CubeSmart Stock

Hello, everyone. Thank you for joining us, and welcome to the CubeSmart Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions]. I will now hand the call over to Josh Schutzer, Senior Vice President of Finance. Josh, please go ahead.

Thanks, Sara. Good morning, everyone. Welcome to CubeSmart's Second Quarter 2026 Earnings Call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session.

In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com. The company's remarks will include certain forward-looking statements regarding earnings and strategies that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements.

The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section of the company's annual report on Form 10-K. In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the second quarter financial supplement posted on the company's website at www.kepsmart.com. I will now turn the call over to Chris.

Thank you, Josh, and thank you, everyone, for joining us this morning. 2026 marks a year of inflection as we returned to positive growth throughout the year. Following a stabilization in operating fundamentals in 2025, we saw same-store revenues inflect positively in early 2026. Our base case expectation is for continued acceleration in revenues that will lead to a return to positive earnings growth in the second half of 2026, providing a strong setup entering 2027.

Our key performance indicators are flashing green, showcasing the resilience of the self-storage business and the value of having such a wide range of need-based demand for our product, benefiting us from not being overly reliant on any one source. Same-store revenues continue their positive momentum, reflecting the strength of our customer base the declining impact of new supply in many of our core markets and the quality of our portfolio and operating platform.

Macro volatility is impacting the U.S. consumer However, our customers' health remains strong with lower vacate activity, elongating lengths of stay and continued solid credit metrics. This environment continues to showcase the strength of our quality focused strategy with primary markets outperforming and showcasing their lower beta characteristics. We had a positive and productive spring and summer busy rental season, closing the occupancy gap to 2025 by the end of June, and that momentum has continued into July. Second quarter move-in rates for new customers at a year-over-year positive 1.7%, improved sequentially by 80 basis points and all other factors held constant, provides an attractive setup for the back half of the year and heading into 2027. There continues to be a wide dispersion and move-in rates for new customers across our major markets.

Strength continues in the Accella corridor, Austin, Stamford, New York and Philadelphia. In the Midwest, Chicago, Columbus and Cleveland, and very positive improving trends in our West Coast markets with our Inland Empire and Los Angeles properties exhibiting very strong sequential improvement and swinging second quarter same-store revenue growth on a year-over-year basis back into positive territory. With another solid quarter of sequentially improving trends we are optimistic for continued gradual recovery in our major Sunbelt markets. These markets are experiencing the most pressure from supply as well as macroeconomic factors impacting the consumer resulting in a challenging new customer pricing environment.

We have maintained our disciplined capital allocation strategy. During the quarter, we executed against several objectives we articulated earlier in the year. including a new joint venture, the continued execution of our share repurchase program and the recast and increased capacity in our credit facility, and I know Tim is very excited to share the details with you during his prepared remarks. As we come to the end of July, our rental volumes are elevated over last year.

As of July 30, our same-store physical occupancy is 91.1%, a 30 basis point increase over July 30, 2025. Our pricing algorithms have informed us that it is optimal to maintain seasonal pricing trends and build physical occupancy as we move into the fall. Self-storage remains a tremendously resilient business as we continue to benefit from the diverse set of needs-based use cases for the product even against the backdrop of volatile consumer confidence. We are optimistic about the outlook for our business, and we continue to see steady acceleration in fundamentals.

Our high-quality portfolio, our sophisticated operating SIMs and our customer service focused team are well positioned to continue to drive us forward as we inflect back to positive earnings growth in the second half of 2026.

I'll now turn it over to Tim for more details on the quarter and our positively updated guidance ranges. Tim?

Thanks, Chris. Good morning, everyone. Thanks as always. We appreciate you taking the time to join us on the call today. Second quarter results were reflective of the positive environment that Chris touched on. with broad-based improvement across most markets as demand trends remain steady, while headwinds from new supply continue to dissipate. Same-store year-over-year revenue growth accelerated from 0.6% in the first quarter to 0.8% in the second quarter.

Move-in rates grew 1.7% year-over-year, while the occupancy gap improved to flat by the end of the quarter. Those stabilizing trends and first half results led us to improving our full year same-store revenue guidance range to a new range of 0.5% to 1.25%, which implies at the midpoint, our expectation that same-store revenue growth will continue to accelerate in the back half of the year. Same-store operating expenses grew 4.4% over last year, in line with our expectations. As we previously discussed, we had some tough expense comps after 4 straight years of industry-leading expense control, especially in the first half of the year.

We modestly improved our full year guidance range for same-store expenses to a new range of 3.25% to 4.5%, reflecting our expectation of moderating expense growth in the back half of the year. Revenue growth of 0.8% combined with 4.4% expense growth, yielded negative 0.7% same-store NOI growth for the quarter. We reported FFO per share as adjusted of $0.63 for the quarter, which was at the midpoint of our guidance entering the quarter. As discussed last quarter, we continue to execute on our disciplined capital allocation strategy, looking for creative ways to create shareholder value in an environment that continues to have a disconnect between public and private market valuations. We announced last evening, a new joint venture with Titan, where we will be contributing 15 noncore assets to a newly formed joint venture in which will have a 20% ownership stake.

The contributed assets were identified as noncore, meaning either they were in isolated markets or they were in outer ring locations in core markets. This transaction allows us to unlock value at a market rate for these assets. continue to participate in upside potential through both future growth as well as fees with a partner, we have a very long and successful history with. It also improves the overall quality of our on-balance sheet portfolio. This initial transaction in the venture provides the seed portfolio with the opportunity to grow in the future, giving us yet another avenue for future external growth in addition to our on-balance sheet activity as well as our previously announced JV with CBRE.

Proceeds from the transaction will be used to fund share repurchases, giving us a leverage neutral opportunity to accretively invest in our shares as they trade at implied valuations that are disconnected from where high-quality storage assets are trading in the private market. We had additional share repurchases during the second quarter, totaling $42.5 million, bringing us to $75.8 million year-to-date, with much of that activity done with the Heitman JV in mind. The relative value of our portfolio has continued to make it our most attractive investment option.

On the third-party management front, we added 25 stores to the platform in the second quarter and ended the quarter with 872 third-party stores under management. Also during the quarter, we closed on our extended and expanded revolving credit facility, extending the maturity from February of '27 to June of 2030, we increased the capacity of the facility from $850 million to $1 billion and improve the pricing. A quick thank you to our entire high-quality bank group. We always appreciate your continued support. Our balance sheet is in great shape. We have a bond that matures next quarter, and we've been actively monitoring the debt markets and will continue to do so in the coming months.

The expanded capacity on the revolver, combined with no debt maturities in 2027 gives us a lot of flexibility as we navigate through the next several quarters. Details of our 2026 earnings guidance and related assumptions were included in our press release last evening. Big picture, operating fundamentals continue to improve across most markets. Demand trends are steady headwinds from new supply continue to dissipate. We saw improvements in move-in rates as well as occupancy levels and our customers remain strong with lower vacate activity, elongating lengths of stay and no change to credit metrics.

Our baseline expectation is for continued gradual improvement in top line growth for the balance of 2026. Our same-store expense guidance implies lower expense growth for the rest of the year. The midpoint of our same-store NOI range implies returning to positive growth in the second half of the year and the midpoint of our FFO per share adjusted guidance range also implies returning to positive earnings growth in the back half. So when you add it all up, we feel great about where we're positioned and see positive trends that are leading to a really nice setup for us in 2027.

Thanks again for joining us on the call this morning. At this time, Sarah, why don't we open up the call for some questions.

[Operator Instructions]. Your first question comes from the line of Michael Griffin with Evercore ISI. Your line is open. Please go ahead.

Great. Chris, in your prepared remarks, you talked about some key performance indicators in green. I was wondering if you can expand on that. I mean is this just really move-in rents getting better year-over-year as a result of maybe better comps, more moderating supply? Or is there anything on the organic demand side that you're seeing differently within the business right now?

Yes. Thanks, Michael. I think it's that full menu. We're seeing very good top-of-funnel demand with a diverse set of use cases for the product. We're continuing to see the existing customer health, as we mentioned, credit metrics, et cetera, be very positive. We're continuing to see those existing customers stay with us on their storage journey. A bit longer each as time goes by. We're seeing some good trends across the board strength in the East Coast and the middle part of the country. some improving green shoots in the Sunbelt on customers' move-in rates I think on the OpEx side, as Tim said, we're seeing the trends as we would have expected to get better as we go into the back half of the year.

So I think just broadly, I feel very good about where we are at this point in the year.

Chris. That's some helpful context. And then Maybe, Tim, I appreciate your prepared remarks around the new joint venture. Is there anything you can share in terms of pricing or cap rates that, that deal transacted at? And I mean it seems like the near-term priorities is share repurchases. I mean are you seeing anything. I know you had the recently formed joint venture earlier this year, maybe to go on offense in terms of JVs, it doesn't seem like wholly owned on balance sheet acquisition pencil, but just curious how you weigh kind of those proceeds being used for either share repurchases or potential acquisition opportunities in the future?

Thanks, Michael. Yes, I mean I consider the share repurchases in the transaction that we just announced with Heitman to absolutely be playing offense. It's playing offense in the context of the environment that we're in. It gives us a great opportunity to be consistent with our operating strategy of improving the quality of our portfolio. it allows us to take advantage of being able to contribute these assets at a market valuation, which I would characterize to your first question in the in the mid-5s from a cap rate perspective and being able to use those proceeds to take advantage of the disconnect of what we're seeing out there.

So that's a bit redundant to my prepared remarks, but that's the gist of the approach. And then -- and then again, it gives us yet another vehicle to look at future growth opportunities along with Titan. Now that we have this seed portfolio in this venture gives us yet another path. I think the -- the market is starting to open up, and we're ready to get to that part of the offensive playbook as well when the time is right for us.

Your next question comes from the line of Michael Goldsmith with UBS. Please go ahead.

Chris, in your prepared remarks, you sounded more optimistic than you've been in some time. So can you -- and then you also talked about accelerating into strength into 2027. So can you talk a little bit about what it is specifically that's driving that? And then also, if you could talk a little bit about the cadence as it creates that set up for next year.

Yes. Thanks, Michael. I am optimistic. The first part of the year here has been has been pretty strong and broad-based in terms of the demand. And I think, again, to my comment, I think we've lost a little bit of our focus on how resilient the business is. It's everyday acts of life that create an opportunity for a customer to experience the joy of self-storage. And so I think we're just seeing that. I think we also have maybe lost a little bit of the focus on the fact that the number 1, 2, 3 issue for our industry is and always has been supply. And I think what we're experiencing is we're really starting to see the benefits of that of that reduction and the impact of supply in many markets, right?

I can pick to Cape Coral Florida, which may take years and years to finally overcome the burden of the amount of new deliveries there. But as you take it broadly across, we're starting to positive about the direction that we're moving here at Cube. I think we're also obviously seeing the positive impact of the high quality, highest quality portfolio that we have. And I think that portfolio...

[Technical Difficulty]

Ladies and gentlemen, we are experiencing some technical difficulties. Please hold.

Ladies and gentlemen, thank you for your patience. We will now resume the broadcast. We have Michael Goldsmith on the line.

Mike, I'm not sure when -- first of all, let me apologize for the technical problems, but we're back. I don't know when I was disconnected there, Michael, because I was on fire. But to just, I think, pick up on the back half of your question on cadence of timing. I think as we're not going to take a date specific, I think we see trends that have been very positive and those positive trends continuing. So whether that's at some point in the third quarter or the fourth quarter on average over the last half of the year, we do see a return to both positive cash flow growth and positive earnings growth.

Your next question comes from the line of Spencer Glimcher with CubeSmart. Please go ahead.

Spencer, I don't know this can get any funnier, but I don't know when you joined CubeSmart, welcome. Your onboarding will be next week. We'll have a little orientation.

Well, naturally, I have no questions then. Still one for me. Look, regulation efforts aren't new to this sector, but there has been slightly more success in passing through legislation on pricing transparency and I just want to get your thoughts on the impact of the recent legislation passed in New York regarding surveillance pricing and whether or not this affects how you set prices of New York Metro.

Yes. Thanks, Spencer. So the CubeSmart way, if you just think about how we operate is we strongly in all -- with all of our stakeholders and all of the municipalities in which we operate or wish to operate. We believe in an open professional, responsible and reasonable dialogue with our stakeholders in those municipalities, whether that be around a proposed new development of self-storage and having a discussion about certainly why we would believe that self-storage in that location is an ideal use or whether it be how we operate our stores in those markets and getting that feedback.

So the reality is often but not always, those are productive and healthy dialogues where we see everybody's point of view. And so specific to New York, but frankly, any municipality in which we operate. As long as that dialogue exists in a responsible and open way, we obviously want to listen to the points of view of the stakeholders and we want to share our point of view with the hope we get to a reasonable place. And as often in those discussions, it's ideal if both parties feel like they didn't get everything they wanted, but we reach a good meeting of the mine.

So I think that specifically relates to that pricing, we will continue to look at how we price the tools that we used and be respectful of any sort of guardrails that are set up in the municipalities in which we operate.

Your next question comes from the line of Ravi Medea with Mizuho.

Your guidance forecasts a pretty significant moderation in expenses in the back half of the year. which line items do you think are most likely to benefit here going forward?

Yes, a couple of things going on there. If you recall from last quarter, we had some pretty heavy winter expenses that impacted the first quarter. So that created that created some pressure on the run rate. You also had last quarter, a pretty big year-over-year increase in marketing spend, which had a lot to do with timing of when we deployed marketing spend last year versus when we did this year. So some of our marketing spend was a little front loaded this year.

So I think you'll see a moderation on those two line items. We had a successful property insurance renewal in May. So a little bit of that flows through to some lower property insurance premiums in the back half of the year. And then I also touched on we expect a little bit of moderation on the personnel line item. So it's not really one line item in particular. It's across a bunch of them. And it's just -- this year, we happen to have a little bit of pressure when comparing year-over-year in the first half of the year. And if you look through the guidance, you nailed it. There's a pretty big moderation in expense growth. And I appreciate you asking the question, so I could say it again.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just to start, just curious on if you could comment on the July moving trends and how that trended throughout the second quarter. And maybe if you could comment as part of that around when you expect to and a return to the long-term same-store revenue growth trajectory. I believe previously, you said the second half '27, but wondering if that gets pulled forward with your renewed enthusiasm.

