U-Haul Holding Company (UHAL) Q1 2019 Earnings Report, Transcript and Summary

Good morning, and welcome to the AMERCO First Quarter Fiscal 2019 Investor Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.

Good morning and thank you for joining us today. Welcome to AMERCO first quarter fiscal 2019 investor call. Before we begin, I’d 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 AMERCO’s business and future operating results, please refer to Form 10-Q for the year ended June 30, 2018, which is on file with the U.S. Securities and Exchange Commission. I will now turn the call over to Jason Berg, CFO of AMERCO.

Thanks, Sebastien. We’re speaking to you today from Phoenix, Arizona. After a few minutes of prepared remarks, we’ll go ahead and open it up for questions and answers. Throughout the presentation, all of my comparisons here are going to be for the first quarter of this year compared to the first quarter of fiscal ‘18, unless otherwise noted. Yesterday, we reported first quarter earnings of $6.53 a share as compared to $6.44 a share for the same period last year. I think, it’s important to remind everyone that the effective federal income tax rate for the first quarter of fiscal ‘19 benefited from the Tax Reform Act while the first quarter of last year did not. Had this year's rate been effective for the first quarter of fiscal 2018, would have increased earnings by about $24 million or about $1.22 per share. Equipment rental revenues increased over 7% that’s about $47 million. For the quarter, the increase was primarily the result of transaction growth combined with slightly better revenue per transaction. Our continued focus on the sales of our Safemove and related protection packages to our equipment rental customers, resulted in revenue gains from broader penetration. Quarter-over-quarter growth in our independent dealer count picked back up again, and we also continued to open new company locations. We continue to have a larger rental truck fleet than in previous years. However, the rate of increase has moderated. U-Move revenue growth has continued into the month of July. Capital expenditures on new rental trucks and trailers were $440 million for the quarter compared to $396 million last year. Proceeds from the sales of retired equipment also increased from $140 million last year to $187 million this year. Regarding truck sales, gains from the disposal rental equipment were up a little over $11 million for the quarter. We’ve increased the volume of sales and we’ve also seen improvements in the sales proceeds per truck. It’s also worthwhile to note that we’re only seeing nominal increases in the acquisitions costs of the trucks that we sold this year, as compared to the price increases that we saw in the equipment that was sold in previous two years. Storage revenues were up nearly $10 million, which is just over 12%. Average monthly occupancy throughout the first quarter of fiscal 2019 for the entire portfolio was 70%. In the press release, I referenced the average occupancy of facilities open either more than three years or less than three years. To build on that, I wanted to bring up what the median occupancy was for these categories, to give you a better sense of how we're doing at the majority of the locations. So, for locations open more than three years, we had a median occupancy of 92%. For facilities open less than three years, we had a median occupancy of 50%. Both of these numbers are about 8 points ahead of the average figures that we provided in the press release. What this says to me is the facilities are generally operating to where we thought they should be. So, we do have a few opportunities to manage locations better than we’re currently managing them. A large portion of revenue gain came from growth in occupied rooms. Looking just at our occupied room count at June 30th, we had an increase of 25,500 rooms compared to the same date in the previous year. If you look at the same statistic for last year, June 30, 2017, we had an increase of 17,200 rooms compared to 2016. So, all of this points to improved rental activity. We are continuing to see an improvement in the underlying revenue per square foot as well from increasing rates. Our real estate-related CapEx for the first quarter of this year was $219 million, that’s up from $143 million last year. Over the last 12 months, we’ve added right around 4.3 million net rentable square feet into the system with about 1.4 million of that coming on line in the first quarter this year. Both of those figures are high points for us. It is fair to expect that our real estate-related CapEx for fiscal 2019 is going to eclipse our fiscal 2018 levels as we finish acquiring what we have in the pipeline and continue working on conversions and ground-up projects. I would expect to see new acquisition activity begin to taper off as we head into fiscal 2020. Looking at what we own currently or have under contract. Our development portfolio has the potential to create or generate over 18 million additional net rentable square feet over the next several years. Operating earnings in the Moving and Storage segment decreased $20 million to $200 million for the quarter. I would like touch on few of the more significant items. The single biggest driver of the increase in operating costs and the decrease in the operating margin has been the additional maintenance and repair that we've been incurring for nearly the last year now in the cargo van pickup fleet. For the quarter, our total repair costs were about $41 million, about $28 million of that is associated with the cargo van and pickup issue. This became an issue on the income statement in the second quarter of fiscal ‘18, the first large variance appearing in August. So, we’re approaching the one-year mark, and it does look like progress is being made. We’ve reduced the amount the we spent per truck getting them ready for resale. However, in this quarter, those improvements were offset just by the sheer increase in volume of the trucks that we repaired prior to their sale. Property taxes, building maintenance, and utilities are three of the larger non-personnel expenses associated with new properties that we’re buying. So, in total, this category increased $6 million compared to last year. About half of that came from properties that we acquired over the last 12 months. Also of significance, and that it wasn't as big of a drag on margin as it has been, personnel expense. The costs were up $14 million for the quarter but it was only about a $1.3 million drag on the margin. So, personnel expense, our largest operating expense number is still well within our ability to manage it. A few final items. In June, we declared a $0.50 per share dividend that was paid in July. At the end of June, our cash and availability from existing loan facilities at the Moving and Storage segment was $838 million. And then, on last item. I wanted to take a moment and give kudos to life insurance and property and casualty insurance teams. With Repwest’s recent upgrade, both of these organizations now have A minus financial strength ratings from A.M. Best. Their Presidents, Mark Haydukovich and Doug Bell have been with the organization now combined for nearly 60 years, and they’ve been excellent stewards of these organizations for us. With that, I’d like to hand the call back to Kate to begin the question-and-answer portion of the call. Thank you.

