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Greetings, and welcome to Public Storage Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, [ Jed ] Reagan. Thank you. You may begin.

Thank you, operator. Hello, everyone, and thank you for joining us for our second quarter 2026 earnings call. I'm here with Tom Boyle and Joe Fisher.

Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, July 30, 2026, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events.

A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports and an audio replay of this conference call at our Investor Relations website, investors.publicstorage.com. [Operator Instructions]

With that, I'll turn the call over to Tom Boyle.

Good morning, everyone, and thank you for joining us. Our second quarter marked the start of our new era at Public Storage. What we call PS4.0. This new era is characterized by greater energy, urgency and a sharper focus on building the capabilities that will drive stronger per share performance over time. My 4 key points today cover initiatives coming together as building blocks from here.

First, we recently closed the NSA transaction, marking the first major milestone of our value creation engine. Second, Public Storage Canada is a strong strategic addition to the portfolio and an attractive entry point into an underpenetrated market with meaningful room for future growth. Third, the PS Next operating platform continues to execute with improving leading indicators in the business and new capabilities that are helping us better serve customers. And fourth, our Own It Culture is gaining momentum across the organization with strong engagement from our team and real urgency around the opportunity ahead.

Let me start first with our recently closed NSA transaction. Closing this transaction last week is a major milestone for Public Storage and a clear example of PS4.0 in action. As we've discussed, this is not just about getting bigger. It's about strengthening our platform, deepening our portfolio, expanding our opportunity set and driving differentiated per share earnings into the future. A tremendous amount of integration planning went into this closing, and that preparation paid off.

We transitioned the 1,100 store and 575,000 unit portfolio on to Public Storage systems overnight and began operating activities immediately upon close. That is exactly the start we wanted. We welcomed over 1,300 new Public Storage teammates and got busy. With all our website and digital presence online that morning, the team completed over 1,500 reservations, switched over 265,000 AutoPay accounts, began collecting rents and started rebranding with temporary signage on the first day.

This early execution is important, but it's also just the beginning. The real value creation is ahead of us as we apply PS Next across the portfolio, rebrand the assets and execute against the operating and capital opportunities we've identified. We are more confident in the achievement of the operating upside with our new unified team driving results from here across customer experience and revenue, operating efficiencies, tenant insurance and G&A.

On the capital front, integration planning has also surfaced additional expansion opportunities that will add to value creation over time. And yes, lots of orange paint is on its way to a location near you. Thank you to the NSA team for the professionalism, focus and partnership they brought throughout this process. And thank you to our Public Storage teammates for their leadership.

Getting to this point took a significant cross-functional effort, many long days, nights and weekends and the strong collaboration between the 2 organizations is a big reason the transition is off to a solid start.

Second, let me turn north to Public Storage Canada. We announced the acquisition of Public Storage Canada in June. We will reunite Public Storage with a portfolio that was operated under common ownership until the 1990s and has since been owned and operated independently by the Hughes family. Today, this high-quality PS branded portfolio is the third largest in Canada and sits in desirable infill locations across top metros with concentrations in Toronto and Vancouver.

The portfolio demographics are strong with trade area populations averaging nearly 250,000 people and average household incomes approaching $100,000. The market is significantly underserved with per capita supply of 2.5, significantly lower than the U.S. And there is meaningful embedded upside in the assets that gives us a compelling opportunity to create value over time with our PS Next operating platform.

The transaction also reflects disciplined capital allocation. It was acquired off-market pursuant to an existing ROFO/ROFR structure with the Hughes family. And in addition to being accretive to long-term portfolio NOI, IRR and FFO growth, it creates the ability to finance a portion of the NSA acquisition with lower-cost Canadian debt. It is the second transaction this year funded with Public Storage OP units, creating another win-win opportunity. So when I step back, I see Public Storage Canada as both a strong addition to the portfolio and an important platform for growth in the future.

Third, our PS Next operating platform. Our full team is zeroed in on improving customer experience, leading to improved fundamentals and on building the platform for the future. The leading indicators of the business have turned and our outlook from here is improving, which Joe will cover in more detail shortly.

Our customer focus is translating into better execution, improving customer sentiment year-to-date, 8% lower move-out activity in the quarter and better-than-expected occupancy and move-in rent performance, both ahead of prior year.

We continue to see favorable trends in our coastal and Midwestern markets and improving trends in key Sunbelt markets. We are seeing sequential improvement with development activity slowing across markets paired with steady demand. We have confidence in demand growth over the medium term with demographic tailwinds as millennial and Gen Z customers age into our core customer usage years. In L.A. County, performance will accelerate from here into 2027 with the expiration of pricing restrictions there from the Board of Supervisors.

Technology remains a critical differentiator for our customers. Nearly 90% of customers interact with us digitally at some point in the rental journey. 3/4 complete their lease fully digitally, and our app has been downloaded over 7 million times. That improves the customer experience and helps us run the business more efficiently, and it provides industry-leading data sets for use across the organization, including capital allocation, data science and machine learning initiatives.

We're also investing in what's next for customer interaction. One example is Ellie, our AI-powered customer service agent, which has already handled more than 90,000 customer interactions in recent months and continues to improve with every conversation. Ellie doesn't just answer questions. she resolves customer needs using our proprietary data and AI models.

We're embracing these new capabilities across PS Next to drive a better customer experience, a better employee experience and stronger financial results. And we're excited to bring NSA and Canadian properties onto that platform to drive value creation.

Now let's move to my fourth point, the Own It Culture. We launched our Own It Culture earlier this year with a combination of customer obsession, new talent and perspectives alongside strong in-place teams, empowerment with accountability and new incentives to drive alignment. The goal is a culture with more energy, more urgency and stronger accountability for execution.

We recently moved into our new headquarters in Frisco, Texas, and I can feel the energy in the environment. We're also looking forward to our Southern California team moving into new office space in months ahead. Last week, we welcomed approximately 1,300 new teammates through the NSA transaction and a new office in Denver. We're excited to have them with us, and we're bringing them into the Public Storage culture in a way that is clear, aligned and performance-oriented. As we said before, strategy only creates value if the organization is aligned behind it. That alignment is getting stronger.

The energy I'm feeling is translating into urgency and what we're building is a culture grounded in accountability, speed and execution. We see a meaningful opportunity ahead, and our goal is to make sure the organization is ready to move with discipline and intensity as that opportunity unfolds.

So to sum up, the company is putting more of the earnings growth building blocks in place at the same time than at any point in recent years. We closed NSA and have begun the value creation work. We announced Public Storage Canada, which expands our platform into an underpenetrated market with room for future growth.

We remained active on acquisitions with new data science tools and faster execution, continue to grow the development pipeline, are expanding the lending platform and are improving the growth profile of our third-party management business.

At the same time, PS Next is strengthening how we operate the core business, improving customer experience, brand, pricing and efficiency. And as Joe will cover, the financial setup also improves from here with contributions from non-same-store growth, ancillary businesses, a future tailwind from L.A. restrictions rolling off and a more favorable financing profile supporting earnings power over time.

These building blocks are for the future based on execution from here. While that execution will cover several years, the direction is clear. Our operating trends are improving, our growth levers are expanding and the building blocks we're putting in place today position Public Storage for stronger growth in the second half and into the next several years.

With that, let me turn it over to Joe.

Thank you, Tom, and good morning, everyone. The topics I will cover today include our second quarter results, a summary of recent transactions and a balance sheet and capital markets update.

Before I dive in, several key highlights from the quarter include: number one, continued momentum in operations, including occupancy, churn and move-in rates; number two, an across-the-board guidance raise; number three, 2 major value creation engine transactions; and fourthly, approximately $12 billion in capital markets activity completed or committed year-to-date.

Moving to results. Core FFO in the quarter was $4.17 per share, which was down year-over-year as we have previously communicated with a sequential decrease from first quarter driven by higher financing costs and G&A. Same-store revenue and NOI growth in the quarter were minus 0.6% and minus 2.2%, respectively, both ahead of internal expectations.

On a forward-looking basis, core metrics were strong versus expectations. Average move-in rents turned positive at plus 1.6%, the first time since 2021 that both new move-in rates and occupancy were up on a year-over-year basis. Move-in rates in 2Q were up 18% since 4Q '25, better than historical trends and a clear sign that we are moving past the last few years of stabilization. Occupancy of 92.5% was positive year-over-year by plus 0.2%.

Lastly, our existing customers continue to perform well as demonstrated by a material reduction in churn. Expense growth was positive 4.4% for the quarter, with pressure in property taxes and marketing offset by savings in payroll from our machine learning-based staffing model.

The property tax increase was primarily timing with 1Q '26 having benefited from earlier-than-expected appeals wins on a year-over-year basis and thus an offset in 2Q '26. Outside of the same-store pool, NOI growth of 22% in our non-same-store pool and ancillary growth of 15% continued to lift results. Non-same-store performance and our external value creation engine continue to be a substantial and repeatable driver of shareholder value.

Turning to 2026 guidance. We are pleased with our year-to-date performance and excited about the underlying momentum we are seeing in the leading indicators and core metrics of our business. We are raising our guidance across all key metrics. Revenue and NOI growth are now forecast at a midpoint to be minus 0.2% and minus 1.1%, an improvement of 90 basis points and 110 basis points, respectively.

Importantly, while we have previously said that 2Q and 3Q, we made a low points for year-over-year same-store revenue growth. Our updated guidance implies an improvement from 2Q levels in the second half, with the fourth quarter expected to exit the year with positive revenue growth.

The key assumptions underlying this guidance increase include improved new move-in rates at positive low single digits versus prior assumptions of down mid-single digits and an improved occupancy forecast of plus 30 basis points year-over-year compared to the prior assumption of flat. This is primarily due to the continued success we are having with our focus on customer experience as demonstrated by increased customer sentiment and decreased churn.

Lastly, given the expiration of the state of emergency in L.A. County, we now see a headwind of minus 50 basis points for same-store revenue growth this year, an improvement of 30 basis points from our original guidance of minus 80%. For core FFO, a we are raising forecast to $16.75 to $17.05 with a midpoint of $16.90. This is an increase of 1.4% or $0.22 per share versus our prior forecast. This increase is being driven by the improvement in same-store performance, better interest expense, and continued strong contributions from non-same-store and ancillary offset slightly by increased G&A.

Lastly, we expect financing benefits from our NSA and PS Canada acquisitions to be approximately $0.02 per share positive to core FFO in 2026 versus our prior assumption of neutral. This is a great start out of the gates for these 2 transactions. Specific to NSA's results, you can see in our supplemental that we provided a number of key disclosure pages historically provided by NSA.

For core FFO, NSA achieved $1.14 per share for year-to-date 2026, which is ahead of consensus and annualized would have achieved above the high end of the original guidance range. For NOI, they achieved positive 2.4% growth year-to-date, well ahead of their midpoint of flat NOI growth driven by solid occupancy improvements and expense controls.

On to transactions. Market activity has picked up in 2026, with roughly steady yields in the low 5s and sellers showing a greater willingness to transact. Our expanded team has been busier than ever in 2026, and we've acquired or under contract for over $450 million year-to-date.

One area of particular focus for the team this year has been recently developed assets, which come with lower occupancy, that present higher stabilized yields and returns. While these can be modestly dilutive to near-term FFO, we believe that future upside, growth and accretion make them the right long-term investment decisions.

We are also speeding up the transaction process, improved efficiencies and sourcing, data and AI informed underwriting and accelerated approvals have improved top of funnel to close deal timelines, leading to higher deal flow, faster execution, and a better process for owners looking to sell assets.

In addition to the NSA closing on July 22, the other big recent transaction news was the announced acquisition of Public Storage Canada. As previously discussed, the strategic entry into the Canadian market provides exposure to a growing Canadian market with infill, high-quality properties, provides significant NOI upside to our PS Next operating platform, given 83% occupancy and 65% NOI margins and will be accretive to our future NOI, cash flow and IRR outlook.

The $1.2 billion transaction will be funded with approximately $900 million of OP units issued at $321.98 per unit and approximately $300 million of Canadian-based debt issuance. In addition, the seller will have the opportunity to receive $288 million of OP units priced at $375 per unit and 2 earn-out tranches over the next 5 years should certain NOI outperformance thresholds be achieved. As mentioned earlier, the $900 million of Canadian equity exposure as part of this transaction, will allow us to finance an equivalent amount of our NSA acquisition and Canadian rates over 100 basis points below the underwritten U.S. levels. We look forward to closing this transaction in the third quarter.

On the development expansion front, our pipeline has grown to $692 million across 47 projects with stabilized yields targeting 8% and remaining amounts unfunded of $432 million. For our lending business, our platform grew to $173 million outstanding, up $30 million from last quarter at a current rate of approximately 7.6%. And lastly, our third-party management platform welcomed 22 net new properties last quarter bringing our total to over 460 properties. We see a path to continued growth in all 4 of these key value creation drivers.

Lastly, our balance sheet remains in excellent position from both a metric and liquidity perspective. We have had a very active and beneficial year in the capital markets, with approximately $12 billion of total capital markets activity. We have completed new issuances, created new facilities and programs, placed hedges, opened up a new market in Canada, done multiple OP unit transactions and issued on our ATM program. These actions have strengthened our industry best balance sheet, enhanced our liquidity and financial flexibility and fully funded our accretive external growth.

During the quarter and subsequent to quarter end, we announced a total of $5.9 billion of debt capital markets activity, including $1.4 billion in new unsecured issuance, the expansion and extension of our $3 billion revolving line of credit, a newly created $1 billion commercial paper program and a $500 million delayed draw term loan. The $1.4 billion of new unsecured issuance was done at a weighted average effective rate below 5%, which was partially supported by $1 billion 10-year treasury hedge we put in place earlier this year at 4.3% to help both recent and future issuance costs.

We've also entered into forward sale agreements under our ATM program for nearly 800,000 shares at a price of $326.32 per share, which is expected to generate nearly $260 million of future net proceeds. At quarter end, we had available liquidity of $3.8 billion between our line of credit and cash on hand, plus approximately $600 million of annual free cash flow.

Our balance sheet remains one of the strongest in the REIT sector with net debt to EBITDA of 2.9x, net debt plus preferred equity to EBITDA at 4.2x, and debt plus preferred equity to enterprise value in the low 20% range. We are 1 of only 2 REITs with A and A2 ratings with S&P and Moody's further testament to our balance sheet health.

In summary, PS Next delivered solid results and an accelerating outlook. Our value creation engine was on full display. We made material enhancements to our fortress balance sheet and continue to execute across all aspects of our business. We are executing today with an eye toward the future and stacking up multiple drivers of absolute and relative per share earnings growth for years to come.

With that, I'd like to turn the call back to the operator to open up for Q&A. Thank you.

[Operator Instructions] Our first question comes from Samir Khanal with Bank of America.

I guess, Joe, maybe to start off on the L.A. front. How quickly can you capture the revenue from L.A.? Maybe just walk us through the math for this year and then into next year as we think about the upside.

Samir, good to hear from you. So on L.A. and the state of emergency there, we did have that factored into our original guidance as a minus 80 basis point drag. As I mentioned in the prepared remarks, 30 basis points of that 90 basis point revenue increase in our guidance is going to come from L.A. So we are anticipating some ability to start recapturing as of the expiration on July 1 of this year. We are going to take a pretty measured and phased approach to that. It's not the idea to go out there and go all customers, either new or existing and move them back to market rates. But we are going to, over time, start to recapture that.

As a reminder, we lost about 70 basis points of same-store revenue growth in '25, another 50 net this year. So that gives you an idea of the demand and supply environment out there, which remains really robust, kind of what we left on the table from the state of emergency and may be able to recapture in the future.

Okay. And then I guess my second question is on NSA. You mentioned expansion opportunities that you're finding. And again, I know it's early, but maybe expand on that. And have you identified at this point, any sort of incremental revenue or cost synergies beyond sort of the original underwriting?

Yes, Samir, it's Tom. I'll cover that. I think as it relates to the capital opportunities, I think there's really a couple that we've identified that I'll share today in collaboration with the NSA team over that integration planning period. The first is expansions, as I highlighted. So there's definitely some opportunities for expansions on some of their existing assets. And we're excited about that. The development team is spending time there. Joe and I just green lit an expansion at our most recent investment committee this week. So we're getting moving on those and that value creation will come over the next several years.

The second component is more tactical, and this is driven by an ability to spend some R&M dollars and get more units online. So we found about 14,000 units and the NSA team pointed those out to us that we can bring back online and which will drive incremental inventory opportunity as we move through the second half here of 2026.

The second part of your question related to overall synergy expectations, I'd say our confidence continues to grow. You heard from me just a few moments ago around we were able to get our systems in place overnight. And that enabled us to have, first, visibility in terms of the operating situations and then also gave our teams tools and the unified team moving forward, those tools to start driving the business.

And so we have confidence both on our top line, bottom line, ancillary and the like from here and we expect to execute on that plan along the same lines of the road map that Joe provided back in March, but have more confidence in terms of the execution on that now that we have the visibility and the teams in place.

Our next question comes from Michael Goldsmith with UBS.

One will be more near term, one will be more kind of intermediate and long-term. But maybe on the near term, can you provide an update on July and how that's reflected in your guidance where you expect kind of same-store revenue growth to accelerate slightly through the back half?

Yes. So I'll take the first piece of that and then the guidance question, Joe can take. We have seen improved core performance as recently highlighted on the call. As we think about move-in rents, for instance, move-in rents are growing 1.6% in the second quarter compared to a decline of 2.4% in the first quarter. Promotions were a little higher in the second quarter, but that was really a function of April and a different promotional strategy in the month of April. But if you look at June, for instance, where we had more consistent promotions year-over-year, move-in rents were up 4% and the strongest month in the quarter.

As it relates to July, trends continued, occupancy up about 30 basis points year-over-year. Churn continues to be lower, which was a bright spot in the second quarter and move-in rents, again, positive, maintaining the momentum from June. So I think your follow-on question could be, so what's driving that? And I think it's a combination of several things. One, steady demand from the customer base across the country; two, reducing supply as we see new competitive supply entering the market slowing down; and then the third is some of the customer experience initiatives that we're really driving.

Sentiment is up, as we highlighted, churn continues to be lower, which gives us more pricing power for new customers coming in. And the team in place continues to test and learn and drive the business.

In terms of second half, the second part of your question there, Michael, was around expectations for the second half embedded in guidance. I don't know, Joe, do you want to cover that?

Yes. So for second half trajectory, I think as we've consistently messaged we did expect 2Q to be the low point for the year as we faced kind of the toughest comps from a revenue perspective. And with the increased momentum that Tom was talking about, it does start to show up a little bit in that year-over-year revenue growth number. Obviously, that's a lagged number, it takes in the prior 4 quarters.

But we do expect to go off of that minus 60 bps in 2Q, see that start to get a little bit better in 3Q and then even turned positive in the fourth quarter. So we have a nice trajectory there, but I think it's kind of a critical piece is the outlook beyond that and the earn-in that we're starting to build with some of this recent momentum of ECRIs continuing to contribute, the existing customers staying with us longer obviously, occupancy coming up a little bit, and that's momentum that we're seeing on new move-in rates. So hopefully, it comes through that we're excited about the momentum we're seeing here in the second half and what that holds for the future.

Got it. And then as my follow-up here, just as you said, Joe, right, it sounds like near term, you've got a little momentum, things getting a little bit better. But you've done a lot of things that are setting yourself up for the intermediate term with the NSA acquisition, PS Canada, you're acquiring more lease-up, L.A. gets better, you've got development.

So it is really the public storage story now that like things are getting a little bit better near term, but you're setting yourselves up for a better 2027 and a big 2028 or some combination of the out years where all of this is going to kind of come together and drive more powerful growth?

Yes, Michael, I think you covered that actually pretty well. We are building -- putting the building blocks in place. We have more of them in place now than we have in the past, and we'll continue to do that, and we are encouraged by the core trends we're seeing in the business as well.

Good luck in the back half.

Our next question comes from Nicholas Yulico with Scotiabank.

This is Viktor Fediv on with Nick. I have a question on your move-out rate trajectory. So to what extent the 3.5% year-over-year decline was being driven by mix, specifically higher in-place rent and longer tenured customers remaining in storage and therefore, representing a smaller share of move-outs? Or are there also unit size or market level mix shifts affecting the average rate?

Yes, I think it's a combination of a couple of things. One, what you just highlighted around longer-term tenants continuing to stay with us, which we are seeing in the portfolio and churn is down, which is helpful, no question.

And then the second thing is, that is a lagging indicator of where move-in rents were as well. And so as we move higher here in moving rents, you'd expect to see that decline start to moderate as we move forward from here. But certainly an additive component in the second quarter.

Got it. And then as a second question, a follow-up on your NSA integration plan because historically, NSA has been operating with lower churn than PSA. So as you transition the portfolio onto your PS Next platform, do you expect to quickly align NSA with PSA's revenue management approach? Or are there any aspects of NSA pricing strategy that you believe is worth preserving, particularly given differences in customer mix and submarket characteristics?

Yes. I think there's maybe 2 components to that question. I think the first is certainly geographically and from a customer base standpoint, there's differences between where churn is. But I think secondly, we are excited to bring those properties into the PS Next operating platform and drive performance.

And we think that there's opportunity, but probably first and foremost, around revenue as we think about occupancy as well as rental rate opportunities as we add the properties to our portfolio, rebrand them and drive performance there. And so a combination of both new customer, existing customer and new marketing opportunities all playing a part there.

Our next question comes from Ronald Kamdem with Morgan Stanley.

Great. Just taking a step back and trying to get a better sense of just top of the funnel demand and some of the indicators that you guys are looking at, at this point. I think you've talked about sort of the narrative of improving demand. And I was hoping you could provide more commentary on what you're seeing in the portfolio and by market and specifically the slope of that improvement.

Sure. On the demand front, I would characterize demand as pretty steady as we move through this year and certainly feels steadier this year than what we experienced last year, which is encouraging.

And I think some of the use cases that we've consistently spoken about, be it existing home sales that often comes up on these calls have been pretty consistent on a year-over-year basis, and we're seeing pretty consistent customer use from that use case, but also continued strength from customers that have ran out of space at home, which continues to be a higher proportion and a healthy proportion there. So no real things that I would highlight that are new as it relates to use cases or otherwise, but I would say steady demand.

The second component of your question is a good one to highlight, which is we have a number of markets, about half the portfolio that continues to perform really quite well. And I would characterize them as the stronger markets. And I would rattle markets off as I have in the past, like Minneapolis, Chicago, San Francisco, Boston, D.C., they're all growing 3% to 5% same-store revenue growth and seeing good trends there.

And at the same time, we have Sunbelt markets that continue to sequentially improve. And those markets have declined from a revenue standpoint over the last several years. We continue to see that this year, given the really difficult comps that they had and the demand that they experienced during '21 and '22, but also the new supply that went to try to match that demand. And that new supply is being absorbed, and we're seeing sequential improvements in many of those markets from here.

So I'd say encouraging trends across both sets of markets as it relates to the operating fundamentals I spoke to just a few minutes ago. And then you put the L.A. component that Joe spoke to, which will be an additive component to revenue growth as we move really into 2027, which is encouraging.

Great. And then my second question, just going back to the acquisitions. I was just hoping -- I know there's -- the acquisition team has expanded and you've talked about sort of the focus there. But if you think about just going forward, just can you give us a sense of like what you guys are doing differently than you have in the past to sort of lead to this outcome where you can increase acquisition volumes and presumably at attractive returns?

Yes. Thanks, Ron. I think that there's a couple of things that I'd highlight and we've highlighted in the past.

One, we have significant capital resources year in and year out, and that gives us an ability to be active and to compound our per share earnings growth opportunity. The second is the operating platform gives us an ability to earn more cash flow from those assets as we put them on the platform.

So we've been investing in the team as well as tools to drive more activity, more precision, shrinking deal time lines with a real micro market targeting focus, which has resulted in some attractive activity year-to-date. As you highlighted, about $450 million of acquisitions year-to-date, about 70% of that is off-market and a meaningful portion of that is also lease-up. But given the confidence we have in the operating platform, we're not shying away from that, which is additive to future earnings growth from here.

On the development side, we did increase the size of the pipeline this quarter. We continue to target micro markets around the country with the national platform and try to maintain or grow that platform, while the rest of the competitive supply dynamics continue to moderate. So a multipronged approach to the capital deployment, and I challenged the team to continue to be active and find those opportunities as we invest in the platform this year, and it's encouraging to see the results year-to-date.

Our next question comes from Salil Mehta with Green Street Advisors.

