Earnings Call Transcript - PSA Q3 2025

Operator, Operator

Greetings, and welcome to the Public Storage Third 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.

Ryan Burke, Host

Thank you, Rob. Hello, everyone. Thank you for joining us for our third quarter 2025 earnings call. I'm here with Joe Russell; and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, October 30, 2025, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourself to 2 questions. Of course, if you have more after that, please feel free to jump in queue. With that, I'll turn the call over to Joe.

Joseph Russell, CEO

Thank you, Ryan, and thank you all for joining us today. Public Storage's third quarter results reflect differentiated strategies that continue to drive our outperformance in addition to encouraging industry trends, including operational stabilization, lower competition from new supply and increasing acquisition activity. We are raising our 2025 outlook for the second consecutive quarter based on outperformance in same-store and non-same-store NOI growth, acquisition volume, and core FFO growth per share. Public Storage's industry leadership is proven by, among other things, the highest revenue generation per square foot with the most profitable operating platform, the strongest portfolio expansion through our best-in-class teams and backed by our growth-oriented balance sheet, the highest retained cash flow generation, which we utilized to invest back into our business to drive earnings, and FFO growth in excess of stabilized same-store growth driven by our compounding returns platform. We have been actively advancing the pillars of this platform, which include our leading operations, capital allocation, and capital access. Just a few of many examples in terms of our operating innovation include: first, we have the industry's leading omnichannel customer experience through which we offer digital options across their entire journey. The success is evident with customers now choosing the digital path and 85% of their interactions and transactions with us. Second, with the shift to digital, we are modernizing our field operations by utilizing AI to directly provide customer service and staff our properties more appropriately. The days of needing a property manager on site all day, every day are behind us. Instead, we now have people on site, when and where customers need help. To date, this has reduced labor hours by more than 30%, while also increasing employee engagement and lowering turnover. And third, we are deploying new technology-based strategies across the entire organization, including customer search and generative engine optimization, unit pricing and revenue management, asset management including security, vendors, and maintenance, identifying and executing development opportunities and putting the right tools in our field and corporate teams' hands to even more effectively drive revenues and control expenses. Collectively, these initiatives are driving higher revenues, margins, and core FFO per share growth. Now I'll turn the call over to Tom.

H. Boyle, CFO

Thanks, Joe. We are leaning into our platform strength. Joe spoke to our industry-leading operations and technology initiatives. I'll now touch on capital allocation, capital access, and performance specifics. On capital allocation, we have accelerated portfolio growth with more than $1.3 billion in wholly owned acquisitions and developments already announced this year. The acquisition opportunities are relatively broad-based across size, geography as well as seller type. We will continue expanding the non-same-store pool through additional acquisitions and our $650 million development pipeline to be delivered over the next 2 years. We are built to execute on this activity based on our industry relationships, data-driven underwriting, and strong capital position. With leverage at 4.2x net debt and preferred to EBITDA and retained cash flow reaching about $650 million this year, we will continue using our advantageous cost of capital to fund portfolio expansion and drive core FFO per share growth. Now shifting to financial performance for the quarter and our improved outlook. Revenue growth in the same-store pool came in ahead of our expectations, primarily due to strong in-place customer behavior. Overall, in-place rents were up 0.6%, offset by lower occupancy. From a market perspective, Chicago, Minneapolis, Tampa, Honolulu, and the West Coast are standouts with revenue growth in the 2% to 4% same-store revenue range. Speaking specifically to the West Coast, our strong presence top to bottom from Seattle down to San Diego, representing 1/3 of our NOI, serves us well with good demand trends and more limited new supply. Los Angeles will return to strong growth when the state of emergency price restrictions expire. Our expense control across the same-store pool continues to be strong as well, held flat for the quarter and driven by reductions across most line items. Continuing declines in property payroll and utilities are direct results of the differentiated initiatives that Joe spoke to. Accordingly, same-store NOI growth came in better than we anticipated. Outside of the same-store pool, outperformance in our high-growth non-same-store pool helped drive core FFO per share higher by 2.6%. This is a 560 basis point acceleration from the growth level achieved in the third quarter of last year. As Joe mentioned, our strategic focus continues to drive core FFO per share growth well in excess of our stabilized same-store growth. We adjusted our full year guidance to reflect the positive trends I just spoke to with increased outlooks for same-store revenue, same-store NOI and non-same-store NOI. All in, we increased core FFO per share growth by nearly 1% with 1 quarter left in the year. Looking forward, we are very well positioned to continue driving performance with differentiated strategies that will further enhance our compounding returns platform. With that, Rob, let's open it up for questions.