Yes. Thanks, Juan. So when you think about July, as I mentioned in my prepared remarks, as of yesterday close, we were at a physical occupancy of 91.1%, that's a 30 basis point increase over July 30, 2025. Our rentals for the month of July were 3% higher than they were through the 30th than they were through the 30th of July last year. And on the vacate side, our vacates are also negative 3%, down 3% from where we were through the 30th of July last year.

On the cadence, obviously, we continue to see, as I said, green lights that are encouraging and getting us very optimistic about next year. the exact pace and how we hit it is obviously going to be pretty varied based on a variety of factors. So I think we just continue to see that steady growth. We have that inflection to positive cash flow and earnings in the back half of this year and then continue to build off that each quarter through 2027.

Could you just let us know what the July move-in rate was? Apologies if that wasn't clear.

Yes. As we think about, as I mentioned, our pricing systems are optimizing by leaning a bit more towards volume versus rate, which is a little bit different than this time last year. This has been built into our expectations. So we would expect in our base case that early third quarter, we don't see growth year-over-year in asking rents and then those metrics return to positive as we get deeper into the third quarter and through Q4. And I'll caveat all that with the fact that we price in real time. And so our strategy may change from [indiscernible].

Your next question comes from the line of Viktor Fadiv with Scotiabank.

On the Heitman JV, should we think of this as the completion of broader portfolio optimization effort? Or have you identified some additional assets that could be candidates for similar transactions in the near term? And what will be the capital structure of this JV, including expected leverage at the entity level?

Yes. Thanks for the question. So the -- that's it for now for us on finding opportunities to sell or contribute assets into a venture I wouldn't consider this necessarily portfolio burning. We really like our portfolio. This transaction was more geared towards in the current environment, what can we do to increase our ability to fund share repurchases in a way that's leverage neutral. And this was a good opportunity for us to accomplish a number of things. from a strategic standpoint, improving the quality of the portfolio, having an additional path for future external growth with a long-term partner in Heitman and from a leverage standpoint, the venture does expect to put leverage on the venture the amount and the timing of that is still a little bit up in the air. We don't expect to close on this until the fourth quarter. So there's a little bit of time to settle all those moving pieces, but it wouldn't surprise me if ultimately, we ended up having somewhere in the neighborhood of 50% leverage on the venture, but that's still to be decided.

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

I wanted to ask about occupancy specifically, you saw occupancy continue to build through quarter end and commented that occupancy has increased slightly higher in July rentals up 3% in July 2. It seems like the rental season extended a bit further than prior years. Has the strength in rental activity persisted throughout the July period? Is there any sense whether that might continue into August sort of up until sort of the Labor Day weekend, which I think historically has been more typical of the leasing season. And any sense what's driving the improving trends and really more of this traditional leasing season versus some of the more prior years?

Yes. Thanks. Great question. So the trends we have seen are not quite at those levels that, again, we always struggle with what's normal here looking backwards. But if you think about that 2016, 2018 sort of time period, typically, we would have seen peak a little bit deeper into July. So this is a lot closer to that than certainly we've seen over the last 3 years, not all the way back there. So as we -- base case expectations, we would assume as we get into August here, and we start to see the college students vacate and go back to school and the other typical patterns that we'll have -- we see good green lights for August, but don't expect to see any aberration in sort of normal behavior.

And then that's sort of our base case expectation as we get through the fall and into the winter. So I think the cause of the positive trends. Again, I go back to the resilience of the business and the fact that we're not reliant upon one particular source of demand. So I think it is just this continued awareness of the product, continued awareness of our brand and I think the continued reduction in the impact of new supply, which again, I would place is probably the primary reason for why we're experiencing what we're experiencing.

Okay. And then I wanted to go back to the question around the New York City regulation on pricing and licensing requirements. Just curious to get your thoughts whether -- does that impact asset pricing or underwriting in any way? Does that sort of change the landscape in New York City at all in your view?

No. I think the thing that it changes in the landscape in New York City is, unfortunately, and we feel bad for the smaller operators, I think it's -- the ultimate burden is significantly higher on them. When you think about the types of things that are being discussed, many of them are already ingrained in the day-to-day practices of us and our larger peers. So I think it only will make it more attractive for folks look at Cube and our position and our execution in that market.

And you can see the you can see the metrics that are disclosed. We are outperforming in the New York MSA, and I think we will to do that, and that will make us even more attractive as an option, either as an owner of that asset if that small operator wishes to sell or as a third-party manager if they wish to partner up with.

Your next question comes from the line of Nick Joseph with Citi Bank. Your line is open. Please go ahead.

Maybe just following up on that question. It sounds like you're already doing many of the requirements in New York City, but have you had to implement any new practices ahead of it, like allergen testing or anything else to comply?

Yes. At this point, anything, we have not done anything meaningfully different than we have been doing in New York state or elsewhere in the country. I think we're all sort of navigating through all of this as it's sort of evolving, but have not identified anything yet that would be a material deviation to our normal practices.

And you talked about kind of the debt markets earlier. Just curious where you think you could price 10-year debt today if you go down that road.

Yes. So if we were looking at a 10-year today, it would probably be in the mid-5s, maybe a little higher and then a 7-year call it, 50 basis points inside of that. So we're actively monitoring the markets. The 10-year obviously, has been pushing up a little bit here in recent weeks and there's an awful lot of volatility in the world. And so that's the not so great news.

The good news is that we have a tremendous amount of flexibility as we have additional capacity on the revolver, and we have nothing maturing in 2027. So we have a good bit of time to be patient and opportunistic as we think about long-term strategy from a debt perspective.

Your next question comes from the line of Michael Mueller with JPMorgan.

So Chris, outside of COVID, when you look back at recoveries over the past 30-plus years or so, what was the largest same-store revenue increase that you remember seeing in a single year?

Yes, 30 years, a long time. So I'm not sure I'm going to get this 100%. But I think if you eliminate the COVID year something in that 7% to 8% kind of quarterly same-store revenue growth was probably the next highest and I think that was for a couple of straight years. I think that was like 2012, '13, '14.

Coming out of GFC, and there was no supply -- so the complete lack of supply led to multiple years of 7-plus percent type top line growth.

Got it. Okay. And if you're thinking about a level of improvement from 1 year to the next, for example, if you're starting at 0. What was the most you were calling in a year? That wasn't a 7% revenue improvement here?

I have -- my memory is not that good. I think again, I think if you -- even if you think about COVID and how quickly that happened, because of the churn, right, there's only so many customers vacating each month, which is -- that churn is lower than it was historically. It takes a couple of quarters to get elevated to that level.

Your next question comes from the line of Brendan Lynch with Barclays. Please go ahead.

You guys have been kind of talking about the setup for 2027. Certainly, supply can't come back online fast enough to impact next year. Chris, you also mentioned the resiliency of the self-storage demand we've seen lots of countercyclical demand drivers and past challenging macro environments. So I guess the question is, what are the risks that could cause a deceleration relative to the outlook that you're kind of presenting here today?

Yes. Great question. Again, I'll keep coming back and pound in the drum that the biggest headwind for storage is and always has been supply. And as you noted, we don't see at this stage of 2026. Any material increase in supply or its impact certainly in '27. So at this stage, I would say that risk is low. I think the second risk that has always created a near-term challenge for our industry.

Is any sort of black swan event that causes the consumer to freeze in place. So if you think about some of the unfortunate events, the onset of COVID, the GFC and the related bankruptcies can go all the way back to -- those typically have a short-term impact on move-ins as consumers tend to freeze in place and stop making decisions. They also then tend to have the corresponding effect where you see vacate volumes decline. And it takes a while until the consumer recovers. But those type impacts have typically been weeks if maybe a month or 2 months and then the industry tends to bounce right back.

Great. That's helpful. And then maybe one for Tim, just on [indiscernible]. I think you suggested there's going to be some moderation in the year-over-year comp for personnel -- just walk us through your thoughts on running a little bit leaner on the labor front versus maybe adding a little bit more head count to maintain the in-person relationships in the facilities themselves.

Yes, I think it's always that balance of trying to find the optimal staffing levels to provide the level of customer service that we insist on providing. And the changes and the evolution on that line item really date back to things that we did last year. And so later in 2025 we saw a little bit of pressure on that line item as we were adding back some store hours and making some adjustments that increased the level from where we had reduced it to.

And so I think what you're going to see here in the back half of the year is just getting up against those comps. And so the first half of the year saw a more difficult comp for adjustments that we made over time during 2025. We feel like we're in a great spot right now. from a combination of staffing, technology and our approach to attracting new customers and making sure that we're providing great service to our existing customers. And so nothing that we're doing today, more stuff that we did about a year ago.

Your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.

Quick question just the Sunbelt markets and some of your earlier comments. Can you just kind of talk us through how you're thinking about recovery in part of a few of those markets, again, you did mention that oversupply in places like Fort Myers, really could be a multiyear problem. But I just kind of think through those markets and you're trying to think about potential inflection. How should we be thinking about that, whether it's a year away, 2 years away? Or just whatever kind of Chris, whatever your comfort ball is telling you selling some of you appreciated?

Yes. So I think as everyone knows, this is a micro market business. So even within Sunbelt markets, we see pockets that are improving more rapidly than others, likely largely due to, again, that impact of the new construction, the new supply that has been brought on board adjacent to those same stores in those markets. So I think it's improving. If you look at the sequential results, as we mentioned, you're seeing the same-store revenues going in a good direction. I think it will be unique to each individual market, like let's use Miami as an example.

There, you had an awful lot of supply, but an attractive and continues to be an attractive place both for individuals and businesses to work and live. And I think we saw that supply get absorbed fairly expediently and you've seen results in Miami move a little bit quicker towards and into positive growth territory. I think the major Texas markets and the Southwest, it will be a bit slower and gradual how to predict which quarter or which date things flip positive. That's really difficult to say. But I do think we'll just kind of see this continued gradual recovery throughout the balance of 2026.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.

Storage is so sexy I had to come in twice. Just hoping -- just following up on the JV and investments discussion for CBRE and Heitman, is the topic going forward, those 2 ventures would acquire in the open market going forward to grow. And I think Tim, you said something about like a falling or something in your prepared remarks and just curious if you could elaborate on that.

Yes, I think the most likely avenue for growth in each of those ventures would be would be open market opportunities, perhaps things that we manage currently that we can find a home for. And each of those ventures and each of those partners have areas of focus that range from the type of opportunity as far as return profile, early-stage lease-up, stabilized, looking at different markets.

And so the great thing for our investments team having each of those partners is -- gives us the ability to pursue a pretty wide range of opportunities, and that's pretty exciting. I think the -- what was the second part of your question?

You mentioned, I think, some falling in the acquisition market, maybe more product coming to market, just kind of elaborate.

Yes, hasn't fall off all that much for us, but I think you're starting to see some momentum and a lot more things that are -- I think the brokerage community is pretty excited about the things that are starting to come across their plates. I think there continues to be an evolution that the market is what the market is. And I think sellers understand where buyers are and vice versa, and it feels like it's getting a little bit more constructive and the thing that hasn't changed is that it certainly feels like there is a wave of opportunity that is coming, and we've talked about that in prior quarters.

I just think you have an awful lot of self-storage assets that are held by folks who want liquidity, some who are going to need liquidity, you have things in closed-end funds that ultimately have to close. And you've had a fairly -- you've had a really modest amount of transactions here now for 2 years running. And so certainly feel like the dam is going to break, and when it does, there's going to be an awful lot of opportunity. And from a CubeSmart perspective, we want to make sure that we're in the best position we can be in to take advantage of that, and that's what we're preparing to do.

And then lastly, just to be -- sorry to be greedy here. On the labor front and the wages, just curious on where you think we are in the optimization of FTEs or what have you. And kind of are we at a max in terms of efficiency gains? Or what you think the future may hold.

Yes. Thanks, Juan. I think that's an area that is likely subject to continued evolution. I think on the service delivery front and especially in our or more dense urban markets, you continue to see the value of having our teammates in the stores, keeping them clean and providing great customer service. I think as we as we continue to evolve in our utilization of AI looking for ways where that can enhance customer service. Many of those will be hand-in-hand with our teammates delivering.

And so I would expect that while that may not that will likely translate into revenue gains on the efficiency side more than necessarily focused on the cost side of things. But the markets that the technology and the opportunities to serve and then also our customers' preferences continue to evolve, and we would expect that we would expect those trends to be continuing, as I described.

We have reached the end of the Q&A session. I will now turn the call back to Chris Marr for closing remarks.

All right. Thanks, everybody, for participating today. We apologize for the technical difficulties. I'm told that we can blame Michael Goldsmith if we need to. But as we look forward here, we are excited about the return to growth. return to growth in cash flows, return to growth in earnings, returning to growing our assets under management, whether that be through our excellent third-party management platform acquiring stores with our partners or on balance sheet, and we will continue to execute on that growth in a very disciplined way laser-focused on creating shareholder value. So thank you all. Look forward to seeing you in the future and talking to you again next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the CubeSmart First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Josh Schutzer, Senior Vice President of Finance. Josh, please go ahead.

Thank you, Paige. Good morning, everyone. Welcome to CubeSmart's First Quarter 2026 Earnings Call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com.

The company's remarks will include certain forward-looking statements regarding earnings and strategies that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning together with our earnings release filed with the Form 8-K and the Risk Factors section of the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the first quarter financial supplement posted on the company's website at www.cubesmart.com.

I will now turn the call over to Chris.

Thank you, Josh. Good morning. The first quarter showed a continuation of trends from late last year with results that were in line with our expectations. We are encouraged to finally see the inflection in same-store revenue growth this quarter as the stabilization and operating trends we experienced in late 2025 is flowing through the financial metrics.

We expect continued gradual improvement throughout 2026, albeit without a projected catalyst coming from the macro environment. Positive move-in rates and same-store revenues were supported by steady demand trends and lessening headwinds from new supply. We are encouraged that the wave of new stores from the last couple of years continues to lease up while the forward pipeline remains lighter. This environment continues to showcase the strength of our quality focused strategy with primary markets outperforming and showcasing their lower beta characteristics.

Steady demand when combined with fewer vacates resulted in a 240% increase in net rentals for the quarter, helping to narrow the year-over-year occupancy gap to now 20 basis points by the end of April and putting us in a good position entering the spring summer busy season.

Our more stable urban markets in the Northeast and Midwest continue to outperform, while our more transient supply-impacted markets across the Sunbelt and the West Coast are beginning to see green shoots in the form of second derivative improvement.

