Public Storage sounds like 2Pac California Love on Earnings Call

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Public Storage sounds like 2Pac California Love on Earnings Call Host: Chris Berg — Abernathey Development Recorded: July 31, 2025 (published August 2, 2025) Video: https://www.youtube.com/watch?v=IzjIjYpvCFk Key topics: Joe Russell and Public Storage talking up the West Coast like 2Pac's California Love; Extra Space Q2 2025 NOI down about 3%; property tax and insurance expense pressure; PSA falling from $288 to $274 and Extra Space from $149 to $136 after earnings; Extra Space's $57 million Life Storage write-down in Q2 2024; Public Storage's roughly $100 million euro-versus-dollar hit on Shurgard; $64 million for 200,000 square feet of Public Storage ground-up development, north of $300 a foot; Extra Space deploying over $100 million of bridge and mezzanine loans; ITB and D.R. Horton stalling at the 200-day moving average; Fort Pierce and St. Lucie County, Florida oversupply — 8.57 square feet per capita, 43,000 population, a $1.38 10x10 climate-controlled rate and 600,000 square feet in the pipeline; Dallas-Fort Worth NOI down 12.8%; negative NOI in New York City; AI search going from 15% to over 65% of queries in months; Noah Star of Track IQ and the SSA 50th anniversary fall show in Las Vegas 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. ————————————————————————————— Chris Berg: Welcome to the self storage report. I'm your host Chris Berg, otherwise known as the AI storage guide to land acquisition for Abernathy Development. Joining us here today as always, the one and only Rad Thad, Thaddius Campbell with S3 partner. Say that 10 times fast. Uh my co-host here and then to host some other great podcasts as well. Literally just wrapped up listening to the public storage earnings report for Q2 2025. Uh, Extra Space is actually doing their earnings call as we speak. So, Eric, I don't know if it's possible for you to sort of find that. Maybe we can bring that up live or I can try to do my best if we want to jump into that call as well. Um, but I do want to share something with you, F. Did you get a chance to listen to the call at all or go through the earnings report? Thaddius Campbell: I I tuned into your LinkedIn for a few seconds. Unfortunately, been on a bunch of calls this morning. Had a call that took up an hour and a half of my morning, so I didn't get to listen to it as much as I'd like to. Since you got the news background like I do, here's my headline from the public storage earning call. I thought Joe Russell public storage was Tupac, bro. California love, man. Chris Berg: Awesome to hear them talk about, hey, the West Coast is banging right now. LA is going to be all good. It's a little bit down just because of uh the fire stuff, but I was like, wow. I was waiting for Joe and the team there to start playing some California love from Tupac in the background because they love what is happening in California now. Atlanta, Dallas, let's see, Florida, not so much. What say you, my friend? Thaddius Campbell: I I listen, I was We're going to look a little later at our friends at Track IQ, our our data partner. I was on their platform earlier this week looking at a site in St. Lucy County just north of of Miami, Fort Lauderdale area in a town called Fort Pierce, Florida. And you see some of the saturation and I'll pull it up on Track IQ a little bit later, but yeah, there's parts of the country where the saturation has definitely taken a massive toll. Are we starting to see a little bit of a bounce back? I think that, you know, we certainly have seen rates start to trend upwards again. That being said, I think as you look at live stock prices, um you know, the the CEOs can be as as happy as they want in the earnings call, um investors are not overly excited with what they've seen from the extra space in public uh reports if you if you just look from a straight, you know, what's happened to their stock price in the wake of yesterday's announcements. Chris Berg: Yeah. And I think I'll bring those up just so we can kind of presence those for people, but I think you bring up a really good point. you know, extra space NOI overall was down around 3% which I think is a pretty interesting if not shocking number. It's very rare you see negative NOI obviously within the self- storage space. Now there could be a myriad of reasons. I think one of the reasons if you dive into their actually earnings report and we'll see what Joe Margolus says on the call there today, but was managing expenses. You know, property taxes are up in a lot of their sites. Obviously, we hear a lot about insurance, what's going on, but I also think at least what we've seen that because public storage manages our stuff is that extra typically has a few more managers or people on site, employees on site, and so you're going to have a little bit higher cost there. Um, and it's starting to impact their NOI. And I think as you and I have talked about with what's happening with AI and speaking of stocks, if you see what's going on with Microsoft and Meta today, they had just unbelievable earnings, shot up 8, 10, 12, you know, 15% after hours. I'm going to suggest a big part of that is because of what's going on. We've talked about earlier where Microsoft laid off 6,000, then