Q3 2025 National Storage Affiliates Trust Earnings Call

Speaker #4: Greetings . Welcome to the National Storage Affiliates . Third quarter 2025 conference Call . At this time , all participants will be in listen only mode .

Speaker #4: A brief question and answer session will follow the formal presentation . If anybody today should require operator assistance , please press Star Zero from your telephone keypad .

Speaker #4: As a reminder , this conference is being recorded . It's now my pleasure to introduce your host , George Hoglund Vice President of Investor Relations for National Storage Affiliates .

Speaker #4: Thank you, Mr. Hoagland. You may now begin.

Speaker #5: We'd like to thank you for joining us today for the third quarter 2025 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, David Cramer.

Speaker #5: And CFO Brandon Togashi . Following prepared remarks , management will accept questions from registered financial analysts . Please limit your questions to one question and one follow up and then return to the queue .

Speaker #5: If you have more questions in addition to the press release distributed yesterday afternoon , we furnished our supplemental package with additional detail on our results , which may be found in the Investor Relations section on our website at enzastaurin .

Speaker #5: Com . On today's call , management's prepared remarks and answers to your questions may contain forward looking statements that are subject to risks and uncertainties and management's estimates .

Speaker #5: As of today , November 4th , 2025 . The company assumes no obligation to revise or update any forward looking statement because of changing market conditions or other circumstances after the date of this conference call .

Speaker #5: The company cautions that actual results may differ materially from those projected in any forward looking statement . For additional details concerning our forward looking statements , please refer to our public filings with the SEC .

Speaker #5: We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures , such as FFO , Corfo and net operating income contained in the Supplemental Information Package available in the Investor Relations section on our website and in our SEC filings .

Speaker #5: I'll now turn the call over to Dave . Thanks , George , and thanks . everyone , for joining our call today . We delivered solid results in the third quarter , reflecting sequential improvement in the level of year over year .

Speaker #5: Same store revenue growth and 16 of our 21 reported MSAs . Additionally , our core FFO per share result beat consensus estimates . Our focus on driving performance with our upgraded tools .

Speaker #5: A consolidated platform and an enhanced team are starting to take hold and have continued into the fourth quarter. Contact rates in October were better than last year by 160 basis points, versus the 20 basis point increase for the third quarter. Occupancy for the month was 84.3%, compared to 84.5% at the end of September.

Speaker #5: We were pleased that we were able to hold occupancy relatively flat in October on a year over year basis . Occupancy was down 170 basis points .

Speaker #5: I'll remind you that occupancy in October of last year had 20 basis points of hurricane demand. Looking at the sector more broadly, we are positive about the outlook for self-storage in 2026 and beyond.

Speaker #5: Given that one new supply over the next few years is expected to come down to levels well below long-term historical averages, supporting a notable shift in the supply-demand balance for the sector.

Speaker #5: Two assumed Fed interest rate cuts would push down mortgage rates. This would likely result in increased storage demand that would accelerate the current inflection in fundamentals.

Speaker #5: Three . In addition , lower interest rates will benefit our borrowing costs and overall cost of capital , which will aid us in our future acquisition activity .

Speaker #5: Additionally, we are encouraged by our relative position in the industry, as we have two levers to pull: rate and occupancy, which provide us with a growth potential advantage.

Speaker #5: Going forward . Our positive momentum is supported by one . The pace of our same store . Revenue growth is improving quickly , suggesting the worst is behind us and the solid inflection off of the bottom two .

Speaker #5: Our continued focus on the execution of our strategy , including enhanced marketing , revenue management , optimized staffing levels , property improvements and expense controls are all starting to show results .

Speaker #5: Three we continue to add earnings growth drivers , as evidenced by the launch of our preferred investment program , adding strategies like this will help return NSA to being a growth company in aggregate , these factors provide the best setup for the self storage sector and our portfolio have seen in several years .

Speaker #5: We are confident that our revenue growth will continue to improve even without a housing market recovery. Although the pace of the recovery is uncertain, we are encouraged that we have reached an inflection point.

Speaker #5: We will continue to focus on improving our occupancy level and revenue growth with increased marketing spend, competitive position in terms of rate and promotion, solid execution of the sales process, and remaining assertive with our Acra strategy.

Speaker #5: We are also focused on improving our portfolio to continued capital , recycling and reinvesting in our properties . I'll now turn the call over to Brandon to discuss our financial results .

Speaker #6: Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.57 for the third quarter, in line with our expectations.

Speaker #6: The 8% decline from the prior year period was due primarily to a decrease in same-store NOI and an increase in interest expense for the quarter.

Speaker #6: Same store revenues declined 2.6% , driven by lower average occupancy of 150 basis points and a year over year decline in average revenue per square foot of 40 basis points .

Speaker #6: This is meaningful improvement from the first half of the year due to us finding stability operationally and also as we encounter the easier comps to last year .

Speaker #6: To emphasize this , I'd refer you to schedule seven in our supplement where we break out same store total revenue between rental revenue , which represents over 95% of the total , and other property related revenue , which primarily consists of tenant insurance dollars retained by the stores .

Speaker #6: Our rental revenue line item was down 2.2% year over year in the third quarter, compared to -3.2% year over year in the first half of 2025, a 100 basis point improvement.

Speaker #6: The other property related revenue line item , on the other hand , had a difficult comp as last year's third quarter was outsized , partly due to us colonizing all of the legacy Pro properties onto our corporate tenant insurance program .

Speaker #6: Understanding these different components is critical to evaluating the same-store portfolio performance in the third quarter and the implied fourth quarter growth at the midpoint of our guidance.

Speaker #6: Expense growth was 4.9% in the third quarter. The main drivers of growth were property taxes, marketing, and utilities, partially offset by a decrease in insurance costs.

Speaker #6: Property taxes were elevated mainly due to a tough comp given successful appeals in the prior year period . Marketing was up 29% versus the prior year .