We are also encouraged by pricing trends. Last year, we began seasonally pushing rates a little earlier, which for us, created a tougher March comp, but move-in rates have improved throughout the month, they ended the quarter up 2% and that plus 2% spread held through the month of April. Across all markets, our existing customer metrics remain strong, with no change to attrition rates or credit. Our pricing and operating strategies when combined with our best-in-class portfolio, are attracting a high-quality customer who is remaining in the portfolio longer.

Looking at performance across markets, 21 of our top 25 MSAs saw a sequential improvement in the same-store revenue growth during the quarter. The Acela corridor continues its outperformance led by New York, Austin and Washington, D.C. MSAs. Midwest markets led by Chicago, maintained their steady pace of improvement. Major Sunbelt markets showed encouraging signs with Miami swinging to positive same-store revenue growth, and Phoenix and Atlanta making meaningful progress in their recovery from the influx of new supply. We are proud of the work our operations team has done to have us well positioned to capitalize on the opportunities presented as we transition into our busiest time of the year.

We remain committed to our strategy of building the highest quality portfolio in the storage sector. Through cycles, our target markets and their strong demographics produce the best long-term risk-adjusted returns. The strength of our portfolio demographics and density of populations around our stores ensure stability of demand and insulates our portfolio from some of the cyclicality based by more transient and supply impacted markets.

We are confident that our focus on building the highest quality portfolio in the self-storage sector by acquiring high-quality assets in top markets will create meaningful value for our shareholders over the long term.

Thank you, and I'll now turn the call over to our Chief Financial Officer, Tim Martin, for his comments.

Thanks, Chris. Good morning, everyone. Thanks for taking a few minutes out of your day to spend it with us. First quarter results were encouraging coming in at the high end of our expectations, giving us a nice positive start to the year. Same-store revenue growth was 0.6% over last year. And as Chris mentioned, nice to see top line growth flip to positive for the first time since mid-2024.

Move-in rates remain positive year-over-year, while the occupancy gap further narrowed to down 30 basis points from down 70 basis points at year-end. The early months of 2026 were a continuation of trends from last year with generally stable overall levels of demand. Demand does vary across markets and submarkets and with a continued bifurcation in performance between the outperforming core urban markets in the Northeast and Midwest, and the more volatile performance across the more supply-impacted markets throughout the Sunbelt and Southwest. However, we have seen second derivative improvement across most markets.

Same-store operating expenses grew 5.8% over last year, in line with our expectations. After 4 straight years leading the industry in expense control, our expectation is for more inflationary type growth this year with some particularly tough comps early in the year, leading to outsized growth in the quarter. We knew snow removal costs were going to be elevated over the prior year, and those elevated costs accounted for about 120 basis points of our overall quarterly same-store expense growth.

We entered the year with attractive return opportunities across our primary marketing channels and a plan to front-load some of our spending to take advantage. When combined with a tough comparison, as we had historically low spending in the first quarter of 2025, the year-over-year growth was robust. We expect that for the full year, marketing as a percentage of revenues will align with historical trends.

Personnel expense growth reflects our continued focus on delivering the experience our customers tell us they desire. 2/3 of our customers tell us they want some level of in-person service. As we continue to fine-tune staffing based on our data-driven prediction models as well as our first-person customer feedback, we expect personnel expense to grow at current levels throughout the first half of the year, tapering a bit in the back half as year-over-year comparisons ease.

Revenue growth of 0.6% combined with 5.8% expense growth yielded negative 1.5% same-store NOI growth for the quarter. We reported FFO per share as adjusted of $0.63 for the quarter, which was at the high end of our guidance entering the quarter.

On the external growth front, we continue to execute on our disciplined capital allocation strategy, looking for creative avenues to attractive risk-adjusted returns in this environment. Where the disconnect between public and private market valuations persisted. We, again, repurchased shares in the quarter as the relative value of our portfolio made it our most attractive investment option. We own the highest quality portfolio of self-storage assets and at the low valuation levels during the quarter, the best risk-adjusted return we had was investing in our existing high-quality portfolio rather than the relatively higher private market valuations for what were ultimately inferior assets. Year-to-date, this has been our most attractive avenue for capital deployment.

We also closed on the first store in our recently announced new joint venture with CBRE IM with a $250 million mandate to invest in high-growth markets, allowing us to continue to grow the portfolio with enhanced returns. In the current environment and our current cost of capital, joint ventures such as the CBRE venture are a good investment option for us to pursue.

On the third-party management front, we added 33 stores to the platform in the first quarter and ended the quarter with 854 third-party stores under management.

Our balance sheet remains well positioned with conservative leverage and access to a wide range of capital sources to fund potential growth. We have a bond maturity late in the year that we will address with existing capacity or through accessing the debt markets opportunistically in the coming quarters.

Details of our 2026 earnings guidance and related assumptions were included in our release last night. As I opened with, performance in the first quarter was encouraging and in line with our expectations resulting in no change in our guidance range and underlying assumptions with a small exception of a slightly lower share count resulting from our share repurchase activity.

Thanks again for joining us on the call this morning. At this time, Paige, why don't we open up the call for some questions.

[Operator Instructions] Our first question comes from Samir Khanal with Bank of America.

Chris, looking at your advertising expense growth was up year-over-year. I guess when do we see the impact of that come through? Average occupancy was up slightly sequentially, and just help us understand kind of how to think about occupancy with the spend you're doing? Should we expect a bit of a ramp-up in 2Q? And maybe you can unpack that for us.

Sure, thanks for the question. So as Tim touched on, there was a lot of variables that went into the marketing growth in Q1. And obviously, starting with relatively by historical standards, low spend in the first quarter of 2025. So a very difficult comp. We knew we had -- we were experiencing late last year and going into the beginning of this year, a good ROI on the spend across all of our channels, continue to see some good opportunities through not only paid search, but also as the LLM continue to evolve some interesting opportunities there as well as in social and in those channels.

The spend in terms of the translation, it's always going to be that balance between occupancy and rate. So certainly, as we think about the ROI on that spend, it's a combination of those two. Are we getting more customers into the top of the funnel? That answer is, yes. Are we able to convert those customers at better rates? That answer is, yes, and then ultimately, as you've seen in the trends in asking rates. And as I mentioned, that continued to be in positive territory, up about 2% in April. That occupancy gap, as I said, continue to contract was 20 basis points at the end of April. So we're starting to see it fairly quickly in both rate and occupancy and would expect that trend to continue.

Again, that being said, this is a weekly decision as we think about how to allocate capital to our marketing line item. And so it will continue to ebb and flow. But as we sit here today, as Tim mentioned, for the full year, our expectation is as a percent of revenue, marketing will be in line with what we would have seen from historical trends.

And I guess just my second question is on New York certainly holding up well. Maybe talk about kind of the demand trends you're seeing in New York and certainly anything on supply would be great as well.

Yes. I think New York continues to be a star performer for us. It's why we love the market incredibly resilient through cycles. What we're seeing is almost a complete absence of new supply in the outer boroughs, certainly, that competes well overall. And then for stores that compete within existing Cube. So that sharp decline in supply that we've seen now over the last couple of years is being very helpful as we think about the performance of our same stores. It was a very challenging rental housing market in terms of cost in New York. So you are seeing folks looking for solutions to that issue. And certainly, we are one of those solutions that folks are finding. So continue to be productive.

Manhattan, where we have one owned and a few managed, they're getting some supply, and you are seeing some of those stores, particularly those that may have overweighted the unit mix to the really small, blocker-sized units are a little bit softer there, but the outer boroughs continue to perform really, really well.

Our next question comes from the line of Michael Goldsmith with UBS.

Chris, in your prepared remarks, you noted a 240% increase in net rentals in the quarter. Maybe you can break that number down a bit, both the steady demand and fewer vacates and what that could mean for trends going forward?

Yes. I think the trend in the quarter is pretty consistent with what we had what we had seen historically over the last bit, we disclosed it on Page 16 of the supplemental package. So rentals in the first quarter were down 1.8%. Here in April, we actually had rentals that were up about 1% year-over-year. So good top funnel demand in April at good prices. So very encouraging trend to start off the second quarter.

Vacates were down 3.9% in the quarter. Again, that's just what I think we're seeing a little bit across the industry. The existing customer base is particularly sticky, staying longer than certainly pre-COVID historical trends.

And my follow-up question relates to the guidance or reaffirmation. Regarding that, is that just a function of it's early the year and you -- the decreasing season is really going to determine the trajectory of the annual results? Or is there just a level of -- is there a level of conservative? Just trying to get a understanding of the thought process behind reiterating the guidance.

Thanks, Michael. So we just provided the annual guidance not all that long ago. And the first quarter played out, as we mentioned, very consistently with our expectations on both revenue and expenses and overall from an FFO standpoint, just ending up at the high end of our guidance for the quarter. So nothing has really changed. Nothing happened in the first quarter that would cause us to reevaluate the impact for the full year. And as we sit here, getting ready for our primary leasing season, we're in the same place as we were 60 days ago, ready to go and looking to capitalize on all the opportunities that will present themselves, but nothing has happened in the last 60 days that has had an impact or change on our overall view for the year.

Good luck in the second quarter.

Appreciate it. Thanks.

Our next question comes from the line of Ravi Vaidya with Mizuho.

I wanted to ask about your thoughts about broader regulation and maybe price moratorium that may be in New York and maybe a couple of other markets. Have you had discussions regarding any sort of pricing restrictions or policy shift or moratorium that you could be anticipating from the current administration here in New York?

We have not engaged directly in those conversations. As we've seen across a variety of different real estate product types as well as other industries, certain municipalities have been focused in on varying factors affecting the consumers. And we believe that we offer a valuable solution to our customers who are experiencing a need to put their valuable possessions in a self-storage facility for a period of time that they define. And we think we provide a good value for that service.

So from our perspective, we continue to be keenly focused on that customer service element and providing good value and a solution for their need as varying things governmentally, ebb and flow, we'll will continue to be involved as a corporate.

That's really helpful. I wanted to ask also about the fee income realized in the quarter was elevated. This quarter is also elevated last quarter. What's driving that?

Yes. So on the other property income line item. We have -- there are a variety of things that are in that line item. They include merchandise sales, locks, boxes, fees, as you mentioned, truck rental income. We're always looking at ways to enhance and grow our cash flows in those areas. And we've had some success in that line item. If you think about the level of growth in that line item in the first quarter, we would expect the first quarter to be a little bit higher than where we would land for the full year as it relates to growth on that line item. But we continue -- we always continue to look for ways to provide many services to our customers, and some of them show up in the line item.

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

Just hoping you could talk a little bit about the '26 earnings guidance, it implies a bit of an acceleration, but flat on same-store revenues. Just hoping you could talk through the dichotomy and the acceleration versus flat between earnings and same-store revenue?

I'm trying to understand your question. Certainly, our guidance implies that there is, within the range, there is an opportunity for top line to grow throughout the year, and that's going to be the result of all the trends that Chris touched on a narrowing gap in occupancy. Some better rates to new customers. And so looking at top line growth that could accelerate a little bit.

We talked about the expense somewhat of anomaly of some really difficult comps. The snow being part of it. Marketing expense year-over-year. And so the first quarter had an expense growth that's higher than the range. So if you're looking at accelerating NOI growth then throughout the year would be the expectation that's embedded in the guidance.

Was there another portion of your question that I missed?

That's helpful, Tim. And then just switching gears on the third-party management. You guys have had some success on the growth side, growing the relationships with the net number has seeing a little bit of shrinkage. So just curious on how we should think about the net number going forward and the different pushes and pulls within that business?

It's a little bit analogous to our customers and their length of stay. We are -- we continue to add stores to the third-party management platform, again, 33 more this quarter. We have a great pipeline that looks pretty similar to what it would look like this time of year over the past few years. And so our team in the business development side is focused on finding owners or expanding our relationship with existing owners, and what we can control is having an attractive offering and providing great services to our third-party owners and adding stores to the platform.

What we can't control is when they decide to transact and sell their assets. There are times where we are the acquirer of those assets. We've bought over $2 billion worth of assets from stores that we had previously managed. But in an environment where we are today, we oftentimes are not the buyer. And so the majority of the stores that leave our platform are because of a transaction and they sell to somebody who self manages or they choose to -- they have an existing other relationship that they use to manage their stores for. So very difficult to predict.

But ultimately, when stores leave our platform, in large part, it means that we've -- job well done because we've managed a store for somebody helped to create that value, to put them in a position to be able to seek liquidity and they tend to do pretty well as we create a lot of value for them.

Our next question comes from the line of Todd Thomas with KeyBanc.

First, I just wanted to follow up on April, I think, Chris, you said April rentals were up 1% year-over-year. How did that look on a net rentable square foot basis? And can you discuss occupancy through April and sort of quantify the move-in rents that you discussed a little bit. You said that rentals were at good prices. Can you just elaborate on that a little bit?

Yes. Thanks, Todd. So through the month, we continue to see nice demand in April. And the rentals or the move-ins were up just a little bit shy of 1% throughout the month. You combine that with the continued trend in lower vacates and occupancy from March to April, so not to confuse these two 20 basis points occupancy from March through April grew sequentially, about 20 basis points, and that occupancy gap then at the end of April to April of last year was also -- had also shrunk to about negative 20 bps. The rent through April, as I mentioned early on, at the end of March, that last few days of the month, we saw average rent rate on rentals right around 2% for those last couple of days of the week or the last week of March. Those trends continued throughout April and the average rent rate on rentals in April was plus 2%.

Okay. That's great. That's helpful. And then I just wanted to see if you could speak a little bit more around the improvement that you're seeing in some of the Sunbelt markets, some of the more challenged or supply-challenged markets, I guess, that you've discussed. Do you see that trend improving and continuing as you move through the year? Or does it remain sort of choppy in the near term in your view?

I think as it relates to Miami, does feel as if the wave of supply has been reasonably absorbed, you're still seeing, albeit the velocity is less than what certainly we saw coming out of '21, '22, '23, the velocity of inbound folks into the Greater Miami is reduced a bit, but still pretty healthy. So feeling pretty good about that MSA, Phoenix and Atlanta. If you think about where they're heading this has really been one of the first quarters where we saw some good positive momentum in those two markets in terms of starting to chew into the negative same-store revenue results that we've seen over the last year or so, but cautious on those two, would like to see another quarter or so of that momentum continuing before you would feel much more column about those two.

Okay. So it doesn't sound like you would continue to expect the Acela corridor or to be outperforming at year-end? Or do you see potential for there to be sort of a handoff during the year or late in the year as we start to think about '27?

