REIT Earnings Under the Microscope: All Top 4 Self-Storage REITs Report Negative NOI!

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: REIT Earnings Under the Microscope: All Top 4 Self-Storage REITs Report Negative NOI! Guest: Noah Starr — CEO, TractIQ Host: Chris Berg — Abernathey Development Recorded: August 9, 2025 Video: https://www.youtube.com/watch?v=CrxYt97ypTU Key topics: All 4 major self-storage REITs post negative same-store NOI growth in Q2 2025, first since the GFC; Extra Space -3% and CubeSmart -1.1%; REIT occupancy down from ~96% in Q2 2021 to ~91% in 2025; achieved rents fall below $21 from a $22 peak while street rents bottom in Q4 2024; Public Storage's $1.1B development and acquisition pipeline with 12-13 handle yields on cost from 2020 vintage deals; 1,370 new developments in 2023 and the 18-36 month development lag; labor costs rising from $40,000 to $60,000-75,000 salaries; ECRI strategy and the transparency gap between street, web and achieved rates; AI in REIT marketing and call centers; REIT stock buybacks below the 200-day moving average; Los Angeles County softening on self-storage entitlements as office weakens; Mike Schwartz of SmartStop and Nick Walker of CBRE at CSSA Newport; SSA 50th anniversary show in 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. Want to kick things off today with a shocking stat. Four of the top self-storage REITs have announced their earnings and all four of them for Q2 2025 have shared with us they've had negative negative NOI. First time that's really happened since the GFC. So what does that mean for you? I don't really know. That's why we have a special guest we're going to bring in later in the show. He's going to break it all down for you and tell you exactly why this is important to you. I'm your host Chris Berg here, otherwise known as the AI storage guy. Uh, plus doing some land acquisition for Abernathy Development. Joining me today, my co-host, the one and only Rad Fat, Thaddius Campbell with S3 Partners, host of some other great podcasts as well. Thaddius, great to see you. Just your first initial take on negative NOI from all these major REITs. Thaddius Campbell: Yeah, I think we've been hearing a lot about insurance and property tax pressure and you know, as much as negative um rates has been a big issue, I think when you see across the board all the REITs having negative NOI growth, it's a function of expense increases, maybe even more so than it is rate decreases. So, really kind of a alarming. Um, but we'll we'll dig into that. We brought in some brain power today, so excited. Chris Berg: Yeah. Yeah, and I think what's interesting is is I had a chance to listen to the NSA and CubeSmart earnings calls, the other ones as well, but those are the most recent ones. So, I just want to share with everyone kind of my top 3 takeaways and we'll bring in our special guests and really dive into what these earnings are talking about. Oh, by the way, Smart Stop, the other self-storage is announcing probably right now their earnings. So, we may dive into their phone call uh their earnings call live as well. So, um basically from NSA and CubeSmart, the three things that really jumped out to me was one is demand is steady. I think we've seen that many of us have talked about at least Nick Walker from CBRE which does an amazing job by the way done over a billion dollars this year with his team. So kudos to Nick and his team. Um but he's like look I think October 2024 is probably the bottom of the rental rate situation. We sort of seen that for the most part you know nice little uptick in the beginning of 2025. So that was the positive piece from these calls. The other thing that was very fascinating to me is each CEO was asked about capital allocation and what really jumped out none of these guys are really doing at least from NSA and CubeSmart are doing much development. Now public storage man I don't know if you dived into their development numbers but you got some 2020 developments with a 12 handle on their yield on cost which is just phenomenal and incredible like how they're doing that I don't know but kudos to them. But my point being is they're like look we we're not finding any acquisition deals that really pencil for us right now. So, couple things that came up. One, were they going to reinvest in our current assets and just try to improve those? Obviously, increase the NOI. But the other question that kept coming up, and no one really give you a price point, but they're like, if you look at any of the self-storage REITs right now, stocks are drowned, you know, well below the 200 day moving average. They're like, there's a strong possibility if it continues to go that way, we feel like we might have the best use of our capital to go and do some stock buyback. So, we'll see obviously I'm presuming in the Q3 calls if that ends up taking place. But just something to keep your eye on or maybe you'll hear about some stock bite action from some of the major REITs as well. And then number 3 that really jumped out on these most recent calls, AI. And since I'm your AI storage guy, it was fascinating to hear the conversations around uh the CEOs and people being asked about, hey, where do you see AI coming in from a marketing standpoint? Where do you see AI coming in from an operations standpoint? Because many people are concerned Google search may not be the Google search of yesterday or dare I say your grandpa's Google search because of what's happening with ChatGPT and some of the other AI models that are sucking up a lot more search right now. So what does that mean for self storage number one, but of course you've also got the operations piece where people are implementing AI phone phone bank systems, right? And AI centers where, hey, we're going to take these calls with with AI, hopefully make this much more seamless for some people and and see where that plays out. So just something you want to keep your pulse on, I think to put a button on that is that both calls basically said, look, we're so early. We don't really know where this whole AI thing is going to go. We just know that we need