Speaker #6: As we continue to invest in customer acquisition spend in markets where we clearly see the benefits , we expect some of these expense pressures to ease a bit in the fourth quarter .

Speaker #6: As implied by our guidance range, moving to the transaction environment, our 2023 joint venture acquired two properties, one in California and one in Tennessee, for a total of $32 million.

Speaker #6: We also completed the sale of two assets , which were discussed on last quarter's call . Our continued commitment to our capital recycling program provides several benefits .

Speaker #6: First , we're becoming more operationally efficient . Second , it generates proceeds to deleverage . And third , it funds attractive investments through JV and preferred equity structures .

Speaker #6: We're particularly excited about the preferred equity program that we just announced because this opportunity allows us to invest in self-storage deals that provide us with a larger initial yield than wholly owned acquisitions.

Speaker #6: It also allows us to continue partnerships with our former pros using a structure that solves for our partner's capital raising needs , and NSA's risk adjusted return requirements for capital deployment .

Speaker #6: It also provides a captive acquisition pipeline for us, as we have a right of first offer on the properties acquired by the joint venture.

Speaker #6: We announced the investment with the Real Estate Group. Now, speaking to the balance sheet, we have ample liquidity and maintain healthy access to various sources of capital.

Speaker #6: Subsequent to quarter end , we amended our credit facility agreement to remove the ten basis point Sofr index adjustment on our revolver tranche de term loan and tranche E Term loan .

Speaker #6: This amounts to nearly $1 million of annual interest savings on the debt associated with these facilities . We have maturities of consequence until the second half of 2026 , and our current revolver balance is approximately $400 million , giving us $550 million of availability .

Speaker #6: Our leverage has been slowly coming down, with net debt to EBITDA of 6.7 times at quarter-end, down slightly from 6.8 times in Q2.

Speaker #6: Turning to guidance . Given that results were in line with expectations , we maintained our guidance ranges for 2025 for same store growth and core FFO per share , which are detailed in the release .

Speaker #6: I'll highlight that the midpoint of the same store revenue and NOI guide imply continued improvement in the pace of growth for the fourth quarter .

Speaker #6: Building off of the inflection in the third quarter, which gives us further confidence of positive momentum into 2026. Thanks again for joining our call today.

Speaker #6: Let's now turn it back to the operator to take your questions. Operator.

Speaker #4: Thank you . We'll now be conducting a question and answer session . We ask that you please limit yourself to one question and one follow up .

Speaker #4: If you'd like to ask a question , please press star one on your telephone keypad . A confirmation tone indicate your line is in the question queue .

Speaker #4: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker #4: Thank you . And our first question comes from the line of Samir Kunal with Bank of America . Please leave your questions .

Speaker #7: Good afternoon everybody . Hey Dave , when I listen to your opening remarks , you know your comments in the earnings release , your prepared remarks , certainly you have a very positive tone here , which is a bit different versus what we've heard from the peers .

Speaker #7: Maybe help us understand what makes you so confident , sort of on a relative basis . Thanks .

Speaker #5: Yes . Thanks for joining and good question . You know , I think from from my seat and from our seat , you know , we spent the last couple of years in a very challenging environment working on our company and working on our the way our company was structured , working on initiatives that would allow us to become better and position ourselves to have better performance in the future .

Speaker #5: You know , you think we collapse the structure , we consolidated brands , we consolidated operating platforms , we hung everything on NSA storage , centralized marketing platform , have centralized revenue management .

Speaker #5: Now , centralized pricing , centralized marketing . And so we've worked really , really hard to put ourselves in a position now where we're looking forward saying , you know , we think we've inflected , you know , from this point forward , as we go forward , as we look out to 2026 , we think we're in probably the best position we've been in several years to perform in today's environment than any other environment that's in front of us .

Speaker #5: And so as we as we look out and we look at the progress we've made over the last 3 or 4 months around some of the efficiencies that we're tracking , like occupancy level , contract rate , and where we're heading coming out of this year and looking into 2026 , it just feels like from our seat , you know , we feel very , very good about how we're executing , how the team is executing all of the work and the changes we've done are coming together .

Speaker #5: And and we just feel very confident as we head out that we're in a position today that we haven't seen in several years from easing supply pressures from the sector .

Speaker #5: But really from our seat , looking at what we have in front of us . We have a couple levers to pull that make us a little bit different than our competitors .

Speaker #5: We have occupancy left, and we have rate left. We're going to work on our marketing spend, and we're going to work on our execution.

Speaker #5: And really focus on driving our portfolio forward and having success around , you know , in today's environment and really sets us up in a position for 2026 , going forward .

Speaker #5: You know , you heard in our opening remarks , we've been able to hold occupancy relatively flat coming . You know , we improved in the third quarter , held it flat in October .

Speaker #5: We're in a position now where contract rate is still remaining positive on a year over year basis . There's just a lot of things we feel that we worked on that are that are really starting to have , you know , fruit right now and it feels like , you know , as we go into 2026 , it sets us up to have a good year .

Speaker #7: Good . Got it . And then then I guess the switching subjects here on maybe on the disposition side , maybe talk around kind of capital recycling how you're thinking about it , that sort of , you know , disposition capital recycling over the next 12 months .

Speaker #7: Thanks .

Speaker #5: Yeah . I think we'll stay at our our thought process around recycling our capital . We still have some markets and some stores that we're in the market with right now .

Speaker #5: And so we have stuff that we have not closed on, but we're marketing today as part of that initial push. As we look through our portfolio, everything's built around becoming operationally efficient and really trying to find the future that serves us the best.

Speaker #5: And creates the most return for our shareholders . And so as we look at recycling capital , we've had good success selling properties , we've had good success with the buyers wanting our properties , and we've been able to turn around and reinvest that that money from the recycling program in very efficient ways .

Speaker #5: You know , Brandon will , you know , spoke in his opening remarks about this new opportunity . We just created , which allows us to take some of this recycled capital and put it to very good use and a very good preferred investment .

