Greetings. Welcome to the National Storage Affiliates' Third Quarter 2025 Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund. You may now begin.

We'd like to thank you for joining us today for the Third Quarter 2025 Earnings Conference Call of National Storage Affiliates Trust. On the line with me are NSA's President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional details on our results, which may be found in the Investor Relations section on our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, November 4, 2025. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of the non-GAAP financial measures such as FFO, core FFO, and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I'll now turn the call over to Dave.

Thanks, George, and thanks, everyone, for joining our call today. We delivered solid results in the third quarter, reflecting sequential improvement in the level of year-over-year same-store revenue growth in 16 of our 21 reported MSAs. Additionally, our core FFO per share result beat consensus estimates. Our focus on driving performance with our upgraded tools, a consolidated platform, and an enhanced team is starting to take hold and has continued into the fourth quarter. Contract rates in October were better than last year by 160 basis points versus a 20 basis point increase for the third quarter. Occupancy ended the month at 84.3% versus 84.5% at the end of September. We were pleased that we're able to hold occupancy relatively flat in October. On a year-over-year basis, occupancy was down 170 basis points. I'll remind you that occupancy in October of last year had 20 basis points of hurricane demand. Looking at the sector more broadly, we are positive about the outlook for self-storage in 2026 and beyond. Given that, one, new supply over the next few years is expected to come down to levels well below long-term historical averages, supporting a notable shift in the supply-demand balance for the sector. Two, assuming Fed interest rate cuts push down mortgage rates, this would likely result in increased storage demand that would accelerate the current inflection in fundamentals. Three, in addition, lower interest rates will benefit our borrowing costs and overall cost of capital, which will aid us in our future acquisition activity. Additionally, we are encouraged by our relative position in the industry as we have two levers to pull: rate and occupancy, which provide us with a growth potential advantage going forward. Our positive momentum is supported by: one, the pace of our same-store revenue growth is improving quickly, suggesting the worst is behind us and a solid inflection off of the bottom. Two, our continued focus on the execution of our strategy, including enhanced marketing and revenue management, optimized staffing levels, property improvements, and expense controls are all starting to show results. Three, we continue to add earnings growth drivers as evidenced by the launch of our preferred investment program. Adding strategies like this will help return NSA to being a growth company. In aggregate, these factors provide the best setup for the self-storage sector and our portfolio have seen in several years. We are confident that our revenue growth will continue to improve even without a housing market recovery. Although the pace of the recovery is uncertain, we are encouraged that we have reached an inflection point. We will continue to focus on improving our occupancy level and revenue growth with increased marketing spend, competitive position in terms of rate and promotion, solid execution of the sales process, and remaining assertive with our ECRI strategy. We are also focused on improving our portfolio through continued capital recycling and reinvesting in our properties. I'll now turn the call over to Brandon to discuss our financial results.

Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.57 for the third quarter, in line with our expectations. The 8% decline from the prior year period was due primarily to a decrease in same-store NOI and an increase in interest expense. For the quarter, same-store revenues declined 2.6%, driven by lower average occupancy of 150 basis points and a year-over-year decline in average revenue per square foot of 40 basis points. This is a meaningful improvement from the first half of the year due to us finding stability operationally and also as we encounter the easier comps to last year. To emphasize this, I'd refer you to Schedule 7 in our supplement, where we break out same-store total revenue between rental revenue, which represents over 95% of the total and other property-related revenue, which primarily consists of tenant insurance dollars retained by the stores. Our rental revenue line item was down 2.2% year-over-year in the third quarter compared to negative 3.2% year-over-year in the first half of 2025, a 100 basis point improvement. The other property-related revenue line item on the other hand had a difficult comp as last year's third quarter was outsized, partly due to us commonizing all of the legacy PRO properties onto our corporate tenant insurance program. Understanding these different components is critical to evaluating the same-store portfolio performance in the third quarter and the implied fourth quarter growth at the midpoint of our guidance. Expense growth was 4.9% in the third quarter. The main drivers of growth were property taxes, marketing, and utilities, partially offset by a decrease in insurance costs. Property taxes were elevated mainly due to a tough comp given successful appeals in the prior year period. Marketing was up 29% versus the prior year as we continue to invest in customer acquisition spend in markets where we clearly see the benefits. We expect some of these expense pressures to ease a bit in the fourth quarter as implied by our guidance range. Moving to the transaction environment. Our 2023 JV acquired 2 properties, one in California and one in Tennessee for a total of $32 million. We also completed the sale of 2 assets, which were discussed on last quarter's call. Our continued commitment to our capital recycling program provides several benefits. First, we're becoming more operationally efficient. Second, it generates proceeds to deleverage. And third, it funds attractive investments through JV and preferred equity structures. We're particularly excited about the preferred equity program that we just announced because this opportunity allows us to accretively invest in self-storage deals that provide us with a larger initial yield than wholly-owned acquisitions. It also allows us to continue partnerships with our former PROs using a structure that solves for our partners' capital raising needs and NSA's risk-adjusted return requirements for capital deployment. It also provides a captive acquisition pipeline for us as we have a right of first offer on the properties acquired by the joint venture we announced with the Investment Real Estate Group. Now speaking to the balance sheet. We have ample liquidity and maintain healthy access to various sources of capital. Subsequent to quarter end, we amended our credit facility agreement to remove the 10 basis point SOFR index adjustment on our revolver, Tranche D term loan, and Tranche E term loan. This amounts to nearly $1 million of annual interest savings on the debt associated with these facilities. We have no maturities of consequence until the second half of 2026, and our current revolver balance is approximately $400 million, giving us $550 million of availability. Our leverage has been slowly coming down with net debt-to-EBITDA of 6.7x at quarter end, down slightly from 6.8x in Q2. Turning to guidance. And given that results were in line with expectations, we maintained our guidance ranges for 2025 for same-store growth and core FFO per share, which are detailed in the release. I'll highlight that the midpoint of the same-store revenue and NOI guide imply continued improvement in the pace of growth for the fourth quarter, building off of the inflection in the third quarter, which gives us further confidence of positive momentum into 2026.

And our first question comes from Samir Khanal with Bank of America.

Dave, when I listen to your opening remarks, your comments in the earnings release, your prepared remarks, certainly, you have a very positive tone here, which is a bit different versus what we've heard from the peers. Maybe help us understand what makes you so confident sort of on a relative basis.

Yes, thank you for joining, Samir. That's a great question. From our perspective, we've spent the last couple of years working hard in a challenging environment, focusing on refining our company structure and implementing initiatives designed to enhance our performance for the future. We have restructured our PRO framework, consolidated our brands and operating platforms, and centralized our marketing and revenue management efforts on nsastorage.com. We are now in a better position and believe we've turned a corner. As we look ahead to 2026, we feel more prepared than we've been in several years to succeed in the current environment. Over the past three to four months, we've made significant progress with efficiencies like occupancy levels and contract rates, which gives us confidence moving forward. We are optimistic about our execution and the positive impact of the changes we've made. We're also uniquely positioned compared to our competitors, as we still have opportunities in occupancy and pricing. We are planning to enhance our marketing spend and execution to move our portfolio ahead, especially as we prepare for 2026. As mentioned earlier, we've maintained occupancy levels well, showed improvement in the third quarter, and have seen positive year-over-year contract rates. All of these efforts are starting to pay off, and as we look toward 2026, we believe we are setting ourselves up for a successful year.

Got it. Now, switching topics, could you discuss your approach to capital recycling in relation to dispositions over the next 12 months?

Yes, I think we'll stay at our thought process around recycling our capital. We still have some markets and some stores that we're in the market with right now. And so we have stuff that we have not closed on, but we're marketing today. As part of that initial push, as we look through our portfolio, everything is built around becoming operationally efficient and really trying to find the future that serves us best and creates the most return for our shareholders. And so we look at recycling capital; we've had good success selling properties. We've had good success with the buyers wanting our properties, and we've been able to turn around and reinvest that money from the recycling program in very efficient ways. Brandon has spoken in his opening remarks about this new opportunity we just created, which allows us to take some of this recycled capital and put it to very good use and a very good preferred investment. And we just think we'll be smart about it. We think that probably the big chunks of our recycling program are over, but we will continually work on the portfolio to make sure we're in the best position to perform.