I know you just briefly mentioned this, but I'd just like to quickly touch base on it again. But there was some broader REIT commentary towards the latter half of last year, signaling that markets look in the Sunbelt were reaching an inflection point. But just looking at your disclosures here, I'm seeing Tampa down 10% on NOI, Miami at 3%, Atlanta down 6%. Can you just walk us through what you're seeing in these markets and why are they continuing to lag?

Yes, sure. I can maybe provide some incremental commentary on certain of that. I think I hit the big picture around some of the tough comps and new supply. I certainly put Tampa in that camp. Tampa also had a benefit several years ago from some storm activity, which led to increased customer demand that we now have been lapping.

But I think big picture, sequentially, we've seen improvement in most of the Sunbelt markets, maybe not in Tampa. And I think that's been driven really over the last 12 months or so, and we expect to continue, but revenues continue to decline. So while there is improvement, it continues to be uneven month-over-month, but the direction is clear.

And so as we look at those markets, some of which you highlighted, but I would put some of the Texas markets in that camp, Orlando, Atlanta, Charlotte, for instance, all working through pretty similar characteristics, all seeing sequential improvement in the operating metrics, but we're not expecting those to improve dramatically overnight. That absorption is taking place. And as we move through the year, we're still expecting as we finish this year that those markets are still in negative territory as we finish '26 and head into '27. But the direction is clear and the sequential improvement is occurring.

Great. And just as another follow-up. You guys achieved a positive move-in rate growth around 1.6%. But can you perhaps highlight if this has led to any changes in terms of your ECRI program?

Yes, it's a good question. I think on the ECRI program, specifically, pretty consistent strategies year-over-year. As move-in rents do move higher, that reduces the replacement cost component of that modeling and optimization, which should lead to stronger ECRI contributions over time. Obviously, 1.6% growth in the quarter is modest growth, but as we see that move higher over time, only additive to the ECRI program.

Our next question comes from Juan Sanabria with BMO Capital Markets.

Just curious on the acceleration that's assumed in same-store revenue in the back half and turning positive in the fourth quarter. Would that hold that assumption or that guidance were it not for the sunsetting of the L.A. rent restrictions coming off, i.e., if we strip out L.A., would you still expect positive same-store revenue in the fourth quarter?

Yes. Juan, it's Joe. It would be pretty close. We do think L.A. with the acceleration there and the easier comps that are now faced and with the revenue momentum that we're seeing right now post July 1, L.A. will get to a positive year-over-year revenue growth potentially in fourth quarter. So it is helpful to the portfolio. So it'd be close, but we do have a big component of the portfolio in those Midwestern and coastal markets that's performing very well and continues to put up 2%, 3% and 4% revenue growth. So you have that.

And then we do have a shift in momentum, as Tom talked about in the Sunbelt, where second derivatives is getting better. You're probably not going to see the Sunbelt as a whole get back to positive in the fourth quarter, but it is definitely moving in the right direction relative to where it's at today. So L.A. is additive to that, but it's not the sole driver of it.

Great. And then just on the churn point of that coming down and the focus on customer service. I guess, with all the analytics and data you guys are now running and taking advantage of, I guess, what would you highlight as kind of the key things in the customers' mind that is improving that length of stay or limiting churn? Like what has been most effective as you've been more focused on that customer-centric approach?

Yes. I think there's a few things. One, from a strategic standpoint, that's been a big focus area really for all the teams across the company as we're in a more competitive landscape today. And frankly, customers expect more.

If I had to pick one thing as you're highlighting that would be an important driver of that, I would say it's listening to our customers. And so we've put in new survey programs. We used to get 2,000 to 3,000 surveys a month. We're getting more like 90,000 surveys a month now, and that's clearly going to grow with the NSA portfolio that's coming on. So listening to our customers and getting more of that feedback enables the team to resolve those concerns and provide a better customer experience for the customers at our properties.

And the focus is around a reliable customer experience. And when there are issues that come up, we can seek to resolve them faster this year than we did last year and hopefully even more so moving forward with some of the tools that we're putting in place and the like. So I would say that it's probably listening to our customers more, and we're seeing that benefit play out in customer sentiment scores within those surveys.

Our next question comes from Ravi Vaidya with Mizuho.

Can you discuss the decision to raise equity here? You have ample leverage capacity over $600 million in free cash flow. Why raise now? And how do you think about your various capital sources?

Ravi, so we're definitely fortunate in terms of the various capital sources between the excess free cash flow that we consistently talk about, the balance sheet capacity, having the best credit rating in the space and the ability to borrow at relatively low cost.

We looked at ATM as just another arrow in that quiver in terms of the ability to keep that flywheel going. If you think about the costs that we're raising at combined with leverage, we're about a 5% cost of capital. If you look at where we're deploying while we're deploying into more lease-up assets, which have a yield below that and slightly dilutive near term, we're going to grow those up to the high 6s, low 7s over time as they stabilize.

As you think about that relative to a cost of equity, we're putting on the board over 100 basis points of incremental spread and therefore, compounding that earnings per share profile. So we thought it made sense in terms of the cost. It was in moderation in terms of the sizing, but we did have an identified use in terms of the acquisition momentum as well as increased development lending that we're seeing.

Got it. That's very helpful color. Just one more here. I wanted to follow-up again on the move-in rates first quarter since 3Q '22 that they turned positive. Were there any particular markets that drove this? And maybe what are some of the markets that are -- we're still seeing some difficulty with pricing power?

Yes, I wouldn't highlight one particular market. I'd say a lot of the core improvement that we're speaking to, and you've heard it from both myself and Joe today has been more broad-based and encouraging. But in terms of stronger markets on move-in rate growth, I would highlight Los Angeles, San Francisco, both healthy, Philadelphia, Boston, Minneapolis, a lot of the markets that we highlighted that we characterize in that coastal and Midwest characterization really leading the way with healthy move-in rate growth.

And then some of the Sunbelt markets that continue to be in negative place year-over-year as they work through some of the new supply that's been delivered there. So while that absorption is taking place, that does put some pressure on move-in rents. And while the sequential improvement is there, in many cases, they're still down year-over-year at this point.

Our next question comes from Brad Heffern with RBC Capital Markets.

On L.A., I'm wondering how you think about the extent to which the lack of ECRIs distorted the market. Presumably, tenants stayed longer and occupancy was higher because of the lack of ECRI. So do you think we'll see a period of elevated turnover that potentially offset some of the benefit of the ECRIs coming back? Or is that not meaningful in your mind?

I would say on net, being able to charge market rents is a positive to overall revenue. But you are going to see a little bit of a shift as you'd anticipate with a little bit more rate growth and a little bit less occupancy growth. And so occupancy remains very healthy in L.A. We're not expecting a material shift there. But as we've seen when prior state of emergencies have rolled off, you're likely to see a little bit of an occupancy give up. And the flip side is you'll get more rate and a more balanced growth profile between rate and occupancy.

Okay. Got it. And then, Joe, on the guidance, you called out the $0.02 of benefit from the deals. I think that's really attributable to PS Canada. So I was just wondering, is there any net impact on the guide specifically from NSA being added? I know the original guidance was for it to be neutral, but just checking if anything has changed there.

Yes. Brad, no change on that front. So the original communications in terms of core performance related to both NSA and PS Canada was that they would be neutral to the earnings profile this year. Obviously, we expect a pretty material lift in go-forward years. And as Tom talked about, conviction on that front has only increased with the opportunities that we see in front of us.

So the only adjustment we made relative to the 2 transactions is that $0.02 for the back half of the year. That's really because we financed NSA and underwrote NSA in USD financing. And with the investment in PS Canada, we have $900 million of OP units that we can put in net investment hedge against to hedge against that equity exposure. And so we're going to be able to swap upon close some of that NSA debt into Canadian financing at 100 basis points better rate. So that will pick up on a run rate basis, maybe $0.04 or $0.05 going forward.

So at this time, that's the only change related to 2 transactions given we're only 1 week into NSA and still haven't closed PS Canada.

Our next question comes from Michael Griffin with Evercore.

Maybe just on the same-store expense guide for the year. I think the revised midpoint implies about 3.5% growth in the back half of the year. And Joe, I know you walked through some of the puts and takes with some of the line items, particularly as it relates to property taxes in the second quarter. But anything else we should just be cognizant of? Are there rollout expenses associated with PS Next that might flow through and pressure expenses in the near term? Or how should we think about that?

Yes. So a couple of things to highlight there. Number one, just from a broader context, going up to 2.5% expense growth, still sub-inflationary is a really good outcome for the team, especially after coming off 2% last year. So overall, a couple of really good years of expense containment as you've seen out of the team in the past.

In terms of the increase that we're seeing plus or minus 35 basis points there on the guidance, that's really driven by both the labor side within direct expenses as well as the labor piece in indirect, all of which is related to incentive compensation.

If you recall back in February when we rolled out PS4.0, there was a big focus on alignment throughout the organization and putting additional incentives on the table down to our property managers all the way up through the organization. And so 2Q reflected some of that with increased costs. So we're just flowing that through the rest of the year. That's really the only driver that we're seeing differently.

And then I'll say just on cadence, 3Q is probably our toughest expense comp for the year. So in terms of that mid-3s back half number, you'll see 3Q come in a little bit higher and then revert lower in the fourth quarter.

That's certainly some helpful context. And then maybe just one more on the acquisition opportunity set. Obviously, you've got the PS Canada deal to close in the third quarter this year. I know you guys have looked at other markets internationally. I think Australia is one that comes to mind.

I mean how do you view expansion and acquisition opportunities internationally versus domestically? I mean it feels like Canada has a more favorable supply picture. I'd imagine you'd want to bolster that deal, close it before you continue to expand there. But just can you talk a little bit about the opportunity set between both international and domestic acquisition opportunities?

Sure. I think that there's a few things I'd highlight there. One is the U.S. market continues to be the deepest pool of opportunity and the deepest storage market, no question globally. And it's one where we have a tremendous operating platform in place. And so that's going to always be really the bread and butter of where our team spends its time from a capital allocation standpoint.

That said, there are some really interesting international markets. And you highlighted Australia. Obviously, we have acted on Canada. And we view those markets as both attractive from a fundamental standpoint, as you highlight, but also as expanding the pie for capital allocation going forward. So we're adding Toronto and Vancouver and other Canadian markets to markets that we can think about acquiring and building in over time.

And you noted Australia, we feel similarly around Sydney and Melbourne and Brisbane down in Australia. And we're consistently looking for platforms in those markets where we can both buy an existing portfolio and look to drive operating performance as well as expanding capital allocation opportunities. Canada certainly fits that bill, and we're excited about adding that platform to the business here as we move through the second half.

Our next question comes from Caitlin Burrows with Goldman Sachs.

Just one from me. I guess you mentioned a few times that demand has been steady, but you also mentioned earlier some confidence in demand growth as millennials and Gen Z age into the core range for storage use. So could you talk about this a bit more and when we could see demand actually pick up? I guess, have you started to see it from this group? And do you have any stats on maybe average age of your customer?

Yes, sure. That's a great question. So as I noted earlier, and you just repeated that we are encouraged by what we're seeing. Millennials are our largest cohort of customers today and they're using storage with a higher propensity than prior generations at the same age and Gen Z is following suit. So we're really encouraged by that activity as they age into our core usage years.

And that's a tailwind that we view from a demand standpoint over the next 10 to 15 years and one that we're excited about from a demand profile across the country. And it also informs how we think about our customer experience and how we're leaning into digital and AI-focused customer experience in addition to a strong on-store experience.

In terms of when we're going to see it, I think we're seeing it today and you look at some of the fundamentals, I highlighted that certainly over the last several years, we've been working through stabilization. I think that I would consider where we are now towards the latter end of stabilization and into recovery as we see these leading operating metrics turn more positive. It's been an uneven recovery, but the direction is certainly clear.

And if you look at occupancy moving forward, higher year-over-year, move-in rents higher year-over-year. And as Joe mentioned, that's the first time we've seen both of those in positive territory since 2021. So that's encouraging, and I think demonstrates the fact that we are seeing steady demand as we continue to move forward here through 2026.

Our next question is from Brendan Lynch with Barclays.

Just a few questions on your past commentary from the call today. Tom, you mentioned that you've got participation in your surveys up to 90,000 from just a few thousand a couple of years ago. I'd imagine this is really valuable data. So curious how you're incentivizing that participation to get such a high rate of responses?

Yes. Actually, the answer is we're not incentivizing that on the ground. We get a lot of customer visits kind of over time at the property and a portion of those customers are happy to share their points of view. And I think the shift is we've enabled more opportunities for them to share that feedback, and we're listening and responding to that. And that's happening at the property manager, the district manager level with more of a customer focus. And the reaction from the customer base has been strong, and you can see that in some of the numbers that we highlighted today. But I think it's more of a different approach than it is a change in incentives.

Okay. Very good. And then, Joe, you mentioned savings in payroll from your machine learning-based staffing models. What does that entail? What changed? And what is the magnitude of the difference?

Yes. So that's been in process now for 3 or 4 years in terms of really studying the dynamics of each and every property, understanding the customer, the traffic flows, the attributes of each asset, the risk factors, the seasonality, student components, et cetera, and really knowing exactly what do we need to do from a staffing perspective.

So if you look start to finish and finish is still out there in the future, but start to today, we're down over 30-plus percent from an hours perspective. At the same time, we're giving individuals in the field a more fulfilling job and increasing pay associated with that role. So it's not just about cutting the cost. It's just simply cutting hours and giving better responsibilities and capabilities to the field to manage those properties.

In terms of this year, you can see we're down about 1.8% in the quarter, 1.2% for the year. We would have actually expected that to be down a little bit more. So the offset then comes in from what I mentioned earlier in terms of putting new incentives in place. But we do expect there to be more to come in the future as we continue to find ways to be more efficient, while continuing to deliver great customer service to our customers.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

I wanted to ask about the increase in deal flow that you're seeing for some recently developed assets that might have lower initial yields. How big of an opportunity do you see this being for the company just in light of the amount of development volume across the industry over the last few years? And is there a threshold on how much lease-up or development product the company is willing to add? I guess, how are you balancing the near-term dilution versus the longer-term growth opportunity in those assets?

Yes, Todd, it's Tom. I think as we look at the opportunity set, it is between both assets that have been in place and are highly occupied as well as lease-up assets.

As I noted earlier, we're looking at targeting those micro markets where we want to add products where we think demand and supply dynamics are going to be favorable and will be strengthening the portfolio. And in many instances, those can be lease-up opportunities. And those lease-up opportunities are ones that if the team identifies them and we use some of the new data tools and the like, and we find them attractive, we've got a lot of confidence in terms of our operating ability to drive lease-up and operating performance from those assets once they're on our platform. And so we don't shy away from that operational execution that's required from those assets.

And you're highlighting the near-term dilution associated with it. But the flip side is, Joe just mentioned, higher returns over time. And so with that confidence in lease-up at the micro market level, we're very comfortable with that near-term dilution for longer-term earnings growth. That's a component of what we've done year-to-date, and we'll look to continue to be active on that over time alongside more highly occupied properties that are a good fit for the portfolio.

Okay. That's helpful. And then, Tom, you talked about the effort to grow both the lending platform and third-party management. Can you speak to the opportunity there to accelerate those parts of the business in the future? What are the long-term goals? And should we expect a more rapid acceleration in those businesses in the near term or expect sort of a more steady growth or more gradual ramp in those segments of the business?

Todd, it's Joe. So while we have not put out public goals in terms of what we are trying to attain in terms of size of development book, size of lending book or size of third-party management, your comment that we do see accelerated growth coming out of all 3 of those in the near term is 100% factual. We think we have the ability to add value in all 3 of those avenues, similar to what we've done historically with the acquisition pipeline.

So lending-wise, we saw a little bit of incremental lending take place there in the second quarter. We expect that to continue to probably accelerate through the rest of the year. And again, that has some different attributes there that provide value. There's obviously the rate and return upfront. But as I mentioned earlier, the ability to put our third-party management platform on there, which is a benefit to ourselves as well as that owner and obviously increases the security of that lending that we do.

We have access to tenant insurance through that lending platform. And then we get access to some of the assets where we bought, I believe, over 30 assets out of that platform over time. And so lending provides a whole slew of different opportunities. Same thing to say about third-party management. We're growing off a relatively low base, but the momentum in that team is fantastic. We've added a number of resources there from a business development and client service perspective.

And I think we're really seeing the market react to the benefits of partnering with Public Storage and what we can do for assets on our platform. And so seeing some good momentum there, which we would expect that to drive additional profitability in the future as well.

Our next question comes from Eric Wolfe with Citi.

I think Nick was going to ask the question, but I'll just jump in. I guess for NSA, I understand that you're guiding towards sort of core FFO neutral for the rest of the year. But I guess, are there specific like operating or financial goals that you're trying to achieve over the next 1 to 2 quarters?

I'm just trying to understand if there are certain things that we should look out for going into the back half of the year to measure success, whether that's increased occupancy, margins moving up, expenses moving lower? Just some specifics around what would success look like for the back half of the year.

Yes. I think there's a few things. So the first thing I would say is we were focused on a solid start to the integration. And certainly, you're hearing that from us today and unifying the teams as we operate from here.

And then Joe gave you a pretty good road map as we look at '27 and into '28 when we announced this in March. And it's a combination of, yes, expenses probably you see earlier, but then you start to see tenant insurance show up. And then revenue is probably the longest tail, but the biggest opportunity as we move from here.

We are going to take really a micro market-focused strategy as it relates to the pricing opportunity from here. So you're not going to see us necessarily focus on occupancy over rate from a national standpoint, but that will be more driven by what we're seeing in the local market as we view it as a pretty balanced opportunity between taking a portfolio that's circa 85% occupied today and moving higher with occupancy, but also wanting to capture that rate piece.

And depending on the submarket that it's in, the opportunities are vary there. So for instance, there's lots of great NSA properties that we're looking at that have occupancy well over 90% today. So the opportunity there is around how do we drive rate and look at expense opportunities over time at that property to drive NOI. The flip side is there's some properties that have lower occupancy. And so clearly, we need to lift those higher, but it will be more on a property-by-property micro market basis, not an overarching strategy.

And I think maybe the last thing I'd highlight here is something we highlighted at the call in March, which is the portfolio is really complementary to ours. And so there's the ability to add new geographies and new submarkets into what we're operating. And that gives us more degrees of freedom as we think about operating in those new marketplaces with those properties.

Our next question is from Mike Mueller with JPMorgan.

I guess going back to the move-in rates being up 1.6% in 2Q and increasing to 4% in June. Was more of that improvement into June driven by kind of what's going on this year as opposed to what was happening with the comp last year?

Yes. I mean the comps are certainly a component of this as you look at any given year, but I wouldn't highlight anything particularly in June. And as I noted, we used a pretty similar pricing and promotion strategy in this June compared to last June. So nothing comp related that I would highlight. And obviously, I'm highlighting that it's continued into July as well.

But it doesn't mean that every month is going to be a consistent trend. One of the things we've seen over the last several years is that you do have some better months and some softer months that plays into comps as well as current year performance. I think the confidence that you're hearing from us is that the overall direction is headed there, but it doesn't mean that every month is going to be a step change move consistently.

Got it. Okay. And I know you talked about acquisitions quite a bit, but are you seeing any significant opportunities in Canada already?

We're just getting to a place where we're going to be putting the closing touches here on that portfolio, and we're excited to work with the team to do that. And as we do that, we'll certainly look at capital allocation opportunities alongside it. But the first focus is the integration efforts and building the team there to drive that performance over time. But you'll start to hear from us around international opportunities in Canada. I'm certain of that over the next several years.

We have reached the end of the question-and-answer session. I would now like to turn the call back over to Tom Boyle for closing comments.

Great. Thanks, Rob, and thanks, everybody, for joining today. Michael characterized it pretty well. We've got a combination of core leading indicators operationally that we're encouraged by as we move through '26. And we're putting the building blocks in place and have more of them in place today than we have in the past. And so we're looking forward to providing updates to this group as that execution takes place. Thanks very much for joining.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Public Storage First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brandon Reagan. Thank you. You may begin.

Thank you, operator. Hello, everyone, and thank you for joining us for our first quarter 2026 earnings call. I'm here with the Public Storage leadership team, Tom Boyle and Joe Fisher.

Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, April 28, 2026, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events.

A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports and an audio replay of this conference call at our Investor Relations website, investors.publicstorage.com. [Operator Instructions]

With that, I'll turn the call over to Tom Boyle.

Good morning, everyone, and thank you for joining us. I'll frame my comments this morning around four points. First, the PS4.0 era is now underway with the new team in place and Own-It culture gaining momentum. Second, the announced acquisition of NSA is an important early milestone in that strategy. Third, our operating platform, PS Next, is strengthening the customer experience while also improving how we run the business with first quarter results in line to a touch better than expectations. And fourth, even ahead of the forthcoming recovery in storage fundamentals, we're continuing to invest behind a broader value creation engine that we believe can drive stronger per share growth over time.

Let me start with PS4.0. What PS4.0 is really about is building the next phase of Public Storage around a simple idea. We have a unique opportunity to create value by combining the scale of our platform, the strength of our brand, the quality of our portfolio, our unique Own-It culture and increasingly the advantage of our data and analytics capabilities. We hosted our 160-person leadership team a few weeks ago to kick off the new era with an enthusiastic response internally. Our teams have embraced the strategic vision, and there is real energy across the organization around what comes next. That matters because strategy only creates value if the organization is aligned behind it. Right now, that alignment is getting tighter. The energy is being translated into urgency for execution.

That takes me to point number two, NSA. The announced acquisition of National Storage Affiliates is a major step forward for us and a very clear example of PS4.0 in action. When we discussed the transaction in March, we highlighted three things. One, the portfolio combination is compelling. The two portfolios deepen our brand, scale and operating presence across the national opportunity set. Two, there is meaningful upside from bringing that portfolio onto our platform. On the M&A call, we discussed the customer experience opportunity with managing the properties under the PS brand and PS Next operating model. This will also lead to revenue potential and margin upside. And three, we structured the transaction with a win-win joint venture that optimizes portfolio structure for Public Storage and preserves financial strength. Public Storage will wholly own 46% of the over 1,000 assets in the portfolio with the remaining in joint ventures. Importantly, the transaction maintains our industry-leading balance sheet.

So when I step back and look at the NSA acquisition, I don't see a bigger company. I see a stronger platform, a deeper portfolio and a broader opportunity set for value creation. This will drive differentiated per share earnings growth in coming years. And importantly, integration planning is progressing well. The teams are engaged, the work streams are moving, and we're preparing the business to execute well upon closing.

I also want to take a moment to thank both the NSA and Public Storage teams. Transactions like this require an enormous amount of focus, coordination and professionalism, and we appreciate the strong collaboration we're already seeing across both organizations. There's obviously much more to come as we work toward completion of the transaction, but I'm encouraged by the work that's underway.

That leads to point number three, the operating platform. A big part of why we're excited about NSA is that PS Next is built for this. PS Next is an operating platform that is increasingly shaping how we serve customers, price inventory, manage demand and drive efficiency across the business. Customers are increasingly interacting through digital channels, whether through our website, app, agents and over time, more through large language model-driven interfaces. We're building our operating model around those shifting customer expectations. That customer focus is central to PS4.0. The team is aligning this direction.

Let's connect that strategy with what we're seeing in the business today. The operating environment remains uneven. We're seeing lower customer move-in activity overall in the first quarter with some weather impacts and modest demand. But at the same time, we have driven better rental rates than expected. And importantly, our existing customer base remains very healthy. Move-out activity was meaningfully lower in the quarter, leading to better occupancy than last year.

This is not a one-speed environment, it's a market where execution matters. And that is where the operating model transformation becomes so important. We're improving customer experience in a way that supports performance both on the revenue side and the expense side. We're seeing that playbook continue to develop, and that gives us confidence, not just in integrating NSA, but improving the performance of the broader portfolio over time.

Now let me go to point number four, the value creation engine. We're not waiting for the environment to get easier. We're acting now. We have confidence in the long-term fundamentals of storage and have the opportunity to invest today to benefit the platform over time. That mindset is important because while the near-term environment remains uneven, the longer-term setup is compelling. Several longer-term drivers support that optimism. Self-storage adoption has increased over the last decade. Participation has broadened across customer cohorts with strong participation from younger generations. Our units also present an affordable space solution in a high cost of living environment and competitive supply is slowing as new development becomes harder and more expensive. We like that backdrop. We're positioning the company now to outperform as the environment improves.

NSA is the first major milestone of our value creation engine, but it's not the only one. We continue to execute upon value creation through multiple levers that is a year-in and year-out opportunity given our capital resources at Public Storage, across four different levers: acquisitions, development, expansion efforts and our lending platform. Our capital resources will be allocated across those levers in order to: one, improve our portfolio; two, accelerate per share earnings and cash flow; and three, compound our returns.