Yes. Maybe a little premature, given as we're starting to get here into the busier season. Certainly, would not be surprised if the Acela corridor from an overall growth for the year is at the top of the pack.

Our next question comes from the line of Eric Wolfe with Citi.

It's Nick Joseph here with Eric. So we continue to see consolidation within the storage sector. So just curious if you think there are benefits to being kind of larger or at a certain point, does it kind of diminish and once you're large enough, there's not incremental benefits to getting even bigger.

Yes. I think -- from our perspective and how we think about portfolio construct, there is value to having scale in market. So I think having a portfolio that has brand awareness and scalable opportunities on both the pricing and the expense side within markets and submarkets, I think, has proven to be has proven to be a good strategy. I think when you think about scale on a national level, I think those benefits diminish relative to what you can get with within scale and market.

And then just on the buybacks, as you think about funding continued buybacks, where are you willing to take leverage assuming your stock stays at these levels?

So what we talked about when we execute on the share repurchases last quarter for the first time is that we generate roughly $100 million in free cash flow, and kind of the first level of analysis for us when thinking about the share repurchases is has the valuation been disconnected enough for long enough. And when we got to the fourth quarter, the -- both of those boxes were checked, and so we started to execute on the share repurchases. And so a little bit more than $30 million of those purchases in the fourth quarter, another a little bit more than $30 million in the first quarter. And so you kind of think about that tracking towards utilizing that free cash flow that we generate to repurchase the shares, plus or minus.

And so to this point, we've been repurchasing shares effectively with no impact on leverage. If you were then thinking about how you would execute on share repurchases above and beyond that $100 million-ish for us on an annual basis. Then you're getting into your question, which is how much leverage would you be willing to use. And I think for us, then that goes up another level. Not only would the disconnect between public and private market valuations have to be big enough for long enough, you're then -- also then taking a view on -- for how long do you think going into the future because our equity capital is precious to us. We need to raise equity capital to support our growth over time. And so we don't take executing on our share repurchases lightly from that perspective.

So we talked last quarter about how could we then continue to navigate through an environment where there's this disconnect. And that's where we started looking at and continue to look at opportunities where perhaps we take some assets that we could contribute to a co-ownership vehicle and take some of the proceeds from that to support additional share repurchases above and beyond kind of the $100 million level. And that would be a way to -- for us to continue to navigate and create shareholder value consistent with our long-term strategic objectives of having the highest quality portfolio so we could improve the quality of our portfolio through contributing to some of those assets and take advantage of the arbitrage then between public and private market valuations. It's not super appealing for us to just lever up the balance sheet to repurchase shares for the reasons that I mentioned earlier.

Our next question comes from the line of Michael Griffin with Evercore ISI.

Great. It seems like existing customer trends continue to be strong. But Chris, I'm curious if you can either quantify or give us some color on the rate increases that are going out now versus maybe this time last year? Are you getting more aggressive trying to push on those ECRIs? And have you seen any customer pushback when it comes to getting those rate increases? Or are they still generally pretty willing to swallow them.

The magnitude and the pace of increases to the existing customers is generally unchanged from what we would have seen first quarter of '25 and here into April on a year-over-year basis. So really no fundamental change. And then from an overall customer behavior, and this starts with broad the credit and how we think about units falling into arrears, receivables, units going to auction, et cetera have not seen any measurable change in consumer behavior. We certainly watch all of those metrics quite carefully, particularly given some of the macro impacts we're seeing on the consumer.

Appreciate the color there. And then on the transaction market, I realized that just given where deals are trading right now, maybe relative to your cost of capital on balance sheet acquisitions and not make sense right now. But can you give us a sense of deal volume, how investors are receptive to self-storage product down the market? And is there any way for you to compete on wholly-owned acquisitions? Or are JV deals probably the more opportune avenue to go down at this juncture?

Yes. Thanks, Michael. So the transaction market hasn't really changed all that much. There are still a pretty healthy number of assets that are out there and brokers are representing a lot of potential sellers. I would say the environment has been very similar now for several quarters in that many of the assets that are on the market will trade if they get to the seller's targeted price, many of them don't. So I would say the hit rate on transactions closing remains lighter than certainly at historical levels.

Our cost of capital, just back to the share repurchase conversation, when you just think about choices for us and different items on our capital allocation venue, year-to-date, year share repurchases have been more attractive given the quality of our portfolio versus the quality of an opportunity that we see out there.

Our team, our investments team continues to be very active and very busy underwriting a ton of opportunities. It's just the clearing price on where things are trading or where a seller desires them to trade versus a valuation that makes sense for us to acquire that in an accretive way, both short, medium and long term just doesn't work right now.

On the joint venture side, what I was alluding to is we can make our dollars go a lot further in this market by being a piece of a joint venture. And then from our standpoint, we can get some enhanced returns given the fee structures and management fees and the like in our invested dollar in a joint venture investment. So I would say that the result of what you've seen for us for the past many quarters is that there are assets that are trading. There is a strong desire from many, many pockets of capital to be in the storage space just not valuations they're attractive to sellers at the moment.

Our next question comes from the line of Viktor Fediv with Scotiabank.

So you mentioned that you'll be addressing the September 2026 note maturity, potentially like existing past or opportunistic issuance. So given where credit spreads are today, either a time line or tenure you're targeting?

Yes. So we have a nice gap in our maturity schedule, 7 years out and then anything 10 years or longer is wide open on our maturity schedule. So likely pads for us or to evaluate from a tenure perspective, likely either a 7- or a 10-year bond. We do have amounts drawn on our line as we started the year. I think we saw a possibility that maybe we would go twice this year, and we still could and perhaps do a chunk of 7s and a chunk of 10s. Obviously, the world was -- has been pretty volatile here in the beginning part of the year.

And so we look at -- for us, pricing, if we were to go today on 7 year would be right around 5%, just a little bit higher and then on we would be in the low to pushing mid-5% range for a 10-year bond. So we'll continue to be to onto the markets and be opportunistic, and we're in a great position that if we don't feel. And if we don't see an attractive window to access that market, we have capacity to address that maturity, and we'll be patient and opportunistic.

Understood. And then a second question, but just a quick follow-up on your churn because obviously, first quarter was impacted by weather conditions. So you saw a decline in both move-ins and more substantial on vacates. And you mentioned that so far, second quarter is a positive territory for move-ins, but still down year-over-year on vacates. Just trying to understand whether we can expect some acceleration in vacates as kind of flowing through Q1 being slower or you don't see that in the most recent data?

So as it relates to the weather, I think the reality in the storage business is that it impacts both the move-in and the move-out. If your intention on a miserably snowy Saturday was to vacate, likely defer, but eventually, you're done with the product. So it's something when the weather clears and it's comparable to access you depart. Similarly, for the most case, on the move-in side. It's more of a deferral now there if it was -- if it was a move-in from someone who's in transition from point a to point b, then the firm, but they still need to transact. If it was if it was a solution to another problem where you had some variability to your need, then perhaps that customer doesn't come back within the near term and wait for another day. But it has a little bit of an impact in the near term, but over the course of time, I think it tends to work itself out.

So I think the trends we've seen are very consistent with what has been occurring over the last year or so, which is the impact of supply has certainly been felt on the move-in side. Customers have more options within a market. I think, as we said in the earlier remarks, that impact continues to decline, and we expect it to continue to decline. So that's been a bit now more of a helpful tailwind than a headwind.

On the vacate side, I think we're seeing a customer base, particularly in the more urban stores for whom we are a more semi permanent solution to their particular need as opposed to the more typical precode where it was a transaction in which a customer was simply moving from point a to point b and a add a more defined time line for their length of stay.

Our next question comes from the line of Brendan Lynch with Barclays.

Chris, you mentioned large language models in the context of advertising spending. Can you just give us an update on how Cube is using large language models and how it's changing dynamics for acquiring clients?

So very early stages in terms of certainly our product and how folks are searching for it. So we're still seeing only about 1% or 2% of the customer conversions to a rental coming through channels search channels, not paid search, but increasing gradually. And again, I think it's interesting because it's creating an opportunity for sort of a longer tail search that brings in a disparate characteristics in terms of what the customer is searching for. So as an example, looking not only for geographic convenience. So self-storage near me continues to be the most searched term but also bringing in the more qualitative of mature convenience, but high-quality service, good value. It's creating an opportunity to begin to have a bit more of a spatial surge. So help me understand how to store all the possessions in my one-bedroom apartment, et cetera.

And so what feeds into that, though, is not all that different than what we would have seen as we somewhat evolved from Yellow Pages to paid search, it's the geographies of the geography, but being able to have reviews or other content that enhances and validates that your store has those characteristics that, that customer is searching for good value, great customer service, et cetera. So very early stages continues to evolve.

And then the monetization of that is not quite there yet either in terms of how our some of these LLM ultimately going to monetize the value of having that customer come through that panel. So early and interesting, and we're doing a lot of work with our great team here internally on the marketing side and with a lot of our external partners to continue to make sure that we are well positioned as this evolves.

Maybe a follow-up on that. Are you finding that customers who are using the large language models can be more efficient in the amount of space that they take. I'd imagine if you didn't have the capability to assess really what amount of space you needed for, say, a one-bedroom apartment. If you ask a large language model and said you need a 10x10, you might have otherwise taken the 10x20. So just kind of walk through those considerations about how the customer might be benefiting as well?

Yes. So again, very, very early in this whole journey. So not at a point to draw any conclusions. But one of the headaches, frankly, in our industry is that our customers, in general, are not always the most spatially aware. It's sometimes difficult to understand how all the contents of your 1 bedroom apartment may fit into a 10x10 storage Cube. So to the extent that the LLM and the various inputs help that customer makes the right decision on the front end. I think that's very helpful from a frictional cost perspective to us because having to have them begin the journey and then discover that they either went too large or too small, and they need to relocate to another Cube as an operationally frictional cost to us.

Our next question comes from the line of Eric Luebchow with Wells Fargo.

Tim, I know you talked a little bit about potential co-ownership or JV structure to contribute some assets. I guess as you think about that potential structure, would you focus more on your core urban assets in the Midwest or Northeast, that have been more stable in the last couple of years or potentially look at more Sunbelt markets where trends have been a little choppier.

Yes, I appreciate the question. Overall, what we would hope to do is to, again, be consistent with our long-term objective to have the highest quality portfolio. So most likely what we would do is look for assets that we contribute that are in perhaps outside of top 40 MSAs or assets within top 40 MSAs that are more on the outer ring of that particular MSA versus kind of the core inside.

Then you go through that analysis and say, do you want to target assets that are in markets that have been underperforming or under pressure from supply and the like. And would you be potentially leaving some meat on the bone for some of those assets as those markets inevitably recover and start to outperform. All those things are considered. All of those things are consideration. So it's complicated and -- but we continue to work through that because at the moment within the current environment, we think it potentially could be a pretty attractive path for us.

Great. And I guess just rough numbers, are you still seeing acquisition cap rate kind of in the lower 5% range for Class A? Or have those kind of moved at all year-to-date?

I think that's a safe characterization. I mean we see some things to trade even tighter than that. But I would say very low 5s is -- tends to be where things are trading. Sometimes you get into the mid-5s. A lot of sellers based on what they're looking for would imply something very, very tight even inside some of those numbers.

Our next question comes from the line of Mike Mueller with JPMorgan.

Just quick one, are you seeing any pockets of opportunity where you're starting to see development make more sense at some point? And where we could see activity pick up in the next few years for you?

No. The short answer, I think there are always going to be a unique opportunity in a market where you don't have supply in the trade ring, whether that be ground up or a conversion of the existing asset. So it's not 0. But I think the inputs in terms of costs and then the ultimate underwriting of rental rate for the new customers to fill up the new store, continue to make development quite challenging on a broad scale.

Got it. Okay. And then maybe just something on ECRI. I know you talked about the consumer being good and accepting ECRI. But if you look at the move outs that tend to happen, do you have a sense as to what portion leaves in conjunction with ECRI versus they just don't need storage anymore and maybe how that compares to the split compares to, I don't know, what you've seen in normal times over the past.

Yes. To the best that we can get at that again, we are -- we're observing that customer that gets a rate increase and then their behavior in the recent months following that and comparing that to our expectations based on historical data over a long period of time, and we haven't seen any change in that trend. The stated reason the overwhelming amount of time for why a customer chooses to leave the portfolio is because they no longer have the need for the storage Cube that brought them to us in the first place.

Our next question comes from the line of Spencer Glimcher with Green Street.

I appreciate all the color you provided on the third-party management business. Just Curious if you think that over time, you're more sophisticated AI usage or machine learning will bring a greater portion of smaller operators to your platform?

And I think the -- I think you put that in a laundry list or a bucket of a lot of things that we and a handful of sophisticated operators bring to the table. And so I think that's one of those areas where Chris touched on a little while ago, we're early stages. But as the search for the product evolves from an AI perspective, opportunities to improve operational efficiencies, pricing systems, the larger players are going to most likely be the winners and be on the front end of a lot of that evolution. And I would think that if I were an owner of a store and looked at how challenging of an operating business that we're in, that those large players like us have those tools, have those advantages. So I would just put that in a bucket with a whole bunch of other things that have us stand out as to why our platform is going to help create the most value for their self-storage asset.

Yes, that's fair. Do you think it will be incumbent upon you and the team to go out and make that point like very clear to smaller operators as part of just kind of looking outreach and trying to have others see the growing value of your platform? Or do you think that, that will just naturally bring smaller operators see you without kind of additional work on your end?

I think it will be a combination of those things. Certainly, our business development team, and we're at trade shows and lot of our third-party opportunities come from referrals. And so we need to do a good job and continue to do a good job for our existing owners because their referral is one of our most important contributors to adding stores to the platform. But at trade shows and our "dog and pony" shows certainly we need to do a good job to explain all the things that we do and how we do them in ways that we believe are superior to the way that others do them. And so that, again, that's another piece of that story, and that's another piece of our sophisticated platform that we need to both perform on and do a good job of explaining to potential customers of ours.

There are no further questions at this time. I will now turn the call back to Josh for closing remarks.

Hey there, this is Chris. Josh, ceded his closing remarks to me. But thank you all for listening. We're very enthusiastic by how the Spring has started here for our business and our company. We're quite excited by all of the things we're working on internally, which I think will continue to create value over time and continue to create a great customer service experience for the users of our products. So looking forward to the quarter and seeing how the busy season unfolds here and we'll be excited to report back to you in a few months. Thanks, everyone, and have a great weekend.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the CubeSmart Fourth Quarter 2025 Earnings Call. [Operator Instructions]

I'd now like to turn the call over to Josh Schutzer, Senior Vice President of Finance. Please go ahead.