Our next questions are from the line of Michael Goldsmith with UBS.

Dave, the move-in rate increased by 4.9%, which is very promising, but same-store revenue growth declined by 2.6%. From your viewpoint, how do you see these improved street rates influencing the algorithm and its potential to positively affect same-store revenue growth? How long do you believe that process takes, and what opportunities do you see there?

Yes. Good point, Michael. I think from our seat, we're doing 3 things right now. We're closing the year-over-year occupancy gap and as we look out into 2026, we're going to work very hard around having a pretty level basis on year-over-year occupancy and look next year to grow that occupancy on a year-over-year basis. So that will help on the overall revenue output of the portfolio. Along with that, obviously, we'll position ourselves in the market from a street rate and promotion positioning to make sure that we're competitive and we get the amount of conversions we want for the marketing effort and for the positioning that we're doing around attracting new customers. And so that creates still a rent roll down, which I think we're all dealing with. But what I do have more confidence in as we get better and better with our platforms is around the ECRI strategy and our ability to continue to maximize how we implement in-place rate changes to our customers. And so that's probably a long-winded answer to, I think we have 3 things that we're working on that are going to help us drive additional customers into the platform and actually be able to maximize the revenue. And so as we look at 2026, we're going to start the year in a position we haven't been in several years in the fact that we're going to be pretty flat on a year-over-year basis on occupancy. We're going to have good positioning on contract rate. And from that point forward, it's just a matter of how we drive 2026 as rental volume levels and how we execute on the ECRI program.

Got it. And as a follow-up, just along the same lines, to what extent are the former PROs impacting same-store revenue growth? Is that a positive now? Or is that still a little bit of a drag? How have you been able to operate those stores better and when do you think you can kind of harness some of the upside from your operations out of those stores and realize that benefit?

Yes, that’s a great question. In the third quarter, we experienced some momentum, particularly in terms of move-in square footage. The overall move-in square footage for Q3 was 5.8% higher compared to last year. When we analyze our platforms, marketing, and ongoing initiatives, we noted an improvement in net rental square footage achieved. Of that 5.8 million increase, 3% came from our core portfolio, including the corporate stores we managed previously. The PRO store achieved a 10.1% improvement in net rental square footage year-over-year for Q3. We are beginning to see the impact of our rebranding efforts and centralized platforms reflected in rental performance, which is expected to enhance revenue and drive revenue outperformance. On the expense side, we have managed to save on payroll, but we are also investing more in marketing to boost rental volume. As mentioned last quarter, we were slightly behind our expectations, but we are pleased with the momentum we observed in the third quarter.

The next question is from the line of Spenser Glimcher with Green Street.

Just given your former PROs were obviously a strong piece of your historical external growth. Should we expect to see more of these growth-focused JVs form in the near to midterm?

Thank you for joining, Spenser. I believe this represents a significant opportunity. One of the advantages of the PRO structure is its access to local markets and the ability to facilitate off-market transactions between buyers and sellers, including us as the buyer and identifying sellers. I'm optimistic about the potential. We are excited to share the recent announcement regarding our investment in the Mid-Atlantic and Northeast regions, where this former PRO has a robust operational presence and strong connections in these markets. I believe they will be successful in acquiring properties and thriving in this program. This could potentially lead to more opportunities in the future. While we do not currently have visibility on additional prospects, we believe it is an attractive possibility.

Okay. Great. And then I know you mentioned in your prepared remarks that capital recycling provides obviously to delever and that has been coming down slowly. But can you just talk about the larger capital allocation decision here to grow at all when you're 45% levered and trading at a material discount to NAV that doesn't allow you to delever outside of those disposition proceeds?

