Earnings call transcript: Public Storage Q2 2025 misses EPS expectations

Public Storage (PSA) reported its Q2 2025 earnings on July 31, revealing an earnings per share (EPS) of $1.76, falling short of the anticipated $2.55, resulting in a 30.98% negative surprise. Revenue met expectations at 1.2 billion dollars. Following the announcement, PSA’s stock price dropped by 5.52%, closing at $288.65, reflecting investor disappointment. According to InvestingPro data, the company maintains strong profitability with a 73% gross profit margin and has demonstrated consistent dividend payments for 45 consecutive years. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value.

Key Takeaways

• Public Storage’s EPS missed forecasts by nearly 31%.
• Revenue met expectations at 1.2 billion dollars.
• Stock price declined by 5.52% in after-hours trading.
• The company raised its 2025 core FFO guidance.
• West Coast markets showed revenue growth between 2-4%.

Company Performance

Public Storage’s performance in Q2 2025 demonstrated a mixed outcome, with core funds from operations (FFO) increasing by 1.2%. Despite the EPS miss, the company raised its 2025 core FFO guidance range. The company continues to lead in revenue generation per square foot among its peers, supported by a geographically diversified portfolio and strong brand recognition. InvestingPro analysis shows the company maintains a healthy return on equity of 33% and operates with a moderate debt level, with a debt-to-capital ratio of 15%.

Financial Highlights

• Revenue: 1.2 billion dollars (met forecast)
• Earnings per share: $1.76 (down from forecast of $2.55)
• Core FFO increased by 1.2%
• Rental rates in the same store pool increased by 0.6%

Earnings vs. Forecast

Public Storage reported an EPS of $1.76, missing the forecasted $2.55, marking a 30.98% negative surprise. The revenue, however, aligned with expectations at 1.2 billion dollars. The EPS miss is significant compared to previous quarters, highlighting potential challenges in achieving profitability targets.

Market Reaction

Following the earnings announcement, PSA’s stock price fell by 5.52%, closing at $288.65. This decline places the stock closer to its 52-week low of $256.60, reflecting investor concerns over the earnings miss. The stock’s performance contrasts with broader market trends, where similar sector stocks have shown more resilience. InvestingPro data reveals the stock trades with relatively low volatility, with a beta of 0.85, and offers a competitive dividend yield of 4.16%. Subscribers to InvestingPro can access 8 additional ProTips and comprehensive valuation metrics for deeper analysis.

Outlook & Guidance

Public Storage raised its 2025 core FFO guidance range from $16.35 to $16.45 per share, indicating confidence in future performance. The company anticipates continued market stabilization and gradual improvement in move-in rates, particularly in the Los Angeles market following emergency restrictions. Development projects are targeted to yield 8%, maintaining a $300-400 million annual development pace.

Executive Commentary

"We are raising our outlook for 2025 based on stabilizing operations and accelerated acquisitions," stated Joe Russell, Executive. This optimism is echoed by Tom Boyle, Executive, who noted, "We’ve already seen it in many of our markets and so we have confidence that around the country that’s to come." InvestingPro’s Financial Health Score rates PSA as "GOOD" with particularly strong scores in profitability (4.2/5) and cash flow (3.6/5), supporting management’s positive outlook. The company’s robust EBITDA of $3.3 billion in the last twelve months further validates this confidence.

Risks and Challenges

• Market saturation in key regions could limit growth.
• Economic uncertainties may impact consumer spending.
• Potential disruptions from natural events, such as the LA wildfires.
• Competitive pressures in the self-storage industry.
• Regulatory changes in international markets.

Q&A

During the earnings call, analysts inquired about the impact of LA wildfires on pricing and the company’s international growth strategies. Public Storage executives also addressed market-by-market demand trends and their digital rental and data collection strategies, emphasizing ongoing efforts to enhance operational efficiency.

Full transcript - Public Storage (PSA) Q2 2025:

Rob, Conference Moderator: Greetings, and welcome to Public Storage Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Ryan Burke. Thank you. You may begin.

Ryan Burke, Investor Relations, Public Storage: Thank you, Rob. Hello, everyone. Thank you for joining us for our second quarter twenty twenty five earnings call. I’m here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward looking statements within the meaning of the federal securities laws.

These forward looking statements are subject to certain economic risks and uncertainties. All forward looking statements speak only as of today, 07/31/2025, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non GAAP financial measures we provide on this call is included in our earnings release. You can find our news release, supplement report, SEC reports and an audio replay of this conference call on our website at publicstorage.com. We do ask that you initially limit yourself to two questions.

After that, of course, feel free to jump back in queue. With that, I’ll turn the call over to Joe.

Joe Russell, Executive, Public Storage: Thank you, Ryan, and thank you all for joining us today. Tom and I will walk you through our performance, industry views and outlook, then we’ll open it up for Q and A. We are raising our outlook for 2025 based on stabilizing operations and accelerated acquisitions, which reached $785,000,000 closed or under contract year to date. Public Storage’s industry leadership is proven by among other things the highest revenue generation per square foot among peers, the most efficient operating platform including customer and employee centric technologies that are enhancing satisfaction while bolstering our revenue and margin advantages, and the strongest ability to drive portfolio expansion through our best in class acquisition and development teams backed by our growth oriented balance sheet. As the operating environment stabilizes, new competitive supply deliveries decline further and the transaction market becomes more active, we are holistically enhancing our advantages and positioning for growth.

From a performance perspective, the West Coast in particular along with other markets including Washington D. C. And Chicago are standouts with same store revenue growth in the 2% to 4% range. Our expectation for the impact of fire related pricing restrictions in Los Angeles is unchanged. Similar to most of California, Los Angeles will return to being a higher growth market when the restrictions end.

Speaking more broadly, the trusted public storage brand and our geographically diversified portfolio are highly recognizable to consumers and businesses and a source of pride for our team. We have developed an optimized mix of digital and in person service options that have modernized the customer experience while driving returns and revenues. With our broader operating model transformation, we have created a win win win for customers, team members and our profitability through higher engagement, satisfaction and efficiency. Our ancillary businesses including tenant insurance, third party management and lending are expanding. Our acquisition and development teams are executing on accretive portfolio growth with a five thirty eight property non same store pool expected to generate approximately $470,000,000 of high growth NOI in 2025 with an additional $110,000,000 coming through stabilization in 2026 and beyond.

