Q1 2025 SmartStop Self Storage REIT Inc Earnings Call

Operator: Thank you for standing by. My name is Celine. I will be your conference operator today. At this time, I would like to welcome everyone to the SmartStop Self Storage REIT Q1 2025 Earnings Webcast. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to David Corak, Senior Vice President of Corporate Finance and Strategy. Please go ahead.

Celine: Thank you for standing by, my name is Linn and I will be your conference operator today. At this time, I would like to welcome everyone to the SmartStop Self Storage REIT First Quarter 2025 earnings webcast.

Celine: All lands have been placed on YouTube event any background noise.

Celine: After the speaker remarks, there will be a question and answer in session.

Celine: If you would like to ask a question during this time, simply press bar, follow the number and your telephone keypad.

Speaker Change: If you would like to withdraw your question, Restart one again. Thank you. I would now like to turn the call over to David Korak, Senior Vice President of Corporate Finance and Strategy. Please go ahead.

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

David Korak: Thank you, operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects, and expectations may be considered forward-looking statements within the meeting of the safe harbor provisions of the private security litigation reform act.

David Korak: These forward-looking statements are subject to numerous risks and uncertainties as described in our followings with the Securities and Exchange Commission and these risks could cause our actual results to differ materially from those expressed or implied in our comments.

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

David Corak: Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release on supplemental disclosure that were issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself today, we have H. Michael Schwartz, Founder, Chairman, and CEO, as well as James Barry, our CFO. With that, I'll turn the call over to Michael.

David Korak: In addition to myself today, we have H. Michael Schwarz, founder, chairman, and CEO , as well as James Berry, our CFO . With that, I'll turn the call over to Michael. Thank you, David. And thank you for joining us today for our inaugural earnings call as a New York Stock Exchange listed company. Thank you for joining us today for our inaugural earnings call as a New York Stock Exchange.

H. Michael Schwartz: Thank you, David, thank you for joining us today for our inaugural earnings call as a New York Stock Exchange-listed company. SmartStop has been a public REIT since 2014, we're thrilled to now be part of the listed REIT community. Before we dive into high-level remarks, I'll highlight a few items related to our first quarter results. We posted a strong first quarter with our same-store revenue growth of 3.2%, NOI growth of 2.3%, and ending occupancy 93%. Our FFO as adjusted per share was $0.41, up $0.01 year over year. As this is our first earnings call, I'll start with some introductory remarks about SmartStop, then we'll walk through our industry views, outlook, as well as a deeper dive into our first quarter performance. After that, we'll open it up to Q&A with James, David, and myself.

David Korak: SmartStop has been a public REIT since 2014 and we're thrilled to now be part of the list of REIT community.

Speaker Change: Before we dive into high-level remarks, I'll highlight a few items related to our first quarter results. We posted a strong first quarter with our same-store revenue growth of 3.2% and a wide growth of 2.3% and ending occupancy 93%.

Speaker Change: Our FFL is adjusted per share with 41 cents, up 1 cent year-over-year.

Speaker Change: As this is our first earnings call, I'll start with some introductory remarks about SmartStop and then we'll walk through our industry views outlook as well as a deeper dive into our first quarter performance. After that, we'll open it up to Q&A with James, David, and myself.

H. Michael Schwartz: As many of you know, we filed our initial registration statement in April 2022. Almost 3 years later, on 2 April 2025, we listed on the New York Stock Exchange and began trading, a milestone accomplishment for the SmartStop team. To that end, we'd like to thank our employees, our board, the independent broker-dealer community, and our retail investors who have helped us build this company into a remarkable platform that it is today. We'd also like to welcome our institutional investors and thank them for their support thus far as a listed REIT. We look forward to a great partnership for our next chapter as a publicly traded company. Now let's talk about SmartStop. We're headquartered in Ladera Ranch, California. We have more than 590 employees. We have a highly aligned and experienced management team. We're the 10th largest storage owner in the US and the fifth largest in Canada.

Speaker Change: As many know, we filed our initial registration statement in April 2022. Almost three years later, on April 2nd, 2025, we listed on the New York Stock Exchange of the end trading a milestone accomplishment for the SmartStop team.

Speaker Change: To that end, we'd like to thank our employees, our board, the independent broker dealer community, and our retail investors who have helped us build this company into a remarkable platform that it is today.

Speaker Change: We'd also like to welcome our institutional investors and thank them for their support thus far as they listed REIT. We look forward to a great partnership for our next chapter as a publicly traded company. Now let's talk about SmartStop.

Speaker Change: We're headquartered in La Dera Ranch, California. We have more than 590 employees.

Speaker Change: We have a highly aligned and experienced manager team with a 10th largest storage owner in the US and the 5th largest in Canada. Our portfolio spans more than 17.5 million square feet, 23 states, the District of Columbia, and 4 Canadian provinces.

H. Michael Schwartz: Our portfolio spans more than 17.5 million sq ft, 23 states, the District of Columbia, and 4 Canadian provinces. Approximately two-thirds of our portfolio is located in top 25 US MSAs or Canadian CMAs. Some of our largest markets include Toronto, Miami, Los Angeles, Las Vegas, and Houston. We also have a healthy mix of smaller markets, like Asheville and Dayton. In the GTA, we're the single largest operator, with 23 assets either on balance sheet or in our joint venture with SmartCentres. We manage another 13 assets in that market for a total of 36 owned and managed in the GTA, representing 3.3 million sq ft. Now let's talk about what makes SmartStop Self Storage the smarter way to store. Our technology-driven platform is the backbone of our company. Our platform competes at the highest levels in both the US and Canada.

Speaker Change: Approximately two-thirds of our portfolio is located in top 25 US MSAs or Canadian BMAs. Some of our largest markets include Toronto, Miami, Los Angeles, Las Vegas, and Houston.

Speaker Change: We also have a healthy mix of smaller markets like Asheville and Dayton and the GTA where the single largest operator with 23 assets either on balance sheet or in our joint venture with smart centers.

Speaker Change: And we manage another 13 assets in that market for a total 36 owned and managed in the GTA representing 3.3 million square feet. Now let's talk about what makes SmartStop Self Storage the smarter way to store.

Our technology-driven platform is the backbone of our company.

Speaker Change: Our platform can teach the highest levels in both the US and Canada. We've invested an outsize amount of capital in our proprietary technology all across the organization including acquisitions, digital marketing, our call center, and revenue management.

H. Michael Schwartz: We've invested an outsized amount of capital in our proprietary technology all across the organization, including acquisitions, digital marketing, our call center, and revenue management. This investment can be seen in our results. We posted sector-leading average same store NOI growth over the past 5 years, greater than 9%. Our platform also helps us with external growth equation, as we're able to bring under-managed assets onto our robust platform, increasing our going-in yields. This is true in the US, but especially true in Canada. This sizable technology and human capital investments gives us a platform that's highly scalable and allowing us to achieve economies of scale from growth in our property count. Another differentiated aspect of our business model is our managed REIT business, which we view as our joint venture with retail shareholders.

And this investment can be seen in our results.

Speaker Change: We posted sector-leading, average, same-store, and a wide growth over the past five years greater than 9%

Speaker Change: Our platform also helps us with external growth equation, as we're able to bring under-managed assets onto our robust platform, increasing our going-in yields. This is true in the US, but especially true in Canada.

Speaker Change: This sizable technology and human capital investment gives us a platform that's highly scalable and allowing us to achieve economies of scale from growth in our property count.

Speaker Change: Another differentiated aspect of our business model is our managed read business, which we view as our joint venture with retail shareholders. This generates a creative piece in the near term and helps us realize efficiencies that can improve our operating margin.

