Public Storage Earnings Call - Q3 2025

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Public Storage Earnings Call - Q3 2025 Company / Call: Public Storage (NYSE: PSA) — Q3 2025 Earnings Conference Call. Executives: Ryan Burke (Vice President, Investor Relations); Joe Russell (President & Chief Executive Officer); Tom Boyle (Chief Financial Officer). Analysts: Eric Wolfe (Citi); Michael Griffin (Evercore ISI); Samir Khanal (Bank of America); Caitlin Burrows (Goldman Sachs); Ronald Kamdem (Morgan Stanley); Eric Luebchow (Wells Fargo); Spenser Allaway (Green Street Advisors); Todd Thomas (KeyBanc Capital Markets); Juan Sanabria (BMO Capital Markets); Michael Goldsmith (UBS); Mike Mueller (JPMorgan); Brandon Lynch (Barclays). Operator: Rob. Recorded: October 30, 2025 Video: https://www.youtube.com/watch?v=6t574VW8veo Key topics: 2025 outlook raised for a second straight quarter; $1.3 billion of wholly owned acquisitions and developments announced year to date; $650 million development pipeline; leverage at 4.2x net debt and preferred to EBITDA; core FFO per share up 2.6%, a 560 basis point acceleration; same store expenses held flat with property payroll and utilities declining; labor hours cut more than 30% via AI-staffed properties; 85% of customer transactions now digital; solar installed at over 1,100 properties; Chicago, Minneapolis, Tampa, Honolulu and the West Coast growing 2-4%; Los Angeles state-of-emergency price restrictions now seen at down 1-2% for the year versus down 3%; October move-in volumes up 3-4% with move-in rates down 10-11%; going-in acquisition yields around 5.25% stabilizing into the sixes; non-same store incremental NOI to stabilization raised to $130 million; new supply deliveries declining through 2026 and 2027. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Ryan Burke: [call in progress] ...measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports, and an audio replay of this conference call on our website publicstorage.com. We do ask that you initially limit yourselves to 2 questions. Of course, if you have more after that, please feel free to jump in queue. With that, I'll turn the call over to Joe. Joe Russell: Thank you, Ryan, and thank you all for joining us today. Public Storage's third quarter results reflect differentiated strategies that continue to drive our outperformance, in addition to encouraging industry trends, including operational stabilization, lower competition from new supply, and increasing acquisition activity. We are raising our 2025 outlook for the second consecutive quarter based on outperformance in same store and non-same store NOI growth, acquisition volume, and core FFO growth per share. Public Storage's industry leadership is proven by, among other things, the highest revenue generation per square foot, the most profitable operating platform, the strongest portfolio expansion through our best-in-class teams and backed by our growth-oriented balance sheet, the highest retained cash flow generation, which we utilize to invest back into our business to drive earnings, and FFO growth in excess of stabilized same store growth driven by our compounding returns platform. We have been actively advancing the pillars of this platform, which include our leading operations, capital allocation and capital access. Just a few of many examples in terms of our operating innovation include, first, we have the industry's leading omnichannel customer experience, through which we offer digital options across their entire journey. The success is evident with customers now choosing digital paths in 85% of their interactions and transactions with us. Second, with the shift to digital, we are modernizing our field operations by utilizing AI to directly provide customer service and staff our properties more appropriately. The days of needing a property manager on site all day, every day are behind us. Instead, we now have people on site when and where customers need help. To date, this has reduced labor hours by more than 30%, while also increasing employee engagement and lowering turnover. And third, we are deploying new technology-based strategies across the entire organization, including customer search and generative engine optimization, unit pricing and revenue management, asset management, including security, vendors, and maintenance, identifying and executing development opportunities, and putting the right tools in our field and corporate teams' hands to even more effectively drive revenues and control expenses. Collectively, these initiatives are driving higher revenues, margins, and core FFO per share growth. Now, I'll turn the call over to Tom. Tom Boyle: Thanks, Joe. We are leaning into our platform strengths. Joe spoke to our industry-leading operations and technology initiatives. I'll now touch on capital allocation, capital access, and performance specifics. On capital allocation, we have accelerated portfolio growth with more than $1.3 billion in wholly owned acquisitions and developments already announced this year. The acquisition opportunities are relatively broad-based across size, geography, as well as seller type. We will continue expanding the non-same store pool through additional acquisitions and our $650 million development pipeline to be delivered over the next 2 years. We are built to execute on this activity based on our industry relationships, data-driven underwriting and strong capital position, with leverage at 4.2 times net debt and preferred to EBITDA and retained cash flow reaching about $650 million this year. We will continue using our advantageous cost of capital to fund portfolio expansion and drive core FFO per share growth. Now shifting to financial