Extra Space Storage, Inc. Q2 2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to the Extra Space Storage Inc. Q2 2026 Earnings Conference Call. After today's prepared remarks, I will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Jared Conley, VP of Investor Relations. Jared, please go ahead. Thank you, Connor.

Welcome to Extra Space Storage's second quarter 2026 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filing with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, July 29th, 2026. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call.

I would like to now turn the call over to Joe Margolis, Chief Executive Officer.

Thank you, Jared, and thank you everyone for joining today's call. In addition to our CFO, Jeff Norman, I am joined today by our President, Noah Springer. I am pleased to report a strong second quarter for Extra Space Storage. We delivered core FFO per share of $2.15, representing a 4.9% year-over-year growth, a result that reflects both the quality of our platform and the improving operating environment. Our same-store revenue grew by 2.4% in the second quarter, exceeding our internal projections and accelerating from the first quarter. Occupancy ended the quarter at 94.2% as our systems effectively balanced rate and occupancy to optimize revenue across the portfolio. The pricing power we have been building over the past several quarters is now clearly flowing through our results. With same-store expenses declining modestly year-over-year, same-store NOI also accelerated, demonstrating the leverage in our operating model.

We are seeing broad-based improvement across many of our markets, supported by steady customer demand, strong retention of existing customers, and gradually moderating new supply. While new customers still exhibit some price sensitivity, we continue to capture a disproportionate share of the market due to our best-in-class digital marketing, pricing, and operating systems. The rate gains we established throughout 2025 and into 2026 are now embedded in our revenue base, and we're encouraged by the momentum heading into the second half of the year. Our company, built around operational depth, cutting-edge technology, financial flexibility, and diversified growth channels, is well positioned to continue to outperform the industry. With that, I'll turn it over to our President, Noah Springer, to discuss our external growth initiatives.

Thank you, Joe. Our external growth platform continued to perform well across multiple channels in the second quarter. In the acquisition market, we were both disciplined and active. We closed 18 stores for $91 million, almost all of which were off-market transactions. Our scale, reputation, and longstanding relationships give us broad access to deal flow. We're seeing many opportunities. That said, asset pricing remains elevated. We're maintaining our underwriting standards and staying disciplined with a focus on long-term accretion rather than chasing volume. We have significant growth capital to be opportunistic. We will continue to use our balance sheet and joint venture structures as part of our external growth strategy. We take pride in being strong capital allocators. We will remain focused on opportunities that enhance portfolio quality and generate accretive returns for our shareholders. Our bridge loan program had another strong quarter.

We originated $141 million in new loans and ended the quarter with approximately $1.5 billion in outstanding balances. The bridge loan program creates value on multiple levels. This program generates attractive interest income in addition to earning management fees and tenant insurance. Finally, the program creates a natural pipeline for future acquisitions as we continue to consolidate our fragmented industry. Third-party management also delivers similar benefits. We added 67 stores during the quarter with net growth of 48 stores, bringing our year-to-date net growth to 108 stores and our total managed portfolio to 1,964 stores at quarter end. The steady demand for our management reflects what owners experience firsthand. Our platform consistently drives superior property performance through operational expertise, sophisticated revenue management, and technology infrastructure that scales across more than 4,400 stores. Now, I'll turn it over to our CFO, Jeff Norman.

Thank you, Joe and Noah. Our FFO growth of 4.9% exceeded our internal forecasts and was driven primarily by store-level performance. Year-over-year same-store revenue growth accelerated 70 basis points from the first quarter to 2.4%. Same-store NOI accelerated 230 basis points, increased 3.5% year-over-year. Same-store expenses decreased modestly year-over-year with all major categories at or better than our internal expectations. Our discipline translated directly into accelerated NOI growth. Our ancillary businesses also contributed to our FFO outperformance. Net tenant insurance income exceeded our forecasts due to stronger penetration and lower claims volume. Interest income was also ahead of estimates due to modestly higher interest rates and higher than modeled loan retention. Our low leverage balance sheet remained strong, with significant access to capital. At the end of June, we priced a $550 million bond offering at 4.9%, which settled the first week of July.