Yes, Spenser, this is Brandon. I would say everything that we're doing today is pretty modest and with a very disciplined and prudent eye. I mean, if you just look to the activity that we reported for the third quarter, right? I mean we completed the sale of 2 assets that was part of the 10 pack that we had talked about closing the majority of that portfolio in late second quarter. So that was just finalizing that deal. Our JV '23 acquired 2 stores. Our capital outlay was $8 million. Certainly, this preferred investment that we're talking about is a larger capital outlay upwards of $100 million plus, but that will take time to deploy all that. And then at the same time, we have a clear initiative to improve the portfolio over time through some targeted select dispositions. And so I hear the spirit of your question, but I would just say that everything we're doing is relatively modest and measured for long-term benefits.

The next question is from the line of Eric Wolfe with Citibank.

I think on your last earnings call in your recent presentations, you provided the RevPAF growth. I was just hoping you could provide that for October specifically and then talk about how you expect to trend through the quarter to hit that midpoint of your guidance.

Yes, Eric, this is Brandon. I'll start and then Dave can add his thoughts. We introduced that metric in our investor presentation back at the June NAREIT conference, following our first quarter supplemental report in late April or early May, which is usually when we share new disclosures. In that first quarter supplemental, we began reporting the in-place customer rate for our same-store portfolio, along with the rates of customer movement in and out. Since we provided the in-place customer rate, RevPAF is effectively a combination of that metric and occupancy. Regarding October, Dave mentioned in his opening remarks that our occupancy was down 170 basis points at the end of October, compared to a 140 basis points decline at the end of the third quarter. So, on average, we're in the range of down 150 to 160 basis points. However, it’s important to note that contract rates increased by 160 basis points. These two factors are relatively balanced, suggesting that the RevPAF for October is also flat. That said, we still have elements like discounts and concessions, which we have discussed in previous calls, affecting revenue growth somewhat due to higher discounts in the prior year. Additionally, as I noted earlier, the property-related revenue line item has been a slight drag as well. These are the main factors impacting the RevPAF metric for the third quarter, resulting in the negative 2.6% we reported. This could lead to a slight decline in October RevPAF as well, but ideally starting closer to the 1 handle rather than the 2 handle, which is necessary for us to reach the midpoint of our guidance.

That's helpful. And then I think you mentioned a comment about occupancy being flat to start 2026. Did you mean that on a sequential basis or on a year-over-year basis, meaning you're comparing it versus like, say, October, the third quarter on average? Are you saying that by the time you start 2026 that on a year-over-year basis, that 170 basis points of occupancy gap that you have today in October will go to 0?

I think Dave can clarify his point, but I want to be clear about our guidance. I previously mentioned at recent conferences that we anticipated a shift of around 150 basis points year-over-year for the latter half of the year. Our guidance incorporates various scenarios. I still expect we will show some negative growth year-over-year, although it won't be as significant as what we experienced at the start of 2024 and 2025, which I believe is what Dave was referring to. So, while it won't be entirely flat year-over-year, we expect modestly negative results that will improve.

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

Dave, I want to go back to your comments just on inflection as maybe you look to the year ahead, and I realize you're not giving '26 guidance at this point, but can you give us a sense of maybe the trajectory or expectation of same-store revenue growth? Was that more a comment of a year-over-year improvement? Or could we see that maybe in the first half and then building throughout the year?

Yes. Thanks for joining. It's a good question. I think everything we see today and what Brandon was just commenting earlier is our momentum sequentially month-over-month, and our traction that we're gaining on a year-over-year basis, we're closing the gap on several fronts. And that's around some of the occupancy delta that we faced in the last couple of years, certainly on a contract rate basis as we go forward. And so we look at 2026, where we're starting in a much better position earlier in the year than we've started the last 2, 3 years in several quarters. And so we look at 2026 probably with a little bit more rosy lens in our opinion right now just from our starting position. And so I think from an occupancy level contract rate, where we're going to be with RevPAF, I'm not giving any guidance for 2026, but we do think we're going to be in the best position we've been in several years and have some success there.

Great. Thank you for the insights. Can you provide some details on the recently announced joint venture regarding the types of properties you're looking to acquire, including the anticipated cap rates? Additionally, could you share the internal rate of return you're targeting and any assumptions related to revenue growth or exit cap rates necessary to achieve that return?

