Greetings, and welcome to Public Storage Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ryan Burke. Thank you. You may begin.

Thank you, Rob. Hello, everyone. Thank you for joining us for our second quarter 2025 earnings call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, July 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 2 questions. After that, of course, feel free to jump back in queue. With that, I'll turn the call over to Joe.

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&A. We are raising our outlook for 2025 based on stabilizing operations and accelerated acquisitions, which reached $785 million 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 the 538 property non-same-store pool expected to generate approximately $470 million of high-growth NOI in 2025, with an additional $110 million coming through stabilization in 2026 and beyond. And Public Storage is uniquely positioned to grow internationally, as demonstrated by our success with Shurgard 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 Ki 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.

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 $1.1 billion in acquisitions and development already announced for this year. The acquisition opportunities are relatively broad-based across size, geography and seller type, which we've 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 million 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 million 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 240 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 2025 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.

Our first question comes from Michael Griffin with Evercore.

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?

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 and 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 unfold. Joe spoke to some of the strength in many of our markets, the West Coast markets: San Francisco, Seattle, San Diego, Portland, all posting good 2% to 4% same-store revenue growth. We continue to have certain markets like Atlanta and Dallas, and some of the Florida markets are 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. July trends have been relatively consistent in terms of customer behavior. Rents are trending similar in July, down, call it, mid-single digits. We ran a successful 4th of July sale, which will optically lower that statistically, but we are seeing good customer traffic and behavior there. The occupancy gap continues to tighten, being 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. As you highlighted, we're seeing performance pretty aligned with what we've been expecting year-to-date. Trends are a little bit above the midpoint on year-to-date performance in revenue, which is encouraging. And I think that's specifically what you're getting at. For the second half, the deceleration implied by that guidance, I would point you to the discussion we've been having and Joe highlighted around Los Angeles. 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 contributor to that deceleration in the second half. That said, L.A. 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.

Tom, that's certainly some helpful color. Maybe switching next to kind of the acquisition pipelines and your color on deals closed year-to-date. It looks like you did about $160 million in the second quarter with a healthy pipeline, call it, around $40 million 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 are out there? Could we see incremental acquisitions on top of that $480 million 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 felt more of the brunt of the supply headwinds. So curious if the acquisition strategy is more getting ahead of a recovery in those markets or if it's more submarket specific.

Okay. Yes, Michael, this is Joe. I'll take that, and Tom is welcome to join in as well. First of all, just 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 the first half, but it remains to be seen. But we have seen 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 increased. So that's been encouraging. It's certainly been part of 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. Those that have 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 12 to 18 months and what we've seen year-to-date. It's a little tough to predict how things are going to go between now and the end of 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, and we see very different market opportunities. To that point and the other part of your question, both intentionally and based on what we've seen from the market concentration of activity, it has been dominated by several 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 go 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 have 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. Outside of two, I would say, moderately sized portfolios, they've been primarily dominated by one-off transactions. So we'll see how that continues to play through the rest of 2025, but we have been encouraged by the realization that many owners have had around cap rate expectations and value expectations and have frankly captured some good assets going into 2025 thus far.

Our next question comes from Nicholas Yulico with Scotiabank.

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?

Yes. I mean we've seen consistent performance closing that occupancy gap with move-ins doing better than move-outs really for the past 1.5 years and would expect that to continue. In terms of the dynamic with move-in rents, I think there are a couple of pieces there. One is our own strategies related to what we are doing to drive revenue. And so we do things like run sales that skew some of the numbers one way or the other. But the ultimate driver of some of this is overall industry demand. We've been encouraged by industry demand that really bottomed last year and is starting to recover. I think it's going to take a little more time with that recovery before the industry overall is in a position where we're driving move-in rents higher, given the success we've had in using move-in rents at a lower promotional level over the past couple of years. But I do think that will come as we move through the year and into next year, with the continued narrowing of that move-in rent gap. We will be supported by the demand picture, which we think is modestly improving off the bottom from last year.

Okay. And then second question is just going back to Los Angeles. It does feel like that market is struggling a little more than some others in the U.S. Can you just talk about any other trends you're seeing on the ground? I mean, I know you have the fire ordinance that's an impact. But is there anything else you're seeing that's pointing to near-term weakness in that region?

Yes. We're actually seeing pretty good strength across the whole West Coast and even Los Angeles. I mean you 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 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 that will return Los Angeles to a strong performing market in the future.

Our next question comes from Ronald Kamdem with Morgan Stanley.