H. Michael Schwartz: This generates accretive fees in the near term and helps us realize efficiencies that can improve our operating margin. In addition, it serves as a potential captive future pipeline for growth. Speaking of growth, SmartStop has a track record of disciplined external growth over $2.5 billion of acquisitions since 2016. Today, we are excited about the opportunity for external growth as sellers have become more constructive and attractive opportunities are coming to market. We believe the external growth story is coming back for our sector, and we are finding select opportunities to acquire accretively. In September of last year, we began to execute on our acquisition pipeline and have since acquired a portfolio of 10 properties in the US and Canada, totaling nearly $275 million and over 800,000 net rentable square feet. Lastly, our balance sheet is stronger than ever.

Speaker Change: In addition, it serves as a potential captive future pipeline for growth.

Speaker Change: Speaking of growth, SmartStop has a track record of discipline, external growth, over 2.5 billion of acquisitions.

Speaker Change: since 2016. Today, we're excited about the opportunity for external growth as sellers have become more constructive and attractive opportunities are coming to market. We believe the external growth story is coming back for our sector and we're finding select opportunities to acquire the free-to-free.

Speaker Change: In September of last year, we began to execute on our acquisition pipeline and have since acquired a portfolio of 10 properties in the US and Canada

Speaker Change: totaling nearly $275 million and over 800,000 net rentable square feet. Lastly, a balance sheet is stronger than ever.

H. Michael Schwartz: Even pre-IPO, we maintained a BBB- investment grade rating with Kroll. With the IPO proceeds, we were able to reduce our leverage as measured by net debt to EBITDA to under 5 times, with ample dry powder to strategically grow. Additionally, the IPO has helped us to reduce our cost to capital. To summarize, SmartStop is a technology-driven self-storage REIT with a high-quality, diversified North American portfolio. Our portfolio, our platform, our management team, and our balance sheet are poised for FFO growth through the following: Organic growth in same store, non-same store, and joint venture pools; external growth in an improving acquisition environment; growth in the managed REIT business; and growth utilizing our low-leveraged balance sheet and reduced cost to capital. We feel SmartStop is well positioned to succeed not only in this environment, but in a multitude of broader economic environments.

Speaker Change: Even pre-IPO, we maintained a triple B-minus investment grade rating with Kroll. With the IPO proceeds, we were able to reduce our leverage as measured by net debt to EBITDA to under five times with ample drive powder so it could teetically grow.

Speaker Change: Additionally, the IPO has helped us to reduce our cost to capital.

to summarize.

Speaker Change: SmartStop is a technology-driven self-storage REIT with a high-quality, diversified North American portfolio.

Speaker Change: Our portfolio, our platform, our management team, and our balance sheet are poised for FFO growth to the following – organic growth in same store, non-same store, and joint venture pools.

Speaker Change: External Growth in an Improving Acquisition Environment Growth in the Managed Reat Business and Growth Utilizing our Low-Leverage Palombs Sheet and Reduced Cost of Capital.

Speaker Change: We feel SmartStop is well positioned to succeed, not only in this environment, but in a multitude of broader economic environments. It's important to remember that since 2015...

H. Michael Schwartz: It's important to remember that since 2015, the US storage sector has experienced the largest amount of new supply in its history, with nearly 40% supply growth in the top 50 US markets. COVID-aided demand helped to absorb the supply, and the absorption has proven out to be temporary. We believe that the deceleration of fundamentals over the past three years has primarily been driven by this cumulative wave of supply, in concert with fluctuations in demand over the last two years. Now, the good news is that the supply picture is improving with every day that goes by, and demand appears to be rebounding despite a muted single-family home market. In Q4 of last year, we publicly called the bottom in the US self-storage fundamentals, and the sector has been proving that out since.

Speaker Change: The US storage sector has experienced the largest amount of new supply in its history, with nearly 40% supply growth in the top 50 US markets.

Speaker Change: COVID, ARID, Demand help to absorb this supply and the absorption has proven out to be temporary.

Speaker Change: We believe that the deceleration of fundamentals over the past three years has primarily been driven by this cumulative wave of supply in concert with fluctuations in demand.

Speaker Change: Over the last two years. Now the good news is that the supply picture is improving with every day that goes by and demand appears to be rebounding despite a muted single family home market.

Speaker Change: In the fourth quarter of last year, we publicly called the bottom in the U.S. Self Storage Fundamentals, and the sector has been proving that outstance.

H. Michael Schwartz: For the first time since spring of 2022, move-in rates are stabilizing, and occupancies are in line or better than historical averages. Our customers' health remains strong, and to date, we've seen little to no impact from recent economic volatility. Reservations are up, website visits are up, and online rentals are up significantly. Delinquencies remain at normalized levels, and ECRIs remain healthy without change in attrition. To that end, I'm really just referencing the United States. Canada is experiencing an entirely different dynamic, with less supply per capita, lower institutional competition, strong demographic growth, and slightly different demand drivers than the United States. That trend continues in 2025. In the Q1, our Toronto portfolio posted 7% same-store revenue growth on a constant currency basis, with an ending occupancy of 93%.

Speaker Change: For the first time since spring of 2022, moving rates are stabilizing and occupancies are in line or better than historical averages.

Speaker Change: Our customers' health remains strong, and to date we've seen little to no impact from recent economic volatility. Reservations are up, website visits are up, and online rentals are up significantly.

Speaker Change: Delinquencies remain at normalized levels and ECRIs remain healthy without change in attrition.

Speaker Change: And to that end, I'm really just referencing the United States. Canada is experiencing an entirely different dynamic with less supply per capita, lower institutional competition, strong demographic growth, and a slightly different demand drivers than the United States.

Speaker Change: GTA has been an out performer versus the US, and that trend continues in 2025.

Speaker Change: In the first quarter, our Toronto portfolio posted 7% same-store revenue growth on a constant currency basis with an ending occupancy of 93%.

H. Michael Schwartz: With improving supply picture, a steady demand picture, and easier comps, we believe 2025 will be incrementally better than 2024, but not as strong as a more normalized year in storage. Likewise, we believe we will see more normalized rental season as compared to the past two years, but again, still not quite a typical rental season. Overall, we're entering the rental season from a position of strength. The first time we've been able to say that in almost three years. Now let me turn it over to James Barry.

Speaker Change: With improving supply-pitcher, a steady demand-pitcher, and easier comps, we believe 2025 will be an incrementally better than 2024, but not as strong as a more normalized year-and-storage.

Speaker Change: Likewise, we believe we will see more normalized rental season as compared to the past two years, but again, still not quite a typical rental season. Overall, we're antling the rental season from a position of strength.

Speaker Change: The first time we've been able to say that in almost three years. Now let me turn it over to James Berry. Thank you Michael. I'll remind everyone that the first quarter was our last full quarter of being a non-traded REIT. So the impacts from our APO IPO are not reflected in the financial results or balance sheet.

James Barry: Thank you, Michael. I'll remind everyone that the Q1 was our last full quarter of being a non-traded REIT, so the impacts from our April IPO are not reflected in the financial results or balance sheet. Starting with our operating performance, we are pleased to report that our same-store pool posted year-over-year revenue growth of 3.2%, with property operating expense growth of 5.2%, leading to NOI growth of 2.3%. The FX impact from our 13 Canadian assets within our same-store pool was a headwind of approximately 70 basis points to our overall same-store results, as we posted constant currency revenue growth of 3.9%, with expense growth of 5.9% and NOI growth of 3.0%. Revenue growth was slightly better than our expectations as occupancy ticked up in February and March while rates remained solid.

James Berry: Starting with our operating performance, we are pleased to report that our same-store pool posted year-over-year revenue growth of 3.2% with property operating expense growth of 5.2% leading to NOI growth of 2.3%.