Thank you, Jordan. Good morning, everyone. Welcome to CubeSmart's Fourth Quarter 2025 Earnings Call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com.

The company's remarks will include certain forward-looking statements regarding earnings and strategies that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section of the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the fourth quarter financial supplement posted on the company's website at www.cubesmart.com.

I will now turn the call over to Chris.

Good morning, and thank you for joining us today. We are encouraged heading into 2026 that fundamentals have stabilized, and we are positioned to return to growth. Operating metrics have seen improvement over the last couple of quarters. And now that's beginning to flow through to financial metrics.

Our more stable urban markets in the Northeast and Midwest continue to outperform, while our more transient supply-impacted markets across the Sunbelt and the West Coast are beginning to see green shoots in the form of second derivative improvement. Across all our markets, our existing customer metrics remain strong with no change to attrition rates or credit.

2025 was a year of stabilization for demand trends. Overall demand patterns were more consistent throughout the year and the environment has been more constructive, leading to move-in rates in the back half of the year moving positive year-over-year.

The trend in move-in rates has been very encouraging with year-over-year quarterly growth improving from minus 10% in the fourth quarter of 2024 improving to minus 8.3% in the first quarter of 2025, improving again to minus 4% in the second quarter of last year, continuing to improve and turning positive at plus 2.5% in the third quarter of 2025 and increasing that positive momentum at plus 2.8% in the fourth quarter of 2025.

In the early part of 2026, we have seen similar trends with the occupancy gap continuing to narrow with positive move-in rates. Specifically, the occupancy gap at the end of January of this year improved from year-end when it was down 70 basis points to end January at 88.7%, 40 basis points below January of 2025 with rental and vacate trends consistent with our experience during '25.

With a few days left here in February, overall trends continue to be encouraging, with the occupancy gap continuing to narrow and the quarter-to-date move-in rate trend continuing to be positive with year-over-year move-in rates growing generally in line with what we reported with fourth quarter results.

The improvement in operating fundamentals is beginning to show up in the financial results. It will be steady, gradual improvement as we typically turn over approximately 5% of our cubes in any given month. We started to see that momentum play through in the fourth quarter and would expect that gradual improvement to continue through 2026.

Demand does vary across markets and submarkets with continued outperformance from 4 urban markets in the Northeast and Midwest and more supply impacted through the Sun Belt and Southwest. However, we saw improvements in fundamentals across many markets. With over 75% of our top 25 markets seeing revenue growth accelerate from the third quarter to the fourth quarter of 2025.

As trends in our markets have been quite positive over the last 4 or 5 months, I am optimistic that we are inflecting and see a path to return to more historical levels of revenue and net operating income growth.

In 2026, only 19% of our same stores are projected to face an impact of new supply, the lowest percentage since we began articulating this metric back in 2017. The magnitude of the impact of this competitive supply continues to lessen as more of the delivery is in that 3-year rolling impact from 2 or 3 years ago, and those stores are beginning to reach their first level of occupancy stabilization.

Our highest quality portfolio and best-in-class operating platform, along with a seasoned management team with senior leadership having multiple decades of experience across cycles against the backdrop of declining impact of new supply and more constructive operating fundamentals has us well positioned to take on any challenges and maximize all opportunities through 2026.

Now I'd like to turn it over to Tim Martin for insight on our thoughts on capital allocation and guidance for 2026.

Thanks, Chris. Good morning, everyone. Thanks for taking a few minutes out of your day and spending it with us. I'll provide a quick review of fourth quarter results, discuss our recent investment activity and then jump in and provide some additional color on our '26 expectations and guidance.

Same-store revenue growth accelerated from the third quarter to just shy of flat at negative 0.1% for the quarter, reflecting the continued stabilization of trends that Chris touched on and moving us to an improved starting point for 2026. Same-store expenses grew 2.9% during the fourth quarter, helped by some good news in real estate taxes and property insurance, offset by increases in marketing and R&M spend which are mostly timing related as compared to spend in those areas last year.

Same-store then resulted in declining 1.1% for the fourth quarter. We reported FFO per share as adjusted of $0.64 for the quarter. And during the quarter, we announced a 1.9% increase in our quarterly dividend, up to an annualized $2.12 per share. On yesterday's close, that represents a 5.3% dividend yield.

On the external growth front, it's been a challenging couple of years to find accretive on-balance sheet opportunities to deploy capital especially on marketed transactions. We had success with structured transactions in late '24 and then early into '25 when we were able to accretively invest a combined $610 million on a pair of transactions. One was a recap and one was a JV buyout.

Since then, we've seen very limited opportunities to invest on balance sheet, given the disconnect in public and private market valuations but we've been focused on other creative avenues for capital deployment. We recently announced a new joint venture with CBRE IM with a $250 million mandate to invest in high-growth markets. This allows us to expand our JV relationships and provides another avenue to continue to grow the portfolio with enhanced returns.

We also closed on two on-balance sheet acquisitions for $49 million during the quarter. In the fourth quarter, we also executed on our existing share repurchase program as the relative value for our portfolio made it a very attractive investment option. When considering, we own the highest quality portfolio of self-storage assets and combining that with the disconnected valuation reflected in our share price during the fourth quarter, repurchasing shares was compelling for us on a risk-adjusted basis compared to private market values for lower quality assets.

Our Board has recently expanded the share repurchase authorization giving us approximately $475 million in capacity to repurchase shares based on current valuation levels. We generated approximately $100 million in free cash flow annually so we could execute under the share repurchase program on a leverage-neutral basis up to those levels. We're also looking at potentially selling some assets or contributing assets to a joint venture and using those proceeds to fund additional share repurchases should the public-private valuation gap persist further into 2026.

Our balance sheet is in great shape with credit metrics very favorable to our existing investment grade credit ratings. Leverage ended the year at 4.8x net debt to EBITDA. We do have a few things on the to-do list for 2026. We may look at opportunistically accessing the bond market in the first half of the year and use proceeds to repay amounts currently drawn on our revolver.

And then in the back half of the year, we may look to go again and use the proceeds to repay our existing bonds that mature in September. Looking forward, details of our '26 earnings guidance and related assumptions were included in our release last night. Overall, our FFO per share expectation for '26 is a range of $2.52 to $2.60 per share. For same-store guidance, our 2026 same-store pool increased by 16 stores.

The midpoint of our guidance range for same-store revenues assumes a generally similar macro environment to last year, a lasting impact from competing new supply in our markets, a continuation of steadily improving competitive pricing, and a narrowing of our year-over-year occupancy gap as the year progresses.

On the impact of supply, embedded in our same-store expectations for '26 is the impact of new supply that will compete with approximately 19% of our same-store portfolio, as Chris touched on. For context, that 19% is down from 24% of stores impacted by supply last year, and down from the peak of 50% of stores impacted back at the peak in 2019.

We've been keenly focused on expense controls for several years. In fact, we've led the sector with the lowest expense growth over the last 3 year, 4 year, 5 year and 6-year period. So a bit of our growth overall in 2026 is in the context of us setting a really challenging comp for ourselves given our expense controls over the past several years. Areas that are pushing up our expectation for year-over-year growth include real estate taxes, especially late in the year as some of the good news in late 2025 creates a tough comp for us late in '26. Personnel costs coming off, again, a multiyear period of very, very low growth. And of course, the biggest impact is going to come from the winter-related costs from the storms over recent weeks, pretty impactful storms compared to really not much at all in early 2025 from weather events.

Thanks again for joining us on the call this morning. At this time, Jordan, why don't we open up the call for some questions.

[Operator Instructions] Your first question comes from the line of Michael Goldsmith from UBS.

Maybe first, can we just start with supply? It seems like supply is coming down or at least new deliveries are. But I guess, at the same time, the demand environment has remained kind of stable, but not particularly strong. So how do you think about like how do you think about supply? Is it just kind of new deliveries?

Is it the cumulative buildup over the last several years that's influencing it? And in the numbers that you quote, is that a reflection of expected deliveries this year? Or is that kind of like a multiyear number?

Thanks, Michael. So the numbers that I quoted of the 19% of stores being impacted, what we have consistently disclosed over time is we look at supply and the impact of supply on our existing stores over a 3-year rolling period. So for the 19% of our stores that are impacted by supply in 2026, those are stores that within their trade ring are going to compete against something that is delivered in 2024, 2025 or 2026.

And as Chris touched on, the stores that were delivered in 2024 are going to be less impactful from a headwind perspective than stores in '26 because they will be -- in the third year, they will be starting to approach higher levels of occupancy and tend to start pricing more competitively within the market.

So it's not only the 19%, it's kind of the nature of the 19% is going to be a little bit less of a headwind, we believe, than certainly than when we were at the peak back in 2019. So it's a combination of those things, but all the numbers that we quote are on a 3-year rolling basis.

And as a follow-up, the New York City Department of Consumer and Worker Protection filed a lawsuit over predatory practices in the New York market. So I just want to -- you have a large presence there. I just wanted to get your take on it. Has that influenced the way that you operate? And then obviously, this is a lawsuit against you guys, but just kind of how you're reacting to it?

Michael, we're certainly aware of recent announcements, that specific one out of New York. There's been some similar attempts at legislation in other states around not only for storage, but just in general, pricing and transparency. We continue to monitor those and make sure we're in compliance. We are always focused on providing our customers with the optimum experience, and we'll continue to be flexible in terms of focusing in on that and doing that to the best of our ability.

Good luck in 2026.

Thanks.

Your next question comes from the line of Viktor Fediv from Scotiabank.

I have a question regarding your operating expenses outlook for this year. And it's a bit higher versus, for example, your peers. Just trying to understand what are the key pieces impacting that difference. Probably New York, I see that in 2025 had probably a bit higher operating expenses growth. So can you provide some color on what's driving that?

Yes. As we touched on in the introductory remarks, you have a couple of things going on. You have, again, having led the sector in expense controls and expense growth over the past several years, I do believe we have created a pretty high bar for ourselves from the standpoint of a baseline from which to compare.

I think then the individual drivers of where we're getting a little bit of pressure, again, I mentioned, were on real estate taxes. In particular, in the later part of 2026, we're going to have some tough comps because we had some good news here in the fourth quarter of '25. And then the big one that I mentioned is the weather-related.

We're going to have pretty significant year-over-year growth in weather-related expenses in the first quarter as we have a significant portion of our self-storage portfolio in the Northeast states. And frankly, the winter storms were impactful far beyond just the northeastern part of the country. So real estate taxes, weather-related costs are the big ones.

And then even on a line like personnel, we've been able to manage personnel at flat to negative growth over a multiyear period of time. This year, we're looking at more inflationary or maybe just a little bit north of inflationary type growth in that line item. So those are the areas that are driving the thought process behind our same-store expense guidance.

Understood. And then as a follow-up, if you think about the new reform JV with CBRE, what is actually like your opportunity set? And what should we think about what is achievable for 2026 in terms of incremental investments there?

Yes. So we're super excited to expand our JV relationship. And now we have what we had disclosed with our new venture with CBRE Investment Management. We've been working together with them for several years on the operational side and have established a great working relationship through our third-party management platform. The venture that we announced is focused on investing across the spectrum of core, core plus value-add opportunities.

And ideally, that will result in us being able to assemble a portfolio of geographically diversified assets in high-growth markets. So fairly broad mandate and the $250 million mandate is hopefully #1, and then we're successful there, and we can move on and create additional venture opportunities with CBRE and then, of course, continue to look at creating additional joint venture opportunities with others, including some long-standing relationships that we have.

Your next question comes from the line of Brad Heffern from RBC.

Can you talk about the assumption for move-in rates during the year? Are they just sort of steady during the year at the levels we see now? Do they decline as comps get more difficult? Maybe do they go up because of supply?

Yes. So we don't guide to the specific components. We guide to an overall revenue growth range expectation. I think what we have seen is what Chris touched on a little bit, which is we have seen a more constructive environment for pricing to new customers. And so we flipped to positive, and it's a good place to start the year.

And then as I touched on, at least on the baseline of our expectations, would be in an environment where we're able to steadily close the occupancy gap throughout the year. That would be at the baseline of our expectation. The reality is busy season is going to come and market conditions are going to be what they're going to be, and our systems are designed to maximize revenue.

And so could you get a little bit more rate and a little bit less occupancy, a little bit more occupancy, a little bit less rate? Could you move towards the higher end of the range, the lower end of the range? All that we'll see. But overall, we just guide to the overall number, which you see in our release.

Okay. Got it. And then sort of sticking with that, you said in the prepared comments, you see a path back to historical growth levels. If we see move-in rates stay flat around where they are now, call it, 3%, when should we see same-store revenue get to 3%? I know there's a huge number of moving pieces, but just wondering, generally, is it quarters? Is it a year? Is it 2 years, et cetera?

Yes. I think if you operate under the assumptions that you just described, then you see that gradual upward trajectory throughout the first year, which in this instance would be 2026, and then you would see yourself returning to more historical levels as you get into the second half of 2027 on a quarterly basis. And then ultimately, you would roll into that on an annual basis as you go out then another year.

Your next question comes from the line of Todd Thomas from KeyBanc.

First, just on New York, revenue growth improved from the third quarter, continued to outperform, as you mentioned, with -- along with some of your other sort of core coastal infill markets.

Are you assuming that momentum persists in '26? And what's driving the strength in New York City in your view? Is it more the supply backdrop? Or are you seeing better demand? Any sense regarding the outperformance?

Todd, it's Chris. I would think about New York broadly as continuing to be the MSA that we would expect to be among our top-performing MSAs in 2026 as it was in '25. I think you have 2 things moving in our favor. One is North Jersey and to a lesser extent, Westchester County and Long Island are recovering from the headwind of supply.

So when Tim talked about that and I talked about that 19%, a good market that is benefiting from that is that North Jersey, Westchester and Long Island markets as part of the MSA. And then in the city itself, we continue to see very positive trends that we've experienced over the last several years. You have good lengths of stay.

Again, folks using the product as an alternative to their living spaces, not as a market that's as reliant on that buying and selling of existing homes. We obviously have extremely good brand awareness there, and we would expect that positive performance in the boroughs to continue.

Okay. And then, Tim, you talked about buybacks and the buybacks completed in the quarter, potential dispositions, some potentially seeding assets into the joint venture. The stock price is higher by almost 15% relative to the price that you executed at in the fourth quarter. I guess, how actionable are buybacks today? And how do buybacks stack up against some of the other opportunities that you discussed?