And Public Storage is uniquely positioned to grow internationally as demonstrated by our success with SureGuard in Europe and the potential new partnership in Australia and New Zealand. As announced, we are currently in due diligence and therefore in a quiet period. We are excited about the potential to partner with Abacus Storage King and Kai Corporation, their major shareholder to enhance the company’s customer experience, operating performance and portfolio growth. Now I’ll turn the call over to Tom.

Tom Boyle, Executive, Public Storage: Thanks Joe. We are leaning into our powerful compounding returns platform comprised of three components. Joe spoke to our industry leading operations. I’ll now speak to capital allocation and capital access. On capital allocation, we have accelerated portfolio growth with more than $1,100,000,000 in acquisitions and development already announced for this year.

The acquisition opportunities are relatively broad based across size, geography and seller type, which were built to execute based on our relationships, data driven underwriting and capital structure. And we will continue expanding the high growth non same store pool through additional acquisitions and our $648,000,000 development pipeline to be delivered over the next two years. We are utilizing our advantageous access and cost of capital to fund that growth. During the quarter with ongoing support from bond investors, we issued new unsecured bonds for refinancing and to fund that growth at the tightest spread of REITs for the year. With leverage at 4.1 times net debt and preferred to EBITDA and approximately $600,000,000 in retained cash flow this year, our capital position is very strong and poised to fund growth into the future.

Now shifting to financial performance for the quarter and our increased outlook. In the same store pool, revenue growth came in as expected increasing for a second consecutive quarter following three quarters of declines last year. Rental rates were up 0.6%, which more than offset slightly lower occupancy. And that occupancy gap versus last year continues to improve, down 40 basis points versus down 80 basis points to start the year. And expense control was strong leading to a better NOI outcome than we anticipated.

Strong non same store and ancillary NOI growth drove core FFO higher by 1.2% in the quarter. FFO growth accelerated two forty basis points from the level achieved during the second quarter of last year. In light of that performance, we lifted the low end of our twenty twenty five core FFO guidance range from $16.35 to $16.45 per share, driven by an improved outlook for self storage and ancillary NOI. All in, Public Storage is very well positioned to drive performance from our compounding returns platform comprised of leading operations, strong capital allocation and advantageous capital access. With that, Rob, let’s open it up for questions.

Rob, Conference Moderator: Thank you. At this time, we’ll be conducting a question and answer session. Our first question comes from Michael Griffin with Evercore. Please proceed with your question.

Michael Griffin, Analyst, Evercore: Great, thanks. Maybe just first starting off on fundamentals, wondering if you can give us an update on July operating trends, maybe both from a rate and occupancy perspective. And second, as it relates to the guide, it seems like you’re trending above the revised midpoint at least year to date. So should we kind of interpret the back half of the year as a deceleration in fundamentals? And has that changed your stance at all about potential recovery for storage fundamentals?

Tom Boyle, Executive, Public Storage: Sure. Thanks, Michael. So starting with the first part of your question, just in terms of how operating fundamentals have been through the peak season here into July. I’d say generally speaking, seasonal trajectory very similar to last year, right in line with expectation. The stabilization that we’ve been speaking to continues to play forth.

Joe spoke to some of the strength in many of our markets, the West Coast markets, San Francisco, Seattle, San Diego, Portland, putting up good kind of 2% to 4% same store revenue growth. We continue to have certain markets like Atlanta and Dallas, some of the Florida markets still working through the normalization process. But we’ve been encouraged by some of the trends that we’ve been seeing through the leasing season in those markets. For the quarter, move in rents were down about 5%. And as I noted, occupancy did close the gap to down 40 basis points from starting the year down 80 basis July trends have been relatively consistent in terms of customer behavior.

Rents are trending similar in July, down call in mid single digits. We ran a successful July 4 sale, will optically lower that statistically, but seeing good customer traffic and behavior there. Occupancy gap continues to tighten today down about 30 basis points as we sit here today. The second part of your question related to guidance and kind of performance year to date. And as you highlighted, we’re seeing performance pretty similar to what we’ve been expecting year to date.

Trends are a little bit above the midpoint on year to date performance in revenue, is encouraging. And I think that’s specifically what you’re getting at. I think the second half deceleration that’s implied by that guidance, I would point you to the discussion we’ve been having and Joe highlighted around Los Angeles. And the Los Angeles impact from the fire related emergencies will be more felt in the second half as we’ve consistently highlighted and is the the contributor to that deceleration in the second half. That said, LA continues to be a fantastic storage market and one that we have a lot of confidence in over the medium to longer term and will rebound nicely when those fire emergencies expire.

Michael Griffin, Analyst, Evercore: Tom, that’s certainly some helpful color. Maybe switching next to kind of the acquisition pipelines and the color on deals closed year to date, looks like you did about $160,000,000 in the second quarter with a healthy pipeline, call it, $40,000,000 under contract. Outside of that, I mean, can you give us a sense of how the transaction market has been? What kind of buyers and sellers out there are out there? Could we see incremental acquisitions on top of that $480,000,000 set to close?

And then it looks like you’ve targeted a number of Sunbelt markets with your acquisitions so far this year. Obviously, those have kind of felt more the brunt of the supply headwinds. So curious if kind of the acquisition strategy is more getting ahead of a recovery in those markets or it’s more submarket specific? Thank you.

Joe Russell, Executive, Public Storage: Okay. Yes, Michael, this is Joe. I’ll take that and Tom is welcome to join in as well. First of all, talking about the overall transaction market through year to date tracking that we have seen nationally, it’s up year over year anywhere from say 10% to 15%. We’ll see how that plays out full year.

Typically second half of year transactions are more robust than first half of year, but to be determined. But we have seen again the amount of product coming into the market and the willingness of owners to transact into levels of value that we have seen appropriate actually increase. So that’s been encouraging. It’s certainly been part and parcel to the amount of volume that we’ve done year to date that we’ve spoken to. We’ll see how the rest of the year plays out.

