The MOST IMPORTANT info YOU need to know from the Q4 2025 Extra Space earnings call

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: The MOST IMPORTANT info YOU need to know from the Q4 2025 Extra Space earnings call Host: Chris Berg — Abernathey Development Recorded: February 27, 2026 Video: https://www.youtube.com/watch?v=lmobAfz4h1o Key topics: Extra Space Q4 2025 earnings call breakdown; 2026 same store revenue guidance of negative 0.5% to positive 1.5%; expense growth of 2% to 3.5%; health care costs replacing property taxes as the expense worry; $141 million share repurchase at an average price of around $129; the 200 day moving average crossover; California SB79 disclosure rules showing zero effect on leasing; job growth as the top demand driver; Sun Belt exposure flipping from headwind to tailwind; AI layoffs and recent college grad unemployment; Yardi as the supply data source and cancelled projects lingering on its list; dormant supply flagged by Andover at the New York SSA; 31% of leases from walk-ins; another 5% who reserve online but sign only in store; Extra Space on-site managers versus Public Storage leaning into data and AI 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: Today I'm going to share with you as an investor the most important things you need to know from the Q4 2025 Extra Space earnings call and what it means for the future of this industry. Welcome to the Self Storage Report. I'm your host Chris Berg, head of business development here at Abernathey Holdings. So let's jump right in. If you're a business person, as you know, if your expenses are rising faster than your revenues, typically not great news for your business, and that's essentially what the CFO of Extra Space, Jeff Norman, had to say during the call. Jeff Norman — Extra Space Storage (earnings call clip): In last night's earnings release, we provided our 2026 outlook. Our guidance reflects our current visibility and represents a slow and steady recovery in storage fundamentals. We have not assumed any specific catalysts that can materially accelerate storage demand or any material positive or negative changes in the economy. Specifically, we have not assumed a meaningful improvement in the housing market nor a change to current pricing restrictions in Los Angeles County. With these factors in mind, our 2026 same store revenue guidance is negative 0.5% to positive 1.5%. Our expense growth range is 2% to 3.5% reflecting discipline cost management while maintaining. Chris Berg: So there you go. You've got this lower uh obviously revenue marker with higher expenses. So really a surprise when you think about this industry. Now one of the things that's really driving expenses they talk about within the phone call is surprisingly enough they talked about property taxes beginning to lower for themselves. They've done a good job mitigating that cost but one of their bigger concerns is health care cost. So just something to keep your eye on. I've been hearing that from a lot of uh corporate executives as well that health care costs have been somewhat of a surprise to them. Um I'm going to share with you here real quickly the stock chart for Extra Space and then I'm going to play a clip from CEO Joe Margolis. It was a while back uh we were talking about what's happening within the REITs and their stocks. And you know, you can see here, this is a five-year chart, but uh it was pretty obvious to me because when you're a CEO of a REIT, you know, you get paid to allocate capital effectively to maximize that, you know, return on your capital. And there was a point where I was like, look, at some point it's going to make sense for Extra Space to buy back some stock. Well, they recently announced that uh in this earnings call. Here's what CEO Joe Margolis had to say. And just ask you to pay attention to the price that he talks about here. And I'll explain why in a moment. Joe Margolis — Extra Space Storage (earnings call clip): We took advantage of an opportunity to repurchase approximately $141 million of our common shares at an average price of around $129. Chris Berg: So $141 million average price of $129. Uh why is that important? You can see here on this chart, hopefully you can see it at least, but you know this is uh suggests right around 127 the price. So 129 puts you right along here at this bottom where they obviously believe based on their analysis that hey we think this is probably the bottom of where our stock's going to be. We can come back here buy back some stock increase the value for our shareholders and it's really been going up since. And again this is a five-year chart but you can see it's just crossing over that 200 day moving average which is typically a pretty important metric within a stock chart. So just something to keep your eye on here. Um, I've been in a conversation now for quite some time suggesting, hey, keep your eye in the end of 2026. That's when I think the land markets are going to peak. If that's the case, does it have a negative impact on Extra Space's uh share price? I guess obviously only time will tell. I think one thing when you think about storage is sometimes it can almost be contrarian. So even if things go awry in the land market within the economy, which we'll talk about more here later on in the show, um sometimes that can actually bode well for storage because people unfortunately there's more unemployment. They've got to store things. They're moving around. So we'll see how that bears out for the stock price. But I think it's really interesting. They actually pulled the trigger around 129 for an average price to buy back some stock. And obviously Joe Margolis believes hey that's the best use of our capital at this particular time. One other thing that's been a really important conversation that I want to share with you is there's uh as many of you know because we talked about it a lot here on the Self Storage Report in regards to California SB79. What kind of impact if at all that was going to play. There was a lot of uproar around how this new disclosure bill within self storage could have a big impact potentially on rates on the value of assets. The people at California Self Storage uh