Public Storage (PSA) Earnings

Management highlights

- Strategic Transactions & Portfolio Expansion * Closed the NSA transaction in July 2026, adding 1,100 stores and 575,000 units to the portfolio, with a smooth overnight transition of systems and onboarding of 1,300 new employees. Early integration work has already identified 14,000 idle units that can be brought back online in H2 2026, plus multiple expansion opportunities, with management confidence in original synergy targets growing post-close. * Announced the off-market acquisition of Public Storage Canada, a high-quality third-largest Canadian self-storage portfolio concentrated in Toronto and Vancouver, for $1.2 billion. The Canadian market is significantly underserved with per capita supply 2.5 units, well below U.S. levels, and the transaction is accretive to long-term NOI, IRR, and FFO, while enabling lower-cost Canadian debt financing for part of the NSA acquisition. * Completed $450 million in contracted/under contract acquisitions year-to-date 2026, with 70% off-market and a large share of recently developed lease-up assets that offer higher long-term stabilized yields despite modest near-term FFO dilution. - PS Next Operating Platform & Digital Capabilities * Leading operational indicators have improved sequentially: average move-in rents are up 18% since Q4 2025, churn (move-out activity) is down 80% year-to-date, and occupancy and move-in rent performance both exceed 2025 levels. Favorable trends persist in coastal and Midwestern markets, with sequential improvement in Sunbelt markets as new development slows and demand holds steady. * 90% of customers interact digitally during their rental journey, and 75% complete their full lease digitally, with the company app downloaded over 7 million times. This digital infrastructure creates industry-leading proprietary datasets for capital allocation, data science, and machine learning initiatives. The new AI customer service agent Ellie has already handled over 90,000 customer interactions, resolving needs using proprietary data and models. - Organizational & Cultural Transformation (PS 4.0) * Launched a new owner-focused culture in 2026 centered on customer obsession, empowerment with accountability, and performance-aligned incentives. The company recently moved its headquarters to Frisco, Texas, with new office space coming for the Southern California team and the new NSA team based in Denver, with strong employee engagement across the organization. * Expanded customer feedback programs, growing monthly survey responses from 2,000-3,000 to 90,000, enabling faster issue resolution and improved customer experience that has driven lower churn and higher sentiment. Machine learning-based staffing models have reduced total work hours by over 30% since inception while increasing pay for field staff and generating ongoing payroll savings. - Balance Sheet Strength * Completed or committed $12 billion in capital markets activity year-to-date, strengthening liquidity and financial flexibility. Net debt to EBITDA stands at 2.9x, net debt plus preferred equity to EBITDA is 4.2x, and the company holds A/A2 credit ratings from S&P and Moody's, one of only two REITs with this top-tier rating. Available liquidity totals $3.8 billion plus $600 million in annual free cash flow.

Guidance

- Public Storage raised guidance across all key 2026 metrics, with improvements driven by better-than-expected same-store performance, lower interest expense, and stronger non-same-store contributions. - Full-year 2026 same-store revenue growth midpoint is now -0.2% (up 90 basis points from prior guidance), and same-store NOI growth midpoint is -1.1% (up 110 basis points from prior guidance). Management still expects Q2 2026 to be the low point for year-over-year growth, with sequential improvement in Q3 and positive same-store revenue growth in Q4 2026. - Key updated assumptions: new move-in rents are now projected to be positive low single digits (up from prior expectations of down mid single digits), and full-year occupancy is projected to be up 30 basis points YoY (up from prior expectations of flat occupancy). - The LA County rent restriction expiration (July 1 2026) is now expected to create a 50 basis point headwind to 2026 same-store revenue growth, an improvement of 30 basis points from the original 80 basis point projected headwind. - Core FFO guidance is raised to $16.75 to $17.05, with a $16.90 midpoint, a 22 basis point (1.4%) increase from prior guidance. The combined NSA and Public Storage Canada transactions are expected to add 2 cents per share to 2026 core FFO, up from the prior assumption of neutral impact, with larger expected increases in 2027 and beyond.