Our external growth and capital allocation capabilities continue to build. In March, we announced the strategic data science partnership with Welltower. That partnership brings together Welltower's capital allocation-oriented data science platform and Public Storage's operational, pricing and customer analytics capabilities to better our micro market targeting and portfolio construction over time. Our value creation engine is driven by a combination of our PS Next operating platform advantages, enhanced data science approach and team investments.

So if I put it all together, here's how I'd summarize the quarter. One, we launched PS4.0 and aligned the organization towards a new strategic vision. Two, we announced the NSA acquisition, which, with a unique structure, strengthens our scale, our platform, our portfolio and our value creation opportunity. Three, we continued advancing PS Next in our operating model transformation with a strong focus on customer experience. And four, we expanded the reach of our value creation engine through both external growth and the Welltower data science partnership.

We're realistic about the operating environment. It remains uneven, but we're also optimistic, optimistic about the demand and supply setup over the next several years, optimistic about the capabilities we're building and optimistic about our ability to translate those investments into stronger per share earnings growth over time.

With that, let me turn it over to Joe.

Thank you, Tom, and good morning, everyone. The topics I will cover today include our first quarter results, a summary of recent transactions and a balance sheet and capital markets update.

Core FFO in the quarter was $4.22 per share, up $0.10 per share or 2.4% year-over-year. These results were driven by better-than-expected same-store NOI and significant growth from our non-same-store portfolio and ancillary income initiatives. Same-store revenue and NOI growth in the quarter were flat and positive 0.4%, respectively. Move-in rents, while still negative, came in better than expected at minus 2.4% versus full year expectations of down mid-single digits, which had been expected to start the year lower and improve throughout the year. Occupancy was positive year-over-year by 0.4% versus guidance assumed at flat for the year. Lastly, our existing customers continue to perform well as demonstrated by a material reduction in churn.

We continue to see a market that is mixed by geography. In a number of Sunbelt markets, new supply continues to weigh on performance and pressure revenues. But at the same time, we are seeing strong growth in many of our coastal and Midwest markets. Lastly, Los Angeles continues to be hindered by the state of emergency with the most recent extension through the end of May.

As a reminder, we have assumed the state of emergency remains in place all year at a negative 80 basis point impact to same-store performance. But given the quality of our portfolio, low supply, high occupancy and strong performance in other Southern California markets, L.A. will be a strong tailwind for performance in the future.

Expense growth performed very well at minus 1.1% for the quarter. Property tax, we did see earlier-than-expected appeals wins of approximately $3 million in the quarter, which we had previously expected in the second quarter. Away from property tax, PS Next helped drive negative growth in payroll, R&M, utilities and marketing.

Outside of the same-store pool, NOI growth of 27% in our non-same-store pool and ancillary growth of 12% lifted results. Non-same-store performance and our external value creation engine continued to be a substantial and repeatable driver of shareholder value. If we utilized a same-store definition similar to that of peers, NOI would have been 50 basis points better in the quarter.

While we are pleased with our results, having started the year ahead of our expectations, we have not adjusted our guidance at this time with busy season still ahead of us. As we spoke about in our initial guidance, the leading indicators of our business remain positive, but year-over-year revenue growth as a lagging indicator will soften midyear.

On to transactions. Year-to-date, we acquired or are under contract for $186 million. The first quarter is typically a slow quarter for external growth. However, we do continue to see opportunities that are a great fit for our PS Next operating platform and expect to have more activity to discuss in the second quarter.

On the development and expansion front, we had openings of $45 million during the quarter. The development pipeline stands at $618 million with stabilized yields targeting 8% and remaining amounts unfunded of $416 million. And for our lending business, we had $143 million outstanding at a current rate of approximately 7.9%.

Lastly, our fortress balance sheet remains in excellent position from both a metric and liquidity perspective. At quarter end, we had available liquidity of $1.3 billion between our line of credit and cash on hand, plus approximately $600 million of annual free cash flow. Subsequent to quarter end, we issued $500 million of well-priced 10-year unsecured notes at 5.0%, with proceeds being utilized to pay down our revolving credit facility and improve liquidity.

Our balance sheet remains one of the strongest in the REIT sector with debt-to-EBITDA of just 2.9x, debt plus preferred equity to EBITDA of 4.2x and debt plus preferred equity to enterprise value in the low 20% level.

In summary, we're encouraged by our start to the year and by the opportunities we see ahead. We delivered solid results, maintained a fortress balance sheet and continued to execute against our capital allocation priorities. We remain disciplined on deployment, constructive on the long-term fundamentals of the business and confident in our ability to drive per share value creation.

With that, I'd like to turn the call back to the operator to open up for Q&A. Thank you.

[Operator Instructions] Our first question comes from Michael Goldsmith with UBS.

Joe, in your prepared remarks, you talked a little bit about a material reduction in churn during the quarter. So can you talk a little bit more about that specifically? Was that just in the month of March? Was that throughout the quarter? What do you think is driving that? And what is the impact on the financials of a material reduction in churn?

Michael, good question and definitely a good statistic to highlight for us as we've been very encouraged by the existing customer dynamic and them staying with us longer. So we did see a pretty material reduction in that churn number and move-outs coming down in the quarter.

In terms of what's driving that, I think it's a multitude of factors. One, we're seeing good pay rates and minimal delinquency coming off of the existing customer and an ability to continue to pay those ECRIs as they come through. So the health of the overall customer is strong at this point in time. At the same time, from a customer experience and focus on that experience and length of stay, as part of PS4.0, we've talked a lot about the customer obsession and the teams are really laser-focused right now on customer experience, making sure we deliver a good product and a good experience overall. And hopefully, that results in a longer length of stay for us.

And from an economic perspective, obviously, that existing customer is a little bit more profitable for us. And so the more that we can hold on to that individual and have less inventory available to sell going forward, that helps pricing on the new side as well, which you saw that move-in rate clearly come up pretty materially and ahead of expectations there in the first quarter.

And as a follow-up question. Can you talk about what you've seen -- we're almost at the end of April now, but what you've seen through April? I know we're lapping Liberation Day. So just trying to get a sense of what's the latest and greatest operating metrics.

Yes. Sure, Michael. It's Tom. We saw similar trends in April to what we saw really through the first quarter. So similar to what Joe was just highlighting in terms of better churn year-over-year, so lower move-out volume, lower move-in volume with occupancy kind of flat to a touch better and improving trends as it relates to move-in rates, move-in rates flat to a touch positive through the month of April. So busy season's here, just getting started. We have a busy month ahead of us here in May, June and July. Team is ready and look forward to updating you on that further second quarter activity as we move forward.

Next question comes from Samir Khanal with Bank of America.

I guess, Joe, I mean, how should we think about the cadence of revenue growth here, right? I mean, as we think about the next few quarters, I mean, when you look at the first quarter, you're certainly tracking well above the midpoint here, just help us kind of unpack kind of revenue growth.

Samir, so I guess I'd bifurcate that into two different pieces. You have your leading indicators and your lagging indicators. And on the leading side, I think inherent in the question is, obviously, we started off the year really well from a leading indicator perspective across the board, whether that's those move-in rates, the churn, the occupancy, et cetera. So feel really good on that front. What we did communicate, going back to the original guidance call, was that year-over-year revenue as a lagging indicator, does get a little bit worse before it gets better. And so we had some pressures in third quarter and fourth quarter of last year flow into that year-over-year number as we get into 2Q and 3Q. So we do expect year-over-year revenue to come down a little bit on a year-over-year basis. But sequentially, we continue to be positive in terms of those trends that Tom just talked about going through April.

Got it. And I guess my second question is around kind of how should we think about your investment activity this year, excluding NSA? Maybe expand on kind of the opportunities you're seeing out there and maybe also comment on kind of the lending platform.

Sure. So I'll maybe take the first piece of that, and Joe can take the second piece. I think stepping back on the transaction market, we're seeing similar trends to what we saw last year, which was encouraging, a broader -- a broadening of the seller set, a combination of single one-off transactions as well as some smaller portfolios that we were more active, and I'll get to that in a moment, on single asset transactions in the first quarter.

In terms of the first quarter itself, it tends to be a little bit quieter seasonally. So we'd expect that transaction volume picks up as we move through the year. But I think a more stable interest rate environment, a more stable operating trends and a broadening seller set all point to encouraging trends for transaction activities overall.

As Joe highlighted just a few moments ago, we've acquired or under contract around $200 million in acquisition activity. And that's really being driven by a couple of factors. We, on our last call, spoke specifically to investments we're making into our capital allocation capabilities, and I reiterated those a few moments ago, building the team, enhancing our data science capabilities and utilizing the PS Next operating platform to drive differentiated cash flow. So we're built for the small one-off transactions, which has really been where we've been active year-to-date. About 3/4 of the activity has been off-market as well. So as we continue to find those micro market opportunities that we think fit really well for the portfolio. So teams are executing. The balance sheet is certainly poised to support that level of activity. And we'll keep growing from here.

The second part of your question on lending. Joe?

Yes. Samir, so I guess first off, Tom mentioned the capacity and obviously the PS Next advantage we have across all forms of capital allocation to drive that outsized and compounding return piece. From a guidance perspective, I'd just highlight, there really is no implication to this year, whether or not we're more aggressive or less aggressive from an external growth perspective. It really has to do with compounding that per share earnings growth into '27 and '28 and setting up the growth profile there. So not a big swing factor for '26.

As it relates to lending, this continues to be a growing part of the business. It was a slow start to the year. But we do expect that to continue to grow over time and significantly enhance both the value creation and the size of that platform. I'd say there's some puts and takes to why we were a little bit slower. From a demand for lending, it is a little bit lighter right now, which, given the backdrop of lower development starts and lower supply that shouldn't be unexpected and is actually a net long-term positive, obviously, for us from an industry perspective.

The other piece is that it's a pretty competitive dynamic in terms of individuals and groups trying to make new loans. And we are remaining disciplined in terms of keeping to our rate, keeping to the metrics that we want to underwrite to and have not deviated from that to date. So if we miss out on a few deals because of that, so be it, but we think that's in the long-term interest of shareholders.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

First question for me. I just wanted to follow up on the revenue cadence in response to your -- Samir's question. With the pressure that you're anticipating on same-store revenue growth in 2Q and 3Q, I guess, absent L.A., if you did not have L.A. in the portfolio, would revenue growth still be pressured like the guidance implies? Or do you think that the mix of stronger coastal and Midwest markets would carry the recovery more evenly throughout the balance of the year?

Todd, it would come off a little bit when you look at both coastal and Sunbelt in 2Q and 3Q. Again, you kind of saw some broader-based weakness back in 3Q and 4Q when you looked at some of the new move-in rates going a little bit more negative than where we're at today. And so it is a little bit more broad-based there in 2Q and 3Q. And it's not material, but it is expected to be slightly lower than where we're at here in the first quarter.

And then you called out a good point there from an L.A. perspective. The state of emergency is still in place, at least at this point in time through end of May. From a guidance perspective, we did factor that in through the entire year and that minus 80 basis point impact to same-store rev for the full year. But because of the timing and the comps, L.A. on a same-store revenue basis does continue to get worse throughout the year, assuming that the state of emergency remains in place, which we don't have insights one way or the other. And as I said in my upfront comments, we do think that's going to be a pretty material tailwind to recapture that market rent growth at some point in the future. But for now, it does remain a drag here as we move throughout the year.

Okay. That's helpful. And then, Tom, I wanted to ask about the integration of NSA, which you touched on in your prepared remarks. Can you talk about the steps or the measures being taken to ensure that NSA's operations during the peak leasing season through closing here are sort of intact, I guess, that leasing revenue management, everything is moving along according to plan? And then any incremental thoughts about the expected revenue or expense synergies from the transaction as you work toward closing?

Yes, I'll take the first part of that, and Joe can cover the second piece. On the first part, we've been really encouraged by the dialogue and collaboration between the National Storage team and the Public Storage team as we've gotten together here and are developing deep plans to be able to integrate the properties together as we move into the third quarter here. And over the interim, to your point, they're running their business and they're running the business well. We're doing the same and look forward to the opportunity to bringing them together here in the third quarter.

And we'll obviously share some more on that as we get closer. But as we spoke about on the M&A call last month, the plan is to integrate those assets immediately onto the PS Next platform, start the rebranding process, welcome all their customers and their employees and really get going here in the third quarter.

Todd, it's Joe. And just to close that out, just from a synergy timing and value creation perspective, no changes at this point in time in terms of what we put out in early March from that presentation that we put together. We still expect $110 million to $130 million of synergies over time.

From an accretion perspective, 2026, we had commented that we do expect that to be breakeven in 2026. But by the time we get to stabilization out in '28 and '29, we do think we'll have $0.35 to $0.50 of per share earnings to compound on top of our existing profile, which I think at the time, we had talked about the total value creation coming from that at our multiple, that's over $1.5 billion of value creation coming off of a $10 billion transaction. So very excited to get going on the integration and go out there and prove the upside that we put together.

Our next question comes from Eric Wolfe with Citi.

It's Nick Joseph here with Eric. Just as part of the structure of JV in certain properties and retaining full ownership of others, is there a difference in occupancy between those properties that are going into the JV versus what will be wholly owned?

No. No, there isn't. Pretty similar occupancies between the different pools today.

So just in terms of the high cash flow JV, it's -- there's no difference of stabilization or anything that would drive different return profiles?

Both sets of those assets have been owned by NSA for a period of time and occupancies are in a pretty similar place. As we thought about that formation of that joint venture, really creating that win-win and different return profile for the joint venture compared to on balance sheet, some of the market mix compositions and the like, but occupancy wasn't the driver of the selection of assets one way or the other.

Our next question comes from Nicholas Yulico with Scotiabank.

I guess if we look at the -- sort of the average occupancy in same-store versus where you ended on occupancy, the year-over-year delta is different there, sort of not as much occupancy growth on the year -- the period end versus -- year-over-year versus in the fourth quarter. Is there something that happened in March like were you trying to push prices and you dealt with some occupancy loss because of that? Can you just unpack that a little bit?

Nick, yes, just from an occupancy perspective, we did come in quite a bit better than expected there in the first quarter, given some of that lower move-out activity that we saw. I think one thing that you might be referring to is just the change, if you look at same-store occupancy in fourth quarter of '25 versus first quarter of '26, it did come down a little bit sequentially, but I'd highlight that we did add about 17 million square feet into the same-store pool from '25 to '26 and predominance of that was a little bit more heavily weighted towards our Sunbelt markets, which are running a little bit lower from an occupancy perspective. So if you're thinking about 4Q versus 1Q, I really wouldn't read into that much, focus on that year-over-year momentum that we're seeing.

Okay. Yes. I guess the follow-up on that was I was also looking at some of the year-over-year delta in terms of the ending occupancy in the first quarter versus what that growth was year-over-year in the fourth quarter, and it was a lower year-over-year on the ending. And so that's why I wasn't sure if there was anything that sort of happened late in the quarter that might have impacted the ending occupancy in March.

There wasn't anything in particular towards the end. But as Joe just mentioned, we were really encouraged by churn being lower through the first part of this year. And certainly, the models adapted to that and predicted that moving forward, which led to a little bit more pricing power as we move through the through the quarter. And if you look at the statistics through the quarter, churn really being a really helpful component, but rates improving through the quarter, promos down, marketing down and occupancy up on a year-over-year basis, all encouraging kind of leading indicators as we move forward from here.

Our next question is from Brendan Lynch with Barclays Bank.

Tom, I just wanted to follow up on churn being lower year-over-year. Could you kind of discuss some of the initiatives that are driving that outcome? And how much of that is actually in your control given most customers aren't generally moving out to go to a competitor?

Yes, a great question. I do think there's a number of factors at play here. Joe touched on some of them earlier. And just to reiterate, I do think there's some macro factors at play here, right? As you think about activity levels across the economy, GDP growth, job growth, housing transaction activity all slowing as we moved into 2026. And I think that has an impact both on the ins and the outs. But overall, net-net, we'd prefer less churn within the portfolio.

In terms of initiatives that we have underway, I highlighted earlier around one of the key components of the Own-It culture and PS4.0 is customer obsession and a focus on customer experience. And that alignment amongst the teams is growing, and it's really top to bottom, from targeting new customers and conversion into the platform as well as a heightened focus on customer experience at the property as well, including new incentive programs targeted towards churn. And so overall, lots of different initiatives internally targeting that customer experience, which we think is also benefiting churn levels into the first quarter.

Great. That's helpful. And then maybe just touching base on some of your more challenged markets like Tampa and Atlanta and Phoenix, do you anticipate the dynamics in these markets to continue to improve? Or is there new supply or any other challenges that are -- still potentially could still emerge going forward?

Yes, that's a good question. I think overarching, we continue to expect that new supply will taper down, and that is impacting many of those markets. Tampa, you highlighted, in particular, was related to some storm activity and the comps associated with that as we lap those. But away from that, we've seen encouraging trends in markets like Dallas, for instance, Atlanta, Phoenix, where new supply is being absorbed. Revenue growth is still negative on a year-over-year basis, but improving sequentially. And that speaks to the overall trajectory of that Sunbelt group over time, which we expect kind of modest improvement as we move through '26 and forward.

I think, Brendan, one of the things we've been keeping an eye on is just Tom talked upfront about the secular backdrop and the positivity there for the industry as a whole. But going through this cyclical disruption right now. And when you look at third-party data out there from both an occupancy and a rate perspective, we do seem to be leveling out and stabilizing. And so that's a really good sign in terms of what the go-forward trajectory is going to be coming out of this. And so as supply continues to come down, and then we go out there and put our initiatives in place to capture more than our fair share, definitely optimistic from a cyclical perspective that we've kind of found this period of stabilization.

Yes. And I think stepping back, obviously, the recovery in some of those markets has taken longer than what we would have liked, but that absorption is taking place. And you've got strength in some of the coastal markets that it frankly continues to build such that the recovery is on its way, the timing of it continues to come but is a little slower than maybe what we would have liked a couple of years ago. But in the meantime, we're investing in the platform and focused around where we can deploy capital, improve operations to take advantage of that opportunity set moving forward.

Our next question is from Juan Sanabria with BMO Capital Markets.

Just a question with regards to the churn and the interplay with ECRIs. If I look at the implied contribution of ECRIs, it seems to have come down. So just curious, kind of piggybacking off the last question, is there, I guess, a greater ability for local or corporates to kind of soften those ECRIs if the customer complains to try to keep them on board and reduce churn? Or if you could talk a little bit more about that, the interplay of ECRIs and churn and what we should just expect given the moderating macro environment?

Yes. Good question, Juan. The encouraging thing is we've seen really steady customer behavior and that goes across the board. Joe highlighted earlier, lower delinquency, payment patterns, things like that, vacate activity clearly. But I would put price elasticity on that list as well, which is we haven't seen a shift in terms of price elasticity. And in fact, the replacement cost component of the ECRI modeling is improving as well. So as we think about the customer reaction to rental rate increases, they've been encouraging year-over-year.

What you're seeing in terms of overall contribution on a year-over-year comp basis, is -- a big component of that is Los Angeles, right, where this year, we don't have the ability to send rental rate increases at all, whereas last year, we had the ability to send more modest increases. And I'd say that's probably the primary component of that year-over-year comp.

But stepping back, that price elasticity remains healthy. Customers continue to place a lot of value on the product we're offering. Our rents continue to be affordable versus other space alternatives. And I think all of that is leading towards lower vacate activity from that program and overall.

Great. And then just kind of a bigger picture question. Given the long history and data that you have, what lessons or takeaways do you have from previous times when oil or energy prices had spiked and what that may or may not mean for storage and the stickiness of the customer or potential churn as a result? I'm not sure if there's a lag or any insights you may glean from the past data.

Yes. What we've seen over time, stepping back, is in periods of macro stress, so if you look back at prior recessions with the exception of the COVID environment, what you really saw was vacate activity starting to tick higher. And encouragingly, obviously, we've spoken about it a number of times on this call, we've seen the opposite taking place, and that's continued through April as well. So very encouraging existing customer trends.

In terms of gas prices, specifically, we've seen gas prices and oil prices go higher at several different points over the last 10 to 15, 20 years. And we haven't seen a material impact on storage activity. And I think that goes back to the needs-based nature of our product and the fact that folks aren't waking up on a Saturday morning dreaming of moving their stuff into storage. There's something that's going on in their life, right? And there's a change that's occurring. And we're a solution for that change. And so we don't tend to see short-term moves in gas prices materially impacting the customer base. That all said, teams are laser-focused on watching customer behavior and seeing if there's any shifts. It's just been encouraging to date.

Our next question comes from Caitlin Burrows with Goldman Sachs.

Maybe just first, it seems like a number of the 1Q metrics came in better than expected. So I'm wondering if the reason for no change to guidance is just that it's too soon in the busy seasons ahead? Or are there some known issues that we should take note of like the timing of the one-off acquisitions, timing or rate of debt raise or anything else to offset the strength so far or not necessarily?

Caitlin, it's definitely the former. So hopefully, you're picking up in our tone and commentary the positivity that we have around the start to the year. Very encouraged by everything we're seeing. But to your point, we are still early in the year with a busy season ahead of us. We still have NSA to get closed and integrated. And so our thought process is simply stay focused on the task at hand, focus on how we're going to finish the year, not how we're going to start it from a guidance perspective, and we'll revert back in 2Q with hopefully a positive update for everyone.

Got it, okay. And then maybe just on the supply side, you mentioned how you continue to see new supply competition in some Sunbelt markets in particular. I guess, how long do you think that's going to take to dissipate? And what makes you confident that those sorts of headwinds don't just pop up again as you think about your comments on the confidence in long-term kind of, I don't know, strength in supply-demand that you mentioned earlier?

Yes. So the Sunbelt markets have pretty good demand trajectory, and you think about population growth trends, job growth, income growth. And so there's really encouraging trends that are taking place in many of the markets that we spoke to earlier, be it Tampa, West Coast of Florida, Atlanta, Dallas-Fort Worth, et cetera. And so we're encouraged by the longer-term trajectory there.

There is the impact of new supply periodically in a real estate cycle that occurs in those markets, and we're in that. I think the encouraging thing is new supply is tapering down and frankly, being absorbed in those markets. And the sequential trends on a quarter-over-quarter basis have been improving in many of those markets that I just highlighted.

And so it does feel like from a second derivative standpoint, we're headed the right direction. And I think that just relates to the fact that development business continues to be more challenging, and that's not just a Sunbelt element, that's a nationwide component. You look at time lines and city processes continue to get longer, not easier. Financing costs are obviously higher than they were several years ago. Construction costs are more elevated and not dropping from here. And obviously, in many of the Sunbelt markets, for instance, rents have been coming down, right? Revenues are going lower, and so you think about the economic barriers to entry that are coming through in some of those markets as well.

So we're anticipating that supply takes another leg lower this year and probably further into next year, and you will see that occur in some of the Sunbelt markets as well as elsewhere.

I think it's important, too, to add on that, just in terms of Tom's commentary on the challenges around supply broadly and those economics that is very different than what you see out of us. So we've talked about wanting to continue to lean into our development platform, but that's really a byproduct of the quality of the team, the benefits of being one of the largest, if not the largest developers in the space and very importantly, benefits of PS Next. The fact that we're getting 8% stabilized yield on our platform is not representative of what's taking place in the broader marketplace. So that value creation is to us alone. That's why we continue to lean into that area while the rest of the market is pulling back.

Our next question is from Michael Griffin with Evercore.

Maybe just circling back on the PS Next initiatives and how it relates to your marketing spend and sort of targeted marketing. Tom, can you maybe quantify or give some examples of how the framework around either customer acquisition or marketing spend, leveraging data from Google or AI that you might have, might have changed with the PS Next relative to how Public was doing it previously?

Yes, there's a lot there to unpack. We'll take it piece by piece. I will say, we welcomed the new Chief Revenue and Marketing Officer, Ayash Basu, here earlier this year, and he's getting his fingerprints on our revenue and marketing strategies moving forward. And I think working with the team that's in place, we've had the ability to lean in through the first quarter around some of our targeting initiatives, be it through Google as well as our conversion of initiatives on our website to target customers that we think have an attractive lifetime value.

And I think they're working very closely with Natalia Johnson and her data science team around what it is that we can do and utilize our data to be able to be more refined. So that when a customer drops on our website, we have an expectation of what their lifetime value is going to be, what the right potential pricing and promotion mix is. And then your point on Google, how do we go out and find more customers like that. So all of those things are in the mix and excited to see what those leaders can drive as we move forward from here.