it was 9,000. They've been laying off a lot of people because of what AI is doing, obviously, to relay some of these warm bodies. and you're hearing it from Amazon and different companies. That's the case. So, I just share — I don't want to get too speculative here, but I share that where you want to start to look at earnings per share with some of these tech companies and everyone's like, "Oh my gosh, like look at what Nvidia is doing and they may still have some room to run as they start cutting headcount." What were you going to say? Thaddius Campbell: I I just was going to say, you know, 15,000 people, many of whom are software engineers, you know, which is not the lowest cost employee in the pipeline of a company like that. So, you know, we're we're seeing, you know, cutbacks and and we've talked about this over the last few weeks that graduating with a computer engineering degree has a higher rate of of a software engineer, higher rate of unemployment than our history. Um, you know, it on a bottom line basis, it's great news for those companies. I guess the overall question becomes and and we haven't seen it yet. Has it is it going to have a massive impact on the overall economy as we see some of these jobs getting slashed. It's going to be an interesting thing to play out and then of course how does that then affect self storage? You know, obviously we've talked pretty consistently about how those life events tend to actually be a good thing for storage. People have a life event that forces them to downsize or or find a new location and and they tend to use self storage. Chris Berg: Yes. um you know and Joe Russell, it's funny it's Joe Margolus and Joe Russell for public stories there are he said hey renters are being a big part of their their group I do want to go into dive into some mini markets here in a moment that you and I can take a look at and just see look at I'm a big believer hey let's look at NOI in my opinion that's the number that really really matters at the end of the day but as you mentioned about the stocks I'll share that and then I do have um the call that we can bring up here from extra space but this is extra space right now you can see you know big drop today. Clearly the street not really enjoying uh what they're hearing or at least seeing from these earnings. This is public storage. You know, kind of the same thing. These stocks have not been outperforming by any stretch of the imagination anyway. So, I guess we'll see what this, you know, leans into for the rest of 2025, which when I looked at the earnings, I didn't dive into the speculation as much, but you know, it's pretty soft. I think because you and I talk about the real estate cycle so much, this one is an interesting chart in my opinion because we've talked so much about housing stocks and how those can be key indicators and key leaders of what's coming up over the next 24 months. Well, ITB is like the housing ETF, right? So, if you look at um this is Dr. Horton recently above the 200 day uh you know moving average, which is always a really important trend. You think, oh, that was good. Well, now they're coming back down below that because they just recently announced decent earnings. Um, same thing here. But I do want to go back to the ITB as the the ETF. And you can see here they couldn't break that 200 day moving average mark, which is obviously always an important point of resistance, which for me, as you and I talked about, there was that kind of that peak that happened in September of 24, then it goes down, and then it tries to to hit a peak again and just can't quite do there. I'm not saying this is it. I'm just saying, hey, this is a really interesting resistance point to be, you know, keep your eye on and go are is this thing going to bear out the way you and I have discussed where housing stocks just don't regain the steam and us the economy starts to go in another direction. What's you my friend? Thaddius Campbell: Yeah, I've listen I think we've laid this out pretty clearly over the last 3, 4, 5 weeks and and nothing that's been happening in the overall situation has has lent any data to suggest otherwise. You know, and and quite frankly, it's a big deal for me as I'm looking daily at sites whether to look for a storage build or to look for a small bay industrial flex. You know, there's a lot of markets in the country where there's literally billions of dollars of residential development in a 3 mile, 5 mile you know, radius. The question becomes, are those sites that are in conceptual phase, that are in design phase, are we actually going to see them go through and and get to actual construction? I'm I'm putting a lot more weight today on sites that are already in a bidding process or already under construction than I am something that's conceptual or something that's in a in a design phase. Whereas a few years ago, you know, if something's in a conceptual or design phase, you know, you have a a much more high level of belief that it's going to get down the road. I think today you have to take everything that's not actually all the way through to construction. Even things, and we're seeing this in self- storage all the time, things that are fully permitted sites that aren't going anywhere, right? They're they're sitting there, you know, for lack of a better