It's Jenny on for Ron. First is, can you please comment on any markets that you think you become incrementally more or less constructive? Any notable change in your underwriting approaches in those areas?

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 assets that will have the opportunity for us to put our own brand, our 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.

That's super helpful. Second is regarding operations. Maybe talk a little bit more about if there is more room to automate or centralize operations, like what could be the expected margin expansion like from those initiatives?

Yes. Another very vibrant and robust part of the business that we uniquely are investing in and capturing all types of different levels of either optimization; cost savings and then 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, optimize costs tied to utilities. And then from a scale and concentration standpoint, the leverage that we continue to extract relative to the optimization in the way 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.

Our next question comes from Jeff Spector with Bank of America.

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 for the bottom end versus top end?

Yes. Sure, Jeff. 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. So I 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 move-in rents declining through the second half. 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 gauge performance.

My second question is about street rates. I am curious how operators are using street rates in July to manage occupancy in relation to demand. Could you discuss the current environment regarding discounting and promotional activities?

Yes, pretty consistent. I wouldn't point you to anything meaningfully changed here in July.

Our next question comes from Eric Luebchow with Wells Fargo.

Great. Appreciate it. I guess as you look at the back half of the year, what type of seasonality are you really expecting into the slower months? The last couple of years, it's been pretty competitive on move-in rates across the industry into the slower months. And are you optimistic that we won't see the same level of price competition to maintain occupancy? Any thoughts there would be helpful.

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. Different operators are going to 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.

Great. And as you think about leveraging move-in 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. How should we think about the interplay of those and your ability to hit your occupancy targets this year?

Yes. Big picture, we don't have occupancy targets. We're looking to maximize revenue. You highlighted the three different levers that we utilized day in and day out, being marketing, promotions, and move-in rental rates. We'll continue to do that. That's an analysis that's done very granularly at a product site level at the property, and we'll continue to utilize those tools to maximize revenue over time.

Our next question comes from Eric Wolfe with Citi.

Just wanted to follow up on L.A. 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 will end up close to that level? I'm just trying to understand sort of the volatility of outcomes that could happen in L.A. in the back half of the year.

Yes, sure, Eric. I think that there's a couple of components to that. One is, overall, the impact of the state of emergency pricing restrictions on our ability to send rental rate increases to existing customers. I would say that component of the impact is pretty well defined because we understand our customers that are in place, and they're likely to 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, and that is more variable. 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 L.A. County thing, but I mentioned earlier that Orange County is performing particularly well, obviously not impacted at all by these emergency restrictions. So that is a little bit more variable, and we'll report on Los Angeles as we move through from here. I think you characterized it well in terms of our expectations for the back half.

That's helpful. And then, I guess, maybe a 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?

Yes. No, that's a great question. We obviously have some experience in doing that. We've had emergencies expire in the recent past and had a lot of success in reaccelerating revenue in Los Angeles. We anticipate utilizing a similar playbook, which 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. You'll see revenue accelerate in the months following the emergency expiration. You'll see that probably play out over the course of a year. In the last instance, it probably took more like 1.5 years, 2 years, but that's because that emergency was in place for longer. We'll ultimately need to judge that when we get to that point early next year.

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

Can you just talk about what's driving the increase in guidance for the non-same-store pool? Have those been leasing up faster than expected? Or is it just more on the rate side?

Yes, great question. I'd 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. That’s an encouraging statistic that those lease-up properties are ahead of expectations. 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 increased that from here. Maybe just the last piece, to highlight, we did increase the outlook for the amount of NOI to be achieved in '26 and beyond from that pool, as Joe highlighted in his prepared remarks, from $80 million to $110 million. So we're refiling 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.

Yes. And maybe just to add one more component, Spenser, to the configuration of the non-same-store. So about 100 of the 540 or so assets that are in the non-same-store are developed assets or expansions that we've intentionally put into markets. To your question, we're seeing very good lease-up, but those assets can take additional time to get to stabilization, which is all very powerful. About 20% of the non-same-store is actually tied to our very intentional development activities, which give us, over time, the highest returns on capital. Again, we continue to be very encouraged even with assets that we put into the market over the last year or two.

Okay. That's very helpful. And then specific to California, we've seen more attention being brought to potential rent control as well as pricing transparency. While I realize 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?