Yes, Griff, this is Brandon. I'll respond first, and then Dave can add to it. We're primarily focused on value-add deals in our strategy. In response to Spenser's earlier question, many of the properties we are considering closely align with the profile suitable for our previous operations, meaning the initial yield might appear stable. However, there is potential for further upside, especially for properties being acquired off market, which may have been underperforming due to less skilled management. Additionally, there are assets with opportunities for expansion where our former partners excel in enhancing and expanding those sites. Our target yield is designed with a priority on cash flow for our partners. All operational cash flow after debt service will be directed to us until the 10% preferred return is met. This aligns with our investment level in the capital structure. We anticipate that the initial cash flow will be below 10%, with the unpaid portion of the 10% accumulating and being paid as cash flows grow over time.

Yes. I think I'd just add to that, to Brandon's point, I mean, I don't think we're being overly assertive on exit cap rates, and I don't think we're being overly assertive as we think about revenue growth. I think the partner we've chosen has a good handle on their markets, and we overlook all the underwriting as well on the properties they're buying. And I think we'll certainly be very smart about putting capital out and how we underwrite the performance of the properties.

The next question is from the line of Juan Sanabria with BMO Capital Markets.

Just in the opening remarks, Dave, you mentioned the enhanced team. So I was just hoping you could spend a little time on the additions you have made and maybe future opportunities to kind of bolster the senior leadership of the company.

Thank you, Juan, for your question. We've dedicated significant time to examining all aspects of our business. Initially, we needed to reinforce our financial team as we integrated our accounting within the PRO structure, and the team has performed well. Our recent hires have focused on revenue management and leadership roles that drive performance. We've brought on an experienced individual to lead our revenue management efforts, overseeing ECRI pricing, customer promotions, and the data science and revenue management teams. Her work is crucial in enhancing our strategies to maximize revenue across our portfolio. Additionally, we've strengthened our IT department to ensure we have efficient technology platforms, and we've introduced another important leadership role in our pure marketing and customer acquisition teams. The three new hires bring extensive experience to the table, with two having backgrounds specifically in self-storage, which has significantly bolstered our capabilities. This enhancement has a positive ripple effect across the team as they attract further talent at various levels, from management to operations. On the operations side, our team has invested considerable time in evaluating staffing levels and hours of operation. As I mentioned in my previous call, it's refreshing to concentrate on business development rather than transitions. We're beginning to see the benefits of this focus as we gain momentum.

Great. And then just on the revenue side. Hoping you could talk a little bit about ECRIs and kind of the quantum or the cadence and how that's changed? And then on the move-in side, could you give the numbers net of discounts? I think that's a more useful figure than the kind of the advertised rate, if you will.

Sure. I'll start, and then Brandon can finish up on the rate question. From the ECRI strategy program, I would tell you how we look at the cadence of the ECRIs, we haven't changed. We've been testing some different thought processes around it, but we haven't changed, and we haven't seen anything that's going to make us really change our cadence. I think on the magnitude side, all of the testing we're doing is helping us improve our magnitude on the rate increases. And that's all the way through from the first-time rate increase, all the way through the existing customer base. And so I think on a year-over-year basis from our seat, we feel like the ECRI program is still a little bit stronger than it was last year, and will continue to evolve as data points tell us it can evolve. And so having the additional talent, additional strength, and additional wisdom there is paying off on our ECRI strategy.

And then, Juan, on your discounts question, related to the move-in rate metric that we report back in Schedule 7 for the same-store pool. As Dave mentioned earlier, for the third quarter, we were up 4.9% from the move-in rates. If you adjust that for discounts, for both the third quarter and the second quarter, it was about 100 to 150 basis point impact because concessions were higher. So that 4.9% would otherwise be kind of mid-3s. And for the second quarter, we reported that move-in rate was up 130 basis points, and it was probably closer to flat.

Do you have the corresponding October?

In October, our year-over-year figures are quite high, largely due to last year's easier comparison in September and October. This was influenced by where we had set our rates and the market conditions, along with our internalization efforts. For October, our move-in rates increased by 14%. However, I suggest you consider subtracting about 1 to 1.5 points for discounts. Looking ahead to November and December, we anticipate a decline. Overall, for the fourth quarter, I expect our year-over-year performance to be relatively flat.