Speaker #5: And we just think we'll be smart about it. We think that probably the big chunks of our recycling program are over, but we will continually work on the portfolio to make sure we're in the best position to perform.

Speaker #7: Thank you .

Speaker #5: Thank you .

Speaker #4: Our next questions are from the line of Michael Goldsmith with UBS. Please proceed with your questions.

Speaker #8: Good afternoon . Thanks a lot for taking my question , Dave . The move in rate was up 4.9% , which is really encouraging , but seems for revenue growth was down 2.6% .

Speaker #8: So from your perspective , how do you think about these improved street rates flowing through the algorithm ? And you know and its ability to impact positively , impact same store revenue growth ?

Speaker #8: How long do you think that takes, and what's the opportunity there?

Speaker #5: Yeah good . Good point Michael I think for from our seat we're doing doing three things right now . We're closing the year over year occupancy gap .

Speaker #5: And as we look off into 2026, we're going to work very hard around having a pretty level basis on year-over-year occupancy.

Speaker #5: And look, next year we aim to grow that occupancy on a year-over-year basis. So, that'll help with the overall revenue output of the portfolio.

Speaker #5: Along with that, you know, obviously we'll position ourselves in the market from a street rate and promotion positioning to make sure that we're competitive and we get the amount of conversions we want for the marketing effort and for the positioning that we're doing around attracting new customers.

Speaker #5: And so that creates still a rent roll down , which I think we're all dealing with . But what I do have a more confidence in is we get better and better with our platforms as around the strategy and our ability to continue to maximize how we implement , you know , in-place rate changes to our customers .

Speaker #5: And so , you know , that's a long , probably a long winded answer to I think we have three things that we're working on .

Speaker #5: They're going to help us drive additional customers into the platform . And actually be able to maximize the revenue . And so as we look at 2026 , we're going to start the year in a position we haven't been in several years .

Speaker #5: And the fact that we're going to be pretty flat on a year-over-year basis on occupancy, we're going to have good positioning on contract rate.

Speaker #5: And from that point forward , it's just a matter of how we drove , you know , 2026 , you know , rental volume levels and how we execute on these program .

Speaker #8: Got it . Thanks for that , Dave . And as a follow up , just along the same lines to what extent are the former pros impacting same store revenue growth ?

Speaker #8: Is that is that a positive now and or is that still a little bit of a drag ? How have you been able to operate those stores better and you know , when do you know when do you think you can kind of harness maybe some of the , the upside from your operations out of those stores ?

Speaker #8: And, you know, and realize that benefit? Thanks.

Speaker #5: Yeah . Good question . You know , we definitely in the third quarter saw some momentum around . I'll give you this stat around moving square footage for Q3 .

Speaker #5: And if you think about the overall move in square footage for Q3 was 5.8% higher than it was a year ago . So as we look at our platforms and our marketing and all the things we're working on , we certainly saw an improvement in the net rental square foot that we were able to achieve of that , 3% of that 5.8 came out of the core portfolio .

Speaker #5: The corporate stores that we had managed before , the Pro store saw 10.1% improvement in that net rental square foot on a year over year basis for Q3 .

Speaker #5: So we certainly are starting to see momentum around all of the rebranding and all the efforts around centralized platforms starting to flow through on a , you know , a rental basis , which will lead to revenue and revenue outperformance from the expense side of the House .

Speaker #5: We've seen some savings around payroll . You know , but we're also spending more on the marketing dollars to generate the rental volume that you're seeing here .

Speaker #5: So we just think, you know, as we talked about last quarter, we were a little bit behind where we thought we would be.

Speaker #5: We definitely were happy with the momentum we saw in the third quarter.

Speaker #8: Thank you very much. Good luck in the fourth quarter.

Speaker #5: Thank you .

Speaker #4: The next question is from the line of Spencer Glimcher with Green Street. Who is this you with your questions?

Speaker #9: Yeah . Thank you . Just given your former pros were obviously a strong piece of your historical external growth , should we expect to see more of these growth focused JVs form in the near to mid-term ?

Speaker #5: Spencer . Yeah , thanks for joining . You know , I certainly think it's an opportunity . We you know , one of the strong points of the there was a lot of strong points of the pro structure , but that was one of them was their access to these local markets .

Speaker #5: And ability to get off market transactions done with with buyers and sellers . And , you know , us being the buyer . And then finding sellers .

Speaker #5: And so I do think it's an opportunity . We're very pleased to announce the one that we have just announced . It puts us in the Mid-Atlantic and of northeast section of the country , where this former pro has a very , very strong operating presence .

Speaker #5: And they have very, very strong tentacles into these markets, where I think they're going to have very good success buying properties and having good success in this program.

Speaker #5: So, I think it could lead to more. We don't have a line of sight right now on more, but it's certainly something we think could be attractive.

Speaker #9: Okay , great . And then I know you mentioned in your prepared remarks that the capital recycling provides proceeds , obviously , to deliver , and that has been coming down slowly .

Speaker #9: But can you just talk about the larger capital allocation decision here to grow at all when you're 45% levered and trading at a material discount to NAV? That doesn't allow you to delever outside of those disposition proceeds?

Speaker #6: Spencer , this is Brandon . You know , I would say everything that we're doing today is is pretty modest . And with a very disciplined and prudent eye .

Speaker #6: I mean , if you just look to the activity that we reported for the third quarter , right ? I mean , we completed the sale of two assets that was part of a ten pack that we had .

Speaker #6: We had talked about closing the majority of that portfolio in late Q2. So that was just finalizing that deal. Our JV 23 acquired two stores.

Speaker #6: You know, our capital outlay was $8 million. Certainly, this preferred investment that we're talking about is a larger capital outlay, upwards of $100 million plus.

Speaker #6: But that'll that'll take time to deploy all that . And , and then at the same time we have a clear initiative to improve the portfolio over time through some targeted select dispositions .