performance for the quarter and our improved outlook. Revenue growth in the same store pool came in ahead of our expectations, primarily due to strong in-place customer behavior. Overall in place rents were up 6% offset by lower occupancy. From a market perspective, Chicago, Minneapolis, Tampa, Honolulu, and the West Coast are standouts with revenue growth in the 2 to 4% same store revenue range. Speaking specifically to the West Coast, our strong presence top to bottom from Seattle down to San Diego, representing a third of our NOI, serves us well with good demand trends and more limited new supply. Los Angeles will return to strong growth when the state of emergency price restrictions expire. Our expense control across the same store pool continues to be strong as well, held flat for the quarter and driven by reductions across most line items. Continuing declines in property payroll and utilities are direct results of the differentiated initiatives that Joe spoke to. Accordingly, same store NOI growth came in better than we anticipated. Outside of the same store pool, outperformance in our high growth non-same store pool helped drive core FFO per share higher by 2.6%. This is a 560 basis point acceleration from the growth level achieved in the third quarter of last year. As Joe mentioned, our strategic focus continues to drive core FFO per share growth well in excess of our stabilized same store growth. We adjusted our full year guidance to reflect the positive trends I just spoke to, with increased outlooks for same store revenue, same store NOI, and non-same store NOI. All in, we increased core FFO per share growth by nearly 1% with one quarter left in the year. Looking forward, we are very well positioned to continue driving performance with differentiated strategies that will further enhance our compounding returns platform. With that, Rob, let's open it up for questions. Operator (Rob): Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to 2 questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Eric Wolfe with Citi. Please proceed with your question. Eric Wolfe (Citi): Hey, thanks for taking my questions. Um, as we get uh closer to year end, could you maybe just talk about the process you go through in setting your budgets for 2026 and sort of how you go about determining things like where move-in rents could go, occupancy, and sort of all the the the main variables that are going to make up um growth for next year. Tom Boyle: Yeah, sure. We could talk about that. I mean, we're continuously um forecasting and and updating our forecast for the business as we move through any given year. Obviously starting with um with the 2026 process, something we started several months ago um and people are forecasting their businesses. In terms of some of the line items you spoke to, um you know, we're using data-driven processes and and historical trends as well as predictive analytics to to drive uh those forecasts. Uh you know we certainly challenge our teams to come up with uh new initiatives and um to drive the business going forward uh into a new year and you know that process is well underway. Joe Russell: And you know, Eric, I'd add that you know it's a robust process across literally every function within the company. It's fluid, it doesn't end and begin um even as we speak. It builds and we have a lot of analytics relative to the things that we're doing from a deployment standpoint. As we've spoken to, we have a whole host of efficiency efforts that are tied to investments in digital and otherwise that continues to drive our margins to the level that uh we attain. And then um to Tom's point, the whole host of things that we do tied to revenue optimization across the entire portfolio with not only our same store but our non-same store portfolio. Eric Wolfe (Citi): Got it. That's helpful. And I think in the the press release you characterize things as as sort of stabilizing. I don't know if you feel like you know maybe there's a path to things getting back to more sort of a normal run rate growth or what it would take to get there. It's sort of curious how are you thinking about, you know, sort of the trends that you've seen recently in October over the last couple months, if you're starting to get a little bit closer back to normal or if it's more of a just a kind of like a stabilization um and sort of a little bit more of a muted rebound? Tom Boyle: Yeah, the uh a good question. And I think as as we look ahead, you know, we do see steady stabilization. Uh and as we've moved through 2025, we've seen demand bouncing off the bottoms of '24. Um you know, we we see new supply continuing to be uh coming down just given the challenges associated with new development in many of the markets we operate. Uh, but I'd probably point you most notably to the fact that what I commented on earlier around some of our stronger markets where, you know, we're we're we're stable, but we're growing at a healthy clip as well. And, you know, just highlighting that the West Coast again with growth in the 2 to 4%, you know, same store revenue growth range and and good fundamentals. So, some of the markets aren't quite there yet. Um but you know we're we're seeing uh good and healthy customer and and uh overall operational performance in in many of the markets we operate today. Eric Wolfe (Citi): Got it. That's helpful. Thank you. Tom Boyle [attribution inferred]: Thank you. Operator (Rob): Our next question comes from Michael Griffin with Evercore. Please proceed with your question. Michael Griffin (Evercore ISI): Great. Thanks. Um I'm curious if you can give us any insight into whether new customer behavior has changed at all. Um, it seems like the revenue