[Operator Instructions] The first question comes from George Godfrey of C.L. King. Please go ahead.

Hi, there. I just wanted to ask about the operating margin within Moving and Storage, and taking a multiyear look at it, from where we were to where we are today. By looking at mine numbers, if I go back to Q1 of fiscal ‘16, I have a margin of 34; then, in Q1 of 2017, it’s 29; Q1 of ‘18, it’s 25; and now, in this quarter we just reported, it’s 21%. And so, that’s a 1,300 basis-point degradation and perhaps the ‘16 Q1 was elevated. But, my question is, is the same revenue on the storage facilities and the trucks just securely a lower -- structurally a lower profit margin of revenue, today versus where we were 5 or 10 years ago?

Great question. I think that’s on a lot of people's minds, and that’s kind of our challenge. A few things going on here. First, the biggest decrease in margin this year over last year continues to be and has been this for the last three quarters, this repair and maintenance on the pickups and cargo vans. And so, I think we've made a reasonable amount of progress. I mentioned that we’ve increased revenue from sales and protection packages to customers. Our field team has been monitoring the equipment much closer on the receive and dispatch end. When there is damage, we’ve been working with the customer more diligently to try to get reimbursed for that or through their insurance company for that. And then, last piece of the puzzle, spending less per unit. And our repair and maintenance team, and fleet sales team have been moving levers here over the last six months trying to figure out what is the right amount of repair and maintenance that we need to do to continue getting these trucks moving. And I think that we’re starting to see some benefits of that. If we had repaired the same number of units this year that we repaired last year, the increase would've been much less than it was. So, I think that's a positive. Getting back to the overall question, and the second piece of this puzzle is the effect that we've had by adding all of these new properties, and how that is dragging down the margin. And, I think it was two calls ago, I introduced kind of this analysis where we began tracking our quarterly acquisitions, having been seeing how they were doing from a kind of a cash flow or NOI perspective, and evaluating what that drag has been. So, we’re up to looking at kind of 14 of these quarterly groups of acquisitions, 20 acquisitions in each group, and seeing what the drag is on them. So, those -- it covers about 286 properties. And for the quarter, those 286 properties, I think, we lost about $1.3 million on an NOI basis from those properties. So, those are locations that not only are they not contributing anything positive to margin, they’re actually a little bit of a loss right now. That’s a fairly big piece of this puzzle. Now, on the positive side. Those properties did about $136,000 better than they did the year before, and that was at the same timeframe we added 112 new properties over the last 12 months. So, we’re starting to see some improvements in the development portfolio. In fact, over the last two quarters, only that first group of properties that we bought in the fourth quarter of ‘15, had a positive NOI. Now, in this quarter, half of those groups, the first seven cohorts are operating at a positive NOI. That’s going to take us some time for that to kind of turn the ship around. So, as an example, this quarter, an additional $25 million of storage revenue, and not having the pickup and cargo van expense, our operating margin would've been flat. Now, that’s sounds really simple. But, storage revenues only increased $10 million. So, I am asking someone to increase them $25 million. But, we certainly have the ability to do that. Every 1% increase in occupancy right now is about $4.5 million of revenue. So, and our existing portfolio has about a $100 million of revenue opportunity. Once we finish building out all of our development properties that we own or have in escrow, that’s probably another $150 million to $160 million of storage revenue, on top of that. So, I view a lot of this as a revenue problem that once we fix that our margins should come back up to what we’ve seen in the past. And I’ve been looking for that point where previous acquisitions are going to start offsetting new acquisitions. And I think, those figures that I just gave you for the NOI turn in earlier acquisitions, are starting to indicate that maybe we’re at the front end of that now where it’s starting to turn…

