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Greetings, and welcome to SmartStop Self Storage Q1 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to David Corak, Senior Vice President of Corporate Finance and Strategy. Thank you. You may now begin.

Thank you, operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects and expectations may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to numerous risks and uncertainties as described in our filings with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments.

Forward-looking statements in our earnings release that we issued last night, along with the comments on this call, are made only as of today. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that we issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today, we have H. Michael Schwartz, Founder, Chairman and CEO; as well as James Barry, our CFO.

Now, I'll turn it over to Michael.

Thank you, David, and thank you for joining us today for our first quarter earnings call. I'll start with a few highlights of our first quarter results. We posted strong same-store revenue growth of 1.5%, NOI growth of 2% and maintained average occupancy of 92.5%, while facing our toughest quarterly comp of the year. Operationally, we posted very strong results despite recent geopolitical news. With that said, 10 of our top 15 markets posted positive same-store NOI growth and good expense control led to a 30 basis point growth in our same-store operating margins.

Likewise, other areas of our business outperformed expectations. We reported FFO as adjusted per share of $0.49, up 19.3% year-over-year. In February, we completed the recast of our $500 million syndicated bank facility at an all-in cost of about 30 basis points below the previous facility. Additionally, we acquired a parcel of land in Canada that we intend to develop into Class A storage in our SmartCentres joint venture. Lastly, in March, we entered into a strategic joint venture with AXCS Capital focused on providing bridge capital to self-storage sponsors across the United States.

In terms of guidance, we are now narrowing our same-store revenue growth from a range of negative 0.5% to 2% to a range of negative 0.25% to 1.75%. Additionally, we're reducing our overall OpEx growth range from 2% to 4% to 1.75% to 3.75%. The result is an increase of our NOI growth midpoint from a negative 40 basis points to a negative 25 basis points. Additionally, we are narrowing our FFO as adjusted per share of $1.93 to $2.05 to $1.94 to $2.04.

Turning to operations. January and February were strong months for us, slightly above our initial expectations. In March, we saw a pullback in demand that directly coincided with the geopolitical news. This played through from the second week of March until about the second week of April when things really started to turn for the better. Demand has returned, and it appears rental season is upon us. We are still very early in the year. And in the self-storage business, rental season can end up impacting annual results. That said, we are certainly encouraged going into the rental season.

With that, I'll turn it over to James to discuss the quarter.

Thank you, Michael. Starting with our operating performance. Our same-store pool posted year-over-year revenue growth of 1.5%, with operating expense growth of 60 basis points, leading to an NOI increase of 2% with quarter ending occupancy of 92.3%. While we did increase promotional utilization during the quarter, we were able to hold a solid average occupancy level of 92.5% with limited increases in marketing spend in the first quarter. Our achieved move-in rates per square foot were down 7% on average, while our move-in rates per unit were actually up 2% year-over-year during the quarter.

As we moved into April, we grew our occupancy, ending April at 92.6%, only down 45 basis points year-over-year and notably up 30 basis points from the end of March. We were pleased with our operating expenses as well with year-over-year growth of only 60 basis points in the same-store pool. This expense control led to an increase in our same-store margins of 30 basis points, the first year-over-year margin increase since 2023.

We experienced a tailwind from FX during the quarter for the first time in a long time. Our 13 Canadian same-store assets posted same-store revenue growth of 4.1% and negative 50 basis points on a constant currency basis. These results were in line with our expectations as the GTA had a 7% constant currency revenue comp in the first quarter of 2025, far and away our toughest comp of the year.

In terms of our Asheville portfolio, our occupancy gap has narrowed dramatically since December, averaging down 260 basis points year-over-year in the first quarter. And as of the end of April, we are only down 130 basis points year-over-year at 92.2% occupancy. That's notably up 220 basis points from the end of December 2025. On the external growth front, we acquired one parcel of land in Toronto within our SmartCentres joint venture that we intend to develop into Class A storage.

Turning to our third-party management platform. We ended the quarter with 227 properties under management, in line with our expectations. The result of all of this is that for the first quarter of 2026, we posted fully diluted FFO as adjusted per share and unit of $0.49.

Lastly, turning to the balance sheet. During the quarter, we completed the recast of our $500 million syndicated bank facility, as Michael mentioned earlier. That facility matures in February 2030 and has a 1-year extension option. And the credit agreement has built-in language that would allow for a further pricing step down upon reaching an investment-grade rating from S&P or Moody's Rating Services. At quarter end, our Canadian FX exposure is fully hedged naturally from a cash flow standpoint and 94% of our outstanding debt was fixed as of quarter end. SmartStop's balance sheet is positioned to access a wide variety of attractive capital sources, both in terms of debt and equity to execute on future growth opportunities.

And with that, operator, we will open it up to questions.

[Operator Instructions] Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

I appreciate some of the details on April. I was wondering if you could just provide a little bit more detail on the move-in rent trends that you saw in April and how the promotional activity trended?

Todd, it's Corak. So as James mentioned, at the end of April, our occupancy was at 92.6%, down 50 bps year-over-year. Our move-in rates on a unit basis were up about 1% year-over-year in April, while the move-in rents on a per square foot basis were down about 6.5% on a year-over-year basis.

April ended up being a pretty good month overall, even with a sort of a slower start. We had a record number of web reservations, over 10,000 for April. Our call center broke an all-time high for rentals, which was kind of up 25% over last year with a really nice low abandonment rate, something that we take a lot of pride in.

The team has done a really good job of managing receivables, which is just a really good overall practice, but also creates more unit availability for rental season, which is a nice positive for us. So I think we are really encouraged as we're getting into rental season here.

Michael, do you want to talk a little bit about Canada?

Yes, absolutely. Thank you, David. From a Canadian perspective, on a constant currency basis, the same-store revenue was down about 50 basis points in Q1. The comp that we had for 1Q 2025 was 7%. So we had a much tougher comp than in the U.S. However, that's still 6.5% growth over a 2-year period. And so I think in this environment, we think that's an excellent result.

If you look at our joint venture properties that would meet our same-store definition, they actually did even better, at around 10% year-over-year revenue growth on a constant currency basis. At the end of April, our GTA same-store occupancy was 93.1%. That was flat year-over-year, but slightly higher than the States. And meanwhile, our in-place rates were actually up 1.5% year-over-year in April. So our outlook for the full year in our GTA portfolio, it will perform slightly better than our U.S. portfolio in 2026, even with the tougher comps.

Okay. And in the quarter, can you speak to the increase in vacate activity that you experienced? What was that attributable to? Was there anything notable that occurred on the move-out side during the period?

Yes, Todd, this is James. I'll jump in. And just say, first of all, there's a couple of things going on with the increase in vacates. First and foremost, we were coming off a tougher comp. Q1 of '25 was down year-over-year in vacates. And so there is a cycling of that comp.

In addition, as we mentioned in some -- in our prepared remarks, we did see an uptick in vacates really starting at the beginning of March with some of the geopolitical uncertainty and some consumer decisions. That's abated since the first 2 weeks of March, but that's what's driving the first quarter increase in vacates.

Your next question comes from the line of Viktor Fediv with Scotiabank.

I have a question on Argus Professional Storage Management platform. So you have full quarter Q1 now. So how has the operational integration gone? And were you able to identify potential synergies for SMA as a whole? And then what is the expected timing for those?

Yes. I'll jump in first. This is James. On the expense side and integrations. And clearly, it's been 6 months since the close. And we've been doing a lot of processes in terms of migrating employees over into the SmartStop platform. In addition, as it relates to the first quarter results and our expenses there, there's a lot of seasonal effect, right? We had multiple conferences that all take place in the first quarter, including our owners conference, which we talked about on our last earnings call. That doesn't happen over the course of -- over the next couple of quarters. That's an annual event. And so we would expect the margins to increase from here.

And I think it's still going to take a handful of quarters and even into 2027 before we start to really see the operating margin synergies, although we're starting to see them in smaller pockets such as Denver, where we've quadrupled our overall store count between SmartStop Managed, SmartStop Legacy as well as the private label properties under the Argus platform.

Got it. And just a follow-up on. Go ahead, sorry.

This is Michael. I was going to jump in there and just say that I think the integration has been going well. There's been a significant amount of technology upgrade for our third-party owners, which has been incredibly positive. We actually have signed up our first Canadian property in the Greater Toronto area. And we have a nice pipeline of existing private label owners who now see the power of SmartStop Self Storage with respect to the top of the funnel.

And so, those properties that we ported over, those owners are incredibly successful. Some of them are generating more leads than they ever have on a private label basis. And so we think over the next 12 months, we will start to see a strong migration from our private label platform to either the legacy or the full-blown SmartStop platform. And so, we're really, I think, pretty excited about the integration, the people and the ability to keep growing this in the future.

And I have a follow-up on move-out trends. I appreciate the details on move-in side in terms of the sizes of units that are involved there. And can you provide some additional details on move-outs in terms of what sizes were more heavily impacted in Q1?

Yes. When we look at the move-outs in terms of the average size, it's really in line with our portfolio average. What's unique is that the move-ins we're renting more of the larger units, but the move-outs are not matching that same disconnect, right, on a year-over-year basis. It's pretty consistent on a year -- move-outs Q1 '26 versus Q1 '25 in terms of the size of the units.

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

Maybe you could talk a little bit just about the acquisition environment. I know you're a little more restricted in what you can do wholly-owned on balance sheet this year, but maybe update us on the discussions around an institutional JV partnership and how those conversations are trending.

Okay. I'll jump in here. Well, let me just start by saying that I've been doing this a very long time. And from an acquisition perspective, I think this is one of the, I think, single greatest opportunities to transact in self-storage since the Great Recession on a risk-adjusted basis. You have a lot of markets that have readjusted from a rate perspective, down 25%, 35%. And so we think that there's a really nice recovery of acquiring at really solid cap rates with either management upside and/or rate upside.

There's a lot of groups out there that acquired at very aggressive cap rates in 2021, '22 and probably half of ' 23 at 4%. They had short-term debt and some of them had bridge loans, and they've had to extend those loans. And so now you're facing an environment where they're no longer willing -- these lenders are willing to extend and pretend. And so this is a result of creating a really nice wave of high-quality properties that are coming to sale, because the owners are currently out of options.

And so we're seeing a lot of attractive opportunities on the stabilized front in the U.S. and also Canada. The deals that we've closed, I think, are great examples of this. And I think we are continually encouraged about the current pipeline deal flow out there. There are some larger portfolios out there, but there's also enough onesies and twosies. And so I just want to emphasize that a lot to us may not be a lot to others. And so for every $300 million that we can acquire, it increases our market cap by approximately 10%.

And so as you guys are probably well aware that we acquired about $370 million in 2025, about $0.5 billion since 2024. And that's meaningful, I think, growth for us. and it's enough for us to move the needle. And so -- and it obviously benefits our size. And so we are still seeing a healthy amount of aggregate opportunity. So I think from that perspective, we feel pretty good.

The second part of your question was?

Yes, just around institutional JV and how those discussions are coming along.

So those discussions are having as we speak, and I think they're coming along nicely. Obviously, as you know, we have a very solid institutional joint venture with SmartCentres on the development of self-storage in Canada. And obviously, we're looking to kind of expand that for existing either lease-up or stabilized properties. And so we're out there trying to find the right partner. But as you can imagine, we currently have a lot that we are doing on a daily basis. And so, we're going to take our time to find the right capital partner that -- for the long term.