this quarter was mainly driven by that existing customer, which it seems to remain sticky. But, you know, as these move-in rents, you know, decline on a year-over-year basis, do you feel like we're starting to hit a trough there, or do you think there's potentially further to go in terms of, you know, new move-in rents? Tom Boyle: Yeah, I'd say taking a step back, you know, I think there's too much focus related to move-in rents as one particular element of of revenue, right? Overall, um, across the organization, we're focused on revenue as the most important metric and that is a combination of what you're highlighting, yeah, move-in rents, but also move-in volumes, move-out activity, uh, existing customer behavior, uh, and and rent increases. And it continues to be a competitive operating environment for new customer move-ins. Uh and you could see that uh through the quarter. But the focus um here is is certainly around revenue uh as the most important metric and that goes you know throughout the organization from the property managers and and property staff all the way through the the home office organization. So we continue to make um you know investments through our platform uh to drive revenue in a competitive environment and um you know I would I would point you not to one particular metric. Michael Griffin (Evercore ISI): Thanks uh Tom, appreciate the the context there. Um, and then maybe just on the revised guidance, it seems like you're trending, you know, in the more favorable range both on, you know, expenses being toward the low end and and NOI being toward the high end, at least on a year-to-date basis. So, maybe are there any puts and takes we should think about when looking at the fourth quarter sort of implied guidance? Maybe tougher comps in certain line items or or any clarification there would be helpful. Tom Boyle: Yeah, sure. You know, every quarter's got its own set of comps. I I do think the fourth quarter specifically, uh, property tax is a tough comp. We had a a number of of healthy refunds last year. We'll see whether the team can can execute on on, uh, similar amounts this year, but that's a pretty tough comp. Uh, and then as we think about same store revenue, you know, we've been consistent highlighting that the impact on Los Angeles will grow as the year progresses. And so, we do anticipate that to to occur in the fourth quarter. Otherwise, uh, those would be the two two items I'd highlight for you. Michael Griffin (Evercore ISI): Great. That's it for me. Thanks for the time. Tom Boyle [attribution inferred]: Thank you. Operator (Rob): Our next question comes from Samir Khanal with Bank of America. Please proceed with your question. Samir Khanal (Bank of America): Yes, thanks a lot. Um, I guess just sticking to that topic about LA and the impact. I mean, kind of what what are you hearing on the ground? Um you know given given the price restrictions and the burn-off in Jan, I mean what are your channel checks kind of telling you at this point? Joe Russell: Yeah, Samir, not um probably anything differently than you're hearing, which it's completely in the hands of the governor and um you know the decision time frame he's looking you know to to come back to announce whatever next set of decisions would be very early January. So no additional color or context beyond it could you know result in a whole range of outcomes, but nothing you know specific at this point. Samir Khanal (Bank of America): Got it. And then I guess, Tom, on on the expense side, when you look at expense growth kind of that 2% range, um you guys have done a great job in terms of controlling expenses. I mean, how much room do you have there to kind of still kind of grow at that sort of 2% um into next year or at least the next 12 to 24 months? Thanks. Tom Boyle: Yeah, sure. And and appreciate the comments. You know, the team is is focused around a number of different different initiatives um to drive operating expense performance while also driving revenue and and the overall business. And you know the the couple that we continuously highlight and we're seeing bear fruit again this year continue to be the digital uh investments that we've been making. Uh one of the the side effects of of those digital investments is the ability to think holistically differently about our our property staffing and customer interaction. Um so we saw some some fruit born from that this year, more to come there uh as the team continues to drive evolution in our operating model. And then I think the other one clearly to highlight is our solar power initiatives, which we'll have uh solar on over 1,100 or we have solar on over 1,100 of our properties today and continue to drive forward with that initiative uh and we'll continue to see uh the benefits from that. But it, you know, in this environment, we're looking for all those ways to invest in the platform and drive better opex uh performance. Samir Khanal (Bank of America): Thank you. Operator (Rob): Thank you. Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question. Caitlin Burrows (Goldman Sachs): Hi there. Um I was wondering if you could talk through your current expectations for supply and maybe how you expect the next 12 months will compare to the last 12 months and what's driving that. Joe Russell: Um, yeah, sure, Caitlin. The trajectory continues to be the same, meaning on a year-by-year basis, we see the pressure creating fewer and fewer uh developments as a whole, uh, industry-wide. You know, there are, you know, here and there certain markets that may have, um, a number of additional assets coming to market, but clearly and nationally, and um in a very positive context, that supply delivery momentum continues to go down and we've seen it throughout 2025. We're going to see it into '26 and I would even say it would continue into '27. The basis for that outlook, you know, continues to be first and foremost we're in that business nationally. We see the complexity and the friction that comes from any kind of a development. Um it's tied to the things that you have to do from an entitlement standpoint becoming more and more complicated, the um cost structure of assets themselves, and then again formulating and understanding the risk that would be tied to going into the development process that in and of itself could take anywhere from 2 to 3 years if not longer, and then going to a stabilized asset that could take another 2, 3 or 4 years. So the risk factors for any kind of developer out there are much higher today and they continue to um to go a direction that's actually very good for the industry as a whole, meaning there are going to be fewer and fewer deliveries even going into the next couple years. Caitlin Burrows (Goldman Sachs): Um got it. And then so I guess then leading into PSA's own development activity, it does sound though like you guys want to kind of maintain or backfill your pipeline of activity. So, um, other than, I guess, size, uh, what do you think differentiates your strategy and ability to kind of get past all of those issues? And how is your, um, kind of stabilization over the past few years been going versus underwriting? Joe Russell: Sure. I'll I'll take the first part and I'll have Tom talk to the stabilization, which um, is is, uh, quite good as well. So, no question we have very different um capabilities. Uh it starts with you know inherent and deep-seated knowledge market-to-market with the amount of inherent operational data that we get. Um we have an ability to underwrite assets from a development and risk standpoint far differently than others do. We have the data set that guides us to optimize not only property size but also configuration within properties, unit size mix, etc. Uh we can find pockets of assets quite effectively, or posit pockets of asset development, very differently than most developers. Um we've got um a a good national team uh working aggressively out finding and um you know developing assets in a window that I just spoke to that is far more difficult. So in a reverse way for us uniquely it's providing the opportunity to go in and find very um powerful development opportunities in a whole host of markets nationally. So our confidence and our commitment to the business has never been higher but at the same time it's never been a more difficult business. So uh it it is a very good and unique window for us to continue to deploy capital and it continues to lead to substantial and, you know, the highest returns that we see from any capital allocation effort. Um, Tom, you can go ahead and talk about some of the metrics side of that which uh continue to be quite good. Tom Boyle: Yeah, you know our our lease up of our developments that have been recently delivered continues to do well, actually pacing a little bit ahead of expectations uh year to date, and and you can see in the sub the the yields produced by those vintages. To Joe's point earlier, it does take 2 to 4 years for those vintages to stabilize, but uh we're seeing good trajectory uh across those vintages today uh and and achieving those strong risk-adjusted returns that that Joe spoke to. Caitlin Burrows (Goldman Sachs): Thanks. Joe Russell [attribution inferred]: Thank you. Operator (Rob): Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question. Ronald Kamdem (Morgan Stanley): Hey, just two quick ones. Um I look, the guide, I think this came up earlier, but the guidance sort of assumes a little bit of deceleration as you get into sort of 4Q, and I guess the the obvious question is just as you're thinking about top of the funnel demand, whether it's some of the the web search data or anything like that, are you seeing anything from that standpoint that's showing that demand may be slowing or uh you know how do you sort of think about that? Thanks. Tom Boyle: Yeah, thanks, Ron. No, no, nothing implied there as it relates to demand overall. Um, you know, we continue to see healthy customer activity uh to date. I think the the item that I would highlight as it relates to same store revenue, if that's where you're focused, is what I had highlighted to Michael Griffin earlier around the um the the cumulative impact of the rental rate restrictions on Los Angeles, which will be uh holding us back a little bit more in the fourth quarter compared to the third quarter, uh and then that property tax um tough comps as well. But otherwise, you know, the non-same store pool is set to continue to accelerate given the the activities to date and the capital allocation that we've been been putting forth. Ronald Kamdem (Morgan Stanley): Great. And then yeah, my second question was just on on the acquisition pace picking up. Just maybe talk about the product that you're seeing, stabilized, non-stabilized, and sort of cap rates and returns expectations. Thanks so much. Joe Russell: Sure, Ron. It's a um combination of all those things. So, had a you know active quarter obviously and pleased to see you know the range of different types of sellers that um have come to us either through off-market transactions and/or assets that we've been um trolling or um in dialogue for some period of time. So, it's a combination of um some larger portfolios that we've curated to match some of our own investment requirements market-to-market. It's also been a combination of some smaller portfolios that have um resulted from um some of our off-market and/or um private