And that’s -- that was going to be my more positive take on it. It sounds like it has been difficult, it has cost more, both acquiring new trucks, refurbishing trucks for sale, but we’re at a low point now, and now the margins can go higher from here as some of these headwinds start to abate on the truck side. That’s what I heard.

Yes. And that in a very long-winded way was what I was trying to say. And so, I normally don't go on this long, but in the absence of Joe on the call, I thought like someone needed to have a long answer. So, I was trying to provide that.

Yes. I appreciate that. And then -- that was all very clear on the truck side. And then, on the storage side -- and thank you for providing the occupancy rates based on the room count. If I look at the reverse of the occupancy rate or the vacancy rate, the vacancy in 2015 was roughly 15.5%, and now here, in this quarter, Q1, the vacancy rate is 30.5%. 30% vacancy or the rooms not filled. Is there are point where even if capital deployment of the real estate assets you want to buy make sense that you just reach a point where we just say, you know what, we can’t have 35% to 40% of our room portfolios empty, even if this acquisition does make sense or you just plow ahead and say, no, if it’s a good buy, and it’s a good buy? And I'll leave it there. Thank you.

Well, I think, up until this point, we’ve said if it’s a good buy, it’s good buy, let’s move ahead. Now, 48% of our locations are above 90% occupancy. So, the underlying fundamentals of the storage market are still strong. I think, in certain areas, supply is creeping out, and there is going to be challenges with that. But we still believe in the underlying storage market. Now, to the probably the bigger part of that question, that is, do we keep buying? Well, I think, certainly for us, there is a natural constrain at some point with how much capital that you have. And I think, as I project out the cash that we have and the cash that we need, and then, in conjunction with our treasury team, up in our Reno office is projecting out what they think that can lever against these assets. I think, we’re approaching a time towards the end of this year where acquisitions are just naturally going to begin to -- I think the word I used is paper off. They are going to slow down a little bit. We are going to continue to spend probably in excess of $300 million a year in development construction of what is that we bought, but perhaps begin to slow down the number of new properties coming into the portfolio.

The next question is from Ian Gilson of Zacks Investment Research. Please go ahead.

Jason, I don’t want to belabor the point, but I will. If you back out the $28 million, which you said was the increase in van and pickup maintenance and repair costs, and you’re still at a loss of 3 percentage points in gross margin. How much of that -- as you at that number of $13 million, how much of that was included in truck and storage business and how much was not? And would we ever get back to the 50% gross margin number? And I’m talking here as operating expenses as a portion of rental revenue, not as a percent of total revenue.