Yes. I think we obviously have a share price, which is a little bit more favorable for us today than where we were repurchasing back in the fourth quarter. But who knows what tomorrow brings or next week brings or next month brings. I think the point trying to make is that we're not sitting around waiting for the day where we get back to having a green light to grow and our share price is such that we can get back to buying $400 million, $500 million, $600 million worth of assets and do so accretively.

We haven't seen that environment now for a couple of years. And to the extent that we are in a continued prolonged period of time where private market valuations are very disconnected from public market valuations, then what's actionable for us.

To continue to execute on our long-term strategic objectives would be to perhaps improve the overall quality of our portfolio by trimming some things that would have us improve the overall quality of the portfolio and turn around and redeploy that capital to buy back shares because implicit in that is it's an awfully good opportunity when you think about the implied cap rate, even at the levels we're trading today, while not as compelling from a share repurchase as where they were, still pretty compelling relative to opportunities to buy things on balance sheet.

So we'll see. It will be great. It would be great for us if share repurchases were never attractive again and the share price continues to get back and we get back to where we believe we should be valued, which is at a premium to the value of our underlying assets. But to the extent we don't get back there and the disconnect remains, we're going to keep working to execute on our strategic objectives, and that might be a path for us to do it.

Your next question comes from the line of Ravi Vaidya from Mizuho.

I saw that in 4Q, your fee income line item as part of your same-store revenue was a bit elevated. Is this primarily from late fees or any other type of fees? And what is your assumption for this particular line item when considering your '26 guide?

Thanks for the question. So that line, the other property income line in same stores includes a variety of things. So it includes merchandise sales, which would include sales of locks and boxes and other items. It includes fees. It includes truck rental income, among some other things.

And so we're always looking at ways to enhance growing our cash flows, and we look at every opportunity, and we've been able to, over time, be successful in finding ways to grow that line item along with growing other revenue line items and controlling expense line items. And so what you're seeing there is the fruits of all of those efforts.

Our 2026 expectations would be based on our expectation to continue to build upon what we -- what you see coming through the results in '25 and continue at those levels and perhaps find even additional opportunities as we go forward.

Got it. That's helpful. And I wanted to kind of think about AI here. But from a demand perspective, some of the announcements that we've seen is some of the layoff activity, it seems to be coming in bulk and a little bit faster than what people might have initially anticipated. How do you think about these announcements and how it could reflect demand for self-storage and moving and displacement as part of your portfolio right now?

So I think the resiliency of our business, and I think it shines through when you think about the last few years pressures on some of the demand drivers for our business and yet the -- in context, really solid results the sector has been able to put up. I think just speaks to the fact that we are a solution to a need for our customers regardless of the pleasurable or unpleasurable circumstances that create that need.

So never want anyone to lose employment. -- certainly want an economy that is humming on all cylinders where there are plenty of opportunities for jobs and opportunities for advancement, what's made this business work so well for so long. But the reality is in an instance of displacement, we are a solution to help solve some of the related problems that come along with that.

Your next question comes from the line of Michael Griffin from Evercore ISI.

Maybe on the revenue side to start, I appreciate kind of the commentary as we've been through about 2 months of the year so far. But as you think about the interplay of rate versus occupancy, clearly, move-in rates are improving, but your occupancy is still kind of below your historical levels even pre-COVID. Give me a sense, does it make sense to maybe push on one of those levers over the other? I realize you're solving for revenue maximization at the end of the day. But in today's environment, does one feel more opportunistic or applicable to drive relative to the other?

I think in today's environment, given where we've been over the last several years, I think if the opportunity is there, and it clearly has been over the last 5 months or so to be able to focus on maximizing the value of that customer as opposed to focusing in on the volume of customers, I think that's been our focus. I think we obviously, as an industry, need to get -- need to continue this momentum of having positive growth in rates in order to generate those more historic levels of overall revenue growth that we've experienced over time.

So that's kind of where the mindset is. But as Tim articulated, those are decisions that are made on a daily, weekly basis, and we're constantly looking at that interplay between volume and rate.

Thanks, Chris, that's certainly some helpful context. And Tim, I know you touched in the prepared remarks on some debt market activity. Curious what's contemplated in the guide as it relates to interest expense. And if you were to go out and refi those '26 maturities, what you think the interest rate on that would be?

Yes. So I mean the guide has a range for a reason, and it's a little bit tricky because you're not only thinking about where we might execute from a -- if we were in the market today, is not super relevant for the guidance because it comes down to when do we go, what tenor do we go with and what does the world look like at that time.

And so what I was mentioning was kind of at the plan today would be a consideration of going first half of the year, using those proceeds to pay down the line, which would then give us a lot of flexibility and capacity as we look at the back half of the year because if we found a compelling market to go again, that would be our preference and just term out the maturity.

But by freeing up all of the capacity under the line, when our bonds mature in September, we would have capacity to use the line of credit if we didn't think that there was a good window for issuance at that time. So the range contemplates a variety of things when we go, how many times do we go, what tenor do we go with and what does the world look like at that time.

Your next question comes from the line of Juan Sanabria from BMO Capital Markets.

Chris or Tim, maybe just hoping you guys could expand a little bit on dispositions. You mentioned maybe pruning some noncore assets or markets presumably.

So just curious on how you think about that if the eventuality were to come to pass, would you want to sell out of kind of the current underperformers, whether it's certain Sunbelt or Southwest markets? Just curious on how you're thinking about that, recognizing it's kind of a fluid discussion or thought exercise.

Yes. It is a very fluid discussion and exercise. I think it could it could end up presenting itself in a variety of ways. The reality is we like our portfolio. And so we don't have a long list of assets that we're anxious to get rid of. I think the reality is, as I mentioned, if there's a persistent environment in which there's a disconnect in valuations, then the opportunity for us to execute our strategic plan and to create shareholder value may be to find opportunities to trade assets and repurchase stock.

I think the reason I wasn't specifically saying dispositions or necessarily joint venture contributions, the joint venture concept is pretty attractive because we could maintain an ownership position in some of these assets that, frankly, we don't want to sell. And we could also get a little bit of additional economics through a joint venture structure, through management fees, that type of thing.

So it is a fluid -- as you -- it's a great word to say it's a fluid discussion. It's just the reality of where we are and just sitting on our hands and hoping for a better day is not what we're doing.

Understood. I appreciate that. And just a quick follow-up on the ECRIs. Just kind of curious on the expectation built into '26 guidance and/or the kind of recent history. Has there been any change in cadence and/or the percent increases you're passing through and/or customers' acceptance of those?

Yes, not much of a change in the contribution that we're expecting going forward is very consistent with the contribution that we've been receiving. So nothing really from a modeling standpoint or an expectation standpoint that it's going to have a meaningful impact from ECRIs one way or the other.

Your next question comes from the line of Spenser Glimcher from Green Street.

Yes. Sorry not to beat a dead horse here, but maybe just a follow-up on the share buyback discussion. So I appreciate the rationale you shared regarding your view of the disadvantaged cost of equity. But given you did buy 2 assets in the quarter and while I realize that the purchase price is only $50 million, what is it you're looking for in acquisition opportunities that would sway you to invest versus that simultaneous desire to shrink the asset base and buy back shares?

Yes. Great question. The horse is not quite dead yet, but let's kick it a few more times. The 2 assets that we bought, it is a process. And so we had those under contract at a value that made sense to us. Inherent in those 2 opportunities are -- there's growth embedded in those opportunities that when they come on to our platform, we get some nice growth out of those.

So we're still very excited about those 2 opportunities as the year progressed and the quarter progressed and the disconnect became even larger and more pronounced, then the share buyback was something that we focused on. So it is -- there are still -- there have been a lot of assets that have traded this year that were very attractive to us and would have been very complementary and attractive on our platform. Just the valuation didn't make a lot of sense for us at this time. So the world changes pretty quickly.

I was going back to my notes from our year-end call a year ago, and we talked about selling shares on the ATM for an average of $51. So things change pretty quickly. And so next quarter or the quarter after, we could be talking about contributing some assets to a joint venture and repurchasing some more shares. We could be talking about buying a big portfolio and issuing shares under the ATM. We need to be prepared for any of those scenarios.

Our investments team is working hard. Fortunately, for us, we do have other options, as we touched upon earlier, with co-investment strategies and the like. And so we're still looking at both. We're certainly not closed for business. We're very involved in underwriting a lot of different opportunities. And to the extent that we found something even on balance sheet that had a compelling enough return that we believe created shareholder value, then that's where we're focused.

Okay. That's great insight. And then would you mind providing some color on the stabilized cap rates that you underwrite on those 2 assets?

Yes. So they weren't stabilized cap rates. I mentioned last quarter that those -- the assets that we had under contract that then we closed 2 of the 3 going in were in the low 5s, and they were stabilizing into the 6% range in year 2, 2.5.

Your next question comes from the line of Brendan Lynch from Barclays.

The commentary around 19% of markets facing new supply in 2026 was really helpful. If the pace of new starts doesn't accelerate, what percent of your portfolio do you think would be facing new deliveries in 2027?

Yes. So one point of clarification, it's not markets. It's not 19% of our markets. It's literally 19% of our assets. You can have assets within a market, some of which are competing with new supply and some are not. So just that is a point of clarification. We just disclosed the 19% and now you're asking for what is it going to be next year. We're never good enough.

But the -- I think if you think about that 3-year rolling period for this year, it's deliveries in '24, '25, '26. So next year, when we disclose this number, it will shift to be deliveries in '25, '26 and '27. So you'll add '27 deliveries and you'll drop off '24 deliveries. I would think across our markets and across our portfolio that deliveries in '27 will be a little bit lower than deliveries were in '24. And so my expectation as we sit here today is that, that 19% would trend downward a little bit more.

Okay. That's helpful commentary. And then just on the CBRE joint venture, you mentioned that some value-added assets might be contributed as well. My sense is that value-added assets were something that you wanted to kind of hold on balance sheet for the upside that you get as you improve those assets relative to maybe some more stabilized assets being better candidates for joint ventures.

Can you just walk us through the kind of the nuances of how you think about which assets are good candidates versus not with your JV partners?

Yes. Sorry, we're covering a lot of different things. I think we might have mixed 2 things together there. So the venture that we have with CBRE is focused on external opportunities, nothing that we would contribute. So the value-add opportunities that, that venture is seeking are value-add opportunities that we can find that are maybe earlier stages on our third-party management platform or going out and trying to identify those opportunities.

So they are external opportunities that would be across the spectrum of value-add, core, core plus. The concept of contributing assets is completely separate from that and is more -- is not as actionable here in the near term as the venture that we announced with CBRE.

Your next question comes from the line of Eric Luebchow from Wells Fargo.

So maybe you could touch on the New York MSA a little more. It had some nice acceleration in the quarter. Could you kind of disaggregate where that strength is coming from between the boroughs, North Jersey, Long Island or anywhere else?

Sure. So really, the acceleration was across the board in each of those contexts. I think when you think about it by borough, Queens has been pretty consistent Q2, Q3, Q4 in terms of its revenue growth, in terms of its occupancy stability, a little bit of supply.

1 or 2 stores, I think, have opened there over the last year or 2, but really not that impactful, seeing good growth in asking rent there. in a little pressure in Long Island City when I mentioned supply because we've had some competitors open some very large stores in the last 2 or 3 years, and they're very close by to the cubes. Brooklyn -- Brooklyn has been the leader through the year, putting up overall same-store revenue growth quarter in and quarter out north of 5% occupancies there, also pretty steady. So a good driver is good length of stay.

So able to continue to focus on the existing customer and then seeing some good move-in rate growth there as well. And that's pretty much across the board with the neighborhoods in Brooklyn from East New York through Quantas. Bronx, pretty nice acceleration there throughout the year. That's somewhat going to be just a year-over-year comp. Occupancies there have been pretty steady, growing a little bit in the back half of the year.

And when looking at that again by area, saw some strength throughout the year in getting better quarter in Riverdale, also the same a little bit in that Bronx River area. South Bronx, Calo City have stayed pretty consistent. And then I think, as I said, in our store in Manhattan continues to perform consistently and well.

Staten Island recovering a bit from supply, which is the same story for the rest of the MSA, which would be that Westchester, Long Island, North Jersey, where new supply has become much less of a headwind than it was certainly in '24 and the first couple of months of '25. So hopefully, that color is helpful.

Yes. Very comprehensive. I guess just one for Tim. I know you called out some tough comps and expenses this year. Maybe could you provide us a little more color on some of the expense growth you expect across some of the key line items like real estate taxes, personnel, anything else to call out that we should keep in mind for this year?

No, I called out the big ones. Those are the ones that were notable that I've discussed a couple of times here.

Your next question comes from the line of Eric Wolfe from Citigroup.

You mentioned that your solutions of a displacement can occur during periods of job losses. So I was just curious if when you see accelerated layoffs or job losses in a certain market, how long that increased demand tends to last?

And along with that, D.C. has definitely been one of your strong markets the last year, but I did notice that it decelerated a bit this quarter. So I was curious if that was just noise in the numbers, tough comps or maybe the lower employment is catching up there a bit.

Great question. Thanks. When you think about storage, we're a neighborhood small trade ring business. And then when you think about displacement. Oftentimes, that can either be so broad in terms of where the employees displaced come from. So I'll use DC as that example. You have folks who work in the federal government in Bethesda at NIH in Washington, D.C. proper at other agencies who live as far away as Culpeper, Virginia or Frederick, Maryland or West Virginia, parts of Prince George's County.

So when we have our general managers focus on demand and try to inquire from the customer as we always do, what's going on in your life. It's just so dispersed that you just never really see an impact on any particular store there. So the DC overall performance is comps. We just had been on a run there for many, many quarters, and we're -- we just saw a little bit of that tough comp in Q4.

But otherwise, it will continue to be a market we expect in '26 to be a leader of the DC, the DMV and a very good market for us. We also saw the ebb and flow of supply there again, just given the broad nature of that MSA.

But I think when you think about layoffs, then that might be within a plant or a business where the majority of the workers tend to be concentrated in a fairly tight geographic area, you would have a more correlated demand to the self-storage opportunities in that area. But in terms of like some historic trend, I don't have anything off the top of my mind and that would be super insightful.

That was very helpful. And I guess you talked about this a lot today, so I don't need to get too much more into it. But I guess one of the things that I'm trying to figure out is you talked about things improving throughout last year. They've stayed very strong recently improving some more. Is there some kind of common reason as to why?