Proceeds for the offering were used to pay off our first bond maturity on July 1st. Today, we have roughly $2 billion available on our revolving lines of credit. Net of amounts held available as a backstop for our commercial paper program, which gives us significant flexibility to move quickly on investment opportunities. Shifting to guidance, last night, we raised our full year 2026 FFO outlook. Our core FFO is now expected in the range of $8.25-$8.40 per share. We raised same-store revenue growth guidance 100 basis points to a range of 1%-2%. We also raised our same-store NOI guidance 200 basis points to a range of positive 0.5%-2.5%. We refined our L.A. price restriction assumption, Our updated guidance reflects approximately 20-30 basis points of headwind for the full year compared to our initial estimate of 40 basis points.

In summary, we are having a solid summer leasing season. Same-store NOI and core FFO are both ahead of expectations. Our balance sheet is strong and prepared for additional future growth, and we continue to benefit from having the strongest team, portfolio, and platform in the industry, which all have contributed to our results. With that, Operator, please open the line for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, again, please press star one to raise your hand. To withdraw your question, press star one again. We also ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. All right. Your first question is from the line of Michael Goldsmith with UBS.

Good afternoon. Thanks a lot for taking my question. The same-store revenue growth in the first half of 2% is equal to the high end of your updated 2026 guidance, implying a deceleration in the back half. One, what would drive a deceleration in the back half? Two, did you change any of your assumptions for the back half outside of updating for L.A.? Thanks. Yeah. Thanks, Mike. You're spot on that depending on where you are in the range, the high end it implies that same-store revenue growth is similar to that of what we experienced in the first half of the year, and that at the low end of the range, it implies some deceleration.

A couple of factors play into that. The first is, as we move deeper into the year, we do experience more difficult comps, so we're mindful of that. Second, while we haven't seen any change in customer health, be it existing customers or new customers, they're all performing consistently as they have been throughout the year. We're not unaware of the headlines and some of the macro risks related to the customer out there. We read a lot about consumer confidence being low, about there being pressure from inflation and other macro forces.

We feel like those risks are appropriate to factor into the range. All of that said, we factored those into our original range and didn't feel those specifically in the first two quarters. So far, really not felt them in July. July was quite similar to June. To the extent that those don't materialize, it presents an opportunity with the guidance, but we think the prudence is reasonable given those macro factors.

Got it. Thanks for that. Since you brought it up, can you give us an update of what you're seeing so far in July? It sounds like it's been pretty similar to June, but would love to get your thoughts on the metrics. Thanks. Sure, Michael, this is Joe.

July was a good month for us. Just as a comparison, in June, we were slightly ahead in rate year-over-year, but we're slightly behind in occupancy. In July, the system flipped that. We're now slightly ahead in occupancy and slightly behind in rate. This is a great example, I think, of our systems using different levers to optimize performance over the long term. The net result of that is so far through however many days, we are slightly ahead of our budget in July. We're having a good month.

Thank you very much. Good luck in the back half.

Thank you. The next question is from Michael Griffin with Evercore.

Your line is open. Please go ahead.

Great, thanks. Joe, I know you touched on this a little bit in your prepared remarks, but I'm just curious if you can expand on the customer demand side of the equation. Has top of funnel improved at all? Has the pie expanded? Are you still just sort of competing against the same customer base? As you look at this inflection and acceleration in same-store fundamentals, is it mostly driven by a moderating supply picture, or is there anything from sort of organic customer demand that you're seeing that gets you incrementally more positive?

Yeah. Our view is that customer demand is steady. We haven't seen any pickup in the housing market. We don't see any indications through our various channels that there's more customers out there. Our systems are able to not only capture more than our share of customers, we've had the highest occupancy at the highest rates in the industry for many quarters and years now. We're also capturing better quality customers through some of our channel pricing and other strategies. I think the short answer is demand is steady, performance is improving because of the continued reduction in supply, and our systems are optimizing what's available in the market.

Thanks, Joe. That's certainly some helpful context. Maybe one next for Noah on the transaction market. Can you just give us a sense of whether it was the deals you closed this quarter, sort of how we should think about those on either a cap rate or an unlevered IRR basis? Then talk a little bit about the competition that you're seeing, the interest from private capital, just as it relates to kind of institutional self-storage quality product. Thank you. Sure, Griff. Thanks for the question.

What we're seeing is the market out there continues to be a little expensive. Where cap rates are coming in on the broker deals tends to push us towards our proprietary pipelines that we have. We continue to close deals that are relationship deals, that are managed deals, and that are joint ventures and bridge loans. We tend to go to those because as those deals come up and they're ready for us to harvest, they end up being great deals for us and for our partners. Kind of the whole idea of all of those pipelines that we have. Quite a few of the stores, in fact, the majority of the stores that we closed this quarter, were from a relationship deal that we had, and we're happy with that and happy with the accretion that we got from those stores.