Operator, Operator

Our first question comes from Eric Wolfe with Citi.

Eric Wolfe, Analyst

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

H. Boyle, CFO

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

Joseph Russell, CEO

And Eric, I'd add that it's a robust process across literally every function within the company. It's fluid. It doesn't end and begin even as we speak, it builds, and we have a lot of analytics relative to the things that we're doing from a deployment standpoint as we've spoken to. We have a whole host of efficiency efforts that are tied to investments in digital and otherwise; it continues to drive our margins to the level that we attain. And then to Tom's point, the whole host of things that we do tied to revenue optimization across the entire portfolio with not only our same-store but our non-same-store portfolio.

Eric Wolfe, Analyst

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

H. Boyle, CFO

Yes, a good question. I think as we look ahead, we do see steady stabilization. And as we've moved through 2025, we've seen demand bouncing off the bottoms of '24. We see new supply continuing to be coming down just given the challenges associated with new development in many of the markets we operate. But I'd probably point you most notably to the fact that what I commented on earlier around some of our stronger markets where we're stable, but we're growing at a healthy clip as well. And just highlighting the West Coast again, with growth in the 2% to 4% same-store revenue growth range and good fundamentals. So some of the markets aren't quite there yet, but we're seeing a good and healthy customer and overall operational performance in many of the markets we operate today.

Operator, Operator

Our next question comes from Michael Griffin with Evercore.

Michael Griffin, Analyst

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

H. Boyle, CFO

Yes. I'd say taking a step back, I think there's too much focus related to move-in rents as one particular element of revenue, right? Overall, across the organization, we are focused on revenue as the most important metric. And that is a combination of what you're highlighting, yes move-in rents, but also move-in volumes, move-out activity, existing customer behavior, and rent increases. And it continues to be a competitive operating environment for new customer move-ins and you could see that through the quarter. But the focus here is certainly around revenue as the most important metric, and that goes throughout the organization from the property managers and property staff all the way through the home office organization. So we continue to make investments through our platform to drive revenue in a competitive environment. And I would point you not to one particular metric.

Michael Griffin, Analyst

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

H. Boyle, CFO

Yes, sure. Every quarter has got its own set of comps. I do think the fourth quarter specifically Property tax is a tough comp. We had a number of healthy refunds last year. We'll see whether the team can execute on similar amounts this year, but that's a pretty tough comp. And then as we think about same-store revenue, we've been consistent highlighting that the impact on Los Angeles will grow as the year progresses. And so we do anticipate that to occur in the fourth quarter. Otherwise, those would be the 2 items I'd highlight for you.

Operator, Operator

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

Samir Khanal, Analyst

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

Joseph Russell, CEO

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

Samir Khanal, Analyst

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

H. Boyle, CFO

Certainly. The team is focused on various initiatives to improve operating expenses while also increasing revenue across the business. We consistently highlight our digital investments, which are yielding positive results this year. These investments allow us to rethink our property staffing and customer interactions, and we expect to see more progress as the team continues to evolve our operating model. Additionally, our solar power initiatives are significant, with solar installed at over 1,100 properties, and we will keep advancing this effort. We are continually exploring ways to invest in our platform and enhance operating expense performance.

Operator, Operator

Our next question comes from Caitlin Burrows with Goldman Sachs.