Okay. Well, I was looking at total revenue and I was coming up with a margin shortfall of about $47 million this year -- or this quarter. So, the maintenance and repair from what I thought was about two thirds of that, and then, it gets to smaller numbers, the property taxes, utilities, building maintenance, that was about $6 million a drag on margin. We had a great quarter for U-Box. But, we did see our shipping costs increase, and they’re probably off margin by little over $3 million. I mentioned the personnel of about a $1.3 million. And then, we still haven’t quite been able to turn the corner on payment processing. That was about a $2.5 million variance. But -- I guess, the majority of it in those items.

Okay. So, as we go forward, even if we get maintenance and repair costs down, we’re still looking at a gross margin -- maybe I shouldn’t call it a gross margin, but say operating expenses as a proportion of a revenue, basically running 5 percentage points above what they have been in 2016 and prior years. Is that a fair statement? Basically, we built in a new level of expenses?

No. I think that this is function of where we’re at in the expansion cycle, for the most part. I think, if were to wind them to manufacture, an improved operating margin, we could just cut off -- well, at this point, even if we cut off new acquisitions, we have so many on the books that we have to finish. But, this is going to take a few years for us to get those up toward the point where they’re contributing some sort of meaningful amount of NOI. So, company-owned locations, we have something close to 1,500 company locations. And I just mentioned that 268 of them right now are at a like $1.1 million loss. So, just because they are so new. So, I think over time, we’re going to see a value from these decisions that we’ve made over the last three or four years is going to come out over time.

And actually, adding new facility is a benefit. I now tend to see that benefit continue, if we’re already talking about say $5 million or $6 million of additional expenses, that is internal growth that is good. But, it’s a problem of all of these little things that are adding up to something which is significant. And so far, I don't see any reversal in amount and number excluding the additional repair and maintenance?

Well, certainly, over the last three years, we’ve acquired somewhat -- somewhere give or take 450 properties. You are right. It’s a big number. But, I guess, I'm a little more positive in the figures that I am seeing. I was trying to show that I think some of the indicators are beginning to point forward. And also, hidden in all of this that is -- I want to make a comment to make sure that it gets in if -- in case you don’t get a question on it, is that on the fleet side, we’ve seen steady growth on the in-town transactions. We’ve seen a little bit of the strengthening of growth on the one-way business. And this is the first quarter that we have had now in probably two years where more models than not are seeing utilization improvements, which is something that I’ve been looking for, for quite some time. We’re starting to see some improvements there. So, if that continues to trend that way and we continue to fill rooms that we've been filling rooms, then, I’d like to think that we’re going to start seeing the operating earnings number begin to turn, if we can. Again, the big wild card right now is the repair costs.

Okay. When you had a repair, is actually on a vehicle that has been insured to Repwest I presume, where does that number come in on the cost side? Is that covered by insurance, is it part of the expenses incurred on the fleet and there is no charge to insurance reserves?

Yes. There is no charge to insurance reserves. So, what Repwest provides to our customers is the safe product. So, that insures them against having to pay for damage or if there is an accident, there is some medical coverage or some coverage if they run into someone else. So, if they purchase that and they damage the equipment, then, the premium that they paid for that, goes into a bucket. We use those funds then to fix the equipment. So, that -- our growth in the sales of that product, that was one of the kind of the three-pronged approach where we were trying to sell more of that to help offset some of these costs. And I would say that above transaction trend, we probably picked up maybe $4 million of additional revenue from those sales in the in the quarter that ran through our truck rental revenues. But, otherwise, we don't have property coverage from an outside insurance company if the truck is damaged. That's our responsibility to fix the truck.

So, when I look at roughly $12 million on Repwest a year ago and $12.5 million this last quarter, that revenue, as we look down the pretax, pre-interest number for that, that does not include any of the maintenance -- or not maintenance, but that does not include any of the repair costs within that $28 million number.

No.

Okay. Tax rate, I presume that the first quarter is what you expect the year to be?

Yes.

And that’s in line with what you had previously discussed, nothing on the horizon there that may change that number?