There are still very few larger portfolios coming into the market and those that have had some level of friction relative to the amount of bidding activity and the value realization that many of those owners have attempted to achieve both privately through many conversations we’ve had with them over the last even twelve to eighteen months and then what we’ve even seen year to date. A little tough to predict how things are going to go between now and into the year, but what we’ve been able to do is unlock many of the things that we do very uniquely as Tom spoke about in his opening comments which we have deep seated relationships. We are in active dialogue with a whole set of different types of owners, very different market opportunities. And to that point, the other part of your question, both intentionally and then what we’ve seen from the market concentration of activity it has been dominated by a number of markets more Mid To East Coast. What we do though is not aim and look for Sunbelt markets that may have different dynamics tied to supply and or growth, but going right down to a submarket basis where we can use data to guide us to where we see unusual value opportunities.

So we’re very confident in the way that we’ve actually captured assets year to date based on all the tools that we have and the unique opportunities that we have to execute those tools. A number of those transactions have been off market. And outside of two, I would say moderately sized portfolios, they’ve been primarily dominated by one off transactions. So we’ll see that how that continues to play through the rest of 2025. But we have been encouraged by the realization that many owners have taken relative to cap rate expectations and value expectations and have frankly captured some good assets going into 2025 thus far.

Michael Griffin, Analyst, Evercore: We’re We’re our cap rate. Was very yes. Thanks so much. I’ll hop back in.

Joe Russell, Executive, Public Storage: You bet. Thank you.

Rob, Conference Moderator: Our next question comes from Nicholas Yulico with Scotiabank. Please proceed with your question.

Nicholas Yulico, Analyst, Scotiabank: Thanks. I guess I just wanted to touch on the move in volume net of move outs and you talked about that being slightly better than last year. Can you just give us a feel for how much that you think that might need to pick up in order to help pricing on the move in side where you said it’s been a little bit more competitive on move in rates?

Tom Boyle, Executive, Public Storage: Yeah. I mean, we’ve seen a consistent, performance, closing that occupancy gap with with move ins doing better than move outs really for the past year and a half, and and would expect that to continue. In terms of the dynamic with move in rents, I think there’s a couple pieces there. One is our own strategies related to to what it is we’re doing to drive revenue. And so, you know, we do things like run sales and things like that periodically and and otherwise that are gonna skew some of the numbers one way or the other.

But the the ultimate driver of some of this is overall industry demand. And we’ve been encouraged by industry demand that that really bottomed last year and is starting to recover. And I think it’s going to take a little bit more time with that recovery before the industry overall starts to be in a position where we’re we’re driving move in rents higher given the success we’ve had in using move in rents at a lower promotional levels over the past couple of years. But I do think that that will come here as we move through the year and into next year continued narrowing of that move in rent gap and we’ll be really supported by that demand picture which we think is modestly improving off the bottoms from last year.

Nicholas Yulico, Analyst, Scotiabank: Okay. Thanks. And then second question is just going back to Los Angeles and as a region, it does feel like that market is struggling a little bit more than some others in The U. S. Can you just talk about any other sort of trends you’re seeing on the ground?

And I mean, I know you have the fire ordinance that’s an impact, but is there anything else you’re seeing that’s kind of pointing to near term weakness in that region? Thanks.

Tom Boyle, Executive, Public Storage: Yeah. No. We were actually seeing pretty good strength across the whole West Coast and even Los Angeles. I mean, highlighted the rent restrictions, but if you look at Los Angeles in aggregate, if you look at Orange County, for instance, Orange County revenues were up 3% in the second quarter, which just speaks to the strength that we’re seeing really across the broad based West Coast. But we are impacted by those rent related restrictions that are in place.

But ultimately, they will expire and we’ve got a lot of confidence both in our portfolio in Los Angeles as well as the demand dynamics here in Los Angeles that will return Los Angeles to a strong performing market here in the future.

Rob, Conference Moderator: Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem, Analyst, Morgan Stanley: Hey, thanks for taking my question. It’s Jenny on for Ron. First is, can you please comment on any markets that you think become like incrementally more or less constructive? Any notable change in your underwriting approaches in those areas? Thank you.

Joe Russell, Executive, Public Storage: Well, the good news is, again, quarter by quarter, we’re seeing continued progression market by market where we’ve seen improvement in either, revenue growth itself or the change in revenue growth. So we’re continuing to be encouraged by the amount of demand factors that are lifting each of these markets one by one. There’s a whole host of markets that then also lead to our confidence relative to capital allocation. But that as I mentioned in a prior question really goes right down to a submarket by submarket basis where we’re looking for ideal opportunities to invest in the assets that are going to have the opportunity for us to put our own brand, our own operational techniques and platform to improve performance as well. And we’ve been very encouraged by a whole host of markets that give us that set of opportunities.

So the landscape for continued investment is quite good relative to the things that we have uniquely to drive and understand not only current conditions, but changing and improving conditions market by market.

Ronald Kamdem, Analyst, Morgan Stanley: That’s super helpful. Second is regarding operations. Maybe talk a little bit more about if there’s more room to automate or centralized operations, like what could be the expected margin expansions like from those initiatives? Thanks.

Joe Russell, Executive, Public Storage: Yeah. Another very vibrant and robust part of the business that we uniquely are investing in and capturing all types of different levels of either a, optimization b, cost savings and then c, from an employee standpoint opportunities for, different levels of specialization as we allocate for instance labor into properties where we can use analytics to determine the best place and location for our own employees to match customer demand. Many of the things that we’ve been doing from a cost efficiency standpoint around our investment into solar for instance, to again optimize costs tied to utilities. And then from a scale and concentration standpoint, the leverage that we continue to extract relative to again the optimization and the way that we’re running our properties day to day. So very encouraged by the amount of progression.

It’s not over yet. We’re seeing the ability to lift optimization that also ties to both revenue and expense control, while also preserving if not enhancing both customer and employee satisfaction. So the entire opportunity that we see there continues to grow and we’re very confident we’ve got more to do.

Ronald Kamdem, Analyst, Morgan Stanley: Perfect. Thanks so much.