We'll continue to look towards that as the market tends to be a little more expensive than we want to do on the brokerage side.

Great. That's it for me. Thanks for the time. Thanks, Griff.

The next question is from Todd Thomas with KeyBanc Capital Markets. Your line is open. Please go ahead.

Yeah. Hi, thanks. I wanted to ask, Joe, you talked about the July trends, mentioned that the comps get a bit more difficult in the second half. Do you see potential for move-in rents to move ahead year-over-year again in the back half of the year? You sort of mentioned the combination of the slightly higher occupancy, the slightly lower move-in rents in July, the combination of that, you're still tracking ahead of plan. Is that an environment, longer term, in which revenue growth can continue to improve generally from these levels?

Sure. There's a lot of factors that can lead to revenue growth. As you point out, rate and occupancy are two of the most important ones, but there's others, such as ECRI, unit mix optimization, other tools we have to have positive revenue growth.

Okay. I wanted to also ask about the New York City settlement. I was just curious if there are any implications or any additional considerations from that suit, or is that in the rear view mirror at this point? Can you also comment separately on the licensing and registration requirements for operators in New York City? Curious to get your view around the impact that has on the industry, whether you think it could ultimately sort of strengthen the competitive positioning for some larger, well-capitalized players, or whether that's sort of a net negative potentially. Just curious to get your thoughts on that.

Sure. Just to set the table what we're talking about, there was a claim made against us by New York City based on 117 complaints they got over three years. We had 130,000 customers over those three years. We continue to vigorously dispute those claims. We do not agree with them at all. That being said, we were forced with the choice of entering a lengthy litigation process in New York City or settling this case for $1.7 million and putting it behind us, and we felt the best thing for our shareholders was to take out the uncertainty and put this behind us. We have settled the case. There's no repercussions or reverberations that we see or have felt elsewhere in the country or in New York. This matter is now behind us.

With respect to the second part of your question, all self-storage operators in New York City will be required to have a license on, I think, August 24th of this year. We are prepared to file the papers, pay the very modest fee, and get licensed. In connection with that license, there will be a series of requirements of how you have to operate. We, the industry, are still waiting to see the final list of requirements that will come with that. I guess all I could say is, one, they'll apply to everyone, so it'll be an even playing field, and two, we will comply with the law.

Okay. All right. Thank you.

Sure. Thanks, Todd. The next question is from Brendan Lynch with Barclays.

Your line is open. Please go ahead.

Great. Thanks for taking the questions. Jeff, just wanted to follow up on your commentary about macro risks and consumer confidence. Sounds like you're being a little bit conservative in guidance because of the potential for those risks to emerge. The question is, in the past, when we have had situations where the macro environment did deteriorate or consumer confidence started to wane, how quickly did you see that in actual customer behavior? How quickly did it impact the same-store NOI results?

Good question, Brendan, I hate to give you a mushy answer, it depends. As we've looked at different types of economic stress and different types of cycles, they haven't all performed the same. In general, we've seen demand hold pretty steady and in some cases even accelerate through some of those types of environments because life transitions give rise to storage, and sometimes economic strain can cause more life transitions. From a demand standpoint, it's generally been steady to even accelerated. On the other hand, you may also deal with vacates. We have not seen elevated vacate activity in our stores. In fact, our length of stay continues to elongate as we think of our in-place customers on a year-over-year basis. It's about one and a half months longer than it was last year.

We haven't seen it yet, but as you see all these headlines out there, as you look at what the consumer is facing, we certainly think it's a reasonable risk to be mindful of. To your point, we have not felt it in our customer behavior year to date. If that continues to be the case, that assumption would potentially prove conservative.

Great, thanks. That's helpful. Maybe just to follow up on that, in terms of length of stay, that's certainly an improvement. I think we've seen some other improvements in customer quality in terms of churn and lower bad debt, higher occupancy in the off-season. How much further do you think you can go in terms of improving the average customer's behavior in the portfolio and to kind of just maintaining that customer relationship for a longer time to benefit from their stay in your facilities?

