I don't know, Jason, if you have any more specific on that.
Jason Berg: Yeah. I don't think that that's going to be a material part. I don't know if we would have seen a much bigger decrease on that. But that's interesting question, Keegan.
Keegan Carl: I know, it's super helpful way to think about it. I guess, shifting gears to storage. So obviously, occupancy was down 170 basis points and that makes sense to us just given the challenging market. I know in your opening remarks you said you're not lowering your street rates like the broader peer group is, but I guess I'm curious what would it take for you to see it actually start to lower street rates?
Joe Shoen: Well, we analyze every location and every room size by location, that's how we manage rates. So, you're unlikely to see us do something like say put it in a 10% rate decrease. If we did a rate decrease, it would more likely be in a certain size. So, let's say, 5x10 non-airconditioned rooms or 10x15 airconditioned rooms, or more specifically, 10x15 airconditioned rooms on the upper floors. So there's all -- it's very, very specific. We don't have in our bag of tricks or whatever you want to call it, normally -- a normal maneuver to simply drop rates. And I mean, of course, there is -- you probably saw the nice article in the Wall Street Journal recently that said basically anybody with a little bit of capital can get rich in self-storage. Well, it's a little bit more to it than that as you might imagine. And mostly I see people when they drop rates across the board, they are in a very uncomfortable situation. Once in great while, a competitor will literally move next door or across the street, they will drop rates as an introduction that's not an uncommon phenomenon. And we lose tenants at that location because of that, but we typically don't drop the rate because our competitor will come up with a rate increase 90 days later. And some of those customers now bounce back because now we'll be cheaper. In the meantime, it disrupts everybody to just drop our rate overall. So that's our specific competitive situation and that would be our typical responses, hold tight and wait for them to get a little bit occupancy and they'll increase rates greater than they decreased. So, that's just about what our strategy typically is, Keegan.
Keegan Carl: Got it. I guess on the topic of storage, just curious if you're seeing any change in your average length of stay? And then, how that helps you guys determine what sort of rate increases you're sending out to your existing customers?
Jason Berg: This is Jason. I just looked at that this last quarter and compared to, say, like a year-ago, it looks like each one of our duration stratifications has maybe moved out a percent. So across the portfolio, I'd say there has been a general move to a little bit longer moves -- longer stays.
Joe Shoen: And I would say, well that seems paradoxical, it's not because a little bit less moving activity, a lot of the storage is people are moving in or out, so they're going to store for 30 days or 60 days because they're waiting for a place to be firmed up or these kind of just little timing difficulties in this overall moving declines, we see that real short stays not as frequent.
Keegan Carl: Got it. And then just one final one here on the topic of storage. So if we think about supply, in general, its often what causes storage to underperform over a short time period. You mentioned in the opening remarks, you don't necessarily plan on stopping to grow your footprint right now. So, I guess, I'm just curious, from the operational side of things, what you'd need to see for that to change?
Joe Shoen: So, I'd had to be discouraged on the long-term prospects. When COVID broke out in March, I think, for 2020, I got a little bit uncertain, so I stopped whole bunch of projects. And it took me at least 24 months to recover and get momentum back again. And COVID was a first time deal for me. And if I had, let's say, that same event, I wouldn't back-off. I would say no, US economy is going to roll-through this and I'll have a little dip, but it's better than being undersupplied. So, I was undersupplied the last half of COVID, which I lost opportunity. There is no certainty amount. Is there overbuilding? Certainly, and I've said that for a couple of years at least. Of course, there's overbuilding. The beauty of it is the markets are local. It should be over building on the north suburb and underserved in the south suburbs. All these things exist. And, of course, part of this is can you find the place that's still needs more supply. We're -- as you probably are aware, we operate in all 50 states, so we make some different choices than some of our competitors. And so -- which are just -- kind of our strategy is to be all 50 states. So, we will be expanding in a market maybe that they're not even in because they just don't -- it's not got enough mass, they aren't interested in getting there. And that's what I would try to do if I saw things get squarely, what I have been doing, which is well, let's search out some different markets that we have great long-term confidence in, but aren't really on the radar of a lot of people because that market will never have five stores from one supplier. It's always going to be a smaller market, and we'll do fine in those smaller markets and our management structure works good for it. And some of our competitors, it doesn't work good for them, which is just a slight difference in strategy, not one is better than the other, but a slight difference.
Keegan Carl: And one final one for me here. Just from a capital allocation standpoint, you guys are sitting on a ton of cash. Just curious how we should be thinking about the deployment of that over the next several quarters and years? And where you're currently finding the best risk adjusted returns? Because it looks like it might be few short-term treasuries.