term. It's like a field that's not getting planted. Um, and and I, you know, I tend to believe that that's what we're going to see played out over the course of the I had to use a little farm reference. You're from North Dakota, man. You should be used to some farm references. Chris Berg: Did you just bring out the wordow? Thaddius Campbell: My dad grew up on a potato farm. Yeah. Got to got to use the language every once in a while. For sure. Chris Berg: The thing I love about the self storage report, we could just call the SAT test. Like you are incredible, man. Like Thaddius Campbell: I appreciate that. I have no idea whatow a field sitsow when it's not planted yet. I gota I got to use that in a sentence so somebody knows what the heck I'm talking about. Yeah. Listen, I to the point I think we're going to see a lot of that over the next couple years. You're going to see some pretty massive massive residential housing projects that don't get built because there's just not enough demand to move those units. And and listen, that puts people when when you're talking about hundreds of millions of dollar projects, the design phase costs hundreds of thousands, millions of dollars, and that money is going nowhere. And so, do I feel like there's going to be some more pain in the economy? I certainly do. Chris Berg: I'll tell you this. I want to call up a a graphic real quick that just illuminates how even maybe a little more starkly and and just to illuminate your point, just a oneline graph to keep it simple. 288 at 430 yesterday down to 274, right? So you've had a $14 drop in their stock price. Extras face even more stark, right? Almost the same price drop, 149 down to 136, but a much lower stock price. So, a much higher percentage drop. They're down almost 10% on that earnings report. You and I still feel the same way, though. I think this is a short-term hit. There's been a few things that have happened over the course of the last year, year and a half, things that, you know, extra space and and public have no real control over um and and are affecting. You know, you can't control what happens on a municipal level with property taxes. You can't control as public storage and extra space what's going on with your property taxes when there's wildfires on the West Coast and there's tornadoes in the Midwest and the Sun Sunb Belt and there's hurricanes in Florida, which is a strong percentage of their presence and those increased costs on the bottom line. At the same time, when there's been some negative pressure on pricing, you know, we're seeing it play out with the way the market's perceiving these stock prices. I'm going to stop sharing my screen and come back to you now. You know, the one nice thing about storage and and Joe Margolas mentioned this in Newport is look, it's always been a long-term investment. It's not a fiveday, weekly, even even on a year-to-year basis, right? You're kind of like, you know, okay, this thing moves pretty slow. It's just big picture to me and is the more I get educated in the space is like, okay, what's the supply at? And can we keep digging away, plugging away? Because even today, Joe Russell from public said, "Look, we still love like the highest return on capital for us right now." I I don't want to misquote, but it was pretty much this like the highest is are still our development deals. We still love, you know, the return on capital we're getting our development deals. So, I say that because they they see it, we continue to see it here at Abernathy and hey, what can I do to continue to just find the right pieces of dirt, get someone creative, and build these things in really low supply areas? So, if you don't mind, man, cuz I've got this brought up. I want to um Dude, it's so funny cuz you've got your news background. I feel like you and I are about to Okay, let's go live right now to the Extra Space Quarter 2 2025 earning. Thaddius Campbell: That's you NPR. Chris Berg: Let's go to our online fad. Fad's live on the scene at the Extra Space Quarter Extra Space Storage executive [attribution inferred]: drag on your so I would say that's a more significant driver than any change from an ECRI perspective? Really, that's been pretty constant on a year-over-year basis. Analyst [attribution inferred]: Thank you. Extra Space Storage executive [attribution inferred]: You bet. Thank you. Operator: Your next question comes from Samir Canal with Bank of America Securities. Your line is now open. Samir Canal — Bank of America Securities: Yes. Uh good afternoon everybody. I guess Joe or Jeff you sounded you know in the opening comments you talked about the progress is being made but you you also said it's sort of gradual and maybe you know I don't want to use the word softness but it feels like maybe it's a bit lighter than you expected maybe Josh just talk or expand around that I guess what do you think is sort of driving that that gradual sort of movement here Joe Margolis — Extra Space Storage: well this is Joe I think there's several things you know one is mentioned that the previous question, we turn 5 or 6% of our customers a month. So it takes time for improvement in rate to to you know build up in the in the rent roll and show it. Um you know we also have a a roll down and that's you know again takes time to to work against that but