James Berry: The FX impact from our 13 Canadian assets within our same store pool was a headwind of approximately 70 basis points.

James Berry: to our overall same sole results. As we posted, constant currency revenue growth of 3.9% with expense growth of 5.9% and NOI growth of 3.0%.

James Berry: Prevenue growth was slightly better than our expectations, as occupancy ticked up in February and March, while rates remained solid.

James Barry: On the property operating expense side, property taxes were up 6.8%, property insurance was up 17.9%, marketing expenses were up 1.2%, in addition to seasonal increases in repairs and maintenance and utilities. The result of all of this was that same-store property operating expenses increased by 5.2%. This combination led to a better-than-expected NOI growth for Q1 2025. Our same-store pool ended the quarter at 93% occupancy, up 100 basis points year over year, with move-ins up 14% and move-outs only up 4.1% year over year. Our web rates were down about 5% year over year, while our achieved move-in rates were down 6.8% on average for Q1 as the stabilization of the rate environment continues.

James Berry: On the property operating expense side, property taxes were up 6.8%.

James Berry: Property insurance was up 17.9%, marketing expenses were up 1.2% in addition to seasonal increases in repairs and maintenance and utilities. The results of all of this was that same-store property offered expenses increased by 5.2%.

James Berry: This combination led to a better than expected NOI growth for the first quarter of 2025.

James Berry: Our same SOAR pool ended the quarter at 93% occupancy, up 100 basis points year-over-year with move-ins up 14% and move-outs only up 4.1% year-over-year.

James Berry: Our web rates were down about 5% year-over-year, while our chief move-in rates were down 6.8% on average for the first quarter.

as the stabilization of the RAID environment continues.

James Barry: Sequentially, we saw healthy growth in revenues over Q4, driven by pickups in occupancy and in-place rate, with our occupancy gap over last year expanding throughout the quarter to 100 basis points at quarter end. These trends continued into April, with occupancy ending at 93.1%, also a 100 basis point increase year-over-year, with move-in rates down high single digits as our systems continue to balance occupancy with rate as we enter this busy season. On the external growth front, we acquired 3 properties for $82.5 million during the quarter. In addition, subsequent to quarter end, we acquired 1 property in Canada for approximately $28 million. With these 4 properties acquired year-to-date, we have added approximately $243 million on balance sheet since 30 September and $111 million thus far in 2025.

SmartStop Self Storage REIT

James Berry: Sequentially, we saw healthy growth in revenues over the fourth quarter, driven by pickups in occupancy and in-place rate.

James Berry: with our occupancy gap over last year expanding throughout the quarter to 100 basis points at quarter end.

James Berry: These trends continued into April , with occupancy ending at 93.1%, also a 100 basis point increase year-over-year. With move-in rates down high single digits as our systems continue to balance occupancy with rate as we enter this busy season.

James Berry: On the external growth fund, we acquired three properties for $82.5 million during the quarter. In addition, subsequent quarter end, we acquired one property in Canada for approximately $28 million USD.

James Berry: With these four properties acquired year-to-date we have added approximately $243 million on balance sheet since September 30th and $111 million thus far in 2025.

James Barry: Additionally, we are under contract to acquire 7 assets for $150 million, of which we expect 6 to go on SmartStop's balance sheet for a total of $121 million. These assets, along with the properties acquired to date, are primarily Class A assets located in top 25 MSAs, with going-in yields in the mid 5% range, with management upside remaining. The properties are primarily in markets in which we already operate, adding to our overall clustering strategy. Turning to the managed REIT platform, our 3 managed REIT funds, inclusive of a 1031 eligible DST programs, increased AUM by $125 million during the quarter, with AUM ending at nearly $900 million. We recognized fees during the quarter of $3.9 million, and the managed REITs acquired 7 properties during the quarter, most of which can be characterized as non-stabilized.

James Berry: Additionally, we are under contract to acquire seven assets for $150 million of which we expect six to go on SmartStop's balance sheet for a total of $121 million.

James Berry: These assets, along with the properties required to date, are primarily class A assets located in top 25 MSAs, with going in yields in the mid 5% range with management upside remaining.

James Berry: Further, the properties are primarily in markets in which we already operate adding to our overall clustering strategy.

James Berry: Turning to the managed REIT platform are three managed REIT funds, inclusive of a 1031 eligible DST programs increased AUM by $125 million during the quarter, with AUM ending at nearly $900 million.

James Berry: We recognize fees during the quarter of $3.9 million, and the managed REITs acquired seven properties during the quarter, most of which can be characterized as non-stabilized.

James Barry: In addition, one of the managed REITs delivered a development in Canada subsequent to quarter end. The managed REITs have a combined portfolio of 43 operating properties and approximately 3.8 million rentable square feet as of quarter end. The result of all of this is that for Q1 2025, we posted fully diluted FFO as adjusted per share and unit of $0.41. Turning to the rest of 2025, last night, we issued our inaugural guidance for the full year. We are expecting same-store revenue growth in the 1.5% to 3.5% range, with NOI growth of 0% to 2.2%. These ranges assume no significant recovery of the housing market and reflects our strong occupancy levels and stabilizing rates balanced against the broader economic environment.

James Berry: In addition, one of the managed REITs delivered a development in Canada, Subsequence Quarter End.

James Berry: The managed REITs have a combined portfolio of 43 operating properties and approximately 3.8 million rentable square feet as a quarter end.

James Berry: The result of all of this is that for the first quarter of 2025, we posted fully-deluted FFO-as-adjusted per share and unit of 41 cents.

James Berry: Turning to the rest of 2025, last night we issued our inaugural guidance for the full year. We are expecting same-store revenue growth in the 1.5 to 3.5% range with NOI growth of 0% to 2.2%.

James Berry: These ranges assume no significant recovery of the housing market and reflects our strong occupancy levels and stabilizing rates, balanced against the broader economic environment.

James Barry: We are expecting managed REIT EBITDA between $10.75 and $11.25 million, which reflects moderate growth in the AUM of our three funds as compared to 331 levels. We are also expecting FFO as adjusted per share and unit of $1.84 to $1.92 for the full year 2025. This guidance range reflects the improving storage operating market balanced with recent broad macro volatility, which does extend to the operating environment as well as interest rates and the fundraising environment within our managed REIT business. Lastly, turning to the balance sheet. During the quarter, we defeased our KeyBank Florida CMBS loan, which carried a balance of approximately $49.9 million as of year-end. At the end of Q1, our capital stack was composed of $1.4 billion of debt and a $200 million Series A preferred. Net debt to EBITDA for Q1 ended at approximately 9.2x.

James Berry: We are expecting Manage REIT EBITDA between $10.75 and $11.25 million, which reflects moderate growth in the AUM of our three funds as compared to 331 levels.

James Berry: We're also expecting FFO as adjusted per share and unit of $1.84 to $1.92 for the full year 2025.

James Berry: This guidance range reflects the improving storage operating market, balanced with recent broad macro volatility, which does extend to the operating environment as well as interest rates and the fundraising environment within our managed REIT business.

James Berry: Lastly, turning to the balance sheet. During the quarter, we defuse our Keybank Florida CNBS loan, which carried a balance of approximately 49.9 million as of your end.

James Berry: At the end of the first quarter, our capital sack was composed of $1.4 billion of debt and a $200 million series they preferred. Net debt to EBITDA for the first quarter ended at approximately 9.2 times.