Yeah, that's a very good question, but also a hard one to answer. I don't know if we have a goal for length of stay or any of these other metrics, but our scale and the amount of data we have allows us to continually test ways to optimize performance. How do we get a better customer? How do we keep them longer? Just all kinds of different metrics. I can say with confidence we continually try to improve across all of these metrics. We have been improving. We have a good track record, but I don't know how far we have to go.

Okay. Very good. Thank you.

Your next question is from Ronald Kamdem from Morgan Stanley. Your line is open. Please go ahead.

Hey. Just two quick ones. Just starting on the expense side, really it looks like outside of property taxes, most of the line items was down, driving that sort of negative growth. Just thinking sort of long term about what more opportunities do you have on the expense saving side, and is there a scenario where expense growth can be lower than inflation?

Yeah. Thanks for the question, Ron. We're really pleased with what we've seen on the expense side this year and how we've been able to continue to leverage our scale to become more efficient. I know you'd mentioned long term. I'll start with the year. As you look at the run rates we've had year-to-date in the first half what we're guiding to for the full year, it implies that we stay in those sub-inflationary ranges, which we view as a real positive, especially in the face of some of the less controllable line items like property taxes, as you mentioned. Long term, while we won't guide or forecast into future years, I think that scale advantage and the efficiencies that it drive will continue to be an operational advantage for Extra Space. I anticipate that we can continue to leverage those opportunities.

One specific one maybe that I'll call out is on the insurance expense line item, we have a mid-year renewal, which we've completed, that was very favorable. It was only applicable for the month of June within the second quarter, and you can see the positive impact that that negative year-over-year change in our premiums had, and that will continue to flow through the rest of this year and into 2027. Several reasons to be optimistic on the expense side looking forward.

Great. My second question was just back to the external growth. Obviously, the acquisition guidance went up. I guess I'd just love to hear what you're seeing in the market in terms of cap rates, in terms of expected IRRs and so forth. I think historically, you've talked about just pricing really not making a lot of sense for you guys to be really sort of aggressive and so forth. Just curious if that's still the thought and how you guys go about it. Thanks. Yeah. We're looking at our underwriting discipline and continue to stay very disciplined in that.

While asset pricing remains elevated, when we say that, I would say in anywhere from A to C markets, you're probably somewhere from the high fours to the high fives, if you want to look between those markets. Where we look at that, we're going to continue to harvest deals from our proprietary pipelines where it makes sense for us and where we continue to have deals that accretes us over our cost of capital.

Thanks so much. Thanks, Ron.

The next question is from Samir Khanal from Bank of America. Your line is open. Please go ahead.

Good afternoon. Jeff, I'm sorry if I missed this, but on the move-in rates, I know you excluded L.A., but just curious, where would that have been if L.A. was included? Just to confirm, did that have much of a benefit for you in 2Q?

Thanks for the question, Samir. We recognize that that number is one that is viewed not only to model our actual performance, but as a proxy for overall new customer health for our portfolio and across the industry. To include L.A. County, which is artificially regulated, doesn't make a lot of sense from our perspective because you're going to be comparing apples and oranges a little bit, especially as you think back to your comp period last year when those restrictions were in place. I won't provide a full portfolio number, but I can tell you that internally, we think of it the same way. We are not using that data. We're focused on it sans Los Angeles County because that's really the best proxy for what we're seeing across the portfolio.

Okay. I guess, Joe, certainly positive comments around the supply side of things. Maybe elaborate kind of which markets are seeing less supply, given that demand is steady here. Thanks. I think you're seeing lower supply in almost all markets.

Now, that doesn't mean that when there's still stores being delivered, and in that micro market, when we talk about self-storage markets, we're talking about very, very small areas. That's bad for that market and negative, but when we talk about MSAs and large markets, I think you're seeing a decline in deliveries in almost all MSAs.

The next question is from Jack Armstrong with Wells Fargo. Your line is open. Please go ahead.

Hey, good afternoon. Thanks for taking the question. Can you characterize your ability to push ECRIs into the back half, particularly following a couple of quarters of lower churn and extended lengths of stay?

You're a little garbled in the question. It might be a systems problem. Do you mind repeating the question?

Yeah, sorry. Hopefully this is a little clearer.

That's better. Can you characterize your ability to push ECRIs in the back half?