Rob, Conference Moderator: Thank you. Our next question comes from Jeff Spector with Bank of America. Please proceed with your question.

Jeff Spector, Analyst, Bank of America: Great. Thank you. First question on the same store revenue growth guidance, it’s still fairly wide minus 1.3% to 0.8%. Can you talk about the various scenarios or key drivers, bottom end versus top end? Thank you.

Tom Boyle, Executive, Public Storage: Yeah. Sure, Jeff. I’d I’d point you to the same guidepost, frankly that I did earlier in the year. The year has played out largely in line with our expectations and so would point you to guideposts of higher occupancy from here to the end of the year in the high end case with move in rents probably narrowing to say down 3% on average. So some improvement there on move in rents.

The low end case being modest drops in occupancy from here as well as moving rents declining through the second half. So while the probability of those high and low end cases may have come down a little bit, we felt like they were still the right guideposts for investors to be able to gauge performance.

Jeff Spector, Analyst, Bank of America: Okay. Thank you. And then my second question is on street rates. Just curious into July, how are operators using street rates to manage occupancy versus demand? I guess if you could talk about just the current environment discounting promotional activity.

Thank you.

Tom Boyle, Executive, Public Storage: Yes, pretty consistent. I wouldn’t point you to anything meaningfully changed here in July.

Jeff Spector, Analyst, Bank of America: Okay, great. Thank you.

Rob, Conference Moderator: Thanks. Our next question comes from Eric Lupchow with Wells Fargo. Please proceed with your question.

Eric Lupchow, Analyst, Wells Fargo: Great. Appreciate it. I guess as you look at the back half of the year, I guess what type of seasonality are you really expecting into the slower months? The last couple of years, it’s been pretty competitive on moving rate across the industry into the slower months? Are you optimistic that we won’t see the same level of price competition to try to maintain occupancy?

Any thoughts there would be helpful.

Tom Boyle, Executive, Public Storage: Yes. I think our expectation coming into this year is we’d see pretty similar seasonal trends this year as we did last year. And I would stick to that into the back half as well. And yes, it continues to be competitive for new customers. I think that’s a dynamic within our industry that’s been tried and true for a long time.

And different operators are going use different pricing and promotion tactics, but we’re certainly well equipped to utilize ours and drive traffic to our public storage sites around the country.

Eric Lupchow, Analyst, Wells Fargo: Great. And as you think about kind of leveraging move and rent versus promotional discounts versus marketing spend, promotional discounts have been down year to date versus last year, and your marketing spend was up a bit in the quarter. So just year over year, so how should we think about the interplay of those and your ability to hit your occupancy targets this year?

Tom Boyle, Executive, Public Storage: Yeah. Well, I’d say a big picture, we don’t have occupancy targets. We’re looking to maximize revenue. And you highlighted the the three different levers that we utilize day in and day out being marketing, promotions, and move in rental rates. We’ll continue to do that.

That that’s an analysis that’s done very granularly at a a product site level at the property and we’ll continue to utilize those tools to maximize revenue over time.

Joe Russell, Executive, Public Storage: Okay. Thank you.

Tom Boyle, Executive, Public Storage: Thanks.

Rob, Conference Moderator: Our next question comes from Eric Wolf with Citi. Please proceed with your question.

Eric Wolf, Analyst, Citi: Thanks. Just wanted to follow-up on LA. It seems like you’re expecting around negative 6% same store revenue growth in the second half versus, call it, flat in the second quarter and the first half. Is there anything that could sort of cause that prediction to be materially off one way or the other? Or is it somewhat just sort of math and certainty that it will end up close to that level?

I’m just trying to understand sort of the volatility of outcomes that could happen in LA in the

Tom Boyle, Executive, Public Storage: back half of the year. Yeah. Sure, Eric. I think I think that there’s a couple components to that. One is, overall, you know, the impact of the the the state of emergency pricing restrictions on our ability to send rental rate increases to existing customers.

And I’d say that component of the impact is is pretty well defined because we understand, you know, our customers that are in place and they’re likely vacate as well as rental rate increase cadences. So I’d say that component is relatively more known as we move into the second half and that’s the biggest contributor to the decline in performance as we move through the year as that impact of rental rate caps accumulates through the year. The other component though is just the strength of overall demand and customer behavior in Los Angeles that is more variable. And I’d say we’ve generally been pretty encouraged by customer demand in Los Angeles as well as just broadly across the West Coast as I highlighted earlier. It’s not an LA County thing, but I I had mentioned earlier that Orange County is performing particularly well.

Obviously, not impacted at all by by these emergency restrictions. So that is a little bit more variable. And we’ll ultimately report on Los Angeles as we move through from here. But I

Jeff Spector, Analyst, Bank of America: think you

Tom Boyle, Executive, Public Storage: characterized it well in terms of our expectations for the back half.

Eric Wolf, Analyst, Citi: That’s helpful. And then I guess maybe difficult question, but to the extent that the restrictions are lifted next January, how quickly do you think you could capture that lost revenue back?

Tom Boyle, Executive, Public Storage: Yeah. That’s a great question and that is something that we obviously have some experience in doing. We’ve had emergencies expire in the recent past and and had a lot of success in reaccelerating revenue in Los Angeles. And we’d we’d anticipate using utilizing a similar playbook, is immediately following those restrictions that we will likely see an opportunity to send those rental rate increases to those we haven’t been able to. And you’ll see revenue accelerate in the months following the the emergency expiration.

And and then you’ll see that probably play out in this instance, maybe over the course of a year. In the last instance, it probably took more like a year and a half, two years, but that’s because that emergency was in place for longer. So we ultimately need to judge that when we get to that point early next year.

Eric Wolf, Analyst, Citi: Thank you.

Rob, Conference Moderator: Our next question comes from Spencer Allaway with Green Street Advisors. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage0: Thank you. Can you just

Ryan Burke, Investor Relations, Public Storage1: talk about what’s driving the increasing guidance for the non same store pool? Have those been leasing up faster than expected or is it just more on the rate side?