James Barry: In early April, in connection with our IPO, we raised $931 million of gross proceeds. After transaction costs and fees, we paid down a $175 million term loan, redeemed in full our $200 million Series A preferred, and paid down our revolver by $472 million. We've included a pro forma capitalization table to reflect the uses of proceeds from our IPO in our financial supplement, which was published yesterday. Also subsequent to quarter end, we flipped our senior credit facility and 2032 private placement notes to fully unsecured, in addition to right-sizing the aggregate commitments on our revolver to $600 million. With the flip to unsecured and the step-down in leverage, our overall cost on a revolver stepped down by 65 basis points. Our pro forma net debt to EBITDA, reflective of the post-IPO basis, accounting for our portion of JV debt, is about 4.8x on Q1 numbers.

James Berry: In early April , in connection with our IPO, we raised $931 million of gross proceeds. After transaction costs and fees, we pay down a $175 million term loan redeemed in full our $200 million series they preferred.

James Berry: and paid down our revolver by $472 million. We've included a proformic capitalization table to reflect the use of the proceeds from our IPO in our financial supplement, which was published yesterday.

James Berry: Also subsequent to quarter-end, we flipped our senior credit facility and 2032 private placement notes to fully unsecured in addition to right sizing the aggregate commitments on our revolver to $600 million.

James Berry: With the flip to unsecured and the step down and leverage are overall costs on a revolver step down by 65 basis points.

James Berry: Our Proforma Net Defi EBITDA, reflective of the post IPO basis, accounting for our portion of JV debt is about 4.8 times on first quarter numbers.

James Barry: This improved balance sheet positions SmartStop for growth that we believe will thrive in a multitude of economic environments. With that, we will open it up to questions.

James Berry: This improved balance position smarts out per growth that we believe will thrive in a multitude of economic environments.

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

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when you're asking your question. Your first question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, if you would like to withdraw your question, simply press star 1 again.

Speaker Change: If you are called about to ask your question and are listening by a loud speaker on your device, please pick up your handset and ensure that your phone is not unknit when you're asking your question.

Speaker Change: And your first question comes on the land of one Sunab Diyah with BMO Capital Markets. Please go ahead.

Juan Sanabria: Hi. Thanks for the time, and congrats on the successful IPO. I just wanted to start with the managed REITs have AUM guidance of growth of $950 million to just over $1 billion. Just if you could comment on how that market's performing, the equity raising market, and your visibility into those assumptions?

[inaudible]

Juan Sanabria: Hi, thanks for the time. I can grab some of the successful IPO. I just wanted to start with the managed REITs. Have AUM gotten some growth of 950 million to just over a billion.

Speaker Change: Just if you can comment on kind of the of that market's performing the equity raising market and your visibility into those assumptions.

James Barry: Yes, I'll do that. Thank you. We continue to raise money in the managed REIT platform. As we all know, we're here today because of that relationship with the independent broker-dealer channel. Both our managed REITs and our 1031 DST programs are structured to pull from several different pools of capital within the independent broker-dealer channel. From a perpetual REIT to life cycle REIT to the 1031 exchange Delaware Statutory Trust. As you noted, we're currently at approximately about $900 million of assets under management across these programs, and we do see some opportunity to grow this AUM. Our guidance is on average AUM of $950 to about 1,050 million, which is very achievable based on our 20-plus year track record in that community. Now, again, we are balancing a few things here with respect to our guidance.

Yes, I'll do that. Thank you.

Speaker Change: You know, we continue to raise money in the Manage Free platform and as we all know, we're here today because of...

Speaker Change: of that relationship with the independent broker-dealer channel. Both our managed REITs and our 1031 DST programs are structured to pull from several different pools of capital within the independent broker-dealer channel.

Speaker Change: As you noted, we're currently in approach to about 900 million of assets in our management across these programs.

Speaker Change: and we do see some opportunity to grow this AUM, our guidance.

Speaker Change: is on average AUM of 950 to about a billion fifty, which is...

Speaker Change: is very achievable based on our 20-plus year track record in that community. Now again, we are balancing a few things here with respect to our guidance.

James Barry: Obviously, macro volatility and any implications on fundraising. In addition, if there's any capital recycle event with respect to I think that's more of a 2026 event. In addition, I'd like to just emphasize that there is obviously a lot of competition. There's product competition, or I'd like to say product pollution. You have from perpetual REITs, life cycle REITs, interval funds, credit funds, 1031 exchange, BDCs, and preferreds. The market and these advisors and their shareholders obviously have a lot more aggregate choices today. It makes it a little bit more competitive. Now, we had about $4 million in revenues in the Q1. In addition to this, the AUM tends to be more growth-oriented.

Obviously macro volatility and any implications on fundraising.

Speaker Change: In addition, if there's any capital recycle event with respect to, I think that's more of a 2026 event. In addition, I'd like to just emphasize that there is obviously a lot of competition. There's product competition, or I'd like to say product pollution.

Speaker Change: You have from perpetual REITs, Lifecycle REITs, Interval Funds, Credit Funds, 1031 Exchange, BDCs, and Preferreds, and so the market...

Speaker Change: And these advisors and their shareholders obviously have a lot more aggregate choices today. So it makes it a little bit more competitive. Now we had about 4 million in revenues in the first quarter. And so in addition to this, the AUM tends to be more growth-oriented and so we like to emphasize that our property management.

James Barry: We'd like to emphasize that our property management and tenant protection revenues are set to grow organically at usually an outsized pace versus the traditional same-store, because as many of you recognize, we put high-quality properties that would have been ultimately dilutive to SmartStop Self Storage. We put those in our non-traded or our managed REIT platform so they can incubate and stabilize over time.

Speaker Change: and tenant protection revenues are set to grow organically. Usually an outside pace versus the traditional same store, because as many you recognize we put high quality properties that would have been ultimately dilutive to SmartStop Self Storage. We put those in our non-traded or our mandatory platform so they can incubate and stabilize over time.

Juan Sanabria: Great. If you could just give us an update on how the April finished up in terms of occupancy achieve rates for new customers and maybe in-place rates. Within that, could you just give us a sense of ECRIs' contribution to achieved rates and if that should continue to kind of help boost same-store revenue as we go through the year, or that benefit will wane as we go?

SmartStop Self Storage REIT

Speaker Change: Great. If you could just give us an update on how the April finished up in terms of occupancy.

Speaker Change: achieve rich for new customers and it may be in-place rates. And within that, could you just give us a sense of BCRI's contribution to achieve the rates?

Speaker Change: If that should continue to kind of help boost stimulus revenue as we go through the year or that benefit will weigh in as we go.

David Corak: Hey, Juan. Thanks. It's Corak. April ended the month with occupancy at 93.1%. That is again, up about 100 basis points year over year. Sitting here a week into May, we picked up another 10 basis points, so we are sitting here today at 93.2%. Web rates were down 2% year over year in April. April move-in rents were down 9% year over year, but that was up sequentially 4.5% over March and up 11% over February. That is actually a little bit better sequential cadence than 2024. To give a little bit of context there, I will take you back to spring of last year. We pushed really hard on rates in April of 2024, thinking that we were going to see some incremental demand as we were entering the rental season. We didn't, and we pulled back that lever a little bit as we entered May.

David Korak: Hey, Juan, thanks, it's Corak. So April ended the month with occupancy at 93.1%. That's, again, up about 100 basis points here over a year. Sitting here a week into May, we picked up another 10 basis points, so we're sitting here today at 93.2%.

David Korak: Web rates were down 2% year-over-year in April . April , move-in rents.

David Korak: We're down 9% year-ever year, but that was up sequentially 4.5% over March and up 11% over February . That's actually a little bit better sequential cadence than 2024, but to give a little bit of context there, I'll take you back to spring of last year.

We push really hard on REIT in April of 2024.