this isn't a month-to-month business right the the this is a long-term business the trends we're seeing are positive to be positive in customer rate for the first time since March 2022 is a meaningful inflection point and we're look you know we we rode down the hill and we're looking forward to riding up the hill now. I mean that we obviously this was no Chris Berg: report is back just gonna say man I mean the fact that we just said hey look this isn't a monthto month but it's a and there and there's CEO of extra space you know they got the best Thaddius Campbell: yeah by the way that was live that wasn't like Chris queued that up and and decided to go at exactly that point as you could probably tell because we queued it up we wouldn't have gone in the last 15 seconds of an answer that we had no context for worked out absolutely perfect then he and he quote he says exactly the quote quote you just quoted from public storage Joe Russell. That was uh very well done my friend. I mean that was just absolutely. So, so again you can see I think what's interesting though is and again I don't have the right context here but I will share just some things having a conversation yesterday with a broker is that it sounded like in Joe's earlier comments you know this transition with life storage and that acquisition maybe has been a little bit more challenging than they anticipated to the point what I heard yesterday and then also saw a LinkedIn post on it where they're starting to maybe sell off some of those assets and I think they're starting to look again at their portfolio. I think Joe Margolus is phenomenal at mitigating risk. And they're going, "Yeah, you know what? Maybe we've got a little bit too much of a footprint in this particular regional area. Let's sell some of these assets and and reallocate that money. Again, we can get a higher return on capital." So, I don't want to put words in their mouth. Again, I have not had a chance to dive into this. I'm just doing some speculation based on some things I'm hearing and reading the earnings. Couple interesting factoids I've discovered as I'm digging into the earnings reports and and historically going back and kind of, you know, looking at not something I did a year year and a half ago before we started this report. So, thanks for that cuz it's made me a much better investigator of what's going on in our industry. But if you compare 2024 second quarter to 2025 second quarter for Extra Space, the thing that jumps out immediately is they took a $57 million write down on their valuation of Life Storage last year in the second quarter. So they actually showed a significant increase in overall net operating income companywide this quarter versus a year ago was like 37% or something like that. Why? Well, because they had to write down $57 million of of unrealized, you know, it wasn't money, but it was their overvaluation of Life Storage when they did the merger that they then had to go to investors and say, "Hey, we've got to account for this somewhere." Um, they took a massive hit second quarter 2024. To your point about those assets now, you know, how they're how they're understanding. Is that to say the merger was uh not long-term going to be fruitful for them? I think we're still going to see that play out, but definitely you've seen that it's created some short-term pain. Maybe the the you know the timing of that merger certainly didn't help anything when you see what happened to occupancy shortly thereafter and how that really changed how the algorithm was setting pricing structures and and you know listen we've talked about this also when you're refinancing a project at 6 mill at 6% versus 2 and a half 3% how that affects the overall valuation of an individual facility. All these things are coming to play in terms of the overall valuation of what's going on. Second interesting factoid I want to share that I discovered that I thought was fascinating was the US dollars actually gained strength against the euro um over the last 6 to 8 months that actually cost public storage a significant amount of money. They they took a $100 million loss on the valuation of the US dollar versus the euro shard storage in in Europe that they're heavily invested in. They have loans to um you know it cost them more money to service that loan now because the dollar is is stronger against the euro. So one of those things where just looking from a global perspective where some events that the the incredible leadership of these two companies have no control over, right? Like Joe Russell's not affecting the the value of the euro versus the dollar in any way, shape or form, but has a staggering impact on public storage is, you know, overall income level. A $100 million hit, I don't care what you're dealing with, is a pretty massive impact. So two, go ahead. Go ahead. Chris Berg: Shard is Shard in in Australia or is that Thaddius Campbell: No, they have a different they have a different company. I can't remember the name of the company. I have to go back and look at my my thing, but they they're heavily invested in one I think Shurgard is is in Europe mostly in Western Europe. That's my understanding of it. Could be completely wrong, but you know, that's an investment that Public Storage involved in. And then there's a separate entity, I think, in