to be implementing to improve efficiencies and ideally hopefully lower costs for our customer. So thoughts, comments on that, Rad? Thaddius Campbell: Yeah, by the way, I love that you've you've given me this moniker and and scared that it's going to stick. Um, as much as I love your AI storage guy, we got to come up with something beyond rad for me. I I feel pressured to get something cool like yours. No. Okay, immediate thoughts. Um, not even just AI, but technology in general, right? We've seen a wave in the industry of young, incredible people coming in and and bringing technology platforms. We're going to invite one of those people to come join us very soon. And not surprisingly, he was talking about AI before we got on in in our pre-show um talk. Um you know, but it's not just AI. I think of James Hatfield and live switch and the ability to go live with someone video conferencing at the click of a text, right? Um you mentioned the the call centers. One of the things that jumped out at me as we talked about pressures on why did all four REITs see negative NOI growth. One of the things that's rising is labor costs, right? You used to underwrite a self-storage facility to maybe a 40,000 yearly salary. That's up to 60 75,000 in some markets. Now, how is AI going to affect that? We've been talking a lot over the last few weeks about software engineers. I just saw a 25% unemployment right now among software engineers. I saw that statistic somewhere this morning. Are we going to start to see AI and technology really changing the game because it has to in self storage to recapture some of that net negative NOI loss that we've seen? Those are things I'm going be keeping an eye on as we go through the next couple years. Chris Berg: Great point. One last comment, then we'll bring in our special guest, but obviously one of the CEOs even said, "Hey, look, it used to take maybe 3 people for us to run a site. Now we're down to 1 thanks to our tech stack." So, watch for improvements there. And I think might be interesting conversation for our special guest today. He's the CEO of TractIQ. He's our data partner as well. Uh Noah Starr. And Noah, it's great to have you on the show. We can bring Noah here. Thank you very much. We've got him now. So, great to have you with us, sir. Um you've got an amazing kind of deck you're going to share with some people, but you know, based on what my initial thoughts are that I shared about these earnings calls, uh what say you, my friend? Noah Starr: Well, first, it's wonderful to be here and I'm thrilled to officially partner with you guys. You guys are 2 of the leading thought leaders in the space and just an absolute joy to work with. So I'm very very grateful to work together and excited to see you both in person next month. There's a lot to unpack there. I think we can save the REITs for the presentation and could certainly talk about how technology and AI is changing self-storage. I think my quick takeaway is that this is going to be really positive for consumers as well. I think we can obviously focus about how the industry is going to leverage this technology to create a better more efficient solution for customers but ultimately I think this results in customers getting a better experience potentially paying a little bit less and we can dive into that and I'm excited to Chris Berg: or let's jump into this um this deck that you put together for the show which is I was like wow man thank you very much like there you go. So if if you don't mind then um talk walk us through what you have here and what you want the audience to get out of it. Noah Starr: Absolutely. And I think this is my institutional background showing but I I think that a deck or a slide just helps us orient the conversation. So if you want to go to the next slide I think what we have in here is first an overview of the REITs. Uh we've had earnings calls come out and Smart Stop is on the phone as we speak. So curious to get the data from from them but put together some an overview here of the REITs which we'll talk about and then you know there's real conversations from the field that I've had. I know the two of you guys have had so want to share some insights from what I'm hearing on the ground and then some other tips what you should be focused on things like that as it relates to this presentation. There's some numbers on the screen, but I thought about bucketing the REIT earnings in 5 different buckets here. Um, so you have occupancy, you have same store NOI growth or declines, which you mentioned, you know, first time since the GFC where all of them are are negative NOI growth, new supply pressure, and then at the bottom here, we have cap rates, acquisitions, and then other growth avenues. So that's how I've thought about it and definitely want you guys to chime in here. But you know the first 2 here performance you know you have occupancy trends all of the REITs were negative in terms of Q2 2025 year-over-year occupancy that obviously you know occupancy in a vacuum isn't the only indication you should look at but the biggest one potentially to look at is same store NOI growth or decline and you know here extra space minus 3% CubeSmart minus 1.1 and down the line. You know what does that tell you? If you just standardize all the data and you look at all this bucket of stores today, you compare them to last year on average the REITs are performing worse. And you know, there's a lot of factors as it relates to rates and occupancy and expense increases, but obviously not a very encouraging sign to see things like that. And there's some signs of optimism that we'll talk about, but curious on on your take here too. Chris Berg: I was going to say now I want to get your take on this and that if you want to jump in because you know Thad and I talk a lot about this idea of the real estate cycle and so for us to say hey this is the first time that they've had negative NOI like this since the GFC. I know you're not, you know, Nostradamus and yet what do you see kind of over the next 24 to maybe 48 months in the industry because I get the sense that there's this bottled up