Great. And just one follow-up on the shaping of same-store revenue growth this year. I know you have some tough comps in Asheville, although it sounds like you've gotten a lot of that occupancy back, some hurricane comps in markets like Tampa and then the L.A. rent restrictions. So maybe kind of putting it all together, you could kind of talk about the shaping of same-store revenue growth in the next couple of quarters that's embedded in your guide and some of the call-outs on those items.

Yes. Thanks for the question, Eric. It's Corak. So when you look at the comps last year, obviously, the first quarter was our toughest comp at 3.2%. The comps are significantly easier in the second quarter and third quarter and then gets a little bit harder in the fourth quarter. So just on that alone, one would think that second and third quarter will probably be our best quarters of revenue growth year-over-year. But obviously, that's not exactly what the guidance would imply at this point on the midpoint.

The other 2 things that are impacting the cadence of same-store revenue growth are, as you pointed out, Asheville and the ECRI restrictions in L.A. Obviously, in Asheville, we were coming off of a really strong year, right? And we lapped that comp. And so as you get into the first quarter, we were still positive in terms of rates, but negative in terms of occupancy. However, as you get into the second quarter, that rate -- the rates will turn negative on a year-over-year basis and will continue to be negative through the second and third quarter, again, on a year-over-year basis. And then the comp gets a lot easier in the fourth quarter as you sort of lap that.

The other element is, of course, on the L.A. restrictions. We are not assuming that the restrictions will be lifted for 2026. So there's a compounding effect that happens there where the second quarter, the impact is worse than the first quarter and then the third quarter from the fourth quarter and so on. So those are the other kinds of things that are impacting the shape of the curve overall. So Asheville is in an interesting spot.

Michael, do you want to talk a little bit about where Asheville stands today?

Yes, absolutely. Obviously, in the fourth quarter, we talked about Asheville. And I think as we position and where we're at today, Asheville was our best-performing market in 2025. We had 6% same-store revenue growth year-over-year. And so we are obviously facing some tough occupancy comps in 2026, but the year-over-year occupancy gap has narrowed dramatically. And I think James discussed this a little bit.

Since December, our average is down only 260 basis points year-over-year. And in the first quarter, our occupancy was at 91.6%. And so at the end of April, we were only down 130 basis points, and we're settling in at 92.2%. That's a great position to be in as we move into the busy season. And so that's notably up 200 basis points from the end of December and generally in line with the rest of our U.S. portfolio, which is positioned nicely also. And so this is a fairly traditional cadence of occupancy for a natural disaster of this kind, and we are now at a post natural disaster stabilized occupancy level.

And so overall, we still expect Asheville to be a relative underperformer in 2026, specifically through the end of the third quarter. But that being said, the portfolio is performing slightly better than expected through April. And so I think that says a lot about our technology, our process. We were able to capture that upside with respect to occupancy and rate. And then as occupancy pulled back, we were able to refill that funnel, stabilize the physical occupancy and get it prepared for the busy season.

Your next question comes from the line of Mike Mueller with JPMorgan.

So I have 2 questions. I guess on the first one, I apologize if I missed this, but can you talk about the move-in rate expectations for the balance of the year compared to, I think it was about 6.5% down you said in April. And then just from a higher-level perspective, how should we be thinking about the bridge loan program? How it fits into the business? Can it be a needle mover going forward, et cetera?

Mike, so I'll give you kind of the operating assumptions. We went over these slightly last quarter, but I'll review them. They really haven't changed. So from a move-in rent standpoint, obviously, we have a handful of markets, some markets that have already turned positive this year. Other supply markets still sort of negative. But our assumption is that by the end of rental season, so call it, end of August, September, we'll on the whole be largely back to a neutral kind of inflection point. If we don't get back there, right, it doesn't have a material impact on the rest of the year, but we'll have some impact on, obviously, the third and fourth quarter.

From an occupancy standpoint, we are modeling kind of fairly flat to slightly positive relative to 2025 with the exception of Asheville, obviously. But for the rest of the portfolio, think about sort of fairly flat to maybe slightly positive. ECRIs, we're modeling at or better than levels in 2025, which is basically what we've been doing, given the strength and the health of the existing customer, the exception, of course, being the California wildfire impacted properties, which we assume are going to be impacted for the full year.

And I'll remind you, our length of stay is actually up year-over-year, which is a trend that us and some of our peers are seeing, which is really good from that perspective. And then on the supply front, we're obviously, like everyone else, assuming that the supply impact decreases throughout the year.

In terms of your second question, Mike, on AXCS and the bridge lending. So let me give a little bit of background on the relationship and then talk about sort of the pipeline and how we're looking at deals and what we're looking at. So AXCS is a portfolio company of Conversant Capital. For some background, they run an institutional commercial real estate finance platform. Michael and the principal of AXCS have a very long-standing relationship. So this is not something that was just sort of thrown together overnight. This was well thought out for a long time. So AXCS, their role in this relationship will help us source structure and service bridge loan investments, et cetera, and they will be a 5% participant in the JV's investments.

The partnership for us, gives us the horsepower to grow our bridge lending business efficiently without burdening our G&A essentially, right? We're really excited at this, right? We're excited at the potential of the partnership and sort of the synergistic relationship that the program will have on third-party management and our overall external growth trajectory.

When you think about the pipeline overall, it's very strong. We're very pleased with it in where it stands today. We're actively looking at over $100 million of deals with average yields of 10% to 14%. Obviously, just like an acquisition pipeline, we're not going to close on those $100 million deals, but our pipeline is filled with really strong deals in markets that we like with sponsors that we generally like.

We're typically looking at some sort of mezz or pref position on a deal that already has senior debt on it or is in market with senior debt. We would also do sort of the A-note, B-note approach, but the pipeline is really dictating the former strategy. The pipeline is a mix of recaps, acquisition financing, development deals. And though I'll note our -- we're particularly selective on any new development deals. So a ton of potential on this front, obviously, working off of a very small denominator. We really like the risk-adjusted returns on a lot of these deals that we're going after, but are certainly sensitive to the quality of the property, the quality of the sponsor, the impact on our leverage and then obviously, the overall quality of our earnings.

And I would just add that also it's opening up additional third-party property management assignments.

Your next question comes from the line of Mason Guell with Baird.

On the expense side, what drove some of the favorable expense growth? And then kind of what is driving the higher expected growth for the remainder of the year kind of compared to the first quarter?

Yes, I'll jump in there. In terms of the first quarter and some of the favorable comps there is we had a good number on our property tax line item, which is obviously our single largest expense line item. That came in at a pretty nominal level.

We also had, as we've talked about on the insurance front, we have not only realized the benefits of a strong general liability renewal that took place in November of 2025, and that's carrying forward for a full year. In addition, we also had a very strong property renewal that took place at the beginning of April. So it's not in our Q1 numbers, but it is part of that -- and the main reason behind our OpEx guide down is those savings on that property insurance renewal.

Part of the offset and part of the reason we were still positive is we had some weather-related expenses, both in utilities and R&M. And our payroll is at a nominal level, call it, in the low- to mid-single digits.

I'll also note that advertising was up about, call it, 1.9% for the quarter on a year-over-year basis, but that's a lever that we want to potentially be strategic with in terms of the trade-off, in terms of getting new rentals between concessions, pricing and marketing. That's something we want to keep that flexibility on. So that's the overall shape of the OpEx, but we felt really good about that property insurance renewal and that allowed us to reduce the OpEx guide.

Great. And then can you talk about what drove the higher managed REIT EBITDA guide and how that segment has been performing?

Yes. I'll also jump in there. And so overall, the recurring revenues from that overall portfolio in the managed REIT platform, as a reminder, those assets are largely unstabilized, right? And so they grew at an outsized pace relative to, for example, our same-store portfolio growth rate. And so those revenues came in higher than our expectations.

And cumulatively, we're talking about an annualized run rate in the first quarter on revenues in the managed REIT platform of just over $16 million on an annualized basis, right? So that's a really powerful base of recurring revenues for SmartStop.

There are no further questions at this time. I would now like to pass the call over to Michael Schwartz, Chairman and CEO, for closing remarks. Please go ahead.

Thank you. It's been a solid first quarter for us, and I want to thank you for your time and interest in SmartStop Self Storage, the smarter way to store. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby and I'll be your conference operator today. At this time, I would like to welcome you to the SmartStop Self Storage REIT Third Quarter Earnings Call. [Operator Instructions]

I would now like to turn the call over to David Corak. Please go ahead.

Thank you, operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects and expectations may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to numerous risks and uncertainties as described in our filings with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in our earnings release that we issued last night, along with the comments on this call, are made only as of today. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that were issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today, we have H. Michael Schwartz, Founder, Chairman and CEO; as well as James Barry, our CFO.

Now I'll turn it over to Michael.

Thank you, David, and thank you for joining us today for our third quarter earnings call to discuss our first full quarter as a New York Stock Exchange listed company. I'll start with some introductory remarks on SmartStop, the Argus transaction and the industry before I hand it over to James to discuss the quarter. After that, we'll open it up to Q&A with James, David and myself.

Before we dive into the high-level remarks, a few highlights of our third quarter results. We posted a strong third quarter with sector-leading same-store revenue growth of 2.5% and average occupancy of 92.6%, both largely in line with our expectations. We reported FFO as adjusted per share of $0.47, which was about $0.02 below our expectations for the quarter. This was entirely driven by 2 events that we noted in last night's earnings release, an unexpected vacate of our only notable industrial tenant and the recognition of a onetime equity-based compensation expense related to performance units issued in 2023. James will elaborate on these items later in the call.

With these pieces in mind and our 3Q strong operating results, we maintained the midpoint of our full year 2025 FFO as adjusted per share guidance. We had another robust quarter, both in terms of performance and activity. First, we opportunistically returned to the Canadian Maple bond market, raising CAD 200 million at a 3.89% coupon this time with a 5-year maturity.

During the quarter, we acquired approximately $86 million of Class A storage properties on balance sheet in both the U.S. and Canada. We also acquired one property subsequent to the quarter end for $15.3 million. These on-balance sheet acquisitions are primarily Class A properties located in top markets consistent with our communicated acquisition strategy. We also increased our loans and preferred investments to the managed REITs by approximately $20 million. Between these loans and our on-balance sheet acquisitions, we deployed about $106 million of accretive capital during the quarter. Additionally, we are proud of SmartStop's inclusion as a member of the MSCI U.S. REIT Index, more commonly known as the RMZ.

Lastly, but certainly not least, we entered into a contribution agreement with Argus Professional Storage Management. Needless to say, it was another very active quarter.

Before turning to the industry, I just want to spend a minute on the Argus transaction, which we closed on October 1. Since the IPO roadshow, we have been communicating to TheStreet that we intended to enter the third-party management business, and we're actively exploring either developing a platform of our own or acquiring an existing pure-play platform.

After thoroughly studying the merits of both paths, we decided that if we could find the right partner, the latter would be the most beneficial to our shareholders. We've known the principles of Argus for almost 2 decades and have the utmost respect for what they've built. So we have tremendous confidence that we've identified the right partner, one with a robust third-party management platform, a top-notch team of professionals, strong relationships across the United States and a managed portfolio that strongly overlapped with ours. With approximately 230 stores under management across 26 states, Argus was the second largest independent third-party storage manager in the U.S. Together, we now operate more than 460 self-storage properties in North America, nearly doubling our store count and increasing our overall owned and managed net rental square feet to over 35 million. This deal immediately jump starts our third-party management strategy in an accretive manner rather than a dilutive and lengthy process of developing one ourselves.