That's certainly helpful. And then maybe just a point of clarification. On the $185 million of deals that closed subsequent to quarter end, were any of these in relation to the new data science partnership you have with Welltower? Or was this stuff that was already in the hopper that just happened to close this month?

Yes. That stuff was more in the hopper. So that's all to come.

Our next question comes from Spenser Glimcher with Green Street Advisors.

In terms of the L.A. market, can you just remind us of how long it has historically taken you to get those customers up to market rents after periods of rent freezes? And do you think that this catch-up could take longer, this go around, just due to the weaker demand landscape?

Yes. Great question, Spenser. The first thing I'd say is that the demand landscape in Los Angeles continues to be very healthy. If you look at Orange County activity and the other counties around L.A. County, San Diego continue to see strong demand, high occupancies, good rental rate trends. And so we've got a lot of confidence in terms of the overall macro backdrop around L.A. and the performance that we're seeing there. And then on the ground, we have a differentiated, attractive portfolio that's really irreplaceable in Los Angeles that we've owned for decades and continue to improve. And so we're optimistic as it relates to the upside from a demand standpoint moving forward from here.

As it relates to the ability to charge market rental rates, obviously, that's not within our control today, but we would look to charge those market rental rates over time, and it will partially depend on how long the state of emergency is in place in terms of how long it takes to get it back. If you look back at the Hill and Woolsey Fire and the COVID emergencies, it probably took us 18 to 24 months to get back to the levels of rents that we were charging. That state of emergency was obviously in place for a longer period of time than where we sit today. So that gives you a guidepost, but we're certainly not going to go rush out and do it immediately either given the breadth of the platform and the brand in L.A., but we do have a lot of confidence and track record in our ability to accelerate those rents to market rents over, call it, a 12- to 18- to 24-month period.

That's very helpful color. And then maybe just switching gears. Just in regards to the transaction market, obviously, you guys have been pretty active and you guys see, I would assume, everything that's coming across being marketed, can you just comment on what you're seeing in terms of assets on the market today? Where is the bid-ask spread generally? And can you comment broadly on cap rates?

Sure. As I highlighted earlier, we've been encouraged by a broadening of the seller set. So we've got activity in the first quarter from institutional sellers, from mom-and-pop sellers and everything in between. And so that's been an encouraging development in terms of the breadth. And I do think the stability that we've seen both operationally as well as within interest rates has led to a narrowing of that bid-ask spread, i.e., there's less of a gap between what a seller thinks rental rates should be versus what we think rental rates should be. Interest rates are more stable, all those sorts of things, all helpful.

In terms of cap rates, they've been reasonably consistent with stabilized product trading in the 5s, getting into the 6s as we put them on our platform, and we really have that PS Next opportunity to take the assets, put it on our platform and earn more cash flow, which is attractive. But overall, that's a sense of where cap rates are across the industry. And I think our team is really built, again, for that one-off activity. Again, about 3/4 of the activity year-to-date has been off-market and really targeted micro market activity. And certainly, NSA on the other end of the spectrum, certainly a large portfolio opportunity. So we're interested in the full spectrum and have different tactics and team investments to try to attack those opportunities.

[Operator Instructions] Our next question comes from Ravi Vaidya with Mizuho.

I know you guys offered some comments on how you expect revenue trends throughout '26. But how do you expect expenses to trend given that we're off to such a strong start?

Ravi, it's Joe. Yes, we did have a lot of success coming through 1Q, even probably better than expected as you saw P tax, personnel, marketing, utilities, R&M all down year-over-year. I think I highlighted in my upfront comments, we did have about a $3 million onetime benefit in P tax, which was really an appeal win that we thought we would have coming through in 2Q. So no change to full year guidance from that, just a timing implication.

So if you look at where our midpoint is on a go forward, still really constrained expense growth overall as well as relative to the peers, but we do think it will tick higher as we track closer towards that midpoint that we've previously laid out. So you'll see some of those numbers going higher, but still a lot of initiatives in place to keep that number constrained and below inflation.

Got it. That's really helpful. Just one more here. Can you comment on the decision to have, maybe, less promotional activity this quarter than a year ago. Is this something that we could expect going forward? And how do you consider promotions as a tool in an environment when both move-in and move-out volumes are declining?

Yes. So you're highlighting promotions, which is one tool. I'd also highlight marketing as well as rental rates as all tools that we use to drive conversion and traffic to the customer acquisition funnel. And promotions have been down really pretty consistently over the last year, and move-in rental rate trends have been improving as we spoke about through the course of the year. And marketing as well, as we think about less churn and less inventory to re-rent, came down a little bit in the first quarter as well. So encouraging trends really across all three of those levers for customer acquisition, and we'll continue to use them dynamically really at the store level to optimize revenue.

Our next question is from Mike Mueller with JPMorgan.

Can you talk a little bit about the lending program? Are you looking at this largely as a lending business that you can make money in? Or does there need to be an angle where you can ultimately get to the real estate or the management? And how big do you think it could ultimately be?

Mike, so you hit on a couple of the key points there. Of course, we're looking to make a strong risk-adjusted return coming out of this business. It's around $150 million business today. We think it could grow up into the $0.5 billion to $1 billion range over time. But we're not going to strive just to get there. As I said, we went pretty slow here in the first part of the year given the discipline that we have around it.

To your point on ancillary pieces, though, there are a lot of ancillary benefits coming off of this platform. So you hit on one of them, which is it could be a potential feeder of future acquisition activity. And so that is one thing that we look at. In addition, we get third-party property management on these assets, and we also get tenant insurance on these assets. So when you look at the profitability of the platform as a whole, you really have to take a holistic view of not just the yield that we get on the loan, but also the revenue streams and cash flow streams coming in from these other businesses.

Our next question is from Eric Luebchow with Wells Fargo.

Tom, you touched a little bit on move-ins being down year-over-year due to less inventory. But just curious if you could touch on top-of-funnel demand, whether measured through web search or in-store traffic and given some of the recent volatility we've seen in mortgage rates, the increase in fuel prices, slower home sales, any caution that you're sensing from the incoming customer? If you could touch on that, it would be great.

Yes. It's a good question. Some of the same macro themes that I hit on that are influencing churn being lower, also having an impact on the move-in side as well. And it really varies by market. So our stronger markets like Minneapolis, San Francisco, New York, Boston, for instance, good top-of-funnel trends and activities, but some of the markets we were highlighting earlier that continue to be in negative territory and are suffering from more competition with new supply as that's being absorbed, the Florida markets, Dallas, for instance, others, also seeing a little softer incoming traffic to pair with that, as you'd expect.

So big picture, some of those macro trends driving more modest demand coming in, but also supporting the churn level and lack of churn and less inventory to rent. So a really nice pair there and giving us, frankly, a little bit more pricing power.

Great. And just one follow-up on the acquisition side. I know you started off a little slower this year. But given the size and the complexity of the NSA transaction, does it impact at all your willingness to go after larger, more complex portfolios given you still have some leverage capacity? Or should we expect more of these one-off kind of private market assets to trade this year?

Yes. Bigger portfolios are obviously much tougher to predict. The team is built for the one-off acquisitions and the micro market targeting that we're speaking to. And we've been investing in that platform, clearly, increasing the size of the team, the data science capabilities in order to enhance that. It's certainly applicable to portfolios as well, but will be dependent on sellers as they come to market.

In terms of ability to transact, certainly, we've got a big closing coming up here in the third quarter. And so right around the immediate closing, we're going to be thoughtful and certainly prioritizing the NSA transaction and making sure that, that integration goes smoothly as we get started there. But away from that time period, really looking to continue to deploy capital at good risk-adjusted returns and grow our per share earnings platform over time. And so I'd say teams are built, balance sheet is in a good spot and looking to be active as we move through '26.

We have reached the end of the question-and-answer session. I'd now like to turn the call back to Joe Fisher for closing comments.

It's Tom. Thanks, everybody, for joining this morning, this afternoon. Appreciate the questions, and look forward to getting you updated how the busy season goes through second quarter. Thanks very much, everybody.

Greetings, and welcome to the Public Storage and National Storage Affiliates Merger Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Brandon Reagan, Director of Investor Relations. Thank you. You may begin.

Thank you, Melissa. Good morning, and thanks for joining us for this joint conference call to discuss the combination of Public Storage and National Storage Affiliates, which was announced earlier today. Joining me from Public Storage are Joe Russell, Tom Boyle and Joe Fisher. And from National Storage Affiliates, welcome Dave Cramer on the call.

As always, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, March 16, 2026, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. You can find our press release, presentation, SEC reports and an audio replay of this conference call at our Investor Relations website, investors.publicstorage.com.

A final note, we will be making presentation slide references during this call. Should you want to follow along, please take a brief moment to locate the feature presentation on our Investor Relations website. With that, I'll turn the call over to Joe Russell.

Good morning. Thank you, Brandon, and thank you all for joining us. Today, I am thrilled to announce the acquisition of National Storage Affiliates. I want to personally thank Dave Cramer, who is with us on today's call as well as NSA's Chair, Tammy Fisher; and Vice Chair, Arlen Nordhagen. We value the partnership approach each of you have taken through this extensive process, and we are excited to welcome NSA's team, customers and legacy partners to the Public Storage family.

Clearly, this is an outstanding opportunity for NSA and PSA to combine forces, creating an historic juggernaut in the self-storage industry. Together, we will lead the industry with the best market scale, deepest data and digital platform, largest customer base and unparalleled financial strength, all led by a highly motivated team that takes pride in optimizing the Public Storage brand. And there's more to come on the heels of our recent announcements tied to PS 4.0, led by Tom Boyle and the senior leadership team at Public Storage. The combination of our portfolios and the entrepreneurial spirit that is deeply ingrained in our respective cultures could not be a better launch for the strategic vision of PS 4.0.

Now I'm going to turn the call over to Tom (sic) [ Dave ].

Thanks, Joe. It's actually Dave. Good morning, everyone.

Pardon me, Dave.

No worries, Joe. Different names on the call today. So it's all good. So we're very happy to enter into this agreement with Public Storage. This transaction is an exciting step forward for NSA and delivers a meaningful premium to NSA investors. This transaction also enables our shareholders and our OP unitholders to participate in the significant value creation of this combination.

For the past several years, NSA successfully executed a strategic transformation that fully integrated our operating platform, streamlined our portfolio and strengthened our marketing, pricing and technology capabilities. I would like to thank the NSA team for their hard work and significant accomplishments that put us in a position to enter this win-win transaction with Public Storage. We are confident that this transaction maximizes value for our investors and our Board of Trustees unanimously approved the definitive merger agreement with Public Storage following a thorough process. Our Board's goal throughout this process was to secure the best outcome for all of our constituents, and I'm confident, as is our Board, that we will achieve that goal with the strategic combination.

We're excited about merging our complementary portfolio together, resulting in a stronger operating platform with enhanced scale and deeper reach across key markets, benefiting our customers and other stakeholders alike. I would add throughout this process, the Public Storage team has been an excellent partner to work with. We look forward to ensuring a smooth transition and continued growth and value for both sets of shareholders.

I'll now turn the call over to Tom.

Thanks, Dave, and thanks, Joe. Today, we're going to walk through a significant transaction in the history of the self-storage industry, the strategic combination that expands our scale, deepens our market presence, accelerates our financial performance, benefits our combined customers and positions Public Storage to lead this industry for the future.

Let's start with the facts on Page 2 of the presentation. Public Storage is acquiring National Storage Affiliates, the #5 self-storage operator in the country in a 100% stock acquisition valued at approximately $10.5 billion, including debt. Under the terms of the agreement, NSA shareholders will receive 0.14 PSA shares for every NSA share held. Post close, pro forma ownership will stand at approximately 92% PSA and 8% NSA. To finance the transaction and refinance the existing capital stack, we intend to put new financing in place at or around closing, consisting of approximately $1.8 billion of unsecured debt and $2.2 billion in secured debt, a structure that benefits from Public Storage's premier balance sheet. We expect to close in the third quarter of 2026, subject to NSA shareholder approval and customary closing conditions. This is a transaction built on strength, strategy and shared opportunity.

If you move to Page 3. Why NSA? Why now? Let me walk you through the strategic rationale because every component of this deal is compelling on its own. Together, they make this a tremendous opportunity. First, category-leading scale and brand. We are creating the leading owned and operated self-storage platform in the world with increased depth in both the physical and digital world. When you combine Public Storage's brand strength, customer reach and operational infrastructure with NSA's footprint, you get something special. Scale matters in this business, and we're now operating at a level that sets a new standard.

Second, complementary markets and assets. NSA doesn't just add size, it adds the right kind of size. Their portfolio is complementary to ours, expanding into high-growth Sunbelt markets and new geographies where we see long-term demand. Over the last several years, our team has toured almost all of these assets, and we're excited about the opportunity to bring them into our portfolio. Combined, we'll operate nearly 4,600 stores across 42 states. That's a 30% increase in total properties.

Third, a creative joint venture structure. At closing, a new joint venture will be formed with 313 wholly owned NSA properties. This is a win-win structure. It creates a high cash flow yield for OP unitholders while concentrating the go-forward company exposure into NSA's growth markets. This JV allows PSA to wholly own 488 assets on balance sheet focused on our key Sunbelt and core markets.

Fourth, synergy and margin upside. We've identified $110 million to $130 million in actionable synergies, identified and executable, driven by revenue management, brand, margin expansion, tenant insurance and overhead efficiency.

Fifth, exceptional balance sheet. The combined enterprise will carry $77 billion in enterprise value, and we expect minimal leverage impact from this transaction. We're entering this combination from a position of financial strength, and we intend to maintain it.

Sixth, accelerated growth and profitability. FFO accretion is expected to be neutral in 2026, ramping meaningfully in '27 and reaching $0.35 to $0.50 per share at run rate stabilization. On our multiple, that accretion equates to approximately $1.5 billion of value creation for our shareholders. Every one of these components reinforces the others.

If you move to Page 4, let's put some numbers on the combined enterprise, so you can visualize just how significant this is. Public Storage today, $67 billion of enterprise value, 3,500 stores, nearly 260 million square feet. NSA brings $10.5 billion of enterprise value over 1,000 stores, 70 million square feet across 37 states in Puerto Rico. Together, $77 billion in enterprise value, 4,600 stores, 328 million square feet. Let's talk about the same-store picture specifically.

Public Storage's same-store average occupancy stands at 92%. NSA's same-store occupancy is at 84%, representing significant upside potential when run through our operating platform and the margin uplift opportunity is similarly compelling. That's the upside story, and it's a big one that Joe will share more details on shortly.

Moving to Page 5. The operating portfolio combination is compelling. On the left, you can see the 2 portfolios deepening our scale and operating presence across the national opportunity. But importantly, on a wholly owned basis, this will continue to deepen Public Storage's presence in high-growth Sunbelt markets. Those markets had tremendous performance during the high demand '21 and '22 period, but have spent the last several years readjusting and absorbing supply built to meet this increased demand. This combination is at a time when those markets are finding their footing. As we've discussed, the new supply picture is improving and the sequential momentum in these markets is building. The combined company will further benefit as it takes hold.

On Page 6, you can see how NSA's operating portfolio will be segmented into a 100% wholly owned growth portfolio, a 20% owned high cash flow asset joint venture formed at closing and the existing 25% owned joint ventures in place. On the left, you can see the 100% owned portfolio concentrated in the core growth markets I just spoke to. This deepens our presence and grows our brand. We'll consider targeted dispositions from this pool over time as we shape the Public Storage portfolio of the future.

In the middle is the win-win 80/20 venture structure formed at closing. It provides participating OP unitholders exposure to a high cash flow private venture while adding to Public Storage's operating scale and management platform. And the existing 75-25 ventures on the right will benefit from the operating capability of the combined company going forward.

Now shifting gears on Page 7. I want to spend a moment on something that is core to why this deal works and why we have such high confidence in our ability to execute, PS 4.0. It's the reason Public Storage is not just the largest self-storage company, but the most effective. Let me give you the benchmarks, and these are measured against every major public self-storage operator.

Revenue, Public Storage is #1 in revenue achieved in our markets, driven by our brand, customer experience and revenue management. Expenses, our efficiency is enhanced by our operating model transformation, enabled by our strong omnichannel digital experience. In an environment where operating costs matter more than ever, this is a meaningful competitive advantage leading to industry-leading margins in every single top market. Corporate efficiency, that leading operating efficiency is supplemented leading to industry best shareholder performance in recent years.

Now here's why this matters for the NSA combination. When we bring NSA's 1,063 stores into the PS Next operating model, we're not hoping for improvement, we're applying proven, repeatable industry-leading playbooks to a new set of assets. The leadership team is in place, the incentive structures are aligned, the technology, the systems, the processes, they're ready.

The Public Storage PS Next operating platform is the engine of value creation in this transaction. The synergy estimates are grounded in what we've already proven we can do and as self-storage market fundamentals continue to improve, and we believe they will, our operating efficiency will be the differentiator that drives our performance. So that's the strategic and financial foundation of this combination, the scale, the rationale and the operating platform that gives us full confidence in execution.

Now I'd like to hand it over to Joe.

Thank you, Tom. On Page 8, we have presented a summary of the total synergies, the key underlying drivers and importantly, key areas that have not been factored into our synergy and growth estimates. In total, you can see approximately $110 million to $130 million of synergies at Public Storage's share. These are driven by the key categories of operations, tenant insurance and G&A.

For NOI, we have identified $70 million to $80 million of initiatives and synergies, equating to 25-plus percent improvement in run rate NOI through a combination of occupancy upside, pricing and operating efficiency. As Tom mentioned, we have demonstrated leadership in historical same-store revenue and NOI growth with the #1 revenue per available foot and the #1 NOI margin versus peers. The same key drivers of those results will be what drives our revenue and NOI outperformance for NSA over the coming 3 years.

For tenant insurance, we believe we have the ability to replace several existing tenant reinsurance programs provided by NSA's various brands with our industry-leading Orange Door insurance program, thus providing better outcomes for customers, increased adoption and improved profitability over the next 3 years, resulting in $15 million to $20 million of upside. For G&A, Public Storage has the industry's best G&A efficiency ratios, which we expect to continue. We will achieve $25 million to $30 million of synergies or roughly 50% of NSA's run rate G&A with the remainder to be incorporated into our indirect operating expenses.

From a modeling perspective, I would note that there is additional accretion coming from our mezzanine investment and joint venture fees, offset by approximately $20 million of incremental financing costs.

Lastly, you can see on the right-hand side, a number of key areas that are critical to our long-term growth and value creation, but that we have not factored into these synergies. For example, we believe that adding over 1,000 properties to our Public Storage brand will only serve to enhance customer visibility, trust, conversion and customer acquisition cost. Similarly, we have a clear initiative road map as part of PS Next platform to drive NOI growth for our existing portfolio. However, we have not yet factored those key synergies into our synergy underwriting.

Lastly, the expansion of our portfolio into new markets and expansion of relationships with NSA's Pro network deepens our ability to deploy accretive capital across more locations and in more ways.

Moving on to Page 9. Our confidence in this integration and synergy forecast comes from our historical capabilities in achieving significant margin expansion and value creation in very short periods of time on large-scale portfolios. As you can see in the various case studies on the top half of the page, on average, we have expanded margins by well over 1,000 basis points on other large-scale transactions since 2021.

On the bottom left, you can see that PSA and NSA have a 9% difference in direct operating margin today. Now you might say that some of that is due to market differentials. However, in our like-for-like markets, that delta stands at 9%, resulting in a significant opportunity for future growth and value creation. Within our synergy estimates, we have assumed that we closed 60% of that gap, resulting in a pro forma NSA margin 4% below that of PSA's portfolio. In addition, we have assumed we will spend $300 million in capital expenditures to rebrand the portfolio, enhance the technology and modernize the properties, all for the benefit of our customers and their experience.

On Page 10, we have presented the current and pro forma composition of the NSA portfolio. As you can see on the left, the current NSA portfolio consists of a consolidated portfolio and existing joint venture platform. On a go-forward basis, we have creatively structured the portfolio into the 3 portfolios you see on the right. We believe we have created a win-win for all stakeholders with these structures as all will benefit from our best-in-class PS Next operating platform, but each will have various differences in the underlying portfolios, yield profiles and leverage.

Finally, on Page 11, you can see the pro forma sources and uses for this roughly $10.5 billion transaction. NSA is capitalized with approximately $5.7 billion in equity and OP units and $4.1 billion of pro rata debt and preferred equity. The future capitalization will consist of new low-cost PSA unsecured issuance on balance sheet and in the newly formed JV, we'll be placing secured debt to ensure optimal leverage for the NSA OP unitholders.

As part of the JV financing structure, PSA will be providing a $240 million mezzanine loan at a rate of SOFR plus 650 basis points, which helps increase total returns for the JV and drives accretion for PSA shareholders. Importantly, the transaction maintains our industry-leading balance sheet with minimal expected changes to our debt and preferred equity to EBITDA ratio upon realization of synergies. Maintaining that financial strength allows us to continue funding acquisitions, developments and new loans to drive shareholder returns while integrating the portfolio.

In summary, this transaction delivers 3 key financial benefits: First, meaningful near- and long-term per share earnings accretion driven by operational synergies; second, continued balance sheet strength with leverage metrics remaining highly conservative; and third, expanded opportunities for external growth through our increased scale, markets, relationships and free cash flow generation. With that, I'll turn it back to Tom for closing remarks.

Thanks, Joe. This transaction combines 2 of the leading self-storage operators, accelerates our financial performance, strengthens our portfolio with PS 4.0 powering it all with an aligned, motivated and experienced leadership team, customer-driven PS Next operating platform, our first major value creation milestone, all with our Own It culture aligned with shareholders. We're excited to welcome the NSA team and customers as we launch the next era of public storage positioned for the future. So with that, Melissa, let's open it up to questions.

[Operator Instructions]

Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

Congratulations. First question I had on the $60 million to $65 million of revenue synergies, can you just discuss a little bit more detail around the timing for that to be realized? And how much of that is occupancy upside versus price optimization?

Todd, this is Joe. So I'll try to take you through the overall synergies from revenue to expenses as well as a couple of the other line items. So overall, we expect to realize all synergies by the time we get through the year and end of year 3. As it relates to the revenue synergies, it's really a composition of both occupancy as well as rate, as you would expect. Occupancy, we have going from the mid-80s up to roughly 90%. And then we also have rate increases as we adjust pricing over the next several years.

So in totality, we have total revenue growth of roughly 11% to 15% within that range. And that's really driven by a couple of different things. Obviously, the enhanced brand presence is helpful within that as well as our ability from a revenue and marketing and pricing perspective to open up the size of the funnel. And then we've talked a lot more recently about customer experience and our ability to retain customers with a good quality customer experience and drive down that churn number. So we feel convicted on the revenue side.

As it relates to the expenses, I'll just take you through what we have there on that $10 million to $15 million. Again, that's probably going to take about 2 years on the expense side to get all the way up and running. Most of that is coming from our payroll efficiency, but we also have benefits coming through our marketing, insurance and utilities. And then if you go to the tenant reinsurance program, that should take about 3 years, we believe, to run through and get to that full number. And then lastly, just on G&A, we expect to realize about 75% of that synergy number in the first year going to 100% by year 2.

Okay. That's helpful. And then I just wanted to go back to -- Joe, you mentioned, I think, on Slide 9, you talked about briefly the $300 million of capital investment for rebranding and for technology improvements. And I just wanted to be clear in understanding, are you intending to rebrand the entire NSA portfolio to Public Storage's to the brand and banner, including the existing and new joint venture? And can you talk a little bit about the timing of that spend and the rebranding process?

Yes, Todd, this is Tom. I'll take that one. In short, yes, we would envision rebranding the assets to the Public Storage brand. And as you recall, we've spent a good bit of time over the last 5 years refreshing and rebranding our own portfolio and have a significant experience in doing so and similarly see the lift and customer benefit associated with doing that. This transaction obviously brings another component, which is consolidating the brand presence under the leading Public Storage brand. So yes, we're going to go out and buy a bunch of orange paint, and this will take several years to work through as it did with our Property of Tomorrow program that we just recently finished, but we've got a lot of experience and track record in doing that.

And how soon post closing do you plan to integrate the assets onto Public's pricing and revenue management systems?

Yes, effectively immediately. And we've spoken about our ability to integrate assets onto the platform in the past, and Joe walked through some of those case studies there on the slides that demonstrate our ability to do that. And so both from a systems and operational standpoint, we're going to be very focused on integration here in the coming months and look to hit the ground running.

Our next question comes from the line of Michael Goldsmith with UBS.