demand and if there that demand opens up this industry is going to actually bode really really well over the next 24 to 48 months. But maybe I'm wrong. What what what's your take Noah Starr: if that was was that for me or that? Chris Berg: Yeah, that's for you, Noah. Noah Starr: Oh, okay. So, Thaddius Campbell: I'm an innocent bystander. You're the guest of honor, man. We're picking your brain here today. I can talk anytime. Noah Starr: I I love it. I love it. So, I think you have a lot of factors and we've talked about this as an industry, I think, for a while, but you have a couple of things going against us here. Number one, in terms of new supply pressure, there's a huge development lag in self-storage, right? So if you think about back in 2022, 2023, if you wanted to actually develop from the ground up a new storage facility, it takes, you know, 18 to 36 months to really open your doors and start the lease up process. So you know that obviously you have a lot of new supply that's entered into the space. The positive news is, you know, new supply starts seem to be t trending down, but I think we're dealing from the ramifications here of a development lag. Coupled with the theme that I'll hit on constantly is a lack of transparency in the industry. We've dealt with a ton of challenges as it relates to what rental rates customers are paying, whether it's the street rate or the online rate or the achieve rate. What are you paying for? How long are you paying? I think that causes a huge breakdown in you know trust with the customer and also no one knows what rates to set and you know so those few things have really factored into um and when you combine that with in an interest rate environment that's significantly higher than it was a handful of years ago. Mortgage rates are drastically elevated. You guys talk a lot and share a lot about how the housing market has slowed down significantly um which has also lowered demand in a meaningful way. So all of those factors to me have have culminated into you know this earnings profile for Q2. Thaddius Campbell: That yeah I'm interested to ask a quick a couple questions that come out of this. I I guess I would ask your your opinion here. It's it's like everything going against storage at one time, right? We we saw rate reductions as the COVID boom came started to end. We saw occupancy dip. We saw this discounting strategy and I love the way you put that lack of transparency maybe in terms of how that was implemented. Um but they that you know the REITs felt like they had to drop prices significantly. In some places it was mindboggling. I mean it was 80 90% drop in web rates in different markets um to to drive that occupancy back up. We're seeing increased uh property taxes across the country. In increased insurance costs, cost of construction has gone up. So, new developments are costing more. It seems like every single factor that could go against storage in the last couple years has. And so, I guess in that context, are we surprised? Maybe it's not worse what we're seeing in terms of the earnings that the REITs are showing. Noah Starr: Yeah. So, surprised. I don't know about surprised but again this is an NOI comparison year-over-year right so to your point right we have and I wish we had a chart I do in some other slides but a chart of historic NOI for each of the REITs but you know coming out of the COVID era right NOI per store you know shot up through the roof right and now we're kind of on that backside here where we've had you know you compare us in 2025 to last year right there's a decline to me you know trends these things take a long time to actually not just be show up shown up in the data but you know these cycles you know if if we knew like two years ago we knew that there was pressure facing storage industry from interest rates the housing market's been stuck many Americans are stuck with a really low mortgage and it's really too expensive to move into a house that might not be better than the one they currently have right those problems have existed for the last number of years and now you know there's only so many things you can do to really drive value in that kind of environment. And I think we're seeing the ramifications of all of those factors playing into the data today. Chris Berg: J, I just want to share this with you. I brought this up um from an Advocate thing, but just to give you an idea of like year-over-year, you know, what's happening and and like you just mentioned though, you look back on what was going on during COVID and you've got, you know, 105% year-over-year as far as the pricing, you know, all the way dramatically down just shocking numbers. I think it speaks to what you're saying where maybe we shouldn't be surprised. But I guess maybe a question I would have for you is when do we kind of revert back to the mean? you know, when do things begin to normalize or are we in that process right now? Noah Starr: So, I think it's I was an economics major and I love Warren Buffett and Charlie Munger and I think it's it's really hard to predict the future and um so I I try not to do that because my predictions of the future are not necessarily more valuable than than anyone else's. I would say we have a lot of factors facing the industry and it takes quarters potentially years to really rightsize yourself and you know to me also you think of the boom years in COVID and how great that was for the industry for it to go the other way it'll take a couple of months and a couple of quarters to really see the light at the end of the tunnel and we're seeing those factors today right whether it's rental rates changing year-over-year or new development starts You know, we can talk about public storage in a second, right? But the industry is responding to all of these conditions. Unfortunately, you have a development lag and an industry lag where this quarterly data, it could take a long period of time for things to change in a meaningful way. Thaddius Campbell: I love that point you make, right? We we had 1,370 new developments in 2023. Those are a function of excitement in in 2019 2020 developers