Caitlin Burrows, Analyst

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

Joseph Russell, CEO

Yes. Sure, Caitlin. The trajectory continues to be the same, meaning on a year-by-year basis, we see the pressure creating fewer and fewer developments as a whole industry-wide. There are here and there are certain markets that have a number of additional assets coming to market. But clearly and nationally in a very positive context, that supply delivery momentum continues to go down. And we've seen it throughout 2025; we're going to see it into '26. And I would even say we're continuing to '27. The basis for that outlook continues to be first and foremost, we're in that business nationally. We see the complexity and the friction that comes from any kind of a development. It's tied to the things that you have to do from an entitlement standpoint, becoming more and more complicated, the cost structure of assets themselves and then, again, formulating and understanding the risk that would be tied to going into the development process that in and of itself could take anywhere from 2 to 3 years if not longer. And then going to a stabilized asset that could take another 2, 3 or 4 years. So the risk factors for any kind of developer out there are much higher today and they continue to go a direction that's actually very good for the industry as a whole. Meaning there are going to be fewer and fewer deliveries even going in the next couple of years.

Caitlin Burrows, Analyst

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

Joseph Russell, CEO

Sure. I'll take the first part and I'll have Tom talk to the stabilization, which is quite good as well. So no question, we have very different capabilities. It starts with inherent and deep-seated knowledge, market to market, with the amount of inherent operational data that we get, we have an ability to underwrite assets from a development and risk standpoint far differently than others do. We have the data set that guides us to optimize not only property size but also configuration within properties, unit, size, mix, etc. We can find pockets of assets quite effectively or pockets of asset development very differently than most developers. We've got a good national team working aggressively out finding in developing assets in a window that I just spoke to; that is far more difficult. So in a reverse way for us uniquely, it's providing the opportunity to go in and find very powerful development opportunities in a whole host of markets nationally. So our confidence and our commitment to the business have never been higher, but at the same time, it's never been a more difficult business. So it is a very good and unique window for us to continue to deploy capital, and it continues to lead to substantial and the highest returns that we see from any capital allocation effort. Tom, you can go ahead and talk about some of the metrics cited out, which continue to be quite good.

H. Boyle, CFO

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

Operator, Operator

Next question comes from Ron Kamdem with Morgan Stanley.

Ronald Kamdem, Analyst

I have two quick questions. The guidance assumes some deceleration as we move into the fourth quarter. Given this, are you noticing any indications from web search data or similar sources that suggest demand might be slowing? How do you approach this issue?

H. Boyle, CFO

Yes. Thanks, Ron. Nothing implied there as it relates to demand overall. We continue to see healthy customer activity to date. I think the item that I would highlight as it relates to same-store revenue, if that's where your focus is what I highlighted to Michael Griffin earlier around the cumulative impact of the rental rate restrictions on Los Angeles, which will be holding us back a little bit more in the fourth quarter compared to the third quarter. And then that property tax, tough comps as well. But otherwise, the non-same-store pool is set to continue to accelerate given the activities to date and the capital allocation that we've been putting forth.

Operator, Operator

Our next question comes from Michael Goldsmith with UBS.

Michael Goldsmith, Analyst

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

Joseph Russell, CEO

Okay. I'll take the first part, and Tom can take the second, Michael. But no question we have continued to deploy capital into many assets that are far from stabilization from some that literally are vacant to 30%, 50%, 70% occupied and otherwise. And time and again, have proven the ability to lift the performance of those assets very confidently, just like I spoke about earlier, tied to the knowledge that we have from a market standpoint, all of the techniques that we're using from revenue management, operational efficiency, knowledge of customer dynamics, knowledge of the market itself. So no question, we have a high degree of confidence in any range of stabilization from an asset standpoint. So we will continue to entertain all different asset types based on that level of knowledge and skill, and that is continuing to produce the kinds of returns that we're very confident will not only continue, but it will give us more running room as we grow the non-same-store portfolio just like we have in 2025. Tom, you can take the second part.

H. Boyle, CFO

Yes, the second part of your question, just related to non-same-store performance. Part of that is better performance and lease-up of some of the assets that you're speaking to. And then the other portion is obviously closing on some incremental assets than what we had closed under contracts. So that combination leads to better outlook for non-same-store for this year. But you also know we included an update to the incremental NOI from after '25 to stabilization, which reflects the future engine of growth associated with this pool of assets as they stabilize and lease up. So that's increased to $130 million for '26 and beyond.

Operator, Operator

Our next question is from Eric Luebchow with Wells Fargo.