I mean, is it demand that's gotten better? Is it lower supply impact in the markets that are accelerating the most, just easier comps? Like what is actually driving that improvement? And I guess what gives you the confidence to know that you've actually reached an inflection in whatever is going to drive it going forward?

I think it is all of the above. I think you've really touched on all of the drivers. So what we've seen over the last 4 or 5 months demand and throughout all of '25, frankly. We now have a new but fairly consistent demand profile for the business throughout the 12 months and that baseline of what we've seen in kind of '24, but really in '25 is the baseline that we're expecting here in '26.

So if that's your baseline, but the impact of vacant space, new supply continues to ramp down very helpfully. Well then you're just in a better position than from, as Tim alluded to, from a pricing perspective because those new stores that had opened in '24 are reaching a better level of physical occupancy. And typically the savvy operators in our space then start to focus in on getting rate. So that's helpful for the submarket in which we operate. We still see a pretty healthy consumer for our product. And so that's helpful.

So I think it's kind of all of the above that is embedded in sort of that range that Tim talked about, and that's been consistent now, as I said, for months. And so we're feeling pretty optimistic as we go into 2026. Obviously, we have a range, and we're comfortable within that.

I think the one item that we do not have factored in, and this is more recent news but when you think about, is there an opportunity here for those pent-up homeowners, home buyers, animal spirits to be unleashed as the 30-year fixed rate dropped yesterday below 6% for the first time in 3 years, you sit here and realize that today, more homeowners have a mortgage rate above 6%, then a rate below 3% for the first time in 5 years.

So we're not counting on it, it's not in guidance at all, but certainly, the kind of news over the last few days here on that front could be very helpful and would just be pure upside.

Your next question comes from the line of Samir Khanal from Bank of America.

I guess, Chris, I just wanted you to expand on -- you talked a little bit about the transaction market. Maybe talk about pricing. And the reason I'm asking is, there was a big portfolio that traded in New York, right? And I'm not sure how this is the Carlyle storage [ mark one ]. I'm not sure how that -- how should we think about that portfolio compared to your portfolio in New York? And if that was complementary to your portfolio, do we think about that disconnect, right, between sort of private market valuation and kind of where your stock trades today?

Yes. Thanks for the question. So the portfolio that you're referencing, we were a manager of some of those assets. So we're a very good partner. And therefore, we don't talk about transactions that we weren't involved in, you can certainly get more take on pricing, et cetera, from the buyer. New York is a great market.

We continue to look for good opportunities there in that particular instance. There just wasn't transaction that made sense for CubeSmart, but it made sense for another operator there, and I'm sure they'd be happy to give you insight as to how they thought about what that pricing was, whatever in their mind, they think it was.

Your final question comes from the line of Mike Mueller from JPMorgan.

Sorry to drag it out. Most stuff has been answered, but just a quick one. Are you likely to only sell assets if you see an opportunity with the stock being cheap or if there is something to buy? Or are there likely some assets you're just going to cycle out of no matter what?

Yes. I think the last part of that cycle out of assets, no matter what was what I was trying to cover before that. That list is very, very short for us. We like our existing portfolio. So the focus for us and, frankly, the difficulty on executing on the concept that I'm putting out there is the timing piece, right? You can't sell something in a week and by the time you would sell it or contribute something to a venture, public market valuations change awfully quickly. And so the objective for us would be to, again, further the strategic objective, improve the overall quality of the on balance portfolio and doing so accretively, which would combine dispositions or contributions of assets to raise the capital and repurchase shares. So the execution of that is a challenge given the timing. And I'm back to Spenser's question earlier, we did -- we bought some properties and repurchased share in the same quarter. We didn't do them in the same week. But things change, and sometimes they change pretty quickly. So it comes down to if there's a prolonged period where there's a disconnect then -- and there has been the execution of that, we believe would make a lot of sense.

And that concludes the question-and-answer session. I'd now like to turn the call back over to Chris Marr for closing remarks.

Thank you, everyone, for your insightful questions. We've enjoyed the dialogue here this morning. We certainly are looking forward to the upcoming seasonal busy season for our industry. We've been off to a very solid start here in January and February notwithstanding the unappetizing weather that we've seen here on the East Coast, but spring is strong and sun is coming and the busy season for storage will be here before you know it, and we look forward to continuing our dialogue after we report first quarter earnings. Thank you very much. Have a great day.

This concludes today's meeting. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby and I'll be your conference operator today. At this time, I'd like to welcome you to the CubeSmart Third quarter 2025 Earnings Call. [Operator Instructions]. I'll now turn the call over to Josh Schutzer, Vice President of Finance.

Thank you, Colby. Good morning, everyone. Welcome to CubeSmart's Third Quarter 2025 Earnings Call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session.

In addition to our earnings release, which was issued yesterday evening, supplemental financial data is available under the Investor Relations section of the company's website at www.cubesmart.com. The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements.

The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section in the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the third quarter financial supplement posted on the company's website at www.cubesmart.com. I will now turn the call over to Chris.

Thank you, Josh. Happy Halloween, and welcome, everyone, to our third quarter call. It was a very solid third quarter for Cube, which resulted in guidance increases across our key same-store and earnings metrics. Across all markets, our existing customer KPIs remain strong with key credit and attrition metrics remaining consistent within historical normal ranges. We are continuing to field diminishing headwinds from new supply as the stores placed in service over the last 3 years lease up and the forward pipeline continues shrinking.

As evident by 2 consecutive quarters of improved guidance expectations, the year has played out a bit better than we expected, which we attribute to the lessening impact of new supply, a more constructive pricing environment during our busy rental season and the continued health of the consumer. We foresee continued gradual improvement in operational metrics.

We are not anticipating a catalyst for a sharp reacceleration. We are prepared and operating under the expectation that the stabilizing trends as well as deliveries of new stores, will vary by market. Market level performance was similar to what we have been discussing for the last couple of quarters.

Top performers continue to be the more urban mid-Atlantic and Northeast markets, the East Coast of Florida is experiencing stabilizing trends and some of the Sunbelt markets are still finding their footing. In summary, it's a slow, steady stabilization without a catalyst for rapid acceleration, just like we laid out when we entered the year. We've seen some better pricing power that started earlier in the year for the reasons I've previously shared, while overall demand levels are mostly stable, but not growing significantly.

It takes time for improving fundamentals to flow through to revenue with only 4% to 5% monthly customer churn, and this was the first quarter since Q1 2022 where move-in rates in the same-store portfolio were positive year-over-year. Assuming these stabilizing trends continue through the end of the year, we should be on improved footing heading into 2026. Now I'd like to turn the call over to our Chief Financial Officer, Tim Martin, for his commentary.

Thanks, Chris. Good morning, and thank you to everyone for taking the time to join us today. For the quarter, we performed in line with our expectations, reporting FFO per share as adjusted of $0.65. Same-store revenues declined 1% compared to last year with average occupancy for our same-store portfolio, down 80 basis points to 89.9%. Same-store operating expenses grew just 0.3% over last year, again, reflecting our keen focus on expense control. We saw favorable year-over-year variances in utilities expenses and in property insurance following our successful renewal back in May, which we discussed last quarter.

So negative 1% revenue growth combined with 0.3% expense growth yielded negative 1.5% same-store NOI growth for the quarter. From an external growth perspective, we're starting to see a little momentum here late in the year as we're under contract to acquire 3 stores in the fourth quarter. We also completed and opened our joint venture development in Portchester, New York during the quarter and are scheduled to open our project in New Rochelle, New York during the fourth quarter

On the third-party management front, we had another productive quarter, adding 46 stores to our platform, bringing us to 863 stores under management at quarter end. On the balance sheet, we successfully completed our issuance of $450 million of 10-year senior unsecured notes on August 20.

The offering has a yield to maturity of 5.29% and was our first time back to the market in 4 years. We were delighted with the execution and delighted with the support we received from our fixed income investor base. Our 2025 notes mature later this month, and we intend to satisfy those initially through borrowings under our unsecured credit facility and then ultimately term that out by accessing the bond market again in the coming months.

Our leverage levels remain quite conservative with net debt to EBITDA at 4.7x at quarter end. From a guidance perspective, we updated our full year expectations and underlying assumptions in our press release last evening. Highlights of the guidance changes include a $0.01 raise at the midpoint of our FFO per share as adjusted.

On same-store revenue growth, we improved the midpoint of our guidance range. Our expense growth guidance range improved as well with a revised midpoint of 1.5% for the year. All of that translates into improved same-store NOI expectations for the year with a revised midpoint of negative 1.25%.

Picking up on Chris' comments, we expect trends to continue to stabilize through the remainder of the year, putting us on better footing heading into 2026 than where we entered this year. Our guidance implies negative revenue growth in Q4, although acceleration from Q3 at the midpoint.

While we're still not anticipating things snapping all the way back to normalized levels of growth quickly, we're seeing encouraging signs that are starting to flow through the portfolio. Thanks again for joining us on the call this morning. Happy Halloween. And at this time, Colby, let's open up the call for some questions.

[Operator Instructions] Thank you. Your first question comes from the line of Samir Khanal with Bank of America.

Chris, I guess just how are you thinking about the balance between rate and occupancy right now in an environment where demand seems to be stable as you try to get that new customer in the door?

So ultimately, the systems are focusing in on maximizing the revenue from each customer. And so trying to find that balance. And it varies by market. So when you think about those 2 levers rate and occupancy, you have the elasticity of demand that one has to deal with.

And so when we look at those markets that we would describe as having been solid for a while, kind of the rock stars in this part of the cycle where you're getting both rate and occupancy. I'd call out New York City, Washington, D.C. MSA, Chicago, then you have those markets that are stabilizing, so their rate and occupancy are moving in a good direction, albeit still perhaps down year-over-year.

And those examples would be Miami and L.A., Los Angeles. And then those markets that are still trying to find their footing where, again, the systems every day are trying to navigate through that dynamic of new move-in customer rate versus occupancy and testing is the demand there at any price. And those would be the same markets we've talked about all year, Atlanta Phoenix, Cape Coral, Charlotte, the Sunbelt market. So it really varies quite a lot by market as the systems try to find that balance.

And maybe as a follow-up here, I know you talked about moving rates that were positive in the quarter, kind of 2.5% better on rate versus occupancy. I mean -- can you provide some color around on October as well? Were you seeing kind of trends in October?

Yes. So the occupancy gap to last year has contracted from the end of the third quarter as of yesterday, were down 100 basis points from where we were at this point last year. And the average rent on rentals that 2.5% that you quoted for the quarter in October is kind of in that 1.9 2% kind of range.

Your next question comes from the line of Nicholas Yulico from Scotiabank.

This is [ Peter Feilim]. On your last call, you said that most demand still comes from traditional search and you're working with your partners or Gemini integration. So what percentage of fleets and bookings are now AI influenced today? And how does overall the cost per AI leads compared to traditional search engine leads so far?

Yes. The leads coming through the LLM, which is primarily ChatGPT at this point for us are about less than 1%.

Got it. And then you also mentioned last call that merchant builder exit wave is kind of coming to the market. And just trying to understand whether it has intensified recently? And what does it mean for you and kind of for your potential acquisition pool?

I'm sorry, I think we got a little bit more clarity on the question, if we could. Merchant builder sellers?

Yes, yes, sellers, yes. Whether you can see now more of them or not really versus, for example, Q2?

Yes. No. I haven't really seen a change. Again, there is no and there typically isn't like significant duress in our sector. And so I think what you have is folks who may have opened a store in 2022, where they were underwriting cash flows based on the spectacular storage performance during COVID are clearly not meeting their pro formas.

But I think what we're finding is everyone is just looking for ways to extend out and anticipate stabilizing trends and better times ahead and financial institutions for the most part are cooperating.

Your next question comes from Todd Thomas with KeyBanc.

Chris, your comment about the improving trends and third quarter being the first period of higher move-in rents and it seems like that continued in October. Your guidance assumes an improving revenue growth trend in 4Q, albeit still negative. You mentioned that, but just your comments overall, suggesting that, that trend of improving revenue growth, early sort of read into '26, is it fair to assume that you would expect also equal that trend to continue from here just given the 4% to 5% churn and the time it takes for that to translate to revenue growth? Is that how you're thinking about it at this point in the cycle?

Yes. As you think about '26 macro, again, assuming the consumer health remains where it is, the economy continues to do okay, we would anticipate that the trend from Q3 to Q4 -- and again, we talked about in Q2 that Q3 had a little bit of an anomaly in that was going to create that [ decel ] from the prior quarter. But yes, that trend should continue.

Again, do we inflect positive in same-store revenue growth as we sit here today? Yes. When might that occur? Again, as we sit here today, I would conservatively expect that's probably the back half of 2026.

Okay. And then some of your peers, I think, ran promotions are implemented, newer discounting strategies during the quarter. I was just wondering if you can speak to whether [ Q ] participated or what discounting strategies might have been implemented during the peak season and how you're thinking about pricing promotions and discounting in the off-peak season as occupancy typically pulls back a bit here.

Yes. So I guess there was some new vernacular introduced recently with this gross net kind of concept. The 2.5% gross move-in rate year-over-year growth that we saw is -- for us, it is also the net. We have not had any change in our discounting.

Okay. Are you changing your promotional offerings, though or changing your discount strategies at all? Okay.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just on the acquisition side, a couple of your peers have become more aggressive, talk about more opportunities or deal flow. Just curious what you're seeing and/or willingness or appetite to increase the external investments.

Thanks, Juan. Appreciate the question. I guess we have 3 stores under contract, so that's movement in the right direction. I think what we have seen and we've talked about here for the past several quarters is pretty consistent view from the buying side of the table as to what return thresholds look like. I don't think that's changed much at all. It hasn't for us. I don't think it's changed much for others either.

I think the change is that the seller side of the equation has gotten a little bit more constructive from the buyer's perspective, and you're starting to see things move a little bit. I think you saw that from some of our peers. I think you see that from us with the 3 stores that we have under contract. So nothing -- I wouldn't say there's any earth-shattering move other than the market becomes a little bit more constructive as the gap between buyer and seller has shrunk to the point where you're starting to see some things get done.

And then just as a follow-up, your rent per occupied square foot was strong in the quarter, up 2.4%, quarter-over-quarter flat year-over-year better than peers. What do you think allowed you to push that in place rate relative to the industry a bit stronger?

Yes. I think, again, you're just -- everybody's system, I assume, is trying to do the same thing, which is find that balance between the levels of demand that are out there for storage and then pricing to capture that customer as well as the marketing tools to capture that customer.