No. I don’t see anything, at least for the next 12 months, as far as proposed changes to the tax laws. A few years out when the interest expense limitation could become effective, if there aren’t any changes made, we’ll look at that then. But, I think that we will benefit from having the insurance companies look in the group, which could help mitigate any potential limitation there. So, I don’t foresee anything in at least the next 12 months.

Okay. The balance sheet is still very healthy. You’ve still got $650 million in cash and cash equivalents on the balance sheet. Is there any intent to make the dividends, the recurring event so that it is picked up by the rating agencies, so on stock side?

I have to defer to the Board on that. But, so far, they seem to be more focused on just doing -- they’ve fallen into a pair of a quarterly dividend but we do not have a dividend policy at this time.

Okay. And what is the minimum level of cash that you’ll be comfortable with?

We’ve set the minimum amount of cash reserves at about $250 million and then, I’d like to have another $150 million of availability on top of that, so somewhere between $250 million and $400 million.

So, you’ve basically got, say, $300 million worth of cash that can be used for fleet purchase and property purchase?

Yes.

The next question is from Jamie Wilen of Wilen Management. Please go ahead.

Hey, Jason. I have a few questions, the first, a little bit of a ranch for what’s happening here. The Company really doesn't seem to have a capital allocation strategy that fits both the short-term and the long-term. I mean, as you can see with adding 4.3 million square feet of which this past year, and the three-year average occupancy is 42%, all those things within the last three, four years not only have an operating loss, but then we have a depreciation expense and the interest expense to build and carry these things. And I realize we have one of our greatest assets, as we have tremendous cash flows and we can -- we don't have to worry about making -- being selective when we add these new properties. But, we’re basically impoverishing the truck rental business by having to carry these operating losses and extra losses from the self storage business. So, my question is, I think we have two choices. And you tell me which one is the better one for the Company. I think, we need to reduce the capital expenditure outlay annually and be more selective on our property, so we only add 1 million square feet and not this 3 million to 4 million square feet that we have to cover the expense and so and impairs the profitability of a business that you're looking at the profitability, which is a truck rental business? Or, do we, as people have suggested in the past, continue to do this and have great cash flow from self-storage but not great profitability and put the self-storage in a much better vehicle which would be a REIT where people would appreciate the cash flow because we have two different businesses, one is a cash flow business and one is a profit centered business, and it's really hard to combine the two. You're doing a good job of doing both individually, but when you put the two together, I think you harm both worlds. So, which do you see would be the proper way for U-Haul in the future, to reduce the capital expenditures of how much we add to self storage or to really actively consider this time, putting everything -- you’ve built so much value in self-storage but it’s all hidden, and to help realize that value by putting it in a REIT and really reconsidering that, considering how much money you’ve spent to develop that cash flow?

I appreciate the feedback, Jamie. And as we normally do, there is probably a third option that we’re going to do, but think we’re probably closer to the option where we’re going to reduce capital expenditures over time. Now, I don't see that happening next few years. So, I don’t know if it makes a lot of sense for us, as long as we have available capital, not to finish what we started. So, I think we’re going to try to finish everything that we started, and write that out. And so, as far as the REIT, that issues has been raised. I watch the storage REITs, and I don’t know if -- I think they would have had to address this issue little bit different than how this is. So, I’m not sure how feasible that would've been anyway. But, I don't see us going down that path. The path that I see in front of us right now is, we are going to finish what is that we have, which is going to take quite a bit of capital over the next several years, as in there would probably be a slowing down of the spending. We’ve been saying for years, we've had -- we’ve been at elevated cash levels and we’ve been wanting to reinvest it. Now, we’ve reinvested the majority of it. And now, we’re having to deal with the income statement consequences of doing that. But, I think we’re really happy with what we bought, and over time, I think, you'll be happy with it. I think it’s just going to take us some time to get there. But, I appreciate the concern about the pain that it’s causing in the interim.

Can we separate out what the self-storage business does, so you can see the health of the truck rental business without having the overriding cost of adding the 15 million square feet of self-storage that is negatively impacting what the truck rental business looks like? I don’t see why we can’t separate those things, so we can get a much clear look at how well you are managing each of those businesses?