did a phenomenal job going up to Sacramento and lobbying trying to change rather than a cap on rents to make it more of a disclosure. Um, I think what's intriguing, what you're going to hear here from Joe Margolis, is he was asked about is it really hasn't had any impact on their rents, their rates whatsoever. So, here's what he had to say. Joe Margolis — Extra Space Storage (earnings call clip): So, our disclosure free legislation was as robust as what they're requiring. Now, they wanted in a different spot in the lease in a specific font and color. None of that made any difference. We had very robust disclosure before the bill and now everybody has the similar disclosure kind of more of a level playing field and we haven't seen any effect on our leasing activity in California. Chris Berg: So really important to note there because again there was a lot of conversation on how this was going to impact uh leasing activity rents and up to this point at least. I know it's early, you know, we're only in February. This started in early January, but at this point, is that zero impact at least for Extra Space. Another piece of the conversation that takes place here, and this is an analyst asking about this, but um we've been talking a lot as of late here on the show in regards to demand and what drives demand within self storage. You can't really manufacture demand. It's not like I can say, "Oh, hey, look, we've got now self-storage version, you know, 17.0 like they can for a new iPhone or whatnot." So, you can't really manufacture demand when it comes to storage. Um, but there are key drivers and some of those obviously are movement. You've got job growth and so, uh, Joe Margolis was asked about that. Here's what he had to say. Analyst — earnings call clip [attribution inferred]: Awesome. That's great to hear. And I guess a slight pivot here as a followup, but you know, you guys mentioned that the guidance is not factoring in any, you know, housing market recovery or any improvements from the macroeconomic environment, but I guess more broadly speaking, um, you know, what are like the top, I guess, macroeconomic drivers outside of home sales that you guys view could help provide a catalyst for this industry? You know, are you guys tracking anything specific both on a market or national level? Um, you know, any color here would be super helpful. Joe Margolis — Extra Space Storage (earnings call clip): So a couple factors that we think are very important one is job growth. I think uh job growth is highly correlated to self-storage performance and it's one of the reasons that even though in 2025 our exposure to Sun Belt markets was a headwind that we believe our kind of proportional overexposure compared to our peers to the Sun Belt is going to be a benefit to us because Chris Berg: So we'll see how that plays out. I apologize for some of the audio here. There was some feedback obviously on the conference call and I wanted to pause here for a moment because when you think about the bigger picture right now as far as job growth, it's clearly been slowing within the economy. If you look at recent college grads, I mean the unemployment rate in that demographic is just abysmal right now. And then you start to layer on the impact of what's happening with AI and the big conversation regards to all these white collar jobs being wiped out because of AI. We'll see if that thesis bears out to be true or not. Point being though is that if job growth is a huge driver of self-storage demand and you know that people are leaning in more and more um AI, we've seen more and more layoffs within even tech companies. Where is that robust job growth going to happen? Is it going to be in robotics which might be in Austin with Tesla and Optimus? We don't know at this point but I think it's something you want to be aware of if knowing that hey one of the demand drivers um obviously is housing movement which has been completely stagnant. We talked about that in the last show. And then he says job growth, which is not growing as robustly as we probably think it should be, especially when you start to layer in the conversation around AI. So the demand factor is right now definitely a headwind for self storage. You just want to keep your eye on that as you're beginning to look at sites that you either want to invest in, acquire, and or develop. Joe Margolis — Extra Space Storage (earnings call clip): In the future. We do believe that's where there'll be outsized job growth. And then the other most important factor is of course supply. And we see, you know, not that supply is going to zero. I don't think it will ever go to zero new supply, but we do see a continued incremental reduction in new stores getting delivered. Chris Berg: So, I want to pause it there. I want to go into another clip in regards to supply because it was addressed more specifically and it was asked about specifically for the CEO, Joe Margolis, and what he said about supply. I'm going to continue to say in this business because I'm a simple guy, simple good, complex bad, that this business, this industry, your assets are really determined by supply and demand. And that's why we want to talk a lot here on the show about building responsibly. Many people, I think, got in in the early 2020s and like, hey, piece of dirt. I can just throw some steel up, make some money. Um, that's not what's happening today. And so I never want to discourage somebody from building, but if you are going to go out and build and develop, I would just really encourage you to make sure that you understand the demand metrics in this industry and what's happening from a supply perspective before you just start plopping down more steel and realize like, oh my gosh, all my equity just got wiped out. Now what am I going to do? So here's um a question in regards specifically to supply and how Joe Margolis, the CEO of Extra Space, responds. Analyst — earnings call clip [attribution inferred]: Getting built. So wondering if you can give more details on your supply expectations, which markets are more versus less exposed and also um which data source or uh data or source informs that view. Joe Margolis — Extra Space Storage (earnings