David Korak: Thinking that we were going to see some incremental demand as we were entering the rental season. We didn't. And we pulled back that lever a little bit as we entered May. So there was a big pop in April . We pulled that back in May. That's an example of our moving rates and our web rights being very dynamic. As you know, our systems are making millions of decisions on a regular basis. And as you heard from some of the peers, April was a quite choppy month. [inaudible]

David Corak: There was a big pop in April. We pulled that back in May. That's an example of our move-in rates and our web rates being very dynamic. As you know, our systems are making millions of decisions on a regular basis, and as you heard from some of the peers, April was a quite choppy month. Sitting here on 8 May, our move-in rates are up sequentially 9% from April, and they are actually up 2% year-over-year. Lastly, I'll just note that the promotional utilization is down about 30%. I'm sorry, it's about 30% right now. That's down 1,300 basis points on a year-over-year basis. We're using that lever a little bit less. Look, we're pretty happy with where we're positioned going into rental season on both the rate and the occupancy side.

David Korak: Sitting here on May 8th, our moving rates are up sequentially 9% from April , and they are actually up 2% year over year.

David Korak: Lastly, I'll just note that the promotional utilization is down about thirty percent right now. That's down thirteen hundred basis points on a year-over-year basis, so we're using that that lever a little bit less.

David Korak: We're pretty happy with what we're positioned going into rental season on both the rate and the occupancy side. Being at 93% gives us the optionality to potentially capture more rate as we go through the rental season.

David Corak: Being at 93% gives us the optionality, right, to potentially capture more rate as we go through the rental season. To your question on the ECRI front. I would note that there's no real change in that strategy on a year-over-year basis. We're still in the same cadence, we're still in the same magnitude. No real change in the attribution from the ECRIs at this point.

David Korak: Your question on the ECRI front. I would note that there's no real change in that strategy on a year-over-year basis. We're still in the same cadence. We're still in the same magnitude. And so no real change in the attribution from the ECRI at this point.

Juan Sanabria: Thank you very much.

Thank you very much.

Operator: Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Speaker Change: Your next question comes from the line-up talk, Thomas with Cuban Capital's Market. Please go ahead.

Todd Thomas: Hi. Thanks. Good afternoon, everybody. First question, for the acquisitions under contract, are you able to share any additional information around where they're located, what markets they're in? Stepping back and just thinking about investments more broadly, you mentioned the clustering strategy. As we think about future investments, should we assume acquisitions are in existing markets, or are you open to expanding in new markets in the near term?

Hi, thanks. Good afternoon, everybody.

Todd Thomas: First question for the acquisitions under contract. Are you able to share any additional information around where they're located, what markets they're in? And then stepping back and just thinking about investments more broadly, you mentioned the clustering strategy. And as we think about future investments, should we assume acquisitions?

Todd Thomas: Are in existing markets, or are you open to expanding in new markets in the near term?

James Barry: Yeah, Todd, this is James. I'll jump in there. As we mentioned in our opening remarks, we expect to close six properties for $121 million. To give you a little more color on that, it's primarily a Houston portfolio. Five of those assets are in Houston as well as another property in the Denver metro. Again, adding to those overall clusters is still a very key part of our story, both in the US and in Canada.

James Berry: Yeah, Todd, this is James. I'll jump in there. So as we mentioned in our opening remarks, we have...

We expect to close six properties for $121 million.

James Berry: to give you a little more color on that. It's primarily a Houston portfolio. So five of those assets are in Houston as well as another property in the Denver Metro. So again adding to those overall clusters is still a very key part of our story, both in the US and in Canada.

Todd Thomas: Okay. We should assume going forward that you'll continue to focus on clustering, or are there other markets, new markets, that you're eyeing for growth?

Speaker Change: Okay, and we should assume going forward that you'll continue to focus on clustering or are there other markets, new markets that you're eyeing for growth?

H. Michael Schwartz: There's no question, Todd, this is Michael, that there are other markets that we do believe we should be in. Markets that probably were overheated a couple of years ago, they're probably softened up. The bottom are bottoming. We like that positioning with respect to some of these aggregate new markets. There's no question there with our existing portfolio. There's a lot of value in the clustering, so that we can kind of tighten up our spread. As we've talked about, our spread's been about 500 basis points lower than the peers. In markets where we have 10 properties or more, we're 300 basis points higher. If you just look at Toronto, our margins 71%+ already because of the clustering that we have. I will also emphasize that that clustering happens and occurs whether it's on balance sheet, right?

Speaker Change: There's no question Todd, this is Michael, that there are other markets that, you know, we, you know, do believe we should be in markets that probably were overheated a couple years ago. They're probably, you know, softened up the bottom or bottoming and so, you know, we like that positioning with respect to some of these.

Speaker Change: Agregate New Markets. But there is no question there is existing portfolio. There is a lot of value in the clustering. And so that we can tighten up our spread as we talked about our spread has been about 500 basis points lower than the peers in markets where we have 10 properties or more worth 300 basis points higher. And if you just look at Toronto Toronto our margins 71% already because of the clustering that we have. And so. And I'll-

Speaker Change: We'll also emphasize that that clustering happens and occurs whether it's on balance sheet, right? It happens if we raise money and deploy capital through our managed REIT.

H. Michael Schwartz: It happens if we raise money and deploy capital through our managed REIT, but it's also through other areas that we have been discussing with you. Right now, SmartStop is not in the third party management business, but it is something that we're exploring and we're looking at. Obviously, if we go down that path, any type of additional assets through that platform would also enable us to increase our margins.

Speaker Change: But it's also through other areas that we have been discussing with you. Right now SmartStop is not in the third party management business, but it is something that we are exploring and we are looking at. And so obviously if we go down that path, any type of additional assets through that platform would also enable us to increase our margins.

Todd Thomas: Okay. That's helpful. My other question, in the guidance for the non-same store NOI, I think this quarter, the non-same store NOI annualizes to around $13.5 million. There's a little bit of an adjustment, I guess, to make related to the timing of the Q1 acquisitions, but the guide is $15 to 15.6 million. That implies a fairly healthy improvement. A couple of things, I guess. One is that guidance for wholly owned assets only, or does that include the unconsolidated JV properties? Second, what's driving that increase? Is there anything specific that you would point to, or is it simply yield upside from another leasing cycle?

SmartStop Self Storage REIT

Speaker Change: Okay, that's helpful. And then my other question on in the guidance for the non-sync store N.O.I.

Speaker Change: I think this quarter, the non-staying external eye annualizes to around 13.5 million.

Speaker Change: There's a little bit of an adjustment, I guess, to make related to the timing of the first-core acquisitions. But the guide is 15 to 15.6 million.

that implies a fairly healthy improvement.

Speaker Change: You know, a couple of things I guess one is is that guidance for wholly owned assets only or does that include?

Speaker Change: The Young Consolidated JV Properties and then second, what's driving that increase? Is there anything specific that you would point to or is it simply yielded upside from another leasing cycle?

David Corak: Yeah. I'd say 2 things, Todd Thomas. It's David Corak. One, as you pointed out, there were 3 properties that were purchased during the quarter. We gave a reconciliation of what that NOI growth could look like on an annualized basis in the NAV breakout. I would also note that some of that is just the seasonality, right? We bought several properties in Q4, and we bought several properties in Q1. If you just take Q1 and annualize that, you're recognizing kind of the seasonally worst quarter of the year. I think there's a little bit of both in that. That is just wholly owned, Todd Thomas.

David Korak: Yeah, I'd say a couple of things. That's correct. One is pointed out as there were three properties that were purchased.

David Korak: During the quarter, and we gave a reconciliation of what that NOI growth could look like on an annualized basis in the NAV breakout. I would also note that some of that is just the seasonality, right? We bought several properties in the fourth quarter, and we bought several properties in the first quarter. And so if you just take the first quarter and annualize that, you're recognizing kind of the seasonally worse quarter of the year. So I think there's a little bit of both in that. So if you just take the first quarter and annualize that, you're recognizing kind of the seasonally worse quarter of the year. You're recognizing kind of the seasonally worse quarter of the year.