I think the question is about pushing ECRIs in the back half of the year. We take a longer view on ECRIs and don't try to maximize in any one quarter or two quarters because customers are extraordinarily sticky. When we test different ECRI levels, we don't see increased move-outs even with increase in ECRI. That being fair, we need to have a long-term, fair, sustainable program, and that's what we seek instead of maximizing ECRI.

Okay. That's helpful. Thank you. How should we be thinking about the growth in the bridge loan business going forward? Is $1.5 billion where you're comfortable keeping that book, or do you plan to grow further from here?

Yeah. The $1.5 billion I think is a good number for us. I think we'll continue to see it there. If we want to flex up or down, we can always sell the A's or hold the A's a little bit longer. Where we are currently, I think that's a good spot for us.

Okay. Helpful. Thank you. Thank you.

Next question is from the line of Eric Wolfe with Citi. Your line is open. Please go ahead.

Thanks. It's Nick Joseph here with Eric. In the release, Joe, in your quote, you mentioned that you're never satisfied. I was wondering if there's any meaning or anything you're trying to convey with that quote, kind of on the go forward in terms of any changes, either technology or M&A or kind of broader thoughts on the business to keep driving the results.

Yeah. Thanks for the question. I think what's important to understand about Extra Space is we're constantly trying to sharpen our tools. We're constantly innovating. We're using our data and technology to test, and it's really a lot of small gains. We're getting a little bit better at this, a little bit better at that. I'm not in any way announcing brand-new Extra Space or any big changes. Certainly want to give the impression that we're never satisfied with our systems and our technology stack and our processes, and we're always trying to get a little bit better, and I think it shows up in the results.

Thanks for that. This is Eric. Had a bit of a specific question. You talked in the beginning about the acceleration you saw in the first half on same-store revenue. Obviously got into a little bit of deceleration in the back half. I guess given the boost from L.A., is it not possible that we see a third quarter sort of acceleration from the second quarter? Maybe if you could just share, for the back half of the year, how much L.A. should boost same-store revenue growth, just in the back half.

At the beginning of the year, we estimated that the restrictions in L.A., if they were in place for a full year, would provide a 40 basis point headwind. Right around mid-year, they were lifted, but we don't get the whole benefit from that exactly on the day they're lifted. Now we're estimating it's a 20-30 basis point headwind as opposed to a 40 basis point headwind. Some help, but not very significant.

Okay. I guess the other part really was just on third quarter. I know everyone always tries to set up things to beat outperform. Is there sort of a path, either in occupancy or ECRIs, everyone just pays attention to move-in rates, where sort of same-store revenue could accelerate in the third quarter, or is that just sort of an unlikely thing to happen?

Yeah. Good question, Eric. I appreciate the way you asked. I think there is perhaps too much focus singularly on new customer rate as the only driver of revenue. As we've talked about on the call, there's multiple other levers. In short, there's always an opportunity to continue to accelerate revenue. We haven't necessarily guided to that, but it is certainly possible.

Okay. Thank you. Thank you.

The next question is from Brad Heffern with RBC. Your line is open. Please go ahead.

Yeah. Thanks. Hey, everybody. Talked in the past about how the last few peak seasons have been sort of truncated, and the explanation has generally been the lack of housing mobility. I'm curious, did you see any difference in the shape of the curve, or the strength of the peak this year?

Good question, Brad. No. I would say no different than what we've seen in the last couple of years in a row, and very much in line with our expectations. We guided to, modeled, and assumed that we would have no material catalyst from a demand standpoint through the summer leasing season, and I think it's played out in line with that expectation.

Okay. Got it. On the recent move-in rates and occupancy, it sounds like the combination's been pretty flat in June and July. I think the traditional wisdom is that you see the same-store revenue converge with move-in rates on maybe a 12 or 18-month lag. I'm wondering, do you think this increase that we've seen into the mid twos on same-store revenue is just because you had those high move-in rates last year, and that it's more inclined to go back to flat just based on where the leading-edge move-in rates are? Am I thinking about that wrong? I know there's tons of things that affect revenue besides move-in rates, but just all else being equal.

I think your thesis is correct that if you look at new customer rates in prior periods, they roll into the rent roll, and that gives you a sense for future revenue growth. It is only one component, and as we spoke earlier on this call, there's other components that could provide positive revenue growth in future periods, even if you have several periods of flat rate growth.

Okay. Appreciate the thoughts. Thanks.

Sure. The next question is from Victor Fadiv from Scotiabank.