looking to build those facilities right 2024 1 and something still reflecting that excitement coming out of the COVID boom even though it was hard to get developments through this year seeing significantly less development in the pipeline. a response to two plus years ago when interest rate three years ago now interest rate hike and and maybe some some you know starting to see the foreshadowing of over supply. I love that point about how it's not like a it's not a one-month change in and how we outlook and and you know seeing different trends. It can take a couple 2, 3 years for those to play out over time. Noah Starr: Yep. And I I have a chart. I wasn't going to share this with you guys, but I would like to. Chris Berg [attribution inferred]: Let's go. Noah Starr: So, because you brought up some macro data, so I'm like, all right, let me let me let me dive in here. So, it's not going to be as pretty. And maybe Eric, you're able to move to my screen. Not sure if you are. Awesome. Okay. So, we're the official data provider for the Almanac. And we we've got a lot of data assembled for next year's version, which I think is going to be the best ever. What we're looking at here in this chart here is the historical same store REIT occupancy per quarter per year. Chris Berg [attribution inferred]: Wow. Noah Starr: Okay. So, just to guide you guys through it, this red this red bar or this red line here is 2021's average REIT occupancy by quarter, right? And then you can see each color breakdown is a different year. And if we we didn't put Q2's data in just yet because it just came out, but you can see 2024's occupancy is at the very bottom when you compare it to other years. Thaddius Campbell [attribution inferred]: Yeah. Noah Starr: And you know, this is a really good indication of when you when we talk about the COVID boom years, right? occupancy in Q2 in 2021 for the REITs 90 what is this 96 or so percent give or take last year it was 92% give or take and this year down to the 91ish percent right and you can see Q1 in 2025 was already lower than 2024 so just contextualizing you know what we're looking at here Chris Berg: Noah thank you for sharing this with us because I don't know if you saw last week's show but um Fat and I talked about you know when I at CSSA in Newport, a couple of really prominent brokers are like, "This is the worst it's been in 20 years." They were like, "This is just painful." And then for you to show the occupancy that like that, it just jump at least it jumps off the page to me like, "Okay, no wonder things are are tough right now. There's just no demand." Is that is that what you assess from that graph or lack of I should say not as Thaddius Campbell: if I can contribute a little bit. I I think one of the things that we have to talk about is 2700 or 2600 new facilities that came online in 2023 2024 right and so how is that affecting overall occupancy numbers I guess I'll ask you Noah is that is that uh factored only facilities that are already economically stabilized or are they including the data from across platform Noah Starr: each REIT does it slightly differently we I think extra they you know one of them includes managed stores the other doesn't so I think it depends and I'd have I'd want to get back to you before commenting but yeah if I can share this other slide here that again I was not prepared to share Chris Berg [attribution inferred]: keep them coming let's go Noah Starr: but you know why not when in Rome as they say so as you probably know we do quarterly REIT reports and we so we summarize all this and it's not done because smart stop is still reporting right we're we're we're taking some time so I'll show you this other chart here. And basically this is a historic snapshot of REIT street rents in blue compared to REIT achieve rents since 2020. And again to drive the point home in 2021 2022, you can see how high the street rate was. And there was a positive delta between the street rate and the achieve rate. And we talk about transparency, right? and and what demand looks like in an era where demand has fallen because of home sales, because of new development activity hitting the market, you know, things like that. You see that the street rate has dropped in a very meaningful way. It even bottomed out here in Q4 of last year. Um, and amazingly, it's it's almost the other way to look at this, and you said Chris, I think you said it's amazing. It's not as bad as it could have been, but think about how long they were able to keep this achieve rate kind of constant while street rates have fallen so much. And you know, one of the ways they've been able to do that is by being pretty aggressive on EC or existing customer rent increases. But it's some point that breaks down. And you can see that here where yeah, it took a little bit of time for the street rate or for the achieve rate here to really start falling. But now you can see the achieve rate here is now below $21 down from a peak of $22 give or take. Um while the street rate has been, you know, inverted in a sense. It's Chris Berg: really good. That was Thaddius that said that. And Thaddius, I think kudos to you as well talking about the supply. I mean that is just it's exactly what Mike Schwartz from from Smart Stop said in Newport. was like, "Hey guys, you can talk about ECRIs all you want, but we sort of killed the golden goose and we just threw a bunch of supply in, you know, random cities." So, Thaddius Campbell: I'm I'm interested in as I see all this data, something that comes to my mind, you know, you're giving that chart going back to earnings reports and able to say achieve rates. The challenge as a developer sometimes is we don't always know what the achieve rate is now, right? We we can go back a quarter and look at earnings calls and and discover that. But I think, you know, one of the things we've seen over the last few years is the the massive increase in the speed of storage going into a small number of people's hands, right? It's it's not no longer much of a mom-and-pop operation. The REITs are controlling a bigger percentage of it. A few really big private