in Australia. I'd have to go back and look. I didn't keep my notes in front of me if I was as good of a news reporter as you were. Chris Berg: But I think I think you're right as I'm trying to do just a quick Google search here. So, but you bring up a really interesting point that I forgot to mention in the fact that that they were the the loss of capital just from the euro versus the USD was like oh that's that's an interesting uh dynamic right there which again I think to look at how and I did not get a chance to peruse extra space as well but if you look at how public is managing expenses it seems like they're doing a pretty darn good job even with that $100 million transition from the euro to the dollar um to minimize you know their operations and and their NOI was was pretty much flat you you know, from I think year over year, at least quarter over quarter. So, anything else you want to add there at that? Thaddius Campbell: Couple things that that jumped out at me, too. First of all, you know, you talked about public storage, building groundup development. Obviously, that's what we do at S3 Partners. You know, we're we're heavily involved in that side of it. 200,000 square feet of groundup development that they had they they have in the works in the second quarter. $64 million for those 200,000 square feet, which works out to somewhere north of $300 a square foot to build, which that jumped off the page to me. I don't know where they're building those. I mean, if they're in downtown LA and downtown San Francisco, then God bless. That makes a little bit of sense because the cost of the land and build costs are going to be a little higher. Um, but the fact that they're moving forward on $64 million on two projects tells you the return they believe they're going to get on groundup development. The other thing I wanted to point out very quickly is that Extra Space put another hundred plus million dollars of loans out last quarter and they only sold off 7 million of loans. So, you know, deployed net over $100 million out into to bridge mezzanine, whatever those loans might look like in their structure, um, out into the loan field. So, we talked about this a couple weeks ago that it's very clear that the two companies have a little bit of a differing strategy as far as how they're they're moving forward with their capital. Chris Berg: Yeah, he brought up the development aspect. This is from public storage. You can see here um an asset in California, 229 bucks a foot. one was just we were looking at it today with my team like 400 bucks Thaddius Campbell [attribution inferred]: in Hawaii is like okay that that's a different you know getting getting steel to Hawaii is a little different than getting steel to Georgia Chris Berg: 100% but still mean like you know what the right seem to be to make that thing actually underwrite work is like all right um real quickly just to run through this because I think it's interesting to take a look at kind of the dynamics that are happening across the country and I wanted to use year to date through June 30th 2025 but You can see LA here um from an NOI perspective again up just a little bit. They talked about it a ton on the on the earnings call. Big part was because of the capsu uh due to the fires, but then San Francisco's been performing well. U they talked about DC. Uh I think the Thaddius Campbell [attribution inferred]: York number is fascinating to me that they're they're losing NOI in New York City. I I would like to dig into that a little more because it's certainly not because of a a massive increase in supply as a very hard place to get things built. Chris Berg: Yeah, I I couldn't put a finger on that, but I think that the Dallas Fort Worth ones, I mean, down 7.8%. Then you've got West Palm Beach obviously in Florida. Um Tampa down 4.3. You know, there's some pretty staggering NOI numbers in my opinion. San Diego 1.1, which is great to see. uh Phoenix, you know, we've got some great assets in Phoenix and I thought this was going to be a much bigger negative number than 6. So that actually I think Phoenix is sucking up the supply um a little bit more efficiently than I, you know, maybe originally anticipated. So just some interesting the one thing that's missing here that I was hoping um and I think Arman does a good job of jumping into this so maybe he knows where it's at, but I was hoping to see Vegas and maybe I'm just missing it, but I'm not seeing Vegas on here and I'm curious how the Vegas market's performing. though. Thaddius Campbell: Fascinating to look through that and see some of the places where you would think. Shout out to my buddy Tony Ardzone by the way. Legacy built out of Phoenix, Arizona has built a a good chunk of the self- storage facilities that have been built in that market over the years. I know that number has to make him feel pretty good. Um I Yeah, I I don't know what's going on in Las Vegas. I'm interested. that I tal I teased earlier that I'm going to show and I actually put it on the screen thinking I was sharing a different page but um want to show you Fort Pierce which is outside that Fort Lauderdale market will give a little light on to why some of that southern Florida market is is struggling so much. Chris Berg: Here's Vegas and extra space. Let's real quickly before you go there. So