Eric Luebchow, Analyst

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

H. Boyle, CFO

Yes, sure. Happy to do that. I'll provide a couple of elements. And as I spoke earlier, the focus continues to be on revenue overall. But specifically, talking about new customer activity, I'd maybe frame it as if you look at the third quarter and the rate and volume associated with new customer activity is down about 9% year-over-year. And each of the months throughout the quarter is a little bit different in terms of volume versus rate, etc. October is doing a touch better than that, down 9%. So some improving from that standpoint. Really driven in this particular month, driven by stronger move-in activity, and we're achieving that with less discounts but also lower rates. So a better net outcome there. I'd point you to move-in rates that again are driving that volume being in the down 10%, 11% ZIP code, but driving good volume up 3%, 4%. In terms of occupancy, because of that move-in volume, occupancy closed, Eric, is sitting today down about 40 basis points year-over-year. But again, I reiterate the revenue focus versus occupancy or rental rate. And we feel like we're in a very good place from an occupancy standpoint to drive revenue in a steady stabilizing and hopefully improving operating fundamental picture.

Eric Luebchow, Analyst

Great. And maybe just a follow-up. I know you touched on this a little bit, but the LA rent restriction headwinds, you had guided to about 100 basis point headwind. So maybe you could just update us on what you're expecting kind of as we look into Q4 and what you see underlying demand looking like on the West Coast? And I guess a related question. I mean, there has been some recent news about rent restrictions related to immigration activity in LA County with ICE. And so just wondering if you expect that to have any impact in the region.

H. Boyle, CFO

Yes, certainly. There are two components to address. First, regarding the performance in Los Angeles for the year, it is trending slightly better than we initially anticipated. In the last quarter, I mentioned our revenue growth expectations for Los Angeles being down close to 3% for the year. However, based on our current position, we now expect it to be down in the 1s, specifically negative 1% to negative 2% for the year, showing some improvement. The key drivers for this change include strong customer activity across the West Coast, reduced new supply in those markets, and overall positive trends. Regarding the second part of your question, the recent state of emergency is expected to have a negligible impact on our operating performance in the fourth quarter, considering the state of emergency has already been in effect since early January. Thus, there will be no changes, although we are still operating under pricing restrictions related to these emergencies.

Operator, Operator

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

Spenser Allaway, Analyst

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

H. Boyle, CFO

Yes. Sure, Spenser. So in terms of cash flow that we can earn from assets that we fold into the portfolio. That's an important component to our capital allocation strategy as we continue to make investments in our operating platform and drive performance there. We can utilize that advantage as we deploy capital. And the most visible thing that I would point to is the margin advantage that we have in and out of the marketplaces that we operate in, and that gives you a sense. Generally speaking, that margin advantage for new assets is both the revenue side and the OpEx side driving that margin performance. And so consistently getting towards 10% sort of margin enhancement for lots of the assets that we acquire. In terms of going forward, I noted earlier, we continue to make investments in the platform, both from a revenue and OpEx side. And so we do anticipate that we'll continue to drive performance within our operating platform, and that will then immediately have the same impact on the assets that we're putting into the pool, both for our wholly-owned assets as well as for the benefit of our third-party management customers, we drive our operating platform.

Operator, Operator

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

Todd Thomas, Analyst

First, 2 quick follow-ups on acquisitions. Your volume is approaching $1 billion for the year, so a fairly active year. First, what's the outlook for that pace to continue into 2026? And then second, you've had very active years in the past, you did more than $5 billion in '21 and nearly $3 billion in '23. Is now a good time to lean in ahead of a recovery? I'm just curious what the appetite is like today to do something more sizable or strategic?

H. Boyle, CFO

Yes. So a number of components to that question. So Joe and I will probably tag team this one. But I think we have seen an improving transaction market this year, Joe, spoke to that a little earlier. I do think the improving debt market trends set up for more active transaction volumes going forward, and so I think that's an opportunity set. In terms of our appetite continues to be very strong. We look back at 2021 and the $5 billion of acquisitions that we acquired there and would love to do that again. So it's a question of what the opportunity set is ahead of us, but we're built to be able to integrate that level of activity and fold those assets into the operating platform that we're speaking to. So we're excited about the potential for increased activity. We'll have to see what 2026 brings.