Sure. The thing that we do nationally, just to step back, is we keep a very close watch on any legislative efforts that are potentially gaining attention or traction that could impact the business. California can be prone to that kind of activity. To your question, we take a proactive posture when and where we see these kinds of activities. In the case of California, which we do, more typically when any of these kinds of events take place, we're not independently engaging with and/or formulating any type of reaction or response. We're addressing that with industry partners, including the National Storage Association, etc. Most recently, the efforts that were taking place in California ended up being basically successful in 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. We felt that was a fair compromise and aligned with the interest of the industry in our particular case. It was a good compromise. This is something we continue to monitor. Part of this is the continued education and advocacy even through different political bodies on how our business works, the way promotions and rate increases typically happen, and how that effectively matches customer attraction, meaning it can be advantageous to the way customers look at acquiring spaces and holding those spaces long term. We continue to look at all those ways to educate legislative efforts, and more often than not, those become sensible to them, and they've provided us a good foundation to move forward when and if these events take place. We're going to continue to stay focused on that, again, with our national partners, and we'll go from there.

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

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 time frames 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?

Yes. Thanks, Todd. So a number of components there. First, just starting with a reiteration of what I mentioned earlier that the lease-up and trajectory of the recently delivered acquisitions and expansions continues to be robust. You can see that in our non-same-store disclosure in the sub in terms of seeing good traction there for lease-up. They are tracking a little ahead of our performance to date, which is encouraging. The overall targets for yields that we're looking for those sorts of developments and expansions are typically in the 8% plus or minus yield on cost. 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 entire industry continues to face headwinds, and we're not immune to that related to longer times in certain jurisdictions, higher costs associated with component parts, and financing costs, we do have unique capabilities compared to others building self-storage facilities. We can purchase nationally, given our breadth of our program, our in-house team and the relationships we build around the country, and obviously, our balance sheet and ability to fund this program mainly with retained cash flow today. 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 million delivering this year. While we haven't provided guidance for next year, we'd anticipate north of $300 million for deliveries next year as well, maintaining our $300 million to $400 million pace of development deliveries from here.

Okay. That's helpful. And then I wanted to go back to some 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 Sunbelt 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 of how far you might be from sort of a bottom and what the timeline for those markets to recover more meaningfully might look like?

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, which is probably in one of the tougher spots at the moment, with a fair amount of supply. Again, there hasn't been enough demand coming through as quickly to shore up or stabilize that supply. Alternatively, we have been encouraged by the turning set of events in Florida. Florida was a high-flyer through the pandemic, if not the highest flyer. It had the commensurate impact from those trends reversing, but on a market-by-market basis, through Florida, we're seeing positive performance factors, good stabilization, and in a number of markets within Florida, we're seeing not only revenue growth but the change in revenue growth trend favorably. The trajectory from a national standpoint is positive. There are three, four, or five markets that we're keeping a close eye on. I mentioned Atlanta, Dallas, Phoenix, and Charlotte, for instance, those are ones that we're observing closely as we speak. But we have been pleased by the turnaround we've been seeing now quarter-to-quarter, frankly, for the last 18 months or so, and we don't see that changing.

Our next question comes from Michael Goldsmith with UBS.

First question is on the new customer. What are you seeing in terms of top-of-the-funnel demand? It sounds like the first half was a little bit ahead of last year. So I was just trying to get a sense of what the funnel looks like. And along those lines, you're continuing to run promotions and marketing spend was up year-over-year. So is the customer reacting to these different factors the same way they have in the past?

Yes, there's a lot there to unpack, Michael. But 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 promotions and pricing tactics have been consistent with our expectations. Our revenue management and marketing tools are working well, and we're utilizing those 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 we are doing it together. The existing customer is actually performing quite well year-to-date. In the second quarter, we saw really strong performance from longer-term tenants. We were watching closely coming out of Liberation Day to see if there would be any shift in behavior. Encouragingly, we saw vacate activities diminish. We've seen delinquency levels be consistent, frankly, a touch better year-over-year, and are accepting rental rate increases. So as we think about the customer base overall, it continues to be a bright spot as we sit here today.

Got it. And then since you covered that, as my follow-up, there's been a series of residential real estate earnings this week and today. Turnover on the apartment side and on the multifamily side has remained relatively subdued. Do you see that as a good thing for self-storage? Or is that just less movement? It could be good in that the apartment customer is staying in place and continues to use storage as an extension of their apartment, but it could also be seen as bad because there isn't a turnover of moving to a home, which drives a different type of demand. So how would you interpret lower apartment turnover and the impact on self-storage?