And that is just how we're on top.

Todd Thomas: Okay, great. Thank you.

OK. Great. Thank you.

David Corak: Operator, can we go to the next question?

Operator, can we go to the next question?

Operator: Your next question comes from the line of Daniel Tyacko with Scotiabank. Please go ahead.

Speaker Change: And your next question comes from the line of Dingle Triako.

It's Scotch of Bank, this go ahead.

Daniel Tyacko: Thank you. Appreciate the April and May commentary, and I guess in relation to Dave's comments. Curious if the move up in occupancy is strategic ahead of more macro or economic uncertainty, or is May at the +2% a signal the pricing model is shifting to rate over occupancy and maybe an indicator of improving demand, or is it just more of a function of comps versus last year?

Okay.

Speaker Change: Thank you. Appreciate the April and May commentary and I guess in relation to Dave's comments.

Speaker Change: You know, curious if the move up in occupancy is strategic that of, you know, more macro or economic uncertainty or is, you know, may at the plus 2% of signal the pricing model is shifting to rate over occupancy and maybe, you know, an indicator of improving demand or is it just more of a function of cops versus last year.

David Corak: Yeah, it's a little bit of strategy, Dan. We're moving into rental season here, sitting at 93.2% occupancy. That gives us optionality in certain markets and in certain properties to be able to push rate, right? Maybe sacrifice a little bit of occupancy. I'm not going to sit here and say that it's a massive shift in the strategy, but the optionality on a property-by-property, on a micro market basis is a really nice thing to have, and it's quite frankly, something we haven't had in a few years.

Speaker Change: Yeah, it's a little bit of strategy, Dan. We're moving into rental season here, sitting at 93.2% occupancy.

Speaker Change: That gives us optionality in certain markets and certain properties to be able to push rate and maybe sacrifice a little bit of accuracy. So I'm not going to sit here and say that it's a massive shift in the strategy. But the optionality on a property by property on a micro market basis is a really nice thing to have and it's quite frankly something we haven't had in a few years. [inaudible]

SmartStop Self Storage REIT

Daniel Tyacko: I appreciate that.

Daniel Tyacko: Following up on growing the portfolio and generating scale in your markets, maybe Denver as an example, what's the magnitude of margin benefit you're expecting this year from the clustering efforts and also, related to that, what's the opportunity set look like for taking on a third-party management platform and how that would possibly expedite that margin upside?

Speaker Change: I appreciate that. And then following up on growing the portfolio and generating scale and your markets maybe Denver as an example. What's the magnitude of margin benefit you're expecting this year from the cost during efforts and also related to that. What's the opportunity set look like for taking on the third party management platform and how that would possibly expedite that margin upside. Thank you very much.

James Barry: Yeah. I'll speak to the margin opportunity with that clustering. As Michael alluded to earlier, in those markets where we have call it 10 or more properties, where we feel we have those economies of scale, our margins tend to be about 300 basis points higher. I think in speaking to Denver specifically, I think there's more opportunity to continue to drive that first 300 basis points as we get that market up to that 10 property mark. Again, if you think about where that comes from, it's just being more efficient within the local MSA on our advertising spend, and better efficiencies from a payroll perspective. So that's where we really see that margin opportunity, at least that first 300 basis points.

Speaker Change: Yeah, I'll speak to the margin opportunity with that clustering as Michael alluded to earlier.

Speaker Change: In those markets where we have, you know, call it 10 or more properties where we feel we have those economies of scale. Our margins tend to be about 300 basis point higher. I think in speaking to Denver specifically, I think there's more opportunity to continue to drive that first 300 basis points as we get that market up to the that 10 property mark.

Speaker Change: And again, if you think about where that comes from, it's just being more efficient within the local MSA on our advertising spend and better efficiencies from a payroll perspective. And so that's where we really see that that margin opportunity. At least that first 300 basis points.

SmartStop Self Storage REIT

SmartStop Self Storage REIT

Operator: Your next question.

David Corak: Another-

David Corak: comes from the line of Kevin Kim with Truist. Please go ahead.

Speaker Change: And you have a question, comes from the line of keep being came with truth, this go ahead.

Kevin Kim: Thank you. Good morning, congratulations on your IPO. On the move-in rates, can you give an update for Toronto, where it was for the quarter, and how it trended in April, please?

Keebeen Kim: Thank you. Good morning and congratulations on your IPO. On the move and raise, can you give an update for Toronto where it was for the quarter and how it turned out in April , please?

David Corak: Hey, Kim. I'll give some numbers on the move-in rates in Toronto specifically, then maybe I'll have Michael talk about kind of the operating environment in Toronto in a little bit more context. In Q1, move-in rates in Toronto, and this is on a constant currency basis, were down about 3%, and in April, they were down comparable to the US at about 9%. We're seeing sort of the same thing in May, where we're up a little bit year over year.

Speaker Change: I'll give some numbers on the move-in rates in Toronto specifically and then we'll talk about the operating environment in Toronto in a little bit more context. I'll give some numbers on the move-in rates in Toronto in a little bit more context.

Speaker Change: So in the first quarter, move-in rates in Toronto, and this is on a constant currency basis, we're down about 3% and in April they were down comparable to the US at about 9% and then we're seeing sort of the same thing in May where we're up a little bit year-over-year.

H. Michael Schwartz: I would just add that, as we've said in the outset, our Canadian portfolio has been an outperformer for us on a constant currency basis with revenues up 7% in that Q1. If you look at our JVs that would meet our definition of same store, they actually did even better. Sitting at very solid 93.2% occupancy, I think puts us in a great position as we go through the busy season. Overall demand in Canada and specifically, let's say Toronto, remains strong. Our platform continues to capture kind of an outsized amount of this demand. We have not seen any weaknesses from the changes in the immigration policy or the macro environment, which are questions that we tend to get. Vacates are down 2% in the Q1 and actually less than the US.

Speaker Change: You know, I would just add that as we said in the outset, our Canadian portfolio has been an outperformer for us.

Speaker Change: You know, on a constant currency basis with revenues up, you know, 7% that first quarter.

Speaker Change: And if you look at our JVs, that would meet our definition of the same store, they actually did even better. And so, you know, sitting at very solid, you know, 93.2% occupancy, I think puts us in a great position as we go through the busy season. You know, overall demand, you know, in Canada and specifically let's say Toronto remains strong. And our platform continues to capture kind of an outsized amount of this to pay.

And so we have not seen any weaknesses.

Speaker Change: from the changes in the immigration policy or the macro environment which are questions that we tend to get. You know vacates are down 2% in the first quarter and actually you know less than on the US. So overall you know we feel pretty comfortable and confident going into the busy season from our Canadian portfolio.

H. Michael Schwartz: Overall, we feel pretty comfortable and confident going into the busy season from our Canadian portfolio.

Kevin Kim: Is it the same dynamic where you push rates maybe a little too hard last year, so the comps get easier and you think Toronto will be positive for the rest of the year? Following up to that, what's implied at the midpoint of your guidance for just overall street rates for the portfolio? Not street rates, move-in rates for the rest of the year.

[inaudible]

Speaker Change: And is it the same dynamic where you push the rate of a beat me the little too hard last year, so the comps get easier and you think Toronto will be positive for a rest of the year. And following up to that, it was implied at the midpoint of your guidance for just overall street rate for the portfolio.