Tom Boyle, Executive, Public Storage: Yeah. Great question. I break it into two components. One is a strong performance from the non same store pools that are in lease up, in particular the development and expansion properties had a very good start to the year. Leasing up ahead of our expectation, which I think just further reinforces the environment for new customers is stabilizing and modestly improving from here.

So that’s a encouraging statistic that those lease up properties are ahead of expectations. And then the second component is the new acquisitions that, we’ve closed on or intend to close on through the back half of this year, as disclosed, also increase that, from here.

Ryan Burke, Investor Relations, Public Storage1: That’s great.

Tom Boyle, Executive, Public Storage: And maybe the the the last piece, Spencer, just to highlight is we did also increase the outlook for the amount of NOI to be achieved in ’26 and beyond from that pool, and Joe highlighted that in his prepared remarks, from 80,000,000 to a 110,000,000. So we’re refilling this high growth non same store pool that not only will have an impact on this year, but importantly will have an impact on future year growth as well.

Joe Russell, Executive, Public Storage: Yes. And maybe just to add one more component Spencer to the configuration of the non same store. So about 100 of the five forty or so assets that are in the non same store are developed assets or expansions that we’ve intentionally put into markets. And to your question, we’re seeing very good lease up, but those assets can take some additional amount of time to get to stabilization, which is all very powerful. So again about 20% of the non same store is actually tied to our very intentional development activities as well that give us over time the highest returns on capital.

So again continue to be very encouraging with assets that we put into the market over the last year or two.

Ryan Burke, Investor Relations, Public Storage1: Okay. That’s very helpful. Thank you. And then specific to California, we’ve seen more attention being brought to potential rent control as well as price pricing transparency. While I realized no rent control bill has actually been successful in passing, does the recent push from California legislators change how you view your exposure to the state mid to long term?

Joe Russell, Executive, Public Storage: Sure. The thing that we do nationally, just to step back, is we do keep a very close watch on any legislative efforts that are potentially gaining either attention or traction that could impact the business. California can be prone to that kind of activity. To your question, we keep a very close eye on the variety of things that may be contemplated legislatively or otherwise within the state. We take a very proactive posture when and where we see those kinds of activities.

In the case of California, which we do more typically when any of those kinds of events take place, we’re not independently engaging with and or formulating any type of reaction or response. We’re going to be doing that with industry partners including the National Storage Association etcetera. Most recently the efforts that were taking place here in California ended up being basically successful around taking a set of initiatives that initially had price controls tied to them and then coming up with a solution that was alternatively geared toward disclosure. So we felt that that was a fair compromise and aligned with the interests of the industry. And in our particular case as well, we felt that that was a good compromise.

So this is just something that we continue to monitor. Part of this is the continued education and advocacy even through different political bodies of the way our business works, the way promotions and then rate increases typically take place, how that does have a good match relative to customer attraction meaning it can be very advantageous to the way customers look at acquiring spaces and holding those spaces long term. So we continue to look at all those ways to continue to educate legislative efforts and frankly more often not those become very sensible to them and they’ve given us a good foundation to continue to move forward when and if these events take place. So we’re going to continue to stay focused on that again with our partners nationally and we’ll go from there.

Ryan Burke, Investor Relations, Public Storage0: Excellent. Thank you.

Joe Russell, Executive, Public Storage: Thank you.

Rob, Conference Moderator: Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Nicholas Yulico, Analyst, Scotiabank: Hi, thanks.

Ryan Burke, Investor Relations, Public Storage2: I wanted to ask about the development and lease up pool a little bit more. I was wondering if you can discuss how the newer vintage projects are trending versus underwriting and comment on stabilization timeframes and NOI yields as you reforecast those projects? And then are you underwriting new projects today in either the in process pipeline or planning any differently for new developments going forward?

Tom Boyle, Executive, Public Storage: Yeah. Thanks, Todd. So a number of components there. First, just starting with reiteration of what I mentioned earlier that the lease up and trajectory of the recently delivered acquisitions and expansions continues to be robust. And you can see that in our non same store disclosure in the sup in terms of seeing good traction there for lease up.

And they are tracking a little bit ahead of our performance to date, which is encouraging. The overall targets for yields that we’re looking for, for those sorts of developments and expansions are typically in the 8% plus or minus yield on cost. And that’s something that if you look in the sub, you can see we’ve consistently hit or exceeded over time and have a lot of confidence in these recent vintages. In terms of how we’re looking at the program overall going forward, While the overall industry continues to face headwinds and we’re not immune to that related to longer timelines in certain jurisdictions, higher cost associated with component parts and financing costs. We do have some pretty unique capabilities vis a vis others building self storage facilities in the fact that we can purchase nationally given the breadth of our program, our in house team and the relationships that we can build around the country and obviously our balance sheet and ability to fund this program largely with retained cash flow today.

So while the rest of the industry volumes for new development we anticipate to decline this year, we’re going to have a relatively strong year for deliveries about $370,000,000 delivering this year. And while we haven’t provided any guidance for next year, we’d anticipate north of $300,000,000 for deliveries next year as well, kind of maintaining our kind of 300 to $400,000,000 pace of development deliveries from here.

Ryan Burke, Investor Relations, Public Storage2: Okay. That’s helpful. And then I wanted to go back to some of the discussions around markets and that performance gap between various markets on the West Coast and Chicago and a few others that you mentioned relative to some of that markets that are still normalizing like Atlanta, Dallas and some of the Florida markets. Are you seeing any indication of stabilization in those more challenged markets? Any sense how far you might be from sort of a bottom and what the timeline for those markets to recover more meaningfully might look like?

Joe Russell, Executive, Public Storage: Yes, Todd. I mean, again, on a case by case or market by market basis, you’re going to see different trajectories. You mentioned Atlanta, for instance. Atlanta is in probably one of the toughest spots at the moment, a fair amount of supply. And again, not the amount of demand coming through as quickly to again either shore up or stabilize that supply.

We have been alternatively encouraged by the turning set of events for instance in Florida. Florida was a high flyer through the pandemic, if in fact the highest flyer. It had the commensurate impact from again those trends reversing. But again on a market by market basis through Florida, we’re actually seeing a good set of performance factors, good stabilization. And now in a number of markets within Florida, we’re seeing not only revenue growth, but the change in revenue growth trend favorably.