down 1.1 you know again not great but not as horrendous as it could be. Phoenix.5, but they talked about it in the public, you know, Dallas is just not performing well. And I want to share with people, you know, when I first came into the to the biz, how do I get you back up here? Um, everyone, even today, people are like, hey, man, are you in Texas? Are you in Texas? And I said to him, I said, you know, Texas scared us. And you and I talked about this where just any Tom, Dick, and Harry can be like, I can build that. And they're like, well, do you have a license? No. Okay, let's build it. You know, you're just like, wait, that's not good from a supply perspective. or at least having any kind of moat. And a lot of people kind of laughed at us like what are you afraid of Texas for man like which again Texas may end up being fine but when I see minus 12.8 noi over the last 6 months in Dallas for Worth it's like glad we're not dealing with that. Thaddius Campbell: I tell you something as as I'm looking at flex as an alternative to storage. Dallas and Houston have massive amounts of small bay flex being built relative to the rest of the country. And one of the reasons I believe that is there is because those two markets have been oversaturated for storage for a long time. And and it's listen not so much as Houston. Houston literally has no zoning code. So if you have a parcel of land, you've got to you've got to follow rules, but you can build whatever you want on that parcel land as long as it fits within the strictctures of height requirements and setbacks and F. Um, so Dallas a little bit more, you know, tough zoning challenges, but to the point it it's it ease is not always your friend when it comes to development, right? Some people seek that, hey, I want to go find a site that's use approved and it's going to be easier. That doesn't always mean that in the long run that you're going to have a a better, you know, I looked at, if you looked at San Francisco, I think they were up 3.9 or something like that, right? one of the hardest areas of the country to go get zoning taken care of. And so, you know, to illuminate your point about Texas and and yes, easier to get things done. Does that necessarily translate to profit at the end of a project? You know, look at the numbers and they they speak for themselves for sure. I want to pull this up, Florida. Yeah. I want to pull this up real quick and and share. This is Fort Pierce, Florida. a site I actually was not looking for for storage. I was looking for at it for a small bay industrial flex, but it really illuminates some of the point we've been talking about. This is obviously a one of 3 and a 5 mile radius around it. I want to shut off the housing development toggle that I had turned on and I'm going to turn on. Of course, the little window with you in it is sitting exactly where I don't want it to be to hit other buttons on the screen. That's the the fun of video conferencing in 2025. You can see how many yellow pins there are on this map. It is absolutely unfathomable. So, if I go into this 3M and I see 8.57 square foot per capita, not immediately a turnoff in Florida where in a lot of places there are are people from the Northeast that go down there and have second houses. They don't necessarily count in the population. So, that's not an immediate nogo. 43,000 population. Not exactly as strong as I might like to see it, but again, it's Florida, so how much of the population is unaccounted for is people that have second houses down there? 69,000 median income. Again, not terrible in any way, shape, or form, especially when you factor in people that are retired that aren't earning any income and pulling that average down. This is where it starts to get really crazy. Look at the number. I'm going to go back up again and I'm just going to highlight total gross existing square footage in the 3 miles. 409, 372 net rental. Let's look at the development pipeline. By the way, yesterday when I or two days ago when I looked at this, this was four. There's since been a fifth development added into the pipeline. I I kid you not, this was four when I looked at it two days ago and it was 430,000 and like 320,000 of net rental. There's since been another 130,000 net renable and 160,000 square foot facility. There's more square footage in the pipeline than there is in the 3m radius existing. By the way, a population of under 50,000 people. Now, for those of you guys that aren't really familiar with development, I figure I need about 6,000 people to fill a 100,000 square foot facility based on square foot per capita national average. Right? If I have 6,000 people that don't currently have good access to storage, I feel pretty comfortable. Well, here's the reality. In this market, without any new development, there aren't 6,000 people that need storage today. And I've got 600,000 square feet in the pipeline. Now, let's go down to a 10x10 rental rate. A $138 for climate control, right? So if you play that over over the course of a year, you're under 17 bucks a square foot right now as a rough number for me to think something's going to pencil as a groundup development in a place where I can build economically, which is not necessarily the southeast coast of Florida. I need to be at 22, 23, 24, even $25 a square foot per year. I