conversations with them. Always a you know a healthy way to do some additional business. And then you know as as we typically do with our national focus and the team that's out working nationally, relationships and otherwise, um we're doing a whole host of you know one-off or much smaller transactions. So it's a whole combination. Um it's again a market um focus that uh we have to stay very close to and we're well suited to do so. Um we have unique capabilities to underwrite these assets with, again going back to our development processes, knowing and understanding markets very deeply, and been very pleased with a whole host of different types of assets that are either on one end of the spectrum stabilized or others that we're very comfortable bringing in the portfolio that are not stabilized, but once we put them on our platform, very comfortable and confident we're going to um get the kinds of returns and meet expectation um from a a again the invested capital going into those assets as well. So, uh we're um seeing a fair amount of good activity based on, you know, a lot of hard work that continues to go in that process, but uh it's bearing some good fruit. Ronald Kamdem (Morgan Stanley): Thanks so much. Joe Russell: You bet. Operator (Rob): Our next question is from Eric Luebchow with Wells Fargo. Please proceed with your question. Eric Luebchow (Wells Fargo): Uh great. Appreciate uh the question. So maybe could you update us a little bit on operating trends through uh through October in terms of occupancy, move-in rates? Anything you're seeing uh as we kind of move into uh the fourth quarter here. Tom Boyle: Yeah, sure. Um happy to do that. Um I'll provide a couple elements and as I spoke earlier, you know, focus continues to be on revenue overall. Uh but specifically, you know, talking about new customer activity, uh I'd maybe frame it as um if you look at the third quarter and the rate and volume associated with new customer activity, uh it is down about 9% year-over-year, uh and each of the months throughout the quarter, you know, a little bit different in terms of volume versus rate, etc. October is doing a a touch better than that, down 9%. So, some improving from that standpoint. Uh really driven in this particular month driven by stronger move-in activity. Uh and we're achieving that with uh less discounts but also lower rates. Um so better net outcome there. I'd point you to move-in rates uh that are again are driving that volume being in the down 10, 11% zip code but driving good volume, um up up 3, 4%. In terms of occupancy, uh because of that move-in volume, occupancy closed the or is is sitting today down about 40 basis points year-over-year. But again, I reiterate the revenue focus versus occupancy or or rental rate. And we feel like we're in a very good place uh from an occupancy standpoint uh to drive revenue uh in a steady, stabilizing and and hopefully improving uh operating fundamental picture. Eric Luebchow (Wells Fargo): Great. And um maybe just to follow up, I know you touched on this a little bit, but the LA rent restriction headwinds, you had you had guided to about 100 basis point headwinds. So maybe you could just update us on, you know, what you're expecting kind of as we look into Q4, um and and what you see underlying demand looking like on the West Coast. And I guess a related question, I mean, there has been some recent news about, you know, rent restrictions related to uh immigration activity in LA County with ICE. So just wondering if you expect that to have any impact uh in the region. Thanks. Tom Boyle: Yeah, sure. So two components there. One uh related to LA performance for the year. Uh it is trending a little better than what we uh had expected at the start of the year and I think last quarter I provided some some perspective around revenue growth expectations for Los Angeles for the uh for the year uh being down, you know, close to down 3% for the year. We think based on where we are right now it's probably going to be down in the ones, uh meaning negative 1 to negative 2% uh for the year. So some better improvements there in terms of, and and I would point to the drivers there really being what we spoke to earlier around really top to bottom the West Coast good customer activity, uh less new supply uh in those marketplaces and and good trends. So, um, good customer activity there. And then the second part of your question, the more recent state of emergency, um, is going to have a negligible impact on our operating uh performance in the fourth quarter, just as you think about a state of emergency already being in place uh through start of January. So, no change there. Uh, but we're certainly still in an environment with pricing restrictions associated with those states of emergency. Operator (Rob): Thank you. Our next question comes from Spenser Allaway with Green Street Advisors. Please proceed with your question. Spenser Allaway (Green Street Advisors): Thank you. Uh just just one for me. Can you can you talk about the amount of NOI upside you guys are currently underwriting when you're acquiring from mom and pop operators today? Maybe maybe just broadly. I know that it varies asset to asset. And then you know with the increasing prevalence and uses for AI, do you think that that upside is going to increase meaningfully in the years coming, just particularly as we think about the amount of data PSA has to work with and enter into like algorithms. Tom Boyle: Yeah, sure, Spenser. So in terms of cash flow that we can earn from from assets that we fold into the portfolio, that that's an important component to our capital allocation strategy. As we continue to make investments in our operating platform