Congratulations to all involved. First question, just given the moving pieces with the JVs and the OP units, how are you thinking about the cap rate for this transaction?

I think the way I'd describe it is, as we look at the cap rates here and you look at the whole company portfolio, we're talking about a low to mid-5s on a going-in basis from a cap rate standpoint, call it, in the 180s on a price per foot basis, a value that we feel confident in. But I think the real story here is the value creation opportunity and placing those assets on our operating platform, as Joe and I both spent time looking at. So we would envision that the cap rate we're really looking at here is in the low to mid-6s post that value creation. And obviously, Joe walked through case studies that demonstrate our confidence in achieving those margin enhancements and cap rate uplifts.

Got it. And my follow-up question is, I believe when you approached Life Storage in the past, I think that merger opportunity was a little bit more expense savings driven than maybe revenue-generating driven, and this one seems a little bit more balanced. So can you just talk maybe a little bit about the difference in the portfolios? And is there a different approach here? Is there more confidence in the platform where it stands today? Just trying to get a better understanding of the approach here versus the last one that you tried.

Yes. I don't want to go into detail around other potential transactions in the past. I guess I'd say if you look at the case studies that Joe walked through, which are transactions that we executed on, in most instances, 0.5% to 0.75% of the synergy opportunities is going to be on the revenue side. And then you also have the expense side given the operating model transformation that we've been very successful in deploying through our own portfolio over the last several years.

So I'd say it's typically a balance. And in terms of this transaction, we see that no different. I'd say the one thing that maybe is a little different on this transaction versus some of those case studies is this portfolio does sit at an 84% occupancy level. So there's clear vacancy, which can be filled up over time and aid that revenue story, which is a little different than, for instance, the simply self-storage or Easy storage portfolios.

Our next question comes from the line of Steve Sakwa with Evercore ISI.

Congrats everybody. On Page 6, when you talk about that high cash flow JV asset portfolio, I realize some of those markets are maybe not core public storage markets, but some of them seem to be maybe a little bit more in your wheelhouse. I'm just curious, how did you kind of allocate between those 2 buckets and decide kind of what went in the JV portfolio and what kind of stayed wholly owned?

Yes. Thanks, Steve. This was an opportunity to really look at the whole NSA portfolio, operating portfolio and to your point, spend some time thinking about what's really complementary to the Public Storage profile going forward. And we had the opportunity over the last several years to visit nearly every single one of these assets. So we know the assets well on the ground and then obviously have overlaid our proprietary data and data sets to select the assets that fit best within our pool, and that's on a market and submarket basis. And so you can see some of our core markets there on the left. But to your point, some core markets there in the middle as well, and we think there's upside in both portfolios.

Okay. And then maybe just going back to the G&A, I guess, on Slide 8. I guess you're assuming, I guess, roughly half of NSA's current G&A is kind of savings. Is there any reason kind of the merger wouldn't create, I guess, more savings on the G&A side? Is that just kind of a conservative number? Or I realize there might be some additional accounting that needs to come over. But I guess I would have thought you'd knock out a little bit more of the G&A overhead at NSA. Any thoughts there?

Yes. Steve, it's Joe. So if you look at our own financial reporting, we report both direct operating expenses as well as indirect operating expenses with those indirects equating to roughly 3% of revenue overall. And so that's our off-site costs that it takes to run that portfolio. So when you look at this for NSA, their indirect costs were generally included within G&A. And so when we look at the allocation for indirect costs, we went through and looked at all the off-site costs that it will take to run that NSA portfolio and did that build up. And that's where we got to the remainder that needs to stick in our numbers.

That's why I mentioned it's not going to be in G&A on a go-forward basis. That will flow into our indirect expense bucket as we integrate the NSA portfolio over time. So we've basically taken 100% of the true G&A costs the way we would look at them and eliminate those and keep the off-site property management costs to run the portfolio embedded in our numbers.

Our next question comes from the line of Hong Zhang with JPMorgan.

Yes. I guess just thinking about the combined NSA, PSA portfolio, are there -- I guess, are there any properties or just regions that you would potentially look to sell out of?

Yes. Great question, Hong. As I noted in the remarks earlier, that will be something that we will explore over time, and that's consistent with what we've been sharing as it relates to our own portfolio as well as we think about micro markets and utilizing a very data-driven approach to shape the portfolio of the future. We'll be doing that as well as we think about the asset pool here that we're adding to the Public Storage portfolio. So yes, over time, we'll update you on that and certainly is part of the discussions moving forward.

Got it. And just to make sure I heard correctly about the rebranding. I guess, as you look at the NSA portfolio today, is there the potential to do another, I guess, multiyear property of tomorrow renovation program within the NSA portfolio? Or do they look good as is?

Yes. The properties look good. No question about that. But as it relates to the branding component and the Property of Tomorrow initiative, yes, there's an opportunity for us to bring those assets into the Public Storage branding, and that will involve new signage, office, lots of orange paint, those sorts of things, which will provide that consistent public storage customer experience that millions of customers around the country today experience with our stores around the country.

Our next question comes from the line of Ravi Vaidya with Mizuho Securities.

Congrats all involved. I wanted to ask more about the formation of the new cash flow JV. Why was this third entity formed versus rolling up the assets on a wholly owned basis? Why the utilization of secured debt for this structure? And what are some of the fee streams that we can expect from this?

Yes. So I'll take the first component of that as it relates to the strategic rationale around the joint venture, and then maybe I'll hand it over to Joe to discuss the financial components of that joint venture. So as I noted earlier, this really creates a win-win opportunity, one that creates a yield profile for participating OP unitholders in that joint venture. It's a private venture with higher leverage than the public company, all with the PS Next operating platform to drive improved operations and performance through that venture over time. So it creates a win-win and one that we were able to craft as it relates to asset selection to create that criteria and that win-win solution for all parties involved. And Joe, maybe cover some of the financial aspects.

Perfect. So I'll refer you to Page 11. We have the go-forward cap stack on that page. So you can see roughly $2.2 billion of total debt on that venture, which we valued at roughly $3.3 billion. So we get to about 65% to 70% overall leverage. That profile is consistent with what we want to be able to offer those participating OP unitholders as they did seek more leverage and more total return potential. That $2.2 billion is constructed of roughly $2 billion of secured debt, which we will need to place in the future. Right now, we'll be using a committed bridge loan component to fund that at closing. And then we also have the $200-plus million of mezzanine investment coming from Public Storage.

As it relates to the fee streams, I would just say we plan to earn typical property management, asset management fees associated with this joint venture as you typically would in an arm's length transaction.

Got it. That's super helpful. And maybe just one more here. A number of these Sunbelt markets and NSA's top market list have -- they're really strong during COVID and maybe coming out of COVID, but they have struggled a bit recently given the high supply pressures. What are you seeing on the ground right now that makes you more optimistic about these markets and the potential to realize some of the operational synergies that you've laid out here?

Yes. I think there's a couple of components to that question. One is it relates to overall market fundamentals. And obviously, each one of these markets and assets is unique. But as we've been saying now for several quarters, we are seeing sequential improvement in many of these Sunbelt markets as we work through those '21 and '22 high demand comps as well as the new supply that you're speaking to, which is slowing down in the vast majority of these markets, and we expect will continue to. So that sequential improvement from a fundamental standpoint clearly gives us some confidence.

And then as it relates to the synergy execution, we've been thoughtful, as Joe highlighted earlier, around sequencing through that synergy execution and recognizing that fundamentals are going to be a component as well as the new operating platform.

Our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Great, congratulations. I guess Slide 9 that have the direct NOI margin comparison. I'd just love to double-click on that because 880 basis points delta seems pretty massive. Sort of similar to Todd's question, is there any way to break that 880 down into revenues, expenses, fees, anything else that could drive such a big margin in the same markets?

Ron, I'd say just from a modeling perspective, as you think about realization of that revenue over time, which we think probably takes about 3 years, we believe that's plus or minus 11% to 15% additional revenue growth on top of what the portfolio would have realized naturally. So that's the key driver. I think as Tom mentioned, plus or minus 50% to 75% of our operating upside typically comes from the top line component. And then from a margin perspective, we're expecting to close about 500 of that 900 basis points.

So we'll end up with a margin on a stabilized basis, about 400 basis points below that of PSA. And we pressure tested that repeatedly from both a ground-up and a top-down perspective going line by line, making sure that we can go out there and execute upon both the revenue and expense synergies and then comping that relative to our other 3,000-plus assets and looking at similar revenue and rent levels, simpler operating profiles and making sure that we believe we can hit that margin number.

Great. And then, look, my second question is, I think what's interesting is there's really no talks of demographics in the presentation at all, right? When you're thinking about, yes, there are some overlapping markets, PSA tend to own assets that were sort of more concentrated versus NSA and so forth. So I'd just love to hear how you guys think about sort of these sort of new markets that you're getting into? Does demographics matter? Does it not matter? How are you guys sort of thinking through that?

Yes. Great question, Ron. No question, as I mentioned earlier around evaluating the opportunity set here. This was both a very data-driven approach, looking at demographics at the local submarket and micro market level, but also overlaying that with our on-the-ground understanding in the vast majority of these markets that we applied here. And thinking about both the long-term opportunity as well as the near-term value creation opportunity, we think strong in the vast majority of these markets we operate day-to-day and understand these markets really well.

So in terms of both from a micro market and data-driven standpoint, yes, certainly using demographics as well as overlaying some new markets that we're excited about potentially growing into over time. As Joe mentioned earlier around expanded capital allocation opportunities, I think there's really 3 components to that. One of that is new markets and submarkets within our existing operating portfolio. Another one is partner relationships over time that NSA has nurtured. And the third is opportunities at the asset level, be it expansion opportunities and the like, which we think will accrue to the combined company's benefit over time.

Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just hoping you could talk a little bit more about, I think, what Ronald was hitting on the last question, just the overlap from a geography perspective for part of the NSA portfolio that's going to be on balance sheet versus not. And where that opportunity lies or where there's more of a reliance on data analytics from stuff that is maybe comparable to not in those markets just to instill the confidence that you can drive that upside over the long term?

Yes, sure. So again, a couple of components to that question. One is, as we think about the overlap and the complementary nature of the portfolio, about 80% of the new operating portfolio across those 3 different buckets is overlapping from a complementary market standpoint, about 20% is new markets, which those new markets do present some incremental opportunities.

As it relates to the wholly owned portfolio, there's a much higher overlap. And obviously, we listed some of those markets -- many of those markets that you see on the page, we've consistently spoken to is some of our favorite within our portfolio, looking at a Dallas-Fort Worth, for instance, one that we've consistently been adding to given the dynamic nature of that marketplace and our ability to continue to deepen our presence and scale there. So I think there's a combination of complementary and additive components of the portfolio and then some new markets that will be additive over time.

Juan, this is Joe. Just to add on to that a little bit. So Tom talked upfront in his opening remarks just about how incredibly important scale is in this business. And so when you think about those overlapping markets, one thing you all don't see when we think about that margin expansion opportunity, when you look at markets that we have critical density in versus those that we do not and look at that on a rent-adjusted basis, there's about a 600 basis point delta in our own portfolio between the margin on those that don't have density versus those that do. So that's a critical part of this portfolio being able to go out there and capture that overlap and really get increased conviction in our ability to close that margin gap as we scale up in certain trade areas or markets. So that's a critical piece to not get lost in there.

Great. And then just on the CapEx, the $300 million, I guess how much of that is going into what will be consolidated versus in the new joint venture? And how much is the orange paint that Keith being referenced and just the rebranding versus maybe some true deferred CapEx from some lack of love over the years for some of those assets?

Yes. So it's fairly well spread throughout the portfolio. Obviously, as Tom mentioned, we've toured the majority of these assets over the last several years. So I have a pretty good sense for what is needed versus not needed. But I'd expand on Tom's prior comments related to any time we take over an asset and try to get it up to not just PSA brand standards, but also when we talk about our 24/7 access, the omnichannel and digital experience that we offer to customers, it's critical that we put certain technologies in place as soon as possible to allow for e-rentals and allow for that staffing efficiency.

So being able to go out there and ensure that all properties have gate access, making sure that all buildings and access points have digital code access, making sure that we put our security systems in place, which are pretty substantial costs to make sure we have 24/7 monitoring from a safety and insurance claim perspective. So there's a lot more that goes into that than just perhaps a deferred maintenance, a refresh of paints, a refresh of parking lots or a refresh of office. There's a lot that has to do with ensuring that we can get the customer the experience that they've come to know with public storage and making sure we go out there and hit our numbers.

Our next question comes from the line of Nicholas Yulico with Scotiabank.

This is Viktor Fediv, on with Nick. And I have a question on your -- on the NSA's existing JVs. So do you plan to just assume this 25% stake and manage this as is? Or is there a plan to buy out the institutional partners over time?

Yes. Thanks. So those are existing joint ventures that have been clearly very successful for the NSA team over time. We look forward to engaging with those capital partners and continuing that partnership moving forward. And obviously, we'd be reaching out to them in the near term post the transaction of this and sharing why we're excited about the transaction and what the combined company can bring to those partnerships.

Understood. And then as a follow-up, so how does this transaction change your overall external growth strategy going forward? So are you on hold until NSA's portfolio is fully integrated? Or do you plan to remain offensive?

Yes. So Joe spoke to earlier, one of the key components of this transaction is how it's been structured from a capitalization standpoint that continues to provide Public Storage with significant financial flexibility to add and continue our value creation pathway here. So more to come there as it relates to what could be next. But as it relates to overall activities, we continue to be encouraged by what we're seeing in the transaction market and think there's an opportunity for more transaction market activity overall within the industry in '26 compared to '25. We've been, as we've highlighted over recent months with the PS 4.0 announcement, adding capabilities to that team, both in terms of investing in the team itself, the Welltower data science partnership. And we're encouraged by some of the initial traction we've had with that dialogue and look forward to continuing to growing that component of the value creation engine and the earnings algorithm.

Our next question comes from the line of Caitlin Burrows with Goldman Sachs.

I think just one question for me. Maybe for those of us not as close to NSA, and you maybe touched on it in the very beginning, but could you just give some comments on what made PSA interested in this portfolio today versus maybe a couple of years ago?

Yes, sure. I'll take this, and I think there's a couple of components of it. One, as we sit here today, we think there's a tremendous opportunity to pair NSA and PSA together as we launch PS 4.0 into the next era. And I'd say that's across a number of different fronts. One, this is clearly a value creation opportunity and one that we've been speaking about earlier and plays into that value creation engine, applying MSA assets into our PS Next operating platform, adding over 450,000 customers, driving operational excellence through the combined portfolio moving forward and then an own a culture opportunity as we think about welcoming the NSA team to the Public Storage platform, injecting the energy, urgency and shareholder alignment that we're excited about, all to launch here into the next era. And we think the transaction is a fantastic way to do so, utilizing a creative set of structures to launch from here.

Our next question comes from the line of Eric Wolfe with Citi.

On the synergies, you mentioned the 900 basis point difference in margins that I think you called them the comparable stores. If you look at those same comparable stores, I guess, how much of a difference is there between the average rate and occupancy at those stores? So in other words, how much higher is your occupancy and rate at the PSA stores versus the comparable MSA stores?

Yes. Eric, so we have gone side-by-side on that within the markets as we're going through our underwriting and thinking through the synergies. When you look at that on a market-by-market basis, it's pretty consistent with what we said overall in terms of our ability to get from where they're at today in the mid-80s up to about 90%. So we might have a little bit of conservatism in there relative to our own portfolio, which operates a little bit higher on an occupancy perspective.

And then on the rate side as well, we think there's pretty significant rate opportunity as we both drive new customers into the portfolio as well as retain existing customers. So I'm not going to go too specific on the exact dollar per square foot adjustments that we've underwritten. But I'd just say that overall, we believe that 11% to 15% revenue incremental to what the portfolio would have done by putting it onto the PS brand is what we'll be able to attain.

Got it. And then maybe a question for NSA. I guess why is now the right time to sell? You talked about finally starting to see the markets recover. Obviously, the stock had some momentum this year. I know you're getting a premium here. I was just curious how you looked at the opportunity with PSA versus staying independent as well as other opportunities that might have been considered?

Yes. Great question. Thanks. Certainly, we did. We spent a lot of time looking -- our Board and our teams looking at our long-term outlook. And we certainly think we've inflected and our team has done a great job working on all the things we're working on and directionally heading in the right way we want to go. But if you just look at the combining of this, our portfolio into this portfolio and the strength of this platform and the strength of this team and all the synergies it brings, I think as we evaluated our journey and where we're headed and combining with Public Storage, to me, it just made a lot of sense, it made a lot of sense to our Board, and we just think it's a very unique opportunity to really accelerate and get us to the goals we were shooting for.

Our next question comes from the line of Samir Khanal with Bank of America.

I guess, Joe, on Page 6, that first bucket, I'm sorry if I missed this, but you did talk about kind of these dispositions and asset recycling opportunity over time. Maybe talk about sort of the magnitude of that and how to think about it from a timing perspective?

Yes, that's something that we'll evaluate over time. This is Tom. As we integrate the assets into the portfolio and drive operating performance as well as taking a very data-driven approach as we get that operating data from those assets and consider the public storage platform over time, what's the right fit. And so more to come there, but there's likely to be some modest dispositions coming out of that. And as we noted, as we were spending time thinking about the Welltower data science partnership, I think you're going to hear more from us as it relates to potential dispositions from the Public Storage portfolio as well as we're targeting micro markets, utilizing a very data-driven approach to portfolio construction.

Our final question this morning comes from the line of Mike Mueller with JPMorgan.

I apologize if I missed this, but can you give a little more background on the new JV? Was this something that NSA, the OP holders were pushing for as part of the transaction to kind of move forward with it? Or is it something you wanted in terms of just isolating this part of the portfolio? Just a little bit more color on that would be great.

Yes. I think as I noted earlier, I think it's a real win-win opportunity for both NSA stakeholders as well as the combined company to create a different return profile and one that is attractive to all involved. And some of that, we spoke earlier to how we thought about market selection and the like. But I think some of it's also the capital structure associated with it, the operating platform upside that we're going to be bringing to that venture. And so it's a real opportunity to create a differentiated structure for a public company stock-for-stock deal that we think will maximize the opportunity for all involved.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Tom for any final comments.

Thanks, Melissa. So as you can hear, we're excited about this combination. It's got a creative structure as we were just speaking to, a real value creation engine opportunity, and it's a good time for us to continue to deploy capital as storage fundamentals improve from here. And so this is a great way to launch the next era of Public Storage positioned for the future. Thanks very much.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation. You may now disconnect.

Greetings, and welcome to the Public Storage Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brandon Reagan, Director of Investor Relations. Thank you. You may begin.

Hello, everyone, and thank you for joining us for our fourth quarter 2025 earnings call. I'm here with the public storage leadership team, Joe Russell, Tom Boyle and Joe Fisher. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, February 13, 2026. And and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report earnings presentation of which we will refer to during this call, SEC reports and an audio replay of this conference call at our Investor Relations website, investors.publicstorage.com. [Operator Instructions] However, if you have any additional questions, please feel free to jump back into queue. With that, I'll turn the call over to Joe Russell.

Thanks, Brandon. Good morning, and thank you for joining us. Today is a significant day for Public Storage. We're here to discuss our fourth quarter and full year results but more importantly, we're unveiling ES 4.0, the next era of public storage leadership and strategy. Tom, Joe and I will walk you through the full range of changes we're making to drive accelerated performance and long-term value creation. Then we'll open it up for your questions. Let me start with the leadership transitions and additions we announced yesterday. Succession planning has always been a top priority for our Board and the objective has been crystal clear. place exceptional talent in every single leadership position at Public Storage. I'm pleased to say we've met that objective.

On the management side, I'm thrilled to announce Tom Boyle's promotion to CEO and trustee. Tom and I have been partners for nearly a decade since we both joined Public Storage in '26. As you know, Tom has proven to be an exceptional leader in both his CFO and CIO roles with outstanding accomplishments across capital allocation, operations and financial strategy. Tom is more than ready to lead public storage into PS 4.0. Our Board, management team and I could not be more confident in his skill, drive and vision. Congratulations, Tom. I'm also pleased to welcome Joe Fisher to the executive team as President and CFO. Joe's tenure at UDR as President, CFO and CIO and along with his stature in the REIT industry, made him an exceptional fit for our senior leadership team. Joe joins Public Storage at a great time and adds outstanding depth to our leadership ranks.

Welcome, Joe.

Tom will cover other significant leadership changes in a moment. At the Board level, Ron Havner is stepping down as Chairman after 15 years of iconic leadership and will continue as a trustee. Ron is a legend in our industry and has been a tremendous mentor to me and the management team at Public Storage. I can't thank him enough for his dedication and insight. John Reyes, our former CFO and Current trustee is retiring from the Board. John has guided public storage with nearly 3 decades of financial acumen and discipline. His impact on this company is immeasurable. And I'm excited to announce that Shankh Mitra, CEO of Welltower, and an independent public storage trustee for the last 5 years will now take the role of Chairman. Shankh brings a proven track record of value creation, strategic clarity and leadership.

We're excited to have him guide and mentor the management team in his new role. And as noted in our press release, Shankh Mitra and Ron Havner have purchased $25 million and $5 million, respectively, of out-of-the-money 1-year options with a 6-year lockout demonstrating their commitment and confidence of what PS 4.0 will deliver to shareholders. Now let's go to Page 4 of the earnings presentation and briefly step back to reflect on our financial performance and highlight how we've built the platform to drive value. From 2023 to 2025, Public Storage has led the sector in same-store revenue growth, NOI growth and NOI margins. Our core FFO per share growth leads the sector. And our total shareholder returns of 18.6% outperformed our peers over that time frame. Over the last 5 years, we've built a platform designed to win. Here are a few significant accomplishments.

First, deployment of the most robust omnichannel digital ecosystem in the industry. where over 85% of our customers engage with us using self-help tools and we're infusing AI to optimize conversion and cost. Second, Completion of the Property of Tomorrow program, a $600 million investment to rebrand and modernize all 3,400-plus properties, with solar on nearly half of the portfolio by the end of 2026. Third, executing accretive growth at scale. We've invested over $12 billion, expanding our portfolio by 763 assets, which are delivering outsized growth with more to come in the future. And fourth, inspiring the team through our winning culture and also being named Best Place to Work for 4 consecutive years. I'm proud of what we've built and I'm even more excited about what's next.

On a personal note, as I retire from public storage, I want to thank the investor and analyst community for the opportunity to work with you over the last decade. I've enjoyed our relationships and the healthy respect we've developed. I've lived by a philosophy of telling it like it is. And I know Tom and the team will continue to communicate with you under that same doctrine. And to my public storage colleagues. Thank you for the tenacity, fellowship and commitment to success. Public Storage has a strong and vibrant culture and has always been a team of winners. I've been humbled to lead you over the last 10 years. I could not be more excited to hand the reins over to Tom and the team and cheer them on as they take public storage into its next era. Now I'll pass the call over to Tom.

Thank you, Joe. I'm incredibly humbled and grateful for this opportunity to lead public storage forward. Joe, to you and the entire Board of Trustees, thank you for the trust you placed in me. I'm energized about the next era. And Joe, on behalf of the entire public storage team, thank you for a decade of exceptional leadership. Your accomplishments resulted in sector-leading total shareholder returns over the past 1, 3 and 5 years. But beyond the numbers, your personal impact on the team from property managers, corporate teams in Dallas and Glendale inspired us to be our best through every challenge and opportunity. Thank you for your mentorship. I also want to recognize Ron Havner and John Reis at the Board level. The 3 of you have built a tremendous foundation for what's next.

Now on Page 5, let's talk about where the industry is headed. -- and where we're headed. The pandemic created noise, but the signal is clear, self-storage adoption has increased over the last decade. Generation Z, millennials and the 65-plus cohort are all participating. Today, 10% of the U.S. population uses storage, and that trajectory is building. Storage is an affordable space solution in a high cost of living environment. competitive supply is slowing as new development becomes harder and more expensive. And while we haven't yet seen a national inflection point on rents, momentum is building in our strongest markets. The trends are there. The self-storage industry also remains highly fragmented. Generational transitions and continued institutionalization of ownership will create more trading activity from here on.

Industry fundamentals have been some of the best in real estate longer term. And while they haven't been exciting for a few years, we're not waiting around. We're building the team and the platform for the future today. Moving to Page 6. We're unveiling PS 4.0, the fourth era of public storage leadership, 53 years from our founding by industry visionary, Wayne Hughes. This is a generational transition and a strategic vision designed to drive accelerated performance. As Joe said, our objective is simple: build the best team to attack the opportunity ahead. and we have. We have new leaders joining the effort, Bill Fisher, President and CFO, here with us today, most recently with UDR. Ayash Basu, Chief Revenue and Marketing Officer; most recently with Boston Consulting Group; Gwendolyn Montgomery, Chief Human Resources Officer, most recently with Gates Corp.