I don’t have anything on the drawing board, but, I’ll certainly see what we can do, Jamie.

Okay. And when your job is to build value short-term and long-term for all shareholders, to look just 10 years down the pike and not look out one year, two-year and five years, I think is really not managing the business, as well as you could. And I would hope Joe and the team would see fit to look at one and three years as opposed to just 10 years down the road as he is allocating capital to the various projects. Thanks, Jason.

Thanks.

Your next question is from Craig Inman of Artisan Partners. Please go ahead.

Jason, a question for you. So, this $41 million of repair costs, you’re calling out the $28 million. What is that again?

That’s the amounts that we have spent to fix the equipment that is headed to auction. So, it’s fixing bumpers, dents, buy new formats, cleaning up the trucks, doing all the things that we need to do in order to get an auction rate high enough where we think the product is going to move at auction.

Okay. So, that's more the number that as time goes by, will diminish as a cost of business because we just weren’t repairing trucks in the past, as we should have been?

Well, they weren’t as damaged in the past. So, if we just hadn’t been fixing them, then, this would be more of a structural change in the cost. And we don’t believe that that's the case yet. We still think that we can manage this back closer to where it was.

And then, it looks like, the used market improved. Is that a function of just that market improving or these trucks being better prepared for sale?

I think, our team has done a better job of prepping them for sale. We’ve put people on the job in order to do that. And so, we were expecting improvements from that. And I think they’re monitoring the process better. They’re monitoring truck flow a little bit better. Last year, we were also contending with recall issues on portions of this fleet that limited our ability to move them. So, I think, things are just kind of starting to fall back in place in some of these processes.

And, you all still anticipate fleet growth moderates significantly this year?

That’s still the plan. Last year, from a fleet spending perspective, I think we probably -- the fleet growth came more from kind of a slowdown in box truck sales and pickup and cargo van sales, and a dramatic expansion in the number of purchases. So, I think over the next several years, we might see fleet sales pick up a little bit.

And then, you gave the number on median versus average here and the median storage being higher. I might be dense, but how do I interpret that? What’s the…

That means -- I interpret that and as we’re looking down at the specific facilities that are dragging average, we have some facilities that aren’t performing as well as the other. So, what I was trying to convey is that on more than -- more than not, we’re able to manage these to where we would like to manage. But then, there's a few -- and when you have these many facilities, there is always going to be a few that just aren’t getting out there. So, our competition kind of deals with that by creating a same store portfolio and then kind of kicks these orphans off into another pool and no one really looks at them. But, ours are all combined. So, those are management opportunities for us.

And then, you all -- is there anything you can do with those facilities? Do you need to -- are you looking to sell them, or it’s an operational issue…

No, no, probably, it either needs a new manager or we placed it somehow incorrectly on the internet or we’re not routing customers there through equipment rentals, or something happened in how we imaged the property to the street. That's normally what it is. I haven’t yet gone through every one of them. So, I can’t tell you specifically on each one. But generally, those are the problems that we see.

And then, the performance in self-storage was picked up. Is that a function of the market or operationally you all do anything different?

No. I think, we’re still doing the same things. We just have a lot more rooms available to rent. And there’s a been a lot of focus -- this is kind of the busy rent up season. July and August are typically your peak occupancy months. So, there is a big push to capture as many customers as we can right now. So, we are over time dedicating more and more management resources towards the self-storage business. In three years from now, this could easily be between what we have on our balance sheet and off balance sheet, over $1 billion revenue here in three to four years. So, it will be a third the size of equipment rental. It’s a big deal. And I think we’re looking to make sure we’re putting enough attention on it.

And the comments that -- there is a statement in the first you all made about this potentially slowing down in the next year two, the development pipeline. Is that more a function of opportunities, or just how big the pipeline is now? I’m just trying to get a sense of -- or are you talking about the pipeline just becomes a smaller percentage of what you already have in place?