Your line is open. Please go ahead.

Thanks. Yeah, I wanted to follow up on these move-out trends because it appears that the low housing mobility environment is actually becoming a benefit rather than a headwind, with customer stickiness, longer lengths of stay, and muted move-outs more than offsetting weaker move-in activity. How sustainable do you believe this dynamic is, and what specific actions are you taking to maintain these strong retention levels, particularly given that some of your peers are having lower occupancy levels, they may be more inclined to compete aggressively on price?

Agree with your point that the reduction in moving customers from a peak of low 60s to about 55% now has largely been replaced by customers who tell us they're storing because they lack space for their goods. The expected length of stay of those customers is at least twice as long as the moving customers. That is the benefit of the downturn in the moving, of the slowness in the housing market. The second part of the question, what are we doing? Well, you need to provide an excellent customer experience at the store. Our customer satisfaction rates are in the low 90%. Important part of that is having a manager there to make sure the store is clean and have a relationship with the tenant and address their concerns.

When the tenant gets a rate increase notice, our store managers and call center agents are empowered within certain bounds to address any concerns a customer have. We end up with about 16% of our customers who get rate increases, getting some level of relief, and staying in the store through that. That helps us retain customers. Sorry, I'm going to repeat myself. I think it all falls under providing a good experience for the customer and making them want to stay and not seek there. Most of our customers, 76% of our customers when they leave, it's because they don't need storage anymore. It's really hard to save those customers if they don't need the product anymore. The other ones, we can focus on providing a good experience to.

Makes sense. Then, the second question, which markets actually contributed most to their Q2 outperformance versus your initial expectations heading into 2026?

Victor, sorry for what will sound like a vague answer. It really was across the board. We saw general outperformance and some of the stronger markets, in terms of total same-store revenue growth, also had the strongest outperformance. As you think of some of the Midwest markets, D.C., Boston, Chicago, Richmond, Virginia, San Diego, California, across the board, we had a number of markets outperform.

Thank you. Thanks, Victor. The next question is from Michael Mueller of J.P.

Morgan. Your line is now open. Please go ahead. Yeah, hi.

Thanks. Joe, given your comments about not focusing just on move-in rates, do you think you have the mathematical ability to kind of get back to a 3% same-store revenue number without a substantial lift in street rates in a flat occupancy world?

To get to 3% without improvement in occupancy or rate, I think would be difficult.

Okay. Do you have a sense as to, I guess, how much of a lift we need to see in street rates to kind of get you back to that level?

I think there's a lot of variables, to say, to plug in one piece of the formula is difficult without knowing what the others are.

Okay. Thank you. I feel like I've given you an unsatisfactory answer.

We believe if supply continues to decrease and we don't have any significant change in customer, the risks of which Jeff outlined, we think we can get back to kind of historical levels of revenue growth between 3% and 4%. I don't know the time period. Our guidance doesn't suggest it's going to happen this year. We're certainly in the recovery stage of the storage cycle, and I would expect that's where we end up.

The next question is from Juan Sanabria of Bank of Montreal. Your line is open. Please go ahead.

Hi. Good afternoon or good morning. Just a question with regards to the slope of same-store revenue expected in the second half. Should we be thinking with an eye towards the exit run rate or how you'd start 2027, that the growth in same-store revenues is getting smaller because of the comps, or that's not necessarily how we should be thinking about it? Any comments on the slope or the exit run rate would be extremely helpful. Thank you. Yeah, apologize for being repetitive, Juan.

It will depend where you are within the range, right? If at the high end of the range, you would imply flat slope heading into 2027. At the bottom end of the range, it would imply some deceleration into next year. If we outperform our range altogether, that would imply acceleration into 2027. We will stick to 2026 for now and let you all forecast 2027 and beyond, but we agree that the slope heading into it will largely impact performance in 2027.

I guess another way to ask it, are the comps tougher in the fourth quarter than the third quarter because of move-in rates last year? Just if you could remind us on how we should think about that.

Yes, the comps do become more difficult, whether it's thinking of new customer move-in rate or even just revenue altogether. We started to accelerate revenue beginning the fourth quarter last year, yes, the comp does become more difficult.

Okay, great. Just my final question, have you guys leaned on ECRI as either cadence or % increases in any noticeable or material way? Have ECRI grown this year as a contribution to same-store revenue versus last year, versus initial guidance or expectations?