The next questions are from the line of Todd Thomas with KeyBanc Capital Markets.

A couple of questions or follow-ups, perhaps on the new growth vehicle that you announced yesterday. I guess, first, will the $105 million preferred investment be funded on a property-by-property basis? Or is each investment completed? Is that how that will work? And then Brandon, you noted that the properties will not hit the 10% preferred early on; the balance will accrue. But based on today's cost of debt and the return profile and assets that you're looking to acquire, any sense what the timeline might be for that 10% hurdle to be achieved?

Yes, Todd. So on the first question, it will be deployed on an investment-by-investment basis or asset by asset. So it will occur over time. And we've been working on the specifics of the agreement with our former PRO for multiple months and are very pleased to be able to announce it now. We've also, over this past few months, been concurrently underwriting a couple of deals that haven't materialized, but jointly underwriting some opportunities. So we are excited about what we're seeing in the market and looking to deploy those first dollars in the venture. On the second question, it's going to be deal-dependent. I mean, I think the initial cash yield comes to us that will rival the cash yields that we're generating in our other JV structures. But then obviously, that growth is going to inure to our benefit disproportionately. And so then that's where it has an opportunity to get up into that 10%. So it will vary. But I'll just tell you because I referenced that we've underwritten a couple of opportunities recently; you're hitting that in a few deals that we've looked at most recently, year 3 on average, I would say.

Okay. It seems that you described it as a program and mentioned it in a previous question. It appears you do not have insight into new ventures, but is there any interest from former PROs to replicate this? Should we expect anything with a specific geographic market focus or some exclusivity in certain regions of the country for potential rollout? Regarding move-in specifically, you recently rebranded those stores. How many move-in stores are currently operating, given that the acquisitions from that venture are set to be branded as move-in? How confident are you in that brand moving forward from an operational perspective?

Sure, I'll take this. This is Dave, Todd. Thanks for the questions. I think there is interest from other former PROs regarding this program. As I mentioned, we don't have a direct line of sight, but we have certainly had conversations. If we find it appropriate and the right time to proceed, we could see a broader rollout focused on specific geographic areas where this aligns with their capital needs and our capital interests. So yes, I anticipate some more activity in the future. Again, there’s no direct line of sight or timing on that, but it is something that could develop. Regarding the move-in brand, I believe they still operate around 35 to 40 stores. They are a regional brand that remained strong after we consolidated the PRO structure; they chose to keep this brand. They invested to have our iStorage stores branded with their move-in signage and wanted to maintain their local brands. There is significant strength in their local markets with this branding, and we are confident in their ability to effectively manage the stores in this venture for us and achieve success at a level we find suitable.

Okay. So there won't be any additional fees or any sort of efficiencies or scale benefits from this growth vehicle; it's purely just limited to the preferred equity investment, and that's it?

Yes. I mean, certainly, there's an initial 10% and then upon exit of a particular part of this venture, there's a chance for us to earn up to about a 14% total return somewhere in that neighborhood of where we want to be potentially. But right now, it's a preferred 10% with an upside, that's correct.

I believe that the initial deal with our former PRO was a sensible move because that particular PRO had invested significantly in developing a property operations group. Our confidence in them managing assets comes from our past experiences with former PROs. In response to your earlier question about whether we view this as a programmatic opportunity to extend to other operators or owners, the answer is yes. In some cases, we could act as the property manager, which would enable us to take advantage of scale and platform benefits.

The next question is from the line of Jonathan Petersen with Jefferies.

Can you update us on how the consolidation of brands on a single website is going? And if you've got search engine optimization back to the levels where it was before the integration?

Yes. Thanks for joining. Good question. Yes. We've had good success with the NSA storage consolidation and consolidation of brands. From a high level, October was really the first month where we had really year-over-year statistics because there was a lot of noise on different websites and different major websites and trying to track the numbers as you think about everybody else having their own little systems and those pieces. But just a couple of high-level stats to come in October. I mean web shopping sessions were up 23% year-over-year in October, which we thought was a good metric, shows good solid progress on the fact that we're actually, the marketing spend and the visibility we're putting at our place and where we're putting our underwriting shares was working, and so we're very happy with that. And the conversion rate was up 7.1%. So we're pretty happy with both the shopping session and the conversion rate. So again, momentum, things that made us happy and pleased with the progress.