equity firms, I just saw top 50 operators and the top 10 or 15 are just massive. Now, the access to data, right? Going back to our conversation earlier about AI and what AI is going to do, we're really seeing how even though the REITs are facing some challenges, the massive amount of data they're able to collect because of how many stores they have around the country is only making it easier for them to make decisions that someone that's smaller that doesn't have access to that data as quickly. Listen, when when street rates were 25 30% above achieve rates, me as a at the time working for a small developer just getting started in the industry, we don't know how to determine, hey, where where should we underwrite this deal? Whereas, if you're public or you're extra space, they know the numbers exactly and and able to get a much clearer picture of what something's going to look like. I think in times like this where it's very challenging that G gives them a massive advantage over other people in the space. Noah Starr: Yeah. And you think of the tone in the CEO comments from Extra Cube and Public. Public was the most aggressive and bullish on storage and their opportunity set probably more than the others. And I think that's exemplified through the fact that they have over $1.1 billion in new development and acquisitions, which is an enormous amount when you think of just developments from that perspective. You know, we we uh have a great relationship with them and their clients of of ours. And you know, we're proud to to work together with them. They're really really smart group across the board. But no doubt there's been a a historic advantage that the REITs have over the rest of the industry. And you know, one of our company missions is to, you know, democratize data and make it more transparent so that everyone is able to, you know, make really smart decisions and stay away from bad deals. But absolutely, you know, there's a lot of competitive advantages that groups like them have to make sure not just that the site is good. Um, a lot of people can do, you know, a site analysis and say, you know, this is a great site. There's a ton of incoming demand. There's a lot of population growth, but what is the true expense load? What are what's the true lease up schedule? You know, I can if I can look at 50 of my nearby projects and see exactly how we've done in this market, that gives you such a different advantage than kind of seeing what the street rate is and hoping. Chris Berg: So, well said. I want to sort of put a button on this guys and move on to another topic. But I I would just want to throw this to you know and then Danny get your answer. I've got my own perspective on it. But I think it's important for just sort of the lay person watching this like why should they care? Why why do the REIT earnings calls the REIT earnings matter to somebody watching the show? Noah Starr: It's a great question and I'll start with the endgame. Who are you going to sell your property to? Right. The ultimate exit opportunity in self-storage are the biggest groups are the REITs. And to me, there's a trickle down effect where if you were a small to midsize investment company, right, and you're hoping for an exit to someone larger, right, it starts at the REITs, right? So if they're cutting acquisition volume, if they're increasing the untended yield on cost that they're looking for, if they're staying away from certain markets, that has a trickle down effect where then that group below their exit opportunity looks a little bit different. So that's a really simple way where if you're in the investment world in self-storage, you have to see and understand what the REITs are doing, not just for your own underwriting, but for your eventual exit opportunity. Chris Berg: Thaddius, it was so great to hear an institutional guy say it that way because all great investors and there's a great books that start with the end in mind. They're always saying like, okay, what's my exit and then I'll build back from there if this is going to be a buy or not. So, that was brilliant and thank you. I it's I have a different perspective which I'll get to in a minute, but that is what's yours. Thaddius Campbell: I listen I I I think that Noah kind of nailed it is is that's the the headwinds of the industry, right? we don't necessarily get to get into the head of the Merit Hill and the Primes and the other really large Cityline capital really large um shameless plug by the way Alex Burnham from Storage Mart's going to be on my podcast next week so I'll do a little shameless plug there but we don't get to see those folks earnings reports so all we get is the big REITs as the driver of what's happening so while there may be a handful of other private equity groups that might compete on an exit I I think Noah's point is nobody underwrites a storage facility without at least having an idea of what a 5-year exit might look like. Even if you're planning on holding it forever, markets shift and things happen and you don't always get to have that long-term hold that you planned as a developer. A lot of developers are merchant developers and they develop it to sell. They're not looking to hold on to the thing forever. And so I I think his point is so well spoken that you need to know you need to know what's going on with the people who are likely to be your eventual buyer if that's what you're doing. Chris Berg: Completely agree. I just want to share a graphic here because I think there's so many aspects of this that's really important and there's people that I talked to like you know what what am I going to really watch learn from the earnings calls and like you guys alluded to a moment ago. I just think they've got so much data that just to look and see hey what's going on in different markets. uh they break it down like Arman does a great job on LinkedIn you know they break it down by each different market what the NOI is what's happening I think this is one that obviously really jumped out to our team where we looked at okay uh we we started the top side of the show saying hey public they love I mean they love