Jason Berg: This is Jason. So, we were fortunate to lock-in rate on a large piece of this cash going into this rising rate cycle and we benefited from that. I mentioned the increase in interest income as we're in short-term government securities and we've gone out and opportunistically purchased some treasuries here and there. I think our sense is that we are going to be going into a credit tightening cycle. We've already seen some small anecdotal evidence of that within our own lending group. And since that is the primary way that we raise capital, we are sitting on a bunch of cash. And that will give us the ability that should we not -- should we want to buy more trucks and not have access to debt financing at that point in time or as much as we would like, it gives us some flexibility at that point. So, our target goal for bringing cash down is probably closer to $500 million mark. It's going to take us a few years to get back to that point. But we have -- in the pipeline of development, we're still looking at potential spending of up to $2 billion in that, along with increasing fleet purchases over the next several years.
Keegan Carl: Super helpful. Thanks for the time, guys. Really appreciate it.
Operator: The next question comes from Steve Farrell with Oppenheimer. Please go ahead.
Steve Farrell: Good morning. How are you?
Joe Shoen: Great, thanks. Appreciate you logging on.
Steve Farrell: Yes, thanks for having me. Quick question on that CapEx. Are we expecting the remaining spend to be spread-out over the rest of the year, or more weighted towards the next quarter or two?
Jason Berg: It will be weighted little bit heavier over the next two quarters.
Steve Farrell: And has it been easier to get supply from the manufacturers [who forwarding] (ph) them?
Joe Shoen: Yes, it's loosening up, but it's at a snail's pace and it has me biting my fingernails. They just -- it's a political question, you probably know as much about as I do, which was trying to reconfigure the automotive industry and that's causing them fits and being able to do their fundamental job which is manufacturing automobiles. And they've made progress on it, but it's -- they have their hands full. We are on good terms with everybody. We're getting units, but they just -- their total overall productions has been short of demand and I think that'll stay that way for a while.
Steve Farrell: And how do you think that affects the fleet moving forward? Should we be expecting longer age of the fleet and less CapEx and turnover there?
Joe Shoen: Well, that may happen. If it does, that basically increases our effective cost per mile. And we're trying to manage the cost per mile, which is the trade-off of repair or variable cost. With CapEx, which is basically you get a fixed cost. The balances are little bit too much on the repair or variable cost side right now in our judgment. And we're trying to, of course, tune that more towards an optimum spot. So, if what you described happens, it won't be because it was our choice. It will be just because market has constrained us. Now we can go through that. We've done that before, but we think a more optimum trade-off could be larger number of annual replacement vehicles.
Steve Farrell: And how should we be thinking about the impact from the increasing CapEx this year and the effect that will have on maintenance and repairs and the timing of those benefits?
Joe Shoen: We can slow the increase, but it's not enough to stop the increase, in my judgment.
Steve Farrell: And do you think spend from the first half of this year that will start to slow the pace more in the first half of next year or second half?
Joe Shoen: I will let Jason take a stab at that.
Jason Berg: Yeah, Steven, on this one, the pace of new acquisition is coming in reasonably well. If we finish out this year on new acquisitions, the way that it looks like, we could make a dent of maybe picking up 2,500 units over a normal pace. We started off the year about a year behind in rotation from the last few years. So that would still put us over four years out from fixing at that pace. The bigger piece is going to affect maintenance as how fast we're taking the old trucks out. So the new trucks are coming in. I think our team is feeling a little bit more -- has more confidence that the new trucks will be there for them. Now we need them to start removing the older trucks that have the higher maintenance costs attached to them. And on that one, I would say, we're at least a quarter behind. I don't think we've made a lot of progress in this first quarter in getting older trucks pulled out of the fleet. So that's going to delay some of the benefits to repair and maintenance here at least another quarter until we can really start to pull old trucks out of the fleet, so we can start fixing them.
Steve Farrell: Thank you for that. And moving to self-storage. The other self-storage REITs, they've reported pretty big price per square foot drops on move-ins versus in move-outs. Are you seeing the same thing?
Jason Berg: Our move-in rates are about 3% higher than what they were last year and we still have a positive differential between move-in and move-out rates. So, we're moving in people at a higher rate than what the people are paying or moving out.
Steve Farrell: And do you think that's because U-Haul is somewhat insulated, not as heavily concentrated in the top 25 MSAs? Do you think that's a benefit for you guys?
Joe Shoen: I'm not so sure it is. I think we've -- you watch our -- just take the REIT competitors. They'll have a good month -- they'll have a good week, they'll jam rates. I mean they could go up 15%. So they are a little bit more aggressive on the upside, which causes them to be little more prone to retreat. Does that makes sense?