Speaker #6: And so , you know , I hear the spirit of your question , but I would just say that everything we're doing is , is relatively modest and and measured for , for long term benefits .

Speaker #9: Okay. Yeah, that makes a lot of sense. Thanks.

Speaker #6: Thank you .

Speaker #4: The next questions are from the line of Eric Wolfe with Citibank. Please see with your questions.

Speaker #10: Hey, thanks for taking my questions. I think on your last earnings call in your recent presentations, you provided a revenue path. Just hoping you could provide that for October specifically.

Speaker #10: And then talk about, you know, how you expect the trend through the quarter to hit that midpoint of your guidance.

Speaker #6: Yeah , Eric , this is Brandon . I'll take that first and then Dave can chime in . You know , that that metric we started to introduce into our investor deck back at Joon Navarrete .

Speaker #6: And that followed our first quarter supplemental . You know , in late April , early May , which is typically when we introduce any type of new disclosures .

Speaker #6: Right . And so in that first quarter , supplemental , that's when we first started introducing the in-place customer rate for our same store portfolio , as well as the the rates at which customers were moving in and out .

Speaker #6: And so, because we were providing that in-place customer rate, it's essentially, you know, that revenue path is essentially a combination of that in-place customer rate metric with the occupancy.

Speaker #6: And so to your question about October , you know , Dave , in his opening remarks , mentioned our occupancy down 170 , 170 basis points at the end of October .

Speaker #6: We were down $140 million at the end of the third quarter. So on average, you're in that down $150 million to $160 million territory.

Speaker #6: But he also commented that contract rates were up 160 basis points. So those two things are essentially flat, meaning that the Rev Path metric for October is essentially flat as well.

Speaker #6: However, you know, all that having been said, you do have things like the impact of discounts and concessions, which we've talked about on these calls more recently. Those discounts are elevated compared to the prior year.

Speaker #6: So that eats into the revenue growth a little bit. And then you also heard in my opening remarks about that other property-related revenue line item being a little bit of a drag.

Speaker #6: And so those are really the things that are dragging you from that RevPath metric for the third quarter to get to that negative 2.6 that we reported.

Speaker #6: And that's also what would take you in October from being flat on the revenue path to something that's negative. But frankly, you know, starting with a one handle instead of a two handle.

Speaker #6: And that is where we need to be, obviously, to get to that midpoint of the guide.

Speaker #10: That's helpful . And then I think you mentioned a comment about occupancy being flat to start 2026 . Did you mean that on a sequential basis or on a year over year basis , meaning you're comparing it versus , you know , say , October , the third quarter on average ?

Speaker #10: Are you saying that at a time you start 2026 , that on a year over year basis , that 170 basis points of occupancy gap that you have today in October will go to will go to zero ?

Speaker #6: I think what Dave meant , well , he can answer for himself , Eric , but I'm also be really clear about what's in our guidance .

Speaker #6: I mean , we I said at recent conferences , you know , we expected to have something in that 150 basis point year over year delta for the back half of the year .

Speaker #6: Now , a range of scenarios feeds a guidance range . Obviously , but I still expect we would be negative year over year to some degree .

Speaker #6: But certainly not to the magnitude that we were to start 2024 and 2025, which I think was the essence of Dave's remark.

Speaker #6: So not entirely zero year over year , flat year over year , but , you know , modestly negative and improving .

Speaker #10: Okay . Thank you .

Speaker #6: Yeah. Thank you, Eric.

Speaker #4: Our next question is from the line of Michael Griffin with Evercore ISI. Please proceed with your questions.

Speaker #11: Great . Thanks , Dave . I want to go back to your comments . Just on inflection , as maybe you look to the year ahead and I realize you're not giving 26 guidance at this point , but but can you give us a sense of maybe the trajectory or expectation of same store revenue growth ?

Speaker #11: Was that more a comment of a , you know , year over year improvement , or could we see that , you know , maybe in the first half and then building throughout the year ?

Speaker #5: Yeah . Thanks for joining it . It's a good question . I think everything we see today and to what Brandon was just comment earlier , is our momentum sequentially month over month .

Speaker #5: And our traction that we're gaining on a year over year basis . We're closing the gap on several fronts , and that's around some of the occupancy delta that we faced the last couple of years .

Speaker #5: Certainly on a contract rate basis . As we go forward . And so we look at 2026 , where we're starting in a much better position earlier in the year than we've started the last 2 or 3 years .

Speaker #5: And several quarters . And so we look at 2026 , probably with a little bit more rosy lens . In our opinion , right now , just from our starting position .

Speaker #5: And so , you know , I think from an oxy level , contract rate where we're going to be with rev path , you know , not giving any guidance for 2026 .

Speaker #5: But we do think we're going to be in the best position we've been in several years and have some success there.

Speaker #11: Great . Appreciate the the color there . And then maybe Dave or can you walk through maybe some of the assumptions or give us a little more color on the recently announced joint venture in terms of , you know , what kind of properties you're targeting in terms of acquisition cap rates and then , you know , maybe an IRR or your underwriting to and assumptions , maybe around , you know , revenue or NOI growth or exit cap as it relates to achieving that IRR .

Speaker #6: Yeah . Griff . This is Brandon . I'll take it . And then Dave can supplement . We certainly value add deals . Is the flavor of what we're looking for in the structure .

Speaker #6: I think to Spencer's earlier question . It a lot of the properties you know fit the profile that very well . May have suited our former pro under our pro structure , meaning the initial yield may may look stabilized , but there could be an opportunity for further upside just because the properties , if we're acquiring them off market , if the JV is acquiring them off market , they've maybe been under managed by by less sophisticated operator .

Speaker #6: Also, some assets that may have expansion opportunities where our former pro and partner has a specialty in being able to deliver on those types of additives.

Speaker #6: You know , additions and expansions to sites . And so that's that's the profile . I would tell you , the , the yield that we're targeting , you know , our cash flow is priority to our partners .