A few highlights of the deal. Given the size of the managed portfolio, this essentially doubles our data sets, enabling better revenue management across both existing and new geographies. We get immediate property clustering in 12 current SmartStop markets, which in time should lead to margin expansion for both managed and owned properties. This provides SmartStop with direct access to a captive pipeline of potential acquisition targets, including off-market deals. It also opens the door to bridge lending to current or potential owners, which is something that no other independent third-party manager can provide.

And lastly, this deal paves the way for SmartStop to expand third-party management in Canada, a vastly underserved management market. As for an update, as of today, we have not experienced any attrition or indications of attrition beyond what we had already known in our underwriting. The integration is going very well, and we've had no turnover of Argus employees.

Finally, I'll note that we closed our first lending opportunity with a $4.8 million preferred investment related to a 5-property portfolio that just onboarded onto our platform last week.

Turning to the industry. On the operations front, we continue to believe that 2025 will be an incrementally better year than 2024, but not as strong as a more normalized year in storage. Accordingly, we saw a more normalized rental season as compared to the past 2 years, but again, still not quite a typical rental season. The recovery in storage is happening, but the choppiness in customer demand continues.

During the quarter, we saw a healthy July and August to close out busy season, but a weaker-than-anticipated September. Industry move-in rates continue to stabilize but are still negative year-over-year, though significantly less negative than the previous 2 years. However, our strategy is working. Website visits are up significantly. Reservations remain strong. In the third quarter, we posted the highest ever lead conversion statistics in our company's history.

We also posted the highest hit rate on tenant protection in our company's history. Our customers' health remains strong. delinquencies remain at below average levels and, in fact, are down year-over-year. 25% of our new rentals utilize our Smart Pay feature for payments and nearly 50,000 customers have downloaded our mobile app. ECRIs remain healthy without any change in attrition. Customers citing their rental rates as a reason for leaving our properties is down year-over-year on our exit surveys. With our year-to-date results through busy season paired with an improved supply picture, we remain optimistic on the sector's slow and steady recovery, creating momentum as we head into 2026.

I do want to quickly touch on the retail shareholder lockup expiration. On October 1, our 6-month post lockup of our existing retail shareholders expired. Over the course of the next 2 weeks, as expected, we saw elevated volume and volatility in our stock price. Since then, both volume and volatility have normalized. While we aren't able to calculate the exact turnover of our retail shareholder base, we want to once again thank our retail shareholders who have been such an important part of SmartStop.

Taking a step back, we have accomplished a tremendous amount in a short period of time as a publicly traded company. We believe we're off to a strong start and are executing on the story that we laid out on our IPO roadshow in March. 2025 will certainly be known as a transformational year for SmartStop. We had a successful IPO raising $931.5 million in some of the most difficult capital markets and tariff concerns, AKA Liberation Day. We raised $700 million in Maple bonds at a sub-4% rate. We had more than $500 million in accretive acquisitions over the past 12 months, including the acquisition of Argus professional storage management, sector-leading same-store revenue growth even with the backdrop of the single largest self-storage supply wave in our sector's history and expected strong FFO growth that should further accelerate in the fourth quarter.

Without a doubt, we're in a choppy self-storage market with volatile capital markets and plenty of uncertainty in the broader economic environment. However, through all this choppiness, SmartStop's accomplishments over the past 7 months have positioned this company to achieve solid forward growth and take advantage of the better days ahead in self-storage. We are a small-cap company with a large cap platform built for continued growth in the U.S. and Canada.

With that, I'll turn it over to James to discuss the quarter.

Thank you, Michael. Starting with our operating performance, we are pleased to report that our same-store pool posted year-over-year revenue growth of 2.5%, the with operating expense growth of 4.5%, leading to an NOI increase of 1.5%. These were all in line with our expectations. The FX impact from our 13 Canadian same-store assets was a headwind of approximately 10 basis points to our overall same-store pool as we posted constant currency revenue growth of 2.6%, expense growth of 4.6% and NOI growth of 1.6%. Revenue growth was in line for the third quarter, and we accomplished best-in-class same-store revenue growth utilizing less concessions and limited marketing dollars while maintaining strong occupancy of over 92%.

On the operating expense front, property taxes were up 4.8% and marketing expense was up only 1.8%. We saw muted or negative expense growth in payroll, utilities, professional and administrative expenses. Notably, our property insurance was down 4.5% this quarter as we finally started to see pressure alleviate in that market. The result was that same-store operating expenses were up 4.5% year-over-year.

Our same-store pool ended the quarter at 92.4% occupancy, up 10 basis points year-over-year, while average occupancy was 92.6%, up 40 basis points year-over-year. Our web rates were down about 3.9% year-over-year for the third quarter, while our achieved move-in rates were down 8.5% on average as the stabilization of the rate environment slowly but surely continues.

As we moved into October, we put a strong emphasis on maintaining occupancy headed into slow season. In doing so, we actually grew our average and ending occupancy over September by about 10 basis points. October ended occupancy at 92.5%, up 20 basis points year-over-year. In-place rates were up 50 basis points year-over-year and flat versus September, and we are positive on a year-over-year basis for rentals in the month of October by 9%.

On the external growth front, we acquired 6 properties for $83 million and a piece of land within a joint venture for $1 million during the quarter, leading to a full year acquisition of $318 million through the end of September. Subsequent to quarter end, we acquired Argus as well as 1 property in the Orlando MSA for $15.3 million. I'll note that as of September 30, we have acquired nearly $500 million on balance sheet over the last 12 months.

Turning to the managed REIT platform. Our 3 managed REIT funds, inclusive of 1031 eligible DST programs ended the quarter with assets under management of $972 million. We recognized gross fees of $3.6 million, and the managed REITs have a combined portfolio of 48 operating properties and approximately 4 million net rentable square feet at quarter end. We also increased our loans and preferred investments to the managed REITs by approximately $20 million, all of which happened in September.

As a result, we recognized interest income of $1.5 million during the quarter. The DST programs continue to successfully raise equity, and we are excited that SST X has closed its first property subsequent to quarter end as that program gets up and running. The result of all of this is that for the third quarter of 2025, we posted fully diluted FFO as adjusted per share and unit of $0.47. As Michael mentioned, this was a few cents below our expectations, driven by 2 main items. First, we recorded an approximate $825,000 expense due to performance-based equity compensation in G&A from the expectation that legacy performance units issued in 2023 will vest at 200% of target. These units were tied to same-store operating performance relative to our peer group. The midpoint of our previous guidance for G&A expenses issued in August 2025 did not contemplate the recognition of this expense on the midpoint for the full year 2025. The impact of this expense to our FFO as adjusted per share and OP unit outstanding is about $0.015 for the full year 2025.

Second, during the quarter, a tenant renting industrial space at one of our non-same-store properties unexpectedly defaulted on their lease and vacated the space. This tenant accounted for approximately $730,000 of annual NOI. We believe the impact to our FFO as adjusted per share to be just under $0.01 for the full year 2025. We are in the process of finding a replacement tenant while simultaneously evaluating a redevelopment of that space into traditional self-storage. And just to preempt the question, this was our only industrial space in the owned portfolio.

Even in the face of those 2 items, third quarter was a much cleaner quarter from a transaction standpoint as compared to the second quarter, but there are a few more moving pieces to keep in mind headed into the fourth quarter on the capital side. These include the September maple bond, which was completed on September 26, the coupon step-down of our U.S. private placement, which occurred on October 1, and the refinance of our joint venture level debt, which was completed last week. Looking out to the remainder of 2025, we updated our guidance for the full year last night. We are now expecting same-store revenue growth in the 1.9% to 2.3% range with operating expense growth in the 4.0% to 4.4% range, resulting in NOI growth of 0.9% to 1.1%.

The other moving pieces as compared to our previous guidance were as follows: better-than-expected execution on the Canadian Maple bond, better-than-expected managed REIT EBITDA, and higher G&A, primarily driven by the previously mentioned performance units, reduction of our same-store NOI guidance by 10 basis points at the midpoint and a reduction to our non-same-store NOI due to the aforementioned industrial tenant. We also narrowed our acquisitions guidance to $365 million to $385 million. The result of all of these updates is that we are tightening our FFO as adjusted per share range to $1.87 to $1.91 for the full year 2025.

Lastly, turning to the balance sheet. In September, we priced our second Maple bond, raising CAD 200 million or approximately USD 144 million. The notes have a 5-year maturity and bear a coupon of 3.888%. We were extremely pleased with this execution, which coming off the back of our June offering was multiple times oversubscribed. In October, we closed on a CAD 160 million term loan within our SmartCentres joint ventures, of which we are 50% owners. The loan is a 5-year term and bears a fixed interest rate of 3.87%. We used the proceeds to pay off all the existing JV level debt, which had a weighted average cost of 5.7%.

The joint venture was also able to raise excess proceeds of approximately CAD 27 million as a result of this refinance. With the Maple bond and the JV level debt issued in October, we have fully hedged our Canadian FX exposure from a cash flow standpoint naturally. Additionally, over 99% of our outstanding debt was fixed as of quarter end and pro forma for the JV refinance.

While our work on the balance sheet is continuous, we are very happy with the transformation of the debt stack that we've been able to accomplish since April.

And with that, operator, we will open it up to questions.

[Operator Instructions] Your first question comes from Todd Thomas with KeyBanc Capital Markets.

James, I wanted to ask about acquisitions. You touched on investments that you've completed. I think it was over the last 12 months, targeting $375 million this calendar year. How are you thinking about acquisitions from here with a view into '26? Do you pause given sort of some of the volatility in capital costs and with leverage in the high 5s? Or do you stay -- do you maintain this pace moving ahead?

Todd, it's Corak. I'll start and then hand it over to the rest of the team here. So what we've said from the get-go is that we've got this target leverage range in the 5 to 6x range, and we intend to stay in there. Obviously, there's going to be periods where we are below it as we were right after the IPO, and there's going to be periods that we opportunistically look to take that up a little bit. But we do want to maintain that as our target range on a go-forward basis.

When you think about the pace of acquisitions, right, this year, [ 3.75 ] is the midpoint of the range, which entails just over 10% growth of the asset base overall. We'd love to be able to grow the portfolio by 10% or more in a given year. But realistically, when you just do the math, if we wanted to do that next year, that would require some common equity to help keep us in that target leverage range. And so what we've said from the beginning is we're not going to go out and issue common equity at a 6.5% cap to go buy 5.5 cap assets on a go-forward basis. So the math just doesn't make sense to us. So I think what I would say is when we look out, we're going to be really prudent with how we deploy capital and be opportunistic on a go-forward basis.

And Todd, this is Michael Schwartz. I would add also is that as many of you are aware, we've had some significant structural changes to our balance sheet, which we're starting to see kind of that kind of flow-through with respect to kind of our FFO for the third quarter, moving in potentially the fourth quarter and then 2026. And so as we look at our levers to growth, clearly, external growth is one that we'd like to capitalize on. But we obviously need to be careful of where we're trading. But we do have other levers of growth. We do have our same-store pool. We do have our non-same-store pool. We have our joint venture pool. And we have our third-party management platform with Argus, which obviously we're spending a lot of attention.

And last but not least, we do have our managed REIT platform, which we think will be -- add some additional contribution as we move forward. And then finally, at this point, we do not have a joint venture partner. At some point in the future, we will have a joint venture partner, and we think that, that will create additional lever for growth.

Just to frame one more thing. Michael mentioned the acquisition of Argus, which obviously closed subsequent to quarter end. And some of the consideration there was in the form of equity for tax planning purposes. So actually, that transaction should bring down our leverage on a net basis when you roll from 9/30 to 10/1 just from that transaction alone.