Steve Farrell: Yes.
Joe Shoen: For an instance, we post rates. Now, our competitors don't post rates. The next person in line can get a different rate. So, we have a different strategy and we've tried to create an expectation with our customer and we largely have the kind of understand what our strategy is. And for one reason or another, they think that it works for them. I think they're all probably aware, not all of it, many customers can figure out the REIT down the street just drop prices. Do they want to move to save $15 a month? Maybe, and maybe not. And so, I think they do a little bit -- they harvest a little bit more on the up and they give away a little bit more on the down. But I know that either strategy is perfect to just kind of the way we've built our customer relationship.
Steve Farrell: And how do you balance rental rates versus occupancy rates when you're looking at where to set the price per square foot?
Joe Shoen: Again, we do it by location, by room type. So, given location and -- so here in Phoenix, Arizona, I don't know, we probably have 85 or so stores. And there'll be certainly 10 different REITs up there on a comparable room, so it's pretty specific. Just because you're in the Phoenix Metro, it's going to be a lot more discerning than that. We're going to get right down to the location, and we have a staff and that's all, that's what they do, they're storage REIT department and they are looking, of course, occupancy and rent up. Well, this depends on where you are in the cycle if you're filling a new store or you're trying to trim the sales just right on the store that has 92%, you like to be at 95%, just how you're going to trim the sales to get there. They -- I'm more -- I'm pretty much dissatisfied with their work and have been for some time.
Steve Farrell: And on the cost side, I know you don't break out the cost specifically for self-storage. But as locations that share in self-storage and equipment rentals, are there synergies compared to standalone self-storage facility or NOI margins about the same level?
Jason Berg: Yeah, this is Jason. It's a complicated question. From an asset owner, it certainly benefits the truck product line, the equipment rental product line, the U-Box product line to have a blended location. The way a specific measurement would work for determining what the storage margin might be, we do have many locations that are essentially storage only. And the way that the costs get allocated to those locations, those look like they have -- appear to look like they have a higher margin because there just isn't as much overhead cost going on there. And you don't have to split up the profits across multiple product lines. So we think the best returning locations for us have the full product line available to all the customers. And so that would look a lot different than a self-storage income statement by itself.
Steve Farrell: Got it. Thank you. And last question is, on the release, we included the chart again for the self-storage by state. Are the same-store numbers comparable year-over-year?
Jason Berg: No, the same-store numbers that were put in there represent what the same-store calc was at that time, right? So, there's a couple different ways of presenting that. The way we presented is showing what the same-store pool look like a year ago and two years ago versus taking the same-store pool from this year and then carrying that back two years. We didn't go that route.
Steve Farrell: Would it be possible to maybe include both of them just so that you can compare -- whatever subset you're looking at you're looking at the same group of stores, the same cohort.
Jason Berg: Yeah, Steven, I've been accepting feedback since last quarter on that. I would say the comments asking for that had been fewer than the ones who have been happy with it. We've tried to index this against what people are used to from our storage competitors and we found this presentation and some of theirs. But it's an open question, so I wouldn't say that the book is closed.
Steve Farrell: All right. Well, thank you very much. That's all my questions. And I appreciate you taking my questions on the call.
Jason Berg: Thank you.
Operator: The next question comes from Craig Inman with Artisan Partners. Please go ahead.
Craig Inman: Hey, guys. Finally, on here live for once instead of sending in questions. I guess one of the things I was wondering about from a strategy perspective, obviously, moving in household formation and I don't have these macro questions, but interest rates on housing and all that are a lot different now than they were two years ago and you've seen that slowdown. I'd imagine that kind of moving in household formation puts pressure on the truck rental business, but I'm not sure. Can you comment on just what that means for the business? How big it should be? I know you want to win and gain transactions, but some thoughts around strategy with this change in what the consumer can afford from housing and what we're seeing there?