Speaker #6: And so all of the operating cash flow after debt service will come to us up until that 10% preferred return is filled.

Speaker #6: And and so that and that just corresponds to the level at which we're invested in the capital stack . And so we expect that initial cash flow to be less than the 10% .

Speaker #6: And the delta, the unpaid piece of the 10%, will accrue. Then it will be paid over time as cash flows increase.

Speaker #5: Yeah, I think I just added that to Brandon's point. I mean, I don't think we're being overly assertive on exit cap rates.

Speaker #5: You know , and I don't think we're being overly assertive as we think about revenue growth . I think , you know , the partner we've chosen has a good handle on their markets .

Speaker #5: And we overlook all the underwriting as well . On on the properties they're buying . And I think we'll we certainly be very smart about putting capital out and how we underwrite the performance of the properties .

Speaker #11: Great. That's it for me. Thanks for the time.

Speaker #6: Thank you. Thanks, Griff.

Speaker #4: Next questions are from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your questions.

Speaker #12: Hi . Good morning . Just on the in the opening remarks , Dave , you mentioned the enhanced team . So I was just hoping you could spend a little time on on the additions you have made and maybe feature opportunities to kind of bolster the senior leadership of the company .

Speaker #5: Yeah . Thanks , Juan , for joining . Good question . You know , we we've really spent a lot of time around looking at all facets of our business .

Speaker #5: You know, early on we had to obviously strengthen our financial team as we brought all the accounting and all the stuff through the pro structure.

Speaker #5: And the team has done a good job there. Our recent additions have really been around more revenue management performance, driving leadership roles, and so we brought in a seasoned person to help us with our revenue management.

Speaker #5: She takes care of pricing and upfront pricing for customers and promotions . And she really leads the data science team and the revenue management team on the efforts towards , you know , improving and remodeling and tweaking and continually to test and do all the things we're trying to do around driving the maximum dollar through our portfolio .

Speaker #5: We've also added strength in the IT department that allows us, with these consolidated systems, to have the most efficient technology platforms we have.

Speaker #5: And continue to develop . And we added it another , you know , strength in leadership position around the marketing , pure marketing team and the customer acquisitions team .

Speaker #5: And so I think adding this experience, these three people we added had years of experience in their fields. They've had years of experience.

Speaker #5: Two of them had years of experience around self-storage. And so I think we've just really strengthened there. And then that just ripples through the team.

Speaker #5: You know , as they come in , they bring in additional talent , whether it be at a manager level or whether it be , at a systems operations level .

Speaker #5: And so they've just done a really , really good job strengthening that side of the house . On the operations front , obviously now the transitions over the operations team has spent a tremendous amount of time around staffing levels , hours of operation .

Speaker #5: I think I said in my last call, it's nice to be focused on the business instead of transition. And I think all the benefits of focusing on the business are starting to pay off.

Speaker #5: And we just are really starting to hit our stride.

Speaker #12: Great , thanks . And then just on the on the revenue side , I'm hoping you could talk a little bit about Ecris and kind of the quantum or the cadence and how that's changed .

Speaker #12: And then if on the move in side , could you give the numbers net of discounts , I think I think that's a , a more useful figure than kind of the , the , the advertised rate , if you will .

Speaker #12: Thanks .

Speaker #5: Sure . I'll start . And then Brandon can finish up on the rate question , you know , from the ECR strategy program , I would tell you how we look at the the cadence of these drives .

Speaker #5: We haven't changed. We've been testing some different thought processes around it, but we haven't changed, and we haven't seen anything that's going to make us really change our cadence.

Speaker #5: I think, on the magnitude side, all of the testing we're doing is helping us improve our magnitude on the rate increases. And that's all the way through from the first-time rate increase all the way through the existing customer base.

Speaker #5: And so I think on a year-over-year basis from our seat, we feel like these programs are a little bit stronger than they were last year.

Speaker #5: And we'll continue to evolve as data points tell us it can evolve . And so having the additional talent , additional strength and additional wisdom there is paying off on on our ECR strategy .

Speaker #6: And then, Juan, on your discounts question related to the move-in rate metric that we report back in Schedule Seven for the same store pool.

Speaker #6: And Dave mentioned it earlier for the third quarter , we were up 4.9% on the move in rates . If you adjust that for discounts , it's for for both third quarter and and the second quarter , it was about a 100 150 basis point impact because concessions were higher .

Speaker #6: So that 4.9% would otherwise be kind of a mid-threes. And for the second quarter, we reported that the moving rate was up 130 basis points.

Speaker #6: And it was probably closer to flat.

Speaker #12: Do you have the corresponding October .

Speaker #6: October . Year over year one is very is high just because and that's a consequence of last year . You know the September and October comp was much easier just given where we had moved rates , given what was going on in the market as well as what we were dealing with with the pro internalization .

Speaker #6: So our our move in rates achieved for October were up 14% . And I would also guide you to take a point , a point and a half off that for the discounts .

Speaker #6: But that's that's going to flip in November and December . We're likely going to be down . So on on average for the fourth quarter , I think it'll be year over year .

Speaker #6: You know, relatively flat.

Speaker #12: Thank you .

Speaker #5: Thank you .

Speaker #6: Thanks , Juan .

Speaker #4: Next questions are from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your questions.

Speaker #13: Hi . Thanks . A couple of questions or follow ups , perhaps on the new growth vehicle that you announced yesterday . You know , I guess first , will , will the $105 million pref , will that be funded on a property by property basis , or is each investments you know completed ?

Speaker #13: Is that how that will work? And then, Brandon, you noted that the properties will not hit the 10%. Preferably, on the balance, they will accrue, but based on today's cost of debt and the return profile of assets that you're looking to acquire, do you have any sense of what the timeline might be for that 10% hurdle to be achieved?

Speaker #6: Yeah . Todd . So on the first , first question , it will be deployed on a on a investment by investment basis or asset by asset .