And we have leaders stepping up Natalia Johnson promoted to President, Chief Digital and Transformation Officer; Chris Sambar, promoted to President and Chief Operating Officer; and Paul Spittle, who's stepping up to head our acquisitions efforts. We've brought in diverse perspectives for multifamily, consulting, manufacturing and telecommunications. This complements our multifaceted and experienced leaders in every part of the company. with proven capabilities that have driven our outperformance over the last several years. We've also shifted our headquarters to Frisco, Texas, where our largest corporate presence is today. and with our LA team relocating to a new long-term office space. I'm delighted to lead this premier team into the next era.

On the next slide, our strategic vision rests on 3 core pillars: EF Next, our value creation engine and on IT culture, which will collectively drive performance for our shareholders. First is the launch of the PS -- next operating platform to meet the customer where they're going. Today's customer expects a fast, seamless and quality experience which will rapidly evolve with AI playing an important part of all customer journeys. CSX combines the industry's leading owned property portfolio with the only scaled omnichannel digital-first platform. advanced data science and exceptional property managers and care center agents. Customers demand more from the brands they do business with today. not only a core reliable in-store experience, which we enhanced with our Property of Tomorrow program, but also the digital and AI-led interactions of the future.

We commit to innovate to meet and exceed those expectations across both the customer experience and the operational delivery of that experience. Customer obsession is critical. CSX will drive both revenues and expenses, building on our margin leadership. Our third-party management platform is 2. The target result is organic growth acceleration. The second pillar, the value creation engine captures the external growth opportunity. Building on PS next operational leadership is a critical component for value creation, capital allocation with PSA's capital resources and costs, we have a capital opportunity each and every year. I've grown increasingly passionate and energized about this opportunity over my time of public storage leading to my expanded role several years ago as Chief Investment Officer.

We will allocate our capital resources to: one, improve our portfolio. two, accelerate our per share earnings and cash flow; and three, compound our returns. My vision of our value creation engine is not just about doing more given our capital resources, but also better across our acquisitions, development, expansions and lending investments. These 4 value creators will differentiate our return profile by fueling our non-same-store growth. Assets that are placed into the PS next operating platform will earn more cash flow than others in the industry. Data science will lead our underwriting and targeting leveraging the industry's largest data sets to enhance portfolio composition scale advantages compound as we reinforce PS next and drive earnings growth. And lastly, the industry's best balance sheet is a competitive advantage and prepared to support it all.

We have significant capacity paired with a differentiator million of retained cash flow that's growing and will help us execute our strategy. We're investing in this value creation engine. We're growing deal teams, streamlining processes and infusing data science to increase the speed of execution. We've been active over the last several years amidst a slower transaction market industry-wide. The transaction market is poised to accelerate from here, driven by those generational sales and institutionalization, setting the table for our value creation opportunity. The target result is accretive portfolio growth. The third pillar is what I call the culture. As a leadership team, we're enhancing our strong culture that's been built over the past 53 years. With an infusion of new talent and perspectives complementing our strong team, we are raising the bar for performance.

We will empower with accountability. And I've been working with chunk on redesigning our incentives given their power as we launch our new era at Public Storage. With Shank and the Board, we have redesigned our incentive program for 2026 with a focus on per share and total return outperformance and now with the launch, we have the opportunity to rethink the incentive structures throughout the organization to get the incentives right. meaningful incentives, not based on marginal improvements or tweaks but on the same per share earnings growth and total return for alignment across the teams. Our goal is clear, we will win or lose as a team. The target is more energy, urgency and engagement driving results for our shareholders. We're just getting started. PS 4.0 is about customer obsession strong capital allocation with a focus on per share earnings and cash flow growth. Over the coming year, you'll see these initiatives come to life as we showcase these pillars. Now I'd like to turn over the call to Joe Fisher for his first Public Storage earnings call. Joe, welcome to the team.

Thank you, Tom, and good morning, everyone. I want to start by saying how excited I am to be here. I've known and followed public storage for the last 20 years of my career, and I've known many of you and members of this team for much of that time. I want to first thank Joe Russell, Tom Boyle, on metro, Ron Havner and the entire PS team and Board for the opportunity to join this great company. It was clear from our initial discussions last September that the vision and strategy we are unveiling here today was something I wanted to be a part of. Over the past several months, I've spent substantial time with the teams in Dallas and Glendale and on-site at properties getting up to speed. What I've witnessed is a team full of talented dedicated A players with a will to win.

There is a clear excitement for PS 4.0 and a shared commitment to drive performance for our stakeholders through our 3 key pillars. Now -- let's get into the results on Slide 8. First, you'll notice we made several enhancements to our press release and supplemental. As always, we're seeking to be best-in-class in all areas of our business, and we welcome your feedback. For FFO in the quarter was $4.26 per share, resulting in full year core FFO of $16.97 per share at the high end of our guidance range. Same-store revenue and NOI growth in the quarter were minus 0.2% and minus 1.5%, respectively. Declines in move-in rents were offset by strong existing customer performance, resulting in in-place rents up 20 basis points and occupancy down 20 basis points. We're confident in our team's ability to continue driving outperformance in revenue growth, just as we have in recent years.

I've been incredibly impressed by the sophistication of our revenue platform and the intersection of pricing, data analytics, machine learning, AI, marketing, customer experience. And I'm excited to see where I as and the team will take it next. Expense growth was contained for the year with Q4 at 4.2%. The Property tax growth was offset by continued benefits from payroll optimization, utilities and marketing. Outside the same-store pool, NOI growth of 20% in our nonsame-store pool helped drive core FFO per share higher by 1.2% year-over-year. This is a critical area of our value creation engine and our ability to drive core FFO performance well in excess of our stabilized same-store growth. It's also worth noting, if we utilized a same-store definition similar to our peers, NOI growth would have been positive 0.2% instead of the negative 0.5% reported.

On to transactions. During the quarter, we acquired $131 million of accretive new acquisitions that will drive growth through our industry-leading PS next operating platform. This brings our 2025 total to $953 million, with deployment diverse across size, geography and seller type at stabilized yields in the high 6s. On the development and expansion front, we had openings of $409 million during the year. We ended the year with a total development pipeline of $610 million, with stabilized yields targeting 8% and and remaining amounts unfunded of $416 million. Our lending platform continues to grow with $131 million deployed in 2025 and bringing our total outstanding lending business to $142 million at a current rate of approximately 7.9%. Lastly, -- our fortress balance sheet remains in excellent position from both a metric and liquidity perspective.

At quarter end, we had available liquidity of $1.8 billion between our line of credit and cash on hand, plus approximately $600 million per year of annual free cash flow. Our balance sheet remains one of the strongest in the REIT sector with debt plus preferred equity to EBITDA at 4.2x, and debt plus preferred equity to enterprise value in the low 20% range. Moving on to guidance on Slide 9. We've established an initial core FFO range of $16.35 to $17 and resulting in a midpoint of $16.68 and a year-over-year decline of 1.7%. Negative same-store NOI growth and refinancing activity is being offset by positive contributions from our non-same-store pool and our tenant insurance program. From an economic backdrop perspective, we expect 2026 to look slightly better than 2025 and consistent with consensus expectations.

Same-store revenue and NOI guidance are minus 1.1% and minus 2.2% at the midpoint, respectively. We believe occupancy for the year will remain roughly stable move-in rents will remain negative in the mid-single digits for the year, but will improve throughout the year. and our ECRI contribution will continue to help support total revenue. Specific to Los Angeles, we've guided to the state of emergency staying in place for all of 2026. And resulting in a drag on same-store revenue of approximately 80 basis points. With good demand and limited supply, it is a matter of when, not if, L.A. returns to strong outperformance down the road. To attain the high end of guidance, we would need to see the state of emergency and sooner. And for occupancy, new move-in rates and ECRIs all to perform slightly better. The inverse would take us to the low end. Expense growth is expected to remain constrained again in 2026.

And with mid-single-digit property tax growth being offset by expense constraining initiatives in personnel and R&M. In addition, our non-same-store NOI is once again expected to be a significant contributor with year-over-year growth of 16% before factoring in future transaction activity. We also continue to drive cash flow growth in areas beyond property operations, including our tenant insurance business and third-party property management platform. From a capital perspective, we expect to remain active in driving future FFO accretion through our various capital deployment levers. We have substantial amounts of free cash flow and debt capacity However, we have not factored in additional acquisitions or lending into our guidance at this time. With that, I'd like to turn the call back over to Tom for some closing remarks.

Thanks, Joe. Let me close with this. The opportunity ahead for public storage has never been stronger. Our target is clear: elevated customer experience, strong capital allocation, a winning culture and compounding shareholder outperformance. I'm energized by the team and the platform we're building. This is PS 4.0. With that, let's open it up for questions.

[Operator Instructions] Our first question comes from the line of Eric Wolfe with Citi.

It's Nick Joseph here with Eric. So I guess just asking about capturing the external growth opportunity. You talked about allocating capital aggressively and intelligently what are the greatest near-term opportunities you're seeing? Is it one-off assets, smaller portfolios, I guess, larger M&A, international? And how is that different based on PSA 4.0 than what you were seeing previously?

Yes. Sure, Nick. This is Tom. I think there's a couple of components there. One, we were encouraged by what we saw through 2025 in terms of the breadth and variation of seller type as well as size of activity. So we had a good number of single and double type opportunities, which are really the bread and butter of the industry, and we continue to try to to capture as well as small and medium-sized portfolios. We underwrote a lot. We probably underwrote $7 billion of real estate last year. ultimately transact on about $1 billion of that. The majority of what we underwrote did not trade. And so there continues to be active dialogue amongst larger portfolios and a breadth of different seller types as we move into 2026.

And as we think about -- you also highlighted international, that's an area certainly we spent some time on last year and continue to spend a time on going forward as well. So a broad set of opportunities and one that we think is building from here into 2026. In terms of what's different as we head into PS 4.0, there's a number of things that I just highlighted that are important to note. It's not just about capturing the opportunity and growing more. As I said, it's about how do we fine-tune and get better. So we're investing in the team. Our data science team has done tremendous work with our revenue management and marketing team over the last several years, and we're spending more time with them now and going forward on capital allocation as we think about targeting sites and underwriting, streamlining our processes and looking to take advantage of the industry's largest data set that we have at our disposal.

So all of those things will set us up to be a better buyer and enhance our reputation in the industry. and we look forward to taking advantage of that and deploying capital. The last piece you didn't ask about, but I highlight is just to reinforce the balance sheet opportunity that we have. The company has competitive advantages across the balance sheet as well as retained cash flow, which means we have a capital opportunity every year and one that we want to maximize.

That's helpful. This is actually Eric. Sorry to keep switching analysts on you. But you mentioned in your prepared remarks that momentum was building in your markets. But it does look like your same-store revenue guidance, excluding L.A., so putting that lay aside, it looks like things are expected to get a little bit worse from current levels. So could you just talk about what you expect from same-store revenue growth, again, putting LA aside just for the other 85%. And what do you expect the cadence of that same-store revenue growth to be throughout the year?

Eric, it's Joe. So as you guys all know, year-over-year revenue is a backward-looking indicator. And so that minus 30 bps or so when you back into what the rest of the same-store pool would be doing, excluding L.A. is really a byproduct of what's been taking place more recently, not necessarily the forward indicators that will drive revenue growth into the future. So as we start to pull in the fourth quarter results, which did have little bit more challenged new movement environment, although I'd point out that occupancy at year-end did pick up. We do still expect new move-ins to be kind of the worst of 2026 here in the first quarter, although we are seeing improvement relative to the fourth quarter.

And so we do think we're going to see a little bit of pressure on year-over-year revenue as we move into the middle of the year from a lagged perspective. The piece that we're excited about is how we think about the exit velocity and what we're seeing kind of underneath the hood as a forward indicator. So occupancy for the year we expect will be relatively static. We continue to see really good existing customer activity in terms of pricing power and length of stay and retention. And then new move-ins, we do forecast that will down mid-single digits for the year. We're going to start low and continue to lift throughout the year. and that's really driven by our view of a little bit of improvement on the macro environment, what we're seeing with existing customers as well as those coming in the funnel and then, of course, supply decreasing throughout the year. So we do expect that year-over-year revenue starts to improve probably by the fourth quarter of next year -- or this year, rather.

Yes. And Eric, maybe just to add to that, my comments earlier around momentum building, we've been highlighting for some time the strength in some of the markets, be it West Coast, Midwest, Northeast that continue to show good trends there. And you can obviously see that evidence in fourth quarter performance as well. But I think big picture, as we sit here today, we're focused on not knowing exactly which quarter things are going to move around. Obviously, we gave you a range of estimates. The focus is on what is that we can do now with the platform and the team to set us up for success moving forward. And obviously, that's the focus of PS 4.0 and where we're headed from here.

Our next question comes from the line of Spencer Glimcher with Green Street.

Can you provide an update on moving rents as far into 1Q? And then can you just remind us how your pricing strategy has evolved with the growing use of AI.

Yes, sure, Spencer. Happy to cover that. So we did have a January that was a healthy one, moving rents for January, which is I know one of the things you're getting to down 7% in the month of January. So sequential improvement as we moved into the month of January. We did experience interesting weather across the country in the month of January. So we had lower move-ins, but also lower move-outs occupancy right around where we finished the year on a year-over-year basis, up about 40 basis points over the course of January. So a good start to the year and the start of a continuation of the trends that we saw through the fourth quarter and speaks to the trends that Joe just highlighted.

Okay. Great. And then are you able just to comment on the pricing strategy and how often you rather kind of resetting rents just with the growing use of your AI platform?

Yes. As I noted earlier, the data science team and revenue management team have been working together for the last several years, and we continue to evolve our processes there. I just highlighted we hired a new leader for that effort who is getting up to speed, and we're excited about where he and the team are going to take it from here. But the continued evolution there as we think about attracting the right customers at the top of funnel being able to understand what we think the length of stays are going to be and the price elasticities and then toggling our pricing, promotion, advertising in order to be able to maximize NOI from that customer base as it goes. So continued efforts there, and we're excited about where us and the team are going to take it going forward.

Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Congrats to all, Tom and Joe. Welcome back, Joe. Just on the 26 same-store revenue guidance, Joe, you made an allusion to improving at year-end. Wondering if you could give us a general sense of where you expect to end the year, the fourth quarter run rate as we think about kind of the trend, the improving trend throughout the year that is in the forecast.

Yes, so we typically don't go into true quarter-by-quarter guidance. What I would say is you've kind of grouped the portfolio into a couple of different buckets. And if you look at our coastal markets in combination with some of the Midwest markets, so some of the leaders like Chicago and Minneapolis, that portfolio continues to do really well in terms of plus or minus 2% revenue growth through the year. And we do think that lifts a little bit going into the fourth quarter of next year. When you look at the more supply-challenged markets, so primarily the Sunbelt markets, Dallas, Atlanta, Florida, et cetera, that's probably going to be down a couple of percent on same-store revenue throughout the year. But again, we expect that to start to lift as we get into kind of the fourth quarter of this year, just given the fact that we're comping against easier fourth quarter as we did have a little bit more challenged new move-ins in the fourth quarter. And then given that supply really starts to dissipate as we continue to move throughout the year.

Good segue to my next question. supply, I'm not sure if you saw, but you already kind of put out a revised supply stack for this year -- for the end of last year and this year, they came to the conclusion that supply actually reaccelerated in the back half of the year. So just curious if that dose that you guys are seeing on the ground and if you could kind of quantify exposure of assets to supply in '26 versus '25 or any sort of numbers you can put around supply and how you think about it would be helpful.

Yes, Juan. I think we've been more right than wrong on the trajectory, literally over the last 4 or 5 years, debating some of the external tracking data sets out there. I think more often not, they seem to overemphasize or overplay potential momentum coming into markets. We don't really see a trend or a change in the trajectory that's been going on now for the last 4 or 5 years, which is year-by-year decelerated deliveries. So hard to justify what kind of data they're looking at to say there's a reacceleration.

By all accounts, the development business continues to be quite complicated, quite commanding approval levels, costs, underwriting issues. There certainly are a handful of markets that may see supply as they have over the last year or 2, but we're not seeing any reacceleration. And as you know, we have a a very strong team out in the markets nationally. We're being very judicious on we're putting our own development activity, and we see that as a great tool for us to continue to deploy capital even under the umbrella PS 4.0 that Tom and Joe are talking about.

Our next question comes from the line of Samir Khanal with Bank of America.

I guess with the implementation of 4.0 PSX, which you all have talked about, I mean, what is the long-term profile, so the growth profile of the company, I think, from same-store NOI or FFO growth perspective?

Well, I think you highlighted a couple of different components there, and we can talk more about PSX if you're interested in it. As we think about PS 4.0, in aggregate, the objective is to build on the outperformance that we've been able to put together over the last several years through organic growth and that is driven by a strong focus on the customer, the customer experience, our leading brand and then also embracing continued digitalization and now I interactions that are going to be ever more present going forward with -- between us and our customers and build on that outperformance as we think about how we deliver that customer experience. So both on the revenue side as well as the expense side for for organic growth outperformance. That's been paired with the value creation engine that we're speaking to.

And that is an opportunity year in and year out across 4 different levers. -- as we think about acquisitions, which we just spoke to, Joe just spoke to development, our expansion efforts as well as our lending platform, which will all be additive to FFO growth. And you've seen that over the last several years with our nonsame-store performance with our operating platform being able to achieve more cash flow than when we purchased the property. And so very encouraged by that opportunity and where we're going, and that will be additive to FFO growth. And then our ancillary businesses, right? Some of the things that I just hit on, like lending, for instance, also support our third-party management business and our tenant insurance business, which are also having a healthy growth year this year. So looking to drive organic growth, performance and outperformance stronger value creation engine as we look to plug assets into that operating platform and utilize our capital competitive advantages and drive our ancillary businesses all to a stronger FFO growth profile going forward.

Got it. And I guess on the move of the headquarters to Frisco, I guess what's the operational or financial benefit from that? And is there any sort of costs associated with sort of the relocation that we need to think about?

Yes. So I think a few things to highlight there. One, we've had a presence in both Glendale as well as in Dallas for a long time. and we've been growing both offices. But as we move through the last 5 to 7 years, we oftentimes have open roles in both places, be in Dallas as well as Glendale. And oftentimes, we would fill those roles in Dallas. So we did see the office increase in size there to the point where today, our office in Dallas is our largest corporate presence. So it makes sense to relocate the corporate headquarters name tag to that Dallas office, and we're moving into a new space there. In addition, as I noted earlier, we're going to be moving into a new space in the Glendale area as well with a long-term commitment to be in that market. So it's about finding the right talent across the country and building the team going forward. and we look forward to strong leadership in both offices going forward.

Samir, just related to cost question, so that is embedded within the corporate transformation cost that the team announced about a year ago. We've incurred roughly $4 million of that, I believe, of that $15 million to $20 million. So we will see more costs this year. A lot of that's due to relocation, hiring, severance, the office change, et cetera. But what the group had talked about in the past was from a return on capital perspective, you have both offices, you have great pools of talent in both locations, but this also allows us to do more with an automation perspective and offshoring perspective to the tune of about $4 million in run rate benefit. So it's a good ROI as well.

Your next question comes from the line of Ronald Kamden with Morgan Stanley.

Congrats on everyone, first of all. But the question is just thinking about reacceleration of organic growth that you sort of mentioned. Is there any sort of large capital plan? Or are we investing plan that sort of coming with that? Or you think that could be done sort of based on sort of the existing platform, existing system?

Sure. So let me talk a little bit about the PSX platform and what it represents and the investments that we'll be continuing to make within that platform. I think we've continuously gotten the question over the last year or 2, like what's next? And how are you going to take the platform from here. And PSX is really the answer to that. If you step back about 10 years ago, honestly, storage was behind in terms of digital customer experience and interacting with our customers. 10 years ago, our customers would show up at a property and sign a paper lease, for instance. I think what the team has accomplished over the last 10 years has been impressive. And we've obviously been communicating that over the last several years in terms of how we interact with our customers today across both a stronger digital experience. on our website, our e-rental platform, our app, but also reinvesting in the brand and the platform there.

And then also how we deliver that customer experience. So we've spoken about the operating model transformation and getting more efficient and effective throughout how we deliver that customer experience. So that's all shifted us forward into a very omnichannel and digital-first environment, but we're now sitting at an inflection point going forward. And that inflection point does center around AI and a further digital investment. And you think about what customers were expecting 10 years ago from an Amazon or a Starbucks, we sought to to replicate and deliver a customer experience that was more similar to what consumer businesses were offering at the time. That is moving even further ahead. and customers are expecting more. They're not just expecting options. They're expecting recommendations and fast answers to questions. We're investing as a team across the platform to deliver AI infused experiences both across the customer experience, but also to our teams and how we deliver that customer experience.

So more to come there as we launch that PSX platform. In terms of the investments, that will go on. They will be throughout that customer delivery, both in terms of team as well as technology platforms, et cetera, and we'll share those as we go. But we're excited about them because the returns on them will be strong.

Great. And then my quick follow-up is just on the top of the funnel demand. Some of the other indicators that you sort of look at from website visits and so forth. Maybe can you just talk about what you're seeing there and how that sort of correlates to maybe the slow housing activity we've been seeing?

Yes. top of funnel activity has been pretty consistent at the start of the year. The one thing I would note is January in the start of February has been pretty unique, given the weather across the country. So we've had weeks where you've seen activity really drop off because of the weather and then pick right back up as things warmed up. And so the start of the year has been really embodied by that. But if you kind of look through the peaks and the troughs, as I noted earlier, seeing good trends across moving customer demand as well as existing customer performance. moving rents, again, trending in a better direction into January. The existing customer continues to perform incredibly well. Move-outs down again in January, like they were in the fourth quarter. just demonstrating the strength of the storage consumer.

Our next question comes from the line of Nicholas Yulico with Scotiabank.

This is Viktor Fediv on for Nicholas. I have a follow-up on the external growth opportunity set. So you mentioned that you executed around EUR 1 billion of acquisitions in 25 billion, while roughly around EUR 7 billion was under consideration -- have you noticed any resin sheet in seller expectations? And how is this translating into Bask spreads in this 1 to 7 conversion ratio, so to speak?

That's been something that's been really evolving over the last several years, right? I mean we had a time period where the cost of debt was really low. Cap rates were lower. And it's been a readjustment for both sellers and buyers over the last several years. As time has gone on and you've seen a 10-year treasury, for instance, just to pick 1 metric that's been in a relatively tight band for the last several years, there's been an ability to transact more rationally, I think, for both sellers and buyers, and that led to some of our successes last year. And I think momentum is building towards that in 2026 based on our dialogue. No question. in many instances, there's still a healthy disconnect between buyers and sellers, and that's okay. We're ready to transact when sellers are ready to transact and continue to monitor the marketplaces therein. And -- but we are optimistic around 26 and 27 as the cap rate ranges start to narrow.

And I'd just add to that, as Tom mentioned in his opening comments, part of the multiyear trend, and this has been going on literally for the last decade plus is the number of owners coming into the sector with a different set of capital either constraints or opportunities that can feed activity, either predictable or unpredictable based on their need to bring assets to market. We saw a fair amount of that in 2025, where some larger portfolios ended up coming to the market. We curated a number of those larger portfolios into the assets that we thought were best suited for our own investment requirements, but that activity and that level of ownership structure within the REIT sector continues to grow, and that too is going to create opportunities, some predictable and in some cases, some unpredictable -- the team is ready to embrace those opportunities. And a lot of those conversations take time to cure. That's why some of the volume that we saw from an underwriting standpoint has yet to play through from a transaction. But step by step, we're more confident where activity along those lines could come through.

Got it. And then geographically speaking, where do you kind of want to grow the most? And where do you see the amount of opportunities available for you? And probably do we -- should we expect to see more growth in Texas even more than rail?

Yes. Sure. We have tremendous advantages because of the operating platform we have across the country in terms of understanding trends, having long-term data sets to understand what's taking place in submarkets. And so you may see in the supplemental, for instance, we're acquiring in this date or that state, but we're really focused on is capturing the opportunity at the submarket level and being able to identify those submarkets where there's a real fit for our portfolio. and a fit from a customer demand standpoint where there's an opportunity to deploy capital. And that goes to the the data-driven approach that we use today and one that we continue to infuse energy into moving forward, it's a submarket story in storage, and that's the opportunity we're chasing.