call clip): So we start with Yardi which is a national database and might have a little different opinion. We take that data and we apply it you know only to the markets that we're active in. Right? So we don't care what's getting built in North Dakota for example. And then we use other data that we have through our people on the ground, our investments team, our management team. And when we look at that um stores that we expect to be delivered in 2026 in our same store markets, it's an incremental step down, very modest step down, but a step down. Um I would also say that when you look, you know, Yardi does a great job. We think they're the best data source in the industry. I'm not criticizing Yardi, but I think it's hard for them when projects get cancelled for them to take it off of their list. They're sometimes behind on uh taking stores off their list that don't go forward. Chris Berg: So, this is a big conversation right now in the industry because I think many metrics are saying that hey, supply is going down. I think many people will even concur with that. Although there was a gentleman from Andover at the New York SSA where he talked about, look, if rates were to turn, meaning interest rates or if rental rates would start to go back up, he believes that there's a lot of quote unquote dormant supply that isn't necessarily on the books or, you know, maybe was being proposed or in planning a long time ago, has been just sitting there now. He's like, hey, if things turn in this industry, you could see some of that supply come back online very, very quickly. In fact, you already just recently um reassessed the supply and as you said it was going back up or at least in that direction. So just again one thing you want to keep your eye on what's the demand in a market and what's the supply coming online and sometimes you know you want to look at a Yardi or some of the different uh software or information that's out there. But always go and talk to the city specifically and say hey what's in the pipeline? What do you guys have going on right now as far as self-storage assets that are being built or potentially being built? Just so you've got really clear specifics on what potentially could be coming into that market. I want to share this last clip with you. It's really interesting and important in my opinion because if you look at Extra Space versus Public Storage, like these are the two giants that are bowing out in the self-storage REIT space. And what's fascinating if you listen to both earnings calls and we'll do an analysis on Public Storage in the next week or so, but they're really leaning into their data. They're really leaning into how do we, you know, leverage data and AI to really help lower headcount and just maximize efficiencies where Extra Space is a huge proponent of having on-site managers, more of a headcount, live bodies. And Joe Margolis was asked about that especially in the context of hey you just said earlier in your guidance that your expenses are rising you know what can you be doing to maybe cut some expenses and so here's how Joe Margolis responds to the idea the question around having live people inside their stores and I think he makes a very strong argument. Joe Margolis — Extra Space Storage (earnings call clip): So our philosophy is that we want to let the customer choose how to do business with us and the customer can't choose how to do business with us if we close certain channels to them. So right now we allow the customer to interact with us online, at the call center or at the store. And 31% of our leases are from customers who walk into the store and have not interacted with us online or on the phone. Chris Berg: So just let that sink for a moment. That's almost a third, 31% of their customers. Now couple questions is one how do they know that this person has never interacted with them online or on their phone? So that's a little bit freakish, but 31% if that data point is accurate, almost a third of their customers have never had any sort of contact with them in a digital fashion, only live. And so here's this argument going, look, we're missing out on that many customers potentially because we don't have a warm body in a store that obviously can impact your NOI and the value of that asset very, very quickly. Joe Margolis — Extra Space Storage (earnings call clip): So, if we take those people out of the store, those customers all have a cell phone, they all have a computer, they all could choose to interact with us that way, but they want to go to the store for a reason. And if they get to the store and there's no one there, maybe they'll scan the QR code, maybe they'll go online, or maybe they'll go across the street to the competitor. And you don't need to lose too many rentals in a high margin business where your expense savings is overshadowed by the loss of revenue. So as long as the customers are telling us they want to talk to a store manager, right? 31% of our tenants walk into the store. 5% of our tenants start online, reserve a unit, but will not sign a lease until they go to the store, see the unit, and talk to the store manager. Chris Berg: So, there's 36% that are saying, "Hey, I want to talk to a warm body." You know, there's a lot of people out there in this industry that are trying to run things completely remotely. And there you got Joe Margolis with probably the most data, you know, in this industry, or at least close to it, suggesting that 36% of their customers absolutely want a human, a warm body that they're going to interact with um before they make that final decision to become a customer and a client. So, I just think there's some really interesting data points here. Would love to know your point of view, your thoughts, and what you hear from Extra Space um heading into 2026. Their guidance, Public Storage guidance wasn't much better if at all. And again, we'll break that uh earnings call down very, very soon. So, please share this video, family, friends, colleagues, and definitely put your comments here below and let me know your point of view. Again, this is the Self Storage Report. I'm Chris Berg. We'll see you back here again very very — END OF TRANSCRIPT —