the return on capital when it comes to development deals many of the other REITs aren't doing as much development as public but they are and I mean this makes it abundantly clear if we find a deal where it's a 7.5, 8 handle on a yield on cost, we're probably going to do that deal. You can see here public's got deals from 2020 with a 12 a 12 and a 13 handle on those things. So, um, which I just think is phenomenal. Thaddius Campbell: I just want to give some context to somebody who maybe doesn't understand yield on cost, which I didn't until very recently. An 8 or a 9 is a deal that someone's going to want to go do. So when you all of a sudden are like almost 50% higher on yield on cost than your baseline go deal, that is a big big deal. Chris Berg: Thank you. And no, anyone since you're since you're the institutional guy, anything you want to add to this? Noah Starr: Yeah, I'll just break it down. So when you talk about yield on cost, right, there's there's a there's a stabilized yield on cost and then there's a trended or untrended yield on cost. Yield on cost is basically NOI divided by your cost basis. So what is the yield that that project is going to deliver to you assuming you lease up and what Chris was showing on the screen here is public is stabilizing and developing these facilities and they're earning 11 12% on their money which is amazing in the context of exiting at a 6 or a 6.5 cap rate right the development margin like their margin or their cost basis on what the actual value of that project is is enormous and you know I work with dozens and dozens of great developers uh you know Thaddius of course and Chris being among the best trying to achieve a 12 cap on your development project is insane and would be a complete home run so it's a real testament to the competitive advantages they have their site selection methodology and really their institutional knowledge Chris Berg: when you bring up a really good point or you talked about hey I start with the exit fine. I think one thing that's important for us to note is maybe once in a while, but public and extra don't really do exits, right? Like they buy and hold and hold and hold and hold and hold. So, it's it's obviously a much different dynamic as well. But one other note just as far as why I would say, hey, these earnings are important to take a peek at listen to the calls because you do get some really intriguing insight, but also here it shows you what do they, you know, what's the cost per square foot for a deal in Cali that they did? What's the cost in in Hawaii? It just it gives you an idea to go, okay, man, am I on the right track? Here are some of my numbers adding up and um I think it's just really really valuable information to to know. So, I want to move on to another topic. Before we do, want to invite everybody to come uh hang out with Thaddius and I at the TractIQ booth coming up here in September. We're going to be at the SSA. It's the 50th year. Big event coming up. And and Noah, thank you so much for allowing us to be at your booth and host the show there. come on by the TractIQ booth, say hello and join us here on the Self Storage Report and we'll have some fun hanging out in Vegas. So, want to move on. Noah, I know also we want to discuss, hey, what what are you hearing on the ground? I think one of the real powerful things and again, thank you for being a partner on the show is you're talking to so many different people and at least I believe that's just one of the greatest things you can bring to this show is, hey, what are you hearing from boots on the ground? I'd love to hear from you. What are some anecdotes that really stand out? do you think um our audience should know? Noah Starr: Sure. So, you know, I think I was talking to one of the the largest self-storage syndicators in the country and, you know, we were talking about underwriting and what he said because I asked how hard is it to raise capital right now for self-storage and he said unless we can show clear upside potential, raising capital is nearly impossible in this environment. And what is upside potential? Right? I think historically right it would be somewhat simple to say okay I'm looking at this facility the rents are x% below market right now when I ask people is what's a market rent what is the market are we talking street we talking web we talking achieved who knows right and so when we think of upside it has to be meaningful upside meaning you're going to make improvements meaning you're going to expand the property meaning you're going to add real real change, whether it's institutionalizing the product through a new website and a new management system and some new services, you know, insurance, things like that. There have to be real meaningful additions to the project where you're going to drive value, not just my comp says that I'm below market, so we're going to increase it. Um, you know, that was that that's one big one. And and the second one being um you know we have some first-time buyers here and then some developers but it seems to me that people are getting smarter about where development sites are popping up. Um I think we have something to do with that of course but people are doing their due diligence. They're they're talking to the city. I think there's been a very clear positive education of to developers and first-time buyers around the importance of truly understanding are you building or buying in an underserved market or not? And if you're not in an underserved market, this is not the time to go against the data and just build and hope for the best. You really need to be super targeted and super focused so that you're protecting your own capital, your investor's capital, and the rest of the industry's capital. Chris Berg: Amen. You guys ready for this? What I'm hearing on the ground? This this one was very intriguing to me. So, spoke to a woman this week. There's a lot of entitlements within um Los Angeles County. And as everyone I mean literally guys when I was at my first ISS was coming from North Dakota out to California and something. Yeah, we're going to go out and build in California