and and drive performance there, uh we can utilize that advantage as we deploy capital, and you know the the most uh visible thing that I would point you to is the margin advantage that we have in and out of the marketplaces that we operate in. Uh and and that gives you a sense, um generally speaking, that that margin advantage for new assets is both on the revenue side and the opex side driving that margin performance. Um and and so, you know, consistently getting towards uh you know 10% sort of margin enhancement for lots of the assets that that we acquire. In terms of going forward, uh I noted earlier we continue to make investments in the platform both from a revenue and opex side and so we do anticipate that we'll continue to drive performance within our operating platform and that will then uh immediately have the the same impact on the the assets that we're putting into the pool, uh both for our wholly owned assets as well as for the benefit of our third-party management customers, as we drive our operating platform. Spenser Allaway (Green Street Advisors) [attribution inferred]: Okay, great. Thank you. Operator (Rob): Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question. Todd Thomas (KeyBanc Capital Markets): Hi, thanks. Um, first, two two quick follow-ups on acquisitions. You know, your volume's approaching a billion dollars for the year. Um, so fairly active year. First, what's the outlook for that pace to continue into 2026? And then second, you've had some very active years in the past. You did more than $5 billion in 2021 and nearly $3 billion in 2023. Is is now a good time to lean in ahead of a recovery? I'm just curious what the appetite's like today um to do something more sizable or or strategic. Tom Boyle: Yeah. So, a number of components to that question. So, Joe and I'll probably tag team this one, but I I think we have seen an improving transaction market this year. Uh Joe spoke to that a little earlier. I do think the improving debt market um trends uh set up for more more active transaction volumes uh going forward. Uh and so I think, you know, that's an opportunity set. In terms of our appetite, continues to be very strong. You know we look back at 2021 and the $5 billion of acquisitions that we acquired there and would love to do that again. Uh so it's a it's a question of what the opportunity set is ahead of us. Uh but we're built to be able to integrate uh that level of of activity uh and fold those assets into the operating platform that we're speaking to. So, we're excited about the potential for for increased activity. We'll have to see what 2026 brings. Joe Russell: Yeah, Todd, I'd just add the balance sheet is well positioned to serve us as we again unlock those range of opportunities. To Tom's point, we've proven over the last 5 years in particular that whether we're in a process where we're taking down one individual very large portfolio or a whole collection of smaller assets, you know, all of our systems and digital investments, etc. allow us to integrate these assets incredibly smoothly in, you know, in many cases within a 24-hour time frame um from, you know, one platform to another. So we've got the technique, the skill and now uh time and again uh the experience, you know, to continue to aggregate these assets and we are going to continue to look for any and all ways to do just that. Todd Thomas (KeyBanc Capital Markets): Okay. Um, that's helpful. And then, and Joe, just sticking with your comments around technology. So you mentioned a number of things, um you know, employee efficiencies, the rental process, um generative AI search. You know, clearly expenses are an area where you've seen technology have a big impact. Um you know, is there is there a lot more room there or do you feel you've sort of wrung out a lot of the the efficiencies at this point with maybe more benefits accruing toward acquisitions mainly going forward? And and what do you think might have the biggest impact in the next 3 to 5 years as as you look out? Joe Russell: It it's um top to bottom, Todd, and uh continues, you know, from an investment standpoint. Um we we are making a whole host of um priorities around impacts to the business. It starts right at revenue, all the things that we can do you know through our technology and investments tied to revenue and then its optimization. Clearly you can see that with the efficiency and continued you know outperformance on margin achievement. Um but you know, again, to give you you know color on you know where we are on this road map, we're we're very confident we have only just begun. I mean there are you know very meaningful things that the team continues to invest in literally every part of the company. Um it's um very empowering. Uh it's not easy. Um, but we have the fortitude and we've continued to display the ability to uh use these tools very effectively and uh many times in a much shorter time frame than we may have originally estimated. You know, as as we've spoken to now for some time, 85% of our customers now transact with us digitally where 4 or 5 years ago that number was basically zero. Uh and um with, you know, again the migration to more and more data-driven processes, that creates um iterative and, in some cases, compounding opportunities to drive efficiency much sooner and more effectively than we may have even envisioned at the front end, and we are encouraged by the team effort that continues to play through. We are no question a self-storage company, but we have a focus on data optimization that continues to serve us quite well and we're very committed to that. Todd Thomas (KeyBanc Capital Markets): What kind of margin upside do you think is is ultimately