need this number to be at $2 and it's at a buck 38. and yet I have five different development deals in a 3 mile radius. I quite frankly, Chris, it's mind-boggling. I'm excited. Next week, Noah Star is going to make his debut on the show with us next Thursday at 1:00. Um, and we're going to talk about this a little bit because, you know, I I talked to some of the people that have been in this game for a long time. Obviously, my partner Barry Sherman, we're going to the 50th anniversary of SSA show. It will be his 28th SSA show that he's been to. 28th year of SSA shows, right? Even better than that, Mike Burnham, who I'm actually meeting with later this afternoon from Storage Mart, was at the very first SSA show. I talked to these people that have been in the industry for a very long time. And we talk about this this asset class and how cool people are and how nice they are. And one of the things Mike Burnham said to me many years ago, he was on the podcast and he said, "That I'm nice to people because it hurts my business if they do the wrong thing. I'm gonna give them good advice and I'm going to share every bit of knowledge I have because if they open the wrong store in the wrong place with the wrong unit mix, it has a negative effect on my asset." So, I don't know how much more strongly to say this to the people out there that are developing. Talk to the other people that are around. do your due diligence, call other developers, and if you look at a map and you see a bunch of new development in the pipeline, there's a reason that the markets that you showed that are having negative NOI growth are having NOI growth. Negative NOI growth. It's because of overdevelopment. It's because people are bringing facilities into that market where they don't need it. And you know how you know very quickly the prices that people are paying to rent their stuff will tell you almost immediately whether or not that market needs new storage or not. That's enough. I'm getting down off of my I'm getting down off of my pulpit now. I'm going to step back. Chris Berg: But I mean it makes it simp, you know, a basic game. We've talked about it many times here before. Samzel, supply and demand. If you can just sort of follow that. And I and I want to make one quick anecdote to help people understand. I think one of the things that helped, you know, Brett Henry and I build a relationship is that we were going to build an asset in El Grove. Um, we ended up saying no because he had a giant store opening just across the literally across the street of like 250,000 square feet. I saw him in Napa and like, "Hey, man, great asset and I'll grow. We were going to build right next door." We said, "No, we don't have that one. I have that fight." And you could tell he's just kind of like, "Oh, okay. Thank you." And I I think that was sort of an endearing moment where he was like, "All right, this guy's okay. I can talk to this guy." Okay. because um so I think it's important that you just understand you got to really have a long-term game just like Joe Margola said a few moments ago uh in this space. So uh I want to give you the last word that anything else you want to add or share? Thaddius Campbell: I'm going to just beat this dead horse. I was looking at a site in New Jersey and a buddy of mine is developing another site about 6 miles away. The last thing this area needs is more storage. And the guy trying to sell me the site when I tell him that I'm not going to build it because my friend's building the facility down the road says, "Well, what price would we have to sell it to you at to make it worth your time?" And I'm like, "No, you're just not understanding what I'm saying here, right?" Like, I'm not building this site that the area just doesn't need more storage. There's already more supply on the way. You know, I I I I've said it enough, but I'll I'll say it again. Just be responsible in your development. Just because there's hundreds of thousands of dollars of fees that you can gain, just because there's potential for profit, doesn't mean it's the right thing to do. Chris Berg: Amen. Let's just jump one last minute here into the extra space, Colin, to see if there's anything interesting that we may want to expand upon. Citi Analyst [attribution inferred]: So, there's been a good amount of volatility in the stock recently. Can you just remind us how you look at buybacks versus your cost of capital and other uses of capital today? I think you bought a small amount of stock around 126 earlier this year, but uh the opportunity went away quickly. Extra Space Storage executive [attribution inferred]: Yeah, that was a an interesting day where we had about a 2-hour window before uh the president announced a pause on tariffs and we got out of our price band. So, the board of directors uh you know approves a certain band of of pricing in which we'll use use capital to repurchase our stock. And as you point out, it's a capital allocation decision and we've done it in the past and we're certainly not afraid to do it in the future. Citi Analyst [attribution inferred]: Right. And then you mentioned the impact of um AI on search and how maybe that's not going to make sort of these Google search terms is a is a good proxy for demand. I guess do you have a sense for what percentage of your customers are