Speaker #6: So, it'll occur over time. And, you know, we've been working on the specifics of the agreement with our former pro for multiple months, and I'm very pleased to be able to announce it.

Speaker #6: Now we've also, over these past few months, been concurrently underwriting a couple of deals that haven't materialized. But jointly underwriting some opportunities.

Speaker #6: So we are excited about what we're seeing in the market and looking to to deploy those first dollars in the venture . On the second question , you know , it's going to be deal dependent .

Speaker #6: I mean, I think the initial cash yield to us will rival the type of cash yields that we're generating in our other JV structures.

Speaker #6: But then obviously that growth is going to inure to our benefit disproportionately. And so then that's where it has an opportunity to get up into that 10%.

Speaker #6: So it'll vary. But you know, I'll just tell you, because I referenced that we've underwritten a couple of opportunities recently.

Speaker #6: You know , you're hitting that in the few deals that we've looked at most recently . You know , year three on average , I would say .

Speaker #13: Okay . And then , you know , it sounded I mean , you characterized it like a program . And I think you you referenced this or maybe mentioned it in a prior question .

Speaker #13: It sounds like you don't have line of sight into additional ventures , but , you know , is there interest from former pros to replicate this ?

Speaker #13: Is this something that you think we should assume, you know, with sort of a geographic market focus or some exclusivity?

Speaker #13: You know, regionally around the country that you might roll out, and then with regard to move specifically, you just rebranded and announced that you rebranded those stores.

Speaker #13: How many Move It stores are there left operating today? Because my understanding is that the acquisitions made by that venture will be branded.

Speaker #13: Move in, and how comfortable are you with that brand? And banner moving forward from an operational standpoint?

Speaker #5: Sure . I'll take those as Dave . Todd , thanks for the question . Questions . You know , I think there is interest from other former pros around this program .

Speaker #5: And like I say, we don't, like I said, I said we didn't have a direct line of sight, but we've certainly had conversations.

Speaker #5: And so if we think it's appropriate and we think it's a the right , you know , time to move forward , you could see us roll this out a little bit more to , as you said , it really around geographic focused , opportunistic focused areas where this fits their capital need .

Speaker #5: And our capital want . And so yeah , I think we could see some more activity here in the future . I don't again no no direct line of sight , no timing on that .

Speaker #5: But it's certainly something that could materialize as far as the moving brand . They still operate , I think over , I don't know , 35 , 40 stores .

Speaker #5: They've got , you know , probably in that range around those store count . They are a regional brand that is strong . When we we collapse the pro structure .

Speaker #5: It was a brand they wanted to keep, so they paid to have our ice storage stores branded from their move-in stores.

Speaker #5: And they wanted to keep their regional brands. So, there's a lot of strength in their local markets with this brand, and we're pretty comfortable in their ability to manage the stores in this venture.

Speaker #5: For us to have success, you know, at a level where we think it's appropriate.

Speaker #13: Okay , so so there won't be any any additional fees or , you know , any , any sort of efficiencies or scale benefits from this , this growth vehicle .

Speaker #13: It's it's purely just limited to the , to the preferred equity investment . And that's it .

Speaker #5: It's . Yeah . Yeah , I mean certainly there's the initial 10% . And then you know , upon exit of a particular part of this venture , there's a chance for us to earn up to about a 14% total return somewhere in that neighborhood .

Speaker #5: You know , of where we want to be , you know , potentially . But right now it's a it's a preferred ten with an upside .

Speaker #13: Okay . Right . But but know no revenue management platform that's being shared . No technology , no . You know overlap around any any impact around tenant insurance or anything of that nature .

Speaker #5: Yeah, yeah, there is T.I. Todd. That's something we could mention there, using the RTI program. And so, we'll have some benefits from this program.

Speaker #5: We get some some revenue off of that T.I program . Other than that no revenue management , no marketing , no other . You know , fees being paid to us .

Speaker #5: But the tenant insurance is an upside. That's correct.

Speaker #6: I think . Todd though to your to your tying your questions together though this this initial deal with our former pro made a lot of sense given that that particular pro had invested a lot in building out a property operations group , you know , so and our comfort with them being managers of assets stems from obviously our history with them as a pro .

Speaker #6: To your earlier question about whether we see this more as a programmatic thing that we could roll out to other operators or other owners?

Speaker #6: The answer is yes . And I think in some of those situations , you know , we would we would potentially be the property manager , in which case some of those scale and platform benefits would start to come into play .

Speaker #13: Okay . Thank you .

Speaker #4: Thanks . Next questions come the line of John Peterson with Jefferies . Please proceed with your questions .

Speaker #14: Great. Thank you. Can you update us on how the consolidation of brands on a single website is going? And if you've got search engine optimization back to the levels where it was before the integration?

Speaker #5: Yeah . Thanks for joining . Good question . Yes . So we've had good success , you know , with the NSA storage consolidation and consolidation of brands , you know , from a from a high level , October was really the first month where we had really year over year statistics because there was a lot of noise on different websites and different measurements of websites and , you know , trying to track the numbers as you think about everybody else having their own little systems and those pieces .

Speaker #5: But , you know , just a couple of high level stats that caught my eye on October . I mean , web shopping sessions were up 23% year over year in October , which we thought was a good metric , shows good , solid progress on the fact that we're actually , you know , the marketing spend and the visibility we're putting our place and where we're putting our ranking shares was working .

Speaker #5: And so we were very happy with that . And then , you know , conversion rate , you know , was up 7.1% .

Speaker #5: So we're pretty happy with both the shopping session and the conversion rate. So again, momentum things that made us happy, pleased with the progress.

Speaker #14: Okay. All right. That's helpful. And then maybe related to that, Dave, I think in your prepared remarks you mentioned that you want to spend more on marketing.

Speaker #14: Can you talk about what that might look like? Like what channels and maybe dollar amounts that you guys are targeting on marketing?