Segment performance

Same-store segment: Revenue declined 0.6% YoY and NOI declined 2.2% YoY, both above internal expectations. Average move-in rents turned positive at +1.6% YoY (the first positive reading for both move-in rates and occupancy since 2021), and occupancy hit 92.5%, up 0.2% YoY. Expenses grew 4.4% YoY, driven by timing-driven property tax increases, offset by payroll savings from machine learning staffing models. Non-same-store segment: NOI grew 22% YoY, and ancillary businesses grew 15% YoY, continuing to be a substantial repeat driver of shareholder value. Lending platform: Total outstanding loans grew to $173 million, up $30 million quarter-over-quarter, at an average current rate of 7.6%. Third-party management: Added 22 net new properties in Q2, bringing the total managed portfolio to over 460 properties. Development pipeline: Grew to $692 million across 47 projects, targeting 8% stabilized yields, with $432 million in remaining unfunded capital.

Risks & headwinds

- Sunbelt markets continue to face year-over-year revenue declines as they absorb large amounts of new supply added in 2021-2022, with improvement expected to be gradual and uneven through 2026, and most markets not expected to return to positive year-over-year growth until 2027. * Lease-up acquisition assets carry modest near-term FFO dilution, even as they offer higher long-term returns. * Gradual recapture of LA County rent following the expiration of restrictions could lead to a small temporary decline in LA occupancy as rates rise to market levels, partially offsetting near-term revenue gains. * Recovery of operating trends and demand growth is uneven across markets, with no guarantee of continued sequential monthly improvement after the Q2 2026 inflection.

Analyst Q&A

• Q: How quickly can Public Storage recapture revenue after LA County rent restrictions expire, and how much upside is available? /

  A: Management is taking a measured, phased approach to raising rates to market levels, not immediately hiking rates for all existing and new customers. 30 basis points of the 90 basis point 2026 guidance increase already comes from LA. The company left ~70 basis points of same-store revenue growth on the table in 2025 and expects to recapture it gradually, with robust underlying demand and supply fundamentals supporting future upside heading into 2027.

• Q: What new opportunities have been identified during NSA integration, and have synergy estimates changed? /

  A: Integration planning has already identified multiple expansion opportunities for existing NSA assets, with one expansion already approved by the investment committee. The team also found 14,000 idle units that can be brought back online and contribute incremental revenue in H2 2026. The smooth overnight system transition has given management full visibility into operations, increasing confidence that the original synergy roadmap will be met or exceeded, with no changes to near-term neutral core FFO guidance.

• Q: What is driving the large reduction in churn, and what customer experience changes have been most effective? /

  A: Lower churn is partially driven by a mix shift of longer-tenured customers staying in units, which is a lagging effect of past lower move-in rents. The largest driver is a new, more customer-centric approach that prioritizes collecting and acting on customer feedback. Monthly customer survey responses grew from ~2,500 to 90,000, enabling faster local resolution of issues and a more reliable customer experience, which has improved sentiment and increased length of stay.

• Q: How does Public Storage balance near-term dilution from lease-up development/acquisition assets against long-term growth, and what is the size of this opportunity? /

  A: The company targets lease-up assets in favorable micro markets with strong long-term demand dynamics, and leverages its operating platform to drive faster lease-up than competitors. While these assets produce modest near-term dilution, the long-term stabilized yields are attractive and deliver stronger long-term earnings growth. Management is comfortable continuing to add these assets alongside higher-occupancy acquisitions, with no hard threshold for how much of this product the company will add.

• Q: What demand tailwind do millennials and Gen Z provide, and is it already visible? /

  A: Millennials are already Public Storage's largest customer cohort, and they use self-storage at higher rates than prior generations at the same age, with Gen Z following this pattern. This demographic trend is a 10-15 year demand tailwind that is already visible in today's operational results: positive YoY move-in rates and occupancy, the first time both have been positive since 2021, reflects this steady demand growth alongside other industry trends.