Okay. All right. That's helpful. And then maybe related to that, Dave, I think in your prepared remarks, you mentioned that you want to spend more on marketing. Can you talk about what that might look like, like what channels and maybe dollar amounts that you guys are targeting on marketing?

Yes. I think the run rate will be pretty consistent as we go through the fourth quarter of what we saw around the third quarter as far as dollars deployed towards really the primary driver of this is around the paid marketing platform. You do some paid search in social, you do some paid search in other platforms, but we're really working hard on positioning ourselves in the market where we have the right efficiency to get the right amount of sessions we want and the number of our reservations, which obviously lead to rentals. And so the team has done a good job with the new modeling around our paid search model, and that's been our primary effort and primary lift, and we're very happy with the progress we're making there. So I think from our view, we use the marketing dollars as a tool. And if the tool is working, we'll continue to put dollars into the tool as long as we get the results out of it.

Next question is from the line of Ravi Vaidya with Mizuho Securities.

Can you discuss some of the demand drivers within the quarter and for October here? Are you seeing any more housing-related demand given that mortgage rates are in the high 5s and low 6s? And within your portfolio, which markets do you think have the most immediate upside in the event of a housing market recovery?

Thank you for joining. We have not observed any significant change in the number of people using storage due to the housing market. While it's encouraging to see rates decrease slightly, it hasn't had a noticeable impact on home resales or turnover, in our view. Moving remains a leading reason for utilizing storage, which is positive, but it doesn't necessarily mean that individuals are purchasing homes. They could simply be relocating from one rental to another. Nevertheless, the increased activity related to moving and transitions is promising for overall mobility across the country. Regarding the Sun Belt, we have substantial exposure in the southern states, including Florida, Phoenix, and Las Vegas. We believe these areas stand to benefit the most from housing turnover within our portfolio. We have confidence in the long-term prospects for the storage market there, although they have been hit hardest during the current housing market stagnation.

Got it. That's super helpful. And maybe just one more here. It seems like fundamentals are inflecting and there's a lot of positive momentum. Maybe why not narrow the guide at this point sitting in November? Like what are some of the bear and bull assumptions regarding the implied 4Q core FFO and same-store?

Yes, Ravi, this is Brandon. Your question is related to our consistent approach where, especially if we revisit the guidance midyear in August and see no significant changes, we keep the ranges as they are. Our comments here, along with a couple of upcoming conferences, should provide clarity for everyone. This helps people understand any biases or adjustments they might want to make based on our results and commentary. That’s really why we maintain our historical practice of not altering the guidance and instead enhancing it with our remarks during these calls.

The next question is from the line of Brendan Lynch with Barclays.

The PRO internalization was initially explained as a way to manage your assets in-house and simplify your narrative. However, with the new joint venture structure, it appears that your partner will be managing the assets, and the joint venture introduces some complexity. Could you help us understand the advantages of this ongoing change to your structure?

I'll start, and Brandon, you can jump in. I think in this particular opportunity, we like the priority position we have in the investment. We understand the operator. We understand the markets that they'll be looking in. We don't have a significant presence in those markets from an operating standpoint. We did rebrand our stores to iStorage, but the markets that this particular person is in is not necessarily on top of those stores. So I don't know that we look at it as overly complicated from our point of view. They're a good strong operator, and we know they understand the markets and where they're at. And from our seat, that's part of the reason we chose them. We were very, very comfortable. We didn't think it was going to be a high risk and a high attention need from us. We understand their abilities, and what they're able to do, and we felt very comfortable that they're able to grow their portfolio in a manner that we would approve and have success with.

Okay. It sounds like you're considering doing more of these in the future. Would you expect to manage the assets in any other joint ventures that may arise, or would you prefer to outsource that again?

No, I think we're open to doing both. I think depending on the situation of the investment and the situation of the operator, I think we could see this where you may find folks who want to do this and have us manage the stores. And so I think the opportunity would sit on both sides. Again, I think we evaluate at the time of who these people are and how strong they are and what their desires are and what our desires are, and it could lead us to both paths.