Our next question comes from the line of Michael Goldsmith with UBS.

Congratulations to everyone involved, including Joe, Tom and Joe lots of exciting announcements about the platform and the customer experience today. How much of what you are doing is reliant on an improving demand environment versus what you can control what you can control given the existing demand back up.

Yes. Thanks, Michael. Good question. As we sit here today, obviously, I highlighted earlier our views around the industry outlook, which we do think is a strong one over time. And storage has been one of the strongest performing subsectors within real estate over time. The last several years have not been particularly exciting, as I noted earlier. And certainly, as we look at it looks pretty similar to 2025 in terms of many of the trends. That's not holding us back. In fact, it just energizes us in terms of what it is we can do now with the team and the platform and to be able to take advantage of this environment, both in terms of capital allocation opportunities as well as platform investments to set ourselves up for the future. And we can't guess exactly when same-store trends are going to be what they've been in the past. But what we can do is invest in the platform and control there. And that will benefit us in the interim period and certainly when things improve as well.

And my follow-up question is, you've hired some new executives. You're building out the acquisitions team is that built into the G&A number? You did $107 million in the last 2 years and guidance is calling for roughly the same. So just trying to understand the trajectory of expense.

Michael, it's Joe. We have factored in a lot of those expectations related to new hires as well as investments into the platform. So Tom talked a lot about technology, data science, AI, we'll be investing in the platform in that respect as well. So that is captured in those numbers. What we obviously hope to do is go out there and drive performance for shareholders. And as it occurs, performance improves and hopefully, compensation improves along with it.

Congratulations again, good luck in 2026.

Thank you.

Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

And yes, congrats on all the promotions and appointments and Joe Russell, best of luck in your next chapter. I wanted to ask with regard to some of the leadership changes, just curious how the Board sees its oversight role evolving under 4.0 here, particularly with regard to capital deployment and capital allocation and sort of tying into that on the balance sheet, should we expect any changes to the company's capital structure, leverage policy, PSA used to be unlevered. You mentioned, Tom, it's 4.2x on a net debt-to-EBITDA basis and talked about some of the refinancing headwinds this year and perhaps over the next couple of years. Should we expect any evolution or changes around the company's cap structure moving forward?

I don't know how many parts are in that question, Todd, we'll do our best to cover them all. I'll start off, Todd, and then Tom and Joe can add any additional color. So first of all, just as far as the Board's role in where we have gotten to relative to the host of announcements as part of PS 4.0. Without question, our Boards always had a high degree of commitment on succession planning, seeding the company with the most robust and talented set of leaders, no change relative to their continued involvement as the team moves forward. in my experience over the last decade with the Board itself, I would say that's an active and continued discussion. It's always quite helpful to the management team as a whole. And with the talent and the range of perspective that we have on our Board and in our case, we feel like we've got a very talented board with a great range of experiences.

There there for counsel, advice and perspective. We're really excited about Shank taking his role, knowing his knowledge of the REIT industry as a whole and his success at Welltower, et cetera. So all very powerful components of what led to the whole host of decisions that came through the announcements yesterday. -- to go more specifically into how that translates into some of our more tactical components in the very near term. I'll let Tom talk a little bit more about that and give you more color.

Yes. Thanks, Joe. I think the only other thing that I'd highlight related to the Board and oversight and guidance and perspectives that that I look forward to is around the formation of a new investment committee of the Board. And obviously, our Board does have a lot of capital allocation experience and perspectives, and so look forward to that. That committee is going to be chaired by Ron Spogli, who is a founder of Freeman Spogli & Co. and him alongside with Shank obviously bring very strong capital allocation perspective, and I look forward to having lots of good dialogue and perspectives from that group moving forward as we launch our value creation engine.

Todd, this is Joe, and I'll try to close this question out relatively efficiently. But from a balance sheet perspective, I'm very fortunate as CFO to be able to inherit a fantastic balance sheet. The team has done a phenomenal job, as everybody knows, in terms of setting up the balance sheet for success and having both defensive and offensive capabilities depending on the period of time that we're in. And so from a metric and policy perspective, the team has talked about in the past wanting to be in that 4 to 5x debt-to-EBITDA range. Today, we're at 4.2x and so the expectation is to continue to stay there, continue to manage our liquidity, continue to have phenomenal balance sheet metrics and duration overall. I do think we're in a position where we can be offensive with this to really support the value creation engine.

So we have that $600 million of free cash flow each and every year. In addition, we have roughly $1.5 billion of capacity on debt just to go to the midpoint of that debt-to-EBITDA range. So I think we're in a position to potentially be offensive with the balance sheet, depending on the opportunities and accretion that are out there as well as with a balance sheet and platform of this size, there's a multitude of sources to fund the business and that goes beyond just the typical debt sources or equity sources. We've had discussions on, do we look at joint venture capital and dispositions in the future as well. And so there's a lot of different levers to pull here to evaluate value creation for the investor base.

All right. That's helpful. And then just following up on acquisitions, as you look to sort of accelerate those efforts a little bit what's been the biggest constraint for acquisitions as you kind of look back over the last several years. Obviously, you've been very active, but I'm just curious, it sounds like the efforts sort of ramping up a little bit. And I'm just curious if you feel there was sort of a constraint in whether you're looking to maybe increase your risk appetite or change your return hurdles at all as you layer assets onto the platform, see the value there.

Thanks, Todd. I would say I think the question earlier was around buyer and seller expectations and transaction volumes. I'd say that's been probably the biggest impediment to to accomplishing more capital allocation over the last several years. But as we look ahead, the value creation engine we're speaking to is not about lowering our return hurdles or getting into assets that we didn't view as attractive in the past. It's around how can we be better in what it is we're doing, how can we build the relationships with a growing team how can we be faster in terms of how we underwrite and provide feedback to brokers and sellers? How can we get more off-market opportunities and more singles and doubles in those pockets and submarkets that we're attracted in and if we think if we're successful in doing those things, there'll be more activity and better activity for us to deploy our capital into.

Our next question comes from the line of Brad Heffern with RBC Capital Markets.

Big picture question on moving to rates. Why do you think we haven't found the floor yet? Cuba was a long time ago, the consumer has been stable, housing has been stable, supply is declining. So I'm just curious like why are we still seeing the year-on-year declines? And do you think that we get to neutral at some point, maybe late in the year?

Yes. So I guess 2 components there. One is maybe looking back in time, how we've gotten here from a move-in rate standpoint. And I think there's a couple of things there. One is new supply in some of the markets that we operate in continues to come in. And so we spoke about some of the markets in the Sunbelt, for example, Atlanta, Dallas, Charlotte, Orlando, where new supply is weighing on performance, no question that competition of new supply drags down, move-in rents. And I think we're still seeing that and absorbing that. The good thing is occupancies are lifting there, and that absorption is taking place, which is encouraging and a forward look as it relates to where moving rents will trend in some of those markets. The flip side is we are seeing move-in rent growth in lots of our markets. So we highlighted some of those stronger markets that Joe mentioned earlier, in Minneapolis, Chicago, San Francisco, D.C., for instance, we have a move-in rate growth. And that move in rate growth is supported by good demand and more limited supply and so it's really not a story of a national phenomenon, but I think really a summation of market dynamics at play.

Okay. Got it. And then on the new compensation plan, Tom, you mentioned you were working with Shank. Obviously, Welltower has a new compensation plan as well. Are there any similarities there? Or are they unrelated?

Sure. I think there's a couple of things to highlight there. The incentives is an important part of what I call the ONT culture. The program that I've been working with Shank for the NEOs is very different than the program that he more recently announced in October, and it's more similar to a more traditional plan that you've seen from us, but at the same time, very, very different. And the differences relate to the performance period being around a 3-year period with delayed vesting the focus really is around total shareholder return, absolute and relative performance versus storage as well as the as well as stretch goals.

And I'd say that's one of the biggest components there is stretching the goals for us as an NEO team and obviously stretching those goals out to benefit shareholders as well if we can go out and achieve those stretch goals. So very much aligned with shareholders, 100% performance-based, and the shareholders and the team will win together. And that's really the focus around that incentive redesign. It's a big shift. And as we think about taking that as part of the 1 culture and PS 4.0, we have an opportunity to rethink incentives across the organization. And that is really the goal to infuse energy, urgency and engagement across the organization to drive results. So I'm passionate about how we think about incentives for the organization and excited about where we're going from here.

Our next question comes from the line of Ravi Vaidya with Mizuho Securities.

I wanted to ask about expenses. The expense forecast came in relatively low, about 100 bps below last year's inaugural forecast. Can you comment on some of the line items that are driving this? And maybe if there are any areas where there could be some levels of conservatism built in?

Ravi, it's Joe. So it's really just a continuation of what you've seen from this team for a number of years now. They continue to attack with a whole series of initiatives, all the various line items while also being cognizant of the delivery of the value to the customer. And so when you look at what took place in 2025, Obviously, you saw from a personnel perspective, we got that constrained, utilities was constrained, R&M constrained. I think you're seeing a continuation of that within our guidance of that 2.2% midpoint property tax leading the way. But if you jump into things like payroll, there's continued initiatives on that front from an hours perspective as we continue to use machine learning to really understand when are the customers there, what do the customers need and how can we better serve them.

So more hours reductions, but a critical offset within that is increasing pay for those property managers on site at the same time. So trying to get a win-win there. I think on the R&M side, you're seeing continued initiatives around how can we reduce costs there. So there's a number of pilots in terms of in-sourcing various aspects of R&M. When you go onto the utility side, we've had a pretty consistent solar effort over the last number of years to the tune of $50 million to $70 million a year. So you continue to see constraints from a utility perspective. And then you get into some of the centralization efforts that are taking place. So trying to find a more specialized approach to certain things. So thinking about sales functions, customer relations, bad debt issue resolution, moving some of those efforts off of the field and into the centralized team to try to get better outcomes. So it's a whole slew of initiatives. There's a whole stack of them that we'd be happy to take you through offline at some point, but a continuation of what the team has done here for a number of years.

Just one more here. Can you offer some more color on your current ECRI policy if you're expecting any other regulatory or legislative restrictions that are outside of California that may weigh on same-store revenue growth give a buffer or something like that built into the guide? Because it seems that this has become a category that more municipalities are likely to include in moratoriums.

Great. So I guess 2 parts to that question. One is in terms of how we think about the existing customer rate increase program, and we've communicated in the past, we think about that in terms of a number of components. One is what's the health of the customer base? What do we think the price sensitivity is in their behavior, and we continue to be encouraged by that. As I noted earlier, vacates are down, customer price sensitivity is consistent. And so a very healthy storage consumer. The other side is the replacement cost and what our occupancies are, what demand is for that unit, what marketing costs are, all those sorts of things play into the replacement cost side. And that's something we navigate on a unit by unit and property-by-property basis. So those 2 combined to really drive that program, and it's a very data-driven approach to meet the customer and move rents as appropriate based on the dynamics that play at the local market.

In terms of the regulatory environment, certainly, we've spoken over the last year around some of the California activities and SB 709 specifically -- and we're certainly compliant with that and communicating with our customers around the disclosure requirements for customers in California. We're certainly aware of some of the recent pronouncements out of New York, for instance, and other states around pricing transparency, storage specific or not and certainly monitoring those around the country and making sure we're in compliance with all of those laws and being transparent with our customers around our pricing approach and what they can expect.

Our next question comes from the line of Michael Griffin with Evercore ISI.

Great. First off, congrats on the team all around, Joe Russell, Best of lock on retirement and Joe Fisher, welcome to the team. Maybe just stepping back to get some perspective on sort of the PS 4 initiative. Can you give us some context? What was the genesis behind this and Joe, maybe you went to the Board, maybe it came down from the Board, and it seems like it's been in the hopper for some time. So just ultimately, what was the catalyst that brought this about given that despite the headwinds the industry has faced, public has been a leader throughout.

Yes, Griff, I wouldn't say there was a trigger or a catalyst. This is, I would say, an outgrowth of what the Board and the management team constantly do, which is look at strategic initiatives, look at generational opportunities in terms of again, our own skills, investments, the deployment, particularly in our case, a very robust environment where we've continued to optimize and drive the level of success through the portfolio operationally are tools tied to capital allocation, our balance sheet, et cetera, and then putting that entire set of opportunities into the hands of very skilled and talented leaders in every part of the company. So this is the outgrowth of a very intentional and ongoing strategic process. When Tom and I and some other significant leaders of the company, Natalia Johnson, et cetera, all came into the company about a decade ago, we went through, frankly, a pretty similar process as well.

And that internally was called 3.0. We've learned and optimized many things through the last decade, and step-by-step, we felt and everything percolated to the plane. It was time for 4.0. So very excited about what it entails. I think the team is going to be transparent around the more direct things that will come from 4.0 based on all the things that Tom and Joe are already speaking to and we're excited about what's ahead. Time and again, through our history, 53 years now plus. We've led the industry on a whole host of initiatives. We've been very proud of the fact that over the last decade, we continue to lead the industry in many areas. And yet again, we're going to challenge ourselves to take the next opportunity to drive forward. So it's a really great time super excited about Joe Fisher coming into the company as well as some other key hires, too. So it's a great time for us to launch. And with this launch, we don't stop either. We keep challenging ourselves to reinvent to optimize. And that's the DNA of public storage.

Great. I certainly appreciate the context there, Joe. And then I know a question was just asked sort of on the regulatory front, but maybe if I could sort of spin it a different way. Obviously, there was one of your peers named in a lawsuit with New York earlier this week. Is stuff like this, maybe the canary in the coal mine as it relates to sort of the pricing practices in the industry? I know there have been pushes, whether it's at SSA or the trade level around greater disclosures, but like is there a worry that greater, I guess, regulatory oversight from these municipalities could preclude what has been this ECRI pricing strategy regime we've been in all over the past couple of years?

Sure, Mike. So I think there's a couple of components to that. One, obviously, we saw some of the New York activity, and we continue to work with the National Self-Storage Association and the state self-source associations around working with regulators and legislators and frankly, ensuring that they understand the benefits of our business, how affordable our business is how affordable some of our new customer promotional rates are. Some of those things that -- and earlier in the conversation we spoke about, how affordable it is versus other space alternatives. So being able to communicate that and educate folks. And then obviously, part of PS 4.0 is a customer focus and improving the customer experience, and that goes everything from pricing all the way through to the day-to-day experience at the property. And so as a team, we're very focused on that customer experience and we'll be moving forward.

Great. That's it for me.

Our next question comes from the line of [ Han Zhang with JPMorgan ].

I guess should we expect any changes with the third-party management platform as it relates to PSA 4.0, especially revolving around income since you traditionally ran the platform of lesser than immediate profit mode of the month?

Sure. So in terms of the third-party management platform, we're excited, obviously, to launch the PS next-generation operating platform. As part of that, our third-party management clients will benefit from those advances that we make in the customer experience and our operational delivery of that experience. So we're excited to share more with them as well as we move forward. In addition to that, as part of the leadership appointments, Chris Sambar, our Chief Operating Officer, is going to be working very closely with Pete Panos, who runs that business day to day and seeking to grow it and to grow our third-party platform. from here. In terms of profitability, profitability of that program has increased modestly over time. And as that portfolio stabilizes and grows from here, the profitability will grow as well. in addition to the lending components and the 10 insurance components, which are synergistic with that platform.

Got it. That leads my follow-up. I guess, is there any color you could provide about how we should expect growth in the lending program over the near term?

We think that's an opportunity for us. Joe Fisher walked earlier through the book as it stands. So certainly, an opportunity to grow that going forward in support of our third-party management customers. and the synergistic benefits again around the third-party platform, tenant insurance as well as the capital component of the investment. So something we look forward to growing from here.

Our next question comes from the line of Brendan Lynch with Barclays.

Joe, congrats on a terrific career and Tom and Joe, congrats on your new positions. Maybe a question on what the primary KPIs you are measuring when you think about the customer experience component of the platform enhancements and how we can measure the progress that you're making.

Sure. I think there's a couple there. I think stepping back, obviously, PSX overall is about customer experience, it's about brand, but it's also about our financial and organic growth performance as well. So across that metric. Some customer metrics you can look at are certainly some of them operationally that you see move in, move out, tenant retention that you'll see from a financial standpoint. As we think about the platform overall, the focus is clearly around where we're headed with organic growth and organic growth performance and outperformance over time.

Great. That's helpful. And then maybe just quickly on international growth. Just give us an update on what your appetite is to maybe test the waters in some of these international markets that you've looked at in the recent past?

Yes, we continue to have appetite to explore international opportunity. Obviously, you've heard from us around Australia. In the past, we have a strong presence in Western Europe with our Shurgard platform there. And there are markets around the world where the storage is growing as an industry and customer demographics are supportive of a growing storage industry. So we evaluate those over time and are looking for the right entry points in order to purchase a platform that will give us access to an expanded pie of both operational as well as capital allocation opportunities in the growing storage markets. I will say -- and we always caveat that with the U.S. continues to be by far the deepest and most vibrant storage market in the world, and we're not taking our eye off that ball. But we do think there's an expanded pie opportunity internationally but we have to find the right fit and the right platform.

Maybe just a quick follow-up on that. When you look at the international portfolios that might be available, how do they compare to U.S. platforms that might have a more advanced data analytics and things of that nature? Like what is the gap that the PSA platform has relative to the 2 different buckets of potential acquisitions?

Yes, I would say for the most part, the platforms internationally are of a smaller scale. And because of that, don't have some of the scale platform and data advantages that we and others here in the U.S. have. And so I think that's probably a pretty clear opportunity. We see that in the U.S. as well as we think about smaller operating platforms and what we can do when we acquire or manage for companies that have a smaller platform to go. So there are real advantages of scale in this business. We've continuously seen that across our portfolio acquisitions over the last 4 or 5 years. And I would say international is right in that same wheelhouse.

Our next question comes from the line of Eric Luebchow with Wells Fargo.

Great. Maybe you could talk about the development business a little bit. Your development deliveries have slowed down a bit the past couple of years down to $300 million this year. And I guess if you can talk about kind of whether that's due to the tougher lease-up environment, the higher cost to develop, anything else you could call out there?

Yes, sure. So the development business is one that that we're passionate about internally because of the ability for us to pick that submarket, pick the land site, design the building, create the unit mix and then ultimately place it into our operating platform where we can earn more cash flow. So it's one that we have a national team out looking for sites. It's also one that's been navigating through a challenging development environment, one with rising costs and obviously, rents coming down in some of the markets with strong population growth. And so as we look at this year, we're anticipating a little less deliveries this year than last year, but we're focused on growing that business over time. to take advantage of a growing storage demand environment in many of the submarkets around the country, and we view it as a very strong risk-adjusted capital return. And so as we think about the value creation engine no question, there's a strong focus on what it is we can do there to grow that business over time.

Great. And then just one follow-up. I know you touched a little bit on how you're using AI internally as we think about the evolution of some of the large language models potentially including ads over time and customer acquisition, any evolution from traditional paid search, how are you thinking about that how that may evolve over the next couple of years because a lot of these models become more and more ubiquitous.

Yes. No, I think they are. I think consumers, myself included, probably lots of us on this phone call are using the large language models more and more in our daily lives. And that speaks to the PSX platform and not only interacting with them through the LLM, but also as customers land on our website, for instance, or otherwise, they can interact with agents or on our app, et cetera. So we're excited about some of the initiatives we have going internally to take advantage of those LLM and frankly, the customer expectations that continue to move towards that direction. And we think we have exciting things to share there, and we'll do that over the next 6 to 12 months.

Our next question comes from the line of Samuel Hima with Deutsche Bank.

I wanted to focus on Shank as the new Chairman of the Board on his commentary around execution even in an environment of unremarkable growth. So I was wondering if you guys could just talk a bit about what the -- what opportunities exist in such an environment and like the idea of buying assets with low occupancy at an attractive basis ahead of an eventual turnaround of fundamentals. I guess if you guys could talk a bit about that, I'd really appreciate it.

Sure. So obviously, Shank's speaks for itself. I think as we think about the opportunity ahead here. We do think that there's an opportunity to deploy capital in an environment where industry fundamentals haven't been particularly exciting over the last couple of years, but we have confidence in where they're going. And we're investing in the people and the platform to be able to do that from here. And I think the -- if you look at just, for instance, the basis on the assets that we purchased last year, on an attractive basis. And we think overall, valuations are attractive today. Obviously, it depends on the submarket. But we'll continue to deploy capital for the right opportunities. and we think that will benefit the platform over time from here. And we have a lot of confidence in the long-term fundamentals of storage. And as those return, that's great, but we're not waiting around for that. We have the opportunity to invest today to benefit the platform over time.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Boyle for any final comments.

Great. Thanks very much for everyone joining today. We're energized by the opportunity ahead and look forward to share more about PS 4.0 down the road. Thanks very much.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to Public Storage Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Ryan Burke. Thank you. You may begin.

Thank you, Rob. Hello, everyone. Thank you for joining us for our third quarter 2025 earnings call.

I'm here with Joe Russell; and Tom Boyle.

Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, October 30, 2025, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events.

A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourself to 2 questions. Of course, if you have more after that, please feel free to jump in queue.

With that, I'll turn the call over to Joe.

Thank you, Ryan, and thank you all for joining us today. Public Storage's third quarter results reflect differentiated strategies that continue to drive our outperformance in addition to encouraging industry trends, including operational stabilization, lower competition from new supply and increasing acquisition activity. We are raising our 2025 outlook for the second consecutive quarter based on outperformance in same-store and nonsame-store NOI growth, acquisition volume and core FFO growth per share.

Public Storage's industry leadership is proven by, among other things, the highest revenue generation per square foot with the most profitable operating platform, the strongest portfolio expansion through our best-in-class teams and backed by our growth-oriented balance sheet, the highest retained cash flow generation, which we utilized to invest back into our business to drive earnings, and FFO growth in excess of stabilized same-store growth driven by our compounding returns platform.

We have been actively advancing the pillars of this platform, which include our leading operations, capital allocation and capital access. Just a few of many examples in terms of our operating innovation include: first, we have the industry's leading omnichannel customer experience through which we offer digital options across their entire journey. The success is evident with customers now choosing digital path and 85% of their interactions and transactions with us.

Second, with the shift to digital, we are modernizing our field operations by utilizing AI to directly provide customer service and staff our properties more appropriately. The days of needing a property manager on site all day, every day are behind us. Instead, we now have people on site, when and where customers need help. To date, this has reduced labor hours by more than 30%, while also increasing employee engagement and lowering turnover.

And third, we are deploying new technology-based strategies across the entire organization, including customer search and generative engine optimization, unit pricing and revenue management, asset management including security, vendors and maintenance, identifying and executing development opportunities and putting the right tools in our field and corporate teams hands to even more effectively drive revenues and control expenses. Collectively, these initiatives are driving higher revenues, margins and core FFO per share growth.

Now I'll turn the call over to Tom.

Thanks, Joe. We are leaning into our platform strength. Joe spoke to our industry-leading operations and technology initiatives. I'll now touch on capital allocation, capital access and performance specifics.

On capital allocation, we have accelerated portfolio growth with more than $1.3 billion in wholly owned acquisitions and developments already announced this year. The acquisition opportunities are relatively broad-based across size, geography as well as seller type. We will continue expanding the non-same-store pool through additional acquisitions and our $650 million development pipeline to be delivered over the next 2 years.

We are built to execute on this activity based on our industry relationships, data-driven underwriting and strong capital position. With leverage at 4.2x net debt and preferred to EBITDA and retained cash flow reaching about $650 million this year, we will continue using our advantageous cost of capital to fund portfolio expansion and drive core FFO per share growth.

Now shifting to financial performance for the quarter and our improved outlook. Revenue growth in the same-store pool came in ahead of our expectations, primarily due to strong in-place customer behavior. Overall, in-place rents were up 0.6%, offset by lower occupancy. From a market perspective, Chicago, Minneapolis, Tampa, Honolulu and the West Coast are standouts with revenue growth in the 2% to 4% same-store revenue range.

Speaking specifically to the West Coast, our strong presence top to bottom from Seattle down to San Diego, representing 1/3 of our NOI, serves us well with good demand trends and more limited new supply. Los Angeles will return to strong growth when the state of emergency price restrictions expire.

Our expense control across the same-store pool continues to be strong as well, held flat for the quarter and driven by reductions across most line items. Continuing declines in property payroll and utilities are direct results of the differentiated initiatives that Joe spoke to. Accordingly, same-store NOI growth came in better than we anticipated.