So the trajectory from a national standpoint is positive. There are three, four or five markets that we’re keeping a very close eye on. I mentioned Atlanta, Dallas, Phoenix, Charlotte for instance, are ones that we’re keeping a particularly close eye on as we speak. But we have been pleased by the turnaround that we’ve been seeing now quarter to quarter frankly for the last eighteen months or so. And we don’t see that changing.

Rob, Conference Moderator: Okay. All right. Thank you.

Joe Russell, Executive, Public Storage: Thank you.

Rob, Conference Moderator: Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage3: Good morning. Thanks for taking my questions. First question is on the new customer. What are you seeing in terms of top of funnel demand? It sounds like first half was a little bit ahead of last year.

So just trying to get a sense of of what what the funnel looks like in, you know, along those lines. Are you’re continuing to run promotions and and marketing spend was up year over year. So is is the customer reacting to these different factors the same way they have in the past?

Tom Boyle, Executive, Public Storage: Yeah. There’s there’s a lot there to unpack, Michael. But I I guess I’d say overall, as you highlighted, we are seeing modestly better demand this year versus last year, which is another sign of stabilization that we’re seeing in the business. In terms of customer behavior itself, pretty consistent trends. Our conversion has been healthy.

Reactions to promotion and pricing tactics has been consistent with what we’d expect. So our our revenue management and marketing tools are working working well, and we’re utilizing those to to seek to optimize revenue from new as well as existing customers. I know you didn’t ask about existing customers, but I might as well highlight that because That’s

Ryan Burke, Investor Relations, Public Storage3: where it’s going next, Tom.

Tom Boyle, Executive, Public Storage: Good. Alright. We’re doing it together. So existing customer is actually performing quite well year to date. Second quarter, we saw really strong performance from longer term tenants, for instance, that’s something we were watching very closely coming out of Liberation Day to see if there would be any shift in behavior.

And encouragingly, we saw vacate activities diminish. We’ve seen delinquency levels be consistent, frankly, a touch better year over year and as well as accepting of rental rate increases. So as we think about the customer base overall, continues to be a bright spot for us as we sit here today.

Ryan Burke, Investor Relations, Public Storage3: Got it. Then since you covered that, as my follow-up, you know, there’s been a series of, residential, real estate earnings, this weekend and today, and turnover on the apartment side and on the multifamily side has remained relatively subdued. Is it do you see that as a good thing for self storage or or is that bad? Is there’s just less movement and, you know, on on the one hand, it could be good in that the, you know, the the apartment customer is staying in place and so continues to use storage as a as an extension of their apartment, but also it could be seen as bad because there isn’t a turnover moving to a home which drives a a different type of demand. So how how would you interpret lower apartment turnover and the impact on self storage?

Joe Russell, Executive, Public Storage: Yeah. Michael, it actually speaks to the resilience and the unique attributes of self storage. We actually can benefit by, you know, any of those events and currently are. So on one end of

Ryan Burke, Investor Relations, Public Storage3: the

Joe Russell, Executive, Public Storage: spectrum, apartment users that may be stickier, maybe may not be moving as often that could be tied to affordability or having less options to expand or take an additional size living space plays very well to the inherent demand factors of our business. And then to your other point, if there’s some amount of dislocation because of movement itself, that’s always a driver to our business. So the affordability factor to place here, which again, self storage is commonly looked at as a sensible way of buffering higher cost of living or higher cost of shelter. So that too is an inherent driver. As we’ve spoken to for some time, we have a high percentage of renters in our portfolio and they’re great customers.

All those factors lead to very similar lengths of stay. I wouldn’t say in any way we have an overarching concern about the type of customer because in fact they may be a renter. In fact most renters end up being very good customers particularly after they stay for some period of time. So all those factors are good inherent drivers to our business.

Ryan Burke, Investor Relations, Public Storage3: Thanks for that. Good luck in the back half.

Rob, Conference Moderator: Thank you. Thanks, Michael. Our next question comes from Ravi Vedaya with Mizuho. Please proceed with your question.

Jeff Spector, Analyst, Bank of America: Hi there. Thanks for taking my question. I wanted to follow-up on the ECRI program. Maybe can you quantify the average rate increase and maybe how that’s changed from last quarter and last year in terms of frequency and amount?

Tom Boyle, Executive, Public Storage: Thanks, Robbie. We don’t typically quantify frequencies or specific magnitudes, but we do disclose information that allows folks to get to the contribution from existing customer rent increases. And as I highlighted on our February call when we came out with our outlook, I’m anticipating contribution from existing customer rent increases across the country to largely be pretty similar to last year. But given the rent restrictions in in Los Angeles, which will drive less contribution year over year overall modestly lower contribution from the full national pool. We continue to see customer price sensitivity that’s very much in line with our expectations and predictable behavior and reaction to our tactics on the ground.

And a stable number of customers that are requesting some sort of concession after they receive an increase. So I’d say overall very consistent trends and right on plan.

Jeff Spector, Analyst, Bank of America: Got it. That’s helpful. Just one more here. Can you maybe discuss the impacts of the big beautiful bill? Does this further encourage your development pipeline given the bonus depreciation provision?

Or do you forecast home sales increase and subsequently self storage demand given the salt property tax adjustments? Maybe just walk us

Ryan Burke, Investor Relations, Public Storage4: just how you’re thinking about,

Jeff Spector, Analyst, Bank of America: the recent legislation there?

Tom Boyle, Executive, Public Storage: Yeah. Sure. There’s a couple components there that I’d highlight. You hit on some of them. I think the full impact of the bill will will be felt across the the macro, I think, over time.

But I think specifically the public Storage, there’s two things I’d highlight. One of them relates to our solar program. So we’ve been very active in investing in solar for rooftop generation to offset our own utility usage. And that’s something that we’ve had a robust pipeline on. And our pipeline is set to complete here over the next several years.