using chat GPT or AI to find the best storage solution um versus like say this time last year or a couple years ago? And do you think that makes customers a bit more sensitive on the front end to pricing just because they can sort of quickly analyze um you know the cheapest option within a within a certain area? Joe Margolis — Extra Space Storage: Yeah, I I'm going to apologize. I don't have a lot of good answers about this. This is changing so quickly and we have a lot of people who are a lot smarter than me spending a lot of time trying to figure it out. I mean, in the beginning of the year, 15% of searches came up with a a U AIO at the beginning of it and now that's over 65% I think in 6 or 7 months. Uh so we're we're trying to understand and um take advantage of the changes that are going on in the search landscape, but I do have confidence in our our team and our ability to be out in front in this. Extra Space Storage executive [attribution inferred]: Eric, one piece of color that I would add is while it does definitely create some noise in the data in terms of searches, one thing that we've noticed is that a lot of the types of inquiries customers are putting into um Chad GBT and other AI models are moreformational in nature. So if they were wondering what size of a unit to rent or the benefits of climate controlled versus not, etc., That's a good place to get those common answers, but customers that have the intent to transact still are tending to click through and go and are going to websites. So, we've seen while it uh maybe gets a little murkier on just a total traffic from a traffic standpoint, the conversion rates for those customers that are clicking to the website have improved and increased. So, uh, again, evolving very quickly like Joe mentioned. Um, but something that we're tracking very closely. Citi Analyst [attribution inferred]: Got it. That's helpful. Thank you, Chris Berg: dude. How about our guy from City dropping a couple of good questions right there, man? You going to be buying some stock? Thaddius Campbell: Listen, I thought that was a very fitting way to end the show today with the AI storage guy at my side with the question about AI. Fascinating statistic, right? And Joe dropped it quickly. 15% of searches coming from AIdriven search engines at the beginning of the year, 60% in 6 months. Talk about the speed of change that we're seeing in our world. It's it's, you know, it's going to be interesting to see and I I certainly agree with Joe. If I'm going to trust somebody on the technology front, Extra Space has proven to be very strong there. Chris Berg: Well, I think you said, "Hey, we've got a higher conversion rate." And one of my great marketing mentors always said, "Eu educates the market, dominates the market." And so this AI to Google thing, I mean, I think Google's they've got so much data. They potentially could be well positioned to, you know, go and speaking of stock, watch their stock do something, again, not investment advice, but Open AI just did such a great job of being that first in your mind, right? Like I'm going to take that position in your brain. And so that dynamic when you think AI search, you think chat GPT, when you think of, you know, search and AI, like it that that's just going to completely change the game of how things are going to be done. And so that dynamic to me is going to be a really really interesting one because right now AI is not monetiz excuse me chat GTP is not monetizing that. So if I can go there do get the information I want and then just click on a button and go right to the website I think that dynamic is going to change pretty dramatically. Thaddius Campbell: Yeah agree wholeheartedly. One way or the other it's going to be absolutely fascinating to watch. Chris as always thank you. I just want to give a plug again. Our data partner Track IQ Noah Star is going to be appearing with us once a month. next week, Thursday, 1:00 p.m. Eastern, 10:00 a.m. Pacific, will be his first journey into the Self Storage Report World. Very excited about that. The following time he's going to come on is actually going to be live at the Self Storage Association fall event in Las Vegas. So, that's going to be a lot of fun. Chris Berg and I will be live from the show floor in SSA in Las Vegas. still working out a bit little bit of logistics about that, but we'll we'll get that all figured out in another It's hard to believe it's only five weeks away, but Chris, as always, incredible preparation. Thanks for bringing so much data and so much knowledge to the show, Chris Berg: dude. You too. And can you maybe whisper in Mike's ear and say, "Hey, you want to join us on the Self Storage Report and see what he says?" Thaddius Campbell: Who's that? Mike Burnham. Chris Berg: Yeah, he would be fantastic. Thaddius Campbell: Absolutely. I will. By the way, I don't mean to d name drop, but I got two meetings this afternoon. One's with Mike Burnham, the other one's with Brett Henry. So, I thought that was kind of funny that you brought him up, Chris Berg: dude. Tell Brad I say, "Wait, what's up?" And everyone, thank you for joining us here. Again, this is a self storage report. Please share this with colleagues, family, friends. We'll see you back here next Thursday. God bless and have a great day. — END OF TRANSCRIPT —