achievable? Joe Russell: Well, we we we'll see how that plays, but we're confident we uh we're not done. Todd Thomas (KeyBanc Capital Markets): Okay. Thank you. Thank you. Operator (Rob): As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question. Juan Sanabria (BMO Capital Markets): Hi. Uh, thanks for the time. Just wanted to follow up on LA quickly. You talked about um feeling a a bit better about the drag that LA is going to see for the year. I'm just curious if you could translate that that down 3% to now down 1 to 2 on the overall portfolio, and is there any offsets from the strength in LA and the West Coast to the same store revenues? Tom Boyle: Yeah, you know, and I think you know giving you the guidepost as it relates to the markets is is should be helpful. You know I think the the fourth quarter obviously implied number associated with that, as I've noted a couple times, uh will be holding us back a little bit further as it relates to the impact to the overall same store. You know, the the demand associated with um a new customer as well as, you know, one of the things we've seen in in Los Angeles is less vacate activity, and we've seen that up and down many of our markets and nationally, less vacate activity also helpful. Uh, so occupancy's up a little bit in Los Angeles and um, and so a lot of the same trends that that Joe and I have already spoken to on this call in terms of good customer activity, very challenging new development environment, continue to support Los Angeles despite the fact that we can't charge the rents that we otherwise would charge in a competitive marketplace. Juan Sanabria (BMO Capital Markets): And then just uh, cap rate wise, how should we think about going in yields and and targeted stabilized yields on the investments you're making at around a billion dollars year to date. Tom Boyle: Yeah. You know the yields that we've been um targeting are pretty consistent with what we highlighted last quarter. So we're likely to achieve going in yields in the kind of 5 and a quarter uh zip code on a mix of stabilized and unstabilized activities uh year to date. And you know, so the points we've been making on this call, we have the opportunity to plug those assets into our operating platform and as we do that we'll achieve more cash flow uh from those assets and so those will stabilize into the sixes. Juan Sanabria (BMO Capital Markets): Thank you. Tom Boyle [attribution inferred]: Thanks. Operator (Rob): Our next question comes from Michael Goldsmith with UBS. Please proceed with your question. Michael Goldsmith (UBS): Good afternoon. Thanks a lot for taking my questions. Sticking with the transaction market, can you talk about the opportunity uh that you see with lease up properties? You'll be able to operate them better. Maybe the appetite to purchase that. And then also the increase in the non-same store NOI guidance moved higher by $10 million. Does that reflect improved performance of the previously owned properties or does that reflect the newly acquired ones? Thanks. Joe Russell: Okay, I'll take the first part and Tom can take the second, Michael. But no question we uh have um continued to deploy capital into many assets that are far from stabilization, um from some that literally are vacant to 30, 50, 70% occupied and otherwise, um and time and again have proven the ability to lift the performance of those assets very confidently, just like just like I spoke about earlier uh tied to the knowledge that we have you know from a market standpoint, all of the techniques that we're using from revenue management, operational efficiency, knowledge of uh customer dynamics, uh knowledge of the market itself. Um so no question we have um a high degree of confidence in any range of stabilization from an asset standpoint. So we will continue to entertain all different asset types based on that level of knowledge and skill. And that is continuing to produce the kinds of returns that we're very confident will not only uh continue but will give us more running room as we grow the non-same store portfolio just like we have in 2025. Tom, you can take the second part. Tom Boyle: Yeah, the second part of your question just related to non-same store performance. Part of that is better uh performance and and lease up of some of the assets that that you're speaking to and the other portion is obviously closing on um some incremental assets than what we had closed under contract. So that combination leads to to better outlook for non-same store for this year. But you'll also note we included an update to the incremental NOI from after '25 to stabilization, uh which reflects the the the future engine of growth associated with this pool of assets as they stabilize and and lease up. So uh that's increased to $130 million for for uh '26 and beyond. Michael Goldsmith (UBS): Thanks for that. And my follow-up question, you know, your marketing spend is down year-over-year. Uh I believe your promotions given uh is is also down. So can you just walk through kind of like the thought process around around using these levers as a top of funnel demand driver? And just, you know, is is there a reason why pulling back on some of these uh factors, this is the right time to do that versus maybe leaning in um you know at a time with demand being kind of uneven. Thanks. Tom Boyle: Yeah, thanks, Michael. I'd say we we consistently use uh all the tools you highlighted uh in order to drive the right kind of customer volumes and and behavior over time. Uh so we're active in utilizing advertising um as well as promotional activity, lowering our rental rates, increasing our rental rates, and as I noted earlier, it all goes into um a focus on