Speaker #5: Yeah, you know, I think the run rate will be pretty consistent as we go through the fourth quarter, similar to what we saw around the third quarter.

Speaker #5: You know, as far as dollars deployed towards, you know, really the primary driver of this is around the paid marketing platform.

Speaker #5: You know , you do you know , you do some paid search and social . You do some paid search in other platforms .

Speaker #5: But we're really working hard on positioning ourselves in the market where we have the right efficiency to get the right amount of sessions we want for the minority reservations, which obviously lead to rentals.

Speaker #5: And so the team has done a good job with the new modeling around our paid search model, and that's been our primary effort.

Speaker #5: And primary lift . And we're very happy with the progress we're making there . So I think from our view , we use the marketing dollars as a tool .

Speaker #5: And if the tool is working, we'll continue to put dollars into the tool as long as we get the results out of it.

Speaker #14: All right. That's helpful. Thank you. That's all for me.

Speaker #5: Appreciate it .

Speaker #4: The next question is from the line of Ravi Vaidya with Mizuho Securities. Please, proceed with your question.

Speaker #14: Hi there .

Speaker #15: Thanks for taking my question . Can you discuss some of the . Demand drivers within the quarter and for October here ? Are you seeing any more housing related demand given that mortgage rates are in the high fives and low sixes and within your portfolio , which markets do you think are the most immediate upside in the event of a housing market recovery ?

Speaker #15: Thanks .

Speaker #5: Yeah , thanks for joining . Good questions . Certainly we we have not seen a major shift in the amount of people because of the housing market .

Speaker #5: We obviously , you're pleased to see rates come off a little bit , but it does not have hasn't had a material impact in our opinion , on the amount of resale of homes or turnover around homes .

Speaker #5: I would note that moving is back to being it's , you know , about where it would be in our in our thought process of positioning , of why people are using storage .

Speaker #5: So, we’re seeing moving as a top reason people use storage, which is good. But that doesn’t mean they’re buying a house.

Speaker #5: It could just mean they're moving from apartment to apartment or , you know , some other place and they're still renters . But , you know , the fact that we have seen more around moving in transition is encouraging as far as just people moving around the country , the second part of that Sunbelt , obviously for us , we've got a lot of exposure throughout the South .

Speaker #5: If you think about down through Florida , down through parts of , you know , Phoenix and Vegas , and you go all the way through , really the southern parts of the country would be the biggest benefit , we think , from a housing turnover for our portfolio .

Speaker #5: We have a lot of exposure down there. We like the market's long-term outlook. We think they're a great place to own storage, but we believe they've been the most adversely affected during this.

Speaker #5: This lockup of the housing market.

Speaker #15: Got it . That's super helpful . And maybe just just one more here . It seems like , you know , fundamentals are inflecting and there's a lot of positive momentum .

Speaker #15: Maybe . Why not narrow the the guide at this point . Sitting in in November . Like what are some of the bear and bull assumptions regarding the implied for Q core FFO and same store .

Speaker #15: Thanks .

Speaker #6: Yeah . Ravi , this is Brandon . Your question touches on probably more of just a an approach that we've always taken where especially if we've revisited the guidance mid-year and August and things haven't materially changed .

Speaker #6: And we feel comfortable with the ranges generally we just leave leave them untouched down the board . Obviously , you know , our commentary here and we've got a couple of conferences coming up , which I'm sure will be helpful for folks .

Speaker #6: It allows people to kind of understand , you know , our our any type of bias or narrowing that others want to want to take from our results .

Speaker #6: And commentary and apply . So that's that's really the reason it's just kind of been our historical approach of leaving everything unchanged . And then supplementing it with our remarks on these calls .

Speaker #15: Got it. Thank you. I appreciate it.

Speaker #5: Thank you .

Speaker #4: The next question is from the line of Brendan Lynch with Barclays. Please proceed with your questions.

Speaker #16: Great. Thanks for taking my question. The pro-internalization was kind of the reason you guys gave at the time, which was about managing your assets in-house.

Speaker #16: And simplifying your story, but with the new JV structure, it seems that your partner is going to manage the assets and the JV itself has a bit of complexity.

Speaker #16: So maybe just help us think about how we should consider the benefits of this ongoing change to your structure.

Speaker #5: I'll start . Brandon , you can jump in . You know , I think in this particular opportunity , we like the priority position we have in the investment .

Speaker #5: We understand the operator. We understand the markets that they'll be looking in. We don't have a significant presence in those markets from an operating standpoint.

Speaker #5: You know, we did rebrand our stores to High Storage, but the markets this particular person's in are not necessarily on top of those stores.

Speaker #5: So I don't know that we look at it as it's overly complicated from our point of view . It's it's you know , they're they're good strong .

Speaker #5: Operator . And and we know , you know , they understand the markets and where they're at . And from our seat , you know , that's part of the reason we chose them .

Speaker #5: We were very, very comfortable. We didn't think it was going to be a high risk and a high attention need from us.

Speaker #5: You know , we understand their abilities and what they're able to do . And we felt very comfortable that they were able to grow their portfolio in , in , you know , in a manner that we would approve and have success with .

Speaker #16: Okay . Thanks . If you do , it sounds like you're considering doing more of these going forward . Would you expect to manage the assets in any other JVs that come down the line , or would you outsource that again ?

Speaker #5: No , I think we're open to doing both . I think , you know , depending on the situation of the the investment and the situation of the operator , I think we could see this where you may find folks who want to do this and have us manage the stores .

Speaker #5: And so I think , I think the opportunity would sit on both sides . Again , I think we evaluate , you know , at the time of who this person , you know , who the who the people are and how strong they are and what their desires are and what our desires are .

Speaker #5: And it could lead us to both paths.

Speaker #16: Okay . Thank you .

Speaker #5: Thank you .

Speaker #4: Our next question is from the line of Ronald Camden with Morgan Stanley. Please proceed with your questions.

Speaker #17: Hey , just have two quick ones . Just on the same store , same store revenue . I know the guidance implies you're sort of down 1.3 .