No. Absent some testing we're doing, there's been no change in our ECRI policy.

Yeah. One, this is getting really on the margins, but the only one that I'd point out is with our original guide assumed full-year restrictions in Los Angeles County. With that being lifted, on the margins, a little better in the back half of the year.

Got it. Thank you. Thanks, Juan.

The next question is from Spenser Glimcher of Green Street. Your line is now open. Please go ahead. Thank you.

Just one on the regulation front from me. How dependent is EXR's revenue management system on consumer specific data versus broader market level inputs? And how concerned are you, if at all, that additional legislation regarding surveillance pricing might impede rate algorithms?

Yeah, not concerned. Our algorithms are focused on historical data we have for how a certain market and store performs, vacates, rentals, demand at different times of the year, and not any individual customer data or observations.

Okay. That's very helpful. That's it for me. Thanks, guys. Thanks, Spencer. Thanks, Spencer.

The next question is from Omotayo Okusanya of Deutsche Bank. Your line is now open. Please go ahead. Hi. Yes.

Good morning out there. Congrats on a solid quarter. In terms of just this recovery story that I think we're all kind of looking forward to, curious if you could share any thoughts, just July, beginning of 3Q, and the kind of some of the operating trends you're seeing, whether DN US kind of seeing occupancy holding up, whether you're kind of seeing improvement in street rates. Just any comments that you can at least just make to start off the third quarter?

Yeah. It's Jeff. As we mentioned earlier in the call, it looks a lot like June from a performance standpoint. I think Joe outlined a little bit that we've swapped a little bit of occupancy for a little bit of rate on the margins, and so far with a few days left in the month, we're on pace to modestly outperform our revenue expectations. Continues to be favorable in July and looks a lot like the second quarter.

Gotcha. Then on the third party asset management side, again, increasing store count, but you guys slightly reduced guidance on management fees. Is anything changing there? Is the economics of the third party asset management changing from your contract? Just curious any thoughts there.

Yeah. Thanks, Tayo. No big change at all. In fact, with this business, there's ups and downs where portfolios sell and portfolios come in. Beginning of July, there was a portfolio that sold, not concerning to us. We continue to add properties. We're over 100 properties net so far this year. The benefit of this program is that there's a lot of owners, and the owners have less than two stores on average per owner. Most of the time, if anybody adds or leaves, it's onesies and twosies that we add or that disappear. There was one that we had go beginning of July, and we'll continue to add and continue to feel very strong about the program. No material change whatsoever. Thank you.

The next question is from Ravi Vaidya from Mizuho. Your line is now open. Please go ahead. Hi there.

Thanks for taking my question. Hope you all are doing well. Can you describe the operational inflection and momentum that you're seeing in some of your Sun Belt markets? How have the street rates been trending, and where do you think same-store revenue for these markets could increase to absent a substantial demand recovery relative to the rest of the portfolio? Thank you. We are seeing improvement in some Sun Belt markets.

Austin, Dallas, Miami all turned positive in new customer move-in rates on a year-over-year basis, all improving markets, but not all markets. Houston, Tampa, still Phoenix, still difficult markets for us. That's not at all surprising. We don't expect the Sun Belt all to act the same. We don't expect markets within the Sun Belt all to act the same, and it is one of the reasons that our portfolio is designed to be broadly diversified across mostly primary and secondary growth markets. We know markets don't act the same at the same time, and the more diversification we can get, the more we smooth out our return series.

Ravi, if I could just add a thought there. I think that's one thing that makes us even more excited about our performance this year in general is relative to the market. We're a little overweight the Sun Belt, despite the drag from those markets that haven't had as strong a performance, we've still had pretty significant same-store revenue acceleration, at some point, those markets will continue to flip and accelerate and I think give another leg to that growth.

Got it. Thank you so much.

Thanks, Ravi. There are no further questions at this time.

I will now turn the call back to Joe Margolis, CEO, for closing remarks.

Great. Thank you, everyone, for your interest in our company. Our team is happy to report very solid results and the ability to raise guidance. These results stem from success across all aspects of the platform. Our stores are outperforming expectations. Our expense control is very positive, both at the store level and at the G&A level, and we're getting solid contributions from our ancillary businesses. We're encouraged on where we are in the cycle and confident that we have the machine to optimize results going forward. Thank you, and look forward to talking to you next quarter.

This concludes today's call. Thank you for attending.