No. As we build out stuff, today’s pipeline will be a smaller percentage of our pipeline five years ago -- or five years from now, just because we’re going to build out so much. But, I think it's more a function of -- I think we realized exactly how much we have to finish. There is a lot of work involved with that. And then, two, we had said and communicated that we have this a whole lot of cash and availability that a lot of it we obtained from refinancing existing property several years ago and that we want to reinvest that back into the business, and it took time. Well, it’s now, we’ve reinvested much of that back in business, we’ve gone through that amount. Now, it's time to start slowing back down and going more towards the normal acquisition schedule as in over the next couple of years we’re going to develop additional liquidity as these properties stabilize and go out. Our treasury team is projecting $200 plus million of likely liquidity for the next several years that we’re going to pull out of the portfolio from the properties that are stabilizing. So, I think it's probably a two-part, it’s capital, available capital and then also just wanting to maybe finish what is we've got.

Okay. Sounds great. And when you’re doing your analysis of these properties, you’re not seeing a large change in your -- what you thought how they would perform in terms of IRR of the capital invested?

No. I don’t think we've done anything in the last 12 months to reduce our expectations, I would say in places that’s been harder to find that. And just as a general comment, markets where we used to have a little bit more ability to make acquisitions, secondary markets, Class B type products, there has been an influx of capital into those markets and are pricing those deals, especially portfolio deals much higher than what we think they are worth. So, our acquisition of existing storage facilities I think has dropped even from last year. I think in the last 12 months, we made -- only acquired somewhere around 11 storage facilities, existing storage facilities versus in years past where it’s been much more than that. So, the market for self storage, I haven’t seen any respite from the low cap rates. But, we’re still finding opportunities in gated retail product that we can convert.

Okay. So, you’re capital disciplined. Okay. That’s good to know. You guys are not chasing. Okay. Well, that’s it for me.

Thanks, Craig.

The next question is a follow-up from George Godfrey of C.L. King. Please go ahead.

I just wanted to ask what is the average life of the truck in the U-Haul fleet right now, how long do you own the truck from new to resale?

We model them out, we generally expect to hold the box trucks 12 to 15 years. I think, with what we’ve been seeing, probably if you were to compare how long we held the trucks say five years ago to today, we’ve probably shortened that a couple of years by closer to 12.

Okay. And you made the comment that the trucks are more damaged today than they were a 5 or 10 years ago, why do you think that is?

I think that what we saw was three or four years ago was a very strong resale market for pickups and cargo vans. And I think the market was more forgiving of what it was that we sent to auction. And I think we lost some discipline on our side as far as watching equipment, watching that customers were damaging it because we knew it was going to sell, and cover the sins of the damage. And now the markets aren’t as forgiving and we’re having to fix that up, and we’re having to tighten up our discipline with the customer on the receiving dispatch.

So, I just wanted to make sure I differentiate. So, the market is demanding a higher quality truck at resale, I get that. But, today’s renter, are they more abusive with the truck today than they were a five years ago, either a more potholes driving faster, more damaging…

No. I don’t think that’s the case. I think, that if someone walks with you around the truck when you rent it and points out any damage that the truck has and then informs you how much it's going to cost if you damage any part of the truck when you bring it back, you may drive that a little bit more carefully than if someone just hands you the keys and lets you go.

Understood. Yes. Okay. Thank you.

You’re welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you. I’d like to thank everyone for attending this meeting. I want to remind you that at the end of the month here on August 23rd, we have a few important meetings and are opportunities for you to interact with us again. At 9 o’clock Arizona time on August 23rd, we’re going to have -- we’re going to start with our Annual Shareholder Meeting. Once again, this is going to be a live video feed that broadcast over the internet. And then, two hours after that at 11 o'clock Arizona time, we’re going to do our Virtual Analyst and Investor Meeting. Joe Shoen, our CEO will be moderating both of these meetings and available for you to interact with. We’ll probably have some other key executives available for questions and answers. So, please feel free to start submitting questions to Sebastien ahead of time, if you have an email address, or it’s available on our Investor Relations website amerco.com. This allows us to get to as many questions as possible and gives us a chance to prepare better answers. So, I look forward to speaking to you in a few weeks. Thanks for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.