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

I just have two quick ones. Just on the same-store revenue, I know the guidance implies you're sort of down 1.3% in 4Q, but the commentary suggests that the inflection point, so I guess I was just wanting to tie those together. And is the thinking here if things continue to improve that presumably same-store revenue should flatten out at some point in the next 12 to 18? Just high level without sort of thinking through guidance here.

Yes, Ronald. I will reiterate some points we discussed earlier to emphasize and address your question. One notable statistic from Dave regarding October is that our contract rates increased by 160 basis points for all existing customers in our same-store pool. However, the average occupancy for the same-store in October decreased by 170, and I noted that it was generally in the range of 150 to 160. These two aspects—the contract rate for existing customers and the average occupancy—contribute to a flat revenue per available foot. Additionally, we are experiencing higher discounts year-over-year, and I mentioned that tenant insurance is slightly affecting our performance. These factors have led to a year-over-year decline in revenue. However, as Dave mentioned in his opening remarks, the pace of year-over-year growth is changing rapidly. We are optimistic about the direction we are heading as we conclude this year and enter 2026. I believe achieving flat revenue growth is definitely possible sooner than within a 12 or 18-month timeframe; it seems more plausible within a shorter period.

Yes, that's very helpful. My follow-up is regarding the dividend; I believe the payout ratio has been over 100%. Now that we are at this turning point, how does your perspective shift regarding when you can bring that ratio back below 100%?

Yes, I believe you bring up an important point. We are confident in our growth trajectories and in our execution. This certainly positions us to begin increasing our funds from operations again. The rate of that growth will depend on various factors we've discussed today. Our Board is very thoughtful and considers everything affecting our business and its future. A key aspect of our industry is the ability to quickly adapt to changes in rates and occupancy. Looking ahead to 2026, we have a more optimistic outlook than we do for this year, which will positively impact dividend payout percentages.

Our final question is from the line of Omotayo Okusanya with Deutsche Bank.

Just wanted to go back to the JV, again, Brandon, with your comments about 3 years to get to the 10% prerequisite return. Can you just kind of give us a little bit more information around what kind of NOI growth you are basically underwriting to underneath that? And kind of what kind of debt or cost of debt this JV entity will have when it does ultimately fund the debt part of the equation?

Yes, it will really depend on the specific deal and the opportunities it presents. It's difficult to discuss in broad terms. We wanted to announce the program because we have been developing it for a while, and we believe it will be a significant aspect of our strategy for 2026. However, it might be easier to address some of your specific questions once we have identified and funded the initial deals, as we will then have concrete data to refer to. As an example, if you consider a property with a 6% capitalization rate and debt costs that are comparable to that rate, you would be neutral in that aspect. If there is a 6% equity yield and we are responsible for 75% of that equity capital while receiving all the cash flow, the calculations would show an 8% yield. This is a very high-level and simplified overview, and if you incorporate growth on top of this, you can estimate the growth needed to achieve a 10% return by the end of Year 2, mid-Year 3, and Year 4 scenarios.

Got you. Okay. And then why would your PRO partner also be willing to take on a 10% preferred equity hurdle? Like what's kind of in this for them? The first few years kind of sound like it basically is working for you before they kind of start to make any money. So why is the 10% preferred equity the most attractive cost of equity to them?

I believe that from their perspective, as they evaluate the properties they intend to acquire, and considering our underwriting process, they are assessing the potential performance of these properties and the overall quality of the deals they are entering into. Their experience has shown that they tend to exceed expectations. From their viewpoint, this cost of capital is justified by the returns they anticipate. Having spent a considerable amount of time with these operators, as a former operator myself, I am confident they will discover some exceptional deals that will greatly benefit them and make us appealing as partners.

At this time, this concludes our question-and-answer session. I'll turn the call back over to George Hoglund for closing comments.

Yes. Thank you all for joining our call today, and we look forward to seeing many of you at the upcoming conferences this month and next. Have a good day.

Ladies and gentlemen, this will conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.