Okay. That's helpful. And then 1 or 2 on Argus actually. First, can you talk about the integration of that platform, the time line for SmartStop to fully integrate leasing, revenue management, financial reporting, whatever else. And Michael, you talked about the scale benefits that you might expect to achieve in some of the overlapping markets. Any early update or insights on that and sort of the time line to begin to see some of those benefits?

Todd, thank you. Well, the good news here is that with the acquisition of Argus there's not this integration within SmartStop, okay? And so let me step back. When we decided to acquire Argus, we spent a lot of time understanding what Argus had built. And they had built this entrepreneurial third-party management platform that was developed for entrepreneurial self-storage owners that were fiercely independent. And so some want full service, but some actually want to stay in the overall aggregate operations. And so we've recognized that we have to respect the entrepreneurial owners within that.

And so what our strategy has been, and we've been making this clear is that we want to provide the services that these owners want. And so what we stepped back and said, how do we do that? Well, one, we didn't think it was prudent to go in there and say to these owners that you now all have to be pushed on to the SmartStop platform. That's not very entrepreneurial whatsoever. And being an entrepreneur, I'm very sensitive to that. So we put together a menu, a menu of options that gives us a differentiated experience versus some of the third-party platforms out there.

One, if you want to be on the SmartStop platform, hey, great. We will brand you, sign a couple of year agreement, and we will kick in some dollars to change signs out and brand and onward you march. Or if you like your brand, well, we love your brand, too. You can keep your brand and you can move to the SmartStop platform. We'll create a page within the SmartStop environment and you're utilizing all the benefits.

However, if you really want to maintain your independence through a private label solution, we're going to allow that. Now do we think that the properties will perform better on the SmartStop platform. Absolutely, yes. However, we think there's some significant amount of enhancements that we're going to be able to offer the current owners. So for an example, from an accounting perspective, from a reporting perspective and in addition, consultation perspective on things that they're seeing, how we look at it. And so one of the big items that we're doing, we're having a very large operator meeting at the end of January.

We need to get out and meet these operators one-on-one. We need to introduce ourselves to them. And so from that perspective, I think next year, we will start to see, I think, some of the choices that they will exercise. And so that's how we kind of look at the transaction, and that's how we're handling the transaction. But we do believe, over time, at a minimum, people will probably be choosing the SmartStop legacy brand at minimum. We're engaging a lot of the owners right now, and a lot of them are very intrigued. But I think in January, it will be a great opportunity to introduce ourselves. And I think at that point, we will get a better sense of who's going to be transitioning to the SmartStop platform.

Yes. And Todd, just to add on in terms of kind of time lines and lead flows that we've seen thus far, I would say we've seen interest across owners across the spectrum of menus, right? So we've had people that want to engage with a SmartStop branded location, some that want SmartStop legacy and some want to continue on and then learn more about the platform. So overall, the reception from the owners has been positive and definitely curious about the upgrades that are going to...

And I will add that, obviously, they're running on a separate operating system. We've received a separate data card, and we're about 3 to 4 weeks into being able to provide some similar aspects that we have at SmartStop. So that takes a little bit of time. So it's probably a 60 to 90 days just from a technology perspective.

And lastly, one of the strategies we had in this transaction is we could actually bring our balance sheet to bear to help out owners. And as we mentioned in our opening remarks, we've already closed on one of those transactions in a highly accretive manner, double-digit coupon in the preferred investment. So -- and again, that's servicing our customers from an owner perspective.

Your next question comes from the line of Jonathan Hughes with Raymond James.

I appreciate you adding the earnings bridge, I find it very helpful. I think some who see that might be inclined to annualize that implied fourth quarter figure to get a sense of next year's earnings. But what are some considerations we should be aware of as we look at that implied fourth quarter FFO and think ahead to next year? I mean I know there's overall seasonality in the business. Is there also maybe some G&A seasonality? Just some more color there would be great.

Thanks, Jonathan. It's Corak. I will try not to be long-winded here, but I will probably fail because it's a [ last one pack ]. So yes, we gave the quarterly bridge just given the step-up in FFO from 3Q to 4Q. So it's $0.56 for the 4Q on the midpoint. I'll note, just to be clear that, that $0.56 is on the 4Q share count of about 59.2 million shares, not the full year weighted average share count of 51 million shares. So that $0.56, is that a good run rate in the 2026, to your question.

And I'll try to answer that as best I can without going into actual guidance, which we will give in February. So 4Q is the first quarter that reflects all of the various financing activities that we've done this year from the IPO to the Maple bonds to the JV refi to the private placement coupon step down. It's not quite a full year of the JV, but that's the least impactful piece there. So from a financing standpoint, it's a pretty darn good run rate, right?

From a G&A standpoint, the implied guide for 4Q is about $7 million of clean G&A. That 3Q number was $9 million. So in addition to the $825,000 of performance units, which all hit in the third quarter, there's some seasonality in G&A, whereby 4Q is naturally less than 3Q. My point being that, that, that $7 million is probably not the right number, but also $9 million is probably not the right number, so somewhere in the middle. Those are the 2 sort of pieces I would call out on that front. Everything else is sort of an assumption into next year.

And so I don't want to get in the same-store necessarily just given the fact that we'll guide to that as we get into February. But for the non-same-store pool, right, we have 28 properties and another 10 that are in the JV. The non-same-store properties are obviously classified as such because they're non-stabilized and/or their recent acquisitions or both. Inherently, in those, we would expect the NOI generated by the properties to be higher next year, offset, of course, by the property with the industrial tenant that we discussed.

On the JVs, 4 of those 10 properties are non-stabilized and 6 that are stabilized are putting up better NOI growth than the same-store GTA properties. So 2 of those 3 pools of our properties in theory, would put up better NOI growth than this year. On the 3PM front, the third-party management front, obviously, we completed that transaction in October. So the accretion for the full year is not quite recognized. But if you pair that, and that should be pretty good growth for us. It was an accretive transaction, and we still feel really good about the yields that we gave on those numbers. And then on the managed REIT side, the natural growth in the fees from the revenue growth of those unstabilized portfolios paired with potential future AUM growth did benefit us into 2026. So a lot there, but those are some of the big pieces I'd point to, Jonathan.

Very helpful. I appreciate it. Just one more for me on just the acquisitions front and guidance for the year there was tightened, but can you talk about how you source investment opportunities, maybe what percent are brokered versus sourced via relationships. And maybe how much do you look at on a monthly basis versus what is acquired, so effectively like a conversion rate?

Yes, that's a good question. Obviously, we believe we see, I think, most acquisitions out there in the U.S. and also Canada. So we've got a team of about 6 people that are just carrying through acquisitions on both sides of the overall aggregate border. Many acquisitions are not institutional quality. I think they're discarded from -- at minimum. I think overall, the acquisition flow and quality has been pretty consistent from our perspective. that I think sellers are willing to trade, not all of them, but they are willing to trade. And I think it's been evidenced by our $0.5 billion.

We found that -- I think we found the right acquisitions at the right pricing, I think, at the right time. And so we feel pretty comfortable with respect to the flow. From where we get these, I mean, we -- look, we've -- this is my 21st year. So Wayne has been with me 17 years. So between the 2 of us, we're getting from the traditional brokers, we're getting traditional from owners, developers, third parties. I mean we get a lot of calls from a variety of different people that have self-storage properties. And so they can be on or off market. And so I think that has been very consistent. And obviously, Bliss in Canada has a tremendous amount of relationships within Canada. So she's hearing and seeing all those deals and starting to pitch those to us. I think with respect to kind of a hit rate, I can't say -- I give you a number from a hit rate. But what I can say, the ones we want, there's enough out there that we can transact.

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

Hello. This is Viktor Fediv on with Nick. Now as we are getting closer to the end of this year, just trying to understand your framework of thinking about 2026, kind of what is your base macro expectation for 2026? And how are you thinking about move-in rents and occupancy dynamics kind of in the next 12 months versus the last 12 months?

Thanks for the question. So I will once again be careful here on sort of the 2026 outlook. But I think from a macro standpoint, there's a lot at play, both -- a lot of moving pieces, both in the United States and Canada, right? And so I don't want to get too bogged down in the macro because honestly, I don't know.

With that said, from a storage perspective, there is one thing I do know, and it's that the supply picture in self-storage in the United States is improving, right? And the impact from that new supply will be less in 2026 than it will be in 2025. So from the demand side, I think there's a lot of moving pieces, and it's too early to really tell. But from the supply side, which is a good half of the total equation, we feel better about 2026 than 2025.

Yes. And I think if you step back also, I think that you are seeing additional listings out there. Listings are up year-over-year. You're not seeing things trade. I think you're still probably seeing the prices maybe come down to 5%, 10% to 15%. But I think that sets us up for 2026 and that in concert with the reduction in interest rates, I think could create some mobility. I don't want to overplay that. But the listing for housing, I think, is a good indicator of future transactions.

And you're seeing a lot of markets where listings are increasing and people are talking about that. So I think we're cautiously optimistic with respect to that. But in addition, I will add that what I'm seeing, even with all the choppiness we've talked about, you're seeing natural absorption in the storage market. And I think that's incredibly important. And I know that I'm a broken record on supply, and we've talked about supply, but I think that natural absorption is going to carry over into 2026.

Understood. And then a second small one for me. Now that you've added this third-party managed platform and have access to much more data across several markets, where should we expect to see the first synergies in terms of improved pricing strategies and expense control?

Yes. This is James. I'll jump in on specifically the margin expansion story. We've always said it's -- whenever we get to sort of 10 properties or so in an MSA, that's sort of our benchmark for getting to economies of scale. Within the next 12 months, we start to see that real -- that margin improvement in those economies of scale start to come in.

Clearly, we just closed on this Argus transaction on October 1. I will note, there are 4 more markets that the Argus property overlap tips us into that 10-property mark, right? So we were previously at 6, and we've added 4 more as a result of that transaction. But again, it's going to take, call it, a 12-month period before we start to see the economies of scale really chip in there. And then from a revenue management perspective, I mean, clearly, that's our mousetrap and our algorithms are continuing to incorporate that data and then further enhance their overall pricing synergies to maximize revenue, right? And so that's going to be -- that's an ongoing process, whether it's our data or the newly integrated Argus data as well.

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

This is Robin Haneland sitting in for Juan. I was curious on Toronto, what your preliminary thoughts are on the market's performance heading into '26. And if you can provide some data points on expected new supply this year and 2026, specifically for Toronto?

It's Michael Schwartz. Why don't I talk about supply, and then I'll kick it over to David to talk about some of the KPIs. From a supply perspective, there's been a lot of chatter out there, and we've heard it with respect to additional supply in Canada and in Toronto. And the answer is yes. And we've been very clear in communicating that on previous calls, there is a good amount of supply in Toronto right now.

Now a lot of the supply that is from us. We have delivered 7 properties in the GTA in the past 36 months. We have a pipeline of about a dozen identified properties that we'll look to deliver over the next 5 years and an additional pipeline -- an additional pipeline behind that. Today, about half of our properties are being impacted by new supply. Now the square foot under construction is approximately 10% from our estimation of existing stock. Now those stats are pretty consistent with what we've seen for the past 5 years or so. But when we look out and we expect to see that drop to 5% to 6% next year. And so that said, there are isolated trade areas as there always will be, particularly where multiple projects are being delivered at once, and we will see temporary softness.