optimizing and maximizing revenue as the one metric that we're focused on uh versus individual line items. And and that's the focus of the team. And we'll continue to to use all those tools in order to to focus on that revenue metric. Michael Goldsmith (UBS): Thank you very much. Good luck in the fourth quarter. Tom Boyle: Thanks, Mike. Operator (Rob): Our next question is from Mike Mueller with JPMorgan. Please proceed with your question. Mike Mueller (JPMorgan): Yeah. Hi. Um, I guess for some of the stronger markets that you talked about in your initial comments, can you talk a little bit about how different were the um, I guess the move-in rent comparisons, the year comps in those markets compared to the the rolled up number we see in the sub. Tom Boyle: Yeah, Michael. I mean I I spoke earlier to the fact that many of those markets I highlighted are performing well, uh steady uh strong growth uh from from many of them, and associated with that you know you have better move-in trends but you also have better trends from existing customers and and and good behavior amongst the existing customer base. So uh it's a combination of things as always uh but but no question um seeing some good strength across many of our markets today. Mike Mueller (JPMorgan): Got it. Okay. And as a quick follow-up, um, and I apologize if I missed this one. Um, the, uh, any any changes in terms of the push back from customers on ECRI or ECRI levels in general? Tom Boyle: No, the existing customer continues to perform quite well. Uh, you can see vacates were down in the quarter. Um, you know, price sensitivity remains consistent with our our expectations and our modeling. So, uh, no, no, um, shifts there and we continue to be encouraged by the storage consumer as they rent with us. Mike Mueller (JPMorgan): Okay, thank you. Operator (Rob): Our next question comes from Brandon Lynch with Barclays Bank. Please proceed with your question. Brandon Lynch (Barclays): Great. Thanks for taking my question. Um, clearly you guys are making good progress on the efficiency initiatives, uh, especially on labor. Uh, how do you evaluate though if you've cut too much? I'd imagine there's some sort of A/B testing. Um, but any details on your approach to overage or underage of labor would be helpful. Joe Russell: Um, yeah, Brandon, we, you know, we're on a now multi-year um integration uh which has included, to your point, a whole host of testing relative to the efficacy of um optimized labor. Um and we very conscientiously and first and foremost use you know customer interaction and you know customer service as a guidepost to um see and understand, to your point, how far to go. Um the components of that also though include um on a per market basis and you know even a submarket basis the kind of scale that we have, um and with that the effectiveness of the digital ecosystem that guides us to the predictability factor of this, and the tools that we're using from a predictability standpoint continue to become more and more effective. So those kinds of tools are the tools that we invest in uh completely from a labor standpoint that does a multitude of things from an output standpoint. One, again tied to customer service. Number two, the um the effectiveness of the team member themselves. Um, ironically, but intentionally, it's also led to a much higher level of employee satisfaction relative to the way that they're operating their day in, day out environment. Um it's also um very intentionally provided you know good expense optimization, and we continue to see more and more tools, particularly with the amount of data that we're dealing with where we're moving in, for instance, you know, north of 100,000 customers a month, um to guide us to the effectiveness of this. I mentioned earlier that you know now 85% of our customers are transacting with us digitally, but there are many customers that want to do the opposite and we're servicing them quite well um with, again, a whole host of even different tools than they had uh to um conduct business with us, you know, 2, 3 or 4 years ago. So more um evolution in this entire process, but um very good traction, meaning that we've got more to do and we're excited about it. Brandon Lynch (Barclays): Great. Thank you. That's helpful. Um, I also wanted to ask on housing related demand. Obviously, that's kind of been a missing element for a couple of years now. Are you seeing any signs of improvement yet or uh any reason to be more optimistic that 2026 will be better than 2025 or 2024? Tom Boyle: Yeah, sure. I mean, I think housing is a a component of our demand. It's been relatively stable over the last couple years as housing transaction volumes have been relatively stable after the step lower uh several years ago. Um you know clearly interest rates are a touch lower, mortgage rates are a touch lower. That that should be helpful as we think about activity uh going forward. But we haven't seen anything on the ground yet that would dictate that there's any meaningful shifts. Uh currently our in-house perspective is that it's going to take some time for the housing market to continue to work through its adjustment with the big shift in mortgage rates over the last couple years. So I think it's probably a steady as she goes environment and housing maybe a touch better than that. Brandon Lynch (Barclays): Great. Thank you. Operator (Rob): We have reached the end of the question and answer session. I'd now like to turn the call back over to Ryan Burke for closing comments. Ryan Burke: Thanks, Rob, and thanks to all of you for joining us today. Have a great day. Operator (Rob): This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. — END OF TRANSCRIPT —