David Corak: Yeah. When you think about Toronto, we did enact a very similar strategy last year where we pushed rates pretty hard in April and then pulled them back at the last few days of the month and into May. When you look at the May, right, it's pretty reflective of what I said earlier, up just slightly in May. When you think about our guide this year, as we give our guidance, we're going to try to just stick to guiding to revenue dollars, right, rather than the individual pieces. I will say that as you look at the move-in rate comps

Speaker Change: So when you think about Toronto, we did an act of very similar strategy last year where we pushed rates pretty hard in April and then pulled them back at the last few days of the months and into May. And so when you look at the May, it's pretty reflective of what I said earlier in the, you know, just slightly in May.

Speaker Change: When you think about our guide this year, as we give our guidance, we're going to try to just stick to guiding to revenue dollars rather than the individual pieces. I will say that as you look at the move-in rate comps.

James Barry: You look at the web rate comps, they do get a little bit easier as you go through the summer months and into the rental season. Look, this is a function of us, really things change pretty rapidly. If we gave you the individual pieces, we'd probably just change them over the course of the year. We just want to stay a little bit away from that. As you know, there will be a healthy attribution from occupancy. As you saw in the Q1, it may not stay at 100 basis points for the whole year, but for the first time in a few years, it's actually a tailwind. Like I said earlier, we like where we're sitting with occupancy over 93%, but it gives us the optionality to potentially capture more rate as we go into rental season.

Speaker Change: and you look at the web-ray comps, they do get a little bit easier as you go through the summer months and into rental season. And look, this is a function of us, you know, really things change pretty rapidly. So if we gave you the individual pieces, we probably just...

Speaker Change: Change them over the course of the year, so we just want to stay a little bit away from that. As you know, there will be a healthy attribution from occupancy, and as you saw in the first quarter, it may not stay at 100 dips.

Speaker Change: for the whole year, but for the first time in a few years, it's actually a tailwind. So, like I said earlier, we like whether we're sitting with occupancy over 93%, but it gives us the optionality to potentially capture more rate as we go into the rental season.

Wes Golladay: Okay. Thank you.

James Barry: Thanks, Gannon.

Bye.

Okay. Thank you.

Operator: Your next question comes from the line of Michael Muller with JPMorgan. Please go ahead.

Thanks, Kevin.

Speaker Change: Your next question comes from the land of Michael Mueller, with Capie Morgan, Disco Hut.

Michael Muller: Yeah, hi. Just one. I guess for the managed REIT versus SmartStop, the managed REITs will certainly look at unstabilized acquisitions. How close do you think you could move toward non-stabilized acquisitions with SMA? I mean, what's the rule of thumb for the dividing line between the two buckets?

Speaker Change: Yeah, hi. I'm just one. I guess for the managed read verses.

Speaker Change: SmartStop, the managed REITs will certainly look at unstableized acquisitions, but how close do you think you could move toward non-stabilized acquisitions with SMA? What's the role of thumb for the dividing line between the two buckets?

H. Michael Schwartz: Great question. The fundamental guideline would be probably we would want to accept no more dilution than about 5% of our FFO. If you step back, we built this company being a total return self-storage operator, doing developments, redevelopments, certificate of occupancy, mid-lease-up, highly occupied, under-managed, and stabilized assets. We're not adverse to putting these high-quality lease-up type of properties or even developments within SmartStop. Being a new publicly traded company and our sensitivity to FFO growth, we need to grow the overall size of the company. As we do that, then we can start to slowly layer in that growth component. I've got a track record of that. I want to do that, but I also have to deliver on a quarterly basis. I think that the ultimate question is when will we be able to do that?

Speaker Change: Great question. You know, the fundamental guideline would be probably we would want to accept no more dilution than about 5%.

Speaker Change: of RFFO. And so, if you step back, we built this company, being a total return self-storage.

Speaker Change: Operator. Doing developments, redevelopment, certificate of occupancy, mid-least, highly occupied under-manage, and stabilized assets. And so we're not adverse.

Speaker Change: to put in these high quality lease-up type of properties or even developments within SmartStop. But being a new publicly traded company in our sensitivity to FFO growth, we need to grow the overall size of the company. And so as we do that, then we can start to slowly layer in that growth component. And so I've got a track record of that, I want to do that, but I also have to deliver on a quarterly basis. And so I think that the ultimate question is,

H. Michael Schwartz: Well, obviously, you can see that we have a very solid acquisition pipeline. I think we feel very comfortable with our guide this year on acquisitions. I think it could take probably about 24 months of additional acquisitions and growth thereof to start to seed our portfolio with a little bit more growth.

Speaker Change: When will we be able to do that? Obviously, you can see that we have a very solid acquisition pipeline. I think we feel very comfortable with our guide this year on acquisitions. But I think it could take probably about 24 months of additional acquisitions and growth thereof to start to...

James Barry: Yeah. Michael, just to chime in terms of our guidance and the properties under contract that we've disclosed. To differentiate, as a good example of what Michael's talking about, the 3 assets that are not going into SmartStop, 2 of them are development pieces of land in Canada, and another is an early lease-up property that's below 30% occupancy. Right? Clearly, those would be dilutive in the near term to SmartStop. That just kind of demonstrates the point we were making.

Speaker Change: to eat our poor folio with a little bit more growth. Yeah, and Michael, just to chime in in terms of our guidance and the properties under contract that we've disclosed.

Speaker Change: To differentiate, as a good example of what Michael's talking about, the three assets that are not going in the SmartStop, two of them are development pieces of land in Canada, and another is a early lease-up property that's below 30% occupancy, right? So clearly, those would be diluted in the near term to SmartStop. So that just kind of demonstrates the point that we were making. [inaudible]

Michael Muller: Got it. Okay. Thank you.

Okay, thank you.

Operator: Your next question comes from the line of Wes Golladay with Baird. Please go ahead.

Speaker Change: Your next question comes from the line of the first Galadine with Pierre. Please go ahead.

Wes Golladay: Hi, everyone. You had that comment that things were starting to normalize. Was that mainly a US comment, or does that apply to Toronto as well?

Speaker Change: Hi everyone. You had that comment that things were starting to normalize. Was that mainly a US comment or did that apply to Toronto as well?

James Barry: Hey, Wes. Toronto's a little bit of a different animal, right? It has slightly different demand drivers, and Michael will elaborate on those in a second. In general, the trends that we have seen in the US, when you look at almost every metric that we track, that we talk about with you guys, everything's just a little bit better in Toronto, right? The rental environment's a little bit better. The move-out environment's a little bit better. The rate environment's a little bit better. You don't have the same volatility that we've seen in the United States over the past 3 years here.

Speaker Change: Hey Wes, Toronto is a little bit of a different animal, right? It has slightly different demand drivers, and Michael will elaborate on those in a second, but in general the trends that we have seen in the U.S. when you look at...

Mike: Almost every metric that we track that we get we talk about with you guys. Everything's just a little bit better in Toronto right the rental environments a little bit better the move out environments a little bit better the rate environments a little bit better so it's just you don't have the same volatility that we've seen in the United States. it's just you don't have the same volatility that we've seen in the United States.

H. Michael Schwartz: Yeah. Let me just jump in there is that one of the things that I think that we need to step back and just really understand kind of where demand comes from with respect to Canada. As we know, the beauty of self-storage is the diversity of the demand drivers and the resiliency of those demand drivers. We recognize it's not recession-proof, but it has a lot of recession-resistant traits. In US, it's about mobility. It's always been about mobility. It's about people in transition. In Canada, the demand is more structurally rooted in space constraints, urban densification, immigration patterns, and lifestyle needs.

Over the past three years here.

Speaker Change: Yeah, and let me just jump in there is that one of the things that I think that we need to step back and just really understand, you know, kind of where demand comes from with respect to Canada. You know, as we know, you know, the beauty of Self Storage is the diversity, you know, of the demand drivers and the resiliency of those demand drivers. You know, and we recognize it's not, you know, recession proof but, you know, has a lot of recession resistant, you know, traits in the US.