Outside of the same-store pool, outperformance in our high-growth non-same-store pool helped drive core FFO per share higher by 2.6%. This is a 560 basis point acceleration from the growth level achieved in the third quarter of last year. As Joe mentioned, our strategic focus continues to drive core FFO per share growth well in excess of our stabilized same-store growth.

We adjusted our full year guidance to reflect the positive trends I just spoke to with increased outlooks for same-store revenue, same-store NOI and nonsame-store NOI. All in, we increased core FFO per share growth by nearly 1% with 1 quarter left in the year.

Looking forward, we are very well positioned to continue driving performance with differentiated strategies that will further enhance our compounding returns platform.

With that, Rob, let's open it up for questions.

[Operator Instructions] Our first question comes from Eric Wolfe with Citi.

As we get closer to year-end, could you maybe just talk about the process you go through in setting your budgets for 2026? And sort of how you go about determining things like where move-in rents to go, occupancy and sort of all the main variables that are going to make up growth for next year?

Yes, sure. We can talk about that. I mean, we're continuously forecasting and updating our forecast for the business as we move through any given year, obviously, starting with 2026 process, something we started several months ago, and people are forecasting their businesses. In terms of some of the line items you spoke to we're using data-driven processes and historical trends as well as predictive analytics to drive those forecasts. We certainly challenge our teams to come up with new initiatives to drive the business going forward into the new year, and that process is well underway.

And Eric, I'd add that it's a robust process across literally every function within the company. It's fluid. It doesn't end and begin even as we speak, it builds, and we have a lot of analytics relative to the things that we're doing from a deployment standpoint as we've spoken to, we have a whole host of efficiency efforts that are tied to investments in digital and otherwise, it continues to drive our margins to the level that we attain.

And then to Tom's point, the whole host of things that we do tied to revenue optimization across the entire portfolio with not only our same-store but our non-same-store portfolio.

Got it. That's helpful. And I think in the press release, you characterized things as sort of stabilizing. I don't know if you feel like maybe there's a path of things getting back to more sort of a normal run rate growth or what it would take to get there. But just sort of curious how you're thinking about sort of the trends that you've seen recently in October, over the last couple of months. If you're starting to get a little bit closer back to normal, if it's more of a just kind of like a stabilization and sort of a little bit more of a muted rebound?

Yes, a good question. I think as we look ahead, we do see steady stabilization. And as we've moved through 2025, we've seen demand bouncing off the bottoms of '24. We see new supply continuing to be coming down just given the challenges associated with new development in many of the markets we operate.

But I'd probably point you most notably to the fact that what I commented on earlier around some of our stronger markets where we're stable, but we're growing at a healthy clip as well. And just highlighting the West Coast again, with growth in the 2% to 4% same-store revenue growth range and good fundamentals. So some of the markets aren't quite there yet, but we're seeing a good and healthy customer and overall operational performance in many of the markets we operate today.

Our next question comes from Michael Griffin with Evercore.

I'm curious if you can give us any insight into whether new customer behavior has changed at all. It seems like the revenue this quarter was mainly driven by that existing customer, which seems to remain sticky. But as these move-in rents decline on a year-over-year basis, do you feel like we're starting to hit a trough there? Or do you think there's potentially further to go in terms of new move-in rents?

Yes. I'd say taking a step back, I think there's too much focus related to move-in rents is one particular element of revenue, right? Overall, across the organization, we are focused on revenue as the most important metric. And that is a combination of what you're highlighting, yes move-in rents but also move-in volumes, move-out activity existing customer behavior and rent increases. And it continues to be a competitive operating environment for new customer move-ins and you could see that through the quarter.

But the focus here is certainly around revenue is the most important metric and that goes throughout the organization from the property managers and property staff, all the way through the home office organization. So we continue to make investments through our platform to drive revenue in a competitive environment. And I would point you not to one particular metric.

Tom, I appreciate the context there. And then maybe just on the revised guidance, it seems like you're trending in the more favorable range, both on expenses being towards the low end and NOI being toward the high end, at least on a year-to-date basis. So maybe are there any puts and takes we should think about when looking at the fourth quarter sort of implied guidance? Maybe tougher comps in certain line items? Or any clarification there would be helpful.

Yes, sure. Every quarter has got its own set of comps. I do think the fourth quarter specifically Property tax is a tough comp. We had a number of healthy refunds last year. We'll see whether the team can execute on similar amounts this year, but that's a pretty tough comp.

And then as we think about same-store revenue, we've been consistent highlighting that the impact on Los Angeles will grow as the year progresses. And so we do anticipate that to occur in the fourth quarter. Otherwise, those would be the 2 items I'd highlight for you.

Our next question comes from Samir Khanal with Bank of America.

I guess just sticking to that topic about L.A. and the impact. I mean, kind of what are you hearing on the ground given the pricing restrictions and the burn-off in Jan? I mean, what are your channel checks kind of telling you at this point?

Yes, Samir, not probably anything deterently than you're hearing, which it's completely in the hands of the Governor. And the decision time frame, he's looking to come back to announce whatever next set of decisions would be very early January. So no additional color or context beyond it could result in a whole range of outcomes, but nothing specific at this point.

Got it. And then I guess, Tom, on the expense side, when you look at expense growth, kind of that 3% range, you guys have done a great job in terms of controlling expenses. I mean how much room do you have there to kind of still kind of grow at that sort of 2% into next year, at least the next 12 to 24 months?

Yes, sure. And I appreciate the comments. The team is focused around a number of different initiatives to drive operating expense performance while also driving revenue in the overall business.

And the couple that we continuously highlight and we're seeing bear fruit again this year, continue to be the digital investments that we've been making. One of the side effects of those digital investments is the ability to think holistically differently about our property staffing and customer interaction, so we saw some fruit borne from that this year, more to come there as the team continues to drive evolution in our operating model.

And then I think the other one clearly to highlight is our solar power initiatives, which we'll have solar on over 1,100 -- or we have solar on over 1,100 of our properties today and continue to drive forward with that initiative. And we'll continue to see the benefits from that. But in this environment, we're looking for all those ways to invest in the platform and drive better OpEx performance.

Our next question comes from Caitlin Burrows with Goldman Sachs.

I was wondering if you could talk through your current expectations for supply and maybe how you expect the next 12 months will compare to the last 12 months and what's driving that?

Yes. Sure, Caitlin. The trajectory continues to be the same, meaning on a year-by-year basis, we see the pressure creating fewer and fewer developments as a whole industry-wide. There are here and there are certain markets that have a number of additional assets coming to market. But clearly and nationally in a very positive context that supply delivery momentum continues to go down.

And we've seen it throughout 2025, we're going to see it into '26. And I would even say we're continuing to '27. The basis for that outlook continues to be first and foremost, we're in that business nationally. We see the complexity and the friction that comes from any kind of a development. It's tied to the things that you have to do from an entitlement standpoint, becoming more and more complicated, the cost structure of assets themselves and then, again, formulating and understanding the risk that would be tied to going into the development process that in and of itself could take anywhere from 2 to 3 years if not longer. And then going to a stabilized asset that could take another 2, 3 or 4 years.

So the risk factors for any kind of developer out there are much higher today and they continue to go a direction that's actually very good for the industry as a whole. Meaning there are going to be fewer and fewer deliveries even going in the next couple of years.

Got it. And then so I guess then leading into PSA's on development activity. It does sound though like you guys want to kind of maintain or backfill your pipeline of activity. So other than, I guess, size, what do you think differentiates your strategy and ability to kind of get past all of those issues? And how is your kind of stabilization over the past few years been going versus underwriting?

Sure. I'll take the first part and I'll have Tom talk to the stabilization, which is quite good as well. So no question, we have very different capabilities. It starts with inherent and deep-seated knowledge, market-to-market, with the amount of inherent operational data that we get, we have an ability to underwrite assets from a development and risk standpoint far differently than others do.

We have the data set that guides us to optimize not only property size but also configuration within properties, unit, size, mix, et cetera. We can find pockets of assets quite effectively or pockets of asset development very differently than most developers.

We've got a good national team working aggressively out finding in developing assets in a window that I just spoke to, that is far more difficult. So in a reverse way for us uniquely, it's providing the opportunity to go in and find very powerful development opportunities in a whole host of markets nationally.

So our confidence and our commitment to the business has never been higher, but at the same time, it's never been a more difficult business. So it is a very good and unique window for us to continue to deploy capital, and it continues to lead to substantial and the highest returns that we see from any capital allocation effort.

Tom, you can go ahead and talk about some of the metrics cited out, which continue to be quite good.

Yes. Our lease-up of our developments that have been recently delivered continues to do well, actually pacing a little bit ahead of expectations year-to-date. And you can see in the sub the yields produced by those vintages to Joe's point earlier, it does take 2 to 4 years for those vintages to stabilize, but we're seeing good trajectory across those vintages today and achieving those strong risk-adjusted returns that Joe spoke to.

Next question comes from Ron Kamdem with Morgan Stanley.

Just 2 quick ones. The guide -- I think this came up earlier, but the guidance sort of assumes a little bit of decel as you get into sort of 4Q. And I guess the obvious question is just as you're thinking about top of the funnel demand, whether it's some of the web search data or anything like that, are you seeing anything from that standpoint that's showing that demand may be slowing? Or how do you sort of think about that?

Yes. Thanks, Ron. Nothing implied there as it relates to demand overall. We continue to see a healthy customer activity to date. I think the item that I would highlight as it relates to same-store revenue, if that's where your focus is what I highlighted to Michael Griffin earlier around, the cumulative impact of the rental rate restrictions on Los Angeles, which will be holding us back a little bit more in the fourth quarter compared to the third quarter.

And then that property tax, tough comps as well. But otherwise, the non-same-store pool is set to continue to accelerate given the activities to date and the capital allocation that we've been putting for forth.

Great. And then, yes, my second question was just on the acquisition pace picking up. Just maybe talk about the product that you're seeing stabilized, nonstabilized and sort of cap rates and returns expectations.

Sure, Ron. It's a combination of all of those things. So we had an active quarter, obviously, and pleased to see the range of different types of sellers that have come to us either through off-market transactions and/or assets that we've been [trolling] or in dialogue for some period of time.

So it's a combination of some larger portfolios that we've curated to match some of our own investment requirements, market to market. It's also been a combination of some smaller portfolios that have resulted from some of our off-market and/or private conversations with them, always a healthy way to do some additional business.

And then as we typically do with our national focus and the team that's out working nationally, relationships and otherwise, we're doing a whole host of one-off or a much smaller transaction. So it's a whole combination. It's, again, a market focus that we have to stay very close to and we're well suited to do so.

We have unique capabilities to underwrite these assets with, again, going back to our development processes, knowing and understanding markets very deeply and been very pleased with a whole host of different types of assets that are either on one end of the spectrum stabilized or others that we're very comfortable bringing in the portfolio that are not stabilized, but once we put them on our platform, very comfortable and confident we're going to get the kinds of returns and meet expectations from, again, the invested capital going into those assets as well. So we're seeing a fair amount of good activity based on a lot of hard work that continues to go in that process, but it's bearing some good fruit.

Our next question is from Eric Luebchow with Wells Fargo.

Great. Appreciate the question. So maybe could you update us a little bit on operating trends through October in terms of occupancy moving rates? Anything you're seeing as we kind of move into the fourth quarter here?

Yes, sure. Happy to do that. I'll provide a couple of elements. And as I spoke earlier, focus continues to be on revenue overall. But specifically, talking about new customer activity. I'd maybe frame it as if you look at the third quarter and the rate and volume associated with new customer activity is down about 9% year-over-year.

And each of the months throughout the quarter a little bit different in terms of volume versus rate, et cetera. October is doing a touch better than that, down 9%. So some improving from that standpoint. Really driven in this particular month, driven by stronger move-in activity, and we're achieving that with less discounts but also lower rates. So better net outcome there.

I'd point you to move-in rates that again are driving that volume being in the down 10%, 11% ZIP code, but driving good volume up 3%, 4%.

In terms of occupancy, because of that move-in volume, occupancy closed, Eric, is sitting today down about 40 basis points year-over-year. But again, I reiterate the revenue focus versus occupancy or rental rate. And we feel like we're in a very good place from an occupancy standpoint to drive revenue in a steady stabilizing and hopefully improving operating fundamental picture.

Great. And maybe just a follow-up. I know you touched on this a little bit, but the LA rent restriction headwinds, you had guided to about 100 basis point headwind. So maybe you could just update us on what you're expecting kind of as we look into Q4 and what you see underlying demand looking like on the West Coast?

And I guess a related question. I mean, there has been some recent news about rent restrictions related to immigration activity in LA County with ICE. And so just wondering if you expect that to have any impact in the region.

Yes, sure. So 2 components there. One, related to LA performance for the year, it is trending a little better than what we had expected at the start of the year. And I think last quarter, I provided some perspective around revenue growth expectations for Los Angeles for the year being down close to down 3% for the year.

We think based on where we are right now, it's probably going to be down in the 1s, meaning negative 1% and negative 2% for the year. So some better improvements there.

In terms of -- and I would point to the drivers there really being what we spoke to earlier around really top to bottom, the West Coast, good customer activity, less new supply in those marketplaces and good trends. So good customer activity there.

And then the second part of your question, the more recent state of emergency is going to have a negligible impact on our operating performance in the fourth quarter just as you think about a state of emergency already being in place through the start of January. So no change there, but we're certainly still in an environment with pricing restrictions associated with those state of emergencies.

Our next question comes from Spenser Allaway with Green Street Advisors.

Just one for me. Can you talk about the amount of NOI upside you guys are currently underwriting when you're acquiring from mom-and-pop operators today? Maybe just broadly, I know that it varies asset to asset. And then with the increasing prevalence and uses for AI, do you think that, that upside is going to increase meaningfully in the years coming, just particularly as we think about the amount of data PSA has to work with and enter into like algorithms?

Yes. Sure, Spenser. So in terms of cash flow that we can earn from assets that we fold into the portfolio. That's an important component to our capital allocation strategy as we continue to make investments in our operating platform and drive performance there. We can utilize that advantage as we deploy capital. And the most visible thing that I would point to is the margin advantage that we have in and out of the marketplaces that we operate in and that gives you a sense.

Generally speaking, that margin advantage for new assets is both the revenue side and the OpEx side driving that margin performance. And so consistently getting towards 10% sort of margin enhancement for lots of the assets that we acquire.

In terms of going forward, I noted earlier, we continue to make investments in the platform, both from a revenue and OpEx side. And so we do anticipate that we'll continue to drive performance within our operating platform and that will then immediately have the same impact on the assets that we're putting into the pool, both for our wholly-owned assets as well as for the benefit of our third-party management customers, we drive our operating platform.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

First, 2 quick follow-ups on acquisitions. Your volume is approaching $1 billion for the year, so a fairly active year.

First, what's the outlook for that pace to continue into 2026? And then second, you've had very active years in the past, you did more than $5 billion in '21 and nearly $3 billion in '23. Is now a good time to lean in ahead of a recovery? I'm just curious what the appetite is like today to do something more sizable or strategic?

Yes. So a number of components to that question. So Joe and I will probably tag team this one. But I think we have seen an improving transaction market this year, Joe, spoke to that a little earlier. I do think the improving debt market trends set up for more active transaction volumes going forward. And so I think that's an opportunity set.

In terms of our appetite continues to be very strong. We look back at 2021 and the $5 billion of acquisitions that we acquired there and would love to do that again. So it's a question of what the opportunity set is ahead of us, but we're built to be able to integrate that level of activity and fold those assets into the operating platform that we're speaking to. So we're excited about the potential for increased activity. We'll have to see what 2026 brings.

Yes. And Todd, I'd just add, the balance sheet is well positioned to service as we, again, unlock those range of opportunities. To Tom's point, we've proven over the last 5 years in particular, that whether we're in a process where we're taking down one individual very large portfolio or a whole collection of smaller assets.

All of our systems and digital investments, et cetera, allow us to integrate these assets incredibly smoothly in many cases, within a 24-hour time frame from one platform to another. So we've got the technique, the scale and now time and again the experience to continue to aggregate these assets, and we are going to continue to look for any and all ways to do just that.

Okay. That's helpful. And then Joe, just sticking -- your comments around technology. So you mentioned a number of things, employee efficiencies, the rental process, Generative AI search. Clearly, expenses are an area where you've seen technology have a big impact. Is there a lot more room there? Or do you feel you sort of rung out a lot of the efficiencies at this point with maybe more benefits accruing toward acquisitions, mainly going forward? And what do you think might have the biggest impact in the next 3 to 5 years as you look out?

It's top to bottom, Todd, and continues -- from an investment standpoint, we are making a whole host of priorities around impacts to the business that starts right at revenue, all the things that we can do through our technology and investments tied to revenue and then it's optimization. Clearly, you can see that with the efficiency and continued outperformance on margin achievement.

But again, to give you color on where we are on this road map, we're very confident. We have only just begun. I mean there are very meaningful things that the team continues to invest in, literally every part of the company. It's very empowering. It's not easy, but we have the fortitude and we continue to display the ability to use these tools very effectively in many times, a much shorter time frame than we may have originally estimated, as we've spoken to now for some time. 85% of our customers now transact with us digitally, where 4, 5 years ago that number was basically 0.

And with, again, the migration to more and more data-driven processes that creates iterative and in some cases, compounding opportunities to drive efficiency much sooner and more effectively than we may have even envisioned at the front end.

And we are encouraged by the team-by-team effort that continues to play through. We are no question, a self-storage company, but we have a focus on data optimization that continues to serve us quite well, and we're very committed to that.

What kind of margin upside do you think is ultimately achievable?

Well, we'll see how that plays. But confident we're not done.

[Operator Instructions] Our next question comes from Juan Sanabria with BMO Capital Markets.

Just wanted to follow up on L.A. quickly. You talked about feeling a bit better about the drag that L.A. is going to see for the year. Just curious if you could translate that down 3% to now down 1% to 2% on the overall portfolio? And is there any offsets from the strength in L.A. on the West Coast, the same-store revenues?

Yes. No, and I think giving you the guidepost as it relates to the markets should be helpful. I think the fourth quarter, obviously implied number associated with that, as I've noted a couple of times, will be holding us back a little bit further as it relates to the impact to the overall same-store.

The demand associated with new customer as well as one of the things we've seen in Los Angeles is less vacate activity, and we've seen that up and down many of our markets and nationally, less vacate activity also helpful. So occupancy is up a little bit in Los Angeles.

And so a lot of the same trends that Joe and I have already spoken to on this call in terms of good customer activity, very challenging new development environment continue to support Los Angeles despite the fact that we can't charge the rents that we otherwise would charge in a competitive marketplace.

And then just cap rate wise, how should we think about going in yields and targeted stabilized yields on the investments you're making at around $1 billion year-to-date?

Yes. No, the yields that we've been targeting are pretty consistent with what we highlighted last quarter. So we're likely to achieve going in yields in the kind of 5.25% ZIP code on a mix of stabilized and unstabilized activities year-to-date. And so the points we've been making on this call, we have the opportunity to plug those assets into our operating platform. And as we do that, we'll achieve more cash flow from those assets. And so those will stabilize into the 6s.

Our next question comes from Michael Goldsmith with UBS.

Sticking with the transaction market, can you talk about the opportunity that you see with lease-up properties, you'll be able to operate them better, maybe there's the appetite to purchase that? And then also the increase in the non-same-store NOI guidance was higher by $10 million. Does that reflect improved performance of the previously owned properties? Or does that reflect the newly acquired ones?

Okay. I'll take the first part, and Tom can take the second, Michael. But no question we have continue to deploy capital into many assets that are far from stabilization from some that literally are vacant to 30%, 50%, 70% occupied and otherwise. And time and again, have proven the ability to lift the performance of those assets very confidently, just like I spoke about earlier, tied to the knowledge that we have from a market standpoint, all of the techniques that we're using from revenue management, operational efficiency, knowledge of customer dynamics, knowledge of the market itself.

So no question, we have a high degree of confidence in any range of stabilization from an asset standpoint. So we will continue to entertain all different asset types based on that level of knowledge and skill and that is continuing to produce the kinds of returns that we're very confident will not only continue, but it will give us more running room as we grow the non-same-store portfolio just like we have in 2025. Tom, you can take the second part.

Yes, the second part of your question, just related to nonsame-store performance. Part of that is better performance and lease-up of some of the assets that you're speaking to. And then the other portion is obviously closing on some incremental assets than what we had closed under contracts. So that combination leads to better outlook for nonsame-store for this year.

But you also know we included an update to the incremental NOI from after '25 to stabilization, which reflects the future engine of growth associated with this pool of assets as they stabilize and lease up. So that's increased to $130 million for '26 and beyond.

And my follow-up question, your marketing spend is down year-over-year. I believe your promotions given is also down. So can you just walk through kind of like the thought process around using these levers as top or as a top-of-funnel demand driver? And just is there a reason why pulling back on some of these factors, this is the right time to do that versus maybe leaning in at a time with demand being kind of uneven?

Yes. Thanks, Michael. I'd say we consistently use all the tools you highlighted in order to drive the right kind of customer volumes and behavior over time. So we're active in utilizing advertising as well as promotional activity, lowering our rental rates, increasing our rental rates. And as I noted earlier, it all goes into a focus on optimizing and maximizing revenue as the one metric that we're focused on versus individual line items. And that's the focus of the team, and we'll continue to use all those tools in order to focus on that revenue metric.

Our next question is from Mike Mueller with JPMorgan.

I guess for some of the stronger markets that you talked about in your initial comments, can you talk a little bit about how different were the, I guess, the move-in rent comparisons to the year-over-year comps in those markets compared to the roll-up number we see in the South?

Yes, Michael, I mean, I spoke earlier to the fact that many of those markets I highlighted are performing well, steady, strong growth from many of them. And associated with that, you have better move-in trends, but you also have better trends from existing customers and good behavior amongst the existing customer base. So it's a combination of things as always, but no question, seeing some good strength across many of our markets today.

Got it. Okay. And as a quick follow-up, and I apologize if I missed this one. The -- any changes in terms of the pushback from customers on ECRI or ECRI levels in general?

No. The existing customer continues to perform quite well. You can see vacates were down in the quarter. Price sensitivity remains consistent with our expectations and our modeling. So no shifts there, and we continue to be encouraged by the storage consumer as they rent with us.

Our next question comes from Brendan Lynch with Barclays Bank.

Clearly, you guys are making good progress on the efficiency initiatives, especially on labor. How do you evaluate though, if you cut too much? I'd imagine there's some sort of A/B testing. But any details on your approach to overage or underage of labor would be helpful.

Yes, Brendan, we're in a now multiyear integration, which has included, to your point, a whole host of testing relative to the efficacy of optimized labor. And we very conscientiously and first and foremost, used customer interaction and customer service as a guidepost to see and understand, to your point, how far to go.

The components of that also, though, include on a per market basis, and even a submarket basis, the kind of scale that we have. And with that, the effectiveness of the digital ecosystem that guides us to the predictability factor of this. And the tools that we're using from a predictability standpoint continue to become more and more effective.

So those kinds of tools are the tools that we invest in completely from a labor standpoint that does a multitude of things from an output standpoint. One, again, tied to customer service; number two, the effectiveness of the team member themselves, ironically, but intentionally, it's also led to a much higher level of employee satisfaction relative to the way that they're operating their day-in-day environment. It's also and very intentionally provided good expense optimization and we continue to see more and more tools, particularly with the amount of data that we're dealing with, where we're moving in, for instance, north of 100,000 customers a month to guide us to the effectiveness of this.

I mentioned earlier that now 85% of our customers are transacting with us digitally, but there are many customers that want to do the opposite and we're servicing them quite well with, again, a whole host of even different tools that they had to conduct business with us 2, 3 or 4 years ago. So more evolution in this entire process, but very good traction, meaning that we've got more to do, and we're excited about it.

Great. That's helpful. I also wanted to ask on housing-related demand. Obviously, that's kind of been a missing element for a couple of years now. Are you seeing any signs of improvement yet or any reason to be more optimistic that 2026 would be better than 2025 or 2024?

Yes, sure. I mean I think housing is a component of our demand. It's been relatively stable over the last couple of years as housing transaction volumes have been relatively stable after the step lower several years ago.

Clearly, interest rates are a touch lower, mortgage rates are a touch lower, that should be helpful as we think about activity going forward. We haven't seen anything on the ground yet that would dictate that there's any meaningful shifts currently. And our in-house perspective is that it's going to take some time for the housing market to continue to work through it's adjustment with a big shift in mortgage rates over the last couple of years. So I think it's probably a steady as she goes environment in housing, maybe a touch better than that.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Ryan Burke for closing comments.

Thanks, Rob, and thanks to all of you for joining us today. Have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.