Speaker #17: And for Q but the commentary suggests that , you know , the inflection point . So maybe you're doing better than that . So I guess I was just wanting to tie those together .

Speaker #17: And is the thinking here, if things continue to improve, that presumably same-store revenue should flatten out at some point in the next 12 to 18 months?

Speaker #17: Just just high level without sort of thinking through guidance here . Thanks .

Speaker #6: Yeah . Ronald . So I'll , I'll just it restate some of the same things we said earlier and that that's more just to re-emphasize and try to answer your question at the same time .

Speaker #6: So, you know, one of the stats that Dave gave earlier about October was our contract rates being up 160 basis points.

Speaker #6: That's for all customers in place for the same store pool. And then the same store average occupancy for October being down 170 in the month.

Speaker #6: And I supplemented that and said on average it was in the 150 to 160 range . So those two things that in-place contract rate for all same store customers , as well as the average occupancy stat that gives you this , this flat rev path , and then you have , you know , higher discounts year over year .

Speaker #6: I mentioned tenant insurance year over year being a little bit of a drag. You know, those are the things that put you into the red and negative year over year.

Speaker #6: Still on revenue . But to Dave's opening remarks , the pace of that year over year growth is changing quickly . And so we like the trajectory .

Speaker #6: We like the trajectory that we have exiting the year entering 26 . And so I think being flat on revenue growth is certainly achievable sooner than a than a 12 month time frame or 18 month time frame .

Speaker #6: I think you're talking, you know, a shorter window than that.

Speaker #17: Yeah , super , super helpful . I , I guess my follow up just on the dividend , you know , I think the payout ratio had been over 100% .

Speaker #17: You know , now that we're this inflection just does your how does your thinking change about when you can get back to , you know , below that mark .

Speaker #17: 100 level

Speaker #17: Thanks .

Speaker #5: Yeah I think you're touching on something . You know , we're . Confident in our trajectories . We're we're really confident in how we're starting to execute .

Speaker #5: That certainly puts us in a position to start growing FFO again . And , you know , and the pace of that will be determined on how , you know , a lot of factors that we've talked about on the call here today , I think from our board seat , they're very thoughtful .

Speaker #5: They always think about all of the things that are going on with our business and what the future looks like. But the one thing that is very prevalent in our business, to Brandon's point, is that you can move pretty quickly in this industry regarding rate and occupancy, and adjust to the factors that are going on pretty quickly in this industry.

Speaker #5: So , you know , I think as we go forward , you know , we're looking to 2026 and a little more positive light than we were looking at this year .

Speaker #5: So I think that helps from the dividend payout percentages.

Speaker #17: Great. Thanks so much. That's it for me.

Speaker #6: Thanks , Ronald .

Speaker #4: Thank you. Our final question is from the line of Omotayo O'Connor with Deutsche Bank. We're pleased to see you with your questions.

Speaker #4: Thank you. Our final question is from the line of Omotayo O'Connor with Deutsche Bank. Pleased to see.

Speaker #18: Hi . Yes , good afternoon . Just wanted to go back to the JV again . Brandon , with your comments about , you know , three years to get to the 10% .

Speaker #18: Prerequisite return. Just kind of give us a little bit more information around what kind of annualized growth you are basically underwriting to underneath that and kind of what kind of debt or cost of debt this JV entity will have when it does.

Speaker #6: You know , it really is going to vary based on the really specific deal and the opportunity that that deal provides . And so I think it's tough to , you know , speak to it in generalities .

Speaker #6: You know, we wanted to announce the program because it's been something we've been working on for a period of time now. We do think that it's going to be an important part of our story for 2026.

Speaker #6: But but I think maybe getting into some of the particulars that you're asking about will be easier once we've identified and funded , you know , the first couple deals , and then we'll have real numbers to speak to .

Speaker #6: Illustratively you know what I would tell you is , if you if you think about a six cap property and if the debt cost is very similar to that cap rate .

Speaker #6: So you're kind of neutral there. And then if you had a 6% equity yield, but we're 75% of that equity capital.

Speaker #6: And we're getting all of the cash flows . You run that math and you're at an eight yield , right ? I mean that's super high level , super simplistic .

Speaker #6: And then you and then you layer growth on top of that . And so you can kind of if you use that super high level illustrative example , you could impute , you know , that growth that would be required to get you to a 10% return to us here , you know , end of year two , middle of year three , and , and year four , you know , scenarios .

Speaker #6: Right .

Speaker #18: Gotcha .

Speaker #6: Okay .

Speaker #18: And then why would you pro partner also be willing to to take on a 10% preferred equity hurdle . Like like what kind of in this for them .

Speaker #18: You know, the first few years kind of sound like they're basically just working for you before they kind of start to make any money.

Speaker #18: So why, why, why, why is a 10% preferred equity the most attractive cost of equity to them?

Speaker #5: I think from their seat, looking at the properties they're going to buy and looking at it from their lens, as we talk about our underwriting, we talk about how we think the properties are going to perform in the overall performance of the deals they're making.

Speaker #5: I think they have a history and have proven that they're going to outperform. And from their lens, this is an appropriate level of cost of capital for what they're going to get out of it.

Speaker #5: And so I just being around that , you know , these operators a long time , I was one of these operators , I think they will find some home run deals that work out very , very well for them .

Speaker #5: And it makes this very attractive for them.

Speaker #18: Thank you .

Speaker #5: Yeah . Thank you .

Speaker #4: Thank you . At this time , this concludes our question and answer session . I'll turn the call back over to George Hoglund for closing comments .

Speaker #5: Yes. Thank you all for joining our call today, and we look forward.

Speaker #19: I'm looking forward to seeing many of you at the upcoming conferences this month and next. Have a good day.

Speaker #4: Ladies and gentlemen . We'll conclude today's teleconference . You may disconnect your lines at this time . Thank you for your participation . Have a wonderful day .