And so we’re fortunate that we started that program and really accelerated it over the last several years to take advantage of the incentives that were in place and that will no longer be in place going forward. So we feel good about that and that will be a tailwind to our expense profile as we reduce our utility expense and our carbon footprint over the next several years. So that’s a negative impact over the longer term, but won’t impact us on the near term in our current pipeline. The second component relates to bonus depreciation as you’re highlighting and bonus depreciation is something that we’ve taken advantage of consistently over the past decade or so. That bonus depreciation was starting to sunset, but with the new bill will come back.

And so that’s an opportunity for us to continue to retain incremental cash flow over time and reinvest it into our development business as well as acquisitions. And that reinvestment into the business helps drive our compounding return platform.

Jeff Spector, Analyst, Bank of America: And, maybe just about the the salt provisions and and home sales, are you seeing anything from that with demand?

Tom Boyle, Executive, Public Storage: No. We haven’t seen anything like from that yet. Obviously, we’ll we’ll see the broader macro impacts as we go from here.

Rob, Conference Moderator: Got it. Congrats on the quarter.

Tom Boyle, Executive, Public Storage: Thanks, Robbie.

Rob, Conference Moderator: Our next question comes from Juan Santabrio with BMO Capital Markets. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage5: Hi, good morning. Just first on acquisitions, just curious on cap rates or yields going in for what’s been done to date and kind of what’s planned for the remainder of the year as well as kind of a longer term more stabilized expectation for those investments?

Tom Boyle, Executive, Public Storage: Yes. Thanks, Juan. I’d point you to pretty similar cap rates to what we’ve been seeing over the last twelve months or so. Generally transactions are trading hands with kind of going in yields in the 5s ultimately getting into the 6s. The portfolio activity and small individual assets that we’ve done year to date are right in line with that.

But we did do some lease up asset acquisitions as part of this component. But even with that, I’d characterize of the $7.85 that going in yield is probably five and a quarter sort of zip code ultimately stabilizing in the sixes.

Ryan Burke, Investor Relations, Public Storage5: Thanks. And then just on the ancillary part, which has done better than expected, you called out tenant insurance. Just curious what’s changed there? Is there maybe more pricing power? Or just curious on what’s driven that outperformance on the ancillary, in particular tenant insurance?

Tom Boyle, Executive, Public Storage: Yes. We continue to see really strong adoption from the tenant insurance program itself. So overall coverage levels are trending higher and have been over the past couple of years. In addition to that premiums have also moved higher. So kind of on both sides of the stabilized store base.

And then obviously adding new properties into the non same store portfolio will further increase the opportunity for the tenant insurance business along with our third party management platform. So that business is really hitting on all cylinders in 2025.

Ryan Burke, Investor Relations, Public Storage6: Thanks.

Rob, Conference Moderator: Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage0: Hi, good morning. Back in the prepared remarks, you guys brought up how you’re positioned to grow internationally. So I guess we’ll see what happens in Australia. Was wondering if you could go through what benefits you think the SureGuard exposure gives PSA overall? And do you expect to pursue additional international opportunities?

Joe Russell, Executive, Public Storage: Yeah, Caitlin. The thing that I highlighted in opening comments around our relationship with SureGuard has been very powerful where we’ve had a opportunity to, a, learn how many of the tools they’ve selected from our own platform have been opportunistic for them in a whole host of Western European countries, country by country with many different types of dynamics. But it’s been a great opportunity for us to see, understand and work with, again, a platform like that that could take those kinds of tools that we’re developing here in The U. S. And implement them, one by one at their election into their own platform.

So for many years, we’ve seen the opportunity how we’ve been able to optimize and see that integration in markets not here in The United States. With that’s given us more confidence that for the right set of circumstances other international markets may also be equally if not better prepared to achieve the same kind of optimization using the tools that we’ve been able to develop here in The United States. We think that that’s very similar. For instance, in Australia and New Zealand, as you know, we’ve had an inherent interest in that market for some time over the last five plus years. This opportunity again is very attractive for many of those exact same reasons.

The partner who controls the entity is very attracted to the things that again have played forth relative to our relationship with Shurgaard and we’ll see how this plays out as that opportunity progresses step by step that we’ll give you some color on as we’re able to. But with that, to your question, it does give us not only the skill, but the confidence and knowledge of how a) complicated, but how b) efficient some of these tools can become in different markets. It’s not a static set of playbook opportunities, but it’s one that if it’s tailorable to a particular market can be very powerful. So we’ll see how that continues to play not only in markets like New Zealand and Australia, but over time potentially other markets as well.

Ryan Burke, Investor Relations, Public Storage0: Got it. Thanks. And then I guess just bigger picture back to The U. S. You’ve talked about same store stabilizing that you think demand bottomed in 2024 and should continue to improve.

You also talked about that storage industry should be able to outperform in a variety of economic environment. So I guess I was wondering if you could just give your current thoughts on what you think it takes to get, like, a stronger improvement and get on the same store side, like positive growth, whether that’s, well, positive or like inflationary plus on the revenue or NOI. So like is it the housing market? Is it less supply? Or do we not really know at this point?

Thanks.

Tom Boyle, Executive, Public Storage: Good question, Caitlin. I do think we’ve seen that stabilization. I think as demand continues to grow off that 24 base, you’re going to see more momentum and we’ve already seen that across a number of our markets, right? If you look at the West Coast markets for instance that Joe and I have been speaking to on this call, starting to see that sort of growth already, which is encouraging. We’ve got a lot of confidence in the Sunbelt markets that have taken a little bit longer to normalize.

But if you think about an environment where demand is coming off a base, you’ve got new supply that is likely continue to taper off given the challenges in the development business I spoke to earlier. And you’ve got a situation set up for a return to stronger growth for the sector. Is that going to happen overnight? No. And as we’ve seen the stabilization process, we’ll take some time to get back up to those levels of growth.

But we’ve already seen it in many of our markets and so we have confidence that around the country that’s to come.

Rob, Conference Moderator: Our next question comes from Ki Bin Kim with Truist Securities. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage7: Thank you. Good morning. Just going back to the impact of the LA wildfires. At the beginning of the year, you estimated about 100 basis points drag to your same store NOI. But given the strength in the West Coast, I think we see the same data, LA looks pretty strong.

You think that drag is actually potentially bigger than 100 basis points?