Yes, Michael, it actually speaks to the resilience and the unique attributes of self-storage. We actually can benefit from any of those events and currently are. On one end of the spectrum, apartment users may be stickier and not moving as often due to affordability or having less options to expand or take an additional size living space. This plays very well into inherent demand factors of our business. Then, to your other point, some amount of dislocation because of movement itself is always a driver for our business. The affordability factor plays here, which, again, self-storage is commonly looked at as a sensible way of buffering higher costs of living or higher costs of shelter. So that, too, is an inherent driver. We've spoken to this for some time; we have a high percentage of renters in our portfolio, and they're great customers. All these factors lead to similar lengths of stay. I wouldn't say we have an overarching concern about the type of customer because, in fact, they may be a renter. Most renters are indeed good customers, particularly after they stay for some period of time. All these factors are good inherent drivers for our business.

Our next question comes from Ravi Vaidya with Mizuho.

I wanted to follow up on the ECRI program. Maybe can you quantify the average rate increase and how has that changed from last quarter and last year in terms of frequency and amount?

Thanks, Ravi. 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. As I highlighted on our February call, I anticipate contributions from existing customer rent increases across the country to largely be pretty similar to last year. Given the rent restrictions in Los Angeles, which will drive less contribution year-over-year, overall, we expect modestly lower contributions 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 requesting some concession after receiving an increase. Overall, very consistent trends and right on plan.

Got it. That's helpful. Just one more here. Can you maybe discuss the impacts of the Big Beautiful Bill? Does this encourage your development pipeline given the bonus depreciation provision? Or do you forecast home sales to increase and subsequently self-storage demand given the SALT property tax adjustments? Maybe just walk us through how you're thinking about the recent legislation there.

Yes, sure. There are a couple of components that I'd highlight. You hit on some of them. I think the full impact of the bill will be felt across the macro over time. Specifically to Public Storage, there are two things I'd highlight. One of them relates to our solar program. We've been very active in investing in solar for rooftop generation to offset our utility usage, which we've had a robust pipeline on. Our pipeline is set to complete here over the next several years. We're fortunate that we started that program and accelerated over the last several years to take advantage of the incentives in place and that will no longer be in place going forward. Feel good about that, and that will be a tailwind to our expense profile as we reduce utility expenses and our carbon footprint over the next several years. That's a negative impact over the longer term, but it won't impact us in the near term in our current pipeline. The second component relates to bonus depreciation, as you're highlighting, which we've consistently taken advantage of over the past decade or so; bonus depreciation was starting to sunset, but with the new bill, it will come back. This is an opportunity for us to continue to retain incremental cash flow over time and reinvest into our development business and acquisitions as well. That reinvestment into the business helps drive our compounding return platform.

And maybe just about the SALT provisions and home sales? Are you seeing anything from that with demand?

No, we haven't seen anything from that yet. Obviously, we'll see the broader macro impacts as we go from here.

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

Just first on acquisitions. Just curious on cap rates or yields going in for what's been done to date and what's planned for the remainder of the year, as well as a longer-term, more stabilized expectation for those investments?

Yes. Thanks, Juan. I'd point you to pretty similar cap rates to what we've been seeing over the last 12 months or so. Generally, transactions are trading hands with 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. We did do some lease-up asset acquisitions as part of this component. But even with that, I'd characterize the $785 million that is going in at about a 5.25 zip code, ultimately stabilizing in the 6s.

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, particularly tenant insurance?

Yes, we continue to see strong adoption from the tenant insurance program itself. 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. 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.

Our next question comes from Caitlin Burrows with Goldman Sachs.

Back in the prepared remarks, you brought up how you're positioned to grow internationally. I was wondering what benefits you think the Shurgard exposure gives PSA overall. Do you expect to pursue additional international opportunities?

Yes, Caitlin. The thing that I highlighted in opening comments around our relationship with Shurgard has been very powerful, where we've had an opportunity to, a, learn how many of the tools they've selected from our platform have been opportunistic for them in a whole host of Western European countries, country by country with many different dynamics. It's been a great opportunity for us to see and work with a platform 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. 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, it'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’s very similar for instance, in Australia and New Zealand. 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 the same reasons. The partner who controls the entity is attracted to the things that have unfolded relative to our relationship with Shurgard. We will 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, it does give us not only the skill, but the confidence and knowledge of how complicated yet efficient some of these tools can become in different markets. It's not a static set of playbook opportunities but one that, if it's tailor-made to a particular market, can be very powerful. We'll see how that continues not only in markets like New Zealand and Australia, but potentially other markets as well over time.

Got it. And then I guess just bigger picture back to the U.S., you've talked about same-store stabilizing, and you think demand bottomed in '24 and should continue to improve. You also mentioned that the storage industry should be able to outperform in various economic environments. I was wondering if you could just give your current thoughts on what it takes to get on a stronger improvement and get on the same-store side, like positive growth, whether that's inflationary plus on the revenue or NOI. Is it the housing market? Is it less supply? Or do we not really know at this point?