But we -- this is not a structural or Toronto-wide issue. So for example, lease side, which is one of the most competitive, I think, markets within the GTA, we have 8 properties in a 0.5 mile range of competition. And we're still experiencing very high overall occupancy and $35-plus rents per square foot. I think the answer is we can compete, specifically from a technology perspective. So at scale, the GTA in Canada in general remain dramatically undersupplied relative to the population. Urban densification continues. Living spaces are shrinking and new supply, they face significant barriers. In some areas, the development charges, just for the privilege to develop self-storage is approximately $45 a square foot. So in a lot of cases, the math simply doesn't support a national, regional oversupply narrative. And so we don't think that will be for the foreseeable future. David?

Yes. So just to talk about some of the metrics in Toronto right now. On a constant currency basis, same-store revenue growth was 1.4% in the third quarter. the comp in 3Q '24 was 2.6%. So a much tougher comp than the U.S., which was actually net. If you look at our joint venture properties that would meet the definition of our same-store pool, they actually did even better at around 5.3% year-over-year revenue growth on a constant currency basis.

As we sit here today or at the end of October, excuse me, the occupancy is 92.5%. That's up 80 bps year-over-year. So that gap has widened and is actually wider than the states. And then we've added another 20 basis points in the first 6 days of November. Move-in rates were down about 9% in October, which was actually better than the States. I think our overall demand remains solid, right, in our trade areas. I think the platform continues to capture an outsized amount of that demand. And really, we haven't seen any of the weakness from changes to immigration policy or macro environment. And it appears that the recently proposed budget could be a potential economic catalyst. So given our operational advantages and everything I just said, our thesis on Canada and the GTA remains unchanged.

Just curious if it's impacting your thoughts on deploying capital for SmartCentres JV, if you'd like to take that elsewhere? Or just curious on your thoughts there?

Can you repeat that. You were a little choppy there.

I was just curious on the -- if that changes your view on deploying capital through the SmartCentres JV, if you're thinking about taking some of that capital deployment in other markets?

No. No. I mean, actually, we're leaning into the SmartCentres joint venture. Part of the strength of that relationship is their access to their retail platform and a lot of underutilized land within some of their retail that we can leverage up and put a SmartStop self-storage next to a Walmart, next to a Home Depot. So the answer is no. I think we are interested in expanding, but not at the expense of that joint venture. I think we've talked about that we believe there's a tremendous opportunity in Canada, and that's why we moved into developing on the island of Victoria, Vancouver, Calgary, Edmonton and Montreal. And so I think sitting and building out, I think, one of the nicest aggregate portfolio in the GTA is now going to benefit us with respect to our overall growth path throughout the top 5 metropolitan cities within Canada.

And now that we're past the IPO lockup, can you maybe talk about what the potential recapture rate back into your managed REIT funds has been?

Well, one of the things when it comes to the kind of the managed REIT platform, we were going to talk about this is that because we switched over to our -- a new managing broker-dealer, we were effectively about 6 months behind with respect to be able to kind of launch new products. So I think at this point, the recapture rate, we're going to have to look at 2026 from that perspective. So right now, we don't have the proper product out in the marketplace right now.

Understood. And then I was just also curious if you can maybe disclose the industrial tenant that went bankrupt.

Yes. It's -- actually, we're a little bit limited in what we can say in terms of this particular matter because obviously, someone -- we had a tenant that broke their lease prematurely. And so we're evaluating all of our options as it relates to that contract. So at this time, we're not at liberty. Just to talk about that particular property. Just to note, this is a component of this non-same-store asset where the majority of the square footage is self-storage. So if you think about it, there is a redevelopment opportunity. It could also just be a re-leasing opportunity. So we're looking at all those options.

Your next question comes from Michael Mueller with JPMorgan.

I guess for the 2 questions. First, I guess, how much higher are the margins in the markets that you were talking about where you have at least 10 properties compared to the others?

And then the second question, just going down the path of adding a JV, I guess, what hole do you see that needs to be filled by adding a JV or that you can fill by adding a JV, especially because it could, I guess, increase optically the complexity to the story overall. So I guess, how do you think about that trade-off?

Yes. I'll start with the margin question. So when we look at our markets, where we've consistently had 10-plus properties, we're generally about 300 basis points higher than our overall portfolio average. And if you look at a market like Toronto, where we have 35 properties in that MSA, we're actually closer to 500 basis points higher in terms of our -- relative to our portfolio average. So that just gives you a sense of the scalability of the platform in all of these particular markets.

Yes. So from a joint venture to your second question there, Mike, I'll be clear, we already have a joint venture, right, with SmartCentres that is a pure development joint venture. I believe what you're referring to is if we added an institutional acquisitions joint venture. So I'll speak to that specifically. What we look for and -- what we'd look for there and what the gap, I guess, we would be trying to fill is given the size of our company, right, if we wanted to go out and acquire a $1 billion portfolio, right, and I'm making numbers up here, it would be tough for us to do that with the capital that we have right now.

But if we were able to partner with an institutional joint venture where we were a smaller part of the overall deal, ELP and put 5%, 10%, 15%, 20% into a particular joint venture, that deal is all of a sudden a lot more achievable for SmartStop to take down. I think beyond that, portfolios that are maybe not pure stabilized, maybe there's a place in there. But I think the main goal would be to be able to compete for larger deals and make those deals accretive for SmartCentres.

Your next question comes from Wes Golladay with Baird.

A question on the revenue management. Sometimes it's early to detect signs of weakness in the economy. I'm just curious if your revenue management is pivoting more to an occupancy mentality right now?

I mean our strategy is currently an occupancy strategy. So we think that best positions us for success. More importantly, it best positions us in the slow seasons in the fourth quarter and the first quarter to maintain as high as occupancy as we can so that as we move into the busy season that we're only focusing on really economic overall aggregate occupancy. And so that to us has always been incredibly important. We focus on high occupancy, then we're focusing on rates and discounts and then we're focusing on existing customer rent increases. That is kind of -- has been our process.

Yes. If you think about the occupancy that we posted in the quarter and then where we are in October, we're sitting here at the end of October at 92.5% occupancy. That's up 20 basis points year-over-year. And importantly, it's up 10 basis points over September, which is a really nice sequential move for us and really illustrates our strategy that Michael laid out to maintain occupancy into the fall. So we're really happy with that.

Okay. And maybe a quick follow-up on the fourth quarter. It looks like the guidance implies like a small uptick in the fourth quarter on same-store revenue. Is that maybe going to be due to the occupancy build? Or will that be potentially easy comps, rate? What's driving that?

I -- just doing the math, I think it actually -- it's a slight downtick versus the 2.5% and absolute on same-store revenue. It implies a further reduction of the OpEx. So the OpEx is where the absolute NOI gain would be there. But we're assuming same-store revenue goes down in the fourth quarter versus the third quarter in terms of absolute dollars.

Your last question comes from Eric Luebchow with Wells Fargo.

I apologize if I missed this earlier, but it seems like your Q3 same-store came in largely in line with expectations. Q4, obviously, maybe the expectations are a touch lower. So could you maybe just touch on some of the moving parts and what you're seeing in October. I know there are some difficult comps in a handful of hurricane or storm impacted markets that you're going to lap. But maybe just give us kind of an update on how you're feeling in terms of exit rate going into '26 versus last quarter?

So I just went over the October occupancy number, so I'm not going to say that again. But we feel really good about where occupancy is sitting in the 92.5% range. When you think about move-in rates during the quarter, the third quarter, James touched on this in his remarks, but they were down about 8.9%. In October, those were down about 18% year-over-year as the building occupancy strategy played out. You pointed this out, but I'll note that October was -- October 2024 was the most difficult move-in comp of the whole second half of 2024. So not too surprising to see that down year-over-year.

As we moved into November, the trends have improved. We're still sitting at 92.5% occupancy, which is really -- really happy with that. and the move-in rates have actually improved sequentially by about 6% or 7% over the October numbers and in-place rates have actually improved sequentially over the October numbers as well. And we're now up 40 basis points in occupancy year-over-year. So those stats have improved as we've gone into November.

And then lastly, just to touch on ECRIs as they are a piece of the whole puzzle, we continue to pull that lever without changes to attrition there. Attrition is actually down year-over-year, as James and Michael mentioned. And without getting into specific numbers because some of that's a bit proprietary, we gave ECRIs to more tenants in October than the new rentals, right? And that average ECRI was above the 18% in a really healthy place. So we feel really good about all those pieces as we stand here right now.

Just to touch because you brought up the hurricane-impacted markets, just to kind of recap those. Obviously, Asheville was a hurricane-impacted market and as was kind of the Gulf Coast of Florida. We're effectively lapping the occupancy comp on Asheville. But remember, we didn't do any sort of existing customer rate increases until the first quarter of 2025. So both the Asheville market as well as the, for example, the Tampa market, while we are starting to lap the occupancy comp where we had elevated occupancy, we are coming in with a pretty healthy head of steam on the rate side.

Got it. Super helpful. Appreciate that. And maybe just one final question. I think -- how are you guys thinking about -- obviously, move-in rates, there's a little bit of tough pressure in the back half of the year. Part of it is comp based. We've heard of some of your larger peers kind of leaning in on discounts or promotions, kind of more short-term ways to bring people in the door. How are you seeing that competitive backdrop play out between discounted move-in rates versus promotions or upfront discounts? And what do you think is kind of more effective in keeping that occupancy number up?

Yes. So if you look at what we've done this year versus last year, year-to-date, our concession numbers have been down pretty materially, like in the 20% to 30% range. So we were able to drive rentals without using concessions nearly as much, and that's paid off for us I think -- and you see it in the revenue growth numbers and the results overall.

As we stand here today, that's less so the case, right? We're utilizing concessions a little bit more than we were in the third quarter, especially as compared to last year, but not drastically differently. So I'd say we're utilizing all of our tools to drive rentals right now. The one thing I would point out is that from a marketing spend perspective, we've been not utilizing that nearly as much as we were last year. I mean, in the second quarter, I think we were negative 4% or 5%. And in this quarter, the third quarter, we were only up like 1.5%, 1.8%, something like that. So not having to spend a lot to drive rentals. And those rentals for what it's worth were up 3% in the third quarter and are up 8% -- 8% or 9% into October. So the strategy is working.

And with no further questions in queue, I'd like to turn the conference back over to Michael Schwartz for closing remarks.

Thank you, operator. It's been an amazing first 7 months as a publicly traded company. We've accomplished a lot in just a short amount of time. We thank our investors, both retail and institution for their support, and we look forward to the next quarter in 2026. Thank you for your time and interest in SmartStop Self Storage, The Smarter Way To Store. Have a great day.

This concludes today's conference call. You may now disconnect.

Thank you for standing by. My name is Kayla, and I will be the conference operator today. At this time, I'd like to welcome everyone to the SmartStop Self Storage REIT Second Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to David Corak, Senior Vice President of Corporate Finance and Strategy. You may begin.

Thank you, operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects and expectations may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to numerous risks and uncertainties as described in our filings with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in our earnings release that we issued last night, along with the comments on this call, are made only as of today. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that we issued last night and are available for download on our website at investors.smartstopselfstorage.com.

In addition to myself, today, we have H. Michael Schwartz, Founder, Chairman and CEO; as well as James Barry, our CFO. Now I'll turn it over to Mike.

Thank you, David. Thank you for joining us today for our second quarter earnings call to discuss our inaugural quarter as a New York Stock Exchange-listed company. I'll start with some introductory remarks on SmartStop and the industry before I hand it over to James to discuss the quarter. After that, we'll open it up for Q&A with James, David and myself.

Before we dive into high-level remarks, a few highlights of our second quarter results. We posted a strong second quarter with our same-store revenue growth of positive 40 basis points; average occupancy, 93.1%; and FFO as adjusted per share of $0.42, all largely in line with our expectations. We maintained our full year 2025 same-store NOI guidance of 1.1%, and raised our FFO as adjusted per share guidance by $0.01 on the midpoint.