had people literally laugh in my face. You're going to do what? Like that place is nuts. What are you thinking? Right. So talking to this woman today who actually just got awarded like one of the 5th best construction projects in LA County for a self storage project. But she said, "Chris, what's happening right now, what I'm finding in LA," which shocked me, is they're actually becoming like more open and softer to self-storage projects because office is so bad. So many people are working from home and the city's finally starting to realize like these people need a place to put their stuff and some of the storage stuff doesn't look as bad as it used to. And so if we can actually help keep multifamily looking good and not shabby and help these guys, you know, have a good safe place to put things in a self-storage project. Yeah, we'll get that deal done. She got a deal done over like a subway in LA for extra space that was down in Korea Town. That was a beautiful, beautiful site. So, I say that because some of the sand or soil is softening in regards to um self storage. And as I'm sure you guys know, most cities would kind of laugh at your face when you ask them about self storage in the past. Noah Starr: Yeah, I mean that's an interesting point. And I would I would say I would chime in and say we are not we are one part of the story in terms of society in terms of real estate development. Every other asset class is facing challenges especially office of course. So you know from a city's perspective right as it relates to tax revenue and future growth in the area you know it's it's not surprising to see where if you know who's going to develop an office project today. it's going to be really it's going to be way harder to do that than self-storage. Uh so we're we're blessed to be in a great industry where there's still ample opportunity to find a great location, but in that sense, cities still need tax revenue. They still need growth and people need to store their stuff. Uh so, you know, not surprising to hear that some cities are are wanting more projects and more investment into their communities. Chris Berg: Tad, how about you thoughts on that or your thoughts on the ground? What are you hearing? Thaddius Campbell: We've been talking about this for the last, you know, 6, 7 weeks, like at what point does the anti-development trend create problems in a community where you we we don't tend to do things in moderation in the United States, right? We tend to swing from one extreme to the other. And I think what you're seeing in LA is a perfect example of that. A place where for literally 50 years, it's been extremely My my uncle was a a GC in in LA in the 70s and 80s. you know, it's been an uphill battle for a long time to do business there. Um, and you're finally starting to see the results of it and and start to see the swing back the other way where you just have people understanding that you can only make things difficult for so long and still need Look, look, the LA market's one of the most expensive places in the country to rent. To Noah's point earlier about how do we make things better for the consumer, well, what you've really done is you've driven prices through the roof by making it so difficult. So interesting to see that swing back in the other direction for sure. Chris Berg: Noah, man, you absolutely just crushed it today. So, thank you so much for joining us here if you don't mind sticking around. I wanted to uh just pop into the Smart Stop earnings call if it's still going and see if we can pick up any tidbits that we want to talk about. So, uh like we did last week, that is let's go live to the Smart Stop Self Storage Q2 2025 earnings call. Oh, and it's over. Thaddius Campbell [attribution inferred]: Oh, you didn't time it as well as last week. Noah Starr [attribution inferred]: What a bummer, man. Chris Berg [attribution inferred]: Didn't time it as well as last week. Thaddius Campbell [attribution inferred]: Thing. Chris Berg [attribution inferred]: That's all right. Shortstop kept it short and sweet. No pun intended. Chris Berg [attribution inferred]: So, we'll see what they had to say. Thaddius Campbell [attribution inferred]: Smart, not Shortstop. Chris Berg: Want to give you the last word. Anything else you want to uh add, talk about, my friend? it. Noah Starr: I I would just say you guys are doing an amazing job breaking this down for people and it's it's really awesome to watch you guys just enjoy doing this. Like this is so much fun and even though you know the data that we're looking at isn't the most positive thing in the world, uh I think that there's light at the end of the tunnel and and you guys are leading the charge in terms of helping educate and and bring a share this information. So I'm very excited to see you both next month and we're gonna have a blast. Chris Berg: Uh it just want to tell you know it means so much to both of us to have you join us as a partner to believe in what it is we're doing. Hey, I think this is our 10th show. So we're we're just getting out of the gate. We believe this is going to grow and become more and more influential because it's needed. People need to understand what's going on in the industry and there isn't an easy platform yet for people to do that. your mention of Modern Storage Media, they've been amazing, but it's a monthly magazine where it's hard to kind of get that up-to-date information in the same way. Um, so just means the world to us to have your support and I'm just blown away. Thaddius Campbell: You know, I've I've got to sit here to this is like my business development calls for S3 partners where I just set up the call and then I get to sit back and not say a whole lot. It's been awesome to hear the incredible information you guys are sharing. And you know, someone once said to be the dumbest person in the room and and I don't consider myself dumb in any way, shape, or form, don't get me wrong, but being around you two just raises my level and and just appreciate that. Really looking forward to having you on live from the floor of the SSA show. That's going to be a blast, Chris