Good question, Caitlin. I do think we've seen that stabilization. As demand continues to grow off that '24 base, you're going to see more momentum. We've already seen that across several 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 kind of growth already, which is encouraging. We've got a lot of confidence in the Sunbelt markets that have taken a little longer to normalize. If you think about an environment where demand is coming off a base, you've got new supply likely continuing to taper off given the challenges in the development business. You've got a situation set up for a return to stronger growth for the sector. Is that going to happen overnight? No. As we've seen, the stabilization process will take some time to get back up to those levels of growth. But we've seen it in many of our markets already, and we have confidence that around the country, that's to come.

Our next question comes from Ki Bin Kim with Truist Securities.

Just going back to the impact of L.A. wildfires. At the beginning of the year, you estimated about a 100 basis points drag to your same-store NOI. Given the strength in the West Coast, and I think you've said L.A. looks pretty strong. Do you think that drag is potentially bigger than 100 basis points?

Ki Bin, we'd still point you to the 100 basis points impact and would point you to L.A. being plus or minus down 3% same-store revenue for the year. So around that 100 basis points number today.

Okay. You mentioned that the second quarter ended where you expected it to be. However, looking at the improvement from the first quarter to the second quarter, it appears to have slowed down a bit. I understand it's just one quarter, but the pace wasn't the same. I was wondering if there was a macro factor or a change in behavior during the quarter that might explain why the improvement was not as strong as in the previous quarter.

Thanks, Ki Bin. I wouldn't characterize it as losing steam or any shift during the quarter. It was pretty consistent throughout the quarter and generally in line with our expectations. I wouldn't point you to that as something that occurred during the quarter, frankly.

Next question comes from Mike Mueller with JPMorgan.

Most of the 2Q stuff has been asked. But I'm curious, when you have digital rentals versus in-person or from call centers, do you generally get the same amount of customer data that helps you formulate pricing and marketing strategies?

Yes. Go ahead, Joe.

I was going to say to your question, Mike, all of those channels give us a variety of robust data. We're continuing to use different tools to leverage that data relative to customer knowledge and behaviors and efficiencies. It's a vibrant amount of the business that consistently channel by channel, as we digitize, we see good residual impact and knowledge opportunities.

Yes. The more digital interactions we have, the more data we can get.

Our next question comes from Tayo Okusanya with Deutsche Bank.

Just a quick one regarding your markets that are outperforming; you mentioned the West Coast, Midwest, and D.C. Just curious thematically if you can kind of talk about what's happening in those markets. Is it just kind of boiling down to less supply through the cycle? Or is there something thematically happening from a perspective of improved demand across these markets?

Yes. Tayo, there's not ever just one impact, but supply is certainly a primary factor. Some of those markets haven't been the high-flyers in and out of the cycles that we've seen over the last five to ten years. That's certainly a residual benefit. It could play to inherent economic activity, cost of housing, and the dynamics going on from a movement and trending standpoint market to market. It can be difficult to put a broad brush on just a market. You've got to take it down to a submarket-by-submarket basis as well. But those factors are important that we've got to keep a close eye on relative to either trends or different ways that the market is evolving. We're very encouraged by the market-by-market trends that we're seeing nationally. With that, the supply factor continues to diminish where today, fortunately, we 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.

Got you. That's helpful. And then one other quick one. Just curious again from your call center data that you have from prospective customers interacting with your website. Have you seen any change in behavior that supports this idea of getting closer to demand stabilization as I believe you guys have mentioned throughout the call?

Yes. The only thing I'd point you to is something I noted earlier: conversion has been very healthy year-to-date, and we've seen an improvement in conversion across the channels, which I think speaks to more customer interest and willingness to transact with us. Thank you.

Our last question comes from Brendan Lynch with Barclays Bank.

Tom, you mentioned quite a bit about markets inflecting and turning positive. It 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 talk about the dynamics contributing to that?

Yes. The primary contributor is that we and others have found good success in lowering move-in rents and getting good customers and move-in volumes. We've utilized it. I think 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 time as demand comes off the bottom.

That’s helpful. You talked about the seasonal pattern being 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.

Sure. It depends on which metric in particular you're looking for in terms of peak. We typically get our occupancy peak here in July. I think that will be the case here again this year. You typically see move-in demand peak at the end of May, early June, for instance. 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.

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

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

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