Tom Boyle, Executive, Public Storage: Ki Bin, we’d still point you to the 100 basis points impact and would point you to LA being plus or minus down 3% same store revenue for the year. So around that 100 basis points number today.

Ryan Burke, Investor Relations, Public Storage7: Okay. And on the call, you’ve mentioned that 2Q pretty much ended up where you thought it would. But when we look at the pace of improvement from one q to ’2 q, you know, it does seem like it just lost a little bit of steam. It’s just one quarter, I get it, but it wasn’t the same pace. So I was just curious that, something was there a macro factor or a change in some behavior that occurred during the quarter where that pace of improvement just looked a little bit softer than the prior quarter?

Thank you.

Tom Boyle, Executive, Public Storage: Thanks, Ki Bin. I wouldn’t characterize it as seeing any sort of losing steam or any shift during the quarter. It was pretty consistent throughout the quarter and generally in line with our expectations. So I wouldn’t point you to that as something that occurred during the quarter, frankly.

Nicholas Yulico, Analyst, Scotiabank: Okay. Thank you, guys.

Rob, Conference Moderator: Thanks. Our next question comes from Mike Mueller with JPMorgan. Please proceed with your question.

Jeff Spector, Analyst, Bank of America: Most of the 2Q stuff has been asked. But I’m curious, Steve, when you have digital rentals versus in person or from call centers, do you generally get the same amount of customer data that you would get at you know, that helps you formulate pricing and marketing strategies?

Tom Boyle, Executive, Public Storage: Yeah. Yeah. Go ahead, John.

Joe Russell, Executive, Public Storage: I was gonna say that you you to your question, Mike, it all of those channels give us a whole variety of robust data. And we are, continuing to use different tools to leverage that data relative to customer knowledge and behaviors and efficiencies. So it, you know, it’s a vibrant amount of the business that time and again channel by channel is we digitize, we see, you know, very good residual impact and knowledge opportunities.

Tom Boyle, Executive, Public Storage: And the more digital interactions we have,

Joe Russell, Executive, Public Storage: the more data we can get. It’s as simple as that.

Jeff Spector, Analyst, Bank of America: Got it. Okay. Thank you. You bet.

Rob, Conference Moderator: Our next question comes from Teo Okusanya with Deutsche Bank. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage6: Yes. Good afternoon. Just a quick one in regards to your markets that are outperforming, as you mentioned, West Coast, Midwest, DC. But just curious thematically, if you can kind of talk about what’s happening in those markets? Does it all just kind of boil down to less supply through the cycle?

Or is there kind of something thematically happening from a perspective of improved demand across these markets?

Joe Russell, Executive, Public Storage: Yes. There’s not ever just one impact, but supply certainly is a primary factor. Some of those markets have not been the high flyers in and out of the cycles that we’ve seen over the last five to ten years. So that’s certainly a residual benefit. It could also play to again just inherent economic activity, cost of housing, the again the dynamics that are going on just from a movement and trending standpoint market to market.

And then like always, can be difficult to put a broad brush on just a market as a whole. And so you’ve really got to take it down to a submarket by submarket basis as well. But those are factors that again are very important that we’ve got to keep a very close eye on relative to either trends or different ways that the market is evolving. As we continue to speak to even on this call, we are very encouraged by the market by market trends that we’re seeing nationally. And with that, the supply factor continues to diminish where today, fortunately, don’t have more than three or four larger markets that are really dealing with an oversupply issue that’s dragging down overall market performance.

Ryan Burke, Investor Relations, Public Storage6: That’s helpful. And then one other quick one. Just curious again from your call center data that you have, from data you have from prospective customers interacting with your website. Just curious if you’re kind of seeing any change in behavior, anything that kind of supports this idea of we’re kind of getting closer to demand stabilization as I believe we you know, you guys have kind of mentioned that quite a few times throughout the call.

Tom Boyle, Executive, Public Storage: Yeah. The only thing I’d point you to there, something I noted earlier, is conversion’s been very healthy year to date. And we’ve seen conversion improving across the channels, which I think speaks to more customer interest and willingness to transact with us.

Rob, Conference Moderator: Thank you.

Ryan Burke, Investor Relations, Public Storage4: Thank you.

Rob, Conference Moderator: Our last question comes from Brandon Lynch with Barclays Bank. Please proceed with your question.

Ryan Burke, Investor Relations, Public Storage4: Great. Thanks for taking my questions. Tom, you mentioned quite a bit about markets inflecting, turning positive. Seems to be improving signs of strength throughout the industry. But street rates seem to be stubbornly negative as implied by your guidance as well.

Can you just talk about the dynamics which they are contributing to that?

Tom Boyle, Executive, Public Storage: Yeah. I think the primary contributor to that is that we and others have found good success in lowering move in rents and getting good customers and move in volumes. And so as that’s worked, we and others have utilized it. But I do think that street rates and move in rents will improve over time and we’ve seen that in some of the stronger markets already. But it will take a little bit of time as demand comes off the bottom.

Ryan Burke, Investor Relations, Public Storage4: Okay. Thanks. That’s helpful. And then you talked about the seasonal pattern being pretty similar to last year in terms of occupancy gains and pricing. If I recall correctly, last year, the seasonal peak was very early.

Was there any change in that? I’d imagine all else equal a later peak is better in terms of third quarter earnings. Thanks.

Tom Boyle, Executive, Public Storage: Sure. It depends on which metric in particular you’re looking for in terms I mean, we typically get our occupancy peak here in July. I think that’ll be the case here again this year. Know, you typically see move in demand peak at the May, early June, for instance.

And so I think generally I’d say we’re not seeing anything unusual or shifting from a seasonality standpoint this year and that’s frankly encouraging.

Ryan Burke, Investor Relations, Public Storage4: Okay. Very good. Thank you.

Rob, Conference Moderator: Thanks. We have reached the end of the question and answer session. I’d now like to turn the call back over to Ryan Burke for closing comments.

Eric Wolf, Analyst, Citi: Thanks, Rob, and thanks to all of

Ryan Burke, Investor Relations, Public Storage: you for joining us. Have a good day.

Rob, Conference Moderator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.

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