Berg: man. Fad, you're the one that was dropping gems today, but you're you're being humble. So, I I appreciate that. And and Noah, kudos and thank you. And kudos back to you from the standpoint you say, "Hey, we're educating like the data and the things you're doing to help guys make much better and safer decisions with their capital." I just think can't say thank you enough um on their behalf. So appreciate everything you're doing for the industry as well, my friend. Thaddius Campbell [attribution inferred]: 100%. Noah Starr: So grateful for you guys and I'm excited to keep this rolling. Chris Berg: Me too, man. Me too. So again, Noah Starr. No, if people want to reach out to you, what's the best way to go about doing that? Noah Starr: Yeah, you can find me on LinkedIn uh or you can send me an email to noah@tractiq.com. And yeah, would definitely love to meet as many folks as possible at SSA. We're doing something pretty special at our booth, not just the podcast with you guys, but a lot of other special surprises that I don't think's ever been done before at a SSA booth. So curious to to see your perspective and and the shock when you see what we've got planned. Chris Berg: You got like dunking booth or give us a hint or what are you what are you doing? Noah Starr: You're on the right track. You're on the right track is all I Chris Berg [attribution inferred]: get to dunk that is. Oh, this is going to be fantastic. Thaddius Campbell: That tease was even better than Chris's from the beginning of the show. Noah, that was very well done. Chris Berg: But if I get to dunk that is I there's going to be a lot of money made at your booth because that will Noah Starr [attribution inferred]: That's great. Noah Starr [attribution inferred]: That would be fantastic. Thaddius Campbell: It's perfect because I'm literally wearing my swimming trunks right now. So, if ever there was a time for me to get dunked, this is it. I The top fools you. I I'm going to the beach right after we're done. So, if you get a dunk, we do it now. Chris Berg: All right, Noah, thank you, man. Appreciate it. Keep up the great work and look forward to having you back on. We'll see you in September. Noah Starr: Likewise, guys. I appreciate you. Chris Berg: Thank you. Just want to remind everybody, come join us at the TractIQ booth uh September probably be 3rd or fourth. on the exact day, but you'll know uh as we're there for the self storage association 50th year event. Going to be very very special. A lot of great things happening. So, look forward to seeing you there. Also want to share with everybody uh be sure and join us on the commercial real estate report. I'll be putting this out soon. But Christine Millington's going to be joining me. Uh phenomenal underwriter at Crow Holdings does a great job with self storage. She was at the CSSA event in Newport. So, be just great to see her view on assets and what she does to underwrite them and obviously what Crow Holdings is looking for right now within the self-storage space. And then Thaddius, you got a great pod coming up as well. Thaddius Campbell: Yeah, next week the the second time. It's been a couple years since Alex Burnham joined me on the show, but the folks at Storage Mart, if you're not familiar with them, unbelievable operators, the largest privately held uh portfolio in the country, you know, bought Manhattan Mini Storage back in 2021, operating that really well-known brand name in New York City at a very high level. So excited to dig in with him. Much like today with Noah, Alex is someone who is incredibly tied into what's going on in the industry. um excited to get his take on on what's happening, especially coming off the backs of the the earnings calls that we've seen. They have a very interesting point. Many people may not know this, but the family, the Burnham family, Alex is the third generation. They were a REIT back in the 90s and were hostilely taken over by public storage. So, have a very interesting take. Interestingly enough, flipped the script and did a hostile takeover of a portfolio in Canada themselves, but have chosen to stay private ever since then. Gonna be very interesting to pick his brain about what's going on with the earnings calls and and get public storage's perspective on what's going on in the industry. Chris Berg: Very much. All right, Thaddius, great job today, man. You were dropping gems. I want to just give you a chance last word. Anything else you want to add or share? Thaddius Campbell: Uh, listen, I think that we'll get into this as we go forward, but all things being equal, I think what we've seen on the earnings calls is nowhere near as bad as it could have been. I I think I've I've been saying this for a while. Literally every box you could check to go against storage has gone against it for the last couple years and you're still seeing some some really positive things out of the REITs across the board. Chris Berg: I think my last note I want to share is I think it's really easy to get caught up in FOMO and you saw that during the COVID times. It's just it's just a natural proclivity for humans to get into FOMO, right? And so we all fall prey to that and then you see what happens during the COVID situation and storage. My point is I love how no and again institutional mind starts with hey what's my exit? Like where do I want to exit this thing at? Is it 20% IRR? Is it going to be a yield on cost? What is that going to be? start from that and then work your way back down because I think it's going to provide you an opportunity to create, you know, a margin of safety, make much better decisions around those investments and making sure, hey, I'm going to give myself the best opportunity to actually exit where I thought I was going to rather than, oh man, I got to do a capital call like what's going on, right? So, uh, all right, that's it for today on the self storage report. I'm Chris Berg. That is Thaddius Campbell. Thanks for joining us. Please share this with your colleagues. Have a blessed and wonderful day. Thaddius Campbell [attribution inferred]: Have a great one, everyone. — END OF TRANSCRIPT —