Speaker Change: It's about mobility. It's always been about mobility. It's about people in transition, but in Canada, the demand is more structurally rooted in space constraints.

Urban Detsification, Immigration Pattern

H. Michael Schwartz: It's important to understand that while many core demand drivers for self-storage exist on both sides of the border, urbanization, downsizing, life transition, the relative weight and nature of those drivers differ significantly between Canada and the US, and that's largely due to the cultural and structural factors, especially around housing mobility. Unlike US, where people tend to move very frequently because of jobs, cost of living, or lifestyle changes, Canadians historically move less often, and this is kind of rooted in a more conservative culture, cultural attitude towards homeownership and stability. We talk about less transient workforce and a more regulated housing and rental market in major Canadian cities. This results in housing mobility is not a primary driver of self-storage demand in Canada. Instead, we see demand from life stages, divorce, death, downsizing, and seasonal needs.

Speaker Change: and lifestyle needs. It's important to understand that while many core demand drivers for self storage exist on both sides of the border.

Urbanization, Downsizing, Life Transition

Speaker Change: The relative weight and nature of those drivers differ significantly between Canada and the U.S. and that's largely due to the cultural and structural factors, especially around housing mobility and so...

Speaker Change: Unlike US, where people tend to move very frequently because the jobs cost the living or lifestyle changes.

Speaker Change: Canadians historically move less often and this is kind of rooted in a more conservative cultural attitude towards home ownership and stability.

Speaker Change: We talk about less transient workforce and a more regulated housing and rental market in major Canadian cities. And so this results in housing mobility is not.

Speaker Change: a primary driver of Self Storage Demand in Canada. Instead, you know, we see demand from life stages, divorce, you know, debt downsizing and seasonal needs. Most of Canada still has four seasons and so, and addition, urban constraints and so...

H. Michael Schwartz: Most of Canada still has four seasons, and so in addition, urban constraints. When you take a look at the urban centers of Toronto, Vancouver, and Montreal, they have small living places. They have higher housing costs. There's a significant amount of densification aggregate overall policies. This has created a significant storage shortfall for urban dwellers. People aren't moving, but they're living in smaller spaces, especially condos that lack basements, garages, or outdoor sheds. In addition, obviously, immigration and population growth has been a big benefit for Canada. Finally, self-storage in Canada also benefits from the recreational aspect of skis, canoes, camping gear. In addition, small businesses and e-commerce needs for affordable inventory and document storage. Many you know about the industrial space in Canada.

Speaker Change: When you take a look at the urban centers of Toronto, Vancouver, and Montreal,

They have small living places.

They have higher housing costs.

Speaker Change: and there's a significant amount of densification aggregate overall policies and so this has created a significant storage shortfall for urban dwellers and people aren't moving but they're living in smaller spaces especially condos.

Speaker Change: that lack basements, garages, or outdoor sheds. In addition, obviously immigration and population growth has been a big benefit for Canada. And then finally, Self Storage and Canada also benefits from the recreational aspect of skis, canoes, camping gear.

Speaker Change: and addition small businesses and e-commerce needs for affordable inventory and document storage. Many you know about the industrial space in Canada, expensive its tight and storage tends to be kind of that utilization added affordable price for start-up businesses.

H. Michael Schwartz: It's expensive, it's tight, and storage tends to be kind of that utilization at an affordable price for startup businesses.

SmartStop Self Storage REIT

SmartStop Self Storage REIT

Operator: Your next question comes from the line of Kevin Kim with Truist. Please go ahead.

Kevin Kim: Thanks for bringing me back. Michael, if you had double the technology or G&A budget, what are some areas of your technology stack or the way you price things that could improve over time?

Speaker Change: Thanks for bringing back. Michael, if you had double the technology or a G&A budget, what are some areas of your technology is bad or the way you price things that could have improved?

H. Michael Schwartz: Yeah, it's a great question. First, let me emphasize that when COVID hit and we started to see that demand in storage, one of the things that SmartStop did, it didn't run around high-fiving each other. What we did is we looked inward and said, Where do we need to improve? Because once things change and settle down, we want to make sure that we're positioned to be successful. Over the last couple of years, we updated our operating system, our CRM system, and call center. More importantly, we've spent a lot of time on our data warehouse. We've talked to you about this with respect to our outside data scientists that have helped us construct a data warehouse that now is making, in our small portfolio, 1 million pricing changes on a monthly basis. To address your question, it's all about artificial intelligence.

Over time.

Speaker Change: Yeah, it's a great question. First, let me emphasize that, you know, when COVID hit.

Speaker Change: and we started to see that demand in storage. One of the things that SmartStop did didn't run around high-fiving each other. What we did is we looked inward and said, where do we need to improve? Because once...

Speaker Change: Things change and settle down. We want to make sure that we're positioned to be successful and so over the last couple of years...

Speaker Change: We updated our operating system, our CRM system, call center, but more importantly we've spent a lot of time on our data warehouse.

Speaker Change: And we talked to you about this with respect to our outside data scientists that have helped us construct a data warehouse that now is making an R small portfolio, a million pricing changes on a monthly basis. And so, to address your question, it's all about artificial intelligence.

H. Michael Schwartz: We have already taken a full look at every aspect of our operations. We've identified approximately 47 areas that we could see some improvement from artificial intelligence. After that review, it's been whittled down to about 37. Some of those have some crossover. From that overall area, there are some that we probably wouldn't do because other people are doing it. Right now we're putting together our AI strategy that's going to take into account, one, some off-the-shelf capabilities, let's say like Salesforce, that already has artificial intelligence built in and to be disciplined in cost. When it comes to our data warehouse, we are already starting the process to implement artificial intelligence over our data warehouse so that we can now just have effectively machine learning and machine decisions.

Speaker Change: So we've already taken out a full look of every aspect of our operation.

Speaker Change: We've identified approximately 47 areas that we could see some improvement from artificial intelligence.

Speaker Change: After that review, it's been whittled down about 37. Some of those have some crossover. And from that overall area, there are some that we probably wouldn't do because other people are doing it. And so right now we're putting together our AI strategy. It's going to take into account one.

Speaker Change: Some off the shelf capabilities, let's say like Salesforce that already has artificial intelligence built in and to be, you know, disciplined and cost but when it comes to our data warehouse, we are already starting the process to implement.

Speaker Change: Artificial Intelligence over our Data Warehouse so that we can now just...

Speaker Change: have effectively machine learning and missing decisions. And so I think that's the next.

H. Michael Schwartz: I think that's the next way for us, is trying to be very specific and strategic with respect to our artificial intelligence investments and how we can get the most out of those dollars.

Speaker Change: Way for us is trying to be very specific and strategic with respect to our artificial intelligence investments and how we can get the most out of those dollars.

Kevin Kim: Thanks for that helpful color.

H. Michael Schwartz: Thanks, Kevin.

Thanks for that helpful color.

Operator: That concludes our question and answer session. I will now turn the conference back over to H. Michael Schwartz, Founder, Chairman, and CEO of SmartStop Self Storage for closing remarks.

Thank you, Ben.

Speaker Change: That concludes our question and answer session. I will now turn the conference back over to H. Michael Swartz, founder of German and CEO of SmartStop Self Storage Ship Reclosing Remarked

H. Michael Schwartz: Well, I want to thank you all for your time today, and we look forward to seeing you all at the upcoming conferences. Make it a great day. Thank you.

Speaker Change: Well, I want to thank you all for your time today and we look forward to seeing you all at the upcoming conferences. Make it a great day. Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

[inaudible]

Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.