Joseph Russell, CEO

Yes. And Todd, I'd just add, the balance sheet is well positioned to service as we, again, unlock those range of opportunities. To Tom's point, we've proven over the last 5 years in particular that whether we're in a process where we're taking down one individual very large portfolio or a whole collection of smaller assets. All of our systems and digital investments, et cetera, allow us to integrate these assets incredibly smoothly in many cases, within a 24-hour time frame from one platform to another. So we've got the technique, the scale and now time and again the experience to continue to aggregate these assets, and we are going to continue to look for any and all ways to do just that.

Todd Thomas, Analyst

Okay. That's helpful. So Joe, regarding your comments about technology, you mentioned several areas, including employee efficiencies, the rental process, and Generative AI search. You've clearly seen significant impacts from technology on expenses. Is there still a lot of potential for further improvements, or do you believe you've already maximized most efficiencies at this stage, with more benefits likely to come from acquisitions in the future? Looking ahead, what do you think might have the largest impact in the next three to five years?

Joseph Russell, CEO

From an investment perspective, we are prioritizing various impacts to the business, starting right with revenue. We are leveraging our technology and investments tied to revenue, and then focusing on optimization. This is evident in our efficiency and continued margin outperformance. I want to assure you where we stand on this roadmap; we are very confident and have only just begun. The team is making significant investments across all areas of the company, which is empowering. While it's challenging, we have the resilience to effectively utilize these tools, often in much shorter time frames than we initially projected. Currently, 85% of our customers interact with us digitally, compared to nearly zero four or five years ago. The shift to more data-driven processes is generating opportunities for improved efficiency earlier and more effectively than we had anticipated. We are pleased with the collaborative efforts from our teams. Although we remain a self-storage company, our emphasis on data optimization continues to yield positive results, and we are firmly committed to this approach.

Operator, Operator

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

Juan Sanabria, Analyst

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

H. Boyle, CFO

Yes. No, and I think giving you the guidepost as it relates to the markets should be helpful. I think the fourth quarter, obviously implied number associated with that, as I've noted a couple of times, will be holding us back a little bit further as it relates to the impact to the overall same-store. The demand associated with new customers, as well as one of the things we've seen in Los Angeles is less vacate activity, and we've seen that up and down many of our markets and nationally, less vacate activity also helpful. So occupancy is up a little bit in Los Angeles. And so a lot of the same trends that Joe and I have already spoken to on this call in terms of good customer activity, very challenging new development environment continue to support Los Angeles despite the fact that we can't charge the rents that we otherwise would charge in a competitive marketplace.

Operator, Operator

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

H. Boyle, CFO

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

Operator, Operator

Our next question comes from Michael Goldsmith with UBS.

Michael Goldsmith, Analyst

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

Joseph Russell, CEO

Okay. I'll take the first part, and Tom can take the second, Michael. But no question we have continued to deploy capital into many assets that are far from stabilization from some that literally are vacant to 30%, 50%, 70% occupied and otherwise. And time and again, have proven the ability to lift the performance of those assets very confidently, just like I spoke about earlier, tied to the knowledge that we have from a market standpoint, all of the techniques that we're using from revenue management, operational efficiency, knowledge of customer dynamics, knowledge of the market itself. So no question, we have a high degree of confidence in any range of stabilization from an asset standpoint. So we will continue to entertain all different asset types based on that level of knowledge and skill, and that is continuing to produce the kinds of returns that we're very confident will not only continue, but it will give us more running room as we grow the non-same-store portfolio just like we have in 2025. Tom, you can take the second part.

H. Boyle, CFO

Yes, the second part of your question, just related to non-same-store performance. Part of that is better performance and lease-up of some of the assets that you're speaking to. And then the other portion is obviously closing on some incremental assets than what we had closed under contracts. So that combination leads to better outlook for non-same-store for this year. But you also know we included an update to the incremental NOI from after '25 to stabilization, which reflects the future engine of growth associated with this pool of assets as they stabilize and lease up. So that's increased to $130 million for '26 and beyond.

Operator, Operator

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.

Ryan Burke, Host

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

Operator, Operator

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