I think some of it is portfolio construct, again, where we are at this part of the cycle. Our strategy and our quality focus, I think is very helpful to our results. And then part of it actually is just sort of the normal seasonality that one would expect to see from Q2 into Q3.

Your next question comes from the line of Eric Wolfe with Citi.

I think you said a moment ago that conservatively, that same-store revenue might not turn positive until the back half of 2026. But mean if you're already at 2% to 3% move in rate growth, is there some reason to believe that, that stays there that you wouldn't just go to like 2% to 3% same-store revenue growth? Is there some kind of offset on the CRI? I'm just trying to understand why if you're already, I call it, positive move-in rent today that it's going to take for the back half of 2026 to be positive on same-store revenue.

Yes. I mean it's not sarcastically, it's math. So we are in a business where 4% to 5% of our existing customers churn on a monthly basis. And so barring again, some sort of change to the good on the demand side, again, which we don't foresee a catalyst for that. It just takes time.

So you will just gradually see that slightly negative same-store revenue growth begin to move in a positive direction. And exactly when that crossover occurs, we're not providing guidance at this point, and we don't do quarterly guidance from a same-store perspective. But again, I think to be fair, at this point in October 31, what I shared is kind of the conservative outlook at the home.

Got it. And then I guess to the move in rents that you provide in the [ SAP], I mean, does that include promotions I'm probably asking because I'm just thinking through like if we continue to see just positive move in rent growth like onto say, 2% to 3% or 2% to 4%, does that eventually translate into kind of 2% to 4% same-store revenue growth?

I know occupancy obviously plays a factor to your point. But I guess I'm just wondering about the -- if you can really just kind of take these move in rent growth and then assume you're going to get a similar ECRI component to it and take that as a leading indicator of where same-store revenue growth is going? Or we're mistakenly not including promotions or not including something else into that calculation?

I'll jump in. If you think about your premise there of 2% to 3%, 2% to 4% type year-over-year improvement in pricing, then -- and you held everything else constant, that ultimately, after, call it, 12 months, when you've churned 5% of your portfolio each month at that type of churn, then eventually, that's where you would get to and then it would probably be helped a little bit then by some of those other factors.

You probably get a little bit more out of your ECRIs. You probably get a little bit of occupancy if you're in that environment when -- if you have that type of pricing power, normal pricing power over a prolonged period of time. So back to Chris' point earlier here, is it just takes time to flow through because it's 4% to 5% a month. and that builds and builds and build. So if you had that for a prolonged period of time, I think that's ultimately where you get to from a revenue growth perspective, plus or minus.

And then does the movement rents include promotions? Or is that like a separate calculation you should make, meaning that -- I think it was up like [ mid-2s ] this quarter. Is that flat with promotion?

Yes. So that 2.5% is gross. And it is for us, is the same as the net because of our promotions have not changed the amount or the magnitude.

Your next question comes from the line of Michael Griffin with Evercore ISI.

Chris, maybe you can expand a bit on whether or not you've seen any changes in new customer behavior? I mean it seems like if you're able to raise these new customer rents, maybe there's less price sensitivity or customers shopping around. And I know it's always a topical point with storage, but any incremental home buyer customers coming back? Or is it still -- they haven't really materialized yet?

Yes. I think what you're finding is you're just able to get rate in these markets that are that are not typically the home buyer and seller movement market. So your leading year-over-year improvement in rate to new customers, Manhattan, Queens, Brooklyn, Chicago, Washington, D.C. and then the laggards where you're just still trying to find your footing in terms of where is that balance and at what rate can you get that customer to convert continue to be Atlanta, Phoenix, Charlotte, some in Texas, some of the major Texas markets are moving in that direction as well. So it really is just market from our perspective, which then sort of ties in to your question, which is its customer use case.

Appreciate the context.

Yes, I'm sorry, one last piece. And then ultimately, it's still -- when we talk about supply and those headwinds are diminishing across the portfolio, but that also varies pretty significantly by market. So not surprising, those Sunbelt markets that tended to rely historically on a little bit more of that home buyer and seller are also the markets that continue to get deliveries while deliveries overall are down, they are still occurring all too frequently in Atlanta and Phoenix in the West Coast of Florida.

So it's kind of a double whammy for those Sunbelt markets, so to say.

Yes.

Great. And then maybe next just on sort of the ECRIs and outlook there. I mean I realize that the rent roll downs, the move in to move out is still pretty wide. But has your strategy changed there at all? Have customers become more sensitive to rate increases? Or are they typically still willing to accept them and you're able to push strategically where you can?

Yes. The customer health, which we continue to really focus in on, and again, varies by economic strata and parts of the country generally across the portfolio continues to be very good. And we have not seen any change in customer behavior as it relates to ECRIs and our overall approach has been consistent throughout 2025.

Your next question comes from the line of Ravi Vaidya with Mizuho.

I wanted to ask for the third-party management business. I saw a couple of stores came off on a net basis. Is there something that -- looking ahead, should we expect it to increase again? Or maybe where some of the new private operator that you're partnering with? And how can that be used as a hedge for higher supply?

Yes, I appreciate the question. So on our third-party management program, we talk about the stores that we add to the platform because that's ultimately what we control. That's our new business that the development team is looking for opportunities to add owners, to add stores to the platform. This year, we have exceeded adding 130 stores for the eighth consecutive -- at least 130 stores a year for the eighth consecutive year. So that part of the business remains healthy.

The part that is very difficult to predict is when stores are going to leave the platform. And part of this year, when you have that churn, part of this year's churn was self-inflicted earlier in the year when we bought 28 stores that were in that third-party managed bucket.

You just have a lot of stores that are -- leave the platform most often, that is because they have transacted. They have sold to somebody that either self manages or has a different relationship. And so trying to predict the net growth in the store count of 3 p.m. platform is an impossible task. So we control what we can control.

And we look -- when stores leave the platform, we've talked about in the past, we feel like it's job well done. We've helped that owner create the value. We've stabilized and improved performance. And in most cases, we set them up to achieve their desired results as they transact and sell the asset to someone else.

Your next question comes from the line of Spenser Glimcher from Green Street.

Maybe just going back to the acquisition front. Are there certain markets or geographies that you guys are more comfortable underwriting? Just due to greater stabilization of fundamentals? And then on the flip side, are there any markets that are sort of red line right now just because there's still too much operational uncertainty maybe outside of the obvious supply ebb markets?

Yes. I mean just the nuance responses we're comfortable with underwriting it everywhere. I think embedded in our underwriting are obviously going to be different risk hurdles based on some of those characteristics that you would refer to. Perhaps the best deal that we can find right now would be in a market that's more challenged because others don't see maybe what we see.

And so we don't have a bias necessarily to blacklist a particular market because of supply as an example or some other criteria. But what we would do in that standpoint is to make sure that from a risk-adjusted standpoint, we're getting paid to take on that uncertainty.

So those markets create more challenge from an underwriting standpoint to try to look at where rates are today, perhaps and where rates might be in a year or 2, it is a challenging but not impossible underwrite when you have a store in particular because it's such a micromarket business, when you have a store that's competing against new supply to be able to have confidence in your ability to project where rates in that small market are going to stabilize once that new supply leases up is a challenge.

It's the fun part of the investments team and what they do because those deals that have a little bit of hair on them are the most challenging, but also very interesting and perhaps the place that you can make a really nice risk-adjusted return. So we haven't -- we're not avoiding markets, but certainly considering all of those risk factors.

Okay. Yes. That was very helpful. And then can you just share what stabilized cap rates you guys are underwriting on the 3 assets you're firing in 4Q?

Those 3 assets are a little bit of a mixed bag between stable and not stable. Going in, when you look across the 3, we're going in, in the low 5s and stabilizing across the board fairly early on in year 2 or 3 at right around 6% across the board for those 3 opportunities.

Your next question comes from Brendan Lynch from Barclays.

New York City continues to perform quite well. And it continues to outperform other large markets in the Northeast. Maybe you can just kind of compare and contrast what is leading to that outperformance? Obviously, there's a lot of supply issues in the Sunbelt, maybe it's the same in the Northeast. But just kind of any color that you can provide on New York relative to some of these other markets in the region?

Yes. So it's going to be partly what you just said. So again, the boroughs really nonexistent new supply impact. So you're really stable from that perspective. You have a more need-based customer. And then obviously, we have a very significant position there and one in which the asset quality is extremely high.

So we just have everything in our favor in a market that in this part of the cycle is just doing very well. Other Northeast, Philadelphia, Boston, a little bit of a mixture there. You've got supply as opposed to the boroughs and you have a little bit more of a mix in the customer base. It's not quite Sunbelt like, but you do have a little bit more of that mover, so to speak, than you might have in, say, the Bronx. So I think it's kind of a combination of those 2 things. And you see that similarly in urban Chicago, you see it in a few of the other urban markets.

Great. And then maybe just sticking with New York City, you've got the new development coming there. It's a relatively small investment, I think it's $19 million. Maybe just talk about what would allow you to get more sort of aggressive on development in the New York City area.

It's really looking for opportunities that have -- that are located in a spot that would be complementary to our existing portfolio and frankly, would have a need from a demand standpoint for there to be new product. Obviously, it's not as easy to pencil out deals in the boroughs as it used to be because the tax incentives aren't there any longer. So surely, there are opportunities somewhere. But the fruit is pretty high up in the tree and for us to find an opportunity, it's going to be something that we're pretty excited about.

Your next question comes from the line of Eric Luebchow from Wells Fargo.

Can you comment a little bit on any trends you're seeing on your average length of stay? It seems like vacates have been kind of muted across the industry this year, obviously helps from a roll down perspective. But perhaps takes a little bit longer for some of these better movement rates to flow through the portfolio. So any commentary on that would be helpful.

Sure. When you think about those trends, I would macro say they're consistent, still elevated. So our customers who have been with us greater than a year, that's up 50 basis points year-over-year. And again, if you kind of compare it to pre-COVID, so third quarter of 2019, it's plus 260 basis points.

And then those customers who have been with us greater than 2 years, which is about 40% of our customers, that's actually down year-over-year about 140 basis points, but again, up 50 basis points what we saw in 3Q '19. So continue to be pretty consistent, have come down a bit off of peak, but still elevated relative to historical metrics.

Appreciate that. And I know you provided a little bit of directional commentary on '26, but just trying to take maybe more of the [ bull ] case. So obviously, if we get a housing catalyst if we see a pickup in customer mobility, moving rates, continue to find stability start growing. Do you think it's reasonable we could get back to more historical levels of growth by maybe the second half of next year, certainly into 2027 and then potentially even higher beyond that, especially given some of the supply delivery commentary. Just wanted to get your temperature on what you see over the next few years and not just into '26?

Yes. I do see that bull case as playing out the way you described, again, it's is sort of finding that catalyst for demand. And if that hurts, housing being the easiest thing to point at, we continue to have a healthy consumer. I think you then start to see consistent performance from those solid markets that we've experienced here over the last couple of quarters those steady eddies continue and then your overall helped by the fact that the Charlotte and Nashville, et cetera of the world should rebound quite nicely.

And I think we're well positioned from -- obviously, to get the rate. We've shown that we can do that through this cycle increasingly more so over the last couple of months. And then on the -- on the occupancy side, then you get the pickup there as well. And to your point, you could see -- and I would expect if those conditions were to occur, you would see more elevated performance.

Your next question comes from the line of Michael Mueller with JPMorgan.

Just go back to development supply. I mean, what's your gut feeling tell you about how quickly supply may come back in some of the markets as they improve over the next couple of years? I mean do you see a lot of competitive projects near you where people are just kind of waiting for the right time to kick off? Or do you think you're going to have a little bit longer of a runway without meaningful supply?

Yes. I think that crystal ball is complicated and maybe a little fuzzy. So I think it will be slower. I think that you have a couple of factors. Again, we still have elevated cost. I think it will, to our point, being a more gradual recovery in move-in rates. So you'll still have to see some progress there.

And I think the developers, again, who have opened in '22 and are sort of trying to figure out how to hang on at this point may not be likely to want to get back into it again until they deal with exiting the store that they have. And then ultimately, primary lenders to the space for the developers, those local and regional banks have to be -- they continue to be constructive in terms of how they think about underwriting and how they think about providing that leverage. I think that should constrain things as well.

So again, at least you look out through next year, probably at least the first half of '27. I think we'll continue to see some restraint. Again, there are the markets I've called out that appear to have no guardrails, but I think we'll continue to see some constraint. And then if you just think practically, if it picks back up again, it takes 6 months to sort of get everything going and then another 12 months to build, so you're 18 months out from whenever that happens.

Your next question comes from the line of Michael Goldsmith with UBS.

Move-in rate was up 2.5% during the quarter are apparently both on a gross and a net basis, but came down in October. So how did the move-in trend during the quarter? Did it peak in October? Or did it peak kind of earlier during the period? And is that how it normally plays out?

Yes, moving trend was historically normal. You see kind of that peak in July and then trends tend to sequentially start to slowdown. But again, I think the message here is that the road is a bit windy. We've got markets that are continuing to move in a fairly straight line and an upward trajectory. And then there are markets, again, pick on the Sunbelt, where the road is a little bit more windy. So overall, I would say, kind of consistent with the last couple of years is what we've seen.

Got it. And you said on the call maybe a couple of times, but just rather stabilizing trends and encouraging sign. By stabilizing trends, are you referring to same-store revenue growth and by encouraging signs you're suggesting the move-in rate. Is that kind of what you're pointing to?

Yes. So again, the top line metric, same-store revenue growth, just kind of beat the drum again, it takes time for that to move given the relatively low churn in the customer base. So when we talk about stabilizing trends, we're talking about move-in rates and demand levels, which again, have been weaker than historical but fairly consistent and occupancy.

So it's more of the KPIs that are happening every day, which will then gradually bleed into the same-store revenue result, which will then gradually move that in a positive direction.

Portchester looks great. Good luck in the fourth quarter.

Super excited about it.

We have units available if you'd like to get.

Thank you. And with no further questions in queue, I'd like to turn the conference back over to Chris Marr for closing remarks.

Okay. Thank you, everybody, for participating. Again, stabilizing trends, encouraged by the direction overall that the portfolio is moving. Assuming these continue, we expect to be on improved footing heading into 2026. We look forward to seeing some of you at upcoming conferences and next time we're on a quarterly call, we'll share our specific expectations for 2026. So thank you all. Happy Halloween.

This concludes today's conference call. You may now disconnect.