We had an exceptionally robust quarter, both in terms of performance and activity. We raised approximately $1.3 billion of capital during the quarter. First, we raised $931 million in April with our initial public offering. Second, we raised CAD 500 million with our inaugural Maple bond in June at a sub-4% coupon. These transactions dramatically improved our balance sheet, setting us up for future growth.

In June, we received an inaugural rating from DBRS Morningstar of BBB Mid with a Stable trend. And in July, we received an upgrade from Kroll to BBB Flat with a stable outlook.

During the quarter, we acquired approximately $150 million of Class A storage properties on balance sheet, another $75 million in the managed REITs and put under contract a CAD 97 million portfolio in Alberta. These on-balance sheet acquisitions are primary Class A properties located in top markets with going-in yields in the mid-5 range with management upside, while the deals into the managed REITs are more stabilized, consistent with our communicated acquisition strategy.

On the managed REIT front, we grew AUM by $78 million during the quarter and entered into a new retail distribution partnership with Orchard Securities, who we feel is a best-in-class distribution partner for our managed REIT products. We opened 3 new developments in Canada, all within our managed REITs, including the first purpose-built self-storage property in Montreal in nearly 2 decades. We also funded loans of $41 million to the managed REITs. Between these loans and our on-balance sheet acquisitions, we deployed about $200 million of accretive capital during the quarter.

Additionally, we're proud of SmartStop's inclusion as a member of the Russell 3000 Index in late June.

Lastly, but certainly not least, we bolstered our Board of Directors by adding Lora Gotcheva, who is an extremely experienced portfolio manager and REIT investor.

Needless to say, it was quite an active quarter. With these accomplishments, we believe we are off to a strong start as a publicly traded company, executing on the story we laid out on our IPO roadshow in March. We feel SmartStop is well positioned to succeed and deliver on double-digit FFO share growth this year with a reasonable leverage profile.

Turning to the industry. On the operational front, we continue to believe that 2025 will be incrementally better than 2024, but not as strong as a more normalized year in storage. Likewise, we believe we will see more normalized rental season as compared to the past 2 years, but again, still not quite a typical rental season.

The recovery in storage is happening, but the choppiness in demand continues. As we saw during the quarter, we had a tough April, strong May and then a weaker-than-anticipated June. Industry move-in rates continue to stabilize, but are largely still negative year-over-year, though significantly less negative than the previous 2 years. Occupancies of large operators are in line or better than historical averages, but small operators have lost market share and now are operating at lower occupancies.

Our customers' health remains strong to date. We've seen little to no impact from recent economic volatility in the U.S. and Canada. Website visits are up significantly; reservations remain strong; delinquencies remain at below average levels; and ECRIs remain healthy without a change in attrition.

Canada continues to experience a more positive dynamic despite a softening economy. With less supply per capita, lower institutional competition and strong demographic growth and slightly different demand drivers in the U.S., the GTA has become an outperformer versus the U.S., and that trend continues in 2025.

In the second quarter, our Toronto portfolio posted 2% same-store revenue growth on a constant currency basis with an ending occupancy of about 93%. With our year-to-date results through the busy season paired with an improving supply picture and steady demand, we remain optimistic on the sector's slow and steady recovery, creating momentum as we head into 2026.

Now I'll turn it over to James to discuss the quarter.

Thank you, Michael. I'll remind everyone that the second quarter was our last partial quarter of being a nontraded REIT. So the impacts from the April IPO are not fully reflected in the financial results.

Starting with our operating performance. We are pleased to report that our same-store pool posted year-over-year revenue growth of 40 basis points with operating expense growth of 3.5%, leading to an NOI decline of 1.1%. The FX impact from our 13 Canadian same-store assets was a headwind of approximately 10 basis points to our overall same-store pool as we posted constant currency revenue growth of positive 50 basis points with expense growth of 3.6% and an NOI decline of 1%.

Revenue growth was slightly less than expected for the second quarter, driven by weaker-than-anticipated demand in June, but we accomplished positive growth for the quarter, utilizing less marketing dollars and less concessions while maintaining strong occupancy of over 93%.

On the operating expense front, property taxes were up 7.8%, with property insurance up 5.9% and marketing expense down 6.3%. We saw muted or negative expense growth in utilities, professional and administrative expenses. The result was that same-store operating expenses were up 3.5% year-over-year, better than our expectation. This combination led to slightly better-than-expected NOI in the quarter.

Our same-store pool ended the quarter at 93% occupancy, up 40 basis points year-over-year, while average occupancy was 93.1%, up 90 basis points year-over-year. Our web rates were up approximately 2.4% year-over-year, while our achieved move-in rates were down 2.5% on average for the second quarter as the stabilization of the REIT environment slowly but surely continues. For reference, the sequential deceleration in year-over-year revenue growth from the first quarter was expected and was reflected in our full year guidance, driven by comps from last year. Keep in mind, our same-store revenue growth in 2Q 2024 was positive 1.3%. We did see healthy growth in revenue sequentially over the first quarter of 2025 of about 1%.

As we moved into July, we started to see the stabilization of rates take effect as revenue growth has begun to reaccelerate. July ended occupancy at 92.8%, up 80 basis points year-over-year. In-place rates were up 10 basis points year-over-year and up 1.2% month-over-month versus June, and concessions continue to be very muted versus last year.

On the external growth front, we acquired 7 properties for $150 million during the quarter, leading to full year acquisitions of $232 million through the end of June. As previously announced, we are under contract to acquire 5 properties in Canada for approximately CAD 97 million or about USD 70 million using today's FX rates. We expect this portfolio to close in late August.

Including these under-contract properties, we will have fulfilled just over $300 million of our full year acquisition guide of $375 million at the midpoint. And taking a step back to September 30, 2024, we will have added nearly $500 million on balance sheet. These acquisitions, along with the assets acquired to date, are primarily Class A properties located in top 25 MSAs with going-in yields in the mid-5% range with management upside.

Further, the properties are primarily in markets in which we already operate and add to our clustering.

Turning to the managed REIT platform. Our 3 managed REIT funds, inclusive of 1031 eligible DST programs increased AUM by $78 million during the quarter, with AUM ending at nearly $974 million. We recognized gross fees of $3.7 million, and the managed REITs acquired 2 properties this quarter, both of which can be characterized as non-stabilized. The managed REITs have a combined portfolio of 48 operating properties and approximately 4 million rentable square feet at quarter end. We also funded $41 million of loans to the managed REITs in June.

Between these loans and our on-balance sheet acquisition, we deployed about $200 million of capital during the quarter. The result of all of this is that for the second quarter 2025, we posted fully diluted FFO as adjusted per share and unit of $0.42. Obviously, a quarter with a lot of transactions given the various capital raises, but we are pleased with our second quarter results. We look forward to the rest of the year, which we expect to be more reflective of our go-forward earnings run rate.

Speaking of the remainder of 2025, last night, we updated our guidance for the full year. We are now expecting same-store revenue growth in the 1.75% to 2.75% range with operating expense growth in the 4.25% to the 5.25% range, resulting in NOI growth of 0.6% to 1.6%.

The other moving pieces as compared to our previous guidance were as follows: Better-than-expected execution on the Canadian Maple Bond, partially offset by higher interest rates in the U.S.; better-than-expected managed REIT EBITDA driven by AUM growth in the first half of the year and better margins; and slightly higher G&A driven by higher-than-expected performance-based equity comp. We did have that baked into the high end of our previous G&A guidance.

We also narrowed our acquisitions guidance to $350 million to $400 million, maintaining the midpoint of $375 million. The result of these updates is that we are expecting FFO as adjusted per share of $1.85 to $1.93, up $0.01 from our previous guidance issued in May.

Lastly, turning to the balance sheet. As we covered on our last call, our April IPO raised $931 million of gross proceeds. The use of those proceeds were primarily to redeem in full the $200 million Series A preferred and paid down debt to the tune of approximately $650 million. We flipped our senior credit facility and 2032 private placement notes to fully unsecured and rightsized our revolver to $600 million of capacity. With the flip unsecured and the step down in leverage, our overall cost on the revolver stepped down 65 basis points during the second quarter.

In June, we priced our inaugural Maple Bond, raising CAD 500 million or approximately USD 370 million. The notes have a 3-year maturity and bear a coupon of 3.91%, which we hedged to an effective interest rate of 3.85% prior to pricing. We were extremely pleased with this execution, which serves to naturally hedge our Canadian FX exposure, term out our floating rate debt at an attractive coupon and ladder out our debt maturity schedule. Additionally, it allows us to more efficiently return to this market for potentially longer duration bonds in the future.

In tandem with the Maple Bond issuance, we received an inaugural rating from DBRS Morningstar of BBB mid. And subsequent to quarter end in July, we received an upgrade from Kroll to BBB flat with a stable outlook.

The completion of the SmartStop IPO in April is a transformational step forward with our entrance into the publicly traded markets, and our Maple Bond demonstrates SmartStop's unique access to multiple debt capital markets, giving us the flexibility to be opportunistic in both the U.S. and Canada.

And with that, operator, we will open it up to questions.

[Operator Instructions] Your first question comes from the line of Jonathan Hughes with Raymond James.

Can you talk about the revenue growth volatility last year? And what drove that and how that impacted your management of REIT and occupancy in the quarter and into the back half of this year?

Yes. This is James. Thanks, Jonathan. Just to touch base and to kind of go back in time to 2024, keep in mind, as we said in our opening remarks that from a same-store perspective, we were cycling a much tougher comp here in the second quarter, and that was baked into our guidance that we would see that deceleration. That comp was positive 130 basis points in the second quarter of last year. The comps do get easier as we go through the rest of the year here.

Yes. Jonathan, it's Corak. I'll just add on a couple of things about the second quarter and sort of balancing the rate and the occupancy versus what we did last year. And I'd point you to the comments that we made on the last earnings call about this balance, right, and the optionality that we have to push rate in certain markets, right, where we saw the occupancy strength and what we saw the demand strength. And that's what we did during the quarter.

And so when you break out the individual months, April had a really tough comp as we discussed on the last earnings call. May was a really strong month overall for us on various -- on pretty much every metric that we look at. And then we started strong in June, but then demand tapered off about 10 days in, and we pulled back on rates. We also did run a pretty successful 4th of July sale in late June. So you can see some of that in the rate data in June.

But when you look at the quarter, move-in rates for the quarter were down about 2.5% year-over-year. Web rates were up about 2%. I will say our concession numbers are down very nicely from last year. That's one major change that's occurred over last year. Concessions were down roughly 20% and growing. So balancing the rate and occupancy during the quarter, pushing rate in certain markets where we saw the green light. The end result was obviously we grew occupancy both sequentially and over the year. And we did all that with advertising spend down 6%, over 6% year-over-year.

The other thing I'd mention when you just look at the comps from last year, if we step back and look at year-to-date, right, first half of 2025, our move-in rates are down about 4% year-over-year. For comparison, the same period in 2024, they were down roughly 11% or 12% year-over-year. So still negative on a year-over-year basis, but a much easier negative to overcome than the previous 2 or 3 years.

Yes. I appreciate all that color. And then just one more. Could you kind of help us walk through or bridge the big moving pieces in guidance to get from the $0.42 per share of FFO in the second quarter to the implied guidance of $0.53 a share in 3Q and 4Q?

Yes, happy to. Let me walk through the major pieces, and I'll start on the capital side and then go to operations and management, et cetera. So on the capital side, the easiest thing to really point to is the Maple Bond transaction and the uses of proceeds on that deal. So we paid off a CAD-denominated loan that was priced at 6.42%, acquired $108 million portfolio with a 5% plus -- mid-5% going in yield. And then we paid down our revolver by over $200 million. That was -- that revolver was priced at 5.8% at the time in 2Q.

So you add all that up with paying that off with 3.91% debt, that's about $2 million per quarter in accretion, right? And we did all that in very late June. So there's very little benefit of that in the second quarter results. Keeping on the capital side, the revolver will be priced at unsecured levels now, whereas in the first -- the second quarter of the year, we only got that benefit for about 2/3 of the quarter. And then SOFR is obviously expected to continue to drop based on the curve from the second quarter levels.

We also took on 2 pieces of what I would call below-market debt in the quarter with a 5.15% loan, the Houston loan, and then the 3.45% BC loan. So both really attractive pieces of debt.

We're also in the process of recapping the debt on the 10 joint venture properties. Those properties are underlevered, and the rates on the current debt are in the high 5s, I think 5.7% during the second quarter. I think given where the Maple Bond price, everyone has a sense of where Canadian interest rates are these days. So not only will there be proceeds out of that deal to us, but certainly some interest rate savings on that piece.

And then lastly, on the capital side, I'll remind everyone that we have a 75 basis point step down coming on the $150 million U.S. private placement that will probably occur -- that will occur on October 1.

Flipping to the operations side, we certainly expect all 3 of our pools, that is the same-store pool, the non-same-store pool and the joint venture, to post sequential growth in net operating income versus the second quarter and certainly the first quarter.

On the managed REIT side, obviously, average AUM in the third quarter and fourth quarter will be higher than in the second quarter. And I'll note the loan balance there is roughly $45 million to $50 million higher as we go into the second half of the year versus the first half of the year.

We also have additional accretive growth coming. If you look at the implied external growth, I would highlight the Canadian 5 pack, which will be sort of a high 5% going-in cap rate, and that should close at the end of this month.

And then lastly, on the G&A front, obviously, a lot of noise in there on the G&A line in the second quarter. The run rate on G&A is lower to the tune of about $1 million per quarter as we head into the third quarter. So when you add all of these pieces up, it obviously becomes quite material. So Jonathan, I hope that answers that question for you.

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

First, I just wanted to see, are you able to share July occupancy and rent trends? Any color on July specifically?

Yes. Sure, Todd. It's Dave again. July ended the month occupancy 92.8%, that is up 80 basis points year-over-year. So that occupancy gap actually widened in July. As James mentioned, in-place rates were up slightly. The interesting thing about July, and I mentioned this earlier, is concessions are down. They're down about 25% year-over-year. So we continue to use that lever a lot less, and we're using the advertising lever a lot less. But when you add up all 3 of these data points, we're only 7 days into August here, but it looks like revenue growth in July on a year-over-year basis is pushing 2%, right? So when you look at that, the reacceleration is already taking effect. It looks like August is shaping up to be a better month than July.

In terms of the move-in rates, because I know you're going to ask this as well, they were down about 11 -- 10% year-over-year in July, but are actually flat year-over-year to date in August. And the occupancy gap sitting here 7 days into August continues to be strong around 90 basis points year-over-year. So keep in mind that the comps are getting a little bit easier for us as we enter the second half of the year.

Okay. So I mean, it sounds like June was sort of the weaker month. It may have started off okay, but I think you said about 10 days in demand started to taper off. Sort of looking back, any sort of insight around more specifically what happened in June because it sounds like July trends have recovered some ground and maybe are holding a little bit here early on in August. So really a couple of weeks in June, any insight around that period specifically?

Yes, Todd, this is James. I'll jump in there and say, well, first of all, I think what we saw was just a little bit more competitive pressure on the pricing side. Obviously, we were still able to maintain strong occupancies over the course of June, but we had to get a little more competitive on the rate front. And obviously, it's a market-by-market analysis, but it's pretty consistent with what you've heard across the entire industry. What we feel strongly about and what we feel comfortable in terms of our outlook for the rest of the year is, as David mentioned, kind of the reacceleration that we're seeing on a year-over-year basis, also coupled with we're still seeing really strong activity, right?

Some other metrics for the month of July, we were actually up 6.5% from a rental perspective. So we are still seeing that demand come in. And part of that is from the 4th of July sale, but we're still seeing a lot of activity. We're not having to push as hard on the marketing lever as we get more efficient on that front. And we are seeing reductions in the overall promotional dollars we're offering.

And Todd, I'll just add that, obviously, the housing market remains anemic. So there hasn't been any pickup there. And so I think one thing that's different this year is that rates have stabilized. And we've been able to hold rate and even drive it, as we've said, in certain markets without sacrificing occupancy. Last year, we would sacrifice occupancy when we started to push rates. In addition, we want to underscore that we are doing that today with lower discounts and promotions. And that's not something that we've been able to say for 2 years.

So for an example, the first half 2025, our achieved rate is up 50 basis points at the 92.7% occupancy. Our second quarter occupancy is up at 93%. And that concession aspect that David talked about, I think, is incredibly important. That first half of the year, we're down 20%. The second quarter, we're down 25%.

And so when we take a look at this competitive rate environment, we've been very clear that the market has bottomed. The market is recovering. It's slow, it's steady, it's methodical, and it's not a hockey stick. And I think we've been very, very clear with that.

And so also just taking a look at our website traffic, which is something that is incredibly important. The second quarter traffic have been up mid-teens year-over-year. June and July, our traffic is up 32% and 45%. And so the reality is the demand is there, and it's just a matter of who's going to be capturing the demand. So we feel pretty comfortable from that perspective.

And your next question comes from the line of Wes Golladay with Baird.

I just going to make a big picture. I understand the comp story, but it does also sound like demand is picking up based on the commentary. And just curious if you think that we may have had like a soft patch just due to the uncertainty around the tariffs, the Big Beautiful Bill and now I think people are getting back to lives as normal, and we just had this little, call it, 2-month soft patch. Is that a -- does that have any factor in anything?

Yes. I mean, look, sorry, it's Corak. I do think that as we got through the summer months, you saw the volatility in demand, right? Certain months were good, certain months were not good, right? It just -- it was -- to use the hockey term, it was -- the puck hit -- going off the backboard. That's not a hockey term.

All right. So the thing is that when we went into June, we felt good about where the rate environment was. We felt good about occupancy and pulled back, right? And so it's really hard to attribute exactly what happened to that demand. And right, we've been very clear on that from the get-go that it's really hard to say to point to one thing or another. But obviously, the beauty of self-storage is that there is a lot of different demand drivers out there. So I'd like to call it a soft patch, and we'll see where the rest of the year shakes out, but we are feeling better as we head into the back half of the year.

Yes. And I'd just say that from a tariff Beautiful Big Bill, I mean, from a customer standpoint, I can't say that at this point, we're seeing any impact to date in our key metrics that we follow, whether it's in U.S. or Canada. I think the demand is actually better now than it was last year, and it's actually better than 2019.

And so consumer behavior, in terms of acceptance, ECRIs, bad debt, length of stay, I mean, all of these are -- there's no significant changes. And so I do think it's probably a little bit too early to tell. But as we've said before is that we do kind of see that people are adjusting to the new normal. The new normal is rates are not going back to 0.

And so you talk to enough people. If, in fact, you live in Vegas and your grandkids are in North Carolina, you're not waiting until rates go back to 0 to go move back to spend time with your grandkids. And we're starting to see, I think, a little bit small signs of changes from a positive perspective of maybe people in motion again.

Okay. And then just one final one on the agreement with Orchard Securities. Can you talk about what that means for the company, I guess, versus original plans maybe 3 or 4 months ago? Do you anticipate raising more money, better terms? Just kind of a little bit more discussion on that.

Yes, absolutely. We felt it was a good time to kind of change partners. Specifically Orchard, I think it is a good fit for us with respect to some of the 1031 Delaware Statutory Trust programs that we currently have in the market. And I think to your point is we are also able to kind of negotiate a lower-cost deal that we believe will help our overall shareholders out. And so I think all in all, it's a good trend.

You do take a few steps back in these types of transition to new firms. But nonetheless, we have launched our second Delaware Statutory Trust program. And we actually just started to see equity start to flow in this week. And obviously, July, August tend to be pretty slow month. So we feel pretty good about the relationship, pretty good about the positioning and the continued growth in that area of our business.

Yes. And Wes, just to speak -- to dive a little bit deeper into the managed REIT guidance in terms of what the update we did. Obviously, that transition to Orchard is a big part of the reason -- a good chunk of the reason as to why we moved up our EBITDA guidance. Because of that lower-cost deal that Michael talked about, we are saving and getting more efficient on that line item as a result of this transaction. That, coupled with us getting some acquisitions and opening up properties as we outlined in the second quarter and the underlying performance of the managed REIT properties driving incremental fees over the course of the rest of the year. All 3 of those components are a result of us kind of moving our managed REIT guidance higher the last night.

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

Sticking with the managed REIT business, can you just give us a feel for like at what point in the year you think you may have some more visibility on how to think about like the forward AUM of the business as we're thinking about potential impact in 2026?

Well, what I can tell you is, look, right now, we're at almost $1 billion of asset under management within those programs. And obviously, they're very beneficial with respect to additional economies of scale, property management fees, tenant insurance, asset management fees, some acquisition fees.

The -- we achieved about $4 million in revenue in the second quarter, which was a little bit higher than I think we had guided. And I think that we're going to see how this year goes with respect to some of the macro volatility and any recycling event that may occur, which we think is more of a 2026. So I think it's a little too early for us to give any significant color. But as we move through the third and fourth quarter, I think we'll have a better picture.

Okay. And then second question is just going back to the guidance on same-store revenue. I know you guys just look at this sort of total revenue. But in terms of the components, is it right to think that the adjustment lower on same-store revenue growth was more of a rate than occupancy issue?

Yes. So if we take a step back on how did we arrive at our second quarter same-store revenue, the tightening of that range, right, we lowered the top end by about 75 basis points while also increasing the bottom end by 25 basis points. And a lot of that was in part by what we saw in the second quarter and what got baked into the second quarter because of that June that we talked about.

I think it's safe to say, and while we don't guide and specifically partition out the attribution from occupancy and rate, because we're so dynamic in real time and across all of our markets, I think it's safe to say that we still feel really good about where we are from an occupancy perspective. And we did see a little bit of weakness on that move-in rate in the month of June. And so that's what's driving the change in the overall -- the tightening of that revenue range from our previous guidance.

And your next question comes from the line of Ki Bin Kim with Truist.

Can you just talk about the Toronto operations? I know you had some kind of volatile comps in that market, but your same-store revenue cadence dropped to like 2% from the prior quarter. Can you just talk about the comps and just overall, what your views are in the Toronto market and how -- which seems like a weak housing market might affect that market going forward?

So as you know, Canada is a very different environment than the U.S. from a storage perspective, different demand drivers, et cetera. But it's been a nice outperformer for us. On a constant currency basis, to your point, same-store revenue growth was up 2% in the second quarter and about 4%, 4.5% year-to-date. The comp was obviously much harder in the second quarter. It was 1.3% in 2Q 2024. So a lot harder to overcome that comp. But still the 2% was a solid print for us in the second quarter.

If you look at our JV properties that would meet the definition of same-store, they actually did even better than that. So we always like to incorporate that as well. We're sitting here today in July with occupancy on our 13 same-store Toronto assets at 92.8%, down a little bit from last year. Move-in rates were down about 5% in the second quarter, but the overall demand remains pretty strong.