Joe Shoen: Again, I would say the total drivers of moving our life events. When your family grows, you're looking for opportunity. Lot of forces and factors going on there. One that I've been focusing on most recently is the heading towards consolidation of the people in the property, the housing rental business and the people who are attempting to form large tracks of rental single-family dwellings. That's -- to me those are two kind of big changes that will maybe impact frequency, people who rent more, move more often, maybe not in Manhattan, people will rent for 30 years. But in most of the country, you see all these four and five story multi-family, basically apartment units, which has just sprung up nearly on every piece of vacant land. All them -- that's become a growing subset of movers and they have some different characteristics and we're trying to really understand them, but we can make sure that our products and services are tailored in a way that's very attractive to them. So I think that's what I want to say was going to be a -- maybe move the needle a little bit over the next two, three, four, five years, I think that maybe what moves the needle even more than interest rates. And these -- again, I'm sure you've heard the pitches, but I understand we're going to get people to rent rather than own. [indiscernible] let's get people to own rather than rent. And I don't claim to understand the overall implications of that. But you can see that they put up -- I don't have a statistic, but you see them everywhere you go, there's four and five story units, they're just popping up. Three years ago, I would have taken a bet they were overbuilt, then they've continued building and they are building today. And they seem to find customers now that -- again the Wall Street Journal reported a bunch of pressure on these people because of rising rates. Okay, but I think that's going to really -- just really drive more consolidation of ownership, not drive use. And maybe it will compress the margins for a little while, but I think that this rental phenomena seems like people who rent -- it's always been our mantra, people who rent are more likely to move than people who own. And so, they can have a shift in the number of people who rent, it's going to change this movement little bit. 25 years ago, Phoenix was a crazy market, and they'd offer six month lease, one month free. And people move every six months. It was just a trend. Finally, they quit doing that, but it was great for us because they're moving a mile, okay. Okay, so great. We get our [90, 95] (ph), and the whole trip mileage uses maybe seven miles for the whole trip, we make great money. But that's how sensitive these people can get. And I don't know quite what these big consolidating owners are going to do. I know they plan to pass customers between their properties. They think they will be able to encourage people to move from this property to that property, I don't know, based, I assume on some combination of amenities and rental rate. So, I think that's -- to me that may be an opportunity for the whole industry. And if it is, I intend for U-Haul to be there.
Craig Inman: Okay. So it's too simple a thought to thank that affordability decreased and new sales are down and that's going to really put a ton of pressure on the rental business.
Joe Shoen: I really think that would be my conclusion. Yeah, you're exactly right. You said it better than I did.
Craig Inman: Okay. My question was a little too long-winded there. Sorry. And I hadn't thought about this -- your strategy difference with the REITs in terms of how rate would play through later, because your move-in rates are higher than in-place, which is the opposite of the REITs. How much longer would this trend go on given how you all operate structurally? Like how much more is there to go there in rate gains as the in-place ages?
Joe Shoen: That's kind of the $64,000 question. My team still believes they have some running room, okay? I'm probably wrong. My brain says, over the last 12 months, we saw increases at 30% of units. I'm not sure that number is right.
Jason Berg: Yeah, I am not sure. But it sounds right.
Joe Shoen: Don't put that in the calculation, but my team, they kind of have -- they kind of know what they're going to do for the next 30 days. They are familiar with the properties they manage. They believe there's still room, I've been surprised. We are seeing pushback from customers, obviously. Everybody is in this economy. So -- but if second floor air-conditioner rooms are 100% full, they're going to look to bump in the rate. And you all almost always find that if you really study it occasionally that some class of rooms is full and another class of rooms is at 80%. Well, did you make a mistake in our original model mix? Are your rates out of line? There's several things to look at. And, of course, my team looks at those things. They think that the year ahead to see some promise for rate increases.
Craig Inman: Okay. And then, I didn't catch fully on the liquidity talk there. $2 billion to finish out in-place developments or is that include possible deals? What was the -- just wanted some clarification on how you're thinking about liquidity?
Jason Berg: That would be to finish everything that we have on the books right now.
Craig Inman: Escrow and everything?
Jason Berg: Not including escrow.
Craig Inman: Okay. Did that cash is -- you're effectively prefunding a lot of that development with cash in case market conditions deteriorate, and if you need to keep buying trucks to catch the fleet up?
Jason Berg: Yes, I think what we've learned over time is better to have it than not have it with where we're headed. So the spending on real estate last two years now we've been well over $1 billion in spend. I think we'll see that continue for the next couple of years at least. And then the fleet spend is increasing because we're starting to get the increased number of units and the cost for these new units is higher than it used to be. So, in the first quarter of this year, I would say if you took the units that we purchased this year and if we would have bought them at last year's prices, that's about $25 million of inflation. We have bought them at the prices from two years ago, it's little over $40 million of inflation. So, with all of those headwinds, we are being very cautious.
Craig Inman: Okay. And then on the app, for the company locations, you said you crossed 6 million transactions. Can you talk about the trend in terms of some color on the percentage of transactions that are happening in the app at the company locations verse -- just -- because it does seem like it can be a labor-saving tool. Obviously, there's always going to be a group that is just going to show-up and walk-in, but how big a percentage of your business is that?
Joe Shoen: Well, two separate subjects. One is what we call Truck Share 24/7, which can go either through the app or you can go through...
Craig Inman: Yes, through desktop.
Joe Shoen: So, we're transitioning those people to the app. We're seeing good growth in the app. I think I can state correctly that two weeks ago we're in the top 10 in the travel apps adopted on Google. We got ahead of steam up there and we intend to run with it. Just where that will go, I can't predict, but we're trying to monitor correct indicators on that. It looks like the apps just -- we have [indiscernible] three years of running room maybe, just steady growth. So, I think that that's kind of pay-off for us very much and I think it will. The customers who want to do business that way, it will increase their satisfaction. So, I'm all in on it if you just want to know what I'm working on. I'm all in on it. I think it's going to continue to grow. How far will it go? I have no opinion, but of course I like and I don't know your habits, but I have adult children and they do so much on the handheld mobile, but I think that's -- just that trend is here to stay and we're trying to make sure we're in a big way. Of course, there's a whole bunch of another group of competitors who are Internet savvy people and they want to be industry disruptors in every industry in the world even now. So, I believe right now we have better tech than they do, and my plan is to continue to have better tech than they do, so that we don't give ground to those people.
Craig Inman: Got it. Last one. I remember when filling 30,000 rooms a quarter was pretty good in the summer. Now we're 44,000 and have been above that. Anything changed in the last few years in terms of the ability to fill rooms faster, doing something better? Obviously, you have more rooms, so that [indiscernible] more availability, but...
Joe Shoen: We have more rooms. They're thoughtfully placed in the present tense. We have stores that are 20 years old. We have stores that are 40 years old. So is that location now as hard as it once was? You see. So if we're doing this right, there's -- we have good room in newer stores. The whole online move-in -- we have a whole online move-in process for those stores, but they have amenities as good adders or better than our competition. And, of course, customers want certain services and they want certain levels of customer service, and we are largely exceeding their expectations at the new stores because the bathrooms are nicer. The load/unload areas a little better. These are all, they seem much small things, but to the consumer, they add-up. So, I think what the real things that changes the percentage of new -- newer say -- let's say 24- or 36-month-old rooms, that percentage has risen in our own portfolio. So, I think that that has had a lot to do with this. You'll see a new place come online and it will start running up at a feverish pace. So that first 60% or 70% occupancy just really impacts your rent up rate overall for the company.
Craig Inman: Okay. So the newer mix -- so nothing in terms of just getting smarter about marketing or no big change in strategy there?
Joe Shoen: But everybody else is getting smarter too. I mean, normal capitalism rat race. So, we learn a little thing and they learn a little thing and we both are trying to figure out what the other one is doing and just it's normal capitalism. So, we have a slightly different strategy because of our truck and trailer rental business. And so, we're more interested in Wyoming, let's say, even most people are just -- we rent trucks at Wyoming. We're all over Canada, most of that's just [indiscernible] and it happens to expand, so we end up in some places our competitor would have no appetite for. But we're making them work. And so, I -- there's -- everything that is -- what my son likes to call secret sauce, is a very tiny increment. There's a bunch of them and when you execute them all. So let's say I came upon a new store and the rent-up rate wasn't what I would have anticipated. Well, maybe I know we're failing on one or more fundamentals. If we go through and just basically do a top-down work up on the store, we'll find out where we're short. And tune that up, rent up those in the curves. But there's a tremendous amount involved in sites selection. You want to get the right site. And we spent a lot of effort and money. And I think all of that -- tell me Jason, I think all that's expense. I think all our site selection expense basically just flows through the costs.
Jason Berg: We capitalize as little as we have to.
Joe Shoen: Yeah. So we're not -- if it's just the question of which way to push, we push it towards expensing. And I think -- I just think that there's a lot -- that money comes back to you over time. You could make an argument for capitalizing it, but I just don't want to do it.
Craig Inman: No need to defer that -- you better defer that -- pay the taxes now. Okay, that's it from me. Thank you.
Joe Shoen: You bet.
Operator: This concludes our question-and-answer session. I would like to turn the conference over to management for any closing remarks.
Sebastien Reyes: Well, thank everyone for their support. As a reminder, one week from today on Thursday, August 17 at 9:00 AM Pacific, we will hold our Annual Stockholder Meeting. And then two hours later at 11:00 AM Pacific, 2:00 PM Eastern, we'll host our 17th Annual Virtual Analyst and Investor Day. Both events can be accessed on the web at investors.uhaul.com. And questions for the Q&A portion of our Investor Day can be sent prior to the meeting at ir@uhaul.com or submitted live during the event. We look forward to speaking with you next week. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