I'm going to turn it over to Michael to give some higher-level thoughts on Canada.

Yes. I mean I want to kind of address kind of the economy and demand in Canada. So in terms of the economy, we have not seen any weakness with changes due to kind of the immigration policy, tariffs. When we -- from our boots on the ground, we're hearing that it feels like a recession up in Canada right now. And so despite that, our rentals have been up 10% in the second quarter, and they're up 17% in July. And so given our operational advantages up there and other positive storage-related trends, we feel pretty good about the short, medium and the long-term prospects of where we're at within the Canadian economy.

In addition, if, in fact, the Canadian economy gets into a significant recession, we do believe that it's going to fundamentally react in the same way that it does in the U.S. You're going to probably cycle out of some people that are a little bit more price sensitive, but then you're going to be cycling in people that need that storage because of the recessionary environment.

And so in addition to that, the demand is -- demand drivers, though, are exactly pretty much the same as the U.S. They are different. And they're different from the perspective that demand is more structurally rooted in space constraints, urban densification, immigration patterns, lifestyle needs. And so the weights on those compared to the U.S. are different. And so we believe and we see more stronger demand from life stages transitions in Canada, divorce, death, downsizing, seasonal needs because most Canada is still 4 seasons, and urban constraints, living in much smaller spaces and denser overall aggregate environments. And you still -- overall, you have a significantly undersupplied market.

In concert with that, we were in Canada -- we were in Toronto for 13 years before we decided to bridge and outside of some of the other major metropolitan cities. And so we're starting to see, obviously, some really nice success in acquisitions, but also aggregate performance with that diversification.

Switching topics a little bit here. On your managed REIT platform, can you just kind of remind us and maybe walk us through what kind of KPIs you're setting for yourself for third-party equity growth, especially as we start to look at 2026? I do believe when we work on -- when we all collectively worked on our IPO, there was some growth that you expected in the fee business in that side. So how does that tie into like how much AUM you want to grow? And if you can just provide some simple KPIs for us.

Yes, Ki Bin, this is James. Just to speak to kind of some of the metrics, obviously, the metrics we are guiding to are 2 of the key ones we're focused on, right, whether that be managed REIT EBITDA, which we put out a range for, as well as the AUM growth. The equity is a leading indicator for that AUM growth. But remember, AUM sequencing versus equity raise, in a lot of cases, tends to be mismatched.

Coupled with the fact that we've got some other events that are going to occur. David alluded to the lockup of the retail shareholders expiring on October 1, whatever recycle is going to occur as a result of that, which, again, is very difficult to forecast and foresee at this time. So we're going to be monitoring the equity raise.

The DST programs, right, those are discrete programs that have defined overall equity raises. So we've got 3 programs in the market, one is $30 million, one is $62 million and one is $54 million. Once those are done, right, then the equity raise for that program stops and then we're trying to backfill with more product. But overall, we're trying to drive AUM growth because it's a very attractive business and a very accretive business to us to kind of supplement and scale our platform.

And your next question comes from the line of Michael Mueller with JPMorgan.

I guess following up on the distribution questions. Considering you switched the partner, should we look at that as a sign that you're kind of doubling down on the managed REIT platform and it's really kind of a vehicle that you want to be in the longer term, maybe compared to what you were thinking a year or so ago?

I think we've been very clear that we think that there's benefits to the managed REITs in the short and probably the mid term, the long term, I don't foresee us being in the managed REIT business over the long term. As you know, with the dislocation in the stock market a few years ago, the managed REIT business helped us continue to grow off balance sheet. And so no, I would say that it's just a transition to a partner to capitalize on some programs that we have on the market to get some additional economies of scale, which all then create some future growth for SmartStop in the future.

Got it. Okay. And then separately, I mean, how should we be thinking of -- and what's in the pipeline in terms of forward acquisitions, I guess, split between the buckets of being focused on building out scale in existing markets versus kind of moving into newer markets on a go-forward basis?

Well, all right. Well, let me just step back. Obviously, I want to emphasize that we were incredibly disciplined during kind of the increase in interest rates. We only bought one asset. In the past 6 or 9 months, we saw some, I think, a lot of great opportunities out there. And so in pricing and product. And so we bought approximately about $0.5 billion of high-quality self-storage properties since September of last year. We're still seeing a lot of attractive opportunities out there on the stabilized front, both the U.S. and Canada. The deals that we've closed and that we have in contracts are just great example of those. Those mid-5 cap rates with nice management upside.

And you know what we're just encouraged by the pipeline, the consistent deal flow and sellers that are far more rational and reasonable than they were a few years ago. There are larger portfolios out there. But you know what, we've been primarily focusing on the onesies and twosies, which we believe we can create some additional value.

And so we've acquired or have under contract about $300 million. Our guide was $375 million. So that's a really meaningful growth for us. It is enough for us to kind of move that needle. And that's obviously because of our size. And so deals in the pipeline, we haven't seen a lot of movement in the bid-ask spread. I think it's been pretty consistent. But we'll see how that occurs and shakes out in the next few months.

And then from a Canadian perspective, I think that we're seeing a healthy amount of opportunities that would make sense for us. And obviously, lower interest rate environment there obviously helps out dramatically. But in addition, the buyer pools are much different than Canada and U.S. So I think overall, we feel pretty comfortable and confident about where we're at and fulfilling kind of our guide.

Yes. I'll just add to that. If you look at the -- what we've acquired, both kind of leading into the month of December, the back half of '24 and year-to-date here in '25, I think it's representative of the opportunities we're seeing and what we're going to target, right? So we are going to be focusing not exclusively, but we will be focusing on acquiring to build out the scale and add to the clusters that we've been talking about.

So the Houston portfolio we acquired in June, that takes us up materially into double digits operating in that market. The Alberta portfolio that we've got under contract and we've disclosed, we already have 3 operating assets in the Edmonton market and have performed quite well. Our platform works in that market. And so we're excited to scale. And other opportunities to kind of add onesie-twosies in the markets that we already have some exposure to and want to increase and reach that critical mass.

And your next question comes from the line of Spenser Glimcher with Green Street.

I realize Alberta is a smaller market for you guys, but can you just provide a little color on the market just in terms of existing supply landscape? And then as you think about looking to expand any existing properties or look at additional acquisitions in the province, do you have any concerns over this being an economically sensitive market, just given its dependence on energy?

Yes, Spenser, great question. And first of all, we've been in the Edmonton market operating within the managed REITs for coming up on 3 years now. So we've experienced multiple busy seasons in that market. And our -- as I said earlier, our platform continues to work. I think what we're excited about is continue to expand in the major CMAs across Canada, right? So whether that's -- obviously, we have a strong and storied track record in the GTA. We're already operating within managed REITs in Vancouver and expanding our presence in the Alberta market.

The supply story in both the major metros, Edmonton and Calgary, continues to be attractive, especially relative to the U.S. There is new supply in Calgary, but we're excited about entering that market. And Edmonton is actually relatively low. It's still sub-3 square foot per capita in that particular market. So we -- and more importantly, this gives us an opportunity to get to 8 operating assets all within a reasonable drive time, which will help us be much more efficient in terms of operating.

And I think you just have to also add that with less sophisticated operators and leveraging our platform, I think it's a recipe for some really nice growth in those markets in various economic times.

Okay. Great. And then have there been any deal opportunities or underwriting in terms of the maritime provinces? I just know that there is a substantial amount of supply in those markets, especially on the residential side. So potentially a good indicator for future demand.

Yes. What I'll say is we see everything in Canada, and our major focus is the top 6 CMAs, right? We want to be in those top 6 markets, which is the GTA, Vancouver, Montreal, Edmonton, Calgary and Ottawa, right? That's our focus. We still look at those and they come across our desk. But to your point, if there's not the population density, then it's going to -- we're not going to be penciling those deals and looking to acquire them. There's a lot of ripe opportunities for us to grow in the major markets in Canada first.

And your next question comes from the line of Matt Kornack with National Bank.

Sorry to keep on the Canada theme here. But there's been some pretty sizable transactions in Toronto as well as West at ridiculously low cap rates, it looks like. Does that make it more difficult for you to acquire? And have you thought of maybe kind of doing some capital recycling within the existing portfolio given where some of those assets have traded?

Well, I think that's good news, bad news, right? Good news is I saw the opportunity in 2010, and we've built upon it, and we've created an amazing portfolio. I think the bad news is that the cap rates in some of those deals were incredibly low. I believe one of them was a 2.5% cap rate. However, from my understanding, that buyer is not trying to buy anymore, they're trying to just figure out day-to-day operations with what they're doing.

So I think from our perspective, Canada is really a marathon. It's not a sprint. And I think we've built just a high-quality portfolio in Toronto, and we're now starting to build a high-quality portfolio in the major metropolitan cities. I think that there's just a tremendous amount of additional growth that I think that we can achieve in undersupplied markets that have a lack of, I think, some sophisticated institutional markets.

And so I think from our perspective, we're in a growth mode. We have a very strong pipeline of development deals, primarily it will probably go on our managed REITs because they'd be dilutive to SmartStop. And so I think that there will always be certain times in cycles where you can point to was that a potential recycling event. I can now look back and say, you know what, you look back and say, if you had recycled, you would have probably sold a lot less than what the value of that real estate and the additional cash flow on a go-forward basis.

I think the other thing, as it relates to this question that's important to keep in mind is, in a way, we did capital recycle. We levered up in Canadian dollars through the Maple bond. We leveraged the portfolio that we've created thus far in the GTA at very attractive financing, and we brought it back across border and deployed it at mid- to high 5 cap rate deals that we acquired in the States, right? So that is an attractive opportunity for us to, in essence, retail capital without actually selling assets.

Makes sense. Maybe switching to the states. As we think of kind of a rebound in the space, is there a single kind of forward-looking indicator or catalyst, whether it's housing market transactions or something to that effect that we should be looking for to kind of give us comfort that we are, in fact, inflecting and that demand is going to pick up?

Well, I mean, look, I don't want to beat a dead horse, but I think the first thing is you got to focus on supply, okay? We had a 10-year cycle supply. It should have been a 5 year, then COVID hit, and it became 10 years. And so I think that we're first focusing on supply. And we're starting to see, obviously, real absorption accruing. It's going slow. We all want it to happen now. We all want it to be a hockey stick, but it's not. And the good news with that is it's going to keep developers on the sideline for a much longer period of time. So as we get through this choppiness, I can see some better days ahead for storage because of that supply being, I think, going to be more muted than maybe we all think in the future.

And so first, I want to focus on supply. In addition, yes, it would be nice to have a robust full housing recovery in the U.S. And so I think they're -- we're all waiting for it. We're all prepared. But I find what's interesting, without the housing recovery, how we've actually performed. Storage operators now have better technology, better sophistication, better access to data. I think in our just small portfolio, we're making now 3 million pricing changes on a monthly basis. We are modifying our approach based on supply and overall aggregate demand.

So one, we're going to focus on supply. Two, we're going to focus on our portfolio and optimize the best we can. We showed that we would focus more on rate than promotions and discounts. And yes, when that next driver, whatever that is, is it housing rentals? Is it COVID, too? Is it hurricanes, earthquakes, whatever that additional driver for storage, SmartStop Storage is prepared to capture the upside in those environments.

And there are no further questions at this time. H. Michael Swartz, I turn the call back over to you.

Thank you, operator. It's been an amazing first 4 months as a publicly traded company. We look forward to the next 2 quarters in 2026. Thank